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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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
  • “…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


Friday, March 5, 2021

AI Summary. The American Rescue Plan is estimated at $1.9tn over a decade, but making its one-year child-related tax provisions permanent — expansions of the child tax credit, earned income tax credit, and child and dependent care credit — could raise the cost 75% to $3.3tn. Permanent extension could add nearly $200bn annually to the federal deficit by the decade's end.

Alex Brill American Enterprise Institute
Date Posted:
Is Database:
Database

@AlexBrill American Rescue Plan’s child-related tax provisions could increase costs by 75% to $3.3tn over next decade, adding $200bn to federal deficit annually by decade’s end.

How much would extending temporary tax provisions raise the relief bill's cost?

Core argument: The House-passed American Rescue Plan is estimated at $1.9tn over the next decade, and making its child-related tax provisions permanent could raise the cost by 75% to $3.3tn.

The House-passed American Rescue Plan (ARP) is estimated at $1.9tn over the next decade, but making its child-related tax provisions permanent could increase costs by 75% to $3.3tn. This includes expansions of the child tax credit (CTC), earned income tax credit (EITC), and child and dependent care credit, initially intended for one year to support economic security during the pandemic. If these provisions are extended permanently, the federal deficit could rise by nearly $200bn annually by the decade's end. Additionally, other temporary measures, like increased premium assistance for certain health insurance buyers, are also on the agenda for permanent extension, potentially adding hundreds of billions more to the total cost. This reflects a strategic use of budget reconciliation tactics, similar to those employed in past legislative efforts.

Takeaways by Macro Roundup® AI

  1. The House-passed American Rescue Plan is estimated at $1.9tn over the next decade, and making its child-related tax provisions permanent could raise the cost by 75% to $3.3tn.
  2. Permanently extending the American Rescue Plan's child tax credit, earned income tax credit, and child and dependent care credit expansions, initially set for one year, could raise the annual federal deficit by nearly $200bn by the decade's end.
  3. Other temporary American Rescue Plan measures proposed for permanent extension, including increased premium assistance for certain health insurance buyers, could add hundreds of billions more to the total cost.

Alex Brill estimates cost of making several recent, and prospective ARP provisions permanent, “…Therefore, a better estimate of the cost of the House-passed American Rescue Plan is a permanent extension of the increased tax benefits. The benefits related to children would alone raise the total cost by roughly 75 percent from $1.9 trillion to $3.3 trillion over 10 years….”

Alex Brill, "The American Rescue Plan’s likely cost is way more than $1.9 trillion," American Enterprise Institute, March 4, 2021, https://www.aei.org/economics/the-american-rescue-plans-likely-cost-is-way-more-than-1-9-trillion/

The American Rescue Plan’s likely cost is way more than $1.9 trillion

The Senate is poised to consider President Biden’s American Rescue Plan, an elaborate bill recently passed by the House of Representatives through the budget reconciliation process at an estimated cost of $1.9 trillion over the coming decade.

However, as lawmakers know well, there is a deep well of budget tactics that can “leverage” any budget reconciliation instructions into a much larger set of tax and/or spending policies. For example, Democrats cried foul in 2017 when Republican-led tax reform, also enacted through the budget reconciliation process, included temporary changes (through 2025) to fit within the requirements of that year’s governing budget resolution.

The current Democrat-led effort leverages these tactics tenfold. Expansions of the child tax credit (CTC), earned income tax credit (EITC), and the child and dependent care credit would be enacted for just a single year under the guise of promoting economic security during the pandemic. However, the Wall Street Journal recently reported on Democrats’ desire to make permanent the CTC expansion. In addition, the House passed a permanent version of their expansion of the child and dependent care credit last year, and it is unfathomable to imagine Congress letting the one-year EITC expansion lapse post-2021.

Therefore, a better estimate of the cost of the House-passed American Rescue Plan is a permanent extension of the increased tax benefits. The benefits related to children would alone raise the total cost by roughly 75 percent from $1.9 trillion to $3.3 trillion over 10 years.

Some of the other temporary provisions will likely (hopefully!) lapse after 2021, including the $1400-per-person rebate check. Others, such as increased premium assistance for individuals with incomes between 100 and 400 percent of the federal poverty level who purchase qualified health insurance, are on Democrats’ wish list for a permanent extension. Extending these provisions would further boost the total cost of this bill by hundreds of billions.

The table below presents an estimate of the 10-year cost of the child-related tax provisions if they were made permanent compared to the one-year cost of the temporary policy.

The American Rescue Plans likely cost is way more than 1.9 trillion: Extended Excerpt Image 1


* I consider only the temporary EITC provisions not including the proposal to allow taxpayers to rely on 2019 income instead of 2020 income for tax year 2021.

** Author’s calculations based on estimates derived from AEI’s OSPC Tax-Calculator 3.0.0. Baseline is the law currently in place as of March 3, 2021 and provisions are assumed effective 01/01/2021.

The merits of these policies can all be fairly debated (see here for one in-depth review of the tax benefits of parenthood and here for an important explanation of the CDCTC), but the likely fiscal impact needs to be rightly recognized. While many policy experts and politicians debate if $1.9 trillion is too much or just right, the reality is enacting this legislation will lead to an annual increase in the federal deficit of near $200 billion annually by the end of the decade. It should not surprise us that Democrats are leveraging the gamesmanship opportunities of budget reconciliation, and we should remember that they learned some of these strategies from Republicans!

