Month: December 2009

Looking at recent numbers, Bruce Bartlett makes the case:

The CBO also looked at the stimulative effect of various parts of the stimulus package. It found that purchases of goods and services by the federal government–such as for public works–had the largest bang for the buck, raising GDP by $2.50 for each $1 spent. Transfer payments had a lesser impact, but were still significantly more stimulative than tax cuts. Moreover, tax cuts of the sort favored by Republicans have the least impact. According to the CBO, tax cuts for low-income individuals raise GDP by as much as $1.70 for every $1 of revenue loss, while those for the rich and for corporations raised GDP by at most 50 cents for every $1 of revenue loss.

Lest one suspect the CBO of bias, private economists have also found that tax cuts are far less stimulative than spending under current economic conditions. Mark Zandi of Moody's ( MCO – news – people ) Economy.com, an advisor to John McCain last year, recently testified before the Joint Economic Committee of Congress that the Republicans' favorite tax proposals–making all the Bush tax cuts permanent and cutting the corporate tax rate–would raise GDP by at most 37 cents for each $1 of revenue loss. By contrast, increased outlays for infrastructure, aid to state and local governments and extended unemployment benefits increase GDP by between $1.41 and $1.57 for every $1 spent.

A reader writes:

I'm not a climatologist, but I am interested in climate change. Fortunately, I attend a college with a climatologist. I asked her about the data massaging trick and this is how she explained it.

The data in question is actually two sets of data. One being the data from 1BCE to now using tree rings and coral. Tree rings are larger when it is wet or hot and smaller when it is cold and dry. Because wet/hot and cold/dry aren't correlated, there are uncertainties with the data. But, the data from tree rings from 1BCE to now does show temperatures similar with other temperature markers. That is, until the middle of this century.

The other set of data comes from real thermometers, from the mid-19th century to now. The data becomes more reliable as data gathering methods become more precise. What the scientists at CRU did was splice and combine the two data sets. The tree rings data shows cooling that is in opposition to actual measured temperatures. So the CRU scientists combined the two data sets to make it look like one data set that shows more continuous warming.

The professor I spoke with was very clear that what the CRU scientists did may not have been ethically pure, but warming is happening. They probably should have made clear the "trick" they used was actually two different data sets, she said. The information that has become known through this "scandal" may call into question historical climate data, but not current climate data. The world is still warming now, and "climategate" doesn't change the need for significant carbon cuts in Copenhagen.

The RNC refuses to see the upside of today's job report.

Ben Smith notices how Palin keeps Trig in the spotlight:

[T]he most striking evidence of her son’s impact has been Palin’s book tour promoting her memoir “Going Rogue.” As she descends from her tour bus or private jet to meet her fans, 19-month-old Trig has been a conspicuous presence — and generated a huge response. “There’s a lot of people who come through the line to see Trig instead of to see her,” says Jason Recher, a campaign aide who remained close to Palin and is now accompanying her on her book tour…if Palin had any ambivalence about exposing her older children to the spotlight, there’s none for Trig. He enjoys the crowds, said Recher, and at every stop, there are admirers who have come specifically to meet him.

Reihan reacts to Rep. Jason Chaffetz (R-UT) making the case for withdrawal in Afghanistan:

Remember that the bitterest opponents of the Clinton-era U.S. interventions in Kosovo and Haiti were conservatives like Tom DeLay, who condemned the Clinton administration for treating “foreign policy as social work,” in Michael Mandelbaum’s evocative phrase. The post-9/11 moment represented a departure from this conservative suspicion of nation-building, as Jacksonian sentiments were yoked to the ambitious project of building democracies in the Muslim world. But now that Obama, a man most conservatives dislike and distrust, is the steward of that effort, those conservative instincts are making a comeback. Jason Chaffetz represents the beginning of a wave—and it’s not obvious that Obama can do anything to stop it.

Justin Fox doles them out:

These numbers are subject to revision. Last month's payroll job loss number of -190,000 has been revised down to 111,000. September's nasty -263,000, which had me wondering if the job market had started getting worse again, has been revised down to -139,000. So this month's good news could be revised upward into really good news or downward into disappointment. The trend is looking pretty good but, as Ian Shepherdson of High Frequency Economics writes, "There is no doubt the underlying trend in payrolls is improving, but this looks a bit too fast."

