With its deadline only a few days away, there seems a high probability that the deficit supercommittee will fail to reach consensus. Then, there may be cuts in defense spending that many, including Defense Secretary Leon Panetta, deem disastrous. Such spending accounts for about 19 percent of the federal budget for fiscal year 2011 and 5 percent of total national output. And as usual, the nation is divided on...
How could debt problems in Greece – a country of 11 million – trigger a financial crisis not only across Europe but for the world as a whole? Although the current crisis is more pronounced than earlier ones in its international ramifications, we’ve learned that all financial crises follow familiar patterns. The role of credit in economies is key. And credit, which stems from the Latin word credere, meaning...
One of the benefits of our move to a new site is that you can search for any word you want in a column. Looking for the column on the vise I pulled out of a dumpster? Type “dumpster” or “vise” into the Search field and hit Enter…like magic you’re transported back to December 2002…and I still have that vise! The comments feature of this new site also makes...
This week’s kerfuffle over “Obama’s tax on Christmas trees” is the most imbecilic one I have encountered in 30 years as an economist. Fortunately, informed commentators eventually introduced some sanity, but not before the Obama administration caved into pressure and suspended the program. Many in the general public probably were left with the notion that the administration did actually make an independent decision to create a new excise tax...
Large national banks reportedly are losing many customers to smaller community banks and credit unions. This is a general, if delayed, response to public disgust at the actions and privileged treatment of the big banks over the past four years. It also reflects specific anger over increases in fees for household and small-business customers typified by Bank of America’s aborted attempt to impose a $5 monthly fee on debit...
North Dakota’s beef about Minnesota’s restrictions on electricity generated from coal together with California’s new greenhouse gas cap-and-trade system illustrate a knotty economic question. How does a society decide issues in which some, but not all, people feel morally bound to take actions that may have immediate economic costs in return for uncertain benefits? North Dakota has sued the State of Minnesota challenging our 2007 Next Generation Energy Act...
Bank of America has caved in on its announced decision to charge most debit card users a $5 monthly fee. Chalk up one for Adam Smith, who explained 235 years ago how competition benefits consumers. Once it became clear none of its major competitors would follow its lead, and as its disgruntled customers began moving their accounts to those competitors, BofA had little choice. Hold your applause, however, because...
(This column is part two in a two-part series. Part one, “Half don’t pay taxes is one misunderstood rubric,” discusses the common misunderstandings the public has about taxation.) In any given recent year, 40 percent to 50 percent of the “tax units” in our country don’t pay any federal income tax or even get some net amount back. Some see this as a threat to our economy and our...
(This column is part one in a two-part series. Part two, “The number of those who pay no U.S. tax is actually miniscule,” discusses the common misunderstandings the public has about taxation.) It is hard to find an economic statistic that is more misinterpreted or that gives rise to more silly editorial commentary than the fact that “half of all Americans don’t pay any taxes.” This is an example...
Just as there are myriad complications in as simple a concept as taxing “income,” there are just as many if you want to tax “sales” or “business profits.” Herman Cain’s 9-9-9 plan may prove to be a flash in the pan, but it certainly has generated plenty of conversation about whether it’s feasible. The idea of changing federal taxes to promote greater economic efficiency – and perhaps greater fairness...