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What’s the Output Gap? – 2023 Edition

One argument for maintaining tight monetary policy is inflationary pressures — but the question is whether it’s from a positive output gap or cost-push…

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One argument for maintaining tight monetary policy is inflationary pressures — but the question is whether it’s from a positive output gap or cost-push shocks (or expectations). One big question is what is the size of the output gap.

Figure 1: GDP (bold black), SPF median August forecast (tan), GDO (blue), GDP+ (teal), GDPNow of 9/1 (red square), and potential GDP (gray), all in bn.Ch.2012$ SAAR. Source: BEA 2023Q2 2nd release, Philadelphia Fed (GDP+), Philadelphia Fed (SPF), Atlanta Fed, CBO, and author’s calculations.

Note that the output gap as of Q2 was -0.6%, using GDP as reported. Using GDPNow as of 9/1 (a blistering 5.6% q/q SAAR) will set the output gap at essentially zero in Q3. On the other hand, GDO — which is likely to be more reliable than final revised GDP — is at -1.6% in 2023Q2 (GDP+ is at -2.1%).

If the output gap is currently negative, then the case for continued tightening is weak. This is even more so, even taking reported GDP as accurate, if the SPF median is correct and the output gap will be increasingly negative over time.

These calculations rely upon estimates of potential GDP. On this point, there is some disagreement. For instance, as of 2022, CBO’s output gap is 1.2 percentage points of potential GDP less than OECD’s (June 2023 Economic Outlook). The estimate for 2023 is 1.1 ppts lower. Relying upon the OECD estimate implies a better case for tight monetary policy.

For comparison’s sake, 2023Q2 CBO gap is -0.6 ppts, HP deviation is 0.3 ppts, and Hamilton filter is 0.6 ppts.

 

 

 

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GOP Efforts To Shore Up Election Security In Swing States Face Challenges

GOP Efforts To Shore Up Election Security In Swing States Face Challenges

Authored by Steven Kovac via The Epoch Times (emphasis ours),

Massive…

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GOP Efforts To Shore Up Election Security In Swing States Face Challenges

Authored by Steven Kovac via The Epoch Times (emphasis ours),

Massive voter fraud allegations that marred the 2020 election spurred a political and grassroots movement from coast to coast to pursue an array of election reforms designed to increase election integrity.

(Illustration by The Epoch Times, Getty Images, Shutterstock)

However, with just months left ahead of the 2024 election, Republicans say little was mended, especially in contested states where they thought fixes were needed most.

Much concern is centered around five key swing states that became the focus of 2020: Georgia, Pennsylvania, Arizona, Michigan, and Wisconsin.

Election reforms tend to follow party lines. Democrats commonly castigate increased election security measures as voter suppression, while Republicans often condemn laws and directives that loosen security as aiding and abetting voter fraud.

According to a report from the Brennan Center for Justice, a left leaning, non-profit, law and research foundation, 23 states enacted 53 laws relaxing election security restrictions in 2023, while 14 states enacted 17 laws tightening them.

 The statistics suggest that Democrats are still winning the nationwide battle, as they have for the past several years. The report found the states that took the most actions to tighten election security are the places that already had security measures in place.

Of the 14 states that tightened voting procedures, President Trump won all but one (New Mexico) in both 2016 and 2020. The 14 states listed by the Brennan Center include Arkansas, Florida, Idaho, Indiana, Kansas, Mississippi, North Carolina, North Dakota, Nebraska, New Mexico, South Dakota, Texas, Utah, and Wyoming.

The methods by which Americans cast their ballots have changed markedly over the last four federal election cycles, with many people embracing election procedures such as no-excuse absentee voting, early voting, and same-day voter registration.

As early as 2005, the bipartisan Carter-Baker Commission raised concerns that mail-in voting was a vehicle for potentially significant election fraud, yet the method has since steadily grown.

In 2018, a quarter of the electorate voted by mail, according to a study by the Election Assistance Commission (EAC). By 2022, it had become one-third.

Forty-six states and territories permitted no-excuse absentee voting in 2022. The number was 43 in 2020 and 40 in 2018.

