Macro Roundup

great WSJ chart comparing “final private-market rounds, initial public offerings and market cap at end of IPO year”of the decade’s unicorns. Unicorns that went public btw 2015-2019 were valued at $203.7 billion in their final private funding rounds, and $211.4 billion at the end of the years in which they went public.not great in context of the S&P over that time period.

Erik Hurst finds women today still choose college majors associated with lower potential wages than men and college major choice has strong predictive power in explaining gender wage gaps independent of occupation choice

“…In this paper, we document....(1) Over the past 40 years, men and women have chosen more similar undergraduate majors. (2) Women have historically chosen college majors associated with lower potential wages than men. Although these gaps have narrowed over time, this is still true for women in the youngest birth cohorts. (3) There are gender differences in the mapping of major to occupation. Women systematically choose lower potential wage and lower potential hours-worked occupations than men even conditional on major. (4) There is a modest convergence between the 1950 and 1990 birth cohorts in the gendered mapping of major to occupation. (5) College major choice has strong predictive power in explaining gender wage gaps independent of occupation choice. These trends arise in an era where both labor force participation of women and the fraction of women that have graduated from universities has increased dramatically, fundamentally changing the composition of the educated workforce....These results show that not only has their been a gender convergence in pre-labor market specialization (college major) and post-schooling specialization (occupational choice), there has also been a gender convergence in the mapping from major choice to occupation. Compared to their predecessors, younger women are in occupations that are closer in potential wages to those chosen by male peers with the same major. We also show that the potential desire for lower hours worked on the part of women explains part, but not all, of these patterns...Over all, we find that controlling jointly for major choice and occupational choice explains roughly 40 percent of the cross-birth cohort decline in the wage gap….”

Carolyn Sloane, Erik Hurst, and Dan Black, " A Cross-Cohort Analysis of Human Capital Specialization and the College Gender Wage Gap," National Bureau of Economic Research, October 2019, https://www.nber.org/papers/w26348

“…She’s the candidate with a plan for everything: That’s Elizabeth Warren’s brand. But even that sells her ambitions short, as we discovered after a tour of her 60-some policy papers. Ms. Warren is proposing a transformation of American government, business and life that exceeds what the socialist dreamers of a century ago imagined. Her standing in the polls has fallen after missteps over Medicare, but she is still in the top candidate tier. Her ideas deserve to be taken seriously because they show where the American left wants to go…”

Editorial Board, "Elizabeth Warren Has a Plan, Oh My," Wall Street Journal, December 27, 2019, https://www.wsj.com/articles/elizabeth-warren-has-a-plan-oh-my-11577404548

Elizabeth Warren Has a Plan, Oh My

She’s the candidate with a plan for everything: That’s Elizabeth Warren’s brand. But even that sells her ambitions short, as we discovered after a tour of her 60-some policy papers. Ms. Warren is proposing a transformation of American government, business and life that exceeds what the socialist dreamers of a century ago imagined.

Her standing in the polls has fallen after missteps over Medicare, but she is still in the top candidate tier. Her ideas deserve to be taken seriously because they show where the American left wants to go:

***

• Wealth tax: Tax net worth over $50 million at 2% a year, and 6% above $1 billion. To prevent the rich from yachting off, add a 40% “exit tax” on assets over $50 million upon renouncing U.S. citizenship. Estimated revenue: $3.75 trillion over a decade from 75,000 households. Most economists, including many Democrats, call that number a fantasy. Courts might also find the tax unconstitutional.

• Medicare for All tax: Charge companies with at least 50 workers an “Employer Medicare Contribution,” equal to 98% of their recent outlays on health care, while adjusting for inflation and changes in staff size. These varying fees “would be gradually shifted to converge at the average health care cost-per-employee nationally.” Estimated revenue: $8.8 trillion over a decade. If receipts fall short, add a “supplemental” tax on “big companies with extremely high executive compensation and stock buyback rates.”

