The US is the global leader in the number of persons that it imprisons by a wide margin. It does so at huge cost. We spend around $50,000 per person to keep someone in prison for one year. There is also a huge social cost. Prisoners are unable to contribute to the support of their families and they have great difficulty finding jobs when they are released.
The article makes an attempt to deal with the causes of imprisonment, and it discusses alternative forms of punishment. The biggest factor in the growth rate, however, is not discussed. It is mandatory sentencing for drug offenders. It also fails to mention that the privatization of US prison systems is a rapidly growing industry. Many states are outsourcing the management of prisons to private firms. I'm sure that they will actively lobby for measures that increase the imprisonment rate.
Saturday, June 2, 2012
Where Do Budget Deficits Come From?
This article by a Republican official in the Reagan Administration, provides an analysis of government spending and tax revenues during our recent history. We get budget deficits when spending exceeds tax revenues, therefore, we need to understand spending growth, and revenue growth, in order to analyze their contributions to budget deficits. The GOP has been blaming "out of control" federal spending for the increase in US budget deficits under Obama. The data show that discretionary spending under Obama has not impacted the deficits very much. The biggest contribution to the budget deficits has been the decline in tax revenues.
Between 2008 and 2009 mandatory spending on social security, and healthcare increased from 12.4% of GDP to 16.4% of GDP. This is called mandatory spending because it is determined by existing law. It is not budgeted by Congress. Discretionary spending, which is budgeted by Congress, and which also includes defense spending, only increased by 1% of GDP.
On the other side of the ledger, tax revenues fell substantially. They fell from 17.5% of GDP in 2008 to 14.9% of GDP in 2009 and 2010. If tax revenues had remained at the 2008 level, combined federal deficit would be $1.3 trillion less than it is today.
Tax revenues as a percent of GDP have averaged 18.5% in the Post War Period. They were 18.2% under Reagan; 19% under Clinton; 17.6% under Bush Sr., and 15.2% under Obama. The drop in tax revenues under Obama are due to the Bush tax cuts and to the effects of slow growth on national income. It is also clear that, despite GOP claims to the contrary, tax reductions do not contribute to GDP growth.
Between 2008 and 2009 mandatory spending on social security, and healthcare increased from 12.4% of GDP to 16.4% of GDP. This is called mandatory spending because it is determined by existing law. It is not budgeted by Congress. Discretionary spending, which is budgeted by Congress, and which also includes defense spending, only increased by 1% of GDP.
On the other side of the ledger, tax revenues fell substantially. They fell from 17.5% of GDP in 2008 to 14.9% of GDP in 2009 and 2010. If tax revenues had remained at the 2008 level, combined federal deficit would be $1.3 trillion less than it is today.
Tax revenues as a percent of GDP have averaged 18.5% in the Post War Period. They were 18.2% under Reagan; 19% under Clinton; 17.6% under Bush Sr., and 15.2% under Obama. The drop in tax revenues under Obama are due to the Bush tax cuts and to the effects of slow growth on national income. It is also clear that, despite GOP claims to the contrary, tax reductions do not contribute to GDP growth.
Central Banks Are Too Credible On Inflation Fighting
The US Federal Reserve has a dual mandate, and presumable central banks around the world have similar mandate. They are supposed to employ monetary to provide price stability and employment stability. This article suggests that they have won the battle against inflation expectations. Inflation expectations are low in the US and in Europe. They are more reluctant, however, to take the needed steps to increase employment. They worry that this would increase inflation expectations. In other words, they place a higher value on price expectations than they do on employment stability. Krugman, along with many other economists, argues that the central banks may get their wish. Price deflation, and slow economic growth, may be the outcome of their policies.
GOP Blocks Administration Efforts To Produce Jobs To Gain Political Advantage
This article describes the GOP game plan for the 2012 election cycle. They are doing what they can to prolong the recovery to improve their chances in 2012. They are betting that the public has a short memory. They claim that new regulations are strangling the economy, and that deregulation is the path to growth. In other words, the policies that led to recession will stimulate the recovery. That message has helped the GOP to raise campaign contributions. It also responds to the belief system of its base, the real question is whether they can sell it to independents.
A Warning About Climate Change That Was Ignored
Climate Science TV placed three videos on its webpage that reveal the warnings about climate change by Roger Revelle in 1957. He had a good understanding of the problems at that time, and he also knew that the earlier we moved to renewable energy sources, the better it would be. Transitions to alternative sources of energy take decades to implement.
Friday, June 1, 2012
May Jobs Report Well Below Expectations
Only 69,000 new jobs were created in May. That is 50% of the forecast for job growth. Job growth in April was also revised downward from 115,000 to 77,000. The US labor market requires at least 125,000 new jobs per month to keep the unemployment rate steady.
The crisis in Europe, and slow growth in the US, reinforce each other. The US is a large market for European exports, and the European market is a large source of revenue for US multinational corporations. Businesses will sit tight, and put off investments in this kind of environment. The looming US elections in 2012 will also negate any political response to the job market. The GOP would rather go into the elections with a slow economy. Mitt Romney is already blaming Obama's economic policies for the slow growth in jobs.
The crisis in Europe, and slow growth in the US, reinforce each other. The US is a large market for European exports, and the European market is a large source of revenue for US multinational corporations. Businesses will sit tight, and put off investments in this kind of environment. The looming US elections in 2012 will also negate any political response to the job market. The GOP would rather go into the elections with a slow economy. Mitt Romney is already blaming Obama's economic policies for the slow growth in jobs.
Facts Don't Support Propaganda About Out Of Control Government Spending
This article provides several slices of data that falsify the claim that splurges in spending, by "tax and spend" liberal governments has produced large government budget deficits. You may have fun showing them to your friends that believe the propaganda.
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