AI Summary. Child allowances are estimated to reduce employment among single mothers by 3-4 percentage points through income effects that make not working easier; applying an estimated income elasticity of -0.18, a $6,000 annual allowance would cut hours worked 2.7%, affecting 167,000 families. The author argues welfare reform offers better options for reducing child poverty without risking employment.

Scott Winship American Enterprise Institute
Date Posted:
Is Database:
Database

Child allowances could reduce employment rates among single mothers by 3-4% points, driven by income effects that make it easier for parents not to work. @SWinshi, American Enterprise Institute.

Do child allowances reduce employment among single mothers?

Core argument: Child allowances could reduce employment rates among single mothers by 3–4 percentage points through income effects that make it easier for parents not to work.

The introduction of child allowances could reduce employment rates among single mothers by 3-4 percentage points, driven by income effects that make it easier for parents not to work. Burtless estimated an income elasticity of -0.18, suggesting a 10% income increase from benefits leads to a 1.8% decline in hours worked among female heads of households with children. Applying this to current figures, a $6,000 annual allowance could reduce hours worked by 2.7%, equivalent to a 2-point drop in employment for single mothers, affecting 167,000 families. This reduction is significant compared to the potential poverty alleviation, as it represents 17% of the employment increase among single mothers from 1989-2019. Welfare reforms have shown better options for reducing child poverty without risking employment rates, as seen with the rise in single-mother employment from 58% in 1992 to 71% in 2000 post-reform.

Takeaways by Macro Roundup® AI

  1. Child allowances could reduce employment rates among single mothers by 3–4 percentage points through income effects that make it easier for parents not to work.
  2. Burtless estimated an income elasticity of -0.18, implying that a 10% income gain from benefits reduces hours worked by 1.8% among female heads of households with children.
  3. Applying Burtless's elasticity, a $6,000 annual allowance could cut hours worked by 2.7%, equivalent to a 2-point employment drop for single mothers affecting 167,000 families and 17% of their 1989–2019 employment increase.

Winship makes the case against child allowance. This is largely a lit review, he basically finds that the evidence is neither overwhelmingly in favor or against the view that child allowances will reduce work and increase single parenthood. But there are plenty of reasons for concern, "....But the concerns of conservative antipoverty researchers are primarily about income effects. We worry that safety-net policy might make it easier for parents to not work or to be single......analysis is oblivious to income effects because he assumes away the complicated preferences and messy lives of real-life parents...In short, even the relatively short-term studies reviewed here provide reason to think that the introduction of child allowances could reduce employment rates among single mothers by 3 or 4 percentage points, and they are not well designed to assess longerterm effects.The research that has been cited to dismiss concerns about disemployment hardly should be reassuring. The correct interpretation of the evidence available is that it is ambiguous; different people with different priors can point to this or that study if they are intent on asserting a claim about the impacts of a novel program, but strong statements are not justifiable based on a comprehensive assessment of the literature…”

Core of his analysis using Brookings analysis of the negative income tax experiments, his conclusion here is worth quoting to describe the underlying dynamic of his concerns"...Burtless estimated the income elasticity at -0.18, indicating (roughly) that a 10 percent increase in income from the NIT benefits led to a 1.8 percent decline in hours worked among female heads of households with children. We can apply this estimate to contemporary figures for single-mother families to get a rough estimate of the potential impact of child allowances on their employment. Data from the Current Population Survey indicate that single mothers have an average of roughly 1.8 children under age 18 in their home. I estimate the average single-mother family would receive $500 per month from the child allowances, or $6,000 per year, given the mix of younger and older children they have and the more generous benefit for younger children. That ends up being about 16 percent of the median family income of female-headed families with children. The Burtless elasticity estimate suggests that this 16 percent increase in income would lead to a 2.7 percent reduction in hours worked. A 2.7 percent decline in hours worked is equivalent to a reduction among single mothers in the Current Population Survey of just one hour per week per worker. But rather than thinking of all single mothers working an hour less, we might worry instead that work would not decline among those who stay employed but that the employment rate of single mothers would fall by 2 percentage points, which would also produce that 2.7 percent drop in hours. This magnitude may still seem small to many readers, but the number of single mothers contained in those 2 percentage points is sizable relative to the changes in poverty the child allowance proposals would supposedly produce. If it reduced the share of single-mother families under the official poverty line by one-third, that would be 892,000 families; a two-point drop in employment would involve 167,000 single-mother families, about one-fifth as large. It would also be equivalent to 17 percent of the increase in employment among single mothers over the 30 years from 1989 to 2019...."

His basic takeaway, we have better options for reducing child poverty as welfare reform showed without the risk“…If a child allowance were the only way to reduce child poverty, then perhaps it would be worth rolling the dice. But we have many other options that would reduce poverty while encouraging opportunity and reinforcing values held by Americans at all income levels. We can do better than child allowances…In March 1979, 58 percent of single mothers were employed, and about half received AFDC at some point during the year. In 1992, the employment rate was still 58 percent, and half of single mothers still received AFDC. However, by 2000, after the 1996 welfare reforms took effect, 71 percent of single mothers were employed, and less than one-quarter received benefits under AFDC’s successor program, Temporary Assistance for Needy Families (TANF). Only 4.5 million children were in families receiving TANF in a typical month. By 2019, just 2.2 million were, or one in 33 children. And poverty among the children of single mothers was at an all-time low—lower by four or five million than if poverty had remained at its 1993 level, when welfare reforms were already in full swing in some states….”

Scott Winship, "The conservative case against child allowances," American Enterprise Institute, March 5, 2021, https://www.aei