Tax Burden is Slowing Economy...
 

...according to the Federal Reserve Bank of San Francisco.

http://www.frbsf.org/publications/ec...el2013-16.html

"Surprisingly, despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag. The excess fiscal drag on the horizon comes almost entirely from rising taxes. Specifically, we calculate that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy."

"However, CBO projections and our estimate based on the countercyclical history of fiscal policy suggest that federal budget trends will weigh on growth much more severely over the next three years. The federal deficit is projected to decline faster than normal over the next three years, largely because tax revenue is projected to rise faster than usual."

So, the sequester is not impeding growth, but the increase in tax burden is. Self evident to some, but I'm glad the Fed has finally figured it out.

They're making an argument against austerity in these economic times. The second sentence in the highlighted top section says of Federal fiscal policy:

"(O)ver the past 2½ years it has become unusually contractionary as a result of several deficit reduction measures passed by Congress."

Their criticism is of the GOP's backassward fiscal policy in tough economic times.

Yeah, maybe so. (Burps and scratches buttocks.)

Dave

Whell.

Sigh.

As if our neck of the woods needs more growth. Detroit already has drug stores with empty asphalt parking lots the size of football fields. They retain more heat than bacon and contribute to global warming.

How much growth is enough?

You really should dig into the history of the banks that comprise the Federal Reserve, make your hair curl.

You're cherry-picking sentences but ignoring the articles conclusion.

Populating strip-malls with small retail operations that sell low-cost goods or services is a low risk venture in lean economic times, which is why that's most of the "growth" that you're seeing. If there was some belief that the economic environment would sustain investment in capital and manpower sufficient to expand manufacturing, then we'd see more of that, and less of the CVS and Rite-Aid's.

Remember when we used to refer to economic contraction as "negative growth"?

For some reason that always made me think of Orwell.

Dave

I thought that was your forte, Mike.:D

I must admit that my perspective is rather limited. When I moved out on my own in the early 1990s I bought an older home in the country north of the Detroit metro area. After that I saw the sprawl go crazy through the northern countryside, such as Auburn Hills, Clarkston, Lake Orion, etc. It wasn't long after that that the economy collapsed and now many of the strip malls are half empty. One of the newer ones in Clarkston already has its anchor grocery store replaced with a Salvation Army. It was sad to see and IMO indicative of a structural problem such as unmitigated growth.

IMO economic growth is OK but it needs to be done smarter. For example the Detroit area has a big empty donut hole that needs to be refilled. When I see all the traffic commuting between the new McMansions and the new Tech Alley in northern Auburn Hills, along with the numerous landfills in the same region, it just makes me sad at how wasteful we are with regard to burning gas and green space.

We need to do better around here.

The economic model has changed dramatically; we are no longer a manufacturing power.

A layman's view; our rate of recover might have been more robust if our model was different.

We are employing old methods on new systems and expect historical results.

Agreed.

Whenever I hear the word "growth" without some more explanation all I can visualize is that we are supposed to go out and buy bigger McMansions and more TVs. Or get fatter.

It's silly.

We need a different model, or in more simple terms, a different way of life. We've raced to the bottom and now it's time to race in another direction. Preferably not sideways.