Monday, January 11, 2016

Three things Congress got right last year

Congress got three things right this year. 

1. End oil export ban.

It was a good-faith effort to reduce dependency on imports after the 1973-74 Arab oil em cargo. But market forces have overwhelmed this simplistic approach. The goal has been attained by increased US production(!) due to fracking. Furthermore US refineries are not set up to handle the characteristics of US crude. It can be processed in many places overseas. Let the marketplace decide where.

2. Make permanent removing marriage penalty from EITC - Earned Income Tax Credit. 

An income subsidy for families with children, it penalized families where both parents were working. A correction was put in place in 2009, but was temporary.

3. Improved military retirement. 

Broadening the “serve for 20 years, so you can retire” rule. Under the existing policy only those who completed 20 years got anything toward retirement. Now all those serving will be able to establish 401(k)-type accounts with employer matching.

Charles Lane puts his best left slant on this meager good news at Washington Post.

Did they get anyting else right? Can't think of anything. Making Paul Ryan Speaker was worse than a disappointment.

Wednesday, January 06, 2016

The middle-income moved up

The middle-income group in the US has gotten smaller. We have all heard this. The assumption is always that the families no longer in the middle dropped to lower-income.

Wrong. They moved up. While the middle group got smaller the top group got larger; even the lower group got smaller. Data for 1967 to 2014.

 The change is not due to more women working. The number of workers per household is unchanged from 1960 to 2000 at 1.22. Source: US DOT (I don’t use “class” terminology, but “income.”)

Graphics and data from Prof Mark Perry’s Carpe Diem blog at AEI - American Enterprise Institute. Click to enlarge.

Saturday, January 02, 2016

Sanders can't afford his socialist dreams

Bernie Sanders’ socialists goals are so expensive that he can’t raise taxes enough to pay for half their cost. Megan McArdle at Bloomberg.
… And Democratic priorities, particularly Sanders' plans, would cost a great deal of money. He says he favors single-payer health care, which would involve funneling through government coffers most of the $3 trillion a year that Americans currently spend on health care; $1 trillion of new spending on infrastructure; expanded Social Security benefits; and free tuition at public colleges. Enacting his agenda would require something on the order of $1.5 trillion a year in new revenue. 
That’s a lot of money. That’s not “whack up taxes on the rich” money: His Social Security plan to modestly increase benefits, for example, appears to consume all of the revenue from lifting the cap on Social Security earnings above $250,000 a year. Maybe that sounds like a little itty bitty change to you, but in fact it is a 12.4 percent tax hike on all wage and salary income for high earners, who already have a marginal tax rate of about 40 percent, not including state and local taxes. That’s just to pay for one proposal. Covering the estimated $1 trillion a year in private health insurance expenditures would need something many times larger than that. 
That means taking money from the middle class, because while the middle class does not have oodles of the stuff lying around, there are so many more of them that in aggregate, taxing them raises more revenue than taxing the rich. (That’s why extending the Bush tax cuts for the middle class cost three times as much as extending the tax cuts for the wealthy would have, even though investment bankers got a much bigger individual benefit from the tax cuts than a bus driver making $45,000 a year.) Just paying for Sanders’ single-payer plan would, for example, conservatively require between 25-35 percent more tax revenue than we currently collect. Other plans require expenditure from other parties -- employers, state and local governments -- that are likely to end up being collected from the paychecks of workers, one way or the other.
She also goes into an obstacle I hadn’t thought/heard of: His tax-raising ideas would have to get past the chattering class - policy wonks and journalists - who will realize that they will have to pay big; some will take a bullet for the cause, but most will hesitate when they realize the tax increases will hurt them.