A Fact That Will Make You Scratch Your Head

Just listened to forum with MSNBC host Rachel Maddow and CEO Eric Schmidt, who said that 13 hours of video are uploaded to YouTube every minute.

“Obamanomics” in Six-Minute Sound Bites

I wrote earlier about the great NY Times Magazine article on Obama's economic thinking. Here is Economist Mom's thoughtful take.

The Republican Approach to Problem Solving

From Atrios & Attaturk:

This sure seems like something that should get media attention.

John McCain's solution to those who have no health insurance...

John Goodman, president of the National Center for Policy Analysis, a right-leaning Dallas-based think tank. Mr. Goodman, who helped craft Sen. John McCain's health care policy, said anyone with access to an emergency room effectively has insurance, albeit the government acts as the payer of last resort. (Hospital emergency rooms by law cannot turn away a patient in need of immediate care.)

'So I have a solution. And it will cost not one thin dime,' Mr. Goodman said. 'The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American – even illegal aliens – as uninsured. Instead, the bureau should categorize people according to the likely source of payment should they need care.

So, there you have it. Voila! Problem solved.'



And I thought John Goodman was acting in The Big Lebowski.

(note: may be different John Goodman)

Is Anti-Corporate Populism Good Politics?

This is putting aside the entirely different question as to whether it's good economics. I wondered about this listening to Biden's speech, which had stronger strands of this kind of language than you usually hear from Obama.

I don't know the answer, and this was a topic I thought about a lot during the campaign. There's a good argument that it doesn't work. Here's that argument, from part of a 2003 internal Dean campaign memo I found in my files:

People strongly identify with the companies where they work, and they vote their identities. Corporations create a bounty of goods and services. They also create jobs and many people work for corporations. Most people strongly identify with the companies where they work and the values instilled at work. And most people work for corporations. (More than half of Americans work for companies with more than 500 employees.) According to analysis of the General Social Survey,

• 82 percent of employees express loyalty toward their company.
• 78 percent say they share the values of their company.
• 90 percent say they are proud to be working for their company.
• These percentages do not differ by gender, race, or blue collar vs. white collar occupations.

Attacking corporations is too easily interpreted as an attack on workers. In addition, recent work in cognitive science demonstrates that people vote their identities, not necessarily their self-interest. General attacks on "big corporations", "big business", and "multi-national corporations" are therefore unnecessary and politically damaging. What is needed is a strategy to attack unethical business practices and features of the system that allow abuses to continue, including Bush's policies and the un-American values behind them, while calling for reforms and a return to honest business practices.

Austan Goolsbee on Larry Kudlow

See it here. Goolsbee's good. He sets Kudlow straight, and harps on the ramp up in marginal rates that would happen with the "bracket jump" under McCain's health care plan, which we mentioned in an earlier post.

FT Interview with Obama Economic Advisers in Denver

Here. Key excerpts:

"This is going to be a fight over who is going to be best for the average American and who will get the economy growing again in a way that benefits everyone, and not just a wealthy, well-connected few," said Austan Goolsbee, a senior adviser to Mr Obama....

Starting with Mr Obama's acceptance speech at the Denver convention tomorrow night, which advisers say will address the concerns of blue-collar America "head-on", the campaign plans to focus more closely on the economic anxieties of America's middle classes....

"We will call for change and we will say what that change is," Mr Furman said. "Measuring the success of the economy by what it does for ordinary families. Recognition that the way to promote growth is to invest in ordinary families . . . 'How is the economy doing for you?' is ultimately the most important question for us."

"Both candidates are offering tax cuts," said Mr Goolsbee. "It is a question of who gets the tax cuts. The Obama plan gets tax relief to 95 per cent of working Americans."

Interesting Day

I went the first couple days in Denver without meeting many people other than old friends from the Dean campaign, and I was wondering how to get noticed by reporters. Then today, I was interviewed by a slew of journalists, met many fans of Economists of Obama, shook hands with Virginia's Gov. Jim Moran, and saw Obama Girl up close. (I was going to say "in the flesh," but then I remembered that my girlfriend is reading the blog.)

