As Exports Soar, US Economy Closes in on Fed's Targets

Revised data released today by the Bureau of Economic Analysis show that the US economy grew at a 4.6 percent annual rate in the second quarter of 2014, even faster than the 4.2 percent previously
estimated. That was the most rapid quarterly growth since Q4 2010.

Much of the upward revision was due to the growth of exports, which also turned in their best performance in four years. The strong performance of the export sector is especially noteworthy in view of slow growth or recession in many US trading partners and the strong dollar, which had not yet begun to weaken in Q2. The BEA also made an upward revision, but not as large, to the growth of imports.

Personal consumption expenditures also grew faster than previously reported, with durable goods accounting for more than half of total growth for that sector. Fixed investment was also significantly stronger than previously reported. The contribution to GDP growth from government consumption expenditures and gross investment was a little stronger than in the second estimate. All of the growth of the government sector came at the state and local levels. The contribution to growth from the federal level was negative, as it has been in 11 of the past 12 quarters. >>>Read more

Follow this link to view or download a slideshow with additional charts of the latest GDP data

One Chart that Shows What's Wrong with US Corporate Tax

Last week the Tax Foundation released its annual International Tax Competitiveness Index for 2014.

The United States ranked 32 out of 34 OECD countries surveyed. Only Portugal and France got lower competitiveness scores, and not by much. As if that were not bad enough, the competitiveness score is only half the story. When you put it together with other data, the US tax system looks like even more of a mess.

First a bit about the Tax Foundation and its competitiveness index. The foundation invites  journalists to describe it as “a non-partisan research think tank, based in Washington, DC,” but not all agree. For example, Dan Crawford, writing for Angry Bear, says, “Its work is aimed at one purpose–convincing Americans that they pay too much in taxes and that government is too big.” Others point out contributions from the Koch Family foundations and ties to other conservative groups as signs of partisan bias. Paul Krugman says flat-out that “knowledgeable people don’t trust the Tax Foundation.”

In an important way, though, the Tax Foundation’s conservative ties only reinforce its credibility as a monitor of tax system features that are perceived as burdensome by its corporate friends. The foundation is entirely up front about what the Tax Competitiveness Index tries to measure:

A competitive tax code is a code that limits the taxation of businesses and investment. In today’s globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world in order to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investments in order to maximize their after-tax rate of return. If a country’s tax rate is too high, it will drive investment elsewhere, leading to slower economic growth.

When the foundation gives the United States a low competitiveness score, then, it is simply saying that there are a lot of things about our tax system that corporate businesses don’t like—the kinds of things they consider when they decide where to locate, how to operate, and where to find funds for their investments.

What really strikes me, though, is not just how uncompetitive the US tax system is (in the Tax Institute’s sense of the word), but that it manages to be so uncompetitive while raising so little revenue.>>>Read more

Ask Me Anything about Universal Basic Income Today on Reddit

Today at 1 p.m. Eastern (10 a.m. Pacific), I will be doing an "Ask Me Anything" session on Reddit on the topic of universal basic income (UBI). Here is the general link to the page where my discussion will appear. I will post an exact link to the discussion itself when the time comes.


The IAMA sub-Reddit requires that people provide "proof" of who they are by posting something that no imposter could easily do. My "proof" is this little video clip inviting you to join me today on Reddit. Sorry for the poor quality--I'm not very good at videos, but you can match the image in the video to the one posted in my profile. I guess that will constitute "proof."

As readers of this blog will know, I have posted lots of stuff about a universal basic income over the past year. Here is a partial list:

• The economic case for a UBI
• Could we afford a UBI?
• Conservative, progressive, and libertarian perspectives on a UBI
• UBI and work incentives: Part 1, theory
• UBI and work incentives: Part 2, evidence

For more, you might check numerous contributions I made to the recent discussion of basic income on Cato Unbound, which starts here  or this short piece posted on Real Clear Markets  or this brief summary of my arguments in the Milken Review.

So please join me, and I look forward to answering your questions!

The Looming Blood Surplus: A Case Study in Supply and Demand

A market for blood? Many Americans, used to being rewarded for a donation with a warm feeling of talking to WPTV of West Palm Beach, Florida.
public service rather than cold cash, might see the idea as offensive. “I would guess 99 percent of people don't know that blood is sold,” says Ben Bowman, CEO of General Blood, a national blood brokerage firm,

Yes, there is a blood market, a big one with a turnover of $3 billion per year by some accounts, and it is entering a period of turmoil.

Demand

Just a few years ago, people thought an aging population, in need of more hip replacements and heart bypasses, would mean an endlessly rising demand for blood. In recent years, though, doctors have come to realize that transfusions, life-saving though they can be, have a downside. The cost of unnecessary transfusions is one consideration, but the risk of transmitting disease is the real negative.

As anesthesiologist, Josh Martini remarked to Minnesota Public Radio, "I was told in medical school, 'don't bother giving one unit, you should just give two if you're going to give any.'" Now, he says, the mantra is changing to "why give two, when one will do?">>>Read More

Follow this link to view or download a brief slideshow with supply-and-demand graphics that can be used as an in-class quiz or independent reading for students.

Broad and Long-Term Unemployment Fall in August Despite Slowdown in Job Growth

The Bureau of Labor Statistics reported Friday that the broad unemployment rate and long-term
unemployment have fallen to new lows for the recovery, despite a slowdown in the growth of payroll jobs. Payroll employment increased by 142,000 in August, significantly less than the 212,000 average for the previous three months. The standard unemployment rate fell fractionally, returning to the low of 6.1 percent first reached in June. The percentage of the labor force working part-time for economic reasons also decreased.

The standard unemployment rate, U-3, is the ratio of unemployed persons to the civilian labor force. Both the numerator and denominator of the ratio fell in August. The broad unemployment rate, U-6, also takes into account discouraged workers (people who would like to work but have stopped looking because they think no jobs are available) and involuntary part-time workers. As the following chart shows, that rate fell to 12.0 percent in August, a new low for the recovery. >>>Read more

Follow this link to view or download a brief slideshow with additional charts of the latest employment situation

Reading Recommendations for You and Your Students

Living with Water Scarcity, David Zetland. Back in April I posted a review of David Zetland's book that recommended it not only as a short, readable treatment of the high-profile issue of water scarcity, but as a case-study in scarcity and markets in general. Now David has reduced the price of the download version, from $5 to $0. If the $5 put you off when you first read the review, download it for free and read it today. (You can still buy the paper or Kindle versions from Amazon if you prefer).

A People's Endowment, Karl Widerquist. Recently I have posted several items on the idea of a universal basic income (See here and here). These posts have included suggestions as to how a UBI could be financed by replacing or cutting back on existing welfare programs, middle-class tax expenditures, and other budget outlays. Karl Widequist, another supporter of a basic income, is currently writing a book that is scheduled to come out next year. He has recently posted a draft chapter setting out his own views of how a basic income could be financed by setting up a people's endowment, similar to the Alaska Permanent Fund or Norway's Sovereign Wealth Fund. It makes good reading as it is, and the author would welcome comments as he works on a final version.