Dean Baker's Blog, page 114

Swamping the Drain with Senator Bob Corker and the Republican Tax Bill

David Sirota, Josh Keefe, and Alex Kotch, writing at International Business Times, reported that a provision inserted into the Republican tax bill will provide large benefits to former holdout Senator Bob Corker, as well as President Trump. The provision would allow income from real estate investment trusts to be taxed at a 20 percent rate, as opposed to the 37 percent tax rate paid by high income individuals.

According to Corker's disclosure forms, he makes between $1.2 million and $7.0 mill...

Washington Post Columnist Gets the Story Wrong In Saying the Fed's Model is Wrong

Zachary Karabell, the head of global strategies at Envestnet, got the story badly wrong in a Post Outlook section piece arguing that the Fed's model of inflation is wrong. The piece highlights the relatively rapid growth in the last two quarters and argues that this should be leading to inflation. That is not what the Fed's model would predict.

In the Fed's model, the change in the rate of inflation is tied to the level of unemployment. While the unemployment rate is at a level where the mode...

Ending the Health Insurance Mandate Matters Because it Makes the Pool Less Healthy, Not Older

A NYT article on the winners and losers from the bill listed among the losers people who buy individual insurance, since it will leave insurers "stuck with more people who are older and ailing." The issue here is ailing, not older. The exchanges can already charge different prices based on their age. While the law limits the band between age groups, so it's not exactly equal to the difference in costs, this is a relatively small matter. The health of the people within an age group makes far m...

NYT Is Confused on Mortgage Interest Deduction in Tax Bill

The NYT seem confused on how the new lower limit on mortgage interest deduction in the Republican tax bill would work. It told readers:

"The bill does retain significant subsidies, allowing home buyers to deduct interest on mortgages as high as $750,000."

In fact, the bill allows homeowners to deduct interest on $750,000 of principle, regardless of the size of the mortgage. While the phrasing in the NYT piece might have led someone to believe that they could not deduct any interest on an $800...

NYT Does Publicity Work for Senator Rubio, Tries to Package Him as "Longtime Champion of the Working Class"

Everyone remembers Marco Rubio walking the union picket lines, demanding stronger enforcement of work safety rules, and strong fiscal stimulus to counter unemployment.Oh wait, Senator Rubio has been on the other side of all these issues. He has opposed strengthening workers' rights to organize, stronger enforcement of work safety rules, as well as stimulus measures to counter unemployment.

That's okay, in New York Times land he still gets to be a "longtime champion of the working class." The...

Predicting the Collapse of the Housing Bubble: Just Call Me "No One"

I see that I got cited at the top of a NYT column this week. Desmond Lachman, an economist at the American Enterprise Institute (who I know and respect) had a column warning about the rise of bubbles around the world and the risk of their collapse. The first sentence tells us, "no one seemed to have anticipated the world’s worst financial crisis in the postwar period." Yeah, well I realize I wasn't very successful in getting my warnings across, but I sure did try.

Anyhow, I would say that Lac...

Higher Wages Can Boost Productivity, but Wages Are Already Growing

Ryan Avent had a nice piece in the NYT this morning pushing the argument that Jared Bernstein, Josh Bivens, and I (among others) have been making for years, that higher wages can be a force driving more rapid productivity growth. The basic point is straightforward, when labor is expensive, employers have more incentive to find ways to use less of it. In this story, anything we can do to push up wages, like promoting unionization or raising minimum wages, is likely to lead to higher productivi...

Republicans Are Not Cutting Taxes on Pass-Through Corporations, They Are Cutting Taxes on Income from Pass-Through Corporations

This is a frequent mistake in reporting on the tax proposal, as in this Post article telling us:

"Under the Trump plan, pass-through businesses get a substantial reduction in taxes."

This is wrong since pass-through corporations already don't pay any taxes, so their taxes can't be reduced unless we have a negative income tax for them. The tax cut applies to income from pass-through corporations.

This distinction matters for two reasons. First, it means that taxpayers with the same income wi...

If Arithmetic Mattered in Budget Debates

We all know that folks involved in debates on economic policy are not very good at arithmetic. That's why almost no one was able to see the $8 trillion housing bubble that sank the economy. But we can always speculate about what the world would look like if arithmetic mattered.

Right now, the Republicans are claiming that cutting the corporate income tax rate from 35 percent to 20 percent will lead to a huge surge of investment and growth. They claim that the additional growth from this tax c...

Wait, How Did Trump "Make Clear His Desire to Keep Low- and Middle-Skilled Jobs in this Country?"

This line inexplicably appeared in the middle of an NYT article about a contract between the Communications Workers of America and AT&T which provides job protection and pay increases for 20,000 workers. It also apparently includes a commitment from AT&T to bring some jobs back to the United States.

There is nothing in the piece that identifies any policy being pushed by President Trump which would keep more low- and middle-skilled jobs in the United States. His actions to date do not...