Economy

Richie Rich Aces the SAT

(Flickr/sacmclubs)

The College Board released its data on 2012 SAT scores on Monday, and beneath the headlines (which tallied how much SAT scores have slipped as more and more students take the test) was a revealing picture of the influence of students’ household income on their performance.

The influence couldn’t be more decisive. The board measured household income in increments of $20,000 – starting with students from households making $0 to $20,000 annually, then $20,000 to $40,000, all the way up to $160,000 – then an increment of $40,000 ($160,000 to $200,000) and then a final category of more than $200,000. And SAT scores rose considerably at every step in the income scale. The poorest students, from households making less than $20,000 had a mean combined score of 1322 out of 2400; the next highest, 1397; then 1458, then 1497 – all the way to a score of 1722 for students from households making more than $200,000. That’s a 400-point difference between our richest and poorest students.

What Will Obama Do about Income Inequality? Not Much.

New data from the Census Bureau shows that the tepid recovery is exacerbating income inequality and pushing ordinary Americans into tougher economic circumstances. Here is the Los Angeles Times with more detail:

The median household income, after adjusting for inflation, dropped 1.5% in 2011 from the previous year to $50,054. That is now 8.1% lower than in 2007, when the recession began late that year. […]

Voters Getting Mixed Signals from the Market

(AP Photo/Richard Drew)

Until not long ago, there was a widespread assumption that the economy could well be Barack Obama's undoing. After all, no president since Franklin Roosevelt had been re-elected with unemployment as high as it is now, so if Obama were to prevail, it would take an unusual combination of factors that usually matter only on the margins—the skills of the respective candidates, a foreign crisis or two—to allow him to win.

What the Heck Is Quantitative Easing?

A look at the history behind the Fed's latest move

(Flickr/Talk Radio News Service)

Last week, the Federal Reserve announced a third round of quantitative easing, or what is referred to as QE3. This is an open-ended purchase of $40 billion a month, along with a commitment to keep rates low until “a considerable time after the economic recovery strengthens.” Many economic commentators are saying that this is a serious change in economic policy. In order to understand why this is so important to our economy now, it might be helpful to go back to an academic debate about Japan in the 1990s.

Romney’s Bigger Lie

 

Lots of Republican conservatives, Paul Ryan and Bill O’Reilly among them, have taken the position that even if Mitt Romney’s rhetoric was clumsy, his point was basically right. Some Americans pay taxes; others collect benefits.

But his basic claim was total baloney. When you count income taxes, payroll taxes, excise taxes, and highly regressive state and local taxes, the typical lower income working American pays about one-fifth of his or her income in taxes—more than Mitt Romney!

According to a study by Citizens for Tax Justice, the bottom fifth of the income distribution paid 17.4 percent of their income in state and local taxes. The second-poorest fifth paid 21.2 percent.

#OWS Is Not the Liberal Tea Party

The progressive movement is the real counterpoint to the Tea Party, and it was made much stronger by the 99 percent's successful attempt to change the conversation on inequality.

(AP Photo/Seth Wenig)

At an event this weekend marking the one-year anniversary of Occupy Wall Street, I was reminded why the success of these protests was so improbable in the first place. It wasn’t just that we’d tried this sort of thing before and it had never worked. It wasn’t the predominance of anarchists, whom we were all accustomed to dismissing as the irrelevant fringe at progressive protests. It was also the smell. New York City smells bad enough on its own. But put populists in a public encampment for a few days, and it stinks. After months, it’s repulsive.

Two-Faced on Taxes

Chart of economic growth from New York Times.

A lot of the debate we have in America about economics (like many issues) ends up being statements of principle masquerading as analysis of empirical reality. And maybe this is my bias talking, but it seems like most of this comes from the conservative side. For example, it's now become disturbingly common to hear conservatives say that when you cut taxes, total tax revenues actually go up, since the tax cutting creates an explosion of economic growth that brings in lots of new revenue. This idea has zero empirical support. It isn't that cutting taxes can't increase growth somewhat, it's just that it doesn't increase it enough to make up for the lost revenue. Yet no matter how many times economists demonstrate that cutting taxes doesn't actually increase revenue, Republican politicians continue to claim that it does. This is widely known as the "Tax Fairy," since believing in it makes about as much sense as believing in the Tooth Fairy. But conservatives would certainly like it to be true. Their belief in low taxes, particularly for the wealthy, is really a moral position more than anything else. And if cutting taxes actually increased revenue and enabled us to cut the deficit, then that would be great too. But their moral belief is where things originate, and why empirical evidence that their preferred policy produces problems doesn't make them change their position.

I thought about this when I read this article in yesterday's New York Times by David Leonhardt, in which he relates a conversation he had with Paul Ryan about taxes. He gave Ryan a chart showing economic growth over the last few decades, to initiate a discussion about the efficacy of tax cuts. As you might remember, Bill Clinton raised taxes in 1993, and what ensued was a period of spectacular economic growth, with 23 million jobs created overall during Clinton's two terms. Then George W. Bush came in and cut taxes repeatedly, and what ensued was a decade of economic stagnation. How does Ryan explain the fact that in the real world, things worked out exactly the opposite of what conservative dogma predicts? His answer reveals the core contradiction at the heart of Republican beliefs about taxes:

Killing Dodd-Frank Softly

To block financial regulations, industries and their congressional allies delay, delay, delay—and if necessary, sue.