Twenty-three states and territories had a permanent absentee voter list in 2022—a practice that allows a voter to request to automatically be sent a mail-in ballot in every succeeding election. No new application or update of registration information is required in most of them.

In the 2022 election, half the states and territories allowed same-day voter registration.

In the election cycles before the pandemic, the EAC study said that nearly 60 percent of Americans voted in person on election day. In 2022, the figure was 49 percent.

Before the pandemic, mail-in ballot drop boxes were rare, with most being deployed in or around an election office. By 2022, there were 13,000 drop boxes being used in 39 states, with many boxes placed in settings that lacked security and surveillance measures.

Fifteen of the 39 states and territories using drop boxes, including Georgia, Michigan, Pennsylvania, Wisconsin, New York, and Maine, couldn’t report how many ballots were collected from their receptacles in 2022, the report said.

A woman drops off her ballot for the U.S. presidential election in Rollinsville, Colo., on Nov. 3, 2020. (Jason Connolly/AFP via Getty Images)

According to the EAC study, 334,382 voting machines were used in the nation’s polling places in 2022. The utilization of electronic ballot marking devices was up 18.6 percent from 2020, while the use of electronic scanners rose 7.8 percent in the same period.

Despite the push by some election integrity activists for the hand-counting of ballots as a means to improve accuracy and security, the method was used by only 17.8 percent of jurisdictions in 2022, down from 20.7 percent in 2020.

And although chain of custody protections for ballots are being tightened in several states, dirty voter registration rolls—resulting in mail-in ballots being sent to ineligible people, undeliverable addresses, or multiple ballots being sent to the same individual—are still a widespread issue.

Georgia

The state of Georgia has been the scene of continuous controversy over the conduct of the Nov. 3, 2020, presidential election in which challenger Mr. Biden defeated incumbent President Trump by 11,779 votes (0.23 percent).

The persistent public outcry over alleged election fraud prompted the Republican-controlled Georgia General Assembly to pass the 95-page Georgia Election Integrity Act of 2021.

Trump supporters gather in front of the Georgia State Capitol in Atlanta on Jan. 6, 2021. (Virginie KippelenN/AFP via Getty Images)

The declared purpose of the legislation is to apply “the lessons learned” in 2020 and “make it easy to vote and hard to cheat,” in the future.

An explanatory notation in the bill acknowledged that there was a “significant lack of confidence” in the state’s election systems stemming from persistent allegations of “rampant voter fraud” and “rampant voter suppression.”

The changes made in this legislation in 2021 are designed to address the lack of elector confidence in the election system on all sides of the political spectrum,” the notation said.

In order to ensure that more votes are not counted than ballots cast, every precinct, by 10 p.m. on election night, must post the number of all ballots cast, including all absentee ballots received by the statutory deadline of 7 p.m.

The new law mandates that the total number of cast ballots must equal the number of ballots counted.

No pauses are allowed once the counting begins, as were seen in the early morning hours in Atlanta in 2020.

To help achieve a timely vote count, the statute allows absentee ballots to be processed days before the election, but the voter’s choices must not be tabulated until the counting begins on election day.

The act provides that ballots shall be printed with authentication marks in order to eliminate counterfeiting.

To deter duplicate voting and ballot harvesting, the statute mandates that mail-in ballot applications be sent out only at a registered elector’s request, and nobody but statutorily specified individuals may return a marked absentee ballot filled out by another person. Seeking to obtain more than one absentee ballot can now expose an individual to legal penalties.

When applying for an absentee ballot, the new law requires a person to provide the numbers from either their driver’s license or state-issued identification card or the last four digits of their social security number.

To expand opportunities to vote, early voting is now an option for three weeks before the election. The law makes early voting on Sunday available at the choice of each county.

Election personnel check in provisional ballots at the Gwinnett County Board of Voter Registrations and Elections offices in Lawrenceville, Ga., on Nov. 7, 2020. (Elijah Nouvelage/Getty Images)

The new legislation codifies the use of drop boxes in 2024, but mandates they be placed in secure, well-lit, locations with continuous human monitoring. To protect the chain of custody, two people are now required to deliver the contents of a drop box to an election clerk.

