Macro Roundup

Te-Ping Chen and Hanna Sender, "What’s a Liberal Arts Degree Worth?," Wall Street Journal, May 10, 2019, https://www.wsj.com/articles/whats-a-liberal-arts-degree-worth-11557501301

What’s a Liberal Arts Degree Worth?

Ezekiel Dixon-Roman, Howard Everson and John McArdle, “Race, Poverty and SAT Scores: Modeling the Influences of Family Income on Black and White High School Students’ SAT Performance,” University of Pennsylvania, January 2013, https://www.researchgate.net/publication/280232788_Race_Poverty_and_SAT_Scores_Modeling_the_Influences_of_Family_Income_on_Black_and_White_High_School_Students'_SAT_Performance

Ed, she cites the 20% to a CBO lit review she did (Attached, see page 27), which in turn relies on a 2015 (also by her) that finds rents are closer to 10%.

"...A widely cited study by Gentry and Hubbard estimated that 60% of corporate profits represented earnings in excess of a risk-free return.Since some (perhaps most) of the excess return is a risk premiums and is part of the opportunity cost of capital (not excess profit), the excess profit share should be lower. Some evidence suggests that it is in the neighborhood of 10% to 20%....Moreover, the burden relates only to those firms that both have some excess profits and engage in bargaining. While bargaining may be common in some European countries, in the United States, where unions would be expected to do the bargaining, less than 7% of private wage and salary workers are covered by unions..."

Jennifer Gravelle, "Corporate Tax Incidence with Excess Profits," Government Accountability Office, 2015, https://www.ntanet.org/wp-content/uploads/proceedings/2015/160-gravelle-corporate-tax-incidence-effect.pdf

"....Most analysis of corporate tax incidence assumes that incidence will fall only on all owners of capital labor in the long run. In short run, corporate shareholders will bear the burden, until forces of supply and demand push the burden to the factors of production—capital via the return to owners and labor through wages. However, the presence of excess profits—those above the normal return on investment—in the long run could result in some share falling on corporate shareholders in the long run as well.Recently the Department of the Treasury adjusted their incidence assumptions to assume that 60 percent of profits are supra normal and thus that share of the burden falls on corporate shareholders, while the remaining 40 percent is split evenly between all owners of capital and labor. They based their assumption on two sources of estimates of excess profits. This paper provides new estimates of the share of profits that may be attributed to excess profits and that would therefore fall on corporate shareholders. The methodology uses data on intangible assets to allocate profits to investment sources and isolate potential excess profits. This study finds that estimates range widely according to data and specifications, but suggests that the share of corporate profits that are supra normal is modest and likely less than 20 percent...it is more likely that the share of profits that are excess or supranormal is much less, closer to 10 percent....."

Jane Gravelle, "Corporate Tax Reform: Issues for Congress," Congressional Budget Office, September 22, 2017,

"...here is a third alternative: back to “Finland Station,” with all the lessons of the past. This time, people get to vote. Well, debate and deliberate and then vote — and have faith that people can organize together to chart new destinations for humanity. Stripped down to its essence, and returned to its roots, socialism is an ideology of radical democracy. In an era when liberties are under attack, it seeks to empower civil society to allow participation in the decisions that affect our lives. A huge state bureaucracy, of course, can be just as alienating and undemocratic as corporate boardrooms, so we need to think hard about the new forms that social ownership could take. Some broad outlines should already be clear: Worker-owned cooperatives, still competing in a regulated market; government services coordinated with the aid of citizen planning; and the provision of the basics necessary to live a good life (education, housing and health care) guaranteed as social rights. In other words, a world where people have the freedom to reach their potentials, whatever the circumstances of their birth. We can get to this Finland Station only with the support of a majority; that’s one reason that socialists are such energetic advocates of democracy and pluralism. But we can’t ignore socialism’s loss of innocence over the past century. We may reject the version of Lenin and the Bolsheviks as crazed demons and choose to see them as well-intentioned people trying to build a better world out of a crisis, but we must work out how to avoid their failures. That project entails a return to social democracy. Not the social democracy of François Hollande, but that of the early days of the Second International. This social democracy would involve a commitment to a free civil society, especially for oppositional voices; the need for institutional checks and balances on power; and a vision of a transition to socialism that does not require a “year zero” break with the present. Our 21st-century Finland Station won’t be a paradise. You might feel heartbreak and misery there. But it will be a place that allows so many now crushed by inequity to participate in the creation of a new world...."
Bhaskar Sunkara, "Socialism’s Future May Be Its Past,"New York Times, June 26, 2017, https://www.nytimes.com/2017/06/26/opinion/finland-station-communism-socialism.html

