Productivity Growth Remains High

Brad DeLong crunches the numbes from today’s GDP report (3.1% annual rate real GDP growth) to get an estimate for productivity growth.

Third Quarter Productivity Growth: Archive Entry From Brad DeLong’s Webjournal
Put these numbers together, and realize that when the Bureau of Labor Statistics calculates productivity growth for the third quarter of 2002, its estimate will be that productivity grew at a 4.0% annual rate.
Take the 7.6% growth rate of the last quarter of 2001, the 8.3% growth rate of the first quarter of 2002, the 1.7% growth rate of the second quarter, and now the third quarter’s 4.0%, and realize that over the past four quarters America’s measured economic productivity has grown by 5.4%.
This is an amazing performance for a time over which total hours worked have been falling. In the eleven years between 1959 and 2001 in which total hours worked have fallen, productivity growth has averaged only 1.5% per year. In the eight years since the start of the post-1973 productivity slowdown in which total hours worked have fallen, productivity growth has averaged only 0.9% per year.

Filed under: Economics, gdp, productivity

The Official Return of Deficits

The OMB has the official deficit numbers for 2002. Bottom line: receipts down, outlays up, swing from a $127 billion surplus to a $159 billion deficit.
The OMB also published a table showing the reasons why the deficit differed from their original forecast. The numbers they show claim that 7% of the budget deterioration was due to the tax cut, while 64% came from “economic change.”
I’m not sure how to evaluate these numbers since there is no supporting material (that I can find) to show where they came from. The “economic change” number is likely to contain both the actual deterioration in the economy along with economic forecasting errors. The 64% number thus contains the effects of the recession as well as (potentially) overly optimistic economic projections back in February 2001.
The 7% is slightly lower than other estimates I’ve seen for the effect of the income tax reductions (the CBO’s estimate was about 9% according to the preceding link). What’s puzzling as well is that the same table in the FY2003 mid-session review and the FY2002 mid-session review had the effect of the tax cut to be $41 billion (page 6) and $40 billion (page 4) — rather than $32 billion as reported on Friday.
(In Billions) …….. Receipts Outlays Surplus/Deficit (-)
FY 2001 Actual…… 1,991 1,864 127
FY 2002 Actual…… 1,853 2,012 -159

Filed under: Economics, Policy, Politics

UI benefits

If the economy continues to show weak growth over the next few months, an extension of unemployment benefits should be a top priority of the post-election lame-duck congress.

370,000 Workers Exhaust Temporary Federal Unemployment Benefits in September Alone:, 10/29/02
According to new Department of Labor data, in September more than 370,000 people ran out of temporary federal unemployment benefits before finding work. That brings the total number of people who have run out of temporary federal benefits to nearly 1.5 million.
–snip–
The unusually high proportion of unemployed workers who are exhausting their regular unemployment benefits before they can find work, as well as the surprisingly large number of workers whose additional weeks of federally funded unemployment benefits are running out before they secure employment, underscore the need for adequate unemployment insurance support at this time. These data demonstrate the need for Congress both to extend and to strengthen the current TEUC program before it expires at the end of the year.

Filed under: Economics, Policy

100,000 page-views.

ArgMax.com yesterday hit the 100,000 page-view milestone. Not bad for the first 4 months or so; the official opening was on June 19, 2002.

Filed under: Website

State Personal Income

How’s your state doing? Click on the graph for a larger version.

State Personal Income
Personal income growth for the nation was 1.3 percent in the second quarter 2002, roughly the same as in the first quarter (1.2 percent), and up from an average of 0.5 percent for the four quarters of 2001, according to estimates released today by the U.S. Bureau of Economic Analysis. Growth in the second quarter reflected faster growth in larger states such as California, New York, and Texas, that more than offset a slowdown in growth elsewhere.

[Map of States showing personal income, percent change 2002:I-2002:II]
For the nation, personal income growth was little changed, as an upturn in dividends, interest, and rent was largely offset by a slowdown in transfer payments. Earnings growth was unchanged. The upturn in dividends, interest, and rent was due in part to step-ups in the growth in rental income of persons and in interest income, the latter reflecting faster accumulation of interest-bearing assets. The slowdown in transfers followed a typical first-quarter uptick, when cost-of-living adjustments boosted payments for social security and other federal programs.

