Tag Archives: taxes

The Recovery that Isn’t

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In a recent piece in The Wall Street Journal about post-Panic borrowing increases, James Sterngold and Matt Wirz had an interesting graphic showing the evolution of the US economy from just prior to that Panic to today.  Excerpted below is the part of that graphic indicating the jobs market evolution.

The graph is hard to read; here are some highlights:

  • More than 21 million Americans wanting a job at the 2010 peak, over 18 million still in that strait today.
  • Just under 16 million Americans out of work for at least 27 weeks (over 6 months), still nearly 12 million in that strait today.
  • Dropping out of the market due to discouragement in finding work—of any sort—peaking at over 1 million per year and still nearly that today.
  • Labor force participation rate near a 35 year low.

And there’s this, which takes a longer look at that last bullet:

Notice that bit on the right: after the Panic’s official end, participation rate continued to plummet.

As the WSJ points out,

If the participation rate merely returned to what it was at the end of the recession, nearly four million more Americans would be collecting a paycheck.

Had our recovery progressed as a normal one does, we’d be here:

A normal recovery coming out of a downturn as deep and steep as the Panic of 2009 typically sees growth rates of 5%-6% per year, or more.  This Obama recovery has been 6.7% over the entirety of his term in office—nearly five years.  Had we seen a normal recovery (and using a pessimistic 5%/year growth rate), we would have reached today’s unemployment rate after a bit over one year—late 2010—and we would have been back to full employment (in the range of 4.8%-5.5%) in just under 2 years—two years ago.

Had our recovery progressed as President Barack Obama promised it would when he was stumping for and signing the massive 2009 Stimulus Bill, we’d be here:

He promised in 2009 a 5.5% unemployment rate by a couple of years ago.  How many new jobs would have been created had we actually reached his promised number?  In December 2009 (some six months after the nominal end of the Panic of 2009), the civilian labor force was 153 million, of which 137.8 million Americans were employed, a 10% unemployment rate, according to BLS statistics, and using round numbers.

In August 2013, again using BLS numbers, the civilian labor force was larger, at 155.5 million (and it had a smaller participation rate than in 2009, but we’ll gloss over that for now).  There were some 144.2 million Americans actually employed.

However, a 5.5% unemployment rate corresponds, if my 1st grade arithmetic serves me well, to 94.5% of the civilian labor force actually employed: 146.5 million Americans.  Again consulting my 1st grade arithmetic book, there are some 2.3 million Americans that should be employed but aren’t—because Obama’s proudly proclaimed policies have come up short, and we aren’t anywhere near 5.5% unemployment.

Finally, there’s this:

Current population: 313.9 million
Current civilian labor force: 155.5 million
Current labor force participation rate: 63.2
Current unemployment rate: 7.3%
Employed Americans: 144.2 million
Unemployed Americans: 11.3 million of those looking for work

2007 population: 301.1 million
2007 civilian labor force (last full year before the Panic): 153.1 million
2007 labor force participation rate: 65.8%
2007 unemployment rate: 4.6%
2007 Employed Americans: 146 million
2007 unemployed Americans: 7.1 million

Over the last six years, our population grew by 4.3%; our labor force population grew less than that, at 1.6%; our employed population shrank by 1.2%; and our unemployed population grew, a lot.  We’re not even keeping up.

Yet despite these obvious failures of Progressive policies, Obama and his Senate counterparts threaten to shut down our government and blow up our national credit rating and with it our economy, if he’s not allowed to have more spending increases, yet higher taxes, and a yet higher debt ceiling so he can borrow to pay for his spending (because he knows higher taxes won’t cover it; he just wants the higher taxes because…well, just because).

Obamacare and Taxes

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Casey Mulligan has looked into this in a paper he has at the National Bureau of Economic Research titled “Average Marginal Labor Income Tax Rates under the Affordable Care Act“.  The full paper can be had through the NBER for five bucks.

Mulligan summarizes his paper here, on his blog supply and demand (in that order).

My summary of Mulligan’s summary is his comparison of Obamacare’s impact on our marginal tax rates with the impact of a couple of other programs and his comment on the impact of Obamacare on our take home pay—the part of our paychecks we actually get to use for our own purposes.

Several SNAP (formerly food stamp program) expansions in combination were a quarter of the ACA’s magnitude.  In terms of its impact on average marginal tax rates, the ACA hike is almost double the effect of permanently increasing unemployment benefit payments to 99 weeks from a baseline of 26 weeks[.]

And

[Obamacare] has not been introduced into a tax-free economy, so its marginal tax rate hikes add to marginal tax rates already in effect.  I estimate that, by 2015, the average marginal after-tax share among household heads and spouses with near-median weekly earnings will have fallen to 0.50 from 0.60 in 2007, largely from the ACA but also from other expansions in safety net programs.  That is a massive 17 percent reduction in the reward to working—akin to erasing a decade of labor productivity growth without the wealth effect….

