December 11, 2019

Strategies: Getting Creative With the G.D.P.

That critique wouldn’t be surprising if it came from an underappreciated artist, scientist or technologist. But it’s being made in what may seem an unexpected quarter: the offices of the federal government. It’s the verdict of the experts who measure the American economy.

We live in an increasingly knowledge-based economy, but until now, official statistics haven’t adequately captured that reality, particularly in the single number describing the economy’s size: the gross domestic product.

That’s the view of Steve Landefeld, director of the Bureau of Economic Analysis, the Commerce Department unit that measures G.D.P. “We’ve been trying to understand the sources of growth in the G.D.P.,” he said. “One of the longstanding gaps in the numbers has been the contributions of intangibles — creations in the arts and entertainment, research and development, things like that — and what they contribute to G.D.P.”

This week, the bureau is doing something about it. It plans to give a greater economic weighting to the creation of many types of intellectual property — from books to movies to music to biotech drugs. The economy won’t change overnight, but the numbers will. Going all the way back to 1929, the G.D.P. will look bigger.

This is to take place on Wednesday, when the bureau releases the results of an immense revaluation of the size and composition of the American economy from the Great Depression to the present. It undertakes this exercise every five years or so, altering its methods as the economy and data quality change. Among the bureau’s revisions is a change in its treatment of research and development and the creation of what it calls “entertainment, literary and other artistic originals.”

That category seemed startling when I saw it in a bureau study on intangibles and the economy.

Artistic originals include books, movies, TV shows, music, photographs and greeting cards — yes, greeting cards. That may seem strange — it did to me, at first — but bear with me.

Copies of an original card that is designed today can still be sold a year or more from now. In that sense, a greeting card is like a building or a machine tool or computer software — it’s a capital investment that can generate revenue for years to come. Items that fit the bureau’s economic definitions will be given a bigger weight in G.D.P. calculations. They will be considered assets — capital investments rather than expenses — and the cost of producing them will be added to G.D.P. In addition, the revenue generated by the cards will be included in G.D.P. later on, when the money flows in.

Money generally needs to change hands for creative work to be considered an investment. Unpaid authors still won’t count as contributors to the G.D.P. Yet in 2007, the accounting change would have added roughly $9 billion to G.D.P. from book-writing alone, a preliminary bureau study found.

That may bolster the self-esteem of some writers, but it will do nothing for those of us who write for newspapers, magazines, blogs and the like. A newspaper column has no enduring value, from the bureau’s pecuniary perspective.

That made for an awkward moment in a conversation with Robert Kornfeld, a bureau economist. He assured me that he wasn’t making a literary judgment. It’s simply that daily journalism is perishable, he said. It’s not worth much commercially a year after it’s published. In the new digital world, a column might turn into an e-book with long shelf life, and the bureau might be able to embrace it. “Who knows?” he said. “We re-evaluate these things all the time.”

Work in other creative fields is being excluded from the investment category, too, and for similar reasons. “Seinfeld” has long-term commercial value, he said. “Monday Night Football” does not, at least not in the new calculations. TV sitcoms and dramas generally count as investments. Soap operas, reality shows and sports do not.

The big picture is this: Recalculating the treatment of all “artistic originals” that fit the bureau’s definitions would have increased the economy in 2007 by about $70 billion, or 0.5 percent. And R. D., particularly in the field of biotechnology, would have added more than $200 billion. Combined, these two changes would have swelled G.D.P. by almost 3 percent, Mr. Kornfeld said. How it will affect G.D.P. this year and in the restatement of past numbers was being calculated as we spoke. Brent R. Moulton, the bureau’s associate director for national accounts, said the statistics would be out this week. He noted that other nations had been making such shifts as well.

The changes could have profound implications. R. D. and the creation of entertainment originals have generally been treated as a cost of doing business, reducing G.D.P. Now they will be recognized for their potential to add economic value for years to come. Business software has been treated this way since the 1990s. “It makes sense to expand our definitions,” Mr. Landefeld said. “That’s something the bureau has done for decades.”

But the bureau’s changes will widen the gap between corporate and national economic accounting, said Baruch Lev, a professor of accounting and finance at New York University. Despite the change in G.D.P. accounting, he said, R. D. is still generally treated as an expense, not as an investment, in calculating profits and tax liability.

“National accounting — G.D.P. accounting — is giving us a more accurate picture of the world,” he said, adding that various intangibles might constitute as much as 50 percent of the value of publicly traded companies. These assets don’t show up on corporate balance sheets, he said, keeping investors “in the dark about the true value of many of the companies traded in the stock market.”

THE bureau is still in the dark about many things, too. It doesn’t know the commercial value of a new movie or of esoteric R. D. in biotechnology, Mr. Landefeld said. “Some of these things succeed, some fail, some have no enduring value; we don’t make a judgment,” he said.

