A roundup of economic news from around the Web.
- Deficit Reduction: Bob Williams writes on the Tax Polcicy Center’s TaxVox blog that higher income taxes alone won’t solve the budget problem. “Under the higher tax baseline of current law, wed have to raise all individual rates by 15 percent to meet our 2 percent deficit goal. But under the lower-revenue scenario of current policy, rates would have to jump nearly 50 percent. In other words, the 10 percent bracket would become nearly 15 percent and the 35 percent top rate would go to 52 percent. What if Congress just raised taxes for high-income taxpayers? Their rates would go up more than 40 percent under current law and more than 150 percent under current policy. In other words, the top tax rate would return to the bad old days of 90 percent. Even if we go for the Administrations more modest goalsstart with current policy and aim for deficits averaging 3 percent of GDPthose top tax rates would have to more than double, taking the top rate over 75 percent.”
- Discouraged Workers: On the Atlanta Fed’s macrobog Julie Hotchkiss and Laurel Graefe say that the impace of discouraged workers may be overstated. “How quickly the discouraged workers will re-enter the labor force, holding everything else constant, is not necessarily the most important question. A more significant question is how quickly the overall labor force will grow. Employment would need to grow at the same rate as the labor force in order for the unemployment rate to remain at 10 percent, which amounts to roughly 91,000 jobs per month if we use the average annual growth rate of the labor force during the three years following the 2001 recession, which was 0.84 percent. Bottom line: While not insignificant, the number of discouraged workers that can be expected to re-enter the labor market once job prospects turn around is only a small piece of the puzzle. More focus should instead be placed on the larger issue of job creation.”
- Geithner: Treasury Secretary Timothy Geithner talks to PBS Newshour about the proposed bank plan. “JUDY WOODRUFF: So in essence, are you saying, big banks need to be broken up? TIM GEITHNER: No, this does not propose that. What this does is try to make sure we limit risk-taking – the kind of risks that could threaten the stability of the system in the future JUDY WOODRUFF: Let me ask you about one particular aspect and that is banks that would separate some of their investment operations. Does it mean, for example, that at J. P. Morgan – without naming a bank, that in essence, would have to spin off its investment operations? TIM GEITHNER: Banks will have some choice about how they comply with this, and it’s going to have to change, result in some changes. And we’re going to work very carefully with the Congress and the regulators to make sure we do this in a sensible way.”
Compiled by Phil Izzo