Abolish the Corporate Income Tax

J: President Trump has proposed reducing the top corporate income tax rate from the current 35 percent to 15 percent. He would also eliminate the current deduction for interest paid. In order to avoid being unfair to owners of small businesses (LLCs, subchapter S, partnerships and sole proprietorships) that pass through their business income to their personal taxes, he would use the same 15 percent rate. While there is no chance that Congress will do that, it does suggest a dramatic tax reform that could be both revenue-neutral and strongly boost growth. During my graduate school days, we had to pick two major fields of economics for our studies in addition to the two full years of econom

Industrial Production Is Headed for a Record At Last

L: This is a long one (in the blogging world) so here’s a preview. In this blog Jim is doing what he does best. Not only is he telling us that the news on industrial production is pretty darn good, but he’s also offering a little background on the report itself, a great explanation of why economists are always working with data that gets revised regularly, and details from the report. He also provides similar information about the manufacturing index, which is about 75 percent of the industrial production index. J: On May 16 the Board of Governors of the Federal Reserve System released some great news about industrial production. The first sentence of the report stated, “Industrial pro

Consumers Are Back to Leading the Charge

J: The Census Bureau gave us much appreciated good news in their Advance Retail and Food Services Sales report of May 12. As the chart below shows, total retail and food services sales rose to a record $474.9 billion, seasonally adjusted. (L: Remember ALWAYS seasonally adjusted unless we say otherwise.) That was an increase of 0.4 percent from March, whose total was revised from a decline of 0.2 percent from February to an increase of 0.1 percent. You should note that on April 26 the Census Bureau revised all of these data back to January 2008 as a result of the 2015 Annual Retail Trade Survey. L: You should also note that being an economist is a weird job. How many jobs depend on hist

WSJ: 100-Year Bonds Article Includes a Jim Smith Quote

L: It's always a good thing when Jim gets quoted in national media. Here's an article from The Wall Street Journal that includes a comment from Jim. In case you don't have a WSJ subscription--tsk, tsk--the article talks about the possibility of the US Treasury Department issuing 40-, 50- or 100-year bonds. Jim adds to the conversation with, "Endowments, pension funds and life insurers will love these options." J: With our pervasive short-term focus, most people do not realize that there are significant groups of investors with very long-term horizons. The longest is endowment funds, many of which would happily buy 1,000-year maturity government bonds if they existed. Next is pension f

Health Care Mysteries

L: This is just me wondering how it is possible that Republicans have been bitterly complaining about the Affordable Care Act for as long as it’s been in place and announcing over and over that they will repeal and replace it as soon as they get a chance, and yet no one seems to have thought to actually craft a replacement before now. Why hasn’t someone (or multiple someones, really) pulled out a sample bill that they have written to get everyone started? Although I agree with the underlying impulse of trying to make healthcare accessible and affordable to all, I always thought the ACA was a terrible bill. The healthcare system is extremely complicated, and “affordable” not only involves i

Healthy Employment Growth Returns!

J: The new employment numbers came out today from BLS and they tell a happy story. The total number of nonfarm payroll jobs in the US rose by 211,000 (seasonally adjusted, of course) in April to a record of 146,043,000 such jobs. L: OK, unless something is NOT seasonally adjusted, I'm not going to mention it. Every time you read a number in our blogs, you may assume it is seasonally adjusted. I get tired of typing it and I'm sure you get tired of reading it. Jim likes to be accurate, but sheesh. And we're always setting new employment records when the unemployment rate goes down now because the number of people in the US keeps going up, so a 5% unemployment rate last year is based on fe

And It Came to Pass: An Accurate GDP Forecast

J: We warned you that a lousy GDP report was coming, and sure enough, the BEA gave it to us on April 28. They reported that real GDP in the first quarter of 2017 rose at a puny 0.7 percent at a seasonally adjusted annual rate from the fourth quarter of 2016. Real GDP in the first quarter was reported at a record $16,842.4 billion at a seasonally adjusted annual rate (SAAR). That was up 1.9 percent from a year earlier, very close to the 2.0 percent year-over-year change reported for the fourth quarter of 2016. L: Real vs nominal: No, there is no unreal GDP. Economists use the word "real" to indicate that the numbers are adjusted for inflation. When the numbers are not adjusted for infl

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