Obama Campaign Manager on Polling

Interesting post from the guy behind Pollster.com, with David Plouffe's thoughts on polls. I agree whole-heartedly with Plouffe on the Gallup tracking polls: the day-to-day changes in those results (reported as a three-day moving average) are so dominated by sampling error as to be meaningless.

Obama to Highlight Tax Cuts For Middle Class in Speech

That's according to this Wall Street Journal article:

Barack Obama said he plans to focus on the struggles of middle-class Americans, including their tax burden, in his Thursday night speech accepting the Democratic nomination for president.

"The single most important thing I have to make clear is the choice we have in November between the same failed policy of the last eight years for the middle class and the new agenda to boost income for Americans and help families who are struggling," he said in a brief interview with The Wall Street Journal Tuesday. "I will make that contrast very clearly."

"In Missouri, and other battleground states, Republican ads say I would raise taxes… but my plan would provide three times more tax relief to the middle class," he said. "I don't think people realize that, and I hope that message will be absorbed by the electorate."

This means that we can expect a huge spike in traffic to Economists for Obama from people Googling for details on the Obama tax program. In preparation for this, I'm trying to figure out the easiest way to convert the Tax Policy Center's tax distribution tables into easy-to-use online calculator.

UPDATE: I discovered that exactly what I was working on has already been done!
Calculate your Obama Tax Cut here: http://www.obamataxcut.com/

Tax Foundation is NOT a Credible Source

As I explained here, it is a right-wing think tank, part of the billionaire-funded Republican propaganda machine. Here's another post describing some of the misinformation they produce.

Greg Mankiw today links to a brief from the Tax Foundation which tries to claim that tax cuts recover up to 40% of their costs through so-called dynamic effects. Although this is still a long, long way from McCain's deluded claim that tax cuts pay for themselves, it is a much bigger effect than Bush's own Treasury Department estimated (less than 10%). This is an effort to argue that McCain's tax proposal wouldn't create deficits quite as massive as the Tax Policy Center's analysis shows.

Where does the TF figure come from? From yet-to-be-published research, which conveniently makes it impossible to fully critique it. It says it is based on a "large sample of tax returns filed by the same taxpayers between 1998 and 2005 and "examined the change in taxpayers' taxable income as reported on their tax forms and the change in their tax rates, after controlling for a variety of non-tax factors." Immediately, one can see the econometric issues, starting with what is the right lag structure and what is the right set of covariates? The whole analysis sounds pretty fishy. If the data is as juicy as it sounds, why didn't the authors just estimate the direct behavioral effects of the 2001 tax changes, treating them as a natural experiment? The fact that they did not makes me suspect that they massaged the analysis to get the results they wanted. Without seeing the paper, I can only speculate.

My big question is, where on Earth did they get such great data? I have never heard of a publicly available panel data on tax returns, although admittedly, this is not my research area. Will this data be released to other researchers so that they can try to replicate the analysis and examine how fragile the results are? (This has become the research standard for major journals.) I am going to hazard a guess that the researchers will say that the data is confidential, so that we'll just have to trust them. But the Tax Foundation doesn't deserve that kind of trust from anyone, Greg Mankiw included.

UPDATE: (I wrote this in comments on Economist's View):
I want to point out that one of the author's took strong issue with the post in comments on our blog and offered to send me the paper (which I hope to get soon.)

So I may revise my opinion of the paper and even retract my criticisms after further reflection!

But I stand by the fundamental point that outfits like the Tax Foundation don't get the benefit of the doubt when publicizing results based on unpublished research.

Upcoming Interview on Denver NBC TV Webcast

The Denver NBC affiliate will interview me and other bloggers via Skype later this morning for their webcast, which you can watch here.

Brief Reflections on Night Two of the Democratic National Convention

Watching TV makes you stupid. This truth has been reaffirmed for me by the convention experience. Pundits yesterday were afire with talk that Hillary's task for her speech last night was impossible, but all she needed to do was celebrate the successes of her own campaign and make it clear she's 100% behind Obama. She did both with grace and passion.

Apart from Hillary, the highlight of the evening was the speech by Montana Gov. Brian Schweitzer, with whom I literally rubbed shoulders on the convention floor. He has a goofy earnestness which is rare to see in national politics, and he got the crowd fired up! I hope to see more of him in the future.

