Dean Baker's Blog, page 110

The Bonus Game: How Congress Paid Off Corporate America to Tout Its Tax Cut

The NYT had a very good piece pointing out that the bonuses promised by many corporations following the tax cut are often less consequential than they appear. For example, many companies highlighted their maximum bonus amount. This was often a figure (e.g. $1,000) that went to a full-time worker who had been with the company for twenty years or more. At a company like Walmart, very few of their workers would have been there for twenty years and many are part-time. This means that the typical...

Newer Data Showing Companies Weren't Feeling Inspired by Tax Cuts Last Year

As I have pointed out repeatedly, the Republicans story about how their corporate tax cut will benefit everyone hinges on the idea that it will kick off a huge round of new investment. In their telling, investment is hugely responsive to tax rates. This means their tax cut will spark an investment boom. The higher levels of investment will increase productivity, which will eventually lead to higher wages.

We got our first weak test of this story with the Commerce Department's release of advan...

Mick Mulvaney Gives Financial Industry Incentives to Develop Schemes to Rip Off Poor and Minorities

Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau (CFPB), effectively decided to incentivize ripoff schemes by taking away the enforcement powers of the CFPB division that is charged with blocking such schemes. As fans of free markets everywhere know, if it possible to make money by designing deceptive financial products that rip off low- and moderate-income people, profit maximizing companies will do it.

Involuntary Part-Time Unemployment Is Not Up, Contrary to What You Read in the NYT

An NYT article noted that people are more likely to work at home now than in the early part of the last decade and that this is reducing energy usage. Near the end, the piece included this paragraph:

"In addition, between 2003 and 2012 the number of part-time workers in the United States almost doubled, from 4.6 million part time workers to 8.3 million, many of whom are involuntarily part-time workers. “The number of people who are spending time at work is going to go down because you’re sor...

Donald Trump Strikes Out in Manufacturing: America Still Isn't Great!

The Commerce Department gave us more news today indicating that manufacturing isn't bouncing back like Donald Trump promised. The Commerce Department released its data on construction spending for December.

It turns out that construction of manufacturing plants is down by 11.7 percent from its December 2016 level. It was running at $60,595 million annual pace in December of 2017, down from a $68,624 pace in December of 2016. This probably shouldn't be a surprise given the $50 billion (0.26 pe...

Donald Trump Calls for Spending 0.08 Percent of GDP on Infrastructure Over Next Decade

Some folks may have been impressed with Donald Trump's plan for $1.5 trillion in infrastructure spending over the next decade. This is both because they have little sense of the size of the economy and also because they don't realize that he is not proposing for most of this spending to come from the federal government.

While he didn't lay out a specific plan, past documents indicate that he wants the federal government to increase spending by $200 billion, with the rest coming from state and...

Donald Trump Calls for Spending 0.08 Percent of GDP on Infrastructure Over Newt Decade

Some folks may have been impressed with Donald Trump's plan for $1.5 trillion in infrastructure spending over the next decade. This is both because they have little sense of the size of the economy and also because they don't realize that he is not proposing for most of this spending to come from the federal government.

While he didn't lay out a specific plan, past documents indicate that he wants the federal government to increase spending by $200 billion, with the rest coming from state and...

The Money New York Would Save Workers with a Payroll Tax

An important provision of the new federal tax code was the capping of the deduction for state and local taxes at $10,000. This was an explicit hit at states like New York and California, which have relatively high tax rates in order to provide relative high quality services in areas like education and health care. These states also tend to vote Democratic in national elections.

One way that these states can partially get around this cap is by replacing a portion of the state income tax with a...

Early Reviews of Tax Cut Are Not Good: Capital Goods Orders Fall in December

The centerpiece of the Republican tax cut was a big reduction in the corporate tax rate, lowering it from 35 percent to 21 percent. While critics argued this was just a handout to shareholders, who are overwhelmingly wealthy, the counter was the tax cut would lead to a surge in growth, which would benefit everyone.

The logic is that a lower tax rate provides more incentive to invest. With new investment in plant, equipment, and intellectual products, productivity will rise. Higher productivit...

Mnuchin Is Not Wrong: Secular Stagnation and the Value of the Dollar

A couple of days ago, Treasury Secretary Steven Mnuchin touched off a firestorm by saying something that is obviously true. He said that a lower-valued dollar would reduce the trade deficit. 

As I pointed out yesterday, this is based on the radical concept of downward sloping demand curves. The idea is that when the dollar falls in value relative to other currencies, it makes goods and services produced in the United States cheaper for people living in other countries. This means that th...