Economics easy simple ways to make money and politics by paul krugman – the conscience of a liberal – the new york times

Yesterday a former government official at a meeting I was easy simple ways to make money attending asked a very good question: have any prominent republican economists taken a strong stand against easy simple ways to make money the terrible, no good, very bad tax legislation their party just rammed through the easy simple ways to make money senate? I couldn’t think of any. And this says something not good about the state of easy simple ways to make money at least that side of my profession.

Other names on the economists’ letter may raise eyebrows. John P. Eleazarian is listed as an economist with the american economic easy simple ways to make money association. But membership to the AEA is open to anybody who easy simple ways to make money coughs up dues, and membership simply grants access to AEA journals and discounts easy simple ways to make money at AEA events. Eleazarian is a former attorney who lost his law license easy simple ways to make money and the ability to practice law in california after he easy simple ways to make money was convicted and sentenced to six months in prison for easy simple ways to make money forging a judicial signature and falsifying other documents. His current linkedin profile lists him as a paralegal at easy simple ways to make money a law firm.

Second are people like the nine unprofessional economists – all of whom have, or used to have, real professional reputations, who signed that open letter asserting that corporate tax cuts easy simple ways to make money might produce rapid growth. As jason furman and larry summers pointed out, they misrepresented the research they claimed supported their position, then denied having said what they said.

OK, folks, this is basically to scratch my own intellectual itch — later this week senate republicans either will or won’t enact the biggest tax scam in history, and analysis won’t make any difference. But inspired by the furman-summers beatdown of republican economists lending cover to disgusting dishonesty easy simple ways to make money by their political masters, I found myself looking for a simple analytical representation of easy simple ways to make money the effects of cutting corporate taxes. By simple, of course, I mean for economists: for anyone else this may as well have been written easy simple ways to make money in cuneiform. You have been warned.

OK, so the naive, super-optimistic version of what corporate tax cuts will do — roughly speaking the tax foundation version, without the incompetence — treats america as a small, perfectly open economy that faces an infinite, perfectly elastic supply of foreign capital at some given rate easy simple ways to make money of return. It also ignores leprechaun economics — the potentially large difference between GDP and national income when easy simple ways to make money foreigners own a lot of your capital stock. Meanwhile, america is neither small nor perfectly open, so that the rate of return to foreigners depends on easy simple ways to make money how much capital we suck in — and since around a third of corporate profits already go easy simple ways to make money to foreigners, they’re likely to collect a significant fraction of the gains easy simple ways to make money from a tax cut.

Starting point: we can think of a downward-sloping demand for capital, reflecting its marginal product. We can also think of an upward-sloping supply of capital, with the upward slope reflecting both the size of the easy simple ways to make money US — we’re probably around half of the world’s capital market not subject to capital controls — and the imperfect nature of capital mobility, even now.

A key part of the senate tax bill is repeal easy simple ways to make money of the individual health insurance mandate. The budget scoring relies on this repeal reducing federal deficits easy simple ways to make money by $318 billion — and the bulk of these spending cuts would hit lower-income families. Republicans argue, however, that these families won’t really be hurt, because they’ll be making a voluntary choice not to be covered easy simple ways to make money and collect government subsidies.

If you think such things don’t happen, consider that one of the major triumphs of behavioral economics easy simple ways to make money involves the demonstration that many people fail to take advantage easy simple ways to make money of retirement plans that cost little or nothing — unless they’re automatically enrolled. If they are automatically enrolled, but with the option of dropping the plan, enrollment is much higher than if they’re offered the same plan, but have to opt in. Sorry, but financial decisions like whether to get health insurance are easy simple ways to make money not made well, even by the well-educated and affluent, let alone the poorer, stressed people who are the main targets of GOP cuts.

Or consider the “woodwork effect” of the ACA: medicaid enrollment increased even in states that didn’t accept medicaid expansion, because greater publicity led some people to look into their easy simple ways to make money options and discover benefits they should have been collecting all easy simple ways to make money along. (not woodwork effect exactly, but I know people in new jersey who tried to easy simple ways to make money sign up for the exchanges and discovered that they had easy simple ways to make money long been eligible for medicaid.)

The big economic policy story for this week will be easy simple ways to make money the attempt to ram through the republican tax bill, which manages both to raise taxes on middle- and lower-income americans even as it blows up the debt, all in the service of big tax cuts for corporations easy simple ways to make money and the wealthy. To the extent that there’s any intellectual justification for this money grab, it lies in the conservative insistence that cutting taxes at easy simple ways to make money the top will magically produce huge economic growth.

Modern financial regulation came about in the aftermath of the easy simple ways to make money great depression, and — as you can see from the figure — the era of effective regulation was also an era of easy simple ways to make money historically unprecedented financial stability. Did this stability come at the expense of economic growth? Hardly: the era of effective regulation was also the era of easy simple ways to make money the great postwar boom in america, the thirty glorious years in europe.

Nonetheless, by the 1970s a combination of free-market ideology and big money (with the latter helping to feed the former) produced a widespread belief among policymakers that those old regulations easy simple ways to make money were pointless and harmful. Regulations were lifted, and, maybe even more important, malign neglect allowed unregulated shadow banking to expand rapidly. (the trump treasury department wants global regulators to stop using easy simple ways to make money the term “shadow banking”, which it says conveys the impression that there is something easy simple ways to make money wrong with such institutions. Funny how causing the worst crisis since the 1930s can easy simple ways to make money give you a bad reputation.) read more…

But brad delong reminds me of a point I and easy simple ways to make money others have been making: focusing on GDP is itself misleading, because we’re a financially open economy with a lot of foreign easy simple ways to make money ownership already, and a large part of the alleged benefit of corporate easy simple ways to make money tax cuts is that they will supposedly draw in lots easy simple ways to make money of foreign investment. As a result, we should expect a significant fraction of the benefits of easy simple ways to make money corporate tax cuts to go to foreigners, not domestic residents; income of domestic residents should rise less than GDP.

