Where is the US economy headed?

cicerone imposter wrote:

Call me a cynic.

Agreed!!

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cicerone imposter wrote:

Trying to prove government numbers with other government numbers is a lost cause when it's about our "unemployment" in the US.

(1) So is denouncing government numbers with no evidence that your numbers are better.

(2) So is attributing sham definitions to well-defined term such as "unemployment".

(3) If there are some government numbers that can estimate and correct any errors in other government numbers, why not use them?

cicerone imposters wrote:

Call me a cynic.

Thanks for the invitation, but I'll decline. I'm not into name calling, and prefer to insult people in more subtle ways.

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Thomas, You ain't subtle.

1. As I've already said, they're not my numbers. UNDERSTAND?
2. Well defined terms and unemployment are mutually exclusive.
3. You can use government numbers to your heart's content. I just don't personally trust them.

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cicerone imposter wrote:

Thomas, You ain't subtle.

1. As I've already said, they're not my numbers. UNDERSTAND?
2. Well defined terms and unemployment are mutually exclusive.
3. You can use government numbers to your heart's content. I just don't personally trust them.

Did you trust the #'s when they showed really high unemployment? I mean we were almost up to 8% back 3 or 4 years ago. Were those #'s worthy in your eyes?

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Thomas wrote:

Hence, the number of participants in the labor force is growing with the number of offered jobs, but the rate of participation is dropping.

Thomas, have you considered the jobs that do not show up in the government numbers, more specifically the underground economy, including people that work on a cash basis and do not report their earnings? It is my opinion that this is growing in the U.S., simply from observation, although I do not have statitistical evidence.

When you visit the U.S., make some observations concerning this probability.

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okie wrote: Thomas, have you considered the jobs that do not show up in the government numbers, more specifically the underground economy, including people that work on a cash basis and do not report their earnings. It is my opinion that this is growing in the U.S., simply from observation, although I do not have statitistical evidence.

One of the very few statements okie has made that I agree with. However, we must also understand that most of the major auto companies with US trade names have been laying off "middle-class" workers by the thousands, and the "new jobs" are mostly in the service industry paying less than $15/hour.

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cicerone, yes, the auto industry is undergoing an adjustment. Thank the unions for a big reason this is happening.

Also, you love to report stories about the auto industry. How about the many thousands of jobs created by companies like Google, a company that did not even exist a few years ago?

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cicerone imposter wrote:

1. As I've already said, they're not my numbers. UNDERSTAND?

I didn't say you measured them or made them up yourself. But they are the numbers you choose to work from. That makes you responsible for their integrity as far as this discussion is concerned. Hence, "your numbers".

cicerone imposter wrote:

2. Well defined terms and unemployment are mutually exclusive.

Says you.

cicerone imposter wrote:

3. You can use government numbers to your heart's content. I just don't personally trust them.

Fine. Then don't.

okie wrote:

Thomas, have you considered the jobs that do not show up in the government numbers, more specifically the underground economy, including people that work on a cash basis and do not report their earnings? It is my opinion that this is growing in the U.S., simply from observation, although I do not have statitistical evidence.

I haven't researched the statistics, but I doubt these people make a big difference either way. Workers in the underground economy destroy legal jobs by earning money and create legal jobs by spending money. To a first approximation, I would expect both effects to cancel out. But as I said, I haven't researched the actual data, so I'm not too confident in this expectation.

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Thomas, are there data to indicate how the percentage of labor force participation typically tracks with other economic indicators? In other words, does the participation rate always go up or down during good or bad economic times?

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Cicerone in particular, you would love to read this again, and again, and again. I imagine you know about this story to illustrate taxes, the story of 10 guys going to dinner, but I think it needs to be posted again. If anyone out there wonders why tax cuts benefit the people that pay the vast majority of taxes, this will explain it for you.

http://www.snopes.com/business/taxes/howtaxes.asp

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okie wrote:

Thomas, are there data to indicate how the percentage of labor force participation typically tracks with other economic indicators? In other words, does the participation rate always go up or down during good or bad economic times?

The BLS website has data about the size of the working age population and of the labor force participation rate. The data goes back to the 1940s if I remember correctly. It has two main features: 1) a general upward trend as more and more women entered the labor force after 1940. 2) swings around this trend that coincide with the business cycle. The labor force participation rate goes down in recessions, up in expansions.

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Not only does that not illustrate what you are talking about, it doesn't make any damn sense at all, Okie. Why is it you cannot prove your position without resorting to unrealistic extremes?