Socialism’s Future May Be Its Past

One hundred years after Lenin’s sealed train arrived at Finland Station and set into motion the events that led to Stalin’s gulags, the idea that we should return to this history for inspiration might sound absurd. But there was good reason that the Bolsheviks once called themselves “social democrats.” They were part of a broad movement of growing parties that aimed to fight for greater political democracy and, using the wealth and the new working class created by capitalism, extend democratic rights into the social and economic spheres, which no capitalist would permit.

The early Communist movement never rejected this broad premise. It was born out of a sense of betrayal by the more moderate left-wing parties of the Second International, the alliance of socialist and labor parties from 20 countries that formed in Paris in 1889. Across Europe, party after party did the unthinkable, abandoned their pledges to working-class solidarity for all nations, and backed their respective governments in World War I. Those that remained loyal to the old ideas called themselves Communists to distance themselves from the socialists who had abetted a slaughter that claimed 16 million lives. (Amid the carnage, the Second International itself fell apart in 1916.)

Of course, the Communists’ noble gambit to stop the war and blaze a humane path to modernity in backward Russia ended up seemingly affirming the Burkean notion that any attempt to upturn an unjust order would end up only creating another.

Most socialists have been chastened by the lessons of 20th-century Communism. Today, many who would have cheered on the October Revolution have less confidence about the prospects for radically transforming the world in a single generation. They put an emphasis instead on political pluralism, dissent and diversity.

Still, the specter of socialism evokes fear of a new totalitarianism. A recent Victims of Communism Memorial Foundation report worries that young people are likely to view socialism favorably and that a “Bernie Sanders bounce” may be contributing to a millennial turn against capitalism. Last year, the president of the United States Chamber of Commerce, Thomas J. Donohue, even found it necessary to remind readers that “Socialism Is a Dangerous Path for America.”

The right still denounces socialism as an economic system that will lead to misery and privation, but with less emphasis on the political authoritarianism that often went hand in hand with socialism in power. This may be because elites today do not have democratic rights at the forefront of their minds — perhaps because they know that the societies they run are hard to justify on those terms.

Capitalism is an economic system: a way of organizing production for the market through private ownership and the profit motive. To the extent that it has permitted democracy, it has been with extreme reluctance. That’s why early workers’ movements like Britain’s Chartists in the early 19th century organized, first and foremost, for democratic rights. Capitalist and socialist leaders alike believed that the struggle for universal suffrage would encourage workers to use their votes in the political sphere to demand an economic order that put them in control.

It didn’t quite work out that way. Across the West, workers came to accept a sort of class compromise. Private enterprise would be tamed, not overcome, and a greater share of a growing pie would go to providing universal benefits through generous welfare states. Political rights would be enshrined, too, as capitalism evolved and adapted such that a democratic civil society and an authoritarian economic system made an unlikely, but seemingly successful, pairing.

In 2017, that arrangement is long dead. With working-class movements dormant, capital has run amok, charting a destructive course without even the promise of sustained growth. The anger that led to the election of Donald Trump in the United States and the Brexit vote in Britain is palpable. People feel as if they’re on a runaway train to an unknown destination and, for good reason, want back to familiar miseries.

Amid this turmoil, some fear a return to Finland Station via the avuncular shrugs of avowedly socialist leaders like Mr. Sanders and Jean-Luc Mélenchon in France. But the threat to democracy today is coming from the right, not the left. Politics seems to present two ways forward, both decidedly non-Stalinist forms of authoritarian collectivism.

“Singapore Station” is the unacknowledged destination of the neoliberal center’s train. It’s a place where people in all their creeds and colors are respected — so long as they know their place. After all, people are crass and irrational, incapable of governing. Leave running Singapore Station to the experts.

