For John, BLUF:
We need to get the money flowing again and getting people hired. Nothing to see here; just move along.
On the
"Financial Exchange" on WRKO this morning
Mr Larry Kudlow was on, espousing his solution to our economic doldrums.
Mr Kudlow's plan is to reduce corporate income tax and to allow corporations to repatriate the billions they have overseas with a minimal tax (he suggested 5%). Mr Kudlow believes that such an action would get money moving again in the economy and thus stimulate employment and possibly give us a 4% growth rate.
I like it. It might not work, but nothing else is working. Right now the unemployment rate is going down not due to people getting jobs but due to people dropping out of the labor force.
The
Bureau of Labor Statistics calculates six different measures of unemployment, U1 through U6, measuring different aspects of unemployment:
U1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force.
U2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force.
U3: Total unemployed, as a percent of the civilian labor force (official unemployment rate).
U4: Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers. (U3 + "discouraged workers")
U5: Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
U6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
We usually see an unemployment rate based on U3. Thus we don't actually consider someone who is out of work and has stopped looking and is living in his or her parents' basement or is couch surfing amongst friends and relatives.
But, back to Mr Kudlow, the fact is that tax policy is social policy. Taxes, intended or not, influence how people, including business people, operate. If the tax burden becomes heavy enough people do things that circumvent the law. That is why such a large percentage of cigs sold in the Boston area are from the gray market. It is human nature. If you do sometime to me that I believe is unfair, I will try to circumvent it. If your tax on me seems unfair, I will try to work around it, sometimes even if it costs me to do that.
Having said I agree with Mr Kudlow, I don't wish someone to think I am "big business". Notwithstanding the myths that are out there, a lot of Republicans are "small business". It is the Democrats who are big business. The relationship is that Democrats provide the things that make big business work. For example, a lot of series of regulations has much less impact on a big business, which has lawyers and accountants to deal with such things, and which can absorb them into the overhead. On the other hand, a small business finds such regulations to be much more of a burden, having a smaller financial based to support the needed lawyers, accountants and other administrative personnel. It isn't the nth instance of the regulation that is expensive, it is the first instance.
Let us support Mr Kudlow's plan, but let us not think that big business is the savior of the nation. We need to be protecting and supporting small business. By protecting, I mean from Government.
Regards — Cliff
Here are a passel of definitions:
Labor force (Current Population Survey)
The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary.
Labor force participation rate
The labor force as a percent of the civilian noninstitutional population.
Marginally attached workers (Current Population Survey)
Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached.
Marginally attached workers (Current Population Survey)
Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached.
Unemployed persons (Current Population Survey)
Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.
Unemployment rate
The unemployment rate represents the number unemployed as a percent of the labor force.