My investigation on changes in the price of going to the prom in the Wall Street Jorurnal (see here) got a number of comments and emails. The most interesting email came from Marie Concannon. She is one of the head librarians at the University of Missouri. Ms. Concannon created a web site called “Prices and Wages by Decade” (click here). It contains links to the retail prices for all sorts of things that people buy like food, clothing, transportation, housing and education. Continue reading
The current issue (Spring 2018) of Ohio State’s alumni magazine has a two page interview with me (click here for the online version). Alumni were asked to send in any kind of question about the economy. My favorite question was by Kamilah King class of 2011, who asked “What are some of the basic economics concepts or principles that you wish students were taught before attending college?”
Today’s Wall Street Journal (March. 19, 2017, page R1; online version is here) printed an article I wrote. They asked me to be part of a debate on “Should the U.S. Retire the Penny and Nickel?” I took the “no” side. This is a follow on article from the piece I wrote for TheConversation back in August 2017 (see the original piece here) that advocated the same idea. Because of space limits the Wall Street Journal edited down my piece. Below is the unedited version: Continue reading
In a speech at the 2018 World Economic Forum held in Davos, Switzerland, French President Emmanuel Macron said he wanted to “make France a model in the fight against climate change” and promised to shut all coal-fired power plants by 2021 – two years earlier than the timetable put forward by his predecessor.
While Macron’s move is mainly symbolic since France only generates about 2.2 percent of its power from coal, it signals his government is actively trying to wean itself off fossil fuels in sharp contrast to the current policy of his U.S. counterpart. “We have finally ended the war on coal,” pretty much sums up American policy these days, as President Donald Trump declared in a recent speech. Continue reading
Tucked away in the recently announced GOP tax bill is a small item you may have missed: a new tax on university endowments. As I have spent decades working in higher education, the proposal immediately piqued my interest.
Colleges create endowments by raising funds from alumni, companies and other donors, invest the money in stocks, bonds and other assets, and use the returns to fund student aid programs, professors’ salaries and any other expenses needed to run a college. Republicans want to slap a 1.4 percent tax on certain endowments’ investment income, also known as their returns. Continue reading
Hurricanes Irma and Maria devastated Puerto Rico in September destroying homes, crops and communications. Many weeks later, less than 20 percent of the electricity has been restored, and no one really knows when the rest of the island will regain power.
How much did the devastation caused by these storms on Puerto Rico impact key U.S. mainland indicators like GDP, unemployment and inflation? The answer might surprise you; not at all.
How Does The U.S. Government Handle Puerto Rican Numbers?
Branches of the U.S. government that collect statistics generally do not include Puerto Rico in national totals. For example, the U.S. Census Bureau has calculated Puerto Rico’s population since 1910. It even lists the island’s almost 4 million people along with the population of the other 50 states. However, the total population of the U.S. does not include the island’s people unless they move to the mainland.
GDP shows the size of a country’s economic pie. The U.S. Commerce Department’s Bureau of Economic Analysis tracks U.S. GDP at a very detailed geographic level. If you want to know the GDP of Oshkosh, Wisconsin ($10 billion in 2016) or Altoona, Pennsylvania ($5 billion), the U.S. government has you covered.
What they don’t track is Puerto Rico. This is strange since the Bureau does track the GDP of four smaller U.S. territories. Data are published annually for the U.S. Virgin Islands, Guam, American Samoa and the Mariana Islands. The press release discussing territorial GDP does not explain why Puerto Rico isn’t part of the list.
One reason might be that Puerto Rico produces its own numbers. However, Puerto Rico produces Gross National Product (GNP) figures. The U.S. mainland tracks Gross Domestic Product (GDP). While the two sound alike, they are not comparable. GNP measures what Puerto Ricans produce where ever they live. GDP tracks what is produced within the U.S. borders irrespective of citizenship or immigration status of the worker.
Unemployment and Prices
Other important economic data are information on unemployment and inflation, which are produced by the U.S. Department of Labor’s Bureau of Labor Statistics. Like population, the unemployment figures for Puerto Rico are calculated and released along with other states. However, Puerto Rican numbers are not included in the national total, which means Maria’s destruction of jobs and businesses will have no impact on U.S. unemployment.