The act prohibits local officials from accepting non-government funds, grants, or gifts in connection with election administration.

In 2023, the Georgia legislature passed SB-222 to bolster the 2021 prohibition to make it a crime.

In protest to the new 2021 measures, Major League Baseball deemed them “restrictive,” and moved that year’s All-Star Game from Georgia to Colorado.

Georgia state Sen. Colton Moore, a Republican, said that although improvements have been made since 2020, much meaningful work is still needed.

Nothing of substance has changed since 2020. Every mechanism to facilitate a steal is still in place,” he told The Epoch Times. “We must work to eliminate the vulnerabilities still in place today.”

Mr. Moore also highlighted the “ridiculous” number of absentee ballots still used in Georgia elections and said they ought to be restricted to military personnel and medically disabled citizens. He said he was also worried about the institutionalization of the use of absentee ballot drop boxes, which he believes should be done away with altogether.

“We need to make it a legislative priority to stop authoritarian figures like [Fulton County District Attorney] Fani Willis from prosecuting people for merely questioning our elections. Her actions have created a chilling effect among my colleagues in the legislature,” he said.

“Unless we obtain a legislative solution soon, we must resolve to overcome fraud through an overwhelming turnout in November.”

Fulton County District Attorney Fani Willis speaks at a news conference at the Fulton County government building in Atlanta on Aug. 14, 2023. (Megan Varner/Getty Images)

Michigan

Right after being elected in 2018, Michigan’s Democrat Gov. Gretchen Whitmer used her veto power to shoot down nearly 20 election integrity reform bills sent to her desk by the then-Republican-controlled state legislature.

In the 2020 presidential election, President Donald Trump lost Michigan to Joe Biden by 154,000 votes or 2.8 percent.

Afterwards, judges in six different court cases found that Michigan’s Democrat Secretary of State Jocelyn Benson issued inaccurate or legally unauthorized guidance to local officials in the runup to the 2020 general election.

When Ms. Whitmer was reelected in 2022 and Democrats captured control of the legislature, within a year 12 new Democrat-sponsored election laws were enacted—all of which Republicans say loosen security.

The new Democrat-authored statutes extend automatic voter registration to other state agencies and offices beyond the Secretary of State’s office, which issues driver’s licenses in Michigan.

They liberalize online registration and allow a person to apply for an absentee ballot online. They permit 16-year-olds to pre-register to vote.

During the past several election cycles, Democrat activists, backed by out-of-state, big-money donors, effectively used the ballot initiative process to repeal existing election laws, enact new laws, and amend the state constitution. Two of the largest contributors were the Sixteen Thirty Fund ($11 million) and the George Soros-founded Open Society Foundation ($1.2 million).

The ballot initiative method was employed to expand and institutionalize the use of mail-in ballot drop boxes, allow no-excuse absentee voting, permit same-day registration and voting, and shorten the length of residency required to register to vote.

The initiative process was also used to weaken photo ID requirements by mandating that election officials accept an affidavit of identity signed by the prospective voter instead. It also enabled people to request to automatically receive an absentee ballot for every election in perpetuity, and it authorized taxpayer-funded, postage-free mailing for people returning absentee ballot applications or mail-in ballots.

Left-wing activist groups also utilized the initiative process to obtain the constitutional right to nine consecutive days of early voting; and early voting sites can now be used by people from more than one community within a county.

The ballot proposals enacting these new laws were approved handily by the Michigan electorate at the polls.

