Too Many Smart People Are Being Too Dismissive of Inflation

Link: https://www.nytimes.com/2021/03/05/opinion/fed-inflation-markets.html

Excerpt:

That assistance should also be more concentrated on where the need exists. According to Bloomberg, California’s revenues for this fiscal year are roughly 10 percent greater than expected (partly a result of soaring technology company valuations), while general-fund revenue in New York is estimated to be 11.7 percent lower than prepandemic forecasts.

And we should take a fine-toothed comb to lesser-known wasteful provisions, like giveaways to the airlines and an indirect bailout (added by the House) of multiemployer pension funds. Some of the money that we save by trimming the American Rescue Plan Act can be reallocated to one of our most pressing needs: infrastructure. Those funds get spent more slowly (and because of that put less immediate pressure on prices) and have the critical effect of helping to improve our unimpressive productivity growth rate.

Wasting precious dollars that could be better spent can’t possibly be worth the risk of igniting high inflation again.

Author(s): Steven Rattner

Publication Date: 5 March 2021

Publication Site: New York Times

Senate passes $1.9 trillion Covid relief bill, including $1,400 stimulus checks, with no Republican support

Link: https://www.nbcnews.com/politics/congress/senate-passes-1-9-trillion-covid-relief-bill-including-1-n1259795

Excerpt:

The Senate passed a $1.9 trillion coronavirus relief package Saturday, capping off a marathon overnight session after Democrats resolved internal clashes that threatened to derail President Joe Biden’s top legislative priority.

The far-reaching legislation includes $1,400 stimulus checks, $300-per-week jobless benefits through the summer, a child allowance of up to $3,600 for one year, $350 billion for state aid, $34 billion to expand Affordable Care Act subsidies and $14 billion for vaccine distribution.

The final vote was 50-49 along party lines, with every Republican voting “no.” It came after Democrats voted down a swath of Republican amendments on repeated votes of 50-49 to avoid disrupting the delicate agreement between progressive and moderate senators.

Author(s): Sahil Kapur

Publication Date: 6 March 2021

Publication Site: NBC News

Covid Baby Bust Has Governments Rattled

Graphic:

Excerpt:

Of course, there’s a case to be made that fewer people in advanced economies is a good thing. But arrayed against that are all the “because groaf” forces. The two drivers of growth are demographic growth, as in more people, and productivity increases. National leaders are afraid of becoming the new Japan, having an aging population and falling in the “size of economy” pecking order, when Japan has weathered a financial system crisis and implosion of real estate prices with remarkable grace. And the demographic time bomb? The feared dependency ratio? More older Japanese work. Japanese even more so than Westerners prize attachment to communities and organizations, so it would probably suit those who are able to handle it to remain in the saddle or get a part-time job.

But the big point is that the Covid impact on child-bearing is widespread and looks set to continue for quite a while. The old solution in advanced economies for low birth rates was immigration. But that’s now become fraught. First is that neoliberalism-induced widening income disparity means those on the bottom are extremely insecure. Bringing more people in to them sure looks like a mechanism for keeping their crappy wages down. Second is advanced economies now eschew assimilation as if it were racist. But what did you expect, say, when Germany brought in Syrian refugees, who skewed male and young, and didn’t even arrange to teach them German? The notion that there’s a public sphere, where citizens hew to national norms versus a private sphere seems to have been lost (having said that, I don’t understand the fuss about headscarves; Grace Kelly wore them, so why should a religious intent matter?).

Author(s): Yves Smith

Publication Date: 5 March 2021

Publication Site: naked capitalism

Municipal Bond Outlook: Recovering at Different Speeds

Link: https://www.pimco.com/en-us/insights/investment-strategies/featured-solutions/municipal-bond-outlook-recovering-at-different-speeds/

Graphic:

Excerpt:

In 2021, the composition of municipal supply could be a key swing factor for high quality muni performance. Last year, taxable muni supply hit an all-time record of $181 billion, due in no small part to the elimination of tax-exempt advance refundings in the 2017 Tax Cuts and Jobs Act (TCJA). The shrinking supply of tax exempts has provided a tailwind to muni market performance, particularly for high quality tax-exempt munis, which have enjoyed a full recovery to pre-pandemic levels.