You cannot show a period in history when tax cuts have lead to higher revenues than would have occurred without the cuts themselves.

Cycloptichorn

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Thomas wrote:

okie wrote:
Thomas, are there data to indicate how the percentage of labor force participation typically tracks with other economic indicators? In other words, does the participation rate always go up or down during good or bad economic times?

The BLS website has data about the size of the working age population and of the labor force participation rate. The data goes back to the 1940s if I remember correctly. It has two main features: 1) a general upward trend as more and more women entered the labor force after 1940. 2) swings around this trend that coincide with the business cycle. The labor force participation rate goes down in recessions, up in expansions.

Thanks, Thomas, for the suggestions. I did check some graphs, and your point #1 is obviously true. I fail to see proof of point #2, although you may be seeing some very subtle trends or blips. If you can post something that best demonstrates your assertion, I would appreciate it. I am always a skeptic by nature. It makes sense and may well be, but there factors that could argue against it as well, so I would like to see the numbers.

The following illustrates the general upward trend.
http://en.wikipedia.org/wiki/Image:US_Labor_Force_Participation_Rate.jpg

This next link illustrates a couple of factors, although it is from Oregon. The most important thing it illustrates is that there are many factors that can affect the rate, some of the more important being demographic and cultural, aside from the economy. For example, the rate appears to decline after 2000, and one could conclude wrong reasons if you didn't notice the next graph that shows one obvious reason being the 16-19 year old participation rate sharply drops.

Another factor that I think of is the baby boomer generation is now in process of retiring. What effect does this apply to the trends? another factor is divorce rates, rates of single parent families, as this necessitates working by those affected by it. What percentage of people work in the underground economy? Has anyone linked these trends into the picture? There are many more that complicate the picture. Studying this would be a full time job for at least a month, to even begin to make any sense out of it.

Cicerone, if you are reading this, this all confirms my arguments that your simplistic explanation that all the people simply gave up on jobs is so blindly naive and wrong. You need to look a little deeper into the statistics. It is not simple and there are many, many factors at work here.

http://www.qualityinfo.org/olmisj/ArticleReader?itemid=00002917&print=1

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Cycloptichorn wrote:

Not only does that not illustrate what you are talking about, it doesn't make any damn sense at all, Okie. Why is it you cannot prove your position without resorting to unrealistic extremes?

You cannot show a period in history when tax cuts have lead to higher revenues than would have occurred without the cuts themselves.

Cycloptichorn

It makes much sense, including statistical and common sense, plus including making much sense to many very smart economists, cyclops. Here we go again with the Laffer curve lurking in the background again, but forget that for now, just believe the obvious fact that tax rates do affect the economy, both positively and negatively, just like all other factors do.

People on opposite sides of this argument will never agree, because it is impossible to roll back the clock and redo the period of time with all other factors the same, and change the marginal tax rates to see how they would compare the second time around. All we can do is observe the changes and attempt to project how the tax revenues were affected.

I think the best period of time to use to argue that you are wrong, cyclops is the JFK reform of the extremely high marginal tax rates. Yes, the economy would have grown anyway, and tax revenues would have grown, but I do not think they would have grown as fast if the tax rates were not lowered as JFK did. Everyone should be reminded that JFK was a Democrat, but even he recognized the principles of human nature and economics as applied to tax rates relative to tax revenues.

http://www.heritage.org/Research/Taxes/images/bg1443cht3.gif
http://www.heritage.org/Research/Taxes/images/bg1443cht4.gif

More:
http://www.heritage.org/Research/Taxes/BG1443.cfm

http://www.heritage.org/Research/Taxes/images/bg1443cht1.gif
http://www.heritage.org/Research/Taxes/images/bg1443cht2.gif

http://www.heritage.org/Research/Taxes/BG1415.cfm
http://www.heritage.org/Research/Taxes/images/bg1415cht3.gif

http://www.heritage.org/Research/Taxes/images/70595489.gif
http://www.heritage.org/Research/Taxes/images/bg1443cht6.gif
http://www.heritage.org/Research/Taxes/images/bg1443cht9.gif

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From this link:

http://www.heritage.org/Research/Taxes/BG1443.cfm

Quote:

may 22, 2001-

The decision to scale back the level of tax relief over the next 10 fiscal years to either $1.25 trillion or $1.35 trillion, 1 substantially less than the $1.6 trillion requested by President George W. Bush, means that less than 25 percent of the projected $5.6 trillion budget surplus will be returned to taxpayers. For this reason, it is more important than ever for lawmakers to craft the best possible package of tax cuts if they want to improve the economy's lagging performance.

