Tag Archives: presidential election

11.05.2012 | Election Economics: Looking at the Millennials, Xers, Boomers, and Silents

Before tomorrow’s election, let’s take a look at the voting age gap. Absent since 1972, the young and the old again are voting differently.

The Silent Generation: The oldest slice of the population, the Silent Generation was born between 1928 and 1945. Representing 17% of all registered voters at the end of 2011, they tend toward conservative views, support less government, and are politically engaged. One of their top issues, Social Security, reflects a contradiction. The Silents tend to be Republican but favor the Democrats’ position on Social Security.

The Baby Boomers: Currently 47-65, the Baby Boomers are a potent political cohort. Numbering 37% of all registered voters, the older Boomers tend to be more Democratic than their younger peers. The concern, though, that resounds for many is uncertainty about their financial future and retirement security.

Generation X: Born between 1965 and 1980, Xers make up 26% of all registered voters. Politically, they tend to split by age. Older Xers sympathize with Republicans while those closer to 30 are more likely to vote Democratic. As for the issue they most care about, it appears to be financial health.

The Millennials: The youngest population group that votes, Millennials are currently 18 to 30 years old. relatively unengaged politically, and 17% of the electorate. 41 percent nonwhite or Hispanic, they are diverse, vote Democratic, and are almost evenly split on whether we have too much or too little government. According to a July 2012 USA TODAY/Gallup Poll, creating good jobs was the key issue for those under 30.

How to summarize the similarities and differences? I suggest looking at the table below. Although it is based on data from October 2011, still the priorities remain similar according to the more recent Gallup poll. And, for more background data, the graphs that follow it are fascinating.

Election Economics Topics:

Sources and Resources: The surveys on which I based my facts were from Pew (Nov. 2011) and USA TODAY Gallup (July 2012). Also, you might have some fun with this USA TODAY candidate match game. All graphs and tables are from Pew.

Posted by: adminEcon
Tags: 1972 election, baby boomers, campaign issues, deficit, Democrats, financial security, Generation Xers, George McGovern, jobs, Medicare, millennials, Mitt Romney, President Obama, presidential election, Republicans, Richard Nixon, Silent Generation, social security, voting generation gap
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09.10.2012 | Election Economics: Tax Matters

The candidates agree that tax proposals need to focus on reducing the deficit and on government spending. After that, the divide on tax policy is considerable.

To narrow the gap between revenue and spending, President Obama supports a higher tax rate for the more affluent to fund government spending. By contrast, former Governor Romney says let’s avoid tax increases and be more frugal about most of what we spend.

For us to decide and defend the position that we support, first let’s look at a definition, then at some history and finally at where we are now.

A Definition:

With marginal rates, we divide income into slices, each having a different tax rate. So, very hypothetically, if you earn $30,000, then for the first $10,000 of income, you could pay 5%, then 10% on the next $10,000, and, 20% for the next $10,000.

Some History:

1) Tax rates: Going as far back as the constitutional amendment that legalized the income tax, in 1913 the top marginal rate was 7%, in the 1950s a whopping 92%, and then between 1986 and 1993, 28%. During 1993, the top rate increased to 39.5% and now it is 35%. In 1985, there were 14 marginal tax brackets with the highest, 50%. The 1986 tax act cut the number of brackets down to 2 although some say there was a third 33% bracket because of a surcharge on certain high incomes.

2) Tax revenue: Since 1945, whatever the top rate, the amount of revenue has remained a somewhat constant proportion of GDP. (Please see graph at bottom.)

Where are we now?

1)Those who are more affluent receive a higher proportion of the nation’s income and are paying a larger proportion of all taxes. Specifically, while the income of the top 5% has increased, they are the source of more than 40% of all tax revenue.

2) Due to expire at the end of 2012, the top marginal income tax rate is 35%. Should it and other temporary tax relief provisions be extended? The list of all the possible extensions is here (at the end of the attached article).

This takes us to your goals and always remembering that whatever you support, you are creating incentives, tradeoffs (there is no free lunch), and unintended consequences.

Sources and Resources:

When people say to you that the tax system has become more complex than ever before, you can show them this 1915 tax form. For a superb discussion of current tax dilemmas through the lens of history, this econtalk interview is ideal and well worth the hour or at least a look at the transcript. Finally, if you can access WSJ.com, this (gated) David Wessel analysis of tax issues is very good.

If you want to smile, this 5-minute Pink Panther video about the tax collector is fun.