That is to say, in just two short years—immediately on implementation of Obamacare—our median income wage earner will see his take home pay drop 17%, from 60% of his paycheck (already too small a portion) to a miniscule 50% of his paycheck.  As Mulligan notes, that is an enormous penalty to pay for the opportunity to work for one’s living.

Keep in mind, also, that the median weekly income in the US as recently as 2012 was the princely sum of $775.  This works out to a skosh over $40,000 per year.  It’s hard enough to feed, cloth, and educate a family on three-fifths of that.  Think about trying to do it on only half.

National Competitiveness

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James Pethokoukis had some thoughts on this in his recent AEIdeas article, “We’re #5: US gains in global competitiveness rankings.  But guess what our biggest problems are…”  In citing the World Economic Forum’s Global Competitiveness Report, he noted

After having declined for four consecutive years in the ranking, the United States reverses its downward trend, rising by two positions to take 5th place this year and overtaking the Netherlands and Sweden.

And

While the economy is getting back on track, the deleveraging process in the banking sector continues to show positive effects on the stability and efficiency of the country’s financial markets, improving from 31st three years ago to 10th this year in that pillar.

But.  There’s always a but, and Petholoukis doesn’t disappoint.  See this graph:

The graph is hard to read; the “most problematic factors” in the red box are, in order, Tax regulations, Tax rates, and Inefficient government bureaucracy.  (Note: The numbers (e.g., Tax regs’ 16.3) are businessmen responses on a scale of 1 (best) to 5 (worst), which are then weighted so that the final values for the 16 factors sum to 100.  Thus, Tax regulations can be interpreted as held roughly 16 times more important than Foreign currency regulations.  The bars visualize the numbers.)

Yet our man in the White House demands to continue raising taxes, to the point he’s willing to shut down the government and blow up our economy (he also refuses to negotiate over the debt ceiling, remember) if he can’t get more and higher taxes.  And it’s his tax collection agency that targets political groups and their speech of which he disapproves.

Hmm….

Obama’s Debt Ceiling Strategy

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Pass increased spending and give me more tax revenue.  Period.  Oh, and hands off my pet projects.

The House of Representatives will agree to a debt ceiling increase (want to agree, for good or ill), if President Barack Obama will agree to spending reductions equal to, or greater than, the increase in the ceiling.  Obama says he refuses to negotiate at all on the debt ceiling.  Just raise it.  Or he’ll be forced to shut down the government for lack of borrowing authority.

The House of Representatives, along with a bipartisan collection of Senators, want to reform our tax code and use any increases in tax revenue that might result solely to pay down the national debt (and so to mitigate any future need to raise the debt ceiling anew).  Obama says that tax reform must, by design, result in increased tax revenue, with that increase to be committed solely to support increased spending.  Otherwise, he’ll be forced to shut down the government for lack of revenue.

Many Republicans want to pass a budget for the coming fiscal year, or failing that a Continuing Resolution for the coming months, that contains clauses that defund Obamacare—a program that Obama has already admitted isn’t ready for adult use.  Obama has said he’ll veto such a budget, even if it means he must shut down the government for lack of spending authority or income.

Obama is perfectly willing to shut down the government and blow up our economy if he can’t have all of this.  Not one or two of them—all of them.

Wondering Why?

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…your gas prices are as high as they are?  It isn’t only the summer driving season.  It isn’t only limits on gasoline production at our refineries.  It isn’t even that ethanol-laced gasoline doesn’t even store well so that inventories can be built to smooth out the ebbs and flows of supply and demand.  Here’s another reason, alluded to in a Wednesday op-ed by Kimberly Strassel on a related topic.

Last week, the Environmental Protection Agency issued its annual renewable-fuels mandate, telling refineries how much ethanol they must blend into the nation’s gas supply.  This quota, which grows each year, is becoming a horrific financial burden on the industry, forcing many refineries to buy federal ethanol “credits” to satisfy the rules.  The skyrocketing price of those credits is adding hundreds of millions of dollars to refineries’ annual costs.

Those costs are passed on.  To gasoline-buying customers like our neighborhood filling stations—and you and me.

Refiners say that, with declining demand for gasoline, next year (2014—oddly, a mid-term election year), the existing quota for ethanol use will force them to blend in more than 10% of ethanol into their gasoline production, which both adds to gasoline costs and isn’t safe for many of the engines that use gasoline—like some cars that are optimized only for 10% blends, and smaller engines such as those used in our lawnmowers.

Even at that, the mandated ethanol use quotas simply aren’t possible to get to.  The 2013 mandated quota is 6 million gallons (down, incidentally, from the EPA’s original laughable requirement of 1 billion (that’s with a “b”) gallons to be used this year); the nation’s total ethanol production for this year will top out below 50 thousand gallons.  The quota stands, though, so the refiners are required to go onto the EPA’s ethanol credit market that Strassel mentioned, and buy up enough credits to make up for their collective failure to use 950,000 gallons of ethanol.

Costs.