Tag: jason furman
Chamber of Commerce Earns Big Pinocchio Nose For False Claim About Build Back Better

Chamber of Commerce Earns Big Pinocchio Nose For False Claim About Build Back Better

Reprinted with permission from The American Independent

The nation's largest corporate lobby is trying to defeat President Joe Biden's $1.75 trillion climate and caregiving infrastructure plan, arguing it would make inflation even worse.

In a new radio ad released Wednesday, the political arm of the U.S. Chamber of Commerce presses Sen. Kyrsten Sinema (D-AZ) to oppose the Build Back Better plan over inflation concerns.

"Higher gas prices and skyrocketing grocery bills are crippling Arizona families. But we count on Sen. Kyrsten Sinema to be our voice, someone who will stand up for us. Like when it comes to the reconciliation bill that would add to inflation," a narrator claims.

Constituents are urged to call Sinema and tell her to oppose Build Back Better and "stand up for Arizona families." The White House has argued that the bill will help hundreds of thousands of Arizona families by providing more affordable child care, health care, long-term care, and housing.


Last Friday, the lobbying group demanded Congress halt consideration of the package.

"With prices rising 6.8% over the past year, squeezing budgets for families and small businesses alike, it is time for Congress to hit pause on the reconciliation bill and not add any more fuel to the inflationary fire," Neil Bradley, the group's executive vice president and chief policy officer urged. "Rather than 'building back better'– the reconciliation bill will just be bringing back bad inflation."

The lobbying behemoth, which represents many of the nation's largest corporations, does not like the fact that Build Back Better would be partially funded by collecting more in revenue from the nation's largest corporations.

It argues, "The proposed tax increases, including a new corporate minimum tax on book income, a new tax on stock buybacks, and tax increases on U.S. business income earned abroad, will harm the recovery and hamstring America as we work to compete globally, especially with China."

But it has focused much of its public opposition on the idea that inflation is high and the package "will make it worse." In November, the group published a roundup of "non-partisan and center left experts" who have stated Build Back Better would "add to inflation over the next year."

The inflation argument has been a common talking point for Republicans in Congress and their dark-money backers. But the opposite is likely true.

The White House Council of Economic Advisers has argued the plan would be an "antidote" to long-term inflation, increasing economic capacity and offsetting its costs with new revenue or spending cuts.

Nobel Prize-winning economists and major financial ratings agencies have concurred, saying it will likely have a negligible effect on inflation in the short term and could curb it over a longer period of time.

Even many of the economic experts the group cited while warning of inflation have publicly said Build Back Better will not significantly fuel inflation.

Jason Furman, a former Council of Economic Advisers chair, wrote a November 15 Wall Street Journalopinion piece urging passage of Build Back Better to address the economy's "chronic problems"

"Build Back Better would have a minuscule impact on inflation over the medium and long term," he argued. "The potential short-term effects of Build Back Better on inflation are dwarfed by the good it would do."

Former Treasury Secretary Larry Summers, who has been frequently cited by congressional Republicans as an inflation soothsayer, has also endorsed the package.

He wrote in a November Washington Post piece that it "would spend less over 10 years than was spent on stimulus in 2021. Because that spending is offset by revenue increases and because it includes measures such as child care that will increase the economy's capacity, Build Back Better will have only a negligible impact on inflation."

Mark Zandi, chief economist for Moody's Analytics, told Reuters in November that Build Back Better and the now-enacted Infrastructure Investment and Jobs Act "do not add to inflation pressures, as the policies help to lift long-term economic growth via stronger productivity and labor force growth, and thus take the edge off of inflation."

In a Fox Business interview on Wednesday, Zandi said "the inflation we're observing now, the high inflation — that has nothing to do with fiscal policy, that has nothing to do with the Build Back Better agenda." He added that it would lift long-term economic growth by "raising labor force participation, so lowering the cost of work."

The House passed its version of Build Back Better on Nov. 19, despite unanimous GOP opposition. The bill is now pending in the Senate.

A spokesperson for the organization did not immediately respond to an inquiry for this story.

President Joe Biden

US Lost 3 Million Jobs Under Trump, But Already Gained 4 Million With Biden

Reprinted with permission from American Independent

The economy added 943,000 jobs in July, the Bureau of Labor Statistics announced Friday morning, indicating robust growth that helped lower the unemployment rate in yet another sign that the economic damage from the COVID-19 pandemic is abating.

