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Friday, June 27, 2008

BudgetBlog on Hiatus for Holiday: Happy Fourth Everyone!

Happy Fourth of July!
Just wanted to let our loyal BudgetBlog readers know we're going on a short hiatus next week. With Congress heading out of town for a short summer recess and the upcoming Fourth of July holiday next week, the Fiscal Policy team is heading out of town in order to escape the heat for some well-deserved vacation. This means, though, that the BudgetBlog will be dormant next week.

But don't despair. Craig and I will return in one short week on July 7 to continue to bring you all the news, gossip, information, and analysis on federal fiscal policy you've come to expect.

Hope everyone has a safe and festive Independence Day next week - be careful with those fireworks.



Posted by Adam Hughes, 06:09:19 PM



Thursday, June 12, 2008

House Passes UI Extension by a Two-Thirds Margin
What a Difference a Day Makes

Yesterday's suspension vote in the House to extend unemployment insurance benefits by at least 13 weeks fell short of the required a two-thirds supermajority by a mere three votes -- perhaps attributable to the eleven members who did not vote.

This afternoon, the House voted again on the proposal as a stand-alone bill and, guess what? It passed precisely by a two-thirds, i.e., veto-proof, margin.

As Speaker Pelosi mentioned in a statement following today's vote, the bill does not only help the nation's unemployed workers, but the rest of us:

Extending unemployment benefits has the potential to help the entire American economy. According to the Congressional Budget Office, it is one of the most cost-effective and fast-acting ways to stimulate the economy because the money is spent quickly. For every $1 spent on unemployment benefits generates $1.64 in new economic demand.

The measure passed with support from 49 Republican House members, who bolted the Bush line opposing the bill, contained in yesterday's veto threat.



Posted by Dana Chasin, 04:27:47 PM



Wednesday, June 11, 2008

The Solution to Growing Unemployment: Free Trade Deals?

Today, the Bush Administration issued a veto threat against H.R. 5794, the Emergency Extended Unemployment Compensation Act of 2008.

Please read the following and see if you can spot the non sequitur:

The Administration is deeply committed to continually fostering an environment where every American who wants a job has a job. The Administration believes the best way to help workers is to create an environment that encourages job creation and to promote effective job training. To accomplish these goals, the Administration urges Congress to create more opportunities for American exporters by passing the pending free trade agreements with Columbia, Panama, and South Korea, make permanent the President's tax cuts that will expire over the next two years, and reform and reauthorize the Trade Adjustment Assistance program and the Workforce Investment Act. The Administration looks forward to continuing to work with Congress to enact these important measures. However, the Administration strongly opposes H.R. 5749. If H.R. 5749 were presented to the President, his senior advisors would recommend that he veto the bill.

Oh, wait -- I think I get it. Those free trade agreements are with some pretty small countries with pretty small economies. In economies of small scale, the blessings of free trade really could make a difference with respect to unemployment...

... in Panama.



Posted by Dana Chasin, 02:31:34 PM



Monday, June 09, 2008

Military Wages

Congress has sent the president a bill that would, in addition to forcing free-riding federal contractors to pay payroll taxes, "allow soldiers receiving combat pay to have their money counted as income for the purposes of the Earned Income Tax Credit." (BNA email)

I realize that we blow a lot of cash on the military, but does it strike anyone as odd that some Americans getting shot at in a combat zone in service of their country are paid so little that they qualify for EITC?



Posted by Craig Jennings, 11:38:29 AM



Friday, June 06, 2008

Workers See Fewer Hours, More Weeks Unemployed

As Dana noted in this morning's daily report, the unemployment numbers released this morning were bad enough to put unemployment insurance (UI) benefits extension back in play for the domestic spending section of the FY 08-09 war supp.

But the past couple of weeks have seen the release of a couple of other data points that should increase concern among lawmakers that the U.S. labor force has come into sour times.

  • The number of continuing UI claims -- workers receiving UI benefits for more than one week -- has not been this high since March 2004. The number of continuing claims has been sharply increasing since Nov. 2007.


(click to enlarge)

  • On Wed. (June 4), the Dept. of Labor reported that productivity in the first quarter was increasing at an annualized rate of 2.6% -- a healthy number. But that number -- the economic output per unit of labor -- is the result of employers scaling back hours, making workers worse off.

