Economists Say Obama Plan Would Prevent Recession

[Mass]

http://politicalwire.com/archives/2011/09/28/economists_say_obama_plan_would_prevent_recession.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PoliticalWire+%28Political+Wire%29

A Bloomberg survey of economists concludes President Obama's $447 billion jobs plan "would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year."

Edit: Apparently, Moody's agree
http://www.reuters.com/article/2011/09/27/us-usa-budget-moodys-idUSTRE78P2FW20110927
Moody's: Obama budget a plus but adoption unlikely

The GOP is not only against science, but against sound economical principles.

[dkf]

1. 275,000 jobs kept or added so not even 275,000 net new jobs?

"The legislation, submitted to Congress this month, would increase gross domestic product by 0.6 percent next year and add or keep 275,000 workers on payrolls, the median estimates in the survey of 34 economists showed. The program would also lower the jobless rate by 0.2 percentage point in 2012, economists said."

[ProSense]

2. The point

"275,000 jobs kept or added so not even 275,000 net new jobs?"

...is that it's positive.

Steve Benen

<...>

In fairness, the economists surveyed had widely divergent estimates, and some were far more optimistic about the proposal’s impact than others. But the overall consensus among the experts is that the Americans Jobs Act would create hundreds of thousands, if not millions, of jobs, and boost economic growth. Some projected a pretty significant boost: “Goldman Sachs Group Inc. estimated the plan would add 1.5 percent to the economy, while Macroeconomic Advisers LLC said 1.3 percent and UniCredit Research, up to 2 percent.”

<...>

[dkf]

3. At what cost?

And when taxes are raised a few years down that will contract GDP. This will keep us limping along and moves a small portion of GDP forward.

[ProSense]

5. What

"At what cost?"

...are you upset about? The cost? The economy is likely to collapse completely if things don't turn around. What are you proposing: the deregulation that began in the 1990s and the economic policies of the Bush era that led to the worst financial crisis in more than 70 years?

What?

"And when taxes are raised a few years down that will contract GDP. This will keep us limping along and moves a small portion of GDP forward."

Debunking the claim that higher income-tax rates reduce GDP

I'm not much into promoting RW talking points.

[dkf]

6. Tax Increases Reduce GDP - Study by Christina Romer (yes Obama's former advisor)

Tax Increases Reduce GDP
"Tax changes have very large effects: an exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent."

http://www.nber.org/digest/mar08/w13264.htm

NBER = national bureau of economic research.

[ProSense]

7. Hmmm?

"Tax Increases Reduce GDP - Study by Christina Romer (yes Obama's former advisor)"

You take an academic study that isolates tax increases from other factors to prove what? Romer acknowledges that other factors can lessen the impact to "substantially." These likely include lowering spending on health care, job creation and other investments.

<...>

Romer and Romer also examine the behavior of output following changes in other measures of taxes. Using broader measures of tax changes, such as the change in cyclically adjusted revenues or all legislated tax changes, the estimated output effects are substantially smaller than those obtained using the new measure of exogenous tax changes. This leads the researchers to conclude that failing to account for the reasons for tax changes can lead to substantially biased estimates of the macroeconomic effects of fiscal actions.

When they consider the two types of exogenous tax changes separately, Romer and Romer find suggestive evidence that tax increases to reduce an inherited budget deficit have much smaller output costs than other tax increases. This is consistent with the idea that deficit-driven tax increases may have important expansionary effects through expectations and long-term interest rates, or through confidence.

<...>

Her point isn't in contradiction to Spitzer's

<...>



A caveat—obvious but critical—is in order. Simultaneity does not equal causation. Annual growth rates are a consequence of many factors, macro and micro, and the isolated impact of marginal tax rates on growth is hard, if not impossible, to discern from these numbers alone.

That said, it's obvious that there is no correlation between higher marginal tax rates and slowing economic activity. During the period 1951-63, when marginal rates were at their peak—91 percent or 92 percent—the American economy boomed, growing at an average annual rate of 3.71 percent. The fact that the marginal rates were what would today be viewed as essentially confiscatory did not cause economic cataclysm—just the opposite. And during the past seven years, during which we reduced the top marginal rate to 35 percent, average growth was a more meager 1.71 percent.

More sophisticated efforts to analyze this relationship also produce decidedly murky results. An excellent review of this in the Yale Law Journal, "Why Tax the Rich? Efficiency, Equity, and Progressive Taxation," concludes that there is scant, if any, legitimate academic support for the proposition that moderate, as opposed to dramatic, increases in marginal rates have any impact on the willingness of the wealthy to participate in the economy.

So where does this leave us? Probably with Weisman's conclusion—that the debate between justice and virtue will continue for years to come. But this debate may be little more than a Rorschach test—an inkblot into which we read our underlying values about income distribution and social welfare. Those who see taxes as the bane of progress will still claim that higher marginal rates are the enemy of economic growth. Those who favor greater progressivity will say there is no evidence of such a claim. They will conclude—and they will be right—that the wealthier can afford to pay more, with no harm to the nation's economic growth.