The July jobs report brings the total number of jobs created during the first six months of President Joe Biden's tenure to nearly 4.1 million, according to data from the BLS.

That's more than the 3 million jobs that were lost under former President Donald Trump's watch.

Trump's jobs record made him the only president since 1939 to leave office with fewer people employed than when they started, according to a report from the Washington Post.

This month was the best for job creation since July 2020, when 1.7 million of the more than 22 million jobs lost in the early months of the pandemic came back.

And economists were jubilant about the data and what it means for the recovery.

"I have yet to find a blemish in this jobs report. I've never before seen such a wonderful set of economic data," Jason Furman, an economics professor at Harvard, tweeted. He based his excitement over the report on the fact that there were, "job gains in most sectors," a "big decline in unemployment rate" including for Black and Hispanic populations, a reduction in long-term unemployment, and "solid (nominal) wage gains."

Justin Wolfers, an economics professor at the University of Michigan, also said that the July report is "what a robust jobs report looks like."

But economists also had a word of caution, saying that the COVID-19 pandemic threatens the progress that's been made.

"The single most important factor holding back work is the virus. Not unemployment insurance, not childcare, not government policies. It's the actual virus changing people's behavior," Betsey Stevenson, the former chief economist at the Department of Labor, tweeted. "So if we want the recovery to continue, get yourself vaccinated."

Published with permission of The American Independent Foundation.

Top Obama Advisor Urges Expansion Of Tax Credits To Cut Poverty

Top Obama Advisor Urges Expansion Of Tax Credits To Cut Poverty

When the modern income tax was first instituted in 1913, it was levied on only the top 1 percent of earners, and when the payroll tax was added in 1937, it started at a rate of only 2 percent. As a result, the tax system effectively ignored low-income households. But a steady broadening of the income tax base and increases in payroll taxes meant that, by the late 1960s, the tax system was adding substantially to poverty by requiring payments from households that pushed some of them under the poverty line and pressed others still deeper into poverty.

A series of legislative measures passed since the 1970s has reversed this trend. In 1975, the earned income tax credit (EITC) was created; in 1997, the child tax credit became law. Since their creation, both have been extended, with an expansion included in almost every major tax bill since the mid-1970s. As a result, over the past century we have moved from a tax code that ignored the poor, to one that exacerbated their condition, to the one we have today that directly reduces poverty for households with children, while increasing incentives for work, education, and advancement.

The recent financial crisis dealt a severe blow to American families, wiping out more than $13 trillion in household wealth, causing median household wealth to fall by 39 percent, and forcing eight million people out of their jobs. Without any tax or benefit policies, the poverty rate measured by market incomes alone would have risen by 4.5 percentage points from 2007 to 2010. That amounts to about 14 million more people, including many from the middle class, who would have fallen into poverty, just based on the economy.

Instead, the comprehensive measure of poverty fully reflecting taxes and benefits went up only half a percentage point — about 1.5 million people. While that amount is certainly lamentable, and we should be doing our best to avoid even that outcome, it is a massive difference from the 14 million that would have fallen into poverty absent those policies.

Moreover, this improvement in poverty was the result of a combination of pre-existing policies and important expansions in the American Recovery and Reinvestment Act, which bolstered tax credits such as the EITC and child tax credit, temporarily expanded SNAP benefits, and extended and temporarily expanded unemployment insurance benefits, in addition to giving states incentives to undertake ongoing unemployment insurance reforms. All told, the expansions in 2009 and beyond were responsible for more than 40 percent of the total poverty reduction from tax credits and benefits.

The EITC and partially refundable child tax credit (CTC) have dramatically altered the impact of the tax code on poverty. In 1967, a household at the poverty line paid about 12 percent of its income in federal taxes all told, including payroll taxes. Paying those taxes pushed millions of families below the poverty line, in turn raising the overall poverty rate by 3.2 percentage points. The impact of the tax system on poverty for non-elderly households with children was even more pronounced, raising the poverty rate by 3.9 percentage points largely because, for those households, the poverty line is somewhat higher to reflect the greater needs of larger families.

The tax system today is dramatically different, working not to increase but to reduce the overall poverty rate by 1.3 percentage points in 2012. Instead of exacerbating the poverty rate for families with children, it lowers the rate — by a total of 3.7 percentage points in 2012. But the tax system still taxes low-income childless households, raising their after-tax poverty rate.