Election Economics Topics:

More of the Jobs Story: 9/3
Aging Challenges: 8/27
A Healthcare Overview: 8/20
Paul Ryan and economist Friedrich von Hayek: 8/13
Unemployment: 8/6
Minimum Wage: 7/30
Dodd-Frank: 7/23
Outsourcing: 7/16

Posted by: adminEcon
Tags: deficit, expenditures, GDP, incentive, income tax, marginal tax rates, presidential election, tax proposals, tax revenue, tradeoffs, unintended consequences
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09.03.2012 | Election Economics: More of the Jobs Story

Here are some jobs facts that might be helpful when you listen to the candidates.

During 1933, the unemployment rate was a cataclysmic 24.9%. Having entered office that year, FDR was re-elected in 1936 with unemployment still soaring but better at 16.9%. The next president to be reelected with pretty dismal unemployment numbers was Ronald Reagan. The year was 1984 and the average unemployment rate was 7.2%, down from 7.5% 4 years earlier.

Both FDR and Reagan faced major economic challenges when they entered office. For FDR, the Great Depression was unprecedented. With Reagan, stagflation–inflation and unemployment- was tough to solve because the solution to one problem made the other worse. For both, things were getting better when they sought a second term.

That takes us to a question we will be asking in “election economics.” How much has the economy improved since President Obama entered office?

Using the following table, we can look at several yardsticks and arrive at different conclusions.

	January 2009	October 2009	July 2012
Household survey employed	142.1 million	138.3 million	142.2 million
Nonfarm payrolls employed	134.4 million	131.0 million	133.2 million
Unemployment rate	7.6%	10.2%	8.3%
Change from previous month: Household survey	-1.2 million	-589,000	-195,000*
Change from previous month: Nonfarm payrolls survey	-655,000	-190,000	+141,000*

*Not considered statistically significant

Source: Bureau of Labor Statistics

Unemployment:

The unemployment rate increased from 7.6% when Mr.Obama entered office to a peak of 10.2% several months later and then decreased to its current rate, 8.3%. (Do you remember when unemployment was 4.4% during March 2007?)

Number of Jobs:

The number of jobs that have been added to the economy is a debatable figure. If you compare January 2009 and now, job numbers have remained almost the same. Instead, starting when unemployment was at its worst, using figures from the households survey (more about the survey here) on which the unemployment rate is based, there are 4 million more jobs now. On the other hand, the nonfarm payrolls survey indicates that the increase in those who are employed has been 2 million jobs.
Finally, we could just say all that matters is the number of jobs that are added monthly. Then, we just look at the nonfarm payrolls totals and see that there were 141,000 jobs added.* (Please do go to this econlife post to see that actually, a seasonal adjustment calculation created that result.) However, the nonfarms payroll numbers exclude the self-employed, household workers and other types of workers.

So where does it leave us on whether the jobs picture is looking better? Perhaps we just have to see how people feel.

Released by the Conference Board several days ago, consumer confidence dipped because, “Consumers were more apprehensive about business and employment prospects…Those expecting more jobs in the months ahead decreased to 15.4 percent from 17.6 percent, while those anticipating fewer jobs rose to 23.4 percent.” All though was not negative. You can see a summary of the entire report here.

With graphs that were especially fascinating, the Bureau of Labor Statistics has a wonderfully thorough report on labor and the Great Recession and they have an interesting discussion about labor and the Great Depression here. For my statistics, I also used their monthly reports on unemployment.

*Originally, this post noted 163,000 as jobs created for July. However, the August jobs report revised it downward to 141,000.

Election Economics Topics:

Aging Challenges: 8/27
A Healthcare Overview: 8/20
Paul Ryan and economist Friedrich von Hayek: 8/13
Unemployment: 8/6
Minimum Wage: 7/30
Dodd-Frank: 7/23
Outsourcing: 7/16

Posted by: adminEcon
Tags: Great Depression, great recession, households survey, jobs added to the economy, Mitt Romney, nonfarm payrolls, President Franklin Roosevelt, President Obama, presidential election, Ronald Reagan, seasonal adjustment, stagflation, unemployment, unemployment rate
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07.31.2012 | Remembering Milton Friedman

Split down the middle, opinion about the US economy puts private initiative or government first. Those who place individual enterprise first believe most private income belongs to those who generate it. By contrast, government’s advocates see a growing share of private income as tax revenue that is fairly collected and redistributed.

