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Jul 27 2012

Some Interesting Facts About Marginal Tax Rates and Real GDP

"In 1947, the year I was born, unemployment was 3.9 percent. In 1968, when I turned 21, it was 3.6 percent. Let’s not forget all the periods in our recent history when our economy was humming along at high speed, creating the opportunities that made our country the most successful and powerful in the history of the world.”  (From:  Believe in America:  Mitt Romney’s Plan for Jobs and Economic Growth)

Here are some facts.  In 1947, the top income tax rate was about 86%; in 1968, it was 70%.  Below is a chart that depicts the year-to-year percentage changes in Real Gross Domestic Product (GDP) from 1948 to 2011.  Over the 37 year period 1948-1984, the annual growth rate in real GDP was in excess of six percent eight times and over four percent 19 times.  Most of this occurred during time periods when marginal tax rates for the top income brackets were 70% or more.  Post-1984, annual growth rates in real GDP never even came close to six percent.  Over the 27 year period 1985-2011, real GDP grew by at least four percent only seven times, five of these coming during the Clinton years when top marginal rates stood at 39.6%.

Now I know very well that the relationship between marginal tax rates and economic growth is way more complicated than what I’ve described.  But really, it should be enough to cast substantial doubts about the dire predictions from the right that higher tax rates on the wealthy will engender some sort of economic Armageddon.

0 comments - Posted by Ernest Zampelli at 7:17 PM - Categories: Economy

Jul 19 2012

Moderate Drinking : How Risky for Children Exposed In Utero?

Once again, a new suite of studies of the effects of moderate drinking on children’s learning capacities (1) that does not find a connection to prenatal alcohol consumption under 9 drinks a week has raised concerns among the Fetal Alcohol Spectrum Disorders (FASD) research and advocacy community as news and media outlets have widely reported these results.  Studies of 870 children whose mothers reported low (1-4 drinks per week) or moderate drinking (5- 8 glasses weekly) found no significant relationship of that drinking to executive function (2), selective and sustained attention (3), or  IQ (4) among 5 year old children.   The moderate drinking group was compared to a matched group of 758, both selected from the Danish National Birth Cohort, a very large sample of 101,042 pregnancies (5).

Caution in interpreting these results has come from researchers who note, among other things, that age 5 may still be too young to find significant neurodevelopmental learning outcomes with this level of exposure (6).  While there may have been other conflicting findings in the literature, several observers including The National Organization of Fetal Alcohol Syndrome (NOFAS) have noted that many other studies have found significant negative outcomes including spontaneous abortions or miscarriages when mothers reported drinking at a moderate level during pregnancy (7).   Like NOFAS, we note that significant risk relationships between moderate drinking in early pregnancy and spontaneous abortion were reported in a recent (2011) secondary analysis of data from the full Danish National Birth Cohort (8) – the same database that has generated the lack of significant learning findings with 5-year-old children whose mothers drank low or moderate amounts of alcohol while pregnant. 

Ah ha!  How can the significant results of moderate drinking and spontaneous abortions be reconciled against the lack of association of moderate drinking with learning outcomes arising from the same sample?  One wonders if the existence of these prenatal deaths might have been disregarded in the study of prenatal alcohol survivors.   Is there a way to calculate cumulative risk in order to provide a more comprehensive and accurate picture of the effects of moderate drinking?

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0 comments - Posted by Carole Williams Brown at 10:24 AM - Categories:

Jul 17 2012

Pitiful Job Numbers—Oh, What a Surprise!

Anyone who is surprised by the dreary June jobs report released earlier this month hasn’t been paying attention to what is and is not going on with regards to economic policymaking.  No doubt we’ll hear from Romney, Boehner, Cantor, and McConnell about how this report, along with the last one, again shows that President Obama doesn’t know what it takes to create jobs, doesn’t know how the economy works, blah, blah, blah.  Of course, suffice it to say that these four musketeers, along with most other Congressional Republicans, are themselves economic illiterates whose stale and tired mantra of reduced government spending and reduced taxes would make things worse instead of better.  (And no, Romney’s business success doesn’t at all suggest any above average capability for managing a nation’s economy.)  Here’s what should be done.  Enact another round of short run stimulus, aimed at (1) stopping the hemorrhaging of jobs in the state and local government sector, primarily in education and public safety and (2) maintaining, improving, and modernizing the nation’s woeful infrastructure.  These are the most effective policies to increase aggregate demand and stimulate faster job growth.  Other things that might help, but not as much, are extending the payroll tax cut, the expensing of investment spending, and the extension of unemployment benefits. 

So who’s going to have the good sense to put together and propose something like this?  Uh, I don’t really, uh, oh?  Well gee whiz, President Obama did last September.  It was called the American Jobs Act and he’s urged Congress time and time again to pass it but to no avail.  Why?  Because according to the four musketeers and their compatriots, increased government spending is the problem not the solution;  fiscal austerity is the answer, not fiscal stimulus.  Read my lips.  They are wrong, wrong, wrong!!!  The economy is stumbling, interest rates are at or near zero, inflation is below target, and consumers are still deleveraging.  It’s the President who has it right—fiscal stimulus is what’s needed now, especially in light of the Fed’s timidity in pursuing more aggressive monetary policy.  Yes, there are structural problems.  Yes, there’s a long run deficit problem.  No, these are not reasons to reject another round of fiscal stimulus—that makes no sense!

What the President needs to do in response to the hammering he’s taking over the jobs numbers is to indict explicitly the Congressional Republicans’ refusal to take up and pass the jobs bill.  Their intransigence on this, as on the first stimulus package, is nonsensical and unconscionable.  They should be held accountable for it.

1 comments - Posted by Ernest Zampelli at 10:09 AM - Categories: Economy