Edward Conard

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  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
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  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, September 9, 2019

AI Summary. The Census Bureau's Official Poverty Measure excludes major government transfer programs and tax credits from income, which the author argues overstates the number of Americans counted as poor and disconnects the official rate from households' material well-being. The author urges counting refundable tax credits and means-tested food, housing, and health care assistance.

Matt Weidinger American Enterprise Institute
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The Census Bureau’s Official Poverty Measure (OPM) overestimates poverty by excluding major government transfer programs & tax credits from income calculations. @MattWeidinger

Does the official poverty measure overstate how many Americans are poor?

Core argument: The Census Bureau's Official Poverty Measure overstates the number of Americans counted as poor by excluding major government transfer programs and tax credits from its income calculations, according to the analysis.

The Census Bureau's Official Poverty Measure (OPM) significantly overestimates the number of Americans classified as "poor" by excluding major government transfer programs and tax credits from income calculations. This exclusion leads to a disconnect between the official poverty rate and the actual material well-being of low-income households. Recent proposals to expand uncounted public assistance programs could exacerbate this issue. Policymakers are urged to include benefits like refundable tax credits and means-tested food, housing, and health care assistance in the OPM. Such adjustments would offer a more accurate assessment of antipoverty spending effectiveness, the true needs of low-income households, and the potential impact of proposed benefits.

Takeaways by Macro Roundup® AI

  1. The Census Bureau's Official Poverty Measure overstates the number of Americans counted as poor by excluding major government transfer programs and tax credits from its income calculations, according to the analysis.
  2. Proposals to expand public assistance programs that the Official Poverty Measure does not count could worsen the disconnect between the official poverty rate and the material well-being of low-income households.
  3. Counting refundable tax credits and means-tested food, housing, and health care assistance in the Official Poverty Measure would give a more accurate assessment of antipoverty spending effectiveness and the needs of low-income households.

“….Despite its many well-recognized flaws, the Census Bureau’s Official Poverty Measure (OPM) remains one of the most cited measures of economic well-being in the US. Crucially, the OPM does not consider major—and rapidly growing—government transfer programs and tax credits when determining an individual’s income and thus overestimates the number of Americans who are officially “poor.” Recent proposals by leading Democratic policymakers to expand the types of public assistance programs not counted as income under the OPM would, if realized, worsen the already serious disconnect between the official poverty rate and the real level of material well-being of low-income households. Policymakers should instruct the Census Bureau to count currently uncounted benefits, such as refundable tax credits and means-tested food, housing, and health care assistance, as income under the OPM. Doing so would provide a more accurate picture of the effectiveness of current antipoverty spending and policy, the real needs of low-income households, and the merits of proposed new benefits….”

Matt Weidinger, "The Government's Official Poverty Data Miss An Increasing Share Of Antipoverty Spending," American Enterprise Institute, September 2019, https://www.aei.org/wp-content/uploads/2019/09/The-Governments-Official-Poverty-Data.pdf

Tuesday, September 10, 2019

AI Summary. The author argues that prolonged slow growth and low inflation in Japan and the West stem from a disappearance of borrowers rather than a shortage of lenders. Because monetary policy mainly affects the availability of financing, aggressive easing cannot revive growth when businesses and consumers are unwilling or unable to take on more debt.

Richard Koo Financial Times
Date Posted:
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Monetary policy becomes ineffective when there is no appetite for debt, as seen in Japan since 1990 and the West since 2008.

Do too few borrowers make aggressive monetary easing ineffective?

Core argument: Japan's slow growth and low inflation since 1990 and the West's since 2008 are attributed to the disappearance of borrowers rather than a shortage of lenders.

The extended periods of slow growth and low inflation in Japan since 1990 and in the West since 2008 highlight a critical issue: the disappearance of borrowers, not the lack of lenders, is the root cause. Monetary policy, which primarily influences the availability of financing, becomes ineffective when there is no appetite for debt. Despite central banks' efforts to stimulate economies through aggressive monetary easing, the lack of demand for borrowing stifles economic momentum. This phenomenon underscores the limitations of monetary policy in environments where businesses and consumers are unwilling or unable to take on additional debt, leading to prolonged economic stagnation and subdued inflationary pressures. The data suggests that without a corresponding increase in borrowing demand, monetary policy alone cannot drive significant economic recovery.

Takeaways by Macro Roundup® AI

  1. Japan's slow growth and low inflation since 1990 and the West's since 2008 are attributed to the disappearance of borrowers rather than a shortage of lenders.
  2. Without an increase in borrowing demand, aggressive monetary easing alone cannot drive significant economic recovery.

though you would enjoy this Koo sentence, "... The extended periods of slow growth and low inflation seen in Japan since 1990 and in the west since 2008 arecaused by the disappearance of borrowers, not by the lack of lenders. Monetary policy, which controls the availability of financing, does not work well when there is no appetite for debt...."

Richard Koo, "Why aggressive monetary easing is pushing on a string,"Financial Times, September 10, 2019, https://www.ft.com/content/e8bc69c2-d2d9-11e9-8367-807ebd53ab77