Nobel laureate Milton Friedman, who would have been 100 years old today, had an opinion about “fair” government. According to Dr. Friedman, being “fair” to one group meant less fairness to others. If government is more equitable to consumers, then it is less fair to businesses. As he said in a 1977 Newsweek column, “To a producer or seller, a ‘fair’ price is a high price. To the buyer or consumer, a ‘fair’ price is a low price. How is the conflict to be adjudicated? By competition in a free market? Or by government bureaucrats in a ‘fair’ market?”

Dr. Friedman reminds us that neither the Declaration of Independence, the Constitution nor the Bill of Rights contains the word “fair.” He says that instead, government should be “policeman and umpire.” It should provide “a framework within which individuals could pursue their own objectives in their own way.”

So yes, we have always had a mixed economy with some government limiting freedom. The question for each of us is how much of each. The coming election will probably provide an opportunity to select a tradeoff.

You can read the entire Milton Friedman (1912-2006) column, “Free Versus Fair,” here. And, for further discussion of America’s 2 economic perspectives, you might enjoy this WSJ editorial column from Daniel Henninger. Finally, during presidential election years, I always ask my classes to read Arthur Okun’s Equality and Efficiency: The Big Tradeoff.

Posted by: adminEcon
Tags: Constitution, Declaration of Independence, economic growth, economic role of government, entrepreneur, free enterprise, free or fair, income taxes, Medicare, Milton Friedman, Mitt Romney, mixed government, President Obama, presidential election, social welfare, welfare state
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07.16.2012 | Election Economics: Assessing Outsourcing

Until November 6, at econlife, Mondays will be about presidential election economics.

In 2004, when President Bush’s Council of Economic Advisers chairman, Harvard professor Greg Mankiw, was lambasted for saying, “… I think outsourcing is a growing phenomenon, but it’s something that we should realize is probably a plus for the economy in the long run, ” politicians, left and right, distanced themselves from his position.

Fast forward to 2012. Still, no one wants to be called an outsourcer. And still we are focusing on the politics of outsourcing rather than its economics.

Here are the economics:

A call center in India or an Apple assembly plant in China are examples of (offshore) outsourcing when firms send jobs abroad that could be done by domestic manufacturing and service workers. (Please note that here, when we refer to outsourcing, we mean offshore outsourcing.)

The Congressional Research Service tells us that the macroeconomic slowdown, not outsourcing, is primarily responsible for high unemployment.

Most economists believe that the US economy benefits from globalization. As a nation, incomes will rise, goods will be cheaper, and corporate profits will increase whenever outsourcing leads to greater efficiency for producing goods and services.

But others accurately point out that outsourcing not only means job losses but can take place on an “uneven” playing field where other nations’ subsidies unfairly attract US businesses.

The bottom line: After discussing what we do know, most research on outsourcing concludes with, “We need to know more.” No one has gathered sufficient empirical data to be sure of the specific impact of offshore outsourcing.

However, economists like Princeton’s Alan Blinder suggest that we have only seen the tip of the iceberg. In the future, with a sufficiently sizable proportion of the economy potentially being outsourced, we will face a massive shift in how we do business.

Maybe that is what our presidential candidates and the media should be discussing.

Also, I hope they will remember what David Ricardo said about international trade. Explaining the concept of comparative advantage, he told us that we elevate everyone’s well-being when nations produce what they are relatively best at.

For example, what if you can teach a class skillfully or mow your lawn expertly while your neighbor can mow the lawn mediocrely or get paid minimum wage at a fast food restaurant? Then you should teach, she should mow and everyone will be better off. The reason? You sacrifice too much by not teaching when you mow and she would sacrifice too much if she earned less at her fast food job.

Varied, there is a wealth of information about outsourcing. Harvard economist Gregory Mankiw co-wrote a paper on the politics and economics of outsourcing and Princeton economist Alan Blinder, looking at “personal” and “impersonal” services and goods discussed how specific jobs might be affected when outsourcing proliferates, and the St. Louis Fed looked at Germany and outsourcing. In addition, here is a recent Congressional Research Service report and a description of the brouhaha about the Mankiw outsourcing statement when he was the CEA chair.

Posted by: adminEcon
Tags: Alan Blinder, apple, biggest outsourcer, call centers, China, comparative advantage, David Ricardo, economic growth, efficiency, globalization, Gregory Mankiw, India, international trade, Mitt Romney, offshore outsourcing, President Obama, presidential election, productivity, unemployment
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