New York Times Blog
Fake-onomics (Part I?)
By Catherine RampellIn the first presidential debate, the Republican nominee, John McCain, just condemned the fact that “the United States of America business pays the second highest business taxes in the world.” He made the same allegation in his speech at the Republican convention.
Depending on where your political compass points, this characterization of U.S. corporate income taxes is either misleading or plain wrong. Yes, statutory corporate income tax rates are high. But effective corporate income taxes — the tax rates companies actually pay — are among the lowest in the developed world. This is because the U.S. tax code offers all sorts of deductions and tax breaks not available in other countries. Mark Thoma, among others, has addressed this issue before.
Have another good example of an egregious misuse of economics by a public figure? Send your Fake-onomics nominees to economix@nytimes.com.
Look in the Mirror, Washington: Part II
By Catherine RampellThis is the second in a series on ways in which Washington’s economic policies mimic the same types of financial irresponsibility it chastises Wall Street for.
Financial gymnastics: Washington has complained that Wall Street banks made the securities, swaps and other complicated things they exchange incomprehensible in order to make them look more valuable. Politicians complain that banks dragged their feet about writing down the value of troubled assets and should quit grumbling about transparency-promoting accounting standards like mark-to-market provisions. Why can’t Wall Street just be honest about what these things are worth, huh? Why do sneaky banks have to slice and dice the things they own to obfuscate, or outright misrepresent, their value?
Politicians who worry about manipulation of balance sheets should turn their attention on themselves. The federal government has been notoriously obfuscatory about its own financial difficulties. Read more…
The Joker’s Bailout Plan
By Catherine RampellA Batman/bailout video mashup is making the rounds today.
Look in the Mirror, Washington: Part I
By Catherine RampellWashington chastises Wall Street for bogus balance sheets and financial hocus-pocus, for irresponsibility and unaccountability. The problem is that Wall Street isn’t alone in these sins. In many and bizarrely parallel ways, the government is equally financially profligate.
I’m going to do a series on these unhappy parallels, starting with:
No tree grows up to the sky: Washington attacks Wall Street banks for being in denial about the value of the bad loans and mortgage-backed securities on their balance sheets. Banks took on loads of bad loans that they knew the borrowers couldn’t pay back. But hey, home prices were going to go up forever, so it didn’t matter; rising home prices would outpace any losses from defaulted loans.
This self-servingly wishful logic is very similar to that Washington used to justify giant tax cuts: Sure, cutting taxes might lower federal revenues and thereby make it harder to pay down the national debt. But hey, Congress reasoned, the tax cuts Americans love will keep the economy growing forever, and so the government will make up for those initial losses in tax revenue because people will be paying more taxes on higher earnings. The United States can eventually pay back the debt owed to China and the rest of the world because the economy will grow indefinitely, and thereby outpace falling tax rates.
Wrong. Read more…
Did You Catch That?
By Catherine RampellAn editor draws my attention to a very interesting ad that just ran on Economix. In case you missed it — our ads cycle through– see the screenshot here.
Wonder who will receive the bill for that one…
Answer Us This, Bailout Critics
By David LeonhardtNeil Irwin and Cecilia Kang point out in The Washington Post today that the bailout plan has two different camps of critics: those who think that the government should inject money directly into the financial system, rather than buy distressed assets; and those who want the government to buy mortgages directly, rather than buying the Wall Street securities based on the performance of mortgages.
(I would argue there is a also a third camp: people who think the idea of buying distressed assets may be a sensible step — even if it’s not the only sensible step — but are worried the current plan would cause the government to overpay for the assets. I share those worries.)
Here is a question for each of the two camps mentioned in The Post’s article, neither of which has yet been adequately answered by the critics: Read more…
More Mankiw
By David LeonhardtAs I expected, Greg Mankiw has more to say about why I might be wrong that the government should demand an ownership stake an any firms it bails out. (Here are parts one, two and three of our virtual debate.) To boil it down, he says that allocating ownership stakes to the government would make any auction of mortgage-backed securities a far more complicated process.
I agree that the auctions would be more complicated this way. But my instinct is that the added complication would be worth it. Perhaps even more important, it isn’t clear that the entire bailout can be accomplished through auctions.
The Mommy Penalty (or Lack Thereof)
By Catherine RampellFollowing our discussion earlier on interesting gender-related wage gaps: Mothers earn about 6 percent less than childless women, even when productivity is taken into account. This so-called motherhood penalty seems to indicate that anti-mommy discrimination is afoot.
Actually, a new recent working paper from Catalina Amuedo-Dorantes at San Diego State University and Jean Kimmel at Western Michigan University finds the difference is almost entirely a result of the way compensation is measured.
If you include health benefits in the measure of compensation, the gap in earnings between mothers and childless women disappears. Mothers, when they can, prefer to trade off higher wages for health benefits. (Because of other traits like race and education, though, mothers are often not as able to get the jobs that offer employer-based health insurance.) Read more…
Welcoming Another Contributor
By Catherine RampellToday you’ll see a post from Uwe E. Reinhardt at Princeton.
A leading health care expert, Professor Reinhardt will lend his insights on everything from the future of Medicare to the cost of prescription drugs to the medical treatment of veterans (on a personal level too — his son, a marine, served in Iraq and was then wounded in Afghanistan). He also likes to talk about accounting and executive pay every once in a while, too.
Professor Reinhardt was born in Germany (and has traveled extensively since then). We’re delighted to have him writing for Economix about the American health care system, as well as how the rest of the world treats, and heals, its citizens.
In Defense of a Giant (and Growing) Health Care Industry
By Uwe E. Reinhardt
Uwe E. ReinhardtEditor’s Note: Uwe E. Reinhardt, one of our Daily Economists, argues that in the midst of a slowing American economy, we should be grateful for a growing health care industry.
If a Martian landed on earth and followed our debate on health care, he or she would conclude that the people on Earth are meshugge.
The Martian would hear politicians, business people and the talking heads on TV lament the burden that health care puts on the economy and over the prospect that health care will destroy America. The Martian would learn an entirely new macroeconomics, according to which the defense industry, the fast-food industry, golf resorts, football games and Nascar racing create jobs and economic value, while health care destroys jobs and economic value with it. Only an ignoramus or a fool could arrive at this conclusion.
Alas, Mother Earth is full of such people.
Think about it. When you last visited a physician’s practice or stayed in a hospital, did you see people other than patients there? Do you realize that these people call their work “jobs,” which yield a livelihood that supports a family and raises the next generation of Earthlings? Did it occur to you that their care for you has economic value, especially as you can walk again as you could not before they cared for you? Did you consider that they postponed your death by many years, perhaps even decades? Would you really surmise that their work creates less value added than, say, the fast-food industry? Note, of course, that the latter is a major driver of obesity in America — and thus of diabetes and the many illnesses that diabetes triggers, such as blindness, kidney failure, loss of limb or even early death, the very things the American health care sector fights. Read more…
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Economics doesn't have to be complicated. It is the study of our lives — our jobs, our homes, our families and the little decisions we face every day. Here at Economix, David Leonhardt, Catherine Rampell and other contributors will analyze the news and use economics as a framework for thinking about the world. We welcome feedback, at economix@nytimes.com.
Open Market: A Reader Contest
This week's contest: Lawmakers are meeting this week to craft a bailout package. What should they name the piece of legislation? Artful acronyms are much appreciated. (Offensive ones are not, though, so keep it clean, people!)
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David Leonhardt writes the Economic Scene column, which appears in The Times on Wednesdays.
Catherine Rampell is the economics editor at nytimes.com.
R.M. Schneiderman is a Web producer for nytimes.com.
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