Dean Baker's Blog, page 117

Republicans Proposed Trigger Mechanism in Tax Bill Would Make Recessions More Severe

The Republicans had planned to include a trigger mechanism in their tax plan, which would have automatically raised taxes in the event of budget deficits that exceeded targets. This is classically bad economic policy. It means that if growth slows and the economy falls into a recession, the government would be raising taxes. Such a tax increase when the economy is already slowing would further dampen growth, making a downturn worse.

This is very basic economics. The fact that the Republicans...

Jeb Hensarling Has Never Heard of George W. Bush and Bill Clinton and Neither Has NPR

On Morning Edition yesterday, Representative Jeb Hensarling, the chair of the House Financial Services Committee, was interviewed by David Greene. At one point, Greene asked him about the Republican tax cut proposal. After blaming President Obama for the slow growth of the last eight years, Hensarling commented:

"Every time we've had a pro-growth fundamental tax reform, be it under President Reagan, President Kennedy — you can even go all the way back to President Coolidge. We have seen payc...

Washington Post Gets Story on GDP Growth Seriously Wrong

The Washington Post proudly told readers that the economy had reached potential GDP in the third quarter of 2017 and therefore future GDP growth will have to be far slower than in the recent past, averaging just 1.8 percent over the next decade. While this is true based on the projections of the Congressional Budget Office (CBO) and most independent forecasters, it would have been worth noting that these projections have been very far from the mark frequently in the past.

CBO and other foreca...

If Cutting Taxes is "What Makes a Republican a Republican," Why Are They Raising Them on So Many Middle Income Families?

The New York Times discussed the prospects for the Republican tax bill, comparing the difference in Republican attitudes towards the tax bill and the efforts to repeal the Affordable Care Act. In its effort to explain this difference, it told readers:

"But lowering taxes is, at heart, what makes a Republican a Republican."

The problem with this assertion is that the Republican plans actually raise taxes for close to half of middle-income families, as the New York Times has reported. Given t...

WaPo Gets It Seriously Wrong: Ron Johnson Does NOT Want Pass-Through Corporations to Be Treated Like Other Corporations

In the bizarre world of Washington economics, where patent monopolies are "free trade" and projections of Social Security shortfalls decades in the future are a "crisis," it's perhaps not surprising to see reality turned on its head in the debate over the Republican tax bill. The Washington Post had a major article on Wisconsin senator Ron Johnson's objections to the tax bill.

According to the article, Johnson's is objecting because he wants a lower tax rate on income that individuals receive...

Taking Issue with Dani Rodrik: Trade Deficits are Different with Secular Stagnation (see Addendum)

I am a big fan of Dani Rodrik's writings on trade, and I agree with most of what he says in his NYT column today, but I do have one major disagreement. However, before going there let me emphasize some of the key points he makes in the piece.

First, Rodrik is very much on the mark in arguing that recent trade deals, like the Trans-Pacific Partnership, have very little to do with free trade. As he says, these deals are about imposing a corporate-friendly structure of regulations on both our tr...

How Did Mara Liasson Determine that the Federal Budget Deficit is "Dangerously High"

That is the question millions are asking after she made this assertion in a segment on Morning Edition today. Economists would usually look to evidence that budget deficits are creating too much demand in the economy, such as a rising inflation rate and/or high interest rates. Both interest rates and inflation are at historically low levels, with inflation consistently running below the Federal Reserve Board's 2.0 percent target. Based on these facts, it is not clear what could be the basis o...

If You Thought Republicans Were Just Trying to Give More Money to Rich People, the NYT Sets You Straight

Since 47 percent of the benefits of the proposed tax bill go to the richest one percent, and the very rich, like Donald Trump, will get an enormous bonanza from ending the estate tax and other provisions, many people thought the goal of Republicans with this tax bill was to give more money to the rich people who finance their campaigns. Thankfully the New York Times is there to correct this mistaken impression.

The NYT told readers that the Republican tax proposals are an:

"effort to clean up...

There is a Legislative History on the Consumer Financial Protection Bureau

Both the NYT and Washington Post articles on the battle over the secession and the Consumer Financial Protection Bureau (CFPB) neglected to mention the legislative history around the creation of the CFPB. There were competing sections on the order of succession in the event of the director's departure in the House and Senate versions.

One specified that the normal procedure on vacancies, in which the president gets to appoint an acting director, would be followed. The other had language indic...

Republicans Do Not "Think" Tax Bill is Political Death: More Mind Reading at the NYT

It's amazing how so many reporters feel the need to tell us what politicians really think. Sorry, but I don't believe they know.

The example this time is a piece reporting on how 2018 may be a wave election with defeats for the Republicans comparable to what the Democrats experienced in 2010. If concludes by discussing the effort to shove through a tax bill before the end of the year:

"Republicans do not think the tax bill will be a political albatross once voters gain a fuller appreciation o...