Economics

Tax Gap Terrorism

By on 3.6.14 | 4:00AM

Tax season is here, and the government has a license to hunt. Nearly two-thirds of Americans are caught like wide-eyed deer in the light of their computer screens. The percentage of people who filed their taxes online using services such as H&R Block and Turbotax has increased 27 percent since 2008.  

The burgeoning population of middlemen between your pocket and the government’s coffers is growing. As the tax-filing industry has increased, the length of the 101-year-old tax code itself has swelled to 73,954 pages. That’s 60 copies of The Lord of the Rings trilogy or 62 copies of Atlas Shrugged, if that’s your credo. The IRS instructions explaining the tax code drone on for 90 pages.

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Economists: Turns Out We Got Everything Wrong

By on 2.18.14 | 1:33PM

At least phone psychics have colorful personalities. The OECD has a new report out that blasts its own economists for having foggy crystal balls with regards to their recent forecasts. The Wall Street Journal reports:

The Organization for Economic Cooperation and Development Tuesday said it underestimated the degree to which economic and banking setbacks in one country would have negative impacts on others, leading it to consistently forecast stronger growth than actually materialized in the wake of the 2008 financial crisis.

But in the latest analysis of forecasting failures by an international financial institution, the OECD said it didn't share the International Monetary Fund's view that misjudging the impact of budget cuts on growth was a crucial error. (Emphasis mine)

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The Minimum Wage President

By on 2.5.14 | 11:12AM

President Obama loves himself some minimum wage banter. The man who never ran so much as a lemonade stand knows more than you about how micro- and macro-economics work, especially as it pertains to small businesses around the country. After all, he went to Harvard. He's a lawyer. Magazines told me he was the smartest fella ever to become commander-in-chief. He's a pragmatist. A great orator. And very good at basketball. 

So that's him. But what about the rest of us? 

As my pal Andrew Johnson reported at NRO, the president is never one to let direct questions about the real-world impact of Obamacare get in the way of a prime chance to extol the virtues of raising the minimum wage:

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Yellen Sworn in as Bernanke Ends Term With Fed Taper

By on 2.4.14 | 11:08AM

Janet Yellen was sworn in yesterday as the fifteenth chair and first woman to head the Federal Reserve. She replaced Ben Bernanke, who presided over his final session during last week’s meeting of the Federal Open Market Committee (FOMC). The Fed announced after that meeting that it would once again taper its monthly asset purchases. Yellen’s installation and the continuation of tapering indicate that Bernanke’s retirement is not the end of an era or an unprecedented turn, but rather business as usual at the central bank.

At the Fed’s January 28-29 meeting, the FOMC announced that it will reduce the scale of quantitative easing. The reduction in asset purchases is $10 billion, bringing the monthly total down from $75 billion to $65 billion. The last reduction was announced during the Fed’s December meeting in 2013, and markets reacted positively. This announcement, however, came on the heels of a bad week for equity markets.

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The Public Policy

Fannie, Freddie, and the Big One

By 1.17.14

Twenty years ago today, the 6.7-magnitude Northridge Earthquake struck the San Fernando Valley 20 miles northwest of downtown Los Angeles, killing 60, injuring 7,000, and damaging more than 82,000 buildings. The price tag for the quake was a record $20 billion in property damage, only about half of which was insured.

The two decades since Northridge have seen significant efforts to mitigate earthquake risk through retrofitting, as well as the creation of a state agency in California dedicated to providing earthquake insurance to all who seek it. Alas, despite those steps, there is significant evidence that not only are we less prepared for a major quake today than we were in 1994, but that the financial brunt of any such disaster would mostly fall squarely on the shoulders of U.S. taxpayers.

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On Obamacare Death Spirals and Medicaid Time Bombs

By on 1.15.14 | 1:41PM

The left’s clairvoyant wonks are pleased with themselves this week. The Obama administration recently announced that 24 percent of enrollees on the Obamacare exchanges have been between the ages of 18 and 34. That was enough for Ezra Klein to herald “The death of Obamacare’s death spiral” in today’s Wonkblog. The death spiral was the prediction made by many that not enough young people would dive into the Obamacare risk pools, leaving them filled with high-cost elderly patients and driving up premiums.

So are we moving in a positive direction? Megan McArdle is skeptical:

Of course, the ratio is mostly what we’re worried about, not the number; getting an extra 100,000 young people to sign up while you get an extra 500,000 old people doesn’t improve the stability of the insurance markets -- it makes them more unstable.

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The ‘Trickle-Down’ Lie

By on 1.7.14 | 4:00AM

New York's new mayor, Bill de Blasio, in his inaugural speech, denounced people "on the far right" who "continue to preach the virtue of trickle-down economics." According to Mayor de Blasio, "They believe that the way to move forward is to give more to the most fortunate, and that somehow the benefits will work their way down to everyone else."

If there is ever a contest for the biggest lie in politics, this one should be a top contender.

While there have been all too many lies told in politics, most have some little tiny fraction of truth in them, to make them seem plausible. But the "trickle-down" lie is 100 percent lie.

It should win the contest both because of its purity -- no contaminating speck of truth -- and because of how many people have repeated it over the years, without any evidence being asked for or given.

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Lord Acton and the Importance of Economic Education

By on 1.6.14 | 11:49AM

Liberty is the prevention of control by others. This requires self-control and, therefore, religious and spiritual influences; education, knowledge, well-being. -Lord Acton

It was during my first full year of seminary (circa 2008) at Trinity Evangelical Divinity School that I finally heeded the counsel of multiple professors and attended my first Acton University conference. Held each summer in Grand Rapids, Mich., "Acton U" is an extraordinary collection of students, professors, writers, journalists, and thinkers of the first order who gather together for the express purpose of exploring the "free and virtuous society" in a civil, intellectually stimulating environment. What started with a few dozen participants a decade ago has organically grown into an event that boasts nearly 1,000 attendees. Those enrolled in the conference are treated to four days of fascinating conversations, engaging lectures, world-renowned guest speakers, delicious meals, and good company. 

As The Acton Institute succinctly puts it:

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Capitol Ideas

Ruination

By From the December 2013 issue

In 1777, a correspondent told Adam Smith that the British loss at the Battle of Saratoga worried him. “If we go on at this rate, the nation must be ruined,” he said. But Smith was unconcerned. “Be assured, my young friend, that there is a great deal of ruin in a nation.” Supporting those distant colonies was not an economic proposition anyway. Smith published figures to that effect in The Wealth of Nations (1776). Getting out of what would become the United States was probably the best policy.He knew, in short, that it took more than battles lost or colonies abandoned to ruin a nation. President Obama and the Democrats know that too. But they have a more cynical take on Adam Smith’s adage.Over generations the U.S. has accumulated plenty of capital (and I don’t just mean our assets). Subconsciously, the president and his allies seem to have decided: “Let’s go ahead and spend that capital for our own political advantage.” The country will survive. “Social justice,” meaning equality, is what they say they want.
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The Fed’s Taperwork

By on 12.18.13 | 4:58PM

The Federal Reserve Board of Governors announced today that they would begin a taper of monthly bond purchases made as part of quantitative easing policy. The taper, or reduction, is slight—a decrease in monthly asset purchases from $85 billion to $75 billion, or a little more than 10 percent, which would begin in January.

While some analysts did not expect the Federal Reserve to taper any time in the near future,  there were hints in Janet Yellen’s testimony before the Senate Banking Committee last month that the Fed was pleased with progress they perceived in the economic indicators they used to determine whether to scale back on asset purchases. Recent jobs numbers were probably one of the major indicators the Fed relied upon in their decision.

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