Category Archives: Economy

The CEO Campaign to 'Fix' the Debt: A Trojan Horse for Massive Corporate Tax Breaks

Source: Sarah Anderson and Scott Klinger, Institute for Policy Studies, November 13, 2012

From the summary:
This business-driven initiative is using the so-called fiscal cliff as a cover for tax-code changes that would damage our economy.

The Fix the Debt campaign has raised $60 million and recruited more than 80 CEOs of America’s most powerful corporations to lobby for a debt deal that would reduce corporate taxes and shift costs onto the poor and elderly.

This report focuses on the Fix the Debt campaign’s corporate tax agenda and in particular the windfalls the campaign’s member corporations would reap from a territorial tax system. We also analyze the savings the Fix the Debt campaign’s CEOs have derived from the Bush tax cuts and how many of them received more in compensation last year than their corporations paid in federal income taxes.

Key findings:
– The 63 Fix the Debt companies that are publicly held stand to gain as much as $134 billion in windfalls if Congress approves one of their main proposals — a “territorial tax system.” Under this system, companies would not have to pay U.S. federal income taxes on foreign earnings when they bring the profits back to the United States.
– The CEOs backing Fix the Debt personally received a combined total of $41 million in savings last year thanks to the Bush-era tax cuts. The top CEO beneficiary of the Bush tax cuts in 2011, Leon Black of Apollo Global Management, saved $9.9 million on the Bush tax cuts. The private equity fund leader reaped $215 million in taxable income last year just from vested stock.
– Of the 63 Fix the Debt CEOs at publicly held firms, 24 received more in compensation last year than their corporations paid in federal corporate income taxes. All but six of these firms reported U.S. profits last year.

The Rise of the Super-Rich: Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949 to 2008

Source: Thomas W. Volscho and Nathan J. Kelly, American Sociological Review, Vol. 77 no. 5, October 2012
(subscription required)

From the abstract:
The income share of the super-rich in the United States has grown rapidly since the early 1980s after a period of postwar stability. What factors drove this change? In this study, we investigate the institutional, policy, and economic shifts that may explain rising income concentration. We use single-equation error correction models to estimate the long- and short-run effects of politics, policy, and economic factors on pretax top income shares between 1949 and 2008. We find that the rise of the super-rich is the result of rightward-shifts in Congress, the decline of labor unions, lower tax rates on high incomes, increased trade openness, and asset bubbles in stock and real estate markets.

State and local government workers unlikely to see job recovery before 2017

Source: Bailey McCann, CivSource, September 25, 2012

A new report from IHS Global Insights shows that any near-term economic recovery in the US isn’t likely to include adding jobs to state and local governments. The data tracks with the the National League of Cities budget report, CivSource reported on last month which shows that cities and states are still making layoffs. Some areas are relying on part-time workers to fill the gaps.

According to the economic forecast from IHS, state and local government workers shouldn’t expect to see their ranks hit pre-recession levels until 2017. Total employment by states and cities could grow 3.2 percent to 19.9 million in 2017 from 19.3 million in 2012 – an addition of 620,000 jobs, IHS Global Insight said.

Unions Are Necessary to Rebuilding Our Middle Class

Source: David Madland and Nick Bunker, Center for American Progress, September 12, 2012

By advancing the interests of the middle class in the workplace and in our democracy, unions help build and strengthen the middle class.
Unions Boost Economic Mobility in U.S. States
Source: David Madland and Nick Bunker, Center for American Progress, September 20, 2012

States with Stronger Unions Have Stronger Middle Classes
Source: David Madland and Nick Bunker, Center for American Progress, September 21, 2012

The United States Labor Market: Status Quo or A New Normal?

Source: Edward P. Lazear, James R. Spletzer, NBER Working Paper No. 18386, September 2012
(subscription required)

From the abstract:
The recession of 2007-09 witnessed high rates of unemployment that have been slow to recede. This has led many to conclude that structural changes have occurred in the labor market and that the economy will not return to the low rates of unemployment that prevailed in the recent past. Is this true? The question is important because central banks may be able to reduce unemployment that is cyclic in nature, but not that which is structural. An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. Although mismatch increased during the recession, it retreated at the same rate. The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions.

Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945

Source: Thomas L. Hungerford, Congressional Research Service (CRS), R42729, September 14, 2012

Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie). Proponents of higher tax rates argue that higher tax revenues are necessary for debt reduction, that tax rates on the rich are too low (i.e., they violate the Buffett rule), and that higher tax rates on the rich would moderate increasing income inequality (change how the economic pie is distributed). This report attempts to clarify whether or not there is an association between the tax rates of the highest income taxpayers and economic growth. Data is analyzed to illustrate the association between the tax rates of the highest income taxpayers and measures of economic growth. For an overview of the broader issues of these relationships see CRS Report R42111, Tax Rates and Economic Growth, by Jane G. Gravelle and Donald J. Marples.

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

The Negative Employment Impacts of the Medicare Cuts in the Budget Control Act of 2011

Source: Tripp Umbach, September 2012

From the press release:
The American Hospital Association (AHA), the American Medical Association (AMA) and the American Nurses Association (ANA) today released a new report that found up to 766,000 health care and related jobs could be lost by 2021 as a result of the 2 percent sequester of Medicare spending mandated by the Budget Control Act of 2011.

The report, produced by Tripp Umbach, a firm specializing in conducting economic impact studies, measures the anticipated effect of these cuts in Medicare payments on health care providers and other industries. The Tripp Umbach model reflects how reductions in Medicare payment for health care services will lead to direct job losses in the health care sector; reduced purchases by health care entities of goods and services from other businesses, which in turn will lay-off workers; and reduced household purchases by workers who lose their jobs. As the impact of these cuts ripples through the economy, jobs will be lost across many sectors beyond health care.

The State of Working America, 12th Edition

Source: Lawrence Mishel, Josh Bivens, Elise Gould, and Heidi Shierholz. Economic Policy Institute, September 2012

From the press release:
Low- and middle-income workers and their families would have had far better income growth over the past 30 years if economic policies had not directed the fruits of economic growth to the highest-income Americans, a new Economic Policy Institute book, “The State of Working America, 12th Edition” finds. For example, had there been no growth in income disparities since 1979, annual income for a middle-income household would have been $88,875 in 2007, $18,897 higher than the $69,978 it actually was. The median household lost wealth between 1983 and 2010 and had just $57,000 in net worth in 2010, rather than the $119,000 it would have had if wealth had grown equally across all households over this period….

…”The State of Working America, 12th Edition” explains that economic policies, including policymakers’ actions and failures to act, have undercut the ability of workers to benefit from economic growth in the United States. Its primary findings include:
– America’s vast middle class has suffered a “lost decade” and faces the threat of another…
– Income and wage inequality have risen sharply over the last 30 years….
– Rising inequality is the major cause of wage stagnation for workers and of the failure of low- and middle-income families to appropriately benefit from growth….
– Economic policies caused increased inequality of wages and incomes….
– Claims that growing inequality has not hurt middle-income families are flawed….
Inequalities persist by race and gender….

…”The State of Working America, 12th Edition” includes new and compelling data on:
Income, Mobility, Wages, Jobs, Wealth, Poverty…

The Trend is the Cycle: Job Polarization and Jobless Recoveries

Source: Nir Jaimovich, Henry E. Siu, National Bureau of Economic Research, NBER Working Paper No. 18334, August 2012
(subscription required)

From the abstract:
Job polarization refers to the recent disappearance of employment in occupations in the middle of the skill distribution. Jobless recoveries refers to the slow rebound in aggregate employment following recent recessions, despite recoveries in aggregate output. We show how these two phenomena are related. First, job polarization is not a gradual process; essentially all of the job loss in middle-skill occupations occurs in economic downturns. Second, jobless recoveries in the aggregate are accounted for by jobless recoveries in the middle-skill occupations that are disappearing.