Follow-up from radio: Businesses still love profits

Anybody that listens to my appearances on the Jarrod Thomas Show will know the voice of my radio stalker. I am not sure I could live in the black-and-white world this individual inhabits. All roads lead to evil investment banks, every political party is wrong, China is the ultimate source of trouble, and so on. Usually he just does his little drive-by rant, selectively quoting anyone that agrees with his ill-pre-conceived notions about the economic world. Last week though he revealed the fatal lack of follow-through that taints all his ramblings.

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All taxes all the time

I am anticipating some commentary from JT on the radio tomorrow about property taxes so I thought it appropriate to reiterate some of my earlier thoughts on taxes. The approach of local area policy makers matters when talking about taxes and tax relief. The typical way I am asked the question is whether or not people in North Dakota, or at least Grand Forks, will see tax “relief?” The answer depends on several factors.

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GDP growth is cause for concern

The official release of the advance estimate of Q2 GDP today was actually greeted with a sigh of relief. What does it say about the economy when at 1.7% rate generates relief? The relief of course is because it is not worse, but this number is subject to significant revision and so it may only be a temporary stay. I get asked on the radio all the time about economic recovery. The answer remains the same: there is recovery, but it is wholly inadequate to make people “feel” like recovery has taken hold.

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College Students & Local Area Poverty Rates

The Census Bureau released a paper (citation below, link here) attempting a correction of sorts for the poverty level in counties and cities with a university. Specifically, the paper looks at the poverty rates with and without college students living without their families and off campus. What they find is a significant difference for some communities. That is, for some of the communities, when you exclude these students you get a significantly lower poverty rate. This is not too surprising really when you consider the rationale for many attending college is to increase their lifetime income. » Read more

Dove v. Hawk

The Wall Street Journal did an analysis of comments by Federal Reserve members and judged the accuracy (article). “Hawks” are thought to be more aggressive anti-inflation policy authorities than “Doves”. I find it interesting that they go so far as to judge a winner in this situation. Long run outcomes are still not known and would be an important part of scoring who was “right”. But there are a few other issues here as well.

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Recalculating GDP

Before the data is released I felt it important to get my take on GDP revisions out there. There will be the standard outcries about political manipulation of the numbers and this is really not the intent, nor the outcome, of this process. This article from Bloomberg.com explains the process a bit. This article does a little better (especially on the R&D front and it mentions economic history). The U.S. economy is dynamic and constantly changing. We can call it innovation or entrepreneurship or development, but at its root it is change. Change in the products and services made and changes in the processes used to make them. These changes require us to change how we account for different aspects of the economy over time.

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After the Crisis, the Baby Boom

The Weather Channel had a report on this week about circumstances on the eastern seaboard after SuperStorm Sandy. My students in Forecasting and Demography classes hear this information from me all the time. Look at any natural disaster, widespread blackout or other major event, and then take a look starting eight months later and you will notice an uptick in births. In fact, you can see this ahead of time if you pay attention to the OB-GYN visits. People are creatures of habit, and it sounds corny, but in times of crisis they look for comfort.

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Monetary policy and the markets

In the last month, I have fielded many questions regarding Federal Reserve monetary policy and financial markets. Not a surprise since so much happened in that sphere. The Fed announced a change in policy. No wait, they didn’t. In fact,all they said at some point in the future we may see the U.S. economy strong enough that massive monetary stimulus may no longer be necessary. We should really file this under a non-story type of title, akin to saying at some point the sun will rise, but I am not sure when.

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Pension math represents a ticking bomb

For anybody paying even a modicum of attention pension math has been a source of significant debate in the last decade. There are many aspects of pension math worthy of discussion and this recent New York Times article points out many of these issues in light of the Detroit bankruptcy filing and the public sector employee pensions. To put it bluntly, most pensions assume their result.

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