Federal Budget and Taxes

Recessions Drive Up Poverty Rates

This will come as a little or no surprise to most people, but poverty rates rise following recessions. The economists at the Keystone Research Center recently put together this chart to make that point, using poverty data from the U.S. Census Bureau's Current Population Survey (CPS), going back to 1980.

Recessions Drive Up Poverty Rates in PA and the U.S.

(Click on the chart to make it larger.)

Economic News and Opinion for September 21, 2011

For those of you not obsessed with the coming Pumpkin Shortage, here is your morning run down:

Which brings me to reaction to Friday's column from two executives about whether more government action is needed. Roger Colley, a former president of ... Betz Laboratories and Envirogen, would try to reduce uncertainty for business by doing the following: First, put all new regulations on hold and freeze federal spending, both for five years. Next, cut the corporate net income tax rate to 15 percent from a top rate of 35 percent and make the current rates for individuals permanent ... Tom Callahan, senior vice president of Bristol's Modern Group Ltd, ... would also cut the corporate tax rate so that businesses are not 'incented to do business overseas all the time.' Instead of a freeze on government spending, Callahan suggested it be cut, saying, 'The wars should be ended.'

Third and State This Week: The Standard and Poor's Downgrade, Public Job Losses, and Energy Investment Bankers and the Marcellus Shale

Programming Note: Third and State will be taking the week of August 15 off. See you back here on August 22.

This week at Third and State, we blogged about the Standard and Poor's downgrade, doubts raised by energy investment bankers about a Marcellus Shale economic impact study, public employment job losses and more.

IN CASE YOU MISSED IT

  • On the economy, Mark Price blogged about the Standard and Poor's downgrade and the other "decidedly grim" economic news of the past couple weeks.
  • On the Marcellus Shale, Michael Wood wrote about doubts being cast by energy investment bankers on the findings in the Marcellus Shale Coalition's recent economic impact study. And, reacting to a recent Bloomberg News story, Mark Price reminded us that 72,000 new hires in the Marcellus industries is not the same as new jobs created.
  • Finally, Chris Lilienthal shared a graphic from the Center on Budget and Policy Priorities highlighting the loss of 611,000 jobs in state and local governments during and after the Great Recession.

See you on August 22, 2011. Keep us bookmarked and join the conversation!

The Standard and Poor's Downgrade

The economic news of the past two weeks has been decidedly grim.

On July 29, new data confirmed that the economy in the first half of 2011 grew much more slowly than necessary to bring down the unemployment rate.

A few days later, the bizarre debt-ceiling fight was resolved with agreement to cut nominal federal spending over the next two years. Economic forecasts prior to this deal put the U.S. unemployment rate at 8% at the end of 2012. Cuts to federal spending mean higher unemployment forecasts are on the way.

By the way, this morning the forecasters at Goldman Sachs increased their unemployment forecast for the end of 2012 to 9.25% — and that assumes Congress will agree to extend the current payroll tax credit before January.

Unless you are living off the grid, you couldn’t have escaped news that last week was brutal for the Stock Market. Then late in the day Friday, credit rating agency Standard and Poor's — after correcting a $2 trillion math error — decided to go ahead and downgrade the full faith and credit of the U.S. taxpayer from AAA to AA+.

So what should we do? To restore confidence in the United States' ability to pay its bills, Congress should take steps now to build a stronger economy, not weaken it as we did with the debt limit deal.

The chief problem in the world economy is both the U.S. and Europe have taken steps to slow rather than boost economic growth. This will have a major impact on the U.S.'s ability to pay down long-term debt.

Unless Congress takes immediate action to create jobs, we face the rising risk that the economy will continue to grow more slowly.

Is that decidedly grim enough for you?

Third and State This Week: Jobs and the Marcellus Shale, Personal Incomes and the Myth of Tax Flight

This week, we blogged about the myth of tax flight, Marcellus Shale drilling and the state economy, and the increasing share of Americans drawing income from public programs like Social Security and unemployment compensation.

IN CASE YOU MISSED IT

  • On the federal budget and the economy, Emma Lowenberg wrote that more Americans are drawing income from government programs like Social Security and unemployment benefits. While some of this change can be attributed to naturally aging populations, much is undoubtedly the result of higher unemployment rates.
  • On the state budget, Chris Lilienthal highlighted a new report from the Center on Budget and Policy Priorities busting the common myth that if you increase state taxes (or don't cut them), people will up and leave for lower tax states.
  • Finally, on the Marcellus Shale, Mark Price blogged that while oil and gas extraction is helping to reduce unemployment in Pennsylvania, it remains an open question precisely how big the impact is, given how small employment in that sector is relative to an economy that employs 5.8 million people.

