Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, March 29, 2019

AI Summary. Bay Area home prices have risen in dollar terms, with Palo Alto's median price going from $1.3m to $3.1m over a decade, but have become cheaper when priced in technology stocks, which grew faster. For households whose wealth is held in tech equities, housing has become relatively less expensive.

Alex Rampell Andreessen Horowitz
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Great @arampell insight on asset relativity and Bay Area Housing CHART LINK Bay Area Housing Has Gotten Cheaper If You Base Housing To Index Of Tech Stocks – @arampell, Andreessen Horowitz.

Has Bay Area housing become cheaper when priced in tech stocks?

Core argument: Palo Alto's median home price rose from $1.3m to $3.1m over the past decade, a gain in USD terms that lags the growth of tech stocks.

While Bay Area housing prices have surged in USD terms, with the median home price in Palo Alto rising from $1.3m to $3.1m over the past decade, they have become relatively cheaper when indexed against tech stocks. This phenomenon highlights the "gravity distorting" effects of technology stocks on asset valuation. As tech stocks have outpaced housing price growth, the relative cost of housing has decreased for those whose wealth is tied to tech equities. This shift underscores the importance of asset relativity in understanding real estate affordability, particularly in tech-driven economies like Silicon Valley. The implications are significant for investors and policymakers, as they suggest that traditional currency-based assessments may not fully capture the economic dynamics at play in regions heavily influenced by tech sector performance.

Takeaways by Macro Roundup® AI

  1. Palo Alto's median home price rose from $1.3m to $3.1m over the past decade, a gain in USD terms that lags the growth of tech stocks.
  2. Indexed against tech stocks rather than dollars, Bay Area housing has become relatively cheaper for buyers whose wealth is tied to tech equities.
  3. Traditional currency-based assessments of real estate affordability may not fully capture the economic dynamics of tech-driven regions such as Silicon Valley.

Alex Rampell, "Data: Asset Relativity (and the Case of Bay Area Housing)," Andreessen Horowitz, March 28, 2019, https://a16z.com/2019/03/28/asset-theory-of-relativity-housing-example-everything-is-correlated-assets-vs-currency-tech-stock-index/

According to Cathy Rampell’s brother, housing prices in Silicon Valley have risen in USD terms but have dramatically fallen in terms of tech stocks, "...Take the example of housing prices in the Bay Area. In the last decade, the median home price of $1.3M in Palo Alto has popped to $3.1M. If you look at prices as a function of the “gravity distorting” effects of technology stocks, however, it turns out housing has gotten much cheaper… that is, IF your base unit of currency is an index of tech stocks....."

Ed Comment:Worth sending to me but I wouldn't publish this if I were him. "80%" of the housing is occupied by people who don't owe these stocks including all the people working in failed, not so successful, and not yet successful startups. The marginal product of their labor largely drives the amount they can pay for rent. A restricted supply of labor via a restricted supply of housing will allow them to earn more but their pay (and the rent they can afford) is still largely pegged to their marginal product of labor. As we know, the value of those stocks represent the highest and currently fastest growing marginal product of labor, much of which is not captured by even the most skillful workers. Most workers' marginal product of labor is growing slower. Most companies, even most in San Francisco, are falling further off the tech frontier not catching up to it. No surprise, so is the value of their real estate (ie their rent).

AI Summary. Broadening the tax base by closing loopholes, improving compliance, eliminating shelters, and partially repealing prior tax cuts is projected to raise more revenue than proposals for a wealth tax or sharply higher top rates. The authors argue this approach is also more politically feasible and would improve economic efficiency and fairness.

Larry Summers Boston Globe
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@LHSummers @BostonGlobe: Summer’s tax reform plan emphasizes base broadening & closing loopholes, projected to generate more revenue than Ocasio-Cortez & Warren’s proposals. This strategy aims to enhance economic efficiency & fairness in the tax system.

Would broadening the tax base raise more revenue than a wealth tax?

Core argument: Summers argues that broadening the tax base and closing loopholes would raise more revenue than the proposals advanced by Ocasio-Cortez and Warren.

Summer's tax reform plan emphasizes a traditional approach of base broadening and closing loopholes, which is projected to generate more revenue than the proposals by Ocasio-Cortez and Warren. By improving compliance and eliminating shelters, along with partially repealing the Trump tax cut, this strategy aims to enhance economic efficiency and fairness in the tax system. The plan is considered more politically feasible than implementing a wealth tax or significantly increasing top rates. While additional measures may be necessary to address the revenue challenge, starting with base broadening is deemed the most effective initial step.

Takeaways by Macro Roundup® AI

  1. Summers argues that broadening the tax base and closing loopholes would raise more revenue than the proposals advanced by Ocasio-Cortez and Warren.
  2. Summers' plan combines improved compliance, elimination of tax shelters, and partial repeal of the Trump tax cut, aiming to improve economic efficiency and fairness.
  3. Summers considers base broadening more politically feasible than a wealth tax or significantly higher top rates, and the most effective first step even if additional revenue measures prove necessary.