• Global corporate tax: Raise the top business rate to 35%. Apply this as a world-wide minimum on overseas earnings by U.S. companies. Businesses would “pay the difference between the minimum tax and the rate in the countries where they book their profits.” Apply a similar minimum tax to foreign companies, prorated by the share of their sales made in the U.S. Estimated revenue: $1.65 trillion over a decade.

• Corporate surtax: Tax profit over $100 million at a new 7% rate, without exemptions. This would go atop the regular corporate rate. Estimated revenue: $1 trillion over a decade from 1,200 public companies.

• Slower expensing: “Our current tax system lets companies deduct the cost of certain investments they make in assets faster than those assets actually lose value.” Closing this “loophole,” she says, would raise $1.25 trillion over a decade.

• Higher capital gains taxes: Tax the investment gains of the wealthiest 1% as ordinary income, meaning rates near 40% instead of today’s 23.8%. Apply the tax annually on gains via a “mark to market” system, even if the asset hasn’t been sold. Estimated revenue: $2 trillion over a decade.

• Finance taxes: Tax the sale of bonds, stocks and so forth at 0.1%. Estimated revenue: $800 billion over a decade. Charge big banks a systemic risk fee, raising $100 billion more.

• Individual tax increases: There’s no detailed proposal, but Ms. Warren’s clean-energy plan is “paid for by reversing Trump’s tax cuts for the wealthiest individuals and giant corporations.” She’s budgeted $1 trillion.

• Social Security: Increase benefits by $2,400 a year across the board. Raise them further “for lower-income families, women, people with disabilities, public-sector workers, and people of color” by changing “outdated” rules that Ms. Warren says disadvantage them.

Pay for this by lifting the 12.4% Social Security payroll tax, which today covers wages below $132,900, to 14.8% on wages above $250,000. Establish a matching 14.8% surcharge on net investment income, paid by those earning more than $250,000.

• Lobbying tax: Tax “excessive lobbying” over $500,000 a year at rates up to 75%. Ms. Warren says this would have raised $10 billion over the past decade, although it probably runs headlong into the First Amendment’s right to petition the government. Use the revenue for “a surge of resources to Congress and federal agencies.”

***

• Medicare for All: Mandate government coverage for everyone, including for illegal immigrants, with no copays or deductibles. Phase out the private plans of 170 million Americans. She says this would cost $20.5 trillion over a decade, which most economists say is $10 trillion short of reality. Keep the growth of health spending below 4% a year with tools like “population-based budgets” and “automatic rate reductions.” Pay doctors at “Medicare rates” and hospitals at 110% of that.

This means cutting payments 25% or more relative to private insurance, per the Mercatus Center’s Charles Blahous. Trim rates further on “overpaid specialties.” To save 70% on branded prescriptions, “negotiate” with drug makers by threatening excise taxes and “public manufacturing” after “overriding the patent.”

• Green New Deal: Spend $3 trillion, including $1.5 trillion on industrial mobilization, $400 billion on research, and $100 billion on a Marshall Plan. By 2030 hit 100% carbon-neutral power and 100% zero-emission new cars. Retrofit “4% of houses and buildings every year.” For “environmental justice,” put a third of the funds into “the most vulnerable communities.”

• An end to fossil fuels: Ban fracking. Halt new drilling leases on federal land. “Prohibit future fossil fuel exports.” Kill the Keystone XL and Dakota Access pipelines. “Subject each new infrastructure project to a climate test.” Give “workers transitioning into new industries” a “guaranteed wage and benefit parity” and “promised pensions and early retirement benefits.”

• K-12 education: Add $450 billion to Title I, $200 billion for students with disabilities, $100 billion for “excellence grants,” and $50 billion for school upgrades. “End federal funding for the expansion of charter schools.”

• A “right” to child care: Build a federal network of local providers, subject to national standards. Give free care to the “millions of children” whose households are under 200% of poverty, or $51,500 for a family of four. For everyone else, cap child-care spending at 7% of income. Estimated cost: $700 billion.