From the Floor of the Democratic National Convention

Tonight I managed to exploit my connections to get a pass which gave me access to the convention floor. Here's a picture of the pass along with my Big Tent credential:



To give you some flavor of the experience, here's a short video I took from the floor, right after Hillary's speech:

Who Will Be the Next Cheney?

See the possibilities at http://nextcheney.com

Obama Going More Populist on Economics?

I just chatted with George Lakoff, whom I got to know very well during the Dean campaign. He said that he thought the language of Michelle Obama's speech last night signaled to him that Obama has decided to go with a populist economic message. I'll have to look at the text of the speech.

The TaxProf pulled the tax policy pieces from Obama and Biden's speeches on Saturday. Biden's speech, in particular, does have a stronger "fight for the people" tilt than we've seen from Obama previously:

Obama: That's what it's going to take to win the fight for good jobs that let people live their dreams, a tax code that rewards work instead of wealth, and health care that is affordable and accessible for every American family.

Biden: We cannot afford to keep giving tax cuts after tax cuts to big corporations and the wealthiest Americans while the middle class America, middle class families are falling behind and their wages are actually shrinking. ... You can’t change America and give our workers a fighting chance when after 3 million manufacturing jobs disappear, you continue to support tax breaks for companies who ship our jobs overseas.

Mailbag: Progressive Taxation and Inequality

Here's a message we received recently:

Hi. I was hoping you could help me to think through this email I got from a friend...

... I would like to focus on the tax issue ... Use $250,000 as a perfect example of "rich". Say you're an average American whose parents can't pay for college and probably don't know the system that well in terms of scholarships. To get into a top tier school expect to pay $100K in tuition and living expenses ...and let's not forget the expenses related to the MBA, law degree or medical degree that are most likely the prerequisites to pay for the right to earn that salary. If you add all that up, the net result is over $1000 a month in student loans and $250K in debt...or NEGATIVE wealth! You are now sitting in the bullseye of the "rich" when in fact you have NEGATIVE wealth.

Should 50% of my salary go to Uncle Sam because I was able to outmaneuver others through the system? Do I not pay for roads, health care, etc in a disproportionate share already through not only my income tax, but real estate taxes as well?

The message raises three issues:

1. Are people making $250,000 "rich"?
2. Is it fair that people who make over $250,000 but have lots of student loan debt have to pay higher rates?
   
3. Why have progressive taxation, and should it be more progressive than it is now?
   

On the first question, if your family makes over $250K, you're bringing in more than 98% of American families. (This is according to 2007 data from the March CPS.) While I don't have the exact figures on the worldwide income distribution handy, roughly this would mean you're income is higher than that of 99.9% of humanity. You're not among the ultra-rich like the McCains, but you're not hurting.

On the second question, it's hard to understand why having negative wealth per se should mean you pay less in taxes. You can be extremely rich--with high income and high consumption levels and still be in major debt. I think Donald Trump was in this category for a while (and may still be). You could think of lots of different ways to conceive of how taxes should be structured, but I don't see an argument for why having low or negative net wealth should mean lower taxation.

The correspondent's friend presumably means to say that because of his debt, his consumption is lower than income of $250K+ would imply. Fair enough, and indeed many economists would say that ideally a progressive tax structure should be based on consumption rather than income. But we're not talking about huge differences here. For people paying $1000 a month in student loans, their consumption is only lower than their income by $25K, not much if they're making over a quarter million.

Now to the fundamental question: why have progressive taxation at all, and should it be more progressive, as Obama is proposing? The first answer is that in order to pay for the things we value as a society, we have to go where the money is. To pay for roads, tanks, universal health care, schools, and everything the government does, we need money, and given the extreme level of inequality--now at levels higher than that seen since the 1930s--it's at the very top where the money is. We don't want the rich to contribute more because we want to punish them but because those resources are needed to pay for what the country values.