Noam Scheiber also urges caution:

There is one ominous note from today's report, though: Long-term unemployment. Last month I noted that the number of long-term unemployed–people out of work 27 weeks or longer–was increasing at a decreasing rate and looked like it might be about to peak. That was key because, as I explained in this post, a peak in long-term unemployment fairly soon after a recession has historically foreshadowed a "jobful" rather than a "jobless" recovery.

Unfortunately, the number of people unemployed for 27-plus weeks shot up again pretty sharply last month: up 293,000 versus only 156,000 in October. That could obviously be a one-off blip. But if not, and if it means what it's historically meant, it could be a while before we start seeing real job growth.

A reader writes:

Felix Salmon’s counter intuitive thought regarding progressive tax rates is an interesting theory, but does nor correlate with the facts. In 1963, the top marginal tax rate in the US was 93%. Since then, it has been almost steadily lowered, till today where it stands at 35% (there was a brief period in the late 80s when it went down to 28%. Yet in this time frame, income inequality has consistently grown:

“In 2005, the top 1 percent claimed 22 percent of the national income, while the top 10 percent took half of the total income, the largest share since 1928.”

“The highest incomes come from executive pay at top corporations. In 2007, the ratio of CEO pay to the average paycheck was 344 to 1, lower than the record 525 to 1 ratio set in 2001, but substantial. …. In the '60s, '70s and '80s, the average ratio fluctuated between 30 and 40 to 1”

So, it would appear that Salmon’s argument is exactly wrong. Lower marginal tax rates over the past 40 years have produced more income inequality.

Another reader adds:

I was struck by a thought while reading that post – namely that it would appear that Salmon is operating under the assumption that the government is in and of itself a corporation-like entity, and, as a result, behaves as such.

To clarify, it is assumed that corporations act in their own interest to maximize profits, but the mechanism of this action isn’t a function of the corporation as a discrete entity, but rather of the individuals (shareholders, board members, etc.) responsible for making those decisions. Because those individuals seek to increase their own personal wealth, and that of their company, they set corporate policies that increase net profits.

Government does not operate in this manner. The goal of government (and those to govern) is not to achieve maximal profits, but rather to serve and protect its citizenry. Yes, there is a great deal of pressure leading legislators to enrich donors or particular industries, and beyond that, increased tax revenue can enable more expansive (and expensive) projects, but government is not a for-profit entity and faces different incentives. This is in part because the individuals setting tax policy do not have the same kinds of incentives as those setting corporate policy in that they do not see their individual wealth affected by increased tax revenue – indeed, many legislators are incentivized against progressive taxation as such policies can make wealthy individuals less inclined to donate to politicians.

Yes, if you have a progressive system of taxation, it creates incentives for government to increase the wealth of those most highly taxed and thus inequality. But government, not being an autonomous, sentient entity, has no way to work towards those incentives unless those in congress share them, and I’m not convinced that they do.

Trumpeting the new jobs numbers, Floyd Norris thinks that "the bad days for jobs are very close to being over, and that this will not be a jobless recovery":

One reason is the sheer abruptness of the decline in employment during the recent recession. (Yes, I think it is over.) After Lehman Brothers failed, the unemployment rate rose at a faster clip than at any time since 1975. There was something approaching panic among employers. They feared sales would collapse and that credit would be unavailable. In that spirit, they cut every cost they could. Imports plunged because no one wanted to add inventory. Ad spending collapsed. And people were fired.

That has left many companies in a position where they may need to add workers quickly for even a small increase in business.

Call me the optimist.

The WSJ reports that the Iranian regime is monitoring and threatening its global diaspora through online portals such as Twitter and YouTube. Here is one story of many:

His first impulse was to dismiss the ominous email as a prank, says a young Iranian-American named Koosha. It warned the 29-year-old engineering student that his relatives in Tehran would be harmed if he didn't stop criticizing Iran on Facebook. Two days later, his mom called. Security agents had arrested his father in his home in Tehran and threatened him by saying his son could no longer safely return to Iran. "When they arrested my father, I realized the email was no joke," said Koosha, who asked that his full name not be used.