Income and Poverty Census Report

Income and poverty data are out today. Not encouraging.
Full data
Quick take:
Overall: Median incomes declined by about $100 (but not statistically significant).
Median incomes for those 65 years or younger fell by about $600 (and was statistically significant).
Of most concern is that declines in the earnings for full-time, year-round workers. For men, median incomes fell by about $1,000, and for women over $300. (also, statistically significant).
Poverty rates increased from 12.5 percent to 12.7 percent. There were broad-based increases in poverty across the spectrum.
Shares of income in the midle 3 quintiles declined, while incomes in the highest quntile increased.
Number of those without health insurance increased by about 860,000.

Filed under: Data, Economics, Economy

Budget Cuts are on the Way

Post has a look ahead at the September budget battles.

Critical Votes Loom For Hill Republicans
Critical Votes Loom For Hill Republicans
Party to Set Cuts to Entitlement Spending
By Jonathan Weisman
Washington Post Staff Writer
Sunday, August 28, 2005; Page A04
Lawmakers are drafting proposals that would cut billions of dollars from the growth of Medicaid, slice into student loans just as students return to college, pare back food stamps and trim farm price supports in the midst of a midwestern drought.
The raft of bills, due out of 16 committees in the House and Senate by Sept. 16, will present the Republican Party its toughest test of fiscal austerity in nearly a decade. For years, the party has embraced the rhetoric of small government while overseeing legislation that has helped boost federal spending by more than a third since the GOP took control of Congress 10 years ago. Now, Republican lawmakers will be faced with the tough votes needed to slow that growth and enact the first cuts in entitlement spending since 1997.
The impact of the bills will be broad:
� The energy committees will produce legislation to open Alaska’s Arctic National Wildlife Refuge to oil drilling to secure $2.4 billion in royalties and other payments.
� The Senate Finance Committee is trying to find as much as $10 billion in savings from Medicaid, trimming anticipated growth by as much as 13 percent at a time when states such as Tennessee and Missouri are throwing tens of thousands of people off their Medicaid rosters.
� The Senate agriculture committee will try to trim farm price supports by $2.4 billion through 2010 while cutting an additional $600 million from food stamps.
� Senate aides are crafting legislation to cut $7 billion from the federal student loan program.
� The House and Senate education and labor committees are expected to draft legislation to raise the premiums corporations pay to the troubled Pension Benefit Guaranty Corp. from $16 to $31 per worker, a move that would improve the government’s balance sheet by $6.5 billion.
The bills are mandated by a budget resolution that passed this spring, after acrimonious debate. The budget blueprint mandated $35 billion in entitlement savings over five years, along with $70 billion in tax cuts over that period. By parliamentary rules, the resolution ensures that both the spending and tax cut packages cannot be filibustered, and thus can pass the Senate with a simple majority of 51 votes.

Filed under: Economics

Estate’s Rites

Up on the American Prospect website…
American Prospect Online – ViewWeb
Estate’s Rites
Conservatives are again trying to bury the estate tax. It doesn’t have to be that way.
By John S. Irons and Robert Gordon
Web Exclusive: 08.25.05
Print Friendly | Email Article
As early as next month, some Democrats seem ready to go along with most Republicans and implement a permanent repeal to the estate tax, a change that would reward the wealthy and drag down the economy by increasing the deficit. But it doesn’t have to be this way.
Read more…

Filed under: Economics

Hamilton on gas prices…

Recession?

Econbrowser: Talk of recession
Talk of recession
Nine out of the ten recessions in the United States since World War II were preceded by a spike in oil prices. Nevertheless, for the past year, I’ve been telling people that this time it’s going to be different– the economy could weather the rising price of oil without a downturn. Developments of the last couple of weeks make me a little more concerned.
Expenditures on energy are a sufficiently small share of GDP that if the only thing that changes is the price of oil, we really shouldn’t expect to see that big a change in total output. The way that previous oil spikes seem to have contributed to broad economic downturns was by helping to precipitate sudden shifts in the pattern of spending by consumers and firms, which demand shifts led to underutilization of labor and capital by the suppliers in those secondary markets.
In my opinion, the reason that the oil price increases of the last two years have not caused a recession yet is that they have built up gradually, and resulted not from a drop in supply but instead from strong global demand. Faced with a gradual price increase and rising incomes, most people have been able to adapt to the higher prices and make adjustments in an orderly way that does not cause serious economic dislocations.
On the other hand, just within the last couple of weeks, I’ve been hearing a lot more expressions of anxiety and concern– the sort of psychological factors that produce abrupt spending changes. That is to some degree a purely subjective judgment on my part. Quantitatively, I suppose I could point to the drop in the University of Michigan’s index of consumer sentiment from 96.5 in July to 92.7 in August, or the spike in phone calls I’ve been getting this last week from worried reporters.
[more]

Filed under: Economics

Tax Law, More economics

Looks like there’s a couple more blogs I’m going to need to check…
TaxProf Blog – More tax law than economics, but good for tax geeks like me.
Card arryingMember is a new blog from a grad school friend of mine.
That is all.