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Tyler Durden Mon, 02/19/2024 - 14:35

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Macro Briefing: 19 February 2024

* ‘Soft landing’ debate for US economy in focus again after latest reports * New signs emerge that America’s shale-oil boom is peaking * US says…

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* ‘Soft landing’ debate for US economy in focus again after latest reports
* New signs emerge that America’s shale-oil boom is peaking
* US says it will react if China dumps goods on global markets
* China reports record upsurge in travel, which may presage stronger growth
* China’s central bank leaves key policy rate unchanged
* Regional banks are vulnerable to risk tied to commercial real estate lending
* US natural gas prices plunge amid warm winter weather
* US producer price inflation rose more than expected in January:

Younger adults grew their wealth at a sharply faster pace than older Americans in the wake of the pandemic, due primarily to holdings in stocks, according to a new study published by the New York Fed. “We examine wealth dynamics from 2019:Q1 through 2023:Q3 for three age groups: 18-39, 40-54, and 55 and over,” the report explains. “eal wealth has increased for all three age groups since 2019, but the change has been most dramatic for younger adults (see chart below). For individuals 39 and younger, wealth increased by 80 percent. In contrast, it grew by only 10 percent for those aged 40-54 and by 30 percent for those 55 and over.”

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Taxing Billionaires Won’t Reduce Taxes For The Middle Class

Taxing Billionaires Won’t Reduce Taxes For The Middle Class

Authored by Daniel Lacalle,

In a world of populist policies, the notion of taxing…

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Taxing Billionaires Won't Reduce Taxes For The Middle Class

Authored by Daniel Lacalle,

In a world of populist policies, the notion of taxing billionaires to alleviate the financial burdens of the middle class stands as a tempting narrative. Advocates tout it as the quintessential solution to income inequality, promising a redistribution of wealth that lifts the masses from their fiscal woes. However, this narrative, so alluring in its simplicity, crumbles upon closer examination, revealing a multitude of complexities and pitfalls that belie its benefits.

Central to the fallacy of taxing billionaires lies a fundamental misunderstanding of the dynamics of government spending and deficits. Proponents of this approach often overlook the inconvenient truth that as most governments increase spending even when tax receipts rise, deficits soar to unprecedented heights, burdening future generations with a mountain of debt and always increasing taxes for the middle class.

Taxing the rich is the door that leads to more taxes for all of us. The case of the United States is evident. No tax revenue measure is going to wipe out an annual two trillion dollar deficit. Therefore, the government announces a large tax hike for the wealthy and disguises it with more taxes for everybody and higher inflation, which is a hidden tax.

The notion that taxing billionaires will miraculously alleviate this fiscal strain is akin to applying plaster to a gaping wound—it does not even provide temporary relief, and it fails to address the underlying malaise.

A seminal paper by Alesina, Favero, and Giavazzi (2015) delves into the implications of government deficits on economic growth. The authors argue that persistent deficits not only crowd out private investment but also lead to higher interest rates, reduced confidence, and ultimately diminished economic growth. This underscores the importance of fiscal prudence in addressing long-term fiscal challenges and the evidence that tax hikes are not neutral.

Billionaires mostly hold their wealth in shares of their own companies. This is what is called “paper wealth.” However, they cannot sell those shares and if they lost them, their value would decline immediately.

The redistribution fallacy comes from three false ideas:

  • The first is the notion that billionaires do not pay taxes to begin with. The top one percent of income earners in the United States earned 22 percent of all income and paid 42 percent of all federal income.

  • The second error is believing that wealth is static—like a pie—and can be redistributed at will. Wealth is either created or destroyed. Confiscating the wealth of billionaires does not make the middle class or the poor richer. We should have learned that lesson from the numerous examples in history, from the French Revolution to the Soviet Union.

  • The third mistake is to believe that the economy is a sum-zero game where the wealth of one person is the loss of another. That is simply false because wealth is not “there.” It must be created through an exercise where all parties win in exchange for cooperation.

The world must strive to create more wealth, not limit those who generate it.

Consider the recent clamour for increased government intervention and spending, particularly in the wake of global crises. For instance, the COVID-19 pandemic prompted governments all over the world to enact a flurry of fiscal stimuli, ostensibly intended to soften the blow of the economic fallout. Yet, as the dust settles, we find ourselves grappling not only with the immediate ramifications of increased government spending but also with the long-term consequences of ballooning deficits as well as persistent inflation.

