The Press and the Budget Deficit
Submitted by
CalculatedRisk on Tue, 07/11/2006 - 2:24pm (12 comments)
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surprisingly accurate coverage: it makes me wonder whether the press criticism by the likes of prof delong, dean baker, and yourself is getting a hearing....
taxes from salaried employees increase by 8%!!
what better source to show income growth than payroll taxes withheld?
to me this is huge. if sustained (anyone else know the trend?), this could really explain housing prices as well as the fed's fear of inflation.
even in this same article the WaPo says or quotes someone that says wages arent rising.
just how would the taxes have gone up then? especially in the face of 'tax cuts'??
howard, I see Delong didn't like the WaPo coverage: Newspaper vs. Birdcage Liner
Of course I just skipped over the lead portion of the WaPo story - and Delong featured it.
The best portion of the WaPo story is the bleak fiscal future - acknowledged by everyone - in large part due to Bush policy (tax cuts, spending and Medicare Part D), although not everyone agrees to the cause.
Best Wishes.
dc1000, I think both are true. First real median wages (adjusted for inflation) have declined over the last year, but nominal median wages are up 3+%. When they talk about increases in tax revenue that is in nominal terms.
Then the article says there has been an increase of "8 percent for taxes withheld from the paychecks of salaried employees" versus the comparable period for last year.
Both could be true if median wages are up close to 3+% (nominal terms) - and high end wages are up substantially more.
Then real wages would be down (they are) and taxes on wages up 8% (nominal) - they are.
Its all in what is being presented. As far as homes, it's really the nominal wage that matters (not the real wage). Also it's not the median wage, but probably the 30th or 40th percentile wage (middle income of homebuyers).
Best Regards.
i understand that CR, thanks. what i meant is that what really matters is that upper professional class in driving the economy, filling the tax coffers, and buying houses.
but then again, what percentage of earners are salaried? and then what percentage of total income do they earn?
to me, if everyone who earns a salary effectively got an 8% raise, doesnt that mean inflation could be an issue?
i've always been watching for the wage/price spiral before i got nervous about inflation - and wages just werent rising...but is it time to get nervous?
I prefer the General Fund deficit reporting too. See my post on the Soc. Sec. issue - and I was driving home, NPR was telling us how the deficit will rise when baby boomers retire. The unified deficit maybe but that's only because it dishonestly credits the Trust Fund surpluses to the rest of the very bankrupt Federal finances.
CR, as i noted on prof delong's site, the wapo article was better than the nytimes article, but i agree that the lead could have been more...accurate.
dc1000, what i believe to be the generally understood assumption is that 20% are salaried, 80% hourly; one of the BLS series tracks the hourly wage only.
if everyone got an 8% increase tomorrow, we'd either see the stock market tank (because profits would be hurt), the bond market tank (out of fear of wage-driven inflation), or both. because we haven't seen either, you can feel highly confident that most people haven't gotten an 8% increase, even nominal, much less real, and they'll be happy to tell you! that's why bush's economic approval numbers are lower than the gop expects with gop growth doing reasonably well.
(btw, dc1000, what i worry about is stagflation lite: slightly increasing inflation leads to increasing long rates leads to economic slowdown but supporting a stronger dollar so that we don't get a nice kick in the terms of trade and therefore most households just keep scufflin' by.)
er, that's lower than the gop expects with gdp growth doing reasonably well.
Off subject, but important:
CR,
Kindly take a moment and compare these two releases from the Fed Reserve.
Monday's release:
Household Debt Service and Financial Obligations Ratios
Previous release, as captured by Google on 26 June 2006:
cache:AMlQpGUscGQJ:www.federalreserve.gov/releases/housedebt/ Consumer debt - Google Search
If you pull them to your screen side-by-side, you will see vast differences that extend back many, many quarters.
I posted info from the previous release last week at Setser's. Needless to say, I was a bit stunned today when I reviewed the new release.
I can understand some minor adjustments for the past quarter, but I do not grasp what is happening when the Fed Reserve makes this many adjustments in "updating" a new release.
What makes this particular interesting is that this Fed summary information doesn't have a historical file that you can pull in order to make comparisons. If it had not been for the Google capture, I would have had no way to explain why the data I posted last week changed so markedly with the update release.
Were you aware of changes of this magnitude extending back many quarters?
What is happening with this data?
As Stormy pointed out over at Angry Bear, some of the changes extend back to 1988.
I've studied the background info on the surveys. Nothing explains the jumps in data presentation that I noted.
What's up?
I agree with MG - whatsup with that?
Buried in the numbers is the sad fact that any slowing of current fiscal gap (negligible as that is) is that it has been accomplished in part with the most regressive federal tax extant: PR taxes that are levied on the first dollar earned by the poor and middle class, but capped for the wealthiest.
This, coupled with low foreign wages, has limited the bargaining power and thus the earnings of the less fortunate here. And if productivity data can be believed, this is the larger force keeping CPI as low as it has been (though probably just shy of double the reported rate.)
CR,
I don't recall having seen you ever appear to avoid any questions at AB or CR previously.
The question was reasonable, as were some others that posters asked you over at AB.
Is there a problem that I am not aware of regarding this question?
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