South By North Strategies, Ltd.

Good Questions

Jonathan Cohn of The New Republic raises some interesting questions in an account of the demise of the CLASS Act, which would have helped American pay for long-term care like nursing homes.

We know conservatives don’t like universal health insurance if it means government coverage. We know conservatives don’t like universal health insurance if it means a private coverage with a mandate. And, based on their reaction to CLASS, we know conservatives don’t like universal health insurance if it means a private coverage without a mandate.
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But if they don’t like any of those options, what’s left? Could it be that conservatives just don’t like universal health insurance at all?  That they simply don’t believe it’s possible or worthwhile to make sure everybody can pay their medical bills, the way every other developed country does?
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It sure seems that way.

Around The Dial – October 17, 2011

Economic policy reports, blog postings, and media stories of interest:

• Martin Wolf calls for “some intelligent policymaking.”
• Uwe Reinhardt thinks about what is counted in GDP statistics.
• E.J. Dionne despairs of the attitude of “don’t just do something, stand there.”
• Paul Krugman sketches “the financialization of America.”

Recycling Bad Ideas

TaxVox explains why a temporary tax holiday for firms that return foreign profits to the U.S. is “still a bad idea.”

The reality, sadly, is quite different. There is no evidence that a similar break created any new jobs when Congress tried it in 2004. Instead, most of the repatriated dollars went to shareholders in the form of dividends or stock buybacks (which raise equity prices).
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Yet, multinationals are salivating over the prospect of a holiday. Jesse Drucker over at Bloomberg reports that 160 lobbyists are working the issue. Even Apple and Google—normally bitter corporate rivals—are singing from the same hymnal.
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No wonder. The [Sens. Kay and John] Hagan-McCain bill would allow firms to pay just an 8.75 percent tax to bring home overseas earnings—far lower than the top corporate rate of 35 percent. They can get the rate down to 5.5 percent if they increase payroll in 2012 (not hard if the economy improves as many expect).

And, in an added twist, TaxVox notes the following:

But with corporate tax reform in the wind, a holiday today could provide an extra windfall. Here’s why:
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Corporate tax reform could include both a lower rate and a shift to a territorial system, which would exempt foreign earnings from any U.S. tax (and require overseas firms to pay U.S. tax on what they earn here). But the real key will be the transition from today’s rules to the new system. It is likely, given big budget deficits, that earnings already sitting overseas would be taxed at a rate higher than 5.5 percent or even 8.75 percent. So, savvy multinationals would much rather bring the dough back now at an extremely low rate and avoid paying a bigger transition tax in a couple of years.
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It’s a win-win. Maybe they get lower rates and reform. If not, they’ll get a big break today and perhaps another holiday down the road. Sweet.

The State Of The 19 Percent

John Quiggin mulls the relationship between the top 1 percent and the rest of the people in America’s top income quintile.

I’m now much more sympathetic to the ‘99 per cent’ analysis. First, a closer look at income growth figures suggests that, while the 19 per cent have enjoyed rising incomes, they’ve only barely maintained their share of national income. The redistribution of the past three decades has gone from the bottom 80 per cent to the top 1 per cent.
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That suggests the possibility of a policy response in which the main redistributive thrust would be to reverse this process.  This would almost certainly involve higher tax payments, but this would be offset by the restoration of public services, which are in economic terms a ‘superior good’, valued more as income rises. The top 1 per cent can buy their own services, and are largely unaffected by public sector cutbacks, but that’s not true of the 19 per cent.
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Another important factor is the growth of economic insecurity. The myth of the US as a land of opportunity for upward mobility has been replaced by Barbara Ehrenreich’s Fear of Falling (another good source on this is High Wire by Peter Gosselin). Even if people in the top 19 per cent are doing well, they are less secure than at any time since the 1930s, and their children face even more uncertain prospects.

Around The Dial – October 14, 2011

Economic policy reports, blog postings, and media stories of interest:

• Nouriel Roubini points out “the instability of inequality.”
• Simon Johnson asks if “tax cuts pay for themselves.”
• Felix Salmon revisits GDP estimates and recovery policy.
• Paul Krugman warns against “rabbit-hole economics.”
• Michael Hiltzik points out the accomplishments of the New Deal.