Top of the News: If you were alive in the 1970s, you learned to pay attention to the government’s consumer price report because inflation was so nasty. Every week, it seemed, prices were going up. Not now. For the first time in half a century, consumer prices fell in March compared with the same month the year before.
That’s not good news if the trend continues. Not only does it mean that companies will have to lay off even more people because they can’t sell goods at a profit, it also puts at risk the value of everything based on the dollar, from the scratch in your wallet to all those Treasury securities held by our foreign creditors. It’s called deflation, and it was the scourge of the Great Depression.
So far, most experts are discounting the possibility of deflation — but they were also the ones who said not to worry about the housing bubble. Prominent bear Nouriel Roubini has not been so sanguine, warning earlier this year that deflation was a definite possibility…followed by inflation. So far, however, Bernanke’s Fed has rightly focused on avoiding deflation. Let’s hope Helicopter Ben can get it right. (The nickname comes from a pre-Fed chairmanship speech when this Depression scholar was discussing ways to avoid a 1930s deflation — if worse came to worst, he’d drop shrink-wrapped dollars on pallets from a chopper).
Another troubling report: Factory capacity fell to a record low in March. This means a recovery will have to take up a lot of slack before expansion and hiring is felt in this critical sector.
Tax facts for tax day:
— As much as we hate April 15th, the United States pays some of the lowest taxes among the advanced OECD nations. Denmark is at the top.
— The U.S. charges some of the highest corporate tax rates among the OECD, but only on paper. As reporter David Cay Johnston explains in his book Perfectly Legal, most major corporations use loopholes, tax shelters, etc. to avoid paying any tax at all.
— Our current income tax rate for the richest Americans is 35 percent. Under Republican President Dwight Eisenhower, the rate was 91 percent. Ike’s 1950s were a time of unprecedented economic growth that reached all income levels. As a labor leader said, “everything is booming but the guns.”
— Offshore tax havens are estimated to cost the United States an estimated $100 billion a year.
— Bob Reich offers a quick guide to reality-based tax facts on his blog.
— Washington state ranks 35th in state and local tax burdens; Oregon 25th — both much lower than in the late 1970s. At the top is New Jersey. The bottom is Alaska. On a per-capita basis, Washingtonians pay a lower rate than the national average.
— A new report by the Nelson Rockefeller Institute of Government outlines the worst sales-tax decline in 50 years.
Today’s Econ Haiku:
The plan to name names
Adds a new kind of stress test
For the CEOs