Historical GDP Growth v Top Marginal Tax Rates

How about this chart?

Should we raise the top marginal tax rate?

Is there a positive correlation between the top marginal tax rate and GDP growth? Cursory analysis says yes.

Also note that for over 60 non-consecutive years (70 years with an 8 year gap in the middle), the top marginal tax rate was over 50%.

Bailout money, underwear, and good news.

Banks are paying back bailout money, with interest. Sounds like it was a pretty good deal!

Another strange economic indicator: underwear. The worse times are (and, presumably, the less money you have), the more willing you are to wear tattered underclothing. Who's gonna see? Also, people attempt to cut their own hair (with hilarious results).

Some regions are seeing potential growth! Seems a little early to be sure, though. Building contracts are up in the Houston area.

There is now increased productivity. Not a surprise, really. When firms lay people off or slow hiring (as they have been doing), they presumably hold on to more productive people in order to achieve this very effect--higher productivity at proportionally lower costs. This goes hand-in-hand with higher profits, which leads to all sorts of benefits in the economy. Yet another sign that we're in recovery mode.

Healthcare, good income news, good recession news, and blips.

Chris Dillow looks at the relationship between health care spending as a percentage of GDP and life expectancy. It's not the whole story, of course, but it does start an interesting discussion.

Real average hourly earnings is up a lot. Presumably, firms are holding on to qualified workers. We'll see how this measure holds out against the unemployment rate.

The chances of positive GDP growth are up! According to a Philly Fed survey. It's been a long recession.

Capacity utilization has a small up-blip, and industrial production is up. This, honestly, doesn't tell us much. If it continues up, that's a good sign, but this increase is probably too small to indicate anything.

Venezuela, China, and land grabbing

Venezuela's inflation (still) isn't doing so hot. No surprises there, right?

Though, China's doing well! (again, still) A lot of countries seem to want to piggy-back on China's growth. Still, no surprises. Investing in China yields better returns than investing in a country with negative growth.

Since bubbles have popped, investors are buying up land in developing countries. Housing isn't bringing in money anymore, so commodities and land is where the money is going. ... So, what happens to the developing countries when this new bubble pops?

Finance, Scrabble, and productivity

Free Exchange challenges a Dean Baker statement in which Baker essentially claims that the current economic situation is due more in part to the housing bubble rather than the financial sector. Free Exchange points out that the two are tied together. In that vein, Mark Thoma quotes Krugman as saying that we need to get rid of so-called shadow banking.

On a lighter note, Jeff Ely applies auctions to Scrabble with interesting results.

Robert Waldeman hypothesizes that, in the 90s and naughts, the productivity increases were due to downsizing. It's an interesting idea--and quite possibly some of the story--but I think that, at best, it works in tandem with the standard theory. Who ever said that there could only be one reason for productivity increases in the 90s?

Graphs, Krugman/DeLong, inflation, and psychology

The recession in graphs. Felix Salmon points us to a bunch of graphs comparing the current recession to previous recessions. It's nice to see all of these together.

Krugman thinks about some notes from DeLong. I think they're interesting reads, though a bit rough.

The Fed is not concerned about falling inflation due to too much slack in production. This seems like a very AD/AS argument, and one that supports the idea of a prolonged recovery. I wonder what they think about the possibility of dipping into another recession.

There's an argument for psychology to be as accurate a science as medicine. I can't say I'm surprised, though I think psychology gets a bad rap. The story here is that psychological correlation coefficients were considered weak, when values of .3 were given, when this is actually a stronger value than "good" values in medical experimentation.

Hurricane claims, grocery stores, inventive cities, recession news, and Venezuela

2008 hurricane claims put Texas home insurance companies in the red. Ouch. Hurricanes continue to affect us. I guess whoever designed the hurricane insurance plans didn't know how much risk was actually involved, or those insurance companies didn't properly prepare themselves for such a situation.

Grocery stores are doing well during the recession.

Houston is one of the world's most inventive cities. We're pretty creative people! I don't think a lot of people believe this, though.

Productivity and labor costs are up. You might expect this from a recession, as companies try to focus on efficiency to weather the rough times.

Venezuela is seizing the assets of more oil service companies. I would have ended my operations there some time ago.

Excess demand for money, manufacturing news, grid parity, and Austrian BC theory

Nick Rowe on the importance of excess demand for money. This directly relates to what the Fed has been doing for quite some time to help the current crisis. Nick has had a lot of really good posts lately, it seems to me.

Mark Perry had optimistic news on the manufacturing front. It seems like these numbers will return to normal pretty soon, which makes me think that more focus will turn towards worsening labor numbers. Though, we're only six months or so away from the peak. Six months seems like a relatively short amount of time considering how long this had dragged out already.

John Quiggin reports that some solar power companies may be approaching grid parity, or the point where solar power is as cheap as conventional power.

Another good post from John Quiggin, he talks a little about the history of the Austrian Business Cycle, and why it isn't really taken seriously anymore by more empirical-minded economists.

Fuel efficiency, forecasts, gendered lob losses, April economic summary, and GDP growth rates

Fuel efficiency raises demand, not lower it. Efficiency lowers cost, which raises demand in the long run. I keep thinking that the short run effect should be modeled as a rise in supply, but the narrative doesn't quite fit.

