President Donald Trump has long been known for his fondness for superlatives when describing his projects and policies. His administration’s proposal for a tax cut is certainly no exception. In a recent interview with the Associated Press he declared: “It will be bigger, I believe, than any tax cut ever. Maybe the biggest tax cut we’ve ever had!”
Americans just got their first taste of some of the details of his tax overhaul. Treasury Secretary Steve Mnuchin repeated his boss’ boast about the tax cut’s size and said it would slash the top corporate rate to 15 percent from 35 percent. It would also simplify individual income rates and reduce them a little, while doubling the standard deduction and eliminating certain itemized deductions.
In assessing whether his cuts might be the biggest ever, many pundits have pointed to President Ronald Reagan’s tax overhaul in 1981, which reduced government revenue by 2.9 percent of GDP.
But was that really the biggest U.S. tax cut ever? Hardly. In fact, we have to go back almost 150 years – immediately after the Civil War and the beginning of the income tax – to find the American whopper of tax cuts. Put simply, it would be very hard for Trump to exceed that cut. Continue reading
In both 2014 and 2015 I wrote about the cost of going to the Prom. I found the results surprising. The cost of going to the prom from 1998 to 2015 was going up much slower than the cost of inflation. The findings appeared in outlets like the Washington Post, US News and The Conversation. It is now two years later.
What has happened since 2015 to the cost of attending the prom? Continue reading
It is almost April 15th; the time many people in the U.S. file their income taxes. Shocking as it may seem, personal income taxes don’t provide most of the federal government’s revenue. Since World War II personal income taxes have consistently provided less than half of all the money taken in by Washington.
Just as shocking has been the change in the source of federal revenues over time. The official statistics show in the 1940s and 1950s corporations picked up a major share of supporting the federal government. Today, it is taxes on workers. Social security and Medicare taxes are now four times more important in providing revenue for the government than they were in the mid-1940s. Continue reading
The Federal Reserve is expected to lift short-term interest rates at the close of its two-day meeting today and signal that more hikes are to come over the course of the year.
Numerous commentators have focused on who is hurt by rising rates, particularly those with lots of floating rate debt, such as a credit card balance, or anyone in need of a loan.
Not everyone, however, is negatively affected by rising rates. There are some individuals and businesses cheering the Fed on as it pushes up rates, including savers, people traveling abroad and foreign exporters and businesses with large cash balances.
When President Donald Trump formally announced his Cabinet, one of the surprises was that the list of 24 Cabinet-level officials did not include the chair of the Council of Economic Advisers (CEA). There is no formal requirement that an economic adviser be part of the Cabinet. However, Barack Obama started a new trend by appointing the last four council chairs as part of his Cabinet. Being part of the Cabinet is important because it ensures economic as well as political considerations are part of presidential decisions.
Not only has the position now been eliminated from Cabinet meetings, but the council’s website has also been turned off. Only archival versions from past administrations remain. This apparent sign of disrespect for the role of the CEA, along with the fact that President Trump has yet to actually nominate a council chair, has caused some to worry that he won’t be getting much economic advice from actual economists. A website that takes bets on who will fill various posts in Trump’s Cabinet suggests he may not even fill the position.
The Dow Jones Industrial Average just broke 20,000 for the first time. Traders and investors cheered this historic high of the world’s most famous stock market index, which is composed of 30 of the biggest and best-performing American companies and is frequently used as a barometer of the strength of the economy.
However, it’s hardly a surprise that the Dow hit this particular milestone. It and other major stock indexes like the Standard & Poor’s 500 have two key features that ensure that they will continually rise and break new zero-filled records: They ignore inflation and are heavily curated. Continue reading
The recent presidential campaign reminded us that the U.S. is one of only a handful of countries that doesn’t require companies to provide paid maternity leave. Maternity leave is important. One of the key reasons is because medical researchers have shown overwhelmingly positive effects when parents are able to spend time with their newborn children.
My outlook for 2017 and beyond is that the U.S. economy will likely see another recession. Yes, the economic picture currently looks wonderful. The Dow and S&P 500 are at record levels. Unemployment is well below 5 percent of the labor force. Inflation is still tame. The U.S. dollar is strong.
The U.S. economy has grown dramatically over the long-run. GDP has increased by one-third since the beginning of the 21st century, even after adjusting for inflation.
