Category Archives: Economy

ALEC Tax and Budget Proposals Would Slash Public Services and Jeopardize Economic Growth

Source: Erica Williams and Nicholas Johnson, Center on Budget and Policy Priorities, February 12, 2013

From the summary:
Governors and legislatures in numerous states are considering, or have recently enacted, sweeping tax and budget proposals that follow recommendations of the American Legislative Exchange Council (ALEC), with potentially adverse consequences for middle- and lower-income families, individuals, and communities across the country.

These policies would cut taxes deeply for wealthy individuals, investors, and corporations; shift tax burdens substantially from well-to-do to middle- and low-income households; and impose strict constitutional or legal limits on revenues or spending that would severely limit states’ ability to provide adequate funds for education, health care, and other priorities, and impair state economic growth.

The specific policies include deep cuts in income taxes, particularly for affluent households and corporations; a repeal of state income and estate taxes; a shift in state revenues from graduated-rate income taxes to sales taxes that are much higher than most states have today; the end of various state-based tax credits for low-income working families; a Taxpayer Bill of Rights (TABOR) that would impose rigid constitutional limits on state revenues and spending; requirements that state legislatures garner two-thirds or other “super-majority” votes to raise any taxes or fees; and other mechanisms that would reduce the funds available to finance key public services.

Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2011 estimates)

Source: Emmanuel Saez, University of California, Department of Economics, January 23, 2013

…From 2009 to 2011, average real income per family grew modestly by 1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011. In 2012, top 1% income will likely surge, due to booming stock-prices, as well as re-timing of income to avoid the higher 2013 top tax rates. Bottom 99% will likely grow much more modestly than top 1% incomes from 2011 to 2012….
See also:
The One Percent Gobbled Up the Recovery, Too / In fact, it put the 99 percent back in recession
Source: Timothy Noah, New Republic, February 12, 2013

20 Facts about U.S. Poverty and Inequality that Everyone Should Know
Source: Stanford Center on Poverty and Inequality (CPI), 2011

Recession Trends

Source: Russell Sage Foundation and the Center on Poverty and Inequality, 2013

The ongoing economic downturn is the worst of the postwar period. It bears some similarity, at least as regards origins, to the economic catastrophe of the Great Depression, and it may well have similarly far-reaching economic and social consequences. The purpose of the Recession Trends website, which is a collaboration between the Russell Sage Foundation and the Stanford Center on Poverty and Inequality, is to monitor and report on such economic and social effects. We do so by offering two main resources:

Recession Briefs: We offer 16 up-to-date Recession Briefs, each written by the top authority in the field, that document the effects of the downturn on wealth, consumption, the labor market, housing, poverty, the safety net, health, education, crime, attitudes, and a variety of other key domains. If you want the latest and best evidence on the effects of the downturn, click here to explore our Recession Briefs.

Graphing Utility: Have you ever wondered where to go to get the best and latest trend data on the social effects of the downturn? It’s here! We offer a simple-to-use graphing utility that provides customizable graphs on the key trends in each of our 16 domains. It’s the most comprehensive compilation of trend data available on the social consequences of the downturn. Click here to check out our Graphing Utility.

But that’s not all. We also offer a host of other resources for journalists, scholars, and anyone else interested in the social and economic effects of the downturn. We offer a series of recession-relevant podcasts, narrated by the inimitable Diantha Parker, on such topics as the destruction of household wealth, the growing number of disconnected youth, the effects of the downturn on politics, the big chill in consumer spending, the downturn in charitable giving, and much more. We also offer a clearinghouse of relevant research projects, working papers, and research summaries.

Nebraska Department of Revenue: An Examination of Nebraska Advantage Tax Incentive Programs

Source: Martha Carter, Kathryn Gudmunson, Clarence Mabin, Stephanie Meese, Performance Audit Committee, Nebraska Legislature, Committee Report, Vol. 18, No. 1, February 2013

From the press release:
A performance audit of four business tax incentive programs found that the goals Nebraska legislators stated for the incentives were too vague to permit useful evaluations of the programs, according to a report released Monday by the Legislative Performance Audit Committee. Businesses that qualified for incentives under the Nebraska Advantage Act—the major program of the four reviewed—used nearly $76 million in tax refunds and credits between 2008 and 2011, and earned as much or more in additional tax credits that had not yet been used, according to the report. Yet, whether these amounts, or key data from any of the other three programs, mean that the incentives are doing “’enough’” or that program costs are “’appropriate’” cannot be judged….

