Robert Reich on "the seven biggest economic lies"

Robert Reich (see here) gets it about right in my opinion.

1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke.

 2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. (Don’t believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)

 3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.

 4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They’ll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.

 5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that’s because the nation’s health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid’s bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.

 6. Social Security is a Ponzi scheme. Don’t believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800. 

 7. It’s unfair that lower-income Americans don’t pay income tax. Wrong. There’s nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.

Why things don't change

In terms of the political organization of businesses, large publically traded companies most closely resemble rigged election autocracies. There are typically millions of people-shareholders-with a nominal say in the choice of chief executive. But in reality the decision to retain a leader comes down to the choices of senior executives, board members and possibly a few large institutional investors.  No executive lasts long if he does not keep this small group happy, which is why such insiders receive large bonuses and rewards even as the organization fails. Investing to promote an increase in a stock’s price and paying large dividends might be really good for shareholders and the economy as a whole, but generally these groups are not the political threat to the corporate leadership. So, as in dictatorship, insiders prosper at the expense of the broader community. This will not change until publicly traded companies alter their governance.

Bruce Bueno de Mesquita and Alastair Smith, authors of The Dictator’s Handbook

Paul Krugman on the economic "fantasy" of the modern GOP

I don't always agree with Krugman, but he seems right on target this time (see here).

The Great Recession should have been a huge wake-up call. Nothing like this was supposed to be possible in the modern world. Everyone, and I mean everyone, should be engaged in serious soul-searching, asking how much of what he or she thought was true actually isn’t.

But the G.O.P. has responded to the crisis not by rethinking its dogma but by adopting an even cruder version of that dogma, becoming a caricature of itself. During the debate, the hosts played a clip of Ronald Reagan calling for increased revenue; today, no politician hoping to get anywhere in Reagan’s party would dare say such a thing.

Another first: Median Monthly Mortgage vs Median Rental Cost

Catherine Rampell over at the New York Times Economix blog (see here) has a graph from the group at Capital Economics which reports an interesting finding:  "For the first time in three decades, the median monthly mortgage payment is about the same as the median rental payment:"

Data on job openings

CalculatedRisk (see here) has an update on the JOLTs report (click to enlarge).

CalculatedRisk says:

Notice that hires (dark blue) and total separations (red and blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general job openings (yellow) has been trending up, and are up about 7% year-over-year compared to August 2010. Layoffs and discharges are down about 10% year-over-year.