Although the changes to the tax system since the 1990s have reduced its contribution to poverty among families with children, it has only been since Democrats insisted that the refundability of the child tax credit be expanded as part of the 2008 stimulus that the tax system stopped increasing overall poverty. In 2009, the Recovery Act further expanded the refundability of the child tax credit and made two critical enhancements to the EITC: reducing the marriage penalty that had dramatically cut down on the credit for some low-income people with children who married; and expanding the tax credit for families with three or more children to reflect both their greater expenses and higher poverty rates. Taken together, the anti-poverty policies under the Recovery Act reduced poverty rates by 2.6 percentage points for families with three or more children and 1.3 percentage points for families with one or two children. The EITC and child tax credit policies first enacted in the Recovery Act now benefit 16 million families a year by an average of $900 per family.

The major changes described thus far apply almost exclusively to households with children. As a result, the federal tax rate for a married couple with two children and with income just at the poverty line has gone from 10 percent in 1967 to -16 percent in 2012. But the tax rate for a married couple with no children at the poverty line has been practically constant, going from 12 percent in 1967 to 11 percent in 2012. The same divergent trends appear among single parents.

Overall, the emphasis on families with children has been appropriate. The tax system used to do more to add to poverty for households with children than for households without. And even with these changes, the poverty rate for non-elderly households with children is still 1.8 percentage points higher than it is for households without children, due to those families’ often higher needs — which is why it would not make sense to expand the childless EITC at the expense of the EITC for households with children.

The president’s proposal would double the childless EITC to be worth up to $1,005 and lower the age threshold from 25 to 21 to help more lower-income young people, while also increasing the upper age limit from 65 to 67 to align with scheduled changes to Social Security’s normal retirement age. The household at the poverty line would see its EITC expand from $170 to $842, more than eliminating its income taxes, although it would still pay net taxes on earnings when including payroll taxes. (Note that these workers would receive returns during retirement through Social Security and Medicare.)

The proposal would benefit more than 15 million people by an average of $430, including lifting about half a million people above the poverty line and reducing poverty for 10 million more. The EITC expansion would be fully paid for by closing loopholes that let some high-income professionals avoid income and payroll taxes, including the carried-interest loophole.

Members of both parties have increasingly advocated expansion of the EITC for childless households. Senator Marco Rubio called for an expanded wage supplement for workers without children. Michael Strain of the American Enterprise Institute has said the program should give “more support to childless workers.” Glenn Hubbard, who chaired the Council of Economic Advisers under President George W. Bush, has written that “increasing the credit for childless workers to an amount closer to that for families with children would augment the direct work incentive and help counter poverty among the working poor.”

These arguments have also received support from other conservatives, including Nobel Prize-winning economist Gary Becker and New York Times columnists David Brooks and Ross Douthat. On the other side of the aisle, Isabel Sawhill and Quentin Karpilow at the Brookings Institution recently proposed an EITC reform that would provide a “significant benefit” to childless single individuals. Likewise, the Center for Budget and Policy Priorities and economist John Karl Scholz have long proposed expanding the childless EITC.

If we are to make significant progress that is economically and politically sustainable, we also need to focus on raising wages and increasing incomes.

This is one key motivation for the president’s support for legislation to raise the minimum wage for all Americans to $10.10 an hour. Doing so in 2016 would raise a family of four with one full-time worker above the poverty line. As the president noted in his 2014 State of the Union address, “Americans overwhelmingly agree that no one who works full-time should ever have to raise a family in poverty.”

The goal of raising market wages and incomes is the motivation for much of the rest of the president’s economic agenda, including investments in education, infrastructure, and research as well as business tax reform and trade agreements and other policies designed to expand economic growth and to ensure that the benefits from growth are widely shared.

In 2064, when we look back on the War on Poverty at its 100th anniversary, if America still faces the same level of “market” poverty we do today, regardless of what further successes we have achieved in reducing poverty through our tax and benefit system, we will have failed as an economy and a society. But this does not mean we should turn our back now on reforming and expanding measures like the childless EITC that boost post-tax incomes. In fact, encouraging work and mobility measures like the EITC are part of the broader strategy to raise pre-tax incomes—and working in tandem these efforts can help achieve a more just and more equal America.

Jason Furman chairs the President’s Council of Economic Advisers.

This piece is adapted from an essay in Democracyissue #32, Spring 2014.

Photo: AgriLife Today via Flickr