It’s Time to Rethink the Charity Deduction

It’s Time to Rethink the Charity Deduction – NOW that Congress has actually managed to enact tax legislation, it may be time to consider some bigger issues. I hope that broad-based tax reform will be high on the list of both major parties.  Any meaningful reform will face intense lobbying from those who stand to lose. The tax deduction for charitable giving is a case in point. Although changes will be fought both by the givers and the receivers of tax-deductible donations, there is good reason to disregard their pleas.  In light of our prolonged economic doldrums, a decision to cut taxes for now is both popular and justifiable. But, eventually, Congress will have to face up to the fact that to deal with the long-run deficit problem we have to raise tax revenue as well as cut spending. Two deductions are likely to be central in any debate on tax reform: those for mortgage interest and for donations to charity. With the housing market still suffering, it is hard to persuade anyone to consider changing the mortgage deduction right now, so I will concentrate on charitable giving.

 13 Products Most Likely To Made By Child Or Forced Labor – There are some 128 goods among the products that most commonly use child labor, according to newly updated data from the U.S. Department of Labor (DOL). The broad definition of exploitive labor by underage workers used by the DOL includes "slavery or practices similar to slavery, the sale or trafficking of children, debt bondage or serfdom; the forcible recruitment of children for use in armed conflict; the commercial sexual exploitation of children; the involvement of children in drug trafficking; and work that is likely to harm children’s health, safety, or morals." The vast majority of the explotiive labor done by children is in agriculture (60 percent), followed by services (26 percent), and industry (7 percent), according to the DOL. But some industries are definitely worse than others.  We sifted through the latest report from the DOL’s "List Of Goods Produced By Child Labor or Forced Labor" to find some of the most common products that are manufactured or harvested using these deplorable practices. We ranked each product by the number of countries that use child or forced labor to produce each good.

Mobile phone masts linked to mysterious spikes in births  Do mobile phone towers make people more likely to procreate? Could it be possible that mobile phone radiation somehow aids fertilisation, or maybe there’s just something romantic about a mobile phone transmitter mast protruding from the landscape? These questions are our natural response to learning that variation in the number of mobile phone masts across the country exactly matches variation in the number of live births. For every extra mobile phone mast in an area, there are 17.6 more babies born above the national average. This was discovered by taking the publicly available data on the number of mobile phone masts in each county across the United Kingdom and then matching it against the live birth data for the same counties. When a regression line is calculated it has a "correlation coefficient" (a measure of how good the match is) of 98.1 out of 100.

Florida Judge Cancels All Foreclosure Sales in His Division Through Year End – Yves Smith  – Per the order below (hat tip Matt Weidner) a judge in Broward County appears to have cancelled all foreclosure sales in one of the foreclosure division from December 20 to December 31: Broward County Judicial Order Canceling Foreclosure Sales. One might think this has something to with the Fannie and Freddie foreclosure halts, with run from December 20 to January 3. But the GSEs’ suspension started right after Thanksgiving and runs through January 3 and it has made similar Thanksgiving to New Years suspensions before, so this seems unlikely to be the trigger.  Moreover, this action, at least based on the account of Florida foreclosure procedures per Lisa Epstein of ForeclosureHamlet, could not impact evictions that were due to take place over the holidays. It turns out that there is usually a significant lapse between the foreclosure sale and the loss of possession.

Are Banks Afraid to Foreclose on the Rich?  – Yves Smith – I got this report from an attorney who is doing work in one of the top five foreclosure states. I’m relying this account in a somewhat sanitized form; he provided far more in the way of specifics.  One of his colleagues has a monthly mortgage payment considerably above $20,000 a month. He has not made a single payment in over 18 months. He has also not received a foreclosure notice or even as much as a call from his servicer. He knows of 20 people personally in his community who have mortgages of over $20,000 a month who have not made a payment in over a year. As with his case, there has not been a peep from the bank about the failure to pay. Some are nevertheless freaked out, concerned that the sheriff will show up any day, and have moved out.  The only theory my contact could come up with is that the high end appliances in these homes would make them particularly attractive targets for stripping, and the banks figure it’s cheaper to keep the nominal homeowner in place rather than pay for security. Another possibility is that the market for $5 million and over homes in this area is so thin (as in non-existant) that they are afraid to take over and put any homes on the market out of concern for revealing where prices are now.

