Macro Roundup

Scott Winship and Rachel Sheffield, “The Demise Of The Happy Two-Parent Home,” United States Joint Economic Committee, July 23, 2020, https://www.jec.senate.gov/public/index.cfm/republicans/analysis

"...It is possible that the earlier, roughly 20-year, decline in male pay reduced marriage and increased single parenthood over the 1970s, 1980s, and early 1990s, and then cultural or other factors continued these trends once pay started rising again. But there is nothing in the marriageable men hypothesis as typically stated that would predict an asymmetric response of marriage to men’s economic circumstances, where declining pay reduces marriage but rising pay does not increase it. Perhaps men born in the 1950s and 1960s were less marriageable, single parenthood became more normal, and men born in the 1970s and 1980s were socialized by their parents into different attitudes about marriage and single parenthood. The marriageable men hypothesis may fare better if more nuanced thresholds are invoked. One possibility is that what matters is how men are doing relative to how the previous generation of men were doing. Harvard economist Raj Chetty and his research team have found that the share of men with individual income that exceeds their father’s at the same age fell dramatically over time.65 Figure 15, based on our modification of their estimates, shows that while 95 percent of thirty-year-olds in 1970 exceeded their father’s income, by 2014 just 44 percent did (see the right axis).66 In only five years after 1990 did half of men surpass their father, a threshold shown by the bolded dashed line.The trend is similar if one instead computes the ratio of two median annual individual incomes—that of non-Hispanic men ages 25 to 29, and that of non-Hispanic men the same age thirty years earlier (also shown in Figure 15).67 Men in their late 20s in 1969 earned 3.6 times what their counterparts did in 1939. By 1979, the ratio had plummeted to 1.7, indicating that young men were 70 percent richer than young men in 1949 were. The figure was just 12 percent by 1989. At some point in the 1990s, the ratio reached one, indicating that the median personal income for young men was no higher than for young men thirty years earlier. The ratio dipped below one from 2001 to 2012. (Note, however, that these estimates do not take taxes into account, which have fallen over time.) In 2013, the median late-twentysomething male was finally once again better off than his counterpart thirty years earlier. That remained the case in 2018, though only barely. The dramatic declines in Figure 15, however, primarily reflect how poor men were around 1940 and 1950, which made it relatively easy for men around 1970 and 1980 to exceed those incomes. Marriage rates were high and single parenthood rare in the 1940s and 1950s. Further, it is difficult to imagine that young women in 1979 looked at men who were 70 percent richer than the previous generation of young men had been and found them wanting because they were not 260 percent richer (as was the case for young men ten years earlier). And the ratio of medians was about the same in 2018 as in 1989, though marriage kept falling during this period, and single parenthood kept rising. Another possible threshold for marriageability is that a husband should make sufficiently more than his would-be wife. Figure 16 shows the trend in the ratio of two hourly pay medians—that of non-Hispanic men ages 25 to 29, and that of non-Hispanic women in the same age range.68 In both 1973 and 1980, the male median was 40 percent higher than the female median, but the ratio dropped fairly steadily from 1980 through 1995. In both 1995 and 2019, men had an 11 to 12 percent advantage over women. That stability, while family instability continued to rise, weakens the case that marriageability is about what men make relative to women...."