• Free college: “Give every American the opportunity to attend a two-year or four-year public college without paying a dime in tuition or fees.” Add $100 billion to Pell Grants and $50 billion for historically black colleges, tribal schools and more. Estimated cost: $610 billion.

• Student-debt forgiveness: Write off $50,000 for households with incomes under $100,000. This would phase out as income rises toward $250,000. Estimated cost: $640 billion.

• Housing: Spend $500 billion “to build, preserve, and rehab” millions of affordable-housing units. Condition such funding “on repealing state laws that prohibit local rent control.” Paid for by lowering the death-tax exemption to $7 million from $22 million per couple. At the same time, “raise the tax rates above that threshold.”

***

• Unions: Overturn “so-called ‘right to work’ laws” in 27 states. Guarantee public employees an ability to “bargain collectively in every state.” Amend labor law to aid “sectoral bargaining.” Give the National Labor Relations Board “much stronger” powers, such as “to impose compensatory and punitive damages.”

• Corporate governance: Make companies with revenue over $1 billion obtain a new federal charter—separate from the current state charter system—that requires them to “consider the interests of all corporate stakeholders.” Give workers 40% of board seats, and put CEOs under “a new criminal negligence standard.”

• Industrial policy: Manage the dollar’s value “more actively” to “promote exports and domestic manufacturing.” Create a Department of Economic Development, and have it write a National Jobs Strategy. Expand the Export-Import Bank. Impose a “border carbon adjustment” fee—that is, new tariffs—on imports from countries that don’t align with U.S. climate policies.

• Antitrust: Break up Amazon, Facebook and Google. “Unwind” their mergers with Whole Foods, Instagram, DoubleClick and more. Regulate as a “platform utility” any online marketplace with global revenue of $25 billion. Reverse agriculture consolidation, “including the recent Bayer-Monsanto merger,” and create a “supply management program” to “guarantee farmers a price at their cost of production.”

• Banking: Pass “a 21st Century Glass-Steagall Act that breaks up the big banks.” Let the U.S. Postal Service “partner with local community banks” to provide “basic banking services like checking and savings accounts.”

***

• Gun control: Create a “federal licensing system for the purchase of any type of firearm or ammunition.” Raise taxes to 30% on guns and 50% on ammo. Ban sales of “assault weapons,” and make current owners “register them under the National Firearms Act.” Pass a law to let shooting victims “hold the manufacturer of the weapon that harmed them strictly liable.”

• Centralized elections: Use federal money to “replace every voting machine in the country.” For federal elections, mandate early voting and same-day registration. If state elections follow the same rules, they can be “fully funded by the federal government,” with “a bonus for achieving high voter turnout.” Estimated cost: $20 billion, paid by “closing loopholes” in the death tax.

• Miscellaneous: Spend $100 billion “to end the opioid crisis,” $85 billion “to massively expand broadband access,” $25 billion on “health professional shortage areas,” and $7 billion “to close the gap in startup capital for entrepreneurs of color.” Double the foreign service and the Peace Corps.

Give congressional staff “competitive salaries.” Recruit 10,000 people to “a 21st Century Civilian Conservation Corps.” End entry fees at national parks. Buy flood-prone houses “for low-income homeowners at a value that will allow them to relocate.” Plus much more.

***

All of this adds up to such an expansion of government that the temptation is to dismiss it as fanciful. But Ms. Warren is a shrewd and disciplined politician who isn’t supporting these ideas on an ideological whim. She believes they have enough political support to help her win the Democratic nomination and then the White House against a vulnerable Donald Trump.

Her only real policy difference with Bernie Sanders is that she has the courage to offer more details. As for getting it all enacted, she has a plan for that, too: Kill the legislative filibuster, so she can pass her agenda with a simple Senate majority.

The question for Democrats: Is this the agenda they want to put forward in 2020? Or will Ms. Warren’s radical plans scare voters into resorting to Mr. Trump again?