It’s Not the prices, after all? — Uwe Reinhardt’s latest: The difference between the growth in Medicare fees and the growth in Medicare spending is, of course, the growth in the volume of services sold, so to speak, to Medicare.  The chart that accompanies his post shows that Medicare spending has soared, although reimbursement rates for doctors have not. I wonder how he will reconcile this with his most famous article.

Fun with Google NGram Viewer – I’ve been playing around with the Google Labs NGram book viewer, and you can do some pretty big picture stuff with it. I mean really big picture:  As the NYTimes reported, Its a “mammoth database culled from nearly 5.2 million digitized books available to the public for free downloads and online searches, opening a new landscape of possibilities for research and education in the humanities . . . It consists of the 500 billion words contained in books published between 1500 and 2008 in English, French, Spanish, German, Chinese and Russian.” Just punching in a few key terms over the past century yields some pretty interesting results:

Hate as a social demographic – Every democracy I can think of has a meaningful (though usually small) proportion of citizens who fall on the extreme right by any standard: racist, White supremacist, hateful, anti-immigrant, anti-Semitic, anti-Muslim, nativist, nationalist, or violently anti-government individuals and groups. In the United States we have many, many organizations that are basically racist and potentially violent hate groups. A recent report by the Institute for Research and Education on Human Rights (link) provides a detailed snapshot of how some of these racist groups have shown up in the Tea Party movement (link). The NAACP made a very careful statement about racist statements and provocations that had occurred at Tea Party protests in 2009 and 2010 (link), including the egregious incident that occurred in Washington in which Representatives Emanuel Cleaver, John Lewis, and Barney Frank were showered with vitriol. And this temperate and careful statement was derided by Tea Party leaders. The IREHR study goes a long way to document the concerns raised in the NAACP statement. The maps of Tea Party membership are genuinely interesting. Here is an aggregate map including six factions of Tea Party organizations around the country (p. 14):

Interpreting the Beveridge Curve – The Beveridge curve (BC) refers to the relationship between job vacancies and unemployment. There are really two types of BCs: one empirical, and one theoretical. The empirical BC is simply a scatterplot of vacancy and unemployment data. Think of data as the entrails of a gutted animal. The theoretical BC is an interpretation of those entrails, as divined by an economic haruspex.  The empirical BC is usually negatively sloped. Except for when it isn’t. (You know how it is.) The theoretical BC is a very intuitive creature. If some measure of general business conditions improve, especially in terms of economic outlook, businesses will generally want to expand their investments. And this includes investment in the form of replenishments to their labor force. If the labor market is subject to search frictions, the hiring process will take time. But an increase in job openings will generally make it easier for unemployed workers to find a job, so we would expect unemployment to decline as job vacancies rise.   Sometimes, however, the BC appears to "shift" its position (e.g., if the BC looks like a shotgun blast). These apparent shifts are sometimes interpreted to be the consequence of shocks that somehow lead to increased search frictions (let me label these "structural" shocks).

Futures Market Forecast of a Federal Funds Rate Increase Likely to be Appropriate – According to the federal funds futures market, the Fed will begin raising rates s

ometime next year—with with the federal funds rate reaching about ½ percent by December 2011. In fact, rising rates next year has been the implicit forecast of the futures market for the past year—except for the month of October during which many FOMC members were promoting quantitative easing. As this chart of the price of a December 2011 futures contract shows, a year ago the forecast was for a funds rate of over 2 percent next by the end of 2011. (The implicit forecast is obtained by subtracting the price in the chart from 100). Expectations of tightening have been rising again since the start of November, though thus far by a small amount. This forecast is consistent with the Taylor rule and most recent forecasts for GDP growth and inflation. In fact, in my view it understates the interest rate that is likely to be appropriate by next December.  Most recent data (through the 3rd quarter) show that the inflation rate is about 1.2 percent (GDP deflator over the last four quarters) and the GDP gap is about 4.8 percent (average of San Francisco Fed survey). This implies an interest rate of 1.5 X1.2 + .5X(-4.8) + 1 = 1.8+ -2.4 +1 = .4 percent which is close to where we are now. But most likely GDP growth will turn out to be above potential growth in the 4th quarter bringing the gap down (Macro Advisers are projecting 3 percent with potential at 2.25 percent and JP Morgan is projecting 3.5 percent). Inflation is also very like to rise by this measure. For these reasons an increase in the federal funds rate next year is consistent with the Taylor rule.

Posted by John B. Taylor at 5:42 PM
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