A roundup of economic news from around the Web.
Taxes: Diane Lim Rogers makes the case for why the Bush tax cuts should be allowed to expire. “Im going to step out of character and sound like a supply-sider for a minute here, and argue that despite having this very steeply progressive distributional pattern, the Obama dual promise tax policy would not necessarily be a good deal for even the vast majority of households not in the top 1 to 5 percentbecause of that 77 percent top marginal tax rate. Having that pattern of marginal tax rates that rises so steeply at the top (go back to Table 3, bottom panel, last column on the right)with rates of 10, 15, 25, 28, 72.4 and 76.8 percentwould create huge disincentive effects on labor supply and saving. See, all economists are supply siders in a sense, because we all believe that marginal tax rates affect economic decisions at the margin. Not all economists, however, are radical, right-wing, Laffer-esque supply-siders who believe that increasing tax rates lead to decreases in revenue. But that is because for most of U.S. history, we havent had marginal income tax rates high enough to worry about the Laffer curve theory. Some empirical work on this (done decades ago by my dissertation advisor, Don Fullerton, in fact), has indicated that the revenue-maximizing tax rate is far above our current highest rates of 30-40 percentin fact, in the 70-80 percent range. Hmmm.”
Strong Recovery: Floyd Norris looks at the politcal implications amid a case for a stronger-than-expected recovery. “The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating. That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.”
Housing Troubles: Barbara Kiviat looks at more potential trouble in the housing market. “There’s long been a worry that after last year’s various foreclosure moratoria lifted, we’d see a fresh surge of trouble in the housing market. The latest figures on distressed sales, from First American CoreLogic, lend some weight to that argument. As you can see in the chart above, distressed sales — which include sales of bank-owned properties and short sales — are again on the rise. In January, such sales accounted for 29% of all existing homes sold. That’s the highest level since April 2009. The peak came in January 2009, when distressed sales accounted for 32% of all existing homes sold. Now, there is a sliver of good news in these numbers. Short salesin which a lender agrees to take less than it is owedare on the rise.”
Compiled by Phil Izzo