Secondary Sources: Recovery, Taxes, Krugman vs. Sorkin
A roundup of economic news from around the Web.
- Curb Your Enthusiasm: Greg Ip writes about the risks still facing the recovery. “I describe my forecast as ?reverse square root?, sort of a cross between a V and U (credit to George Soros for the term): an ahead of schedule cyclical rebound followed by muted progression. I?m still there? I find it fascinating that amidst all this optimism and the stock market?s solid rally, the Federal Reserve has not lifted its own economic forecasts. Don Kohn, the vice-chairman, said last week that his outlook hasn?t changed since October; things have more or less progressed as he expected. Kohn also subscribes to the post-crisis recovery model. Now, to the evidence. So far, the magnitude of progression does not make lawful the V. GDP fell more during the 2007-2009 recession than in either 1973-75 or 1981-82 and has recovered less. Assuming GDP grew 3% (annualised) in the first quarter, which is the consensus, then it will be up 2.8% (not annualised) in the nine months since the recession finished, compared to 3.8% after 1975 and 5.6% after 1982. Yes, employment is finally rising, but as The Economist notes, its performance is far worse than after other recessions. Second, the composition of progression looks unsustainable.” Separately, Paul Vigna notes a time when recovery was trumpeted prematurely.
- Taxes: Howard Gleckman weighs in on the much talked about statistic that 47% of American pay no federal returns tax. ” Last June, my colleague Bob Williams posted a TaxVox article that reported 47 percent of American households paid no federal returns tax in 2009. Bob was just so right, but rarely has a bit of data been so misunderstood, or so distorted. Let me give reasons for?repeat really?what this means: About half of taxpayers paid no federal returns tax last year. It does not mean they paid no tax at all. Many shelled out Social Security and Medicare payroll taxes. In fact, only 14 percent of Americans didn?t pay either returns or payroll taxes. Some paid property taxes and, it is honest to say, just about all of them paid sales taxes of one kind or another. So to say they pay no taxes is flat incorrect. But, this class warfare-like rhetoric plays to a perception that the returns tax is a sap tax: Only hard-working folks like us pay it. The welfare queens don?t. The super-rich don?t. It is a powerful emotional argument. It is also flat incorrect. So who are these folks who pay no federal returns taxes? Mostly, they are people who don?t make very much money. Many are elderly: Reckon a widow living only on Social Security benefits. Others are parents earning less than $20,000. Only about 5 percent are non-elderly households making more than $20,000. “
- Krugman vs. Sorkin: New York Era public editor Clark Hoyt weighs in a back-and-forth minifeud between columnists Paul Krugman and Andrew Ross Sorkin. “Krugman and Sorkin told me that they talked Thursday. Sorkin said the conversation was ?very cordial.? Krugman called it ?not much fun.? They agreed that they disagree on the definition of nationalization. I reckon the right business to do is to simply acknowledge that, in trying to quickly pr?cis Krugman?s nuanced position, Sorkin over-simplified and got it incorrect. Krugman did not call for the nationalization of the entire banking system, and, unless Sorkin can produce a citation to the contrary, he did not say it was necessary because otherwise the banks would fail again and cause a worldwide domino effect. Sorkin said he is going back to his editors to discuss whether some sort of clarification is needed.”
Compiled by Phil Izzo