“…Whether there is anything to the marriageable men hypothesis depends centrally on the thresholds for marriageability that women have applied and how many men have been able to reach those thresholds. The simplest threshold might be that men must bring to the table at least a minimum level of purchasing power. One way to assess whether fewer men have achieved that level is to consider trends in inflation-adjusted after-tax hourly compensation among young men, as in Figure 13.56 We confine our analyses to non-Hispanic men to isolate trends in marriageability from changes in population demographics over time. The chart displays three trends for non-Hispanic men between the ages of 25 and 29—one for median pay (where half of men make more and half make less), one for the 30th percentile of pay (where 70 percent of men make more), and one for the 10th percentile of pay. Hourly pay is available in this data only back to 1973. In Figure 13, all pay rates are scaled so that the 1973 rate is equal to 100. The inflation-adjusted hourly pay of young non-Hispanic men declined sharply between 1973 and the early- to mid-1990s. At its low point, in 1995, the median was down 17 percent. (The 1973 level was probably higher than it had even been to that point.58) The 10th and 30th percentiles fell as much as 22 to 23 percent.59 One caveat to these twenty-year trends is that in supplemental analyses not shown here, we found that these large declines were much less pronounced among middle-aged men. Among non-Hispanic men between the ages of 35 and 44, median hourly take-home pay dipped below the 1973 level in 1974 and 1996, but it was otherwise always at least as high as in 1973. Through the mid-1990s, the 30th percentile was never more than 5 or 6 percent lower than in 1973 and was above the 1973 level from 1975 to 1989. The 10th percentile fell more consistently between 1973 and the mid-1990s, but it bottomed out only 11 to 12 percent lower than in 1973. Even among men ages 30 to 34, the median never fell by more than 10 percent, and the 10th percentile was never lower than 16 percent of its 1973 level….Regardless of the causes, it does appear that fewer young men would have been able to meet a fixed absolute threshold for marriageability over the course of the 1970s, 1980s, and early 1990s. However, the simplest version of this hypothesis runs into a problem after the mid-1990s, as the pay of young men has recovered over the past 25 years. This quarter century has been marked by two strong periods of wage growth—the late 1990s boom, and the recent, pre-pandemic expansion—and by the Great Recession. Median pay exceeded its 1973 level from 2001 to 2010 (except in 2007), and in 2018 and 2019. Like the median, pay at the 10th percentile was higher than ever before in 2019 (essentially at its 2002 level), though last year the 30th percentile remained a percentage point lower than in 1973….”

He also argues that the argument that men have become less “marriageable” isn’t supported by the evidence, that men are choosing not to get married because rising affluence/loosening of moral constraints has resulted in higher opportunity costs of being married. (He notes this is speculative)

Mark Jamison, "5 questions for the Big Tech CEOs," American Enterprise Institute, July 23, 2020, https://www.aei.org/technology-and-innovation/5-questions-for-the-big-tech-ceos/

(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)

For the benefit of the country, I hope the CEOs are ready and that the members of the committee are open to learning.

If any of these Big Tech firms are forcibly made less successful, small businesses that have been built using Big Tech APIs and advertising capabilities will be threatened. For the benefit of Congress, the CEOs should be ready with compelling stories of entrepreneurs, communities, and employees who have benefited because the cost of starting and growing a business is lower now than ever before.

It’s easy to tell stories about businesses that believe they would be more successful if a Big Tech company had behaved differently. Victimhood can make a compelling story, even when it’s untrue. But the futures of many businesses are at stake in this debate.

Some of you are accused of hindering rivals by discriminating against them. Recent accusations include those against Apple for its app store, Google for its algorithms, and Amazon for its Marketplace, all supported with anecdotal evidence. What counterexamples do you have of companies that are able to exist, or are more successful, because of the services you have provide?

It appears that Section 230 has been essential for much of the innovation in social media and other platforms. I have arguedbeforethat great intellectual growth requires grappling with uncomfortable ideas, even false or hateful ones. But as long as tech companies are involved in trying to shape the content on their platforms, there is need for clarity on what content modification is or isn’t allowed under Section 230. For the benefit of Congress, the CEOs should explain which actions should be protected from liability and which should not.

Some social media platforms are filtering, adding to, or taking from content posted by some users. Putting aside questions of political bias, a more important question is whether this moderation is contrary to the spirit, if not the letter, of Section 230 (of the Communications Decency Act). What legal standards should Congress establish so that it is clear when platforms are simply hosting others’ information versus when platforms are doing more than that?

I’vewrittenabout this from a business success perspective, indicating that companies from Asia would benefit significantly. The CEOs might also want to point out that expanding antitrust could be a win for those that want to politicize antitrust (i.e. use the Department of Justice and Federal Trade Commission to go after enemies). We have already seen how politicizing the IRS, FBI, banking regulation, and the appointment of judges has deepened the country’s political divide. For the benefit of Congress, the CEOs should explain that consumers benefit when the companies compete for customers rather than gratify politicized enforcement agencies.

Suppose we expanded the authority of antitrust agencies, so much so that they could legally break up Big Tech companies. Who would benefit?

Two years ago, Zoom’s share of video conferencing serviceswas25 percent. Now, its customer growth rate isover350 percent, and its share hasclimbedto 36 percent. For the benefit of Congress, the CEOs should explain that no tech company, no matter how large, can rest on its laurels, and that this benefits consumers.