Who came out as the loser of the redistribution and stimulus frenzy of the past decade? The middle class. It has been destroyed by persistent inflation created by printing money without control, rising debt and deficits and constantly bloating government size in the economy, which in turn creates two taxes for the middle class and the poor: inflation and rising indirect taxes.

Critics of this approach have long warned of the dangers of irresponsible government spending. Taxing billionaires will not stop this trend of excessive bureaucracy and irresponsible administration of public services; in fact, it may accelerate it, as we have seen in so many countries, and certainly will not reduce the tax wedge on ordinary citizens.

History is replete with cautionary tales of nations brought to their knees by unchecked fiscal excesses. From hyperinflation to sovereign debt crises, the ramifications of fiscal irresponsibility are manifold and far-reaching. And yet, in the face of mounting pressure to “tax the rich,” policymakers seem intent on repeating the mistakes of the past, heedless of the inevitable consequences.

But the fallacy of taxing billionaires extends beyond the realm of fiscal policy—it strikes at the very heart of economic prosperity. At its core, capitalism depends on investment, entrepreneurship, and innovation—all of which are at risk from excessive taxation. The narrative that vilifies billionaires as greedy hoarders of wealth overlooks their crucial role in driving economic growth and prosperity.

By focusing solely on redistributive measures, policymakers risk undermining the very foundations of prosperity upon which our economic system rests.

Moreover, the notion that taxing billionaires will somehow level the playing field and uplift the middle class is predicated on a flawed understanding of economic reality. In truth, the global mobility of capital renders such measures largely ineffective, as the ultra-wealthy can easily relocate to jurisdictions with more favourable tax regimes. This not only undermines the efficacy of taxing billionaires as a revenue-generating mechanism but also exacerbates the very inequalities it seeks to redress.

Indeed, the unintended consequences of excessively taxing the rich are manifold and far-reaching. From reduced investment and job creation to economic stagnation and decline, the repercussions of such policies are felt across society. And while the rhetoric of wealth redistribution may sound appealing in theory, the reality is far more sobering—a stagnant economy, diminished opportunities, and a dwindling standard of living for all.

So, where does this leave us? If taxing billionaires is not the panacea it purports to be, what alternatives exist to address income inequality and alleviate the burdens of the middle class? The answer lies not in punitive taxation but in prudent fiscal policy, targeted policies, and a renewed focus on fostering economic growth and prosperity for all.

Primarily, we must recognize that fiscal responsibility is not a luxury but a necessity. Governments must exercise restraint in their spending, prioritize efficiency and accountability, and resist the temptation to paper over fiscal deficits with ill-conceived tax hikes and money printing. Only through disciplined fiscal management can we hope to secure a prosperous future for generations to come.

Second, we must recognize the vital role that entrepreneurship and investment play in driving economic growth and prosperity. Rather than demonizing billionaires as the root of all evil, we should celebrate their contributions to society and create an environment that fosters innovation, entrepreneurship, and wealth creation. This means reducing regulatory barriers, incentivizing investment, and empowering individuals to pursue their entrepreneurial ambitions.

Finally, we must understand that opportunities provided to citizens, not the size of the government, are what define true progress. Rather than relying on the state to solve all our problems, we should empower individuals and communities to chart their own course to prosperity. This means investing in education, healthcare, and infrastructure, providing a safety net for those in need, and fostering a culture of self-reliance and personal responsibility.

In conclusion, the fallacy of taxing billionaires lies not in its intentions but in its execution. While the notion of redistributing wealth may sound appealing in theory, the reality is far more complex. By succumbing to the allure of punitive taxation, we risk stifling economic growth, undermining prosperity, and perpetuating the very inequalities we seek to redress. Only through prudent fiscal management, targeted interventions, and a renewed focus on fostering economic growth can we hope to build a future that is truly prosperous for all.

Socialism does not redistribute from the rich to the poor, but from the middle class to politicians.

The fallacy of massively taxing billionaires is another trick to promote socialism, which has never been about the redistribution of wealth from the rich to the poor, but the redistribution of wealth from the middle class to politicians.

Tyler Durden Sun, 02/18/2024 - 17:30

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