Simeon Djankov says not to pay attention to the forecasts. They lag behind the news, and are thusly not worth much.

Job losses for different genders. Men have lost many more jobs than women, net. Women seem to have more recessioon-proof jobs.

April economic summary in graphs. It seems to me that most of them tell a similar story.

GDP growth rates for beginners. This is really a well-written and easy to understand post, I think.

Sumner, World Bank, global recession, GDP, the auto industry, and education.

Scott Sumner with an excellent post covering macroeconomics, democrats being called socialists, soaps promoting liberal values, and Tyler Cowen. As is normal on Sumner's blog, the post is quite long, but he makes a lot of great points. Of course, I don't agree with him on the causes of the current recession, I take a more moderate view, I think.

Geo, a map of World Bank development projects. There are some very good, interesting maps there, if you're interested in international aid.

The St. Louis Fed releases some data on how the US is faring compared to other countries.

Even though Wednesday's GDP report was pretty bad, there are some silver linings. For example, the part of GDP that did the worst was the lagging indicators--the leading indicators weren't quite so bad. So, a turnaround may be in sight.

An interesting discussion: does America need the auto industry? Some pretty smart people take a stab at the question. Another NYT "debate" on education reform.

Tea parties, retail sales, and more on the macro ranting.

Bruce Barlett, a former Regean official, points out some of the problems with the logic behind recent tea parties. I somehow think any such attempt to use logic will fall on deaf ears, but the tea parties seem rather silly to me. (part one)

Economix is still on the case of retail sales. We've seen a bigger decline than in the past. I'm going to predict that the trend line will stay below 100, as people try to save more, rely on credit less, and spend less. Dave Altig at the Atlanta Fed doesn't think there's anything so historically odd, though.

Menzie Chinn provides another excellent post, this time on the role of financial systems in macroeconomic models. Kling isn't convinced that macroeconomists have good models, and he's at least partially right, since all models require some degree of simplification. I think it's a field that will continue to get a lot of attention. In a not-totally-unrelated light, Dani Rodrik provides an interesting comment on the field of economics. Still on forecasting, Simon Johnsons provides his forecast of forecats. Nicholas Bloom at Stanford says that the response to the financial crisis was effective in avoiding a severe recession, and that growth will resume at the end of this year. I wonder how much of an effect the "response to the financial crisis" really had.

Tax on soda, fat, PUMA, broadband, solar power, and recession news.

A study shows that a tax on "sugary soft drinks" will result in health benefits regardless of how the tax revenue is used. $1.2 billion could be raised in tax revenue in New York alone, but I wonder how it'd impact the economy as a whole--I imagine the soft drink industry and the medical care industry would each take a hit.

A reduction of "brown fat" could make you more resistant to gaining weight and developing diabetes. Apparently, brown fat is what works to keep you warm when it's cold out.

The PUMA, a two-seater Segway, makes short commutes to work more feasible. During the modernization of Europe, people lived in smaller-sized communities as technology increased. I wonder if that'll happen again. Towers keep getting bigger and bigger, and land becomes more and more precious. In a similar vein, the FCC's $7.2 billion plan to expand broadband can serve to pick up the speed of commerce, and expand markets.

Here's a solar-powered city planned for Florida.

Jobless claims fell more than expected, and many retailers report disappointing sales numbers. Things aren't looking good yet.

News that doesn't get out as much, I think.

BW Senior Economist Michael Mandel reports that real college grad wages are down a whopping 5.5% Ouch! That's a figure we generally don't want falling, because we want to give incentive for people to pursue college degrees. I think we should expect that figure to rebound over the next few years.

And, while new home sales are down (IHT), it's actually higher than expected (Bloomberg). Bloomberg also reports that durable goods orders are up, consumer confidence is up, and moderate growth is expected.

Factory Output and Unemployment

Bloomberg reports that factory output rose in June. What does this tell us?

Well, nothing we didn't already know, I think. Take a look at Capacity Utilization. Looks like it's been falling, until a recent jump up. We don't know if there'll be a change in trend back upward, but I find it interesting how different indeces are tied together.

Look at capacity utilization over the past three years (you'll have to click on 'Charts' then '3-year'), and you'll see the rise in capacity utilization, before its downward descent. It shouldn't surprise you to hear that there's probably a negative relationship between capacity utilization and the unemployment rate (or, perhaps, a positive relationship between capacity utilization and the employment rate).

Capacity utilization measures the percentage of factories in use, but it takes people to work those factories. With constant technology (or, in the short term), a decrease in physical capital will likely lead to a decrease in human capital. For a given technology level, there's a particular ratio of physical-to-human capital, so a decrease in one form of capital will mean a decrease in the other form of capital, in order to keep the ratio constant. A rise in utilized physical capital--as the Bloomberg article reports--might portend a drop in the unemployment rate, or at least provides downward pressure on the unemployment rate.

"Downward pressure" just means that there will either be a drop in unemployment or less of a jump in unemployment, all other things equal.

On the other hand, the report may not be indicative of a trend. Capacity utilization has been dropping this year, and unemployment has been rising. Unemployment continued to rise in June, which suggests that capacity utilization will continue to drop.

Bottom line is this: if the report is actually the start of a trend, we'll see the unemployment rate start to drop. If no, the unemployment rate will continue to rise.

Side note: interesting 2002 article on the savings rate.