Does Romney's Math Add Up?

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying

to lift himself up by the handle." -- Winston Churchill

The Obama campaign has spent a lot of time pushing the idea that Romney’s tax plan will:

• Only benefit the wealthy

• Result in more burden being placed on the middle class and will do nothing to help the poor

• Add $5-8 trillion in additional deficits

• Is a return to the policies of Bush that “created the financial mess”

I find that most of the “studies” (or in many cases, there is even a lack of a study being used) or views pushed by the mainstream media are just thinly disguised regurgitations of campaign news releases that use studies that are funded by partisan research tanks or where the methodology used is at least questionable. I prefer to use non-partisan research or reading actual government research/papers (and reading the footnotes and doing my own work) to make up my mind on where I stand on an issue. One of my favorite sites is www.taxfoundation.org. They have been around forever and do non-partisan research on taxation. They are not funded by a political PAC.

Here is a link to a summary of their recent analysis of Romney’s tax plan:

http://taxfoundation.org/article/simulating-economic-effects-romneys-tax-plan

I highly encourage you to read it. Some of the highlights:

• Romney’s tax plan would grow GDP by 7.4% over the next 5-10 years

• Private business would grow by 7.8% and the reduction in corporate tax rates (the US has among the HIGHEST in the world contrary to popular opinion) would pay for itself

• Two-thirds of the growth in GDP would go to labor income – increased work hours and work wages across the board

• Every income group experiences at least a 7% increase in income. Yes, that means wealthy people make more too. I really don’t understand why wealthy people(folks whose combined household incomes are $200K or more) are so demonized by the Obama campaign, especially since so many of his donors (like Beyonce and Jay Z, Barbara Steisand, etc.) are extremely wealthy people. Like many wealthy people, Obama’s wealthy friends create jobs, often donate more to charitable works, start and invest in corporations/businesses, and ironically most of them also hire tax consultants/advisors to help them reduce their tax liability. (I have never understood that – if they think that the wealthy should pay more in taxes…than shouldn’t they not have a consultant or advisor tell them how to pay less?) Shouldn’t we have a system where people want to and aspire to be wealthy and prosperous?

• The Romney plan would recover nearly 60% of the static cost of the tax reduction.

• “People need to be aware that each dollar of federal spending costs them several dollars in lost wages and income from saving due to the economic damage from the taxes imposed. In the case of the Romney tax plan, each $1 of lost government revenue would raise incomes by nearly $8. Would the public be willing to trade a $1 reduction in government spending for an additional $8 in personal income? Some elements of the Romney plan yield even higher benefits to the public, raising incomes and employment with no cost, and some benefit, to the federal budget, and actually help to pay for the other tax reductions.”

• “The Romney tax plan is very nearly as powerful as the Kennedy tax cuts that were phased in between 1962 and 1965. The Romney plan is as strong in lowering the service price of capital, mainly due to its 10 percentage point cut in the corporate tax rate. The Kennedy cuts included a four point reduction in the corporate tax rate, a 7 percent investment tax credit, and faster depreciation write-offs. The Romney plan’s 20 percent across-the-board individual cuts are of the same pattern as the roughly 20 percent across-the-board Kennedy individual income tax rate cuts. The Kennedy tax cuts were not paid for with tax offsets (base broadeners) but were accompanied by some spending reductions. The economy surged following the Kennedy cuts, “broadening” the tax base through economic growth and employment gains, which is the best kind of base broadener there is. The federal deficit was significantly lower in 1965 ($1.4 billion) than in 1961 ($3.3 billion) before the tax cuts began to take effect.”

• “By contrast, the Johnson 10 percent Vietnam War surtax on individual and corporate income between 1968 and 1970 helped to trigger the 1969-1970 recession. The deficit fell but at a steep price in lost jobs and falling incomes.”

The US Employment Situation -- Are We Better Off Than We Were 4 Years Ago?