Filed under: Data, Economics, State Economy

Copyright Law

Lawrence Lessig on Eldred v. Ascroft.
Does anyone support extending copyright extension to 95 years? I still find it hard to believe this made it through congress.

Copyright law and roasted pig.
–snip–
We live in a time when many question our framers’ values. Unimaginable threats force many to say that we can no longer afford the liberty they sought to protect. Yet here at least, the framers understood something very modern: they knew that the new always builds on the old. They understood the burdens of extended monopolies. They therefore crafted a regime that kept monopolies short–not because they were against copyright or authors, but because they believed that once copyright does its work, there’s no further need to keep creative work regulated. The framers saw copyright as a way to induce new creativity. It was not to be a reward for favored creators.
But though only 2 percent of work 75 years old is currently exploited commercially, Congress’s practice is to extend protection generally. It cannot see beyond this 2 percent–for among other things, the 2 percent includes Mickey.
The framers would never have allowed millions of monopolies for the benefit of just 2 percent; they would not have sacrificed the public domain to benefit a favored few. They had a bigger aim; their means were more focused. As the Supreme Court once said about a statute that banned all indecent speech so that children would not be exposed, we don’t “burn the house to roast the pig.” Exactly right–not even to save a mouse.

Filed under: Other

Best of Blogs

Looks like I made the “Best of Blogs” list for the week over at MSNBC…
Thanks to Bruce Chan – (whoever that is!).

Weblog central: Best of blogs – October 18
Bruce Chan writes from Boston to request more business blogs, recommending, among others ArgMax.

Filed under: Website

Capital Gains

A recent CBO brief examines the role of capital gains taxation in federal revenue.
In 2000, revenue from capital gains taxes represented 12 percent of income taxes. In 1980, it was only 5 percent, so the capital gains tax seems to be a growing revenue source.
I’m very curious to see how strong the capital gains revenue decline has been in the past couple of years as the stock market has fallen.

Capital Gains Taxes and Federal Revenues
Conclusion
Revenue estimators are often faulted for the way they project tax receipts and prepare legislative cost estimates related to capital gains taxes. But the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious. And while reductions in the overall taxation of capital income can measurably increase economic growth, a cut in capital gains taxes alone is likely to produce much smaller macroeconomic effects. Inaccuracies in projecting revenue and disagreements about the effects of tax changes stem not from a failure to incorporate the behavioral responses of asset holders but from the complexities inherent in the nature of gains and gains realizations.

Filed under: Economics, Policy

Readings

Some readings people are talking about:
Krugman in NYTimes magazine (a longer article than his editorials): For Richer
Stiglitz in The Atlantic: The Roaring Nineties
Ben Bernanke, FRB speech: Asset-price “bubbles” and monetary policy
Robert Shapiro in Slate: What Is the Mother of Invention?

Filed under: Economics

Mundell’s top 10

Via Amateur Economist
Robert Mundell 1999, economic noble prize winner read the top ten…
Late Show Top Ten Archive: October 17, 2002
Top Ten Ways My Life Has Changed Since Winning The Nobel Prize
10. Can end almost any argument by asking, “And did you ever win a Nobel Prize?”
9. Whenever I bring it to Applebee’s restaurant, I get a free plate of riblets heading my way
8. When I enter a room, I shout, “Nobel Prize winner in the hizzouse!”
7. At most 7-11s, I can get service even if I choose not to wear shoes or a shirt
6. Instead of saying, “Kiss my ass” to guys who cut me off in traffic, I now say, “Kiss my Nobel Prize-winning ass”
5. I’ve been banned from casinos in seven states
4. When I call K-Rock to request Aerosmith, they play Aerosmith
3. Any meaningless crap I say, the next day it’s in the Wall Street Journal
2. Another Friday, another P. Diddy party
1. In Stockholm, I get more tail than Frank Sinatra

Filed under: Other