Author(s): David Hammer

Publication Date: 19 February 2021

Publication Site: PIMCO

TRUST? ILLINOIS STILL REFUSES TO PAY ITS PENSION BILL.

Excerpt:

Only the statutory contribution is not what the state owes to meet its obligation and prevent more debt. “Statutory” should be translated as the legislature made up a number and blew it out their collective butts.

The actuarial amount owed, the amount actually needed to keep from growing the liability is several billion more that the statutory amount.

They short the pension system every year, after year, after year, after year. And this year again.

Not exactly a trust-building thing, right?

Author(s): Fred Klonsky

Publication Date: 28 February 2021

Publication Site: Fred Klonsky

Combined State and Federal Corporate Income Tax Rates in 2021

Graphic:

Excerpt:

Corporations in the United States pay federal corporate income taxes levied at a 21 percent rate. Many states also levy taxes on corporate income. Forty-four states and D.C. have corporate income taxes on the books, with top rates ranging from North Carolina’s single rate of 2.5 percent to a top marginal rate of 11.5 percent in New Jersey. Fourteen states levy graduated corporate income tax rates, while the remaining 30 states levy a flat rate on corporate income.

In Nevada, Ohio, Texas, and Washington, corporations are subject to gross receipts taxes in lieu of corporate income taxes. Delaware and Oregon impose a tax on corporate income and a separate levy on gross receipts.

Author(s): Garrett Watson

Publication Date: 3 March 2021

Publication Site: Tax Foundation

MoneyPalooza Monstrosity — The Return: Multiemployer Bailout

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-the-return

Graphic:

Excerpt:

Now, you can say that they are just about to add $2 trillion to the federal debt, so what’s $2 trillion more? (and yes, people will be saying that – we shall see how much that money printer can go BRRRRRR)

In my own opinion, the standard measures for DB pension shortfalls greatly underestimate the cash flows needed, given this time of extremely low interest rates. But still, let’s pretend.

The public pension bailout would be at least 20 times the amount of a MEP bailout. Just because you bailout a set of pensions that would have pulled down a federal guarantee fund (the PBGC) does not mean you’re going to bailout other pensions that are much bigger and that you never guaranteed in the first place.

Author(s): Mary Pat Campbell

Publication Date: 3 March 2021

Publication Site: STUMP on Substack

The ‘COVID Relief Bill’ Is Mostly an Expensive Bundle of Politically Motivated Giveaways

Excerpt:

A sizable portion, about $500 billion, is a bailout of state and local governments that for the most part do not need one. While state tax revenues took a small hit from the pandemic and associated economic lockdowns, the damage is far smaller than was once feared. States should handle their own finances.

But it’s not just a bailout; it’s a bailout in which the funding is allocated based on the size of each state’s unemployed population. In other words, states that imposed draconian and unnecessary economic lockdowns during the past year are going to get a larger share of the federal cash than states that managed to balance public health needs and the economy—an arrangement that New Hampshire Gov. Chris Sununu rightly calls “outrageous.”

Author(s): Eric Boehm

Publication Date: 3 March 2021

Publication Site: Reason

$350 Billion Covid “Bailout” To States, Cities, And Counties – Here’s What You Need To Know

Link: https://www.forbes.com/sites/adamandrzejewski/2021/03/03/350-billion-covid-bailout-to-states-cities-and-counties–here-are-the-details/?sh=626de35e661c

Graphic:

Excerpt:

This week, the U.S. House passed, along party lines, the $1.9 trillion American Rescue Plan Act of 2021. A vote in the U.S. Senate is expected soon.