As some of you know, I was a political science major. This has made me a lifelong skeptic of the numbers and statistics that politicians spout off and the thinly disguised regurgitated press releases that most of the mainstream media calls “objective journalistic reporting” during an election year. The only way to get any relatively unbiased information is to look at what the nonpartisan (or somewhat nonpartisan) number crunchers say and to read the footnotes and tables that follow.


The President is claiming that unemployment is going down and that he's created jobs. But a closer look at the Bureau of Labor Statistics report from September provides details that show Obama's claims that things on the employment front are getting better is far from accurate.

Points to consider:

• The number of people who are considered "not part of the labor force" (which includes a group labeled “people who want a job”) is increasing (however they are classified as not being part of the unemployed – why I don’t know) - in fact since Sept 2008 the total # of people considered “not part of the labor force” has grown by more than 10% (and yes, it is also up from Sept 2011).

• Comparing just the number of people who want jobs (but who are not considered part of the labor force according to the BLS) in September 2012 with September 2008 -- the number of people who want jobs but who are included by BLS in the “not part of the labor force” numbers has grown by more than 30% (that's more than 1.5 million more people who are not considered as part of what is used to calculate the "published" unemployment rate). As someone who has studied research methods and statistics, I do not understand how someone who wants a job but doesn’t have one cannot be considered part of the unemployment calculation.

• It doesn’t matter if you are white, Asian, black, Hispanic/Latino, male or female, young or old – in every single category, the number of people who are categorized by BLS as “not in the labor force” has increased (Sept 2008 vs Sept 2012, Sept 2011 vs Sept 2012).

• The real unemployment rate (which includes folks who have given up) is 14.7% (seasonally adjusted), not 7.8%. This compares with September 2008 when the real unemployment rate was 10.6% (part of what is called the “Great Recession”).

• Now some might argue that every president/administration does this playing with numbers, especially during election cycles. But note that the % increase in this group grew less than 4% between the September 2004 and September 2008 reports…September 2008 was another election season. In fact, when I looked through what reports were available that used this statistic, the jump in the % growth of people put into the “want a job” but “not part of the labor force” between election cycles from 2008 to 2012 is by far the highest ever and more than twice that of the second highest jump (Sept 1996 to Sept 2000).

Sources: US Bureau of Labor Statistics (September 2008 and September 2012 reports)
http://www.bls.gov/news.release/pdf/empsit.pdf (Sept 2012 BLS Employment Situation Report Summary)
http://www.bls.gov/news.release/archives/empsit_10032008.pdf (Sept 2008 BLS Employment Situation Report Summary)

Government Fuzzy Math....

No, this isn't a blog about the budget...although there's plenty of fuzzy math in those numbers (but that's a story for another day).

Today, I'm thinking about a simple issue: jobs. To hear our government tell it, things are on the upswing and unemployment is WAYYYYY down. But as we know, Uncle Sam has a funny way of calculating the numbers.

The Bureau of Labor only includes those who are without full time employment in its estimates of the unemployment rate. Seems simple enough, right? Problem is that the BLS numbers don't give the full story. As any student or professor of economics will tell you, a nation's lack of productivity is not simply defined as "people who aren't working full time"...but is more aptly defined as "who can be productive but isn't."

What the numbers don't include are people who have given up looking for a job -- but still would want one and folks who want to and are able to work full time but have been forced to take a part-time job. According to a recent Washington Post article, most economists believe that this population of able-bodied -- but unemployed or underemployed -- workers has grown by nearly 30% in the last three years.  

Let's not forget the many able bodied but non-tax paying adults who are multigenerational recipients of welfare. Yup, they don't count either....but in my opinion, they should be part of those we count as unemployed as well (because frankly they are).

When people are working, they are not only being productive members of society but they will also become active consumers of products and services as well. People who are employed both add value and consume value -- and that is what is needed for our economy to recover. No fuzzy government math needed : ).

Lessons from Milton Friedman....

A friend recently sent me this video from a 1979 interview of Milton Friedman.  Good stuff!