It should also be noted that May's 49,000 net job loss was buoyed by the addition of 17,000 government jobs; the private sector lost 66,000 jobs, continuing a six-month decline in private jobs.


(click to enlarge)


Posted by Craig Jennings, 02:18:48 PM



Thursday, May 29, 2008

Five Years of Bush Tax Cuts, Another Five Years Increasing Inequality

When the Treasury Department released a stack of propaganda analyses yesterday on the 2001-2003 Bush tax cuts, they also promulgated a press release to accompany their reports. While their message was nothing more than years-old, warmed over talking points, it has provided yet another opportunity to talk about the continual deepening of income inequality in the United States.

The administration crows about the enormous burden of taxes that upper income groups shoulder, however, it remains typically silent on why they pay such a large share of taxes -- upper income groups earn way more than lower income groups.

From the Treasury's talking points we learn that the individual income tax is "highly progressive" because:

  • In 2005, the top 5 percent of taxpayers paid more than one half (59.7 percent) of all individual income taxes, and the top 1 percent paid 39.4 percent; and
  • Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes. In 2005, they paid 96.9 percent of all individual income taxes.

But what remains unsaid is the underlying reason for these numbers:

  • Taxpayers in the top 50% earned the overwhelming majority of income. In 2005 they earned 87.2 percent of all income, up from 86.2 percent in 2001; while
  • The bottom 50% has not fared as well. In 2005, they earned 12.8 percent of all income, down from 13.8 percent in 2001.


(click to enlarge)


(click to enlarge)



Posted by Craig Jennings, 06:21:55 PM



Friday, May 16, 2008

Unions Boost Wages of Lowest-Income Workers the Most

Shawn Fremstad posted yesterday on a new paper released this month by John Schmitt over at the Center for Economic and Policy Research. The paper studies the impact unions have on income and has some interesting findings:

Using national data for 2003 through 2007, we estimate that unionization raises the wages of the typical low-wage worker (one in the 10th percentile) by 20.6 percent, compared to 13.7 percent for the typical worker (one in the 50th percentile), and 6.1 percent for the typical high-wage worker (one in the 90th percentile). The traditional statistical approach applied to the same data produces an estimate of the average union wage premium of 11.9 percent, which is substantially lower than the union effect on low-wage workers (20.6 percent) and somewhat below the effect for the median- wage worker (13.7 percent).

Read the full report.



Posted by Adam Hughes, 03:32:21 PM



TPC Testimony Before Senate Finance Committee

The Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, has published two tesitmonies from a recent Senate Finance Committee hearing on overhaul of the U.S. tax code:

A Blueprint for Tax Reform and Health Reform
Leonard Burman

In this testimony Burman outlines a plan for tax reform that would maintain progressivity, raise enough revenues to finance the government, and dovetail with plans to provide universal access to health insurance. The plan would combine a value-added tax (VAT) dedicated to pay for a new universal health insurance voucher with a vastly simplified and much flatter income tax.

Read the complete testimony

Individual Taxpayers and Federal Tax Reform
William Gale

In the next few years, several factors including the expiration of the bush Administration's tax cuts will push tax issues to the forefront of policy discussions. Gale's testimony focuses on some overarching principles that should guide tax reform efforts.

Read the complete testimony



Posted by Adam Hughes, 10:20:10 AM



Thursday, May 15, 2008

An Equal Opportunity Crisis

House Financial Services Committee chair Rep. Barney Frank -- profiled in the New York Times this week -- is the only person in Washington remotely both as bright and as indecipherable as Alan Greenspan. His accent is the aural equivalent of illegible handwriting. A stenographer should follow him around so you don't have to wait 'til the next day for the transcript.

Mr. Frank, who has deftly led the surprisingly challenging effort to pass comprehensive housing legislation equal to the crisis, made an off-handed remark, according to the Times profile, after the House approved his bill on Thursday, though without enough votes to override a veto:

Mr. Frank quickly went on the offensive, seeking to undercut the administration's argument that homeowners in trouble should have known better. "No dumb people got America into this problem," he snapped. "You had to be really smart to understand collateralized debt obligation derivatives."

Needless to say, the profile adds, "Mr. Frank, who holds degrees from Harvard and Harvard Law School, understands collateralized debt obligations." Of course, you don't have to have multiple Ivies to become ensnared in the current housing crisis.

