Faster GDP Growth will be Welcome News for the White House, Despite “Ifs” and “Buts” in the Details

According to the advance estimate released today by the Bureau of Economic Analysis, U.S. real GDP growth increased to a 2.8 percent annual rate in the fourth quarter of 2011, compared to just 1.8 percent the previous quarter. It was the tenth consecutive quarter of growth since the end of the recession.

Furthermore, the new data show that the economy has now solidly entered the expansion phase of the business cycle.  Expansion begins when real GDP surpasses its prerecession peak, which occurred in Q4 2007. Technically, the expansion had already begun in Q3, but by such a tiny margin (just 0.04 percent) that it was hardly enough to count. Read more>>>

Follow this link to view or download a classroom-ready slideshow version of the latest GDP data.

Controversy over Romney's Taxes Underlines the Need for Broad Reform

The controversy over Mitt Romney’s tax returns underlines the need for broad reform of the U.S. tax system.  Much commentary has focused on the low average tax rate that this wealthy candidate for president enjoys, thanks in large part to low rates on capital gains.

The political issue raised by Romney’s taxes is simple: should the rich pay a larger share of the cost of government, or, are they being justly rewarded for their role as job creators? The economic issues are more complex: Does it make sense to treat capital gains differently from other forms of income? How do capital gains taxes interact with the rest of the tax system?

The blogosphere is awash with commentary on the political aspects of the question. (See here for samples from the left and the right.) This post will tackle the economic aspects, under the headings of three economic arguments often advanced in favor of lenient tax treatment of capital gains. >>>Read more.

Court’s Latest Stay of Clean Air Regulations Shows the Best can be the Enemy of the Good

On December 30, The U.S. Court of Appeals for Washington, D.C. stayed implementation of the Environmental Protection Agency’s proposed Cross-State Air Pollution Rule (CSAPR), which was to take effect on January 1, 2012. The EPA maintains that CSAPR would save 13,000 to 34,000 premature deaths annually, as well as lead to improvements in visibility in national and state parks, and increased protection for sensitive ecosystems including Adirondack lakes and Appalachian streams, coastal waters and estuaries, and forests. The stay was the latest in a long series of setbacks to EPA efforts to regulate a family of air pollutants from coal-fired power plants and other sources, including sulfur dioxide (SO2), oxides of nitrogen (NOx), ozone, and fine particulates. READ MORE>>>

Ed Dolan is the author of  TANSTAAFL: A Libertarian Perspective on Environmental Policy.

U.S. Employment Data: Strong Jobs Report Shakes Up the Election Season

Everyone knows what this election will be about: jobs, jobs, jobs. If so, the latest numbers from the Bureau of Labor Statistics should shake things up a little.

The headline number in the report is a relatively robust gain of 200,000 jobs in December, confirming that the jobs market is picking up after a mid-year slump. The November gain was revised downward from 120,000 reported last month to just 100,000, but that was partly offset by an upward revision of the October figure from an originally-reported 100,000 to 112,000. There was good news in the line-by-line numbers, as well. Goods-producing jobs increased by 48,000, after a decrease in November.
Read the complete commentary then,  follow this link to view or download a classroom-ready slideshow with charts of the latest jobs data.

Why the Russian Economy is No Longer a Big Plus for Putin

Vladimir Putin’s decision to return to the presidency has touched off a wave of protests in Russia. The motives behind the protests are partly social and political (see this recent post), but economics also plays a role in Putin’s fading popularity. It is far from clear that the present regime will be able to continue to offer growth and rising incomes in exchange for a monopoly of political power, as it has in the past. Here are some of the problems facing Russia’s economy in as we look toward the March election and beyond. Read More >>>

Best Economics News Story of the Year: Dickens Meets Hayek in a Mumbai Slum

My one-man committee has met and made a decision: The award for best economics news story of the year goes to Jim Yardley of The New York Times for an article titled “In One Slum, Misery, Work, Politics and Hope,” published in the December 29 issue.
It is a story about Dharavi, Mumbai’s most famous slum, a seething hive where perhaps as many as a million people live in 60,000 structures on an area smaller than central park. Not surprisingly, in every alley, there are scenes of appalling poverty: Read more>>>

Choral Singing, Malpractice, Italy: More Links for Your Classroom

• Most economists are familiar with the distinction between coordination via spontaneous order and coordination via hierarchy. (See, e.g., discussion in Ch. 1 of my textbook.) In the real world, coordination often involves a mix of the two. This post from Lynne Kiesling of The Knowledege Problem  illustrates the coordination issue with the example of choral singing. If you scroll down the comments, you will see one I have added.
• The euro crisis is not about tiny Greece, Ireland, or Portugal; it is about Italy. Italy is not only too big to fail, it is too big to rescue. In this post from Economonitor Ed Hugh digs deep into the Italian problem and explains why the euro's ultimate fate will depend on whether Italy can pull itself out of the very deep hole it is in. Hint: Government finance is only part of the story.
• Everyone agrees it would be good to slow the runaway growth of medical costs, but where to attack the problem? Conservatives often single out the need to reign in excessive medical malpractice suits. Others dismiss malpractice as a minor problem, citing data that malpractice legal costs and awards amount to only 2.4 percent of medical spending. This interesting post from the NY Times by Pauline W. Chen, M.C., a practicing physician, explains that the damage done to the medical system by excessive malpractice suits may be far greater than the measured 2.4 percent if one takes into account the way doctors respond to the fear of malpractice claims.