RIP TARP? Not quite...well actually, not really at all

A latest article from the Associated Press indicates that despite Treasury Secretary Geithner's super spin that the "bailouts are completely behind us", reality is that the bank bailout program (TARP) is far from over and that it will likely take many, many years to recoup the funds.

http://news.yahoo.com/s/ap/20101029/ap_on_bi_ge/us_bailouts_rising_costs

By its own admission, Treasury officials have contracted for services -- with TARP funds -- without being able to describe what exactly the funds will be used for because it's not needed yet. That's sort of like me paying for car insurance for a car I don't own or drive yet...huh?

Just four more days...let's hope some common sense gets voted into office!

Just 9 more days...

Yes, it's been a long time since I've written anything on this blog -- work, school, more work and just general life got in the way. Fortunately, others have taken up the banner -- and the fury over what is going on in our government is not fading.

Today, our economy is weaker, the value of the US dollar (as both a currency and symbol of the US's status as an economic superpower) is declining, our real estate market is in the tank, foreclosures are rising, and the affordabiilty of the American dream is fading. Small businesses -- the backbone and catalyst of a growing economy -- cannot gain access to credit. Personal responsibility has become a less attractive choice than taking the easy way out. People can collect unemployment for nearly two years.

Is it just me...or is something seriously wrong with this picture? What are we teaching future generations when we tell our children that we can't be held accountable for our mistakes?

An old camp counselor of mine used to say "Camp is not fair. Life is not fair."...and it's true. Life is not always fair...sometimes, we make a choice (like I did with the stock market) and we lose. That is the cost of true freedom -- the freedom to choose both wisely and foolishly. But without learning the lesson of the consequences of bad choices, one cannot become wise. When we let someone else take the blame -- whether it is the banks, lawyers, politicians, teachers, our parents, etc. -- we give up our personal power. We become pawns for someone else to control.

On November 2, 2010, Americans all over this country will have the ability to exercise their right to vote. Some will do so blindly, others will do so intelligently and still others will not do so at all. Each person will have their justifications and reasons for doing so. We have only ourselves to hold accountable for what we end up with after that day, just as We the People are responsible for how we got to this point today.

Maybe you did or you didn't vote for Obama in 2008 -- but either way, you are part of the collective whole who are responsible for where we are today.  Maybe you were at a dinner and rather than speak your mind, you chose to remain silent. Maybe you just voted how you always did -- checking down the boxes on one side of the column without much thought as to the people behind the names.  Or maybe you didn't show up at all -- maybe you figured "my one vote is not going to make much of a difference."

They say insanity is doing the same thing over and over again -- and expecting a different outcome. So this fall, maybe instead of doing the same thing -- whatever your "same thing" may be -- try something different. Speak up. Read. Listen. Dialogue with that person you'd never speak with. Vote.  Be an example of the change you want in our government.

Now, for some more lighthearted (but educational) entertainment...check out this video from RightChange.com!


If You Give a Democrat a Cookie from RightChange on Vimeo.

They have some other great videos on the website...be sure to check them out.

Just how accurate is the CBO?

Supporters of the healthcare bill have been dancing in the streets since yesterday's report indicated that the Congressional Budget Office projects a $132 billion savings over 10 years on a bill that will cost $940 billion.

Notwithstanding the fact that the CBO numbers:

• Are preliminary;
• Don't take into account the impact of the House reconciliation bill; and
• Have an overly optimistic assumption that government bureaucrats will figure out how to cut costs of Medicare and Medicaid without cutting services....

The real question here is: just how accurate is the CBO?

Here's a quote from a Newsweek article last fall about how accurate the CBO numbers will be on healthcare:
While the CBO puts together its most comprehensive prediction possible, it often gets it wrong with big health legislation. It's not a lack of expertise or bias that causes the predictions to miss the mark, says Stuart Altman, a Brandeis University economist: "The problem is what we're asking them to do is impossible." Health-care legislation is the toughest to score accurately, says Robert Reischauer, former CBO director, because unlike laws that change the tax code or budget new building projects, there are often no data to examine.  -- Newsweek, October 8, 2009.

Another article examining the accuracy of the CBO in the past, says that the CBO projections are less accurate than an astrology horoscope.