[dkf]

10. Marginal tax rates don't mean anything. It's effective tax rates that matter.

And the main point of the study was to separate the effects of taxes when used to counteract the business cycle vs exogenous moves.

http://www.forbes.com/2009/01/07/romer-obama-stimulus-oped-cx_dh_0107henderson.html

The Romers carefully sift through all federal tax cuts and tax increases from 1947 to 2005 to figure out, based on the discussion at the time, whether the changes in tax policy were motivated by a desire to offset the business cycle or by other goals. When they strip out the tax changes meant to offset the business cycle, they find that the other tax changes were highly effective. A tax decrease of 1% of GDP raised GDP by about 3%, and, symmetrically, a tax increase of 1% of GDP reduced GDP by about 3%.

[ProSense]

11. This entire argument

"Marginal tax rates don't mean anything. It's effective tax rates that matter."

is a "rhetorical straw man."

CBPP: “Supercommittee” Should Develop Balanced Package of Tax Increases and Spending Cuts

<...>

Higher Taxes Not a Barrier to Economic Growth

Many who call for a budget cuts-only approach to deficit reduction argue that tax increases are the wrong prescription during a time of continued economic weakness. But this argument is a rhetorical straw man; advocates of a balanced approach to deficit reduction call for delaying tax increases until the economy has strengthened. Indeed, it is for this very reason — to avoid creating any fiscal drag that would threaten the recovery — that the Administration has proposed to extend the current payroll tax cut.

Some assert that raising taxes would damage the economy even under better economic conditions. Similarly, in the early 1990s, some predicted that tax increases on affluent taxpayers would result in a sharp economic slowdown. Instead, as Figure 5 shows, job creation and economic growth were significantly stronger in the recovery following the marginal income tax increases enacted in 1993 than they were following the 2001 tax cuts.

Other critics claim that allowing the high-end tax cuts to expire would kill job growth in the small business sector. This contention, too, is inconsistent with the evidence: a recent Treasury analysis finds that only 2.5 percent of small business owners are in the top two income-tax brackets. <17> Moreover, there is little evidence that tax rates strongly affect growth and job creation by small businesses. Small businesses generated jobs under the Clinton Administration at twice the rate as under the Bush Administration, when marginal tax rates were lower.<18>

In fact, CBO and others have long concluded that tax increases used to reduce budget deficits can improve long-term economic growth and job creation. The evidence also shows that deficit-financed tax cuts reduce long-term growth: CBO projects that, over the longer term, extending the 2001 and 2003 tax cuts without paying for them would reduce economic growth and national income. <19>



<...>

[doc03]

8. What about those 120,000 postal jobs they are going to

eliminate and all the other public jobs the states are cutting? Sounds like we will still be in the hole. It gets down to this a few billionaires control Wall Street and they do the hiring and even though they are sitting on record profits they aren't hiring anyone as long as Obama is president. We are screwed.

[Chiquitita]

4. If Goldman Sachs thinks

it will add 1.5% to the economy, and Goldman Sachs runs the world, it should be adopted. (just joking).

[flpoljunkie]

9. Steve Benen: Moody's estimates the AJA would create 2 million jobs

September 28, 2011 8:35 AM

Economists: Jobs Act may prevent recession
By Steve Benen


Almost immediately after President Obama unveiled the American Jobs Act, some of its biggest fans were economists and economic forecasters. Moody’s Analytics estimated that the plan would boost economic growth by 2 percentage points and create 2 million jobs. Macroeconomic Advisers wasn’t quite as optimistic, but its analysis projected that the White House plan “would give a significant boost to GDP and employment over the near-term.”

Three weeks later, support for the American Jobs Act continues to be much stronger among economists than members of Congress. Indeed, I suspect the White House will be awfully pleased with this Bloomberg News headline this morning: “Obama Jobs Plan May Prevent 2012 Recession.”

President Barack Obama’s $447 billion jobs plan would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year, according to economists surveyed by Bloomberg News.

In fairness, the economists surveyed had widely divergent estimates, and some were far more optimistic about the proposal’s impact than others. But the overall consensus among the experts is that the Americans Jobs Act would create hundreds of thousands, if not millions, of jobs, and boost economic growth. Some projected a pretty significant boost: “Goldman Sachs Group Inc. estimated the plan would add 1.5 percent to the economy, while Macroeconomic Advisers LLC said 1.3 percent and UniCredit Research, up to 2 percent.”

http://www.washingtonmonthly.com/political-animal/2011_09/economists_jobs_act_may_preven032480.php

[GSLevel9]

12. Insert critical word "some" nt

[CakeGrrl]

13. Rec