Competition for the future means existing companies and startups are racing to create the next big thing. Apple did this in creating the iPhone, Google did so in redefining search, etc. There are new companies that seem to believe tech markets are ripe for the picking. TikTok waslaunchedless than four years ago and is now ninth in active users among social network sites, ahead of LinkedIn, Twitter, and Snapchat. It is growing faster than Facebook did when it started.

Most people understand that the tech industry is about disruption. Who are the new disruptors that could change the shape of this industry?

Competition in tech is different than in other sectors: It moves faster and is future oriented, and competitive pressure comes from various directions. I describe these and other differenceshereandhereand in recent law journal articles (hereandhere). This novelty can cause some to see illusions of monopoly. For the benefit of Congress, the CEOs should explain in clear terms (with concrete evidence) that they face meaningful competitive pressure.

People accuse you of being monopolies facing no serious competition. Name your three most significant competitors and how antitrust agencies can objectively know they are truly competitive threats.

In addition to providing drama, hearings sometimes can reveal how witnesses think and the challenges they face, and expose what is at stake for the country. Here are five questions the committee might ask the CEOs and my thoughts on how they might respond.

On Monday, the House Judiciary Committeewill holda hearing featuring the CEOs of Apple, Amazon, Facebook, and Alphabet. Such hearings always evoke drama: The New York Timesdescribesit as Congress uniting to take aim at the companies. Politicodescribesthe power struggles in Congress and between advocacy groups over the shape of the hearing. MarketWatchcallsit a grilling of the CEOs.

5 questions for the Big Tech CEOs

Good chart

“….looking at how the stock of lending by banks and non-banks has slowly changed. America has deleveraged since the financial crisis(see chart 2). That wasalmost wholly driven by the decline in mortgage debt, held by both banks and non-banks. Corporate debt, though, has reached an all-time high, and the bulk of activity has still been facilitated by shadow banks. Of the stock of debt that companies have added since 2012, that lent by banks has increased by just 2 percentage points of gdp. The stock that the non-bank sector holds has risen by 6 percentage points.Even though banks are now flush with capital and liquidity it is the capital markets that have financed the bulk of the increase in corporate debt. A notable shift has taken place in the rest of the world, where capital markets have historically played a smaller role. Since the crisis these have expanded. In 2007 global non-bank financial assets stood at $100trn, equivalent to 172% of gdp and 46% of total financial assets, according to the Financial Stability Board (fsb), a grouping of regulators. Now these assets, at $183trn, constitute 212% of gdp, or 49% of the world’s financial assets….”

Economist Staff, "Banks lose out to capital markets when it comes to credit provision,"The Economist, July 25, 2020, https://www.economist.com/finance-and-economics/2020/07/25/banks-lose-out-to-capital-markets-when-it-comes-to-credit-provision

“Being Antiracists,” National Museum Of African American History And Culture, Accessed July 27, 2020, https://nmaahc.si.edu/learn/talking-about-race/topics/being-antiracist

Here is the full text of the note: “One consequence of aggressive Fed support to credit markets and long periods of low interest rates is that it interferes with the process of creative destruction and keeps companies alive that would otherwise have gone out of business. Since the 2008 financial crisis, leverage in the corporate sector has increased significantly, andthe share of companies in the United States which have debt servicing costs that are higher than profits has continued to increase, see chart below. This trend with a rising share of firms with an interest coverage ratio less than one is likely to continue going forward given the Fed’s commitment to keeping rates low and the ongoing support from the Fed to credit markets, see also here. This is a macroeconomic problem because zombie firms are less productive, and their existence lowers investment in and employment at more productive firms. In short, one side effect of central banks keeping rates low for a long time is that it keeps more unproductive firms alive, which ultimately lowers the long-run growth rate of the economy.”

Torsten Slok, “US: Rising Share Of Companies With Debt Servicing Costs That Are Higher Than Profits,” Deutsche Bank, June 14, 2020

Ryan Banerjee and Boris Hofmann, “The Rise Of Zombie Firms: Causes And Consequences,” Bank Of International Settelments, September 2018, https://www.bis.org/publ/qtrpdf/r_qt1809g.pdf