Filed under: Economics

Somber reasoning and copious citations of precedent

Spotted this gem today in Tax Notes…
“The Court sees no need to further respond to petitioner’s arguments with somber reasoning and copious citations of precedent, as to do so might suggest that his argument possesses some degree of colorable merit.”

Tax Analysts Web Services: Tax Notes Today
Petitioner attached to each return a two-page signed typewritten statement containing classic tax protester statements such as that no section of the Internal Revenue Code establishes an income tax liability; that his return was not being filed voluntarily but was being filed in order to avoid prosecution for failure to file a return; that, in the Ninth Circuit of the Federal Appellate Court system, a tax return (Form 1040) with all zeros on the return constitutes a valid return; and that he had zero income because there is no reference in the Internal Revenue Code for the taxation of wages, salaries, or compensation for personal services, along with several other arguments of this nature. Petitioner also attached to his returns the Forms W-2, Wage and Tax Statement, that had been issued by his employer.
Petitioner filed identical petitions in response to each notice of deficiency, alleging:
“Income tax is based on voluntary compliance and self-assessment income is not defined in the IRC. “Income” is defined by the Supreme Court as “Gains and profits derived from corporate activities”. I never received a “Statutory” Notice Demand for payment. I am not “Statutorily Liable” for “Income” tax. I was never granted an administrative hearing as per due process. No IRS agent ever produced a “Delegation of Authority” to change my 1040 or assess any deficiency.”
The Court rejects entirely petitioner’s allegations and the same arguments he made at trial. Section 61(a)(1) defines gross income to include all income from whatever source derived, including, but not limited to, compensation for services rendered, whether such services are for a corporation, an individual, or in a self-employed activity. Petitioner’s protester arguments have been heard on numerous occasions by this Court, as well as other courts, and have been consistently rejected. The Court sees no need to further respond to petitioner’s arguments with somber reasoning and copious citations of precedent, as to do so might suggest that his argument possesses some degree of colorable merit. See Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). In short, petitioner is a taxpayer subject to the income tax laws, and he is liable for income tax on the compensation and other income paid to him during the years in question, none of which was questioned or denied. His arguments are rejected.

Filed under: Economics

First Social Seurity, then Medicare

In case you were wondering what might come after Social Security privatization, ex- presidential advisor (CEA) Glen Hubbard explains…

The Iceberg Cometh (Harpers.org)
HUBBARD: Exactly. And personal accounts could also serve as an example. The reason to fix Social Security first, I think, even though Medicare is by far the more important problem, is that Social Security reform would help set up a mechanism. Once we had Social Security personal accounts, and they were successful, we could use personal accounts to fund Medicare as well.

The rest is a conversation between Krugman, Hubbard, and Peterson. Worth a read…

Filed under: Economics

Weak Labor Market

Here’s why many people are not jumping for joy when we see a couple of slightly-above-average months of job growth. We have a lot of ground to make up… read here…
Background Paper: Employment During the 2001-2003 Recovery

Filed under: Economics

Angry Bear is not on the side of the supply siders

You can almost see the jaw drop…

Angry Bear
Bush Defends Tax Cuts as Deficit Reducing
Mark Thoma listens to the President’s Saturday morning address so we don’t have to — and provides this link:

“�The tax relief stimulated economic vitality and growth and it has helped increase revenues to the Treasury,” Bush said in his weekly radio address. “The increased revenues and our spending restraint have led to good progress in reducing the federal deficit.”

How did his speechwriter cram so much dishonesty in two short sentences? If we have had spending restraint and strong growth — how does one explain the fact that Federal spending as a share of GDP has risen from 19% in 2000 to 20.3% in 2004? To be fair, real spending has increased only 17% – but also note that real GDP has increased by a mere 9.6% over this four year period. In the meantime, real tax revenues have fallen by 12% with the revenue to GDP ratio now being only 16.8% as of 2004 as compared to 20.9% in 2000.
In many households, the kids are watching cartoons as President Bush delivers his Saturday radio address. Let me suggest that their parents would be better advised to join their kids than to listen to such clownish discussion of our nation’s fiscal policy.

Filed under: Economics