How can you honestly expect me to take such an article seriously?

And this one's great, too - I mean, you have to love the wisdom of a chart which reaches to 1928 and stops for some strange reason.

http://www.heritage.org/Research/Taxes/images/bg1443cht1.gif

Cycloptichorn

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One points out that it's still a bit too soon to say "the baby boom generation is retiring". There's still kids born during WW2 who haven't hit retirement age yet.

As far as tax cuts leading to larger revenues, that's dependent on where you are on the Laffer curve, no? But keep in mind that there's two different effects in operation with a Laffer curve. The first is the increase in tax receipts directly due to increased compliance with tax codes - basically, if your taxes are just way the hell too high, and you cut them some, people will pay the tax who otherwise would have evaded it, legally or illegally. This effect isn't notable in most economies, because taxes generally aren't that ridiculously high, even in Europe.

The second effect is the effect of the rate of taxation on long-term economic growth. Knocking a point off of your economic growth, year after year, eventually builds up into a huge difference in output; a higher tax rate on that output can easily fail to match the tax receipts of a country with a lower rate of taxation that has persistently enjoyed a higher rate of growth.

We do have a few examples of this - Sweden's probably the most extreme example among the western democracies. Even so, it may not be a pure Laffer curve effect - Sweden also has tremendously generous public benefits, and it's hard to say how much of the difference in the rate of participation (and the rate of growth) is due to the punitive rates of taxation, versus how much is due to the lack of participation brought on by public benefits. Of course, the two are not themselves unrelated - they'd hardly need the high tax rates if they weren't paying so much for social benefits! It's incontrovertible, though, that their economic growth has lagged to the point where continuing to fund the social benefits is becoming problematic.

(Then again, continuing to fund OUR social benefits is going to be pretty problematic too!)

Ah well. Economics is hard and our numbers are not necessarily accurate for anything. The whole discussion's moot if we're going to spend more than we take in anyway...

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Interesting observations, Avatar. I take it you believe in the Laffer curve?

I tend to think rates are currently below the peak of the curve, so that increase in rates will generate higher revenue, but the economy will suffer some if raised, but not so much that less tax revenue would occur. This does not alter the fact that I believe taxes are already too high, and that the deficit is a problem of overspending instead of under-taxation.

I have recently defended here the existence of a curve. My argument was simply the existence of a curve, call it Laffer or not, wherein tax revenues equal zero or near zero at 0% and at 100% tax rates, and you would think this was more unbelievable to some than the Roswell space beings. I never asserted where the peak of the curve was, nor that we are at that point now, but nevertheless I was treated with ultimate derision by some.

Cyclops, if you don't like the 1920's graph, that is why I said the JFK era may be the best argument for an example of lower tax rates stimulating higher tax revenues.

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Okie -- although I agree that some of the Kennedy tax cuts probably increased federal tax revenue, you can't support the position with papers by the Heritage Foundation, citing Reagan administration staff papers. Neither institution conducts the kind of disinterested research that can persuade the unpersuaded.

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Quote:

Cyclops, if you don't like the 1920's graph, that is why I said the JFK era may be the best argument for an example of lower tax rates stimulating higher tax revenues.

I don't like the 1920's graph, because it doesn't show the next five years - and what the eventual effects of the policies which lead to the growth brought about. That's just plain ignorant, to think something like that proves that we should be cutting taxes.

The JFK era doesn't prove your point either. You are making the mistake of non-corrollary statistics. There is no real evidence that the marginal tax rate cuts actually lead to greater growth in revenues than we would have had without the cuts.

This is what I've been saying all along- the idea of a 'laffer curve' is useless. It is only a theoretical construct with no actual predictive ability. And there's no way to check or prove it either, outside of modeling. It's not an economic theory, it's a way to try and justify/moralize giving the rich more money. Nothing more.

Av,

Quote:

The whole discussion's moot if we're going to spend more than we take in anyway...

True. We need to spend less, and take in more. Halfway measures aren't going to cut it with our level of problems.

Cycloptichorn

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Thomas wrote:

Okie -- although I agree that some of the Kennedy tax cuts probably increased federal tax revenue, you can't support the position with papers by the Heritage Foundation, citing Reagan administration staff papers. Neither institution conducts the kind of disinterested research that can persuade the unpersuaded.

I know, but I still like the information, so I post it. Unfortunately, the messenger becomes the issue when it should be the message. I agree they tend to point to the information that best supports the thesis, but I don't think they present fraudulent information.

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Where is the US economy headed?

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