Start with the direct effects of a corporate tax cut. The JCT puts the revenue loss at $171 billion in 2027. Assume, as is roughly the consensus, that 1/3 of this accrues to workers, but two-thirds to capital. Steve rosenthal says that about 35 percent of this gain, in turn, accrues to foreign investors. So right there we have about $40 billion in additional investment income paid to foreigners.

Then there are the effects of the trade deficit. I can’t figure out TPC’s estimate there, but typical numbers from other modelers say that we’re looking at around $80 billion a year, or $800 billion in increased net foreign liabilities. BEA numbers say that foreign investors in the US earn easy simple ways to make money on average about 2%, U.S. Investors abroad around 3%. So this suggests an average return of maybe 2.5%? My guess is that this is low, because the changes would be focused on direct investment, which earns higher returns. But let’s go with it: in that case we’re talking about another $20 billion in investment income paid to foreigners.

These are not good times, politically, for republicans. The virginia blowout showed that the trump backlash is real, and will show up in actual votes, not just polls. A series of local elections have produced democratic victories in easy simple ways to make money hitherto deep-red regions. Despite gerrymandering and the inherent disadvantage caused by concentration of easy simple ways to make money minority voters in urban districts, democrats are probably mild favorites to take the house; thanks to roy moore, they even have a chance of taking the senate, despite what was supposed to be an impossible map. “ A wave is a’ coming” says the cook political report.

You might think, given this background, that republicans would moderate their policies in an attempt to easy simple ways to make money limit the damage. But if anything they’re doing the opposite. The house tax bill is wildly regressive; the senate bill actually raises taxes on most families, while including a special tax break for private planes. In effect, the GOP is giving middle-class americans a giant middle finger. What’s going on?

A large part of the answer, I’d suggest, is that many republicans now see themselves and/or their party in such dire straits that they’re no longer even trying to improve their future electoral easy simple ways to make money position; instead, it’s all about grabbing as much for their big donors easy simple ways to make money while they still can. Freedom’s just another word for nothing left to lose; in the GOP’s case, that means the freedom to be the party of, by, and for oligarchs they always wanted to be.

This calculus is clearest in the case of house members easy simple ways to make money representing the kinds of districts — educated, relatively affluent, traditionally moderate republican — that went democratic by huge landslides in virginia. If 2018 ends up being anything like what now seems easy simple ways to make money likely, these members will need new jobs in 2019 whatever they easy simple ways to make money do — and the best jobs will be as K street lobbyists, except for a few who will get gigs as fox easy simple ways to make money news or “think tank” experts. In other words, one way or another their future lies in collecting wingnut easy simple ways to make money welfare, which means that their incentives are entirely to be loyal easy simple ways to make money ideologues even if it’s very much at their constituents’ expense. Read more…

Yesterday I noted that most discussion of the growth effects easy simple ways to make money of the cut cut cut act, such as they may be, focuses on the wrong measure. GDP might go up because lower corporate taxes will draw easy simple ways to make money in foreign capital; but this capital will demand and receive returns, which mean that part of the gain in domestic production easy simple ways to make money is offset by investment income received by foreigners. As a result, GNI – income of domestic residents – will rise less than GDP. And surely, as in ireland with its leprechaun economy based on low easy simple ways to make money corporate taxes, GNI is the measure you want to focus on.

Now, inspired by greg leiserson’s post on problems with the tax foundation model – the only one that shows significant growth effects from cut easy simple ways to make money cut cut – I think I can give an illustration of how much easy simple ways to make money this might matter. It relies on a stylized version of the TF model, which is a model I don’t believe for a minute, so this isn’t a real estimate. But it’s a sort of proof of concept.

The following figure shows the story. Here r* is the required rate of after-tax return, t is the initial tax rate, t’ the post cut cut cut rate. MPK is the marginal product of capital curve. The tax cut leads to a capital inflow that moves easy simple ways to make money the economy down that curve. The rise in GDP is the integral of all successive easy simple ways to make money increments to capital, so it’s the area a+b+c.

At one level, trying to have a serious discussion of the economic impacts easy simple ways to make money of the cut cut cut act – sorry, the tax cuts and jobs act – is arguably a waste of time. Republicans who believe, or pretend to believe, that tax cuts will produce an economic miracle, who didn’t change their minds after the clinton boom, the bush debacle, the kansas disaster, and the strength of the economy after 2013 aren’t going to be persuaded by further analytical discussion.

The thing is, while republicans always claim that tax cuts will produce miraculous easy simple ways to make money growth, both the proposed tax cuts and the supposed sources of easy simple ways to make money the miracle are a bit different this time. Instead of focusing on individual tax rates – aside from the estate tax – this time it’s mostly about corporate taxes. And instead of claiming huge increases in work effort from easy simple ways to make money lower marginal rates, they’re mostly claiming that lower corporate taxes will bring huge easy simple ways to make money capital inflows, raising wages and GDP.

There are multiple reasons to be skeptical about these claims; the actual magnitude of any positive effect on GDP is easy simple ways to make money likely to be far smaller than anything republicans say. The penn-wharton model says that GDP in 2027 would be between easy simple ways to make money 0.3% and 0.8% higher with the tax cuts than without, i.E., basically an invisible effect against background noise; and this doesn’t even take into account the longer-run negative effects of discouraging higher education, slashing nutrition programs, and all the other things that will probably happen due easy simple ways to make money to higher deficits.

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