In fact, as the Washington Post reports today, the crisis knows no class boundaries. "Nationwide, from 2006 to 2007, the number of foreclosed properties listed at $1 million or more rose 50 percent, to 7,642, up from 5,091, according to RealtyTrac. And the number of foreclosed homes priced from $500,000 to $999,999 jumped 88 percent, from 52,836 to 99,457."

Some of that's deep in GOP territory.

Maybe George Bush will re-consider his veto threat. He's got enough Ivy League degrees to understand the problem.



Posted by Dana Chasin, 11:34:12 AM



Wednesday, May 07, 2008

UI Extension: Does the Unemployment Rate Matter?

Since the beginning of the year, when talk of a recession was first heard, Congress has been debating whether or to extend unemployment insurance (UI) benefits by 13 weeks -- as it has done during every single recession, with one exception, for the past 50 years.

The principal objection to such a proposal, which Bush opposed in the winter stimulus package is, as the White House press secretary said last month, that the president doesn't believe the extension is needed, "given that the unemployment rate that we have is historically and relatively low at just over 5 percent." (Note that the first bill Bush signed after the election of a GOP Congress in 2003 was -- that's right -- a 13-week unemployment insurance extension... when the rate was 5.8 percent.)

But increasingly, the focus of the UI extension debate is shifting away from the unemployment rate to what seems like a more logical barometer of the need for an extension: how long it takes to find a new job.

The latest voice to join that chorus is mainstream economics writer Robert Samuelson, opining in today's Washington Post:

When benefits were extended in early 2002, the unemployment rate was 5.7 percent. In 1991 the extension occurred at 7 percent. But so what?

What's wrong with this argument is that it ignores basic changes in U.S. labor markets. Over the past two decades, American businesses have gradually toughened their hiring and firing policies. In recessions, they resort more to permanent dismissals as opposed to temporary layoffs; in recoveries, they're more cautious in adding new workers.

It's harder to find a new job. Average spells of unemployment have slowly lengthened. The increase since 1960 has been about six weeks, estimates economist Gary Burtless of the Brookings Institution.

Nearly 1.4 million U.S. workers qualified as long-term jobless at the beginning of the year, more than twice as many as when the recession started in March 2001 -- and more than the 1.3 million who were long-term jobless the last time Congress temporarily extended benefits, in March 2002. In this environment, is the unemployment rate, per se, a logical reason not to extend unemployment benefits?



Posted by Dana Chasin, 03:21:09 PM



Tuesday, May 06, 2008

Fed Chief's Opinions on Foreclosure Remedies Differ from Frank Bill Oponents

Congressional opposition to the Frank housing bill is coalescing around apparently dubious propositions ($).

[Antonia Ferrier, spokeswoman for House Minority Whip Roy Blunt (R-MO)] also took aim at the [Rep. Barney] Frank proposal. "This bill perversely rewards those who borrowed more than they could afford — their monthly mortgage payments get reduced with the government footing the bill. How is that fair to the millions of Americans who worked hard and paid their mortgages on time? And who ends up holding the bag if all goes south? No surprise, the American taxpayer."

Meanwhile, economist and Fed Chief Ben Bernanke provides an "expert" opinion:

"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy," [Federal Reserve Chairman Ben] Bernanke said Monday..."Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest," he said.

...

The current housing crises has clobbered some borrowers home prices dropped. That left them with mortgages that are bigger than the value of their home. When that's the primary problem, Bernanke said the best solution may be reducing the amount that the borrower owes on the loan or some other permanent modification to the loan.

Fine. Helping distressed homeowners can help everyone. But surely we cannot stand in the way of the the almighty market! That would be disaster.

Republican talking points obtained by Roll Call also suggested housing prices must fall further rather than be propped up by a new government program, an argument also made by [Sen. Richard Shelby (R-AL)] Shelby.

"The correction in the housing market is a necessary reaction to a prolonged period of reckless lending and borrowing practices that helped take housing prices to levels that were simply unsustainable. For the market to stabilize, prices will need to return to levels that ordinary Americans can afford," the talking points read.

Or not.

Rising foreclosures add to the glut of unsold homes and that put more downward pressure on prices, aggravating the housing slump, he said. More rapid declines in house prices could have an "adverse impact" on the broader economy and the stability of the financial system, [Bernanke] said.