When George Lucas made the first “Star Wars” movie in the 1970s, for example, no one knew that it would generate hundreds of millions of dollars in revenue in a stream that continues to this day. Should it have been considered an investment? It could easily have bombed.

“From the standpoint of accounting, we wouldn’t care,” Mr. Landefeld said. The bureau is tallying the production costs of movies, blockbusters and clunkers alike, adding them as assets to the G.D.P. in the years when they were made. The revenue they bring in later will be counted, too.

“Some movies are forgettable; some aren’t,” he said. “We’ll average that out and get the big picture and we hope it will give us a better understanding of the economy.”

Article source:

Economix Blog: On Whether Women Can (or Do) Marry Younger Men

In my earlier post on the economics of the viral Princeton Mom letter, I didn’t address another assertion of the writer: the suggestion that women cannot (or at least do not) pair off with younger men.

She wrote:

Here is another truth that you know, but nobody is talking about. As freshman women, you have four classes of men to choose from. Every year, you lose the men in the senior class, and you become older than the class of incoming freshman men. So, by the time you are a senior, you basically have only the men in your own class to choose from, and frankly, they now have four classes of women to choose from. Maybe you should have been a little nicer to these guys when you were freshmen?

I don’t have data about whether Princeton men, per se, are willing to marry older women, but there are national figures on the age gaps between heterosexual spouses.

Source: U.S. Census Bureau, Current Population Survey, 2012 Annual Social and Economic Supplement. Source: U.S. Census Bureau, Current Population Survey, 2012 Annual Social and Economic Supplement.

According to 2012 Census Bureau data, 85.9 percent of husbands are older than or about the same age as their wives. To break it down further, 52.6 percent of all husbands are at least two years older than their wives (based on their ages at the time of the survey, which could be less than a full 24-month difference).

Another 33.3 percent, a plurality, are within a year of the same age — meaning the wife could be older or the husband could be older, with that slim one-year margin of age difference. Assortative matching at work, once again.

That leaves 14.2 percent of all husbands who are at least two years younger than their wives.

At first blush, the distribution of those age gaps does not seem to have changed much since 1999, the earliest year for which I could find a directly comparable data table. (If you have access to earlier data, please let me know.) In 1999, 12.3 percent of husbands were at least two years younger than their wives.

If norms have changed sharply from then to now, of course, they probably still would not make a big dent in the overall age-gap numbers, since a lot of couples who would have been married before 1999 are still around. Indeed, as we’ve noted before, the annual new-marriage rate has been falling in that time period, meaning that any new preferences that are emerging for newly married couples would show up in a shrinking share of the total married population.

Article source:

Bucks Blog: Wednesday Reading: Some E-Books To Get Soundtracks

August 24

Wednesday Reading: Some E-Books To Get Soundtracks

Some e-books will get soundtracks, gaps seen in cellphone service after east coast earthquake, non-alcoholic beer aids in marathon recovery and other consumer-focused news from The New York Times.

Article source:

Still ‘Far Apart’ on Debt, 2 Sides Will Seek Broader Cuts

Though the president and Congressional leaders did not close wide gaps on the issues of spending cuts or new tax revenues, officials briefed on the talks said, they emerged with a consensus to aim for the biggest possible deal — one resulting in up to $4 trillion in savings — and a recognition of the dire consequences of not acting before Aug. 2, when the government will lose its authority to borrow.

Treasury Secretary Timothy F. Geithner gave a stark description of the upheaval he said would reverberate through financial markets and the broader American economy if the government were to go into default, these officials said. The eight lawmakers from both parties listened somberly, officials said, and pledged to avoid such an outcome.

“Everyone acknowledged that we have to get this done before the hard deadline of Aug. 2 to make sure America does not default for the first time on its obligations,” Mr. Obama said to reporters after the meeting. “And everybody acknowledged that there’s going to be pain involved politically on all sides.”

Democrats and Republicans are confronting not only tough choices about how to balance spending cuts and higher taxes, but how best to sell such a package, which would probably challenge basic philosophical tenets of each party, to their rank-and-file members.

Declaring that the meeting had been “very constructive,” Mr. Obama said that White House and Congressional staff members would negotiate through the weekend and that the leaders would reconvene at the White House on Sunday. At that point, he said, he hopes “the parties will at least know where each other’s bottom lines are” and try to conclude a deal within two weeks.

Later, top lawmakers and Congressional officials said that they thought a narrow opening existed for a far-reaching agreement, and that the next 48 hours and the Sunday meeting would prove pivotal. If an acceptable package cannot be agreed upon, they predicted a fallback plan in the range of $2 trillion or more, based on the earlier negotiations overseen by Vice President Joseph R. Biden Jr.

