U.S. Budget and Economy

As shown at the end of my last post , Example 4 released by the House Ways and Means Committee gives a tax increase if the wages are reduced to $45,000. This reveals an important point. It isn't just taxpayers who lose their deduction for medical or state and local taxes who can end up paying more in taxes. That appears to also occur for lower-wage workers who have no children but already have as many itemized deductions as the new standard deductions, even when they can still take those deductions. The following tables and plots show the change in taxes for such taxpayers, single and married, under the House and Senate tax bills. They were generated by selecting Examples A and B in the interactive application at this link . Example A - Single Person Making $25,000 Per Year with $12,000 in Deductions Example B - Married Couple Making $50,000 Per Year with $24,000 in Deductions House Senate ...

On November 2, a press release from the office of Speaker Paul Ryan announced the introduction of the Tax Cuts and Jobs Act. It begins as follows: Today, House Speaker Paul Ryan (R-WI), Ways and Means Committee Chairman Kevin Brady (R-TX), and other members of House leadership and the Ways and Means Committee introduced the Tax Cuts and Jobs Act—bold legislation to overhaul America’s tax code for the first time in 31 years. With this bill, a typical middle-income family of four, earning $59,000 (the median household income), will receive a $1,182 tax cut. At the end of the release is a link to descriptions of this and several other examples of how the proposed tax cuts would save money for various types of taxpayers. I've created an R Shiny application which can interactively show the tax savings for the first four examples and other variations. That application can be accessed at this link . Selecting "Example 1" in the "Tax Examples" select list causes...

On April 5, it was reported that the Federal Reserve wants to start unwinding the $4.5 trillion in bonds on its balance sheet this year. This revelation came from a summary of the Federal Open Market Committee meeting held in March. The composition of the Fed's balance sheet can be seen in the following chart: Note: In the following charts, click on the chart to see its data and sources. As can be seen from the purple area in the chart, about 2.5 of the 4.5 trillion in assets are Treasuries. Also visible is that these levels have remained stable since the end of 2014, when QE3 ended. In any event, there has been much discussion on what will happen when the Fed starts selling its Treasuries. More specifically, who will step in and buy the Treasuries that the Fed is selling plus any additional debt being created? To judge this, it helps to look at how the holders of Treasuries have changed over time. The following chart shows the holders of Treasury securities since...

In an interview with the Wall Street Journal published on Wednesday, April 12th, President Trump said "I do like a low-interest rate policy, I must be honest with you" . This view has reportedly changed over time with Trump saying that "Janet Yellen should have raised the rates" on November 3, 2015. In any event, it seems worth looking into why Trump may be supportive of a low-interest rate policy now. This blog post lists winners and losers from low interest rates in the United Kingdom. The third item listed under winners is government debt payments and the first chart shows that bond yields are declining but then states the following: This fall in bond yields is occurring, despite a rise in government debt to GDP, and a persistent budget deficit. It is important for limiting the percentage of tax revenue spent on debt interest payments. This same statement could be made about the United States. The following chart shows various treasury interest rates si...

On December 17th, the Washington Business Journal posted an article titled "D.C. far outpaces nation in personal earnings" . It began: D.C. residents are enjoying a personal income boom. The District’s total personal income in 2012 was $47.28 billion, or $74,733 for each of its 632,323 residents, according to the Office of the Chief Financial Officer’s Economic and Revenue Trends report for November. The U.S. average per capita personal income was $43,725. The highest of the 50 states, Connecticut, fell 25 percent short of D.C. The article concludes: The numbers suggest D.C. residents are living the high life. Some are, but, of course, it’s not that simple. Poverty is entrenched in many D.C. neighborhoods, especially east of the Anacostia River, where earnings are virtually nonexistent and the need for social services is dire. But as long as the District is booming on a per capita basis, the money should be available to help. As it turns out, the $74,733 and $43,725 fi...

January 31st marked the end of Ben Bernanke's 8-year tenure as Federal Reserve Chairman. An article titled "Bernanke Leaves Fed with Record Balance Sheet of $4,102,138,000,000" gives a short history of the actions of the Fed and growth in the Fed Balance Sheet during that time. Following is a short summary of the actions taken from there and Wikipedia : DATES AND DESCRIPTIONS OF FEDERAL RESERVE ACTIONS Program Start End Securities purchased ------- -------- -------- -------------------- QE1 Dec 2008 Mar 2010 agency mortgage-backed securities (MBS) and agency debt, up to $600 billion total Mar 2009 Mar 2010 expanded to $1.25 trillion in MBS, $175 billion in agency debt, and $300 billion in treasuries QE2 Nov 2010 Jun 2011 longer dated treasuries, at a rate of $75 billion per month for a total of $600 billion Twixt Sep 2011 Dec 2012 longer dated treasuries with funds from selling shorter dated treasuries, total of $400 billio...

Do Publications Have Any Responsibility to Screen Their Editorials? (Part 4) At the end of my last post , I said that it would be interesting to see if the Wall Street Journal finally corrects the online version of Brett Stephens's column, "Obama's Envy Problem" . As it happens, they have finally done so. I first noticed it when I rechecked the site after my last post late on January 20th. According to a blog post by Paul Krugman titled "Department of Corrections, and Not" , the column was still uncorrected when he checked it a few minutes before his posting at 1:40 PM on January 20th. Hence, the Journal may have corrected it shortly after that. I may have initially missed it because they posted the correction at the end of the column. The correction reads as follows: Corrections & Amplifications Inflation-adjusted income data from the U.S. Census Bureau show that incomes declined by 2.6% for the bottom quintile between 1979 and 2012, increase...