More blog posts next week. Keep us bookmarked and join the conversation!

More Americans Drawing Income from Unemployment, Social Security

Emma Lowenberg, InternBy Emma Lowenberg, Intern

The fact that the economy is still struggling is not news to anyone. The national unemployment rate has increased steadily since February. Now, at 9.2%, it is not too far from its peak of 9.9% in December 2009.

Nationally, the personal income of 20% of Americans comes from the government through programs like Social Security and unemployment benefits, according to a report in The New York Times. The percentage is even higher in the economically worst-off states – like Florida, Michigan, Ohio, and Arizona.

Third and State This Week: States Cutting Budgets, the Debt Ceiling Debate, and a Middle Class 'Under Attack'

This week, we blogged about the looming debt ceiling crisis in Washington, how state budget cuts will hurt the economic recovery, Marcellus Shale job claims, a new report on the middle class in Pennsylvania and more.

IN CASE YOU MISSED IT

  • This week was a busy one for Mark Price, who penned four of our five blog posts. On the Marcellus Shale, Mark corrected an inaccurate figure in a recent Wall Street Journal piece about jobs created in Pennsylvania from Marcellus Shale drilling.
  • On the economy, Mark wrote about a recent report from the Keystone Research Center and the national policy center Demos on a middle class that is "under attack" in Pennsylvania. He also blogged about a new policy brief analyzing Pennsylvania's June jobs report.
  • On the federal debt ceiling debate, Mark shared his op-ed on this "manufactured crisis" which ran on FoxNews.com this week.
  • Finally, on the state budget, Chris Lilienthal highlighted a new report from the Center on Budget and Policy Priorities finding that at least 38 of 47 states are cutting K-12 education, higher education, health care, or other key public services in 2012. According to the report, this cuts-only approach that most states have taken will slow the recovery and weaken the nation’s economy over the long term.

More blog posts next week. Keep us bookmarked and join the conversation!

A Manufactured Crisis

I was asked this week to pen an op-ed for FoxNews.com (seriously) about the looming crisis surrounding the debt ceiling debate in Washington. Check it out.

Third and State This Week: Pa. Job Numbers, Drilling Tax Plans & Getting Cheeky with Tax Data

This week at Third and State, we had a podcast on Pennsylvania's April job numbers, a three-part series on dishonest claims about taxes, an overview of several natural gas drilling tax plans, and a quick visit to Ohio.

IN CASE YOU MISSED IT:

  • On jobs and the economy, Mark Price has a podcast explaining Pennsylvania's April job numbers, what it means for the recovery and why a bill in the state House aiming to cut unemployment benefits could set things backs.
  • On state and federal taxes, Mark also wrote a three-part series playfully titled "Getting Cheeky with Tax Data." In it Mark sheds some light on misleading claims about the impact of state and federal taxes on businesses and how many of them avoid paying taxes. Read Part 1, Part 2 and Part 3.
  • On the Marcellus Shale, Michael Wood takes stock of several natural gas drilling tax plans now before the Legislature.
  • Finally, on income inequality, Stephen Herzenberg shares an Ohio colleague's article voicing the outrage of many people there, as new Governor John Kasich takes a state and a middle class that are down and gives them a good hard kick.

More blog posts next week. Keep us bookmarked and join the conversation!

Getting Cheeky with Tax Data, Part 3

This is the final part of three-part series running this week on Third and State.

On Wednesday, we highlighted the flaws in a Wall Street Journal editorial that was caught being, shall we say, less than truthful in its presentation of data on taxes.

Then, yesterday we wrote about conservatives here in Harrisburg, like the Commonwealth Foundation’s Nathan Benefield and Jonathan Humma, who want to make the case that Pennsylvania's business climate is bad because of taxes, ergo we should cut corporate taxes and shift more of the tax burden away from the wealthy and onto the rest of us.

Richard Florida has a piece at the Atlantic reviewing the relationship between "business tax competitiveness" and various measures of state level economic performance where he concludes:

The bottom line is this: Lower state investment tax burdens aren't associated with stronger state economies, and higher investment tax burdens aren't associated with worse ones. Tax cuts may be an effective political strategy and lowering business and investment taxes may appeal to corporate interests and attract campaign contributions, but they have little relation to state economies.

And don't forget that in Pennsylvania, middle-income taxpayers already pay more of their income in state and local taxes than the wealthy do.

This all reminds me of a great Upton Sinclair quote:

It's difficult to get a man to understand something, when his salary depends upon his not understanding it!

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