With the White House and the lawmakers promising not to divulge details of the talks, the specifics of an eventual deal were not yet clear. But Mr. Obama has put popular entitlement programs like Medicare and Social Security on the table, while Speaker John A. Boehner has signaled for the first time his openness to up to $1 trillion in new revenues. The money could presumably be raised through closing loopholes but would also probably require changes to the tax code that would have to be worked out later.

The prospect of cuts in health care benefits and Social Security has alarmed Democrats. On Thursday, Representative Nancy Pelosi, the House Democratic leader, said she wanted to give the president room to negotiate a broad agreement but would resist efforts to tie the deal to Social Security.

“Do not consider Social Security a piggy bank for giving tax cuts to the wealthiest people in our country,” Ms. Pelosi said to reporters on Capitol Hill after the meeting. “We are not going to balance the budget on the backs of America’s seniors, women and people with disabilities.”

Mr. Obama plans to meet privately with Ms. Pelosi on Friday, suggesting that the White House is now turning its attention to soothing Democrats after the president held a secret meeting with Mr. Boehner last Sunday. That session advanced the talks and laid the groundwork for Thursday’s session, but left some Democrats complaining that they were being excluded from the process.

“The big question everyone is asking is, ‘What are we getting?’ ” said Representative Edward J. Markey, Democrat of Massachusetts.

The White House took pains on Thursday to play down reports that Mr. Obama was open to substantial cuts in Social Security benefits as part of a deficit-reduction deal. The press secretary, Jay Carney, said that the president had vowed in his State of the Union address in January to put Social Security on a firmer footing, and that he would not place the subject off limits in negotiations to reduce the deficit.

But Mr. Carney insisted that the president had not changed his approach to Social Security, saying Mr. Obama would consider only changes to the system that “would not slash benefits.”

Article source:

Study Finds Tax Burden Rising on Workers

PARIS — The tax burden on Western workers’ earnings climbed in 2010 for the first time in years, a trend that could put at risk long-term prospects for employment and economic growth, an international organization said Wednesday.

A report from the Organization for Economic Cooperation and Development, “Taxing Wages,” showed that the “tax wedge” — the average tax and social security burden on incomes — rose last year in 22 of the organization’s 34 member states. It was the first time that the overall burden had risen since the O.E.C.D. started collating such data a decade ago.

“There’s clearly now a trend for this figure to rise, reflecting the recent pressure for countries to consolidate their budgets,” said Jeffrey Owens, director of O.E.C.D.’s tax division.

He added that the combination of higher income taxes in some countries, including Ireland and Spain, along with steady or rising social charges for companies and employees and higher inflation across the O.E.C.D., means that real disposable incomes are also being squeezed for the first time in more than a decade.

The Netherlands, Spain and Iceland were among the countries experiencing significant increases in the tax wedge due to increases in social security charges, taxes or both. The burden also climbed in the United States, Britain and France. Denmark, Greece, Germany and Hungary were among countries showing declines.

Like most other international organizations, the O.E.C.D. has stressed the need for Western governments to reduce budget gaps in the wake of the financial crisis. But the O.E.C.D. also regularly warns that high taxes on labor and incomes can reduce work force participation and raise unemployment, especially for low-income workers.

“Balancing the budgets will invariably involve some form of tax increases,” Mr. Owens said. “The question is how to do this while minimizing the danger to longer-term growth.”

To bring budgets into balance and restore growth, the O.E.C.D. calls on governments to shift the fiscal mix away from direct taxes and toward indirect levies — for example, by raising value-added and property taxes and reducing tax loopholes, rather than increasing income tax and social security charges.

Yet while the burden on labor appears to be mounting, surveys suggest that companies are not being charged more directly. According to a KPMG study released late last year, average corporate tax rates in the O.E.C.D. were steady in 2010 at 25.94 percent from a year earlier, but down from 28.31 percent in 2005.

Governments are reluctant to raise corporate tax rates, fearing that companies will choose to invest elsewhere or shed jobs.

Businesses, of course, often do not always pay the official tax rate — they may be given any number of deferrals, write-offs or deductions. At the moment, for example, many banks are paying low effective rates because they are deducting from their taxable income losses they incurred during the financial crisis.

The latest O.E.C.D. data show that corporate tax rates as a percent of total tax receipts fell to 10.1 percent in 2008, from 10.8 percent in 2007 and 10.2 percent in 2005.

The KPMG same survey also found that indirect taxes were rising, both globally and among Western industrialized countries. In the O.E.C.D. area, average indirect tax rates increased to 18.28 percent in 2010 from 17.70 percent a year earlier and 17.83 percent in 2005.

Article source: