Taxing the wealthy: Diving into the rich pool

This article that talks about the consequences (both good and bad) of taxing the rich in an economy. To start with, it is interesting to know that the top 10% of earners in most developed economies contribute to about 33% of the tax revenues. In the US, however, the top bracket contributes to almost 45% of the tax revenues. The article rightly points out that the rich are "juicy targets" for tax revenues as a slight percentage increase in their taxes can boost up tax revenues by large amounts. However, it is also important to note that increased taxes can cause firms and industries to cut spending, which can in turn slow down or stagnate growth. This was evident during the 1970's and 1980's as major economies such as Britain and the USA had to cut their top marginal income tax rates by almost 50% to avoid stagnation and to counter the slowdown in economic growth. The article uses these ideas to draw a conclusion that the influence of the rich on the economy is often overestimated. Yes, their influence is palpable in the short run, but as we look into the long run, deeper reforms, fixing loopholes in the present taxation systems and broadening the tax base are bound to produce greater results -- as compared to simply altering the top marginal tax rates.

The Importance of Debt Levels

This article comes in the wake of the annual meeting of the International Monetary Fund and World Bank this weekend. Government debt, something that has been in the news quite a lot recently, is sure to be one of the major topics addressed at the meeting. The author of this New York Rimes article, Floyd Norris, explains his view about all of the concern over debt levels by examining debt levels throughout Europe for the last couple of years.

Norris comes to the conclusion that the debt level itself does not appear to be that important of a factor in the health of an economy. He cites mainly three countries to back up this statement: Ireland, Germany, and Italy. Despite being the most fiscally conservative before the credit crisis in 2007 Ireland’s economy has been struggling the last few years. Norris does cite several alternative reasons that Ireland has done so poorly – high levels of private debt, the real estate bubble, and having to rescue banks – but he comes to the conclusion that what causes fiscal troubles is not always simple to discern.

A few thoughts about the Fed

I find this an interesting articles as it provides some insight into Monetary Policy and how the Fed can control it to make the current economic situation better. I personally think it would be wise to raise interest rates for a number of reasons. For banks, low interest rate means lower profit. And as we saw in the fisher equation, they won't want to be stuck in a deal when they expect interest rates to rise. So banks are raising their credit standards to keep from throwing good money after bad. Besides that, we have seen from past results that having no interest rates wasn't a very successful or popular decision. Also, people are not spending as they want to rebuild lost savings and reduce debt. A higher interest rate would help them achieve that.

Overall, this is a good article providing an insight to Monetary Policy and it's effects...

Poverty pervades the suburbs

This article written by Tami Luhby discusses the shift of poverty concentration from rural areas into the suburbs. Suburbs now hold the majority of poverty in the U.S. 15.4 million people live below the poverty line in suburbs today, an increase of 11.5% from last year. The article goes into further detail of how this is a result of frictional changes in job locations as people started moving away from cities into suburbia, and were in need of low wage workers to sustain our modern day suburbs in the U.S.

GM Re-Opens Plants in Tennessee

In Spring Hill, Tennessee General Motors is reopening one of its Saturn plants in an effort to create more jobs. Reactions to this plan are both of joy and surprise. This effort will help in the generation of jobs in an industry that has suffered much loss of work to foreign countries. The reason workers are surprised by this is that this plant in question has been closed for a long period of time, to the point that it would be thought it was impossible to revive.

This offer comes with workers being employed for full wages at $28 per hour. However this full payment would not be able to support large numbers of employees so a tier 2 payment system was developed. This tier 2 system has a wage of $15 per hour. This option of lower wages allows for more employees to be hired. This is expected to reduce unemployment figures significantly as it has already been lowered in the county from 17% to 13%. In this time of difficulty for the working class this is a welcome strategy.

prices or jobs

one of the most interesting articles in recent times
shows some of the most conventional and unconventional methods that the fed can use.

reminds me of 1982 when Paul Volcker in an effort to calm the markets said that the fed was switching to the Friedman methods of letting the market decide the key variables.

This article also has a lot of what we just covered in class.

Joblessness Rose in Majority States

The topic we learn last class was unemployment and this article directly talked about unemployment in the USA whether the rate increases or decreases and what is the reason behind it. The overall unemployment rate still increase for three months in a row. According to the Labor Department unemployment rate increased in 26 states, decreased in 12 States and 12 States’ rate remains the same. This is because no new jobs are being created; the overall rate is still 9.1%. The rate at which new jobs are being created during May to August was 39,500 compared to 178,500 of last year.

Nevada has the highest unemployment rate for 15 consecutive months from 12.9% to 13.4% due to the decline of tourism/construction industry and foreclosures. The second highest state is California at 12.1% and the third is Michigan at 11.2%. The lowest unemployment rate State goes to North Dakota at 3.5% due to job created by the agriculture and oil manufacturing companies. Followed by Nebraska at 4.2% and South Dakota at 4.7%.

Knowing the unemployment rate is important so that we will know where the economy is heading. In order to fight unemployment new job must be created every month.

Suddenly, Over There Is Over Here

The articles discusses that many banks in Europe are facing the problems that short-term lenders are refusing to renew their loans when loans comes to the due. The troubles of Europe and its debt-weakened banks will imperil the United States. A crucial mechanism linking financial players in the United States to the problems in Europe involves credit default swaps, those insurance-like products that did so much damage during the 2008 financial crisis. Even though we do not know how much this will hurt the U.S.’s economy, it will defiantly bring another challenge to the current economic situation.

Federal deficit totaled $1.23T through August

In this article, the author does a good job of explaining why the federal deficit is so large and already nearing the record high for a fiscal year with one month remaining in the federal fiscal year. The last year the government had a surplus was in 2001. Since then, a mix of increased government spending and president Bush's broad tax breaks has seen that surplus plunge into an increasing deficit. I'm interested to see what kind of scheme the President and Congress will come up with to reduce our deficit in the short-run and the long-run. This will ultimately have to incorporate the $447 billion job creation proposal president Obama just proposed.

Women the key to economic growth

Secretary of State Hillary Clinton met with diplomats from 20 other nations to pledge to lower the barrier for women entering and competing in the workforce. Barriers effecting women's participation range from not having the right to inherit land or businesses, or less access than men to land and good quality seed, in developing nations. In more developed economies women still earn less than men, and have fewer opportunities. Clinton shows, that she has great expectations for the effect that increased involvement of women in work will have for the world and it's economies.