1/2 Summer's foreshadowing a tax reform plan

"....Where we differ from Warren and Ocasio-Cortez is in our belief that the best way to begin raising additional revenue from highest income tax payers is with a traditional tax reform approach of base broadening and loophole closing, improved compliance, and closing of shelters. We show that these measures, along with partial repeal of the Trump tax cut, can raise far more than recent proposals. These measures will increase economic efficiency, make our tax system more fair, and are perhaps more politically feasible than a wealth tax or large hikes of top rates. It may be that measures beyond base-broadening are appropriate and desirable given the magnitude of the revenue challenge we face. But base-broadening is the right place to begin...."

Natasha Sarin and Lawrence Summers, "A broader tax base that closes loopholes would raise more money than plans by Ocasio-Cortez and Warren,"Boston Globe, March 27, 2019, https://www.bostonglobe.com/opinion/2019/03/28/broader-tax-base-that-closes-loopholes-would-raise-more-money-than-plans-ocasio-cortez-and-warren/Bv16zhTAkuEx08SiNrjx9J/story.html

AI Summary. Raising top tax rates to 70% would raise less than one-third the revenue of a base-broadening approach, the author argues, because a 1% increase in top rates is associated with a 0.6% decline in reported taxable income as taxpayers shift to avoidance. Broadening the tax base lowers that responsiveness, making income harder to shield.

Larry Summers Boston Globe
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@LHSummers argues that traditional tax reform, focusing on efficient & progressive revenue generation through base broadening, should precede any consideration of wealth taxes or high-income rates, avoiding a confrontational approach with successful individuals.

Does broadening the tax base raise more revenue than higher top rates?

Core argument: Raising top tax rates to 70% would generate less than one-third of the revenue produced by a base-broadening approach, indicating inefficiency in targeting high earners.

Increasing top tax rates to 70% would raise less than one-third of the revenue compared to a base-broadening approach, highlighting inefficiencies in targeting high earners. The elasticity of taxable income suggests a 1% increase in top rates reduces reported income by 0.6%, as individuals engage in tax avoidance. This results in high economic distortion relative to revenue raised, especially with proposals pushing rates over 80% in areas like NYC. Broadening the tax base can lower elasticities, making it harder for the wealthy to shield income. Thus, traditional tax reform, focusing on efficient and progressive revenue generation through base broadening, should precede any consideration of wealth taxes or high-income rates, avoiding a confrontational approach with successful individuals.

Takeaways by Macro Roundup® AI

  1. Raising top tax rates to 70% would generate less than one-third of the revenue produced by a base-broadening approach, indicating inefficiency in targeting high earners.
  2. The elasticity of taxable income implies that a 1% increase in top rates reduces reported income by 0.6% as individuals engage in tax avoidance, creating high economic distortion relative to revenue raised where proposed rates exceed 80% in places like New York City.
  3. Broadening the tax base lowers elasticities and makes it harder for the wealthy to shield income, so traditional tax reform focused on efficient, progressive revenue generation should precede any consideration of wealth taxes or high top rates.

2/2 from Summers, with a warning for the left about class warfare

"... Even increasing top rates to 70 percent would raise less than one third as much revenue as our base-broadening approach....Justifications for substantial increases in tax burdens as a tool to address “oligarchic drift” are problematic. First, given that most outlays to promote a political agenda are tax deductible, approaches like wealth taxation may actually increase oligarchic forces. But more broadly: If America had had more figures like Bill Gates, Warren Buffett, and Steve Jobs over the last generation, it would have been a good thing, associated with a stronger economy even if measured inequality increased. Bill Clinton was right when he said that he wanted to see an economy with more millionaires, because that meant an economy with more job-creating successful businesses. Turning the tax code into a vehicle for confronting what some call “oligarchic drift” would undermine business confidence, reduce investment, degrade economic efficiency, and punish success in ways unlikely to be good for the country or even to be appealing to most Americans.....Moreover, unless a base-broadening approach was adopted first, dramatic rate increasing would be quite inefficient.An important parameter in tax analysis is the “elasticity of taxable income” — which measures how the tax base changes as tax rates change. The reported income of high-income taxpayers responds to tax changes in part because it changes how much income they generate but more so because it increases sheltering incentives. Economics literature suggests that a 1 percentage point increase in top income rates decreases reported taxable income by perhaps 0.6 percent. So more than half of the potential income from raising rates is dissipated as individuals increase their tax avoidance activities and perhaps also reduce their income earning. As a result, the ratio of economic distortion to revenue raised is likely to be very high for rates pushed up to 70 percent, especially when one recognizes that Ocasio-Cortez’s proposal would mean a top income tax rate of well over 80 percent for residents of New York City.One benefit of the approaches we advocate is that broadening the income tax base may lead to lower elasticities by making it more difficult for the wealthy to shield income from taxation. Increasing top tax rates will have more potency in a world where the elasticity of the tax base to rate changes is lower.....The traditional tax reform approach of using the tax code to raise necessary government revenue as efficiently and progressively as possible, starting with base broadening, is the right first step forward. It may be that wealth taxes or very high-income tax rates are necessary to adequately fund appropriate government activities. But that is a conclusion should be reached carefully only after full exploitation of traditional alternatives, rather than in a spirit of joyous confrontation with the successful...."