Photo by Flickr user msabcmom used under a Creative Commons license



Posted by Craig Jennings, 03:11:23 PM



Wednesday, April 30, 2008

1Q08 Economic Conditions: the Good, Bad, and Ugly

By and large, the Bureau of Economic Analysts (BEA) at the Department of Commerce announced this morning an estimated GDP figure for the first quarter of 2008 of 0.6 percent -- the exact same figure as the last quarter of 2007 -- which pushes us back from the brink of "official" economic recession, though we are by no means out of the woods. The BEA report includes this summary analysis:

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, private inventory investment, exports of goods and services, and federal government spending that were partly offset by negative contributions from residential fixed investment and PCE for durable goods. Imports, which are a subtraction in the calculation of GDP, increased.

Note in particular the reference to residential fixed investment, reflecting a contracting housing sector, falling home prices and sales, and a rapid increase in home foreclosures, which are reaching an alarming rate. Per a RealtyTrac report released yesterday:

foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 649,917 properties during the first quarter, a 23 percent increase from the previous quarter and a 112 percent increase from the first quarter of 2007 -- one in every 194 U.S. households received a foreclosure filing during the quarter.

These two developments, taken together, may mean increased support for targeted housing-sector related legislation now moving through Congress. What it means for broader stimulus measures is uncertain, though the April unemployment report, due out on Friday, may have considerable bearing on prospects for such measures.

For additional analysis of the GDP estimate and its contributing factors by Dean Baker, co-director of the Center for Economic and Policy Research, see CEPR's GDP Byte, here



Posted by Dana Chasin, 11:54:01 AM



Thursday, April 17, 2008

Median Weekly Earnings Decline

In yesterday's Daily Fiscal Policy Report, we noted that real average weekly earnings in March were up compared to February, while they were down compared to March, 2007.

Today, the BLS released data on real median weekly earnings, which, like average weekly earnings, have declined since a year ago.

Median weekly earnings of the nation's 106.5 million full-time wage and salary workers were $719 in the first quarter of 2008, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This was 3.8 percent higher than a year earlier, compared with a gain of 4.1 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.


Posted by Craig Jennings, 03:03:08 PM



Friday, April 11, 2008

Economic Indicators Archive

In case you didn't know (as I didn't 'til I stumbled on it), the Wall Street Journal maintains a number of statistical reports that economists use to gauge and forecast business conditions. These reports, issued by government agencies and business research groups, generally are accessible there for one month. Their Economic Indicators Archive is accessible here.

Among the reports:

Good for what ails us.



Posted by Dana Chasin, 10:11:10 AM



Wednesday, April 09, 2008

DAILY FISCAL POLICY REPORT -- April 9, 2008

Health Care -- Bipartisan Support for Blocking Bush Medicaid Rule: CQ reports ($) that a House bill that would block the president's Medicaid rule changes is gaining support among Republicans. The proposed rule changes would shift about $17.8 billion (over five years) in Medicaid costs to states. The bill, H.R. 5613, will be marked up today in the Committee on Energy and Commerce Health Subcommittee.

War Spending -- Iraq Supplemental May Have Additional Stimulus Spending: After last week's deterioration of employment data released by the government, Sen. Majority Leader Harry Reid (D-NV) and Sen. Debbie Stabenow (D-MI), along with Democratic House leaders, are calling for adding extension of unemployment benefits to the upcoming Iraq war spending bill. House Republicans have vowed to oppose additional stimulus spending. CongressDaily ($)

Inequality -- CBPP/EPI: Income Inequality Continues to Rise: The Center on Budget and Policy Priorities and the Economic Policy Institute have released a lengthy report analyzing state-by-state data on income trends. The report concludes that "The gap between the richest and poorest families...grew significantly in most states over the past two decades...In fact, the nation's longstanding trend of growing inequality accelerated since the late 1990s as incomes fell for poor families in a number of states." CBPP/EPI Report Executive Summary

Taxes -- "Extenders" Package Could Move Before End of May: Sen. Finance Committee Chairman Max Baucus (D-MT) hopes to introduce, mark up and bring the extenders package of tax cuts to the Senate floor before the start of the Memorial Day Recess in May. The legislation would be fully offset, cover two years (2008 and 2009), and cost about $50 billion. Baucus would not pin down a date for introducing the measure, but stressed the need to get work done early: "We've got to do as much as we can during this work period." BNA ($)



Posted by Adam Hughes, 09:27:00 AM




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