The audit also found that:
• The estimated cost-per-job for jobs created under the centerpiece Nebraska Advantage Act ranged from $42,747, considering only compensation tax credits, to $234,568 considering all earned benefits except the property tax exemption….
Related:
Nebraska spends up to $235,000 per job in tax incentives, audit report says
Source: Deena Winter, Nebraska Watchdog, February 11, 2013

Aggregate Demand and State-Level Employment

Source: Atif Mian and Amir Sufi, Federal Reserve Bank of San Francisco, FRBSF Economic Letter, 2013-04, February 11, 2013

What explains the sharp decline in U.S. employment from 2007 to 2009? Why has employment remained stubbornly low? Survey data from the National Federation of Independent Businesses show that the decline in state-level employment is strongly correlated with the increase in the percentage of businesses complaining about lack of demand. While business concerns about government regulation and taxes also rose steadily from 2008 to 2011, there is no evidence that job losses were larger in states where businesses were more worried about these factors.

Neoclassical Labor Economics: Its Implications for Labor and Employment Law

Source: Michael L. Wachter, University of Pennsylvania, Institute for Law and Economics, Research Paper No. 13-34, 2012

From the abstract:
Whereas law and economics appears throughout business law, it never caught on in legal commentary about labor and employment law. A major reason is that the goals of the National Labor Relations Act (NLRA), the country’s foundational labor law, are at war with basic principles of economics. The lack of integration is unfortunate if understandable. Notwithstanding the NLRA’s normative goal to keep wages out of competition, economic analysis applies as centrally to labor markets as to any other market.

One of the NLRA’s primary goals is to equalize bargaining power. Its drafters envisioned achieving this goal through procedural and substantive means: increasing the number of people covered by collective bargaining contracts and raising union wages above competitive levels. These goals, however, are in conflict. For the NLRA to succeed, the relationship between demand (employment) and prices (wages) would have to be upward sloping. Unfortunately, the reverse is true. While the adverse tradeoff between above-market union wages and union employment was not as marked in the Wagner Act, the NLRA’s vision became unattainable once the Taft-Hartley amendments sanctioned competition between union and nonunion models of the employment relationship.

This Chapter uses neoclassical economics to analyze several theoretical and policy issues. For example, it considers the efficiency wage theory that unions can raise productivity to offset above-market pay. Efficiency wages work when employees respond to a reward, as in above market pay, with greater loyalty. Yet union workers are more likely to be loyal to their labor unions than the firm that the union claims resisted the higher pay. The efficiency wage model works better in the nonunion model, the context in which it was first developed. While unions may be preferred on normative grounds, the highly competitive political economy of the United States makes it difficult for unions to succeed.

The Increase in Unemployment Since 2007: Is It Cyclical or Structural?

Source: Linda Levine Congressional Research Service, CRS Report for Congress, R41785, January 24, 2013

…This report assesses the relative magnitudes of cyclical and structural unemployment as they respond to different policy measures. An analysis of changes since 2007 in a variety of labor market indicators across industries and areas finds patterns that strongly suggest most of the increase in the U.S. unemployment rate is cyclical (i.e., due to depressed aggregate demand). Empirical studies suggest that, although structural unemployment has temporarily increased, it accounted for a minority of the rise in the unemployment rate in recent years…

The Job-Creation Shell Game: Ending the Wasteful Practice of Subsidizing Companies that Move Jobs from One State to Another

Source: Greg LeRoy, Kasia Tarczynska, Leigh McIlvaine, Thomas Cafcas and Philip Mattera, Good Jobs First, January 2013

From the abstract:
This study describes how state and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather. It also looks at how the existence of relocation subsidies emboldens some large companies to demand large job blackmail subsidies to stay put. The report offers policy recommendations to address the problem.
See also:
Press Release

Debt Limit and Ongoing Fiscal Debate: County Risks and Opportunities

Source: National Association of Counties (NACo), January 2013

The National Association of Counties (NACo) has released a new legislative presentation which provides a quick guide to understanding the debt limit debate and the significance to U.S. counties. The presentation also examines areas of risk and opportunity for counties in the ongoing negotiations.

The presentation highlights:
• Why Counties Should Care about the Debt Limit Debate
• What is the Debt Limit
• Why is there a Debt Limit
• Extraordinary Measures to Prevent Default
• Context for Federal Debt and Deficit Discussion
• Ongoing Fiscal Debate and the First Fiscal Cliff Deal
• County Risks and Opportunities