Just as interesting is the region in which the Bureau of Labor Statistics classifies Puerto Rico. The Caribbean island is part of the New York-New Jersey region. It is not part of something geographically close like Florida.
Hurricane Maria has raised the price of food and other necessities on the island. However, the hurricane will not impact U.S. mainland inflation. U.S. inflation figures are calculated by changes in the Consumer Price Index or CPI. The U.S. CPI collects prices from 87 cities. None of those cities is in Puerto Rico.
Does Puerto Rico count at all in U.S. statistics? The answer seems to be summed up by the Central Intelligence Agency, CIA. The CIA publishes an amazing statistical resource called the CIA World Factbook. The Factbook provides a fast and simple method of tracking key statistics needed to understand the political, economic and military capability of any country. The CIA has a separate entry for Puerto Rico, which they consider “a self-governing commonwealth in political association with the US.”
Overall, there is no impact on the U.S.’s GDP, unemployment or inflation after the extensive devastation of Hurricane Maria since Puerto Rico is not included in the calculation of key economic data.
Is there any silver lining to being ignored by the U.S. government? The Internal Revenue Service (IRS) does not care about Puerto Rico. Island residents do not have to pay U.S. federal income taxes on their earnings. This means there is at least one upside to being overlooked by Washington.
A world without cash seems wonderful at first glance since it is convenient and fast. You don’t need to withdraw dollars or euros ahead of time. You don’t have to worry about money being lost or stolen. Paying for things with your phone is a breeze.
Many countries around the world are steadily shifting away from cash. Canada, the United Kingdom and Sweden have already largely embraced a cashless society. The U.S. is also steadily making the move, with people holding smaller amounts of cash.
However, the recent string of natural disasters and security breaches at major financial entities exposes a huge flaw in this trend: When the power goes out, telephone lines shut down or account information is stolen, it is impossible to use ATMs, credit or debit cards or mobile payments – no matter how rich you are.
In other words, giving up cash increases the chance of the kind of economic catastrophe that results when people can no longer easily trade for the goods they need and want. The solution to this national security issue is simple: bring back the currently maligned large denomination bills like the $500, which was discontinued in 1969. Continue reading
On October 10th Proctor and Gamble, nicknamed P&G, is holding a shareholder meeting to elect a new board of directors. This vote has the potential to dramatically impact Cincinnati, Ohio.
Most corporate shareholder meetings are boring affairs that rubber stamp management’s slate of candidates. Not this one. Nelson Peltz, a Wall Street billionaire, is spending huge sums of money asking P&G’s shareholders to vote the white ballot. Voting white will put him on the board and give him some control. P&G is spending equally large sums to convince shareholders to vote the blue ballot. The blue ballot will keep Peltz off.
Is it just me, or do you also think the number of major natural disasters is increasing each year? Disasters make news. Are they just being over-hyped by the onslaught of 24/7 reporting?
The U.S. government’s National Oceanic and Atmospheric Administration (NOAA) actually maintains a website that answers this question. NOAA’s list of billion dollar weather and climate disasters goes back to 1980 and records the date, place, deaths and total cost. Since 1980 there have been 212 disasters, which NOAA calculates have a combined cost of over US$ 1.2 trillion. Continue reading
There has been a growing war on cash in an attempt to curb terrorism and tax evasion. Much of the focus has been on abolishing large bills, such as the decision to eliminate the €500 note from circulation. However, politicians are also targeting smaller forms of money for elimination. U.S. Senators John McCain and Mike Enzi introduced legislation in March 2017 to eliminate minting of pennies and switch the dollar from paper to a coin only. Continue reading
Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world. Continue reading
John H. Thompson, the director of the U.S. Census Bureau, just resigned amid a funding fight over the 2020 Census. Since it comes at the same time that the president fired the director of the FBI, why should anyone care about the resignation of just another Washington “bean counter”?
This bean counter, whose name is likely unfamiliar to the vast majority of Americans, is actually one of the most important people in determining whether Democrats or Republicans control Congress. The census has a significant impact on political representation and how federal money is distributed. Moreover, how hard the director fights for more funding helps determine the accuracy of the census. Continue reading
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
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
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
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