Accounting for Dropouts in Unemployment Rate

The Wall Street Journal breakdown recent trends in the unemployment rate, labor force participation rate, and the recent drop in the unemployment rate to 7.8%:

  • ...starting in mid-2010, the model and the real world began to diverge. As employment begins picking up, the model, based on historical patterns, expects the participation rate to start stabilizing. Instead, workforce participation has continued to drop, hitting a three-decade low in August.
  • Based on the model, the labor force is about 2.5-million people smaller than it “should” be. If we add those people back the labor force as unemployed workers, the unemployment rate today would be 9.3%, well above the official rate of 7.8%,

Study: Tax Deduction Cap Would Raise $1.3 Trillion

From the Wall Street Journal today -- the economic credence to a basic tenet of the Romney Tax Plan according to the Tax Policy Center:

  • Republican presidential nominee Mitt Romney‘s suggestion for capping itemized deductions at $25,000 would generate about $1.3 trillion in additional revenue over 10 years, according to a new analysis by the Tax Policy Center.
  • The concept of limiting deductions, which is most closely associated with economist Martin Feldstein, was also offered last year by Sen. Pat Toomey (R., Pa.), who was seeking a way forward during the now failed deficit-cutting supercommittee talks.
  • The Tax Policy Center found that capping deductions at $17,000 would bring in $1.7 trillion over 10 years, even after factoring in a 20% rate cut and the repeal of the alternative minimum tax. It said that a $50,000 cap–which would allow for more and bigger deductions–would raise $760 billion.
  • the study leaves out the fact that a lot of other tax breaks could still be pared or trimmed.

Link to full story here.  Link to study here.