Buried within the 591-page bill is a $350 billion bailout for 50 states, tribal governments, U.S. territories, and more than 30,000 cities and counties.

Our auditors at OpenTheBooks.com finally located the $350 billion allocation, line-by-line, in a supplemental database hidden on the back end of the House Oversight Committee’s website.

Map Link: https://www.openthebooks.com/maps/?Map=90043&MapType=Pin

Author(s): Adam Andrzejewski

Publication Date: 3 March 2021

Publication Site: Forbes

Economy: Inflation Concerns Are Growing

Link: https://cgfa.ilga.gov/Upload/0221revenue.pdf

Excerpt:

It has been over a year since the COVID-19
recession began in February of 2020. After going
through a brutal loss of 31.4% in the second quarter
and an immediate, rapid rebound of 33.4% in the
third quarter last year, the economy appears headed
for a recovery. Overall, the U.S. economy shrank by
3.5% in 2020, compared to 2019. This was the worst
growth since one year after World War II. In
January, personal income rose 10% and consumer
spending jumped by 2.4%, the biggest increase since
June of 2020, both of which mostly resulted from the
COVID-19 relief payments by Congress. Housing
markets are still robust, partly supported by low
mortgage rates.
However, the employment report in January showed
weaker-than-expected data. The unemployment rate
fell to 6.3% from 6.7% mostly due to a decrease in
the labor force (i.e. people gave up looking for jobs).
The economy gained 49,000 jobs, which was lower
than expected. Inflation, currently at 1.5%, is
persistently below the Fed’s average goal of 2%.
Having said that, the outlook on the U.S. economy
has improved as daily COVID-19 infection cases are
falling and more dosages of the vaccines are being
administered. In addition, $1.9 trillion is ready to be
pumped into the economy once a third COVID-19

relief bill passes Congress. However, the recovery
rate will not be as fast as the rate seen in the third
quarter of the previous year.

Author(s): Julie Bae

Publication Date: February 2021

Publication Site: Illinois Commission on Government Forecasting and Accountability

State budget shaping up as embarrassment of riches—for now

Excerpt:

Governor Cuomo’s Division of the Budget (DOB) and the Legislature’s fiscal committees have agreed to boost New York State’s revenue projection for fiscal years 2021 and 2022 by $2.45 billion—the latest in a series of upward adjustments that have dramatically improved Albany’s short-term outlook, even as sexual harassment allegations against the governor will complicate negotiations towards a new budget for the fiscal year beginning April 1.

The Consensus Revenue and Economic Forecast issued late last night by DOB splits the difference between the governor’s budget agency, which wasn’t budging from its already improved 30-day amended financial plan outlook, and a very optimistic projection from the Assembly Ways and Means Committee staff, which forecast $5 billion more in revenue through FY 2022. The Senate Finance Committee staff estimate came in a total $3.4 billion higher than the governor’s latest number.

Author(s): E.J. McMahon

Publication Date: 2 March 2021

Publication Site: Empire Center for Public Policy

Our View: Federal stimulus checks should not increase state taxes

Link: https://www.bluemountaineagle.com/coronavirus/our-view-federal-stimulus-checks-should-not-increase-state-taxes/article_5efb3986-7ae2-11eb-9c94-e30cd7275f13.html

Excerpt:

The federal stimulus checks helped a lot of Oregonians out when they needed it. And it is also going to help out Oregon government — about $100 million in federal stimulus payments is going to wind up in the state treasury.

The federal government is not taxing the stimulus payments. In Oregon, they are not taxed as income, either. But the payments can impact the federal tax calculations used on your Oregon income tax. And so the stimulus payment may mean you owe state tax on more of your income and wind up paying more taxes or get a reduced refund.

Does that sound right to you? The stimulus checks sure seemed to be aimed at helping individuals, not helping state government.

Author(s): Editorial board

Publication Date: 2 March 2021

Publication Site: Blue Mountain Eagle