However, capitalist economies do not simply grow steadily larger. Instead, their long-term growth is periodically punctured by downturns. Continue reading
Black Friday is hyped as one of the biggest in-store shopping days of the year, with stores trumpeting giant sales and even bigger advertising campaigns. Some pundits claim that Black Friday is dying and is no longer relevant. However, the National Retail Federation issued a strong denunciation of these articles and declared that Black Friday is “far from gone.” Which is the true story? Is Black Friday dying or still relevant? Continue reading
Research into a phenomenon known as the “presidential puzzle” has shown that the stock market performs better under Democrats than Republican presidents. Does that mean it’s time to sell all of your investments now that Donald Trump has won? Continue reading
Halloween is here, the night every year when children dress up in costumes and go “trick or treating.” On the surface, that activity appears to be a relatively benign one. What could be more innocent than cute youngsters collecting sweets?
Halloween, however, is actually one of our only holidays based on extortion. When children scream “trick or treat,” they are essentially demanding candy in exchange for not doing a prank or something else that is nasty. Continue reading
Have you ever pulled out your camera or phone in a museum or historic place and suddenly found a staff person telling you “no photographs”? I was in London recently and it happened repeatedly in places like Westminster Abbey, Buckingham Palace and Parliament. The no-photos policy is not limited to just England but is a worldwide phenomenon. Visitors cannot take photos in places like the Sistine Chapel in Rome, the Van Gogh Museum in Amsterdam or inside Thomas Jefferson’s Monticello home.
Each year in September, the U.S. Census Bureau releases a report showing how income and poverty have changed over time. The most recent report, which came out on Sept. 13, was filled with great news. Compared with the previous year, average inflation adjusted income soared 5.2 percent. The U.S. poverty rate fell 1.2 percentage points, resulting in 3.5 million fewer people living in poverty. Even the number of people without health insurance fell by 4 million people in the past year.
While these statistics got the headline attention they deserve, there is one piece of great news in the report that hasn’t attracted as much attention but is just as important. The gap between women’s and men’s earnings shrank to a new record low. The median woman working a full-time year-round job now earns 80 percent of the median earnings given to men working full-time. Continue reading
Labor Day is a U.S. national holiday held the first Monday every September. Unlike most U.S. holidays, it is a strange celebration without rituals, except for shopping and barbecuing. For most people it simply marks the last weekend of summer and the start of the school year.
The holiday’s founders in the late 1800s envisioned something very different from what the day has become. The founders were looking for two things: a means of unifying union workers and a reduction in work time. Continue reading
Politicians have a long history of trying to be elected by kissing babies. However, with about four million babies being born in the U.S. each year, there isn’t enough time in the current presidential race to kiss enough newborns to make any real difference. So Trump is trying to find another way to convince Americans he cares about babies. Continue reading
We’ve been talking about society’s transition to a cashless society for a long time, but it begs an important question: Can stores and other retail establishments refuse to take your dollars and cents? As odd as it sounds, this is not hypothetical anymore as a small number of stores and industries have stopped accepting cash and allow payment only by credit card, debit card or via a smartphone app. Continue reading
The Republican National Convention is coming to Cleveland, and boosters are cheering the millions of dollars it will bring to northeast Ohio’s businesses. There are lots of impact studies of previous Republican and Democratic nominating conventions. Each seems to produce more eye-popping figures than the last. However, some academics and journalists suggest these conventions really have no impact on the local economy.
Which is the true story? Continue reading
On June 23, the United Kingdom will decide whether to leave the European Union or stay. The vote is nicknamed Brexit, short for British Exiting. One reason the debate is important outside of the U.K. is that it is partly a referendum over the amount of government regulation voters want. Continue reading
This past Friday, the Bureau of Labor Statistics issued a press release stating the monthly employment figures for May 2016. The headlines following the report’s release emphasized that the U.S. economy created only 38,000 additional jobs in May 2016. This figure promptly caused the stock market to fall. The next day’s Wall Street Journal front page led with a story declaring “Weak Hiring Pushes Back Fed’s Plans” for an interest rate hike. But the true figure was much higher than 38,000 jobs.
The actual number of additional jobs created between April and May was 651,000! This much larger figure is calculated using numbers found in table B1’s top line located on the press release’s 28th page. Continue reading
June kicks off the wedding season in the U.S.! No matter whether you love or hate them, an astounding trend is happening. There are fewer weddings every year.
The number of U.S. marriage ceremonies peaked in the early 1980s. Back then there were almost 2.5 million marriages recorded each year. Since the early 1980s, however, the total number of people getting married each year has steadily fallen. Now, in the mid-2010s, only about 2 million marriages happen a year. This is a drop of almost half-a-million marriages a year since the early 1980s peak. To provide a frame of reference the reduction in weddings means more people are now injured in U.S. car crashes than getting married each year. Continue reading