Natasha Sarin and Lawrence Summers, "Fair, comprehensive tax reform is the right path forward,"Boston Globe, March 28, 2019, https://www.bostonglobe.com/opinion/2019/03/28/fair-comprehensive-tax-reform-right-path-forward/DwzX8IbqbRY5zxaCy2DoBI/story.html

Sunday, March 31, 2019

AI Summary. New York City full-service restaurants reported a 1.6% job loss, the first annual decline in two decades, which the article attributes to the $15/hr minimum wage. A New York City Hospitality Alliance survey found 76.5% of full-service restaurants cut employee hours and 36% eliminated jobs in response to higher labor costs.

Gregory Bresiger New York Post
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NYC’s restaurant industry is experiencing contraction due to the $15/hr minimum wage law, with full-service restaurants reporting a 1.6% job loss, the first annual decline in two decades.

Is a higher minimum wage cutting restaurant jobs and hours?

Core argument: New York City full-service restaurants reported a 1.6% job loss, the first annual decline in two decades, which the article attributes to the $15-per-hour minimum wage law.

NYC's restaurant industry is experiencing contraction due to the $15/hr minimum wage law, with full-service restaurants reporting a 1.6% job loss, the first annual decline in two decades. According to a survey by the NYC Hospitality Alliance, 76.5% of full-service restaurants reduced employee hours, and 36% eliminated jobs in 2018. Additionally, 75% of limited-service restaurants plan to cut hours, and 53% will eliminate jobs in 2019. These adjustments are responses to increased labor costs, prompting many establishments to raise prices. Despite these challenges, state officials argue that higher wages boost local economic activity by increasing consumer spending. However, the Hospitality Alliance warns that the industry, once a significant economic driver, is now stagnant, impacting hundreds of thousands of jobs and billions in economic output.

Takeaways by Macro Roundup® AI

  1. New York City full-service restaurants reported a 1.6% job loss, the first annual decline in two decades, which the article attributes to the $15-per-hour minimum wage law.
  2. In a NYC Hospitality Alliance survey, 76.5% of full-service restaurants reduced employee hours and 36% eliminated jobs in 2018, while 75% of limited-service restaurants planned to cut hours and 53% to eliminate jobs in 2019.
  3. State officials argue higher wages boost local economic activity through increased consumer spending, while the NYC Hospitality Alliance warns the restaurant industry is now stagnant, affecting hundreds of thousands of jobs and billions in economic output.

“…A once-growing industry is contracting, according to an online survey conducted by the New York City Hospitality Alliance, an association representing restaurants in the city. Last year, “full-service restaurants recorded a 1.6 percent job loss, which is the first recorded annual loss in two decades,” said Andrew Rigie, executive director of the trade group.The survey also said about a third of respondents will eliminate jobs and most will raise prices this year because of the new $15-an-hour law backed by Gov. Andrew Cuomo and other state officials, which took effect on Dec. 31, 2018.A total of 76.5 percent of full-service restaurant respondents reduced employee hours, and 36 percent eliminated jobs in 2018, the survey said.Also, 75 percent of limited-service restaurant respondents reported that they will reduce employee hours, and 53 percent will eliminate jobs in 2019 as a result of the wage increases, according to the survey.…”Gregory Bresiger, “The new minimum wage is killing NYC’s once-thriving restaurant scene,” New York Post, March 30, 2019, https://nypost.com/2019/03/30/the-new-minimum-wage-is-killing-nycs-once-thriving-restaurant-scene/The new minimum wage is killing NYC’s once-thriving restaurant scene New York City restaurants are eliminating jobs, reducing employee hours and raising prices due to the higher costs of the $15-per-hour minimum wage. A once-growing industry is contracting, according to an online survey conducted by the New York City Hospitality Alliance, an association representing restaurants in the city. Last year, “full-service restaurants recorded a 1.6 percent job loss, which is the first recorded annual loss in two decades,” said Andrew Rigie, executive director of the trade group. The survey also said about a third of respondents will eliminate jobs and most will raise prices this year because of the new $15-an-hour law backed by Gov. Andrew Cuomo and other state officials, which took effect on Dec. 31, 2018. A total of 76.5 percent of full-service restaurant respondents reduced employee hours, and 36 percent eliminated jobs in 2018, the survey said. Also, 75 percent of limited-service restaurant respondents reported that they will reduce employee hours, and 53 percent will eliminate jobs in 2019 as a result of the wage increases, according to the survey. The governor, through a spokeswoman, defended state policies: “All New Yorkers deserve to make a living wage and under the governor’s leadership, more minimum-wage workers than ever before have received an increase in their wages. The fact is that increasing the minimum wage puts more money in the pockets of hardworking New Yorkers, which creates more demand for local businesses and increases economic activity.” A spokeswoman for Mayor Bill de Blasio didn’t respond with a comment. The Hospitality Alliance said, “The results of this survey, and other industry trends, signal that a once-growing industry responsible for hundreds of thousands of jobs and billions of dollars in economic impact has become stagnant.”