March 11th, 2010 . by economistmom
The Senate “jobs bill” passed on Wednesday contains nearly $60 billion in (obviously-jobs-related) extended unemployment benefits. (Here is the CBO cost estimate.) But it also includes $34 billion in extended tax cuts, none of which are brand new (they’re “expiring” provisions, after all) nor uniquely designed to get us out of this particular recession. These are expiring tax provisions that regularly expire and regularly get extended. (Here is the JCT revenue estimate where you can see line by line details on the revenue provisions.)
So the extension of the expiring tax provisions is something that would occur, repeatedly, even without the vehicle of a “jobs bill.” There really is hardly ever a tax cut that is truly “temporary” in practice, no matter how it is written into law. What the label of “jobs bill” allows is the exemption of these (effectively permanent–in good times and in bad) tax cuts from PAYGO rules, which would otherwise require that the cost of the tax cuts be offset. The CBO estimate shows (on page 2) that out of the package’s around $100 billion in cost over ten years, $95 billion is considered PAYGO-exempt because of the “emergency” designation.
It makes me wonder why politicians don’t try to label any policy they’re trying to pass lately, especially any policy they don’t want to have to pay for, as a “jobs bill.” The title of this tax extenders bill that happens to include the extension of unemployment benefits is the “American Workers, State, and Business Relief Act of 2010.” As the Administration and Congress struggle to reach agreement on the health reform bill, particularly over the policies designed to keep it (at least slightly) deficit-reducing, I wonder if it won’t be long before we hear the argument that health reform–and the expansion of health entitlements and the deficit–is needed to create jobs even more than it’s needed to control costs. When will the health reform bill get relabeled as a “jobs bill”?
March 10th, 2010 . by economistmom
A front page story in this morning’s Washington Post explains why DC’s legalization of gay marriage has been good for the DC economy:
As the first same-sex couples married in Washington on Tuesday, the city is in the national spotlight as a pioneer in the gay-rights movement. But local officials say the historic event also has more practical implications for a city grappling with 12 percent unemployment: jobs. A study by the nonprofit Williams Institute predicted that legalizing same-sex marriage will create 700 jobs and contribute $52.2 million over three years to the local economy.
“We think it’s a great opportunity to capitalize on groups that will be coming to Washington,” said Elliott Ferguson, chief executive of Destination D.C., the city’s tourism and marketing arm. “It’s the nation’s capital. It’s symbolic.”
Businesses are already lining up to cater to what Forbes estimated is a $16.8 billion national market. A local restaurant answered the phone Tuesday with “Happy gay marriage day.”
Organizers of the city’s first gay and lesbian wedding expo, planned for spring at the Renaissance Hotel in Dupont Circle, said hotels were jockeying to host the expo — a dramatic change from the days when hotels were reluctant to put signs with same-sex couples’ names in the lobby.
It makes great sense to me. I know from just casual observation that some of the nicest parts of Rehoboth Beach, DE, with the most beautiful (and pricey) homes, are the parts known to have a high concentration of gay homeowners. This may be stereotyping, but gay people do seem to like to shop (certainly more than the average run-of-the-mill heterosexual male who is one half of most “couples”), and they do seem to have above-average taste and style. So legalizing gay marriage means there will be some unusually tasteful and stylish (and probably expensive) weddings, honeymoons, home furnishings, etc. Good for the economy, for sure. And because there’s this thing called the sales tax (which is pretty high in DC–10% for restaurant meals, meaning wedding receptions!), gay marriage will be good for government budgets as well.
It reminds me of the economic argument I’ve heard for why we should legalize marijuana. And I think when prohibition (of alcoholic beverages) ended, that was probably pretty good for the economy, too. I mean, where would all that Super Bowl commercial revenue come from if it weren’t for (legal) beer?
March 8th, 2010 . by economistmom
Boy– that was awful being disconnected for so long (even longer than during Snowmageddon!). I’ll be back posting something of substance tomorrow (Tuesday) I hope. Can’t believe I missed CBO’s (preliminary) analysis of the President’s budget. I’ll write about it tomorrow, but you won’t be surprised about what I’ll emphasize. CBO Director Doug Elmendorf already pointed it out in his blog post from last Friday (emphasis added):
Under the President’s budget, the cumulative deficit over the 2011–2020 period would equal $9.8 trillion (5.2 percent of GDP), $3.8 trillion more than the cumulative deficit projected in the baseline. Of that difference, roughly $3.0 trillion stems directly from proposed changes in policy and another $0.8 trillion results from additional interest on the public debt. By far the largest budgetary impact would stem from the President’s proposals to index the alternative minimum tax (AMT) for inflation and to extend various tax provisions contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion. Other policies would have smaller but still significant effects on the budget and would largely offset one another.
March 4th, 2010 . by economistmom
I have a lot going on in my real (mom) life over the next few days, so I won’t be posting for awhile. I won’t even be able to moderate comments for at least the next couple days. No family emergency–just busy. (And no, this is not at all related to Charlie Rangel’s leave of absence from his Ways and Means chairmanship…)
Keep up the comments without me. (I know a few of you will.)
Oh — here’s a good post by Bruce Bartlett critiquing the idea a couple of House Republicans have for reining in spending. That is quite a contrast to Paul Ryan’s approach, which although (I believe) unrealistic, is still brutally honest. Steny Hoyer gave the proposal and its author some credit the other day when he said:
It’s also clear to me that if the commission takes a one-handed approach, it will fail, both politically and substantively. Congressman Ryan’s thoughtful budget proposal shows what an approach looks like when it relies entirely on cutting spending. He should be commended for putting together a serious and detailed plan to tackle the deficit. It doesn’t raise a single tax. But as a consequence, it significantly changes Medicare.
That strikes me, as I think it would strike most Americans, as very much the wrong solution. But Congressman Ryan deserves respect for his honesty—for being one of the few members of his party, or of either party, to tell the public exactly what he’d cut. That’s far better than pretending that the solution to higher deficits is simply lower taxes and wishful thinking. In fact, as much as his party’s leadership tries to distance itself from his plan, Paul Ryan’s program, or something very much like it, is the logical outcome of the Republican rhetoric of cutting taxes and deficits at the same time.
March 2nd, 2010 . by economistmom
OK — we’re a little worried at the Concord Coalition that the harder the politicians work at finding agreement on health care reform, the more likely we’ll end up with a reform that doesn’t actually “bend the health cost curve.” From a “Tabulation” blog post by Concord Executive Director Bob Bixby:
If we learned anything from last week’s health care summit, it is that the final end game negotiations will not take place between Democrats and Republicans but among various factions of Democrats…
One casualty of the situation may be cost containment. Democrats are mostly united around coverage expansion. That’s the easy part. Their biggest difference is on the more difficult question of aggressive cost containment. The two most promising cost-containment strategies still on the table are the tax on high-cost health care plans and the Independent Payment Advisory Board (IPAB). Both were adopted by the Senate but not by the House, where they remain deeply unpopular.
If the price for securing 218 votes in the House is eliminating or neutering these provisions, the result will be a bill that expands coverage with very little prospect of controlling costs…
President Obama has already given ground on the high-cost tax. In his latest summary of proposals to bridge the gap between House and Senate Democrats, he proposes that implementation of the tax be delayed until 2018. However, while some phase-in period may be appropriate, the same forces fighting the tax now will not simply melt away over the next eight years. The projected cost savings from this provision are thus looking increasingly speculative.
The assumed cost savings from IPAB may also be in danger. The President proposed this idea last summer as an ongoing method of reviewing Medicare expenditures and proposing ways to keep costs under control. While it has been watered down, the President remains committed to the concept. However, many influential House members view it as an intrusion on their ability to set Medicare payment rates and have opposed it from the outset.
Wait — remind me: why was it we were pursuing health care reform?
March 1st, 2010 . by economistmom
House Majority Leader Steny Hoyer gave a speech on fiscal responsibility at the Brookings Institution today. He reaffirmed his strong faith in PAYGO (pay-as-you-go) budget rules as “so valuable” to the cause–although he acknowledged the large exemptions for current policy and at the same time brushed that qualification aside a little too easily (for my tastes).
But my favorite part was when he talked about how the politically easy choices are the economically devastating ones:
The most important lesson we can draw from the years of recklessness is this: when it comes to budgeting, what is politically easy is often fiscally deadly. It is easier to pay for tax cuts with borrowed money than with lower spending; easier to hide the true costs of war than to lay those costs before the people; easier to promise special cost-of-living adjustments than explain why an increase is not justified under the formula in law; easier to promise 95% of Americans that we won’t consider raising their taxes than to ask all Americans to contribute for the common good. Those kinds of easy choices are so often selfish choices—because they leave the chore of cleaning up to someone else. Easy choices may be popular—but the popularity is bought on credit.
Washington’s behavior will only change when the incentives change: when voters demand more responsibility, and when the political price for easy choices rises sharply. As I said, I’m hopeful that just that is happening. But the public has a responsibility, too: to educate itself about the sources of the deficit and the range of realistic solutions—not to demand that government continue to escalate entitlement payments and lower the deficit at the same time.
We can’t meet this challenge unless the public is ready to confront tough choices, and unless leaders in both parties are ready to be honest about tough choices. When deficit solutions meet resistance, which they will, and when they are painful, which they will be, it’s our job to explain why they are also correct—and essential.
“Steadfast Steny” can talk like this without being a hypocrite, as he’s taken a lot of courageous positions and votes, even in his role as Majority Leader where he’s supposed to be worried about the politics.
UPDATE Tuesday morning: The NYTimes’ Jackie Calmes points out that Steny bravely “challenged the sacred cows in his own party” by suggesting some fairly specific options to damp down spending on Social Security and Medicare. My observation is that for most in Steny’s “own party”–including the President himself–the (Bush) tax cuts for that very-broadly-defined middle class of households with incomes under $250,000 have (bizarrely) become another “sacred cow” of theirs (the Democratic Party). And that’s the problem. How can the Democrats work in a bipartisan manner with Republicans if what they would otherwise negotiate on–in terms of “I’ll give up this (entitlement spending) if you give up that (tax cuts)”–is not really bargaining for anything they really want?