This is a workable vision for elites who look at the rise of an erratic right-wing populism with justified fear. Many of them argue the need for austerity measures to maintain a fragile global economy, and worry that voters won’t take their short-term pain to spare themselves long-term dysfunction. The same goes for the looming threat of climate change: The science is undisputed among scientists, but is still up for debate in the public sphere.

The Singapore model is not the worst of all possible end points. It’s one where experts are allowed to be experts, capitalists are allowed to accumulate, and ordinary workers are allowed a semblance of stability. But it leaves no room for the train’s passengers to yell “Stop!” and pick a destination of their own choosing.

“Budapest Station,” named after the powerful right-wing parties that dominate Hungary today, is the final stop for the populist right. Budapest allows us to at least feel like we’re back in charge. We get there by decoupling some of the cars hurtling us forward and slowly reversing. We’re all in this together, unless you’re an outsider who doesn’t have a ticket, and then tough luck.

The “Trump train” is headed this way. President Trump can’t offer tangible gains for ordinary people by challenging elites, but he can offer a surface-level valorization of “the worker” and stoke anger at the alleged causes of national decline — migrants, bad trade deals, cosmopolitan globalists. The press, academia and any other noncompliant parts of civil society are under attack. Meanwhile, other than having to adjust to more protectionism and restrictive immigration policies, it’s business as usual for most corporations.

But there is a third alternative: back to “Finland Station,” with all the lessons of the past. This time, people get to vote. Well, debate and deliberate and then vote — and have faith that people can organize together to chart new destinations for humanity.

Stripped down to its essence, and returned to its roots, socialism is an ideology of radical democracy. In an era when liberties are under attack, it seeks to empower civil society to allow participation in the decisions that affect our lives. A huge state bureaucracy, of course, can be just as alienating and undemocratic as corporate boardrooms, so we need to think hard about the new forms that social ownership could take.

Some broad outlines should already be clear: Worker-owned cooperatives, still competing in a regulated market; government services coordinated with the aid of citizen planning; and the provision of the basics necessary to live a good life (education, housing and health care) guaranteed as social rights. In other words, a world where people have the freedom to reach their potentials, whatever the circumstances of their birth.

We can get to this Finland Station only with the support of a majority; that’s one reason that socialists are such energetic advocates of democracy and pluralism. But we can’t ignore socialism’s loss of innocence over the past century. We may reject the version of Lenin and the Bolsheviks as crazed demons and choose to see them as well-intentioned people trying to build a better world out of a crisis, but we must work out how to avoid their failures.

That project entails a return to social democracy. Not the social democracy of François Hollande, but that of the early days of the Second International. This social democracy would involve a commitment to a free civil society, especially for oppositional voices; the need for institutional checks and balances on power; and a vision of a transition to socialism that does not require a “year zero” break with the present.

Our 21st-century Finland Station won’t be a paradise. You might feel heartbreak and misery there. But it will be a place that allows so many now crushed by inequity to participate in the creation of a new world.

Richard Freeman on the failure of Swedish socialism

".... The Swedish economic model is perhaps the most ambitious and publicized effort by a capitalist market economy to develop a large and active welfare state. For a long time, many viewed the Swedish model as a more humane and successful form of capitalism and thus as a model for other countries to emulate. This view was shaken when Sweden fell into severe economic crisis in the early 1990s. Between 1990 and 1993, open unemployment rose from 1.4 percent to 9 percent of the labor force. An additional 5 percent of the labor force participated in labor market programs so that 14 percent of the labor force was jobless. The employment rate fell by 12 percentage points from its precrisis peak. The economic decline brought government spending above 70 percent of national income, raised the budget defi cit to 12 percent of gross domestic product (GDP), and forced the government to reduce public- sector employment. Between 1990 and 1994, the ratio of debt to GDP doubled. Even before the crisis, however, Sweden’s economic performance was not exemplary. Slow productivity growth had eroded Sweden’s position in real per capita income relative to other Organization for Economic Cooperation and Development (OECD) countries; private- sector employment had not grown since the 1960s; and recurring current account defi cits led to currency devaluations. The Swedish model was no longer anyone’s envy..."

Richard Freeman, Birgitta Swedenborg, and Robert Topel, "Reforming the Welfare State: Recovery and Beyond in Sweden," National Bureau of Economic Research, February 2010, https://www.nber.org/chapters/c5357.pdf