Sunday, August 22, 2010

Marginal Tax - Keep Greed in Check

Interesting analysis from the LAtimes on Disincentivizing Greed

To a surprising degree, economic misfortune has correlated with low top marginal tax rates. The top marginal tax rate at the time of the 1929 crash was 24%. After his election, Roosevelt promptly raised it to 63% and then to 94%, and one could easily make the case that it was this rise, rather than financial regulation, that played the primary — though certainly not the only — role in curbing abuses by attacking greed at its source, without, by the way, damaging the economy. Roosevelt essentially taxed away big money.

Thursday, August 12, 2010

Clean Energy in Portugal

Really interesting article about clean energy projects in Portugal, the challenges, and issues specific to Portugal.

To force Portugal’s energy transition, Mr. Sócrates’s government restructured and privatized former state energy utilities to create a grid better suited to renewable power sources. To lure private companies into Portugal’s new market, the government gave them contracts locking in a stable price for 15 years — a subsidy that varied by technology and was initially high but decreased with each new contract round...

Portugal was well poised to be a guinea pig because it has large untapped resources of wind and river power, the two most cost-effective renewable sources. Government officials say the energy transformation required no increase in taxes or public debt, precisely because the new sources of electricity, which require no fuel and produce no emissions, replaced electricity previously produced by buying and burning imported natural gas, coal and oil...

But a decade ago in Portugal, as in many places in the United States today, power companies owned not only power generating plants, but also transmission lines. Those companies have little incentive to welcome new sources of renewable energy, which compete with their investment in fossil fuels. So in 2000, Portugal’s first step was to separate making electricity from transporting it, through a mandatory purchase by the government of all transmission lines for electricity and gas at what were deemed fair market prices.

In the Line of Fire : Unemployment Benefits

Some good analysis on unemployment from the WSJ. They use a graphic and some analysis about who was laid off during this recession from Professor Autor! The article is about how even though unemployment is very high, companies are having trouble hiring for a variety of reasons. Many people are less able to move during this recession because it was a housing bubble, and people either don't want to or are unable to take a loss selling their house. Some people are choosing to stay on unemployment benefits rather than take a low paying job. The deteriorating education system also seems to have caused the quality of the labor force to be lower, which makes it difficult for companies looking for people with specialized skill, especially since many companies are either unable or unwilling to pay very much. During the recession, it is mainly middle skilled workers who are laid off, who don't necessarily have the skills that companies are currently looking for.

While an obvious solutions seems to be to stop unemployment benefits, it may be a short-sighted thing to do. Stiglitz encouraged extending unemployment benefits because stopping or even reducing them would make reduce consumer spending and increase foreclosures, so even if those people got lower paying jobs, there may not be a net aggregate benefit to the economy. It may arguably help reduce government expenditures, but it may also make things worse by reducing state and local revenues.

Another obvious need is to improve the skill level of the labor force by investing in education. However, this is expensive, and I think part of the problem is also that companies also used to pay more for their workers to go to training classes, but now that financial burden needs to be borne by either the workers or government training programs. Perhaps a more efficient use of the unemployment benefits should be in the form of money for taking classes.

Stiglitz also makes a good argument that since the recession was caused by a bubble in the financial and housing markets, there is no reason that people in other sectors should be taking the hit for it, especially since real wages for the middle class have been stagnant. Income disparity has been growing the United States, implying that some have gotten rich at others' expense. The fact that the financial industry has pretty much recovered since the crash means that those who benefited are likely to keep their gains and will likely gain further since others are being pressured to take lower paying jobs.

Sunday, August 8, 2010

Saturday, August 7, 2010

Repeal Bush Tax Cuts

Greenspan has come out in support of repealing the Bush tax cuts. Then again, should he still have an credibility left since he was wrong about the 2008 crash? Oh well, maybe he's seen the error in his ways.

In the meantime, the new Republican star Paul Ryanhas a Roadmap for America that Krugman exposes as "flimflam." Maybe people need to use more charts and visuals when discussing things like the budget and tax policy because numbers that don't add up should be easily exposed and thrown out.