But is it fair to raise taxes on the wealthy? Consider what the Obama tax hikes would mean for a very higher earner, relative to where they would have been ten years ago. The NY Times article in the Sunday Magazine made this comparison:

Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year. It’s hard not to look at that figure and be a little stunned. It would represent a huge tax increase on the wealthy families. But it’s also worth putting the number in some context. The bulk of Obama’s tax increases on the wealthy — about $500,000 of that $800,000 — would simply take away Bush’s tax cuts. The remaining $300,000 wouldn’t nearly reverse their pretax income gains in recent years. Since the mid-1990s, their inflation-adjusted pretax income has roughly doubled.

For those who are not ultra-high earners, the gains since the mid-90s have not been as extreme, but the tax increases under Obama would be lower as well.

By Table A6 of Emmanuel Saez's IRS data, the income group that is the top 5% but excluding the top 1% ($148K-$376K in 2006) saw average real wage growth of $35,505 between 1996 and 2006. How much would taxes go up under Obama for this same group? According to the Tax Policy Center's analysis, that would be $5686 in 2012. In other words, even after the tax hikes on the wealthy, people in this group would be far better off than they would have been at the same point in the distribution in 1996--21% better off to be exact. Incomes grew much more slowly for those not in the top ranks: 7% overall for those in the bottom 90% of the distribution.

The larger point is that lifting tax rates at the high end is in part a response to the huge rise in inequality in the United States. (See Emmanuel's very readable summary documenting the rise in inequality)

Why has inequality risen so dramatically, with the gains being overwhelmingly concentrated at the top end? This is a complicated question that I'll save for another post. But it's clear that inequality rose not because education levels at the top increased or because higher earners started to work harder. Inequality rose because something (or many things) changed about the economy. In his new book, The Predator State, Jamie Galbraith argues that the distribution of income doesn't just "happen"--rather we decide the distribution we want as a society and the economy conforms. I'm not sure I'd subscribe to quite such a bold assertion, but it is evident that society--and the government--do a great deal to shape the institutions that determine how much inequality we have. Those institutions are many, and our control over most of them is highly imperfect. Tax policy is our most direct tool, and we shouldn't be shy about using it to have those who prospered most in recent years to contribute more.

Recommended Blogger Coverage of the Convention

There are lots of sketchy bloggers running around here (I include myself in that group.) I recommend the Huffington Post's Off the Bus group blog, run by my old friend Amanda Michel, who was profiled in the NY Times a few weeks back.

Rather on the Media's Failures

I just heard Dan Rather and then John Nichols (writer for the Nation magazine) speak, and Bob Kuttner (editor of the American Prospect) is up next. Rather gave an impassioned speech on the profound failures of the corporate media--familiar material to progressive blogger-types, but still striking coming from the mouth of a former network news anchor. I considered asking "Didn't Chomsky cover all this twenty years ago?" But I decided not to ask him such a harsh question after, towards the end of his talk, he started sobbing while describing the scene the media has rarely shown --that of soldiers coming back from Iraq in caskets.

After the Obama Health Care Reform

On a panel yesterday, Paul Krugman hammered home his main message: it is vital that President Obama make universal health care a priority. People love Medicare and they will love universal health care once it's in place--after just a year, he said.

I agree 100% that for universal health care to have any chance of passing, Obama will have to put his effort at full throttle, starting before Inauguration Day. The forces of opposition--chiefly, the the health care lobbyists--are already sharpening their knives to kill the proposal. Unlike Krugman, I don't think it will be such easy swimming after the program's in place. Once government has taken a heavier role, people will blame Washington for everything about their health care that they don't like, and the Republicans will keep trying to roll it back for years. This will be a long, tough fight, especially with the imperfect and complex managed-care-for-some program that Obama wants to install. Even if he succeeds, most people will continue to see their health care bills rise (although perhaps not by as much), they'll look for someone to blame, and government will be the scapegoat.

Coming Soon on Economists for Obama

When I saw Arianna Huffington speak yesterday, she highlighted the importance of progressives speaking to people who are not already in the choir. She explained that the Huffington Post covers celebrity news in order to attract people outside the liberal political blogosphere to the site, in the hope that some of them stay. She said their tracking shows that 8% of those readers become regular consumers of the site's political news.

Taking inspiration from this model, I've asked Jonah to start providing regular updates on Paris Hilton.