(Flickr/Emmanuel Huybrechts)

On August 16, a group of 32 members of Congress—27 Republicans and 5 Democrats—sent a seemingly innocuous request to Richard Cordray, the director of the Consumer Financial Protection Bureau, regarding a new rule on international money transfers. "We urge you to delay the effective date of these rules and to undertake a comprehensive study of their impact before moving forward to avoid irreparable harm to consumers," they wrote. The regulation, set to go into effect in January, will force companies to disclose the full extent of the fees they charge when people send money overseas. While the letter raised concerns about the rule, the members of Congress didn’t ask the CFPB to scrap it; instead, they entreated Cordray to hold off on the rule until January 2015.

Chicago, Yes; Wisconsin, Huh?

As Chicago teachers union officials and Mayor Rahm Emanuel’s office were assuring Chicagoans that they had reached an agreement Friday afternoon on their contractual dispute, a judge a hundred miles north in Madison, WIsconsin struck down as unconstitutional that state’s hugely controversial law banning collective-bargaining rights for public employees. As I write, the text of the judge’s decision is not yet available, but since a ban on public-employee collective bargaining exists in many states, either the judge found new grounds to declare the law unconstitutional, or he declared it so for reasons not related to the constitutionality of such prohibitions.

Ben Bernanke, the Newest Avenger

(AP Photo/Manuel Balce Ceneta)

Ben Bernanke’s announcement Thursday that the Fed would keep easing money sent the stock market soaring, but more important was his declaration that there is only so much the Federal Reserve can do.

The Fed’s latest move, approved by the policy-setting Open Market Committee, will buy a total of $85 billion in bonds every month, including $40 billion per month of mortgage-backed securities. This pumps vast sums into the economy. It is the equivalent of printing money.  Bernanke’s hope is to drive down interest rates generally, especially on home mortgages.

As Common As Dirt

In the fields of California, wage theft is how agribusiness is done.

(Photography by David Bacon)

One morning earlier this year, in the borderland town of Brawley, California, 75-year-old Ignacio Villalobos perched on a chair in his trailer, removed a plastic bag from the well of a rubber boot, and finished dressing for work. Dawn was still an hour away, and in the wan light of the kitchen, Villalobos took off his house sandals and pulled the bag over his right foot. He bunched it at the ankle, then slipped his foot into his boot.

“These shoes aren’t made for water,” he said, adding that morning dew and irrigation keep farm fields damp—even in the desert of the Imperial Valley where he was working. Villalobos estimated that a pair of decent used boots would run him $30, almost half a day’s wages; the bags were free.

Koch: It's Only Crony Capitalism When I Don't Benefit

The right-wing press is chock-a-block with articles decrying the Obama administration’s romance with industrial policy. So reflexive is this ideology that some of them are even written by major beneficiaries of industrial policy, whose sense of entitlement must be so ingrained that they fail to notice this anomaly.

Exhibit A appeared in Monday’s Wall Street Journal op-ed page, in which Charles Koch of Koch Brothers fame took out after crony capitalism and industrial policy.

Angela Merkel's Bad Medicine

The German chancellor’s remedy of austerity is killing Europe, and the failure to contain financial speculation is spreading the epidemic.

(Flickr/World Economic Forum)

On July 26, as traders were once again deserting Spain’s government bonds, setting up the risk of a default and a deeper crisis of the euro, Mario Draghi, president of the European Central Bank surprised and delighted financial markets. Speaking off the cuff in London, he vowed to do “whatever it takes” to save the European economy. 

Europe: Old Austerity in New Bottles

In late July, European Central Bank (ECB) President Mario Draghi, speaking off the cuff in London, pledged to do “whatever it takes” to save the Euro, including massive intervention in bond markets to keep speculators from extending the Greek disease to Spain and Italy, where interest rates were ominously rising. This impressed money markets for a few days—until investors realized that Draghi’s commitment came with big strings. Strapped countries benefitting from these purchases would first have to double down on austerity. No thanks, said the leaders of Spain and Italy.

Third Night of the DNC: TV & Twitter Review

So the DNC gave us a week that got more and more sober as it went on. By last night, we were down and dirty with tough choices and grim policies. Foreign policy dominated the early part of the evening, with a salute to military veterans that had many in my Twitter feed commenting on how strange it was that the parties have switched places. The Republicans hadn’t even mentioned the wars or the veterans; as conservative Ramesh Ponnuru tweeted, “Really was malpractice, and wrong, for Romney not to mention troops in Iraq, Afghanistan in convention speech.” And so for a night the Democrats became the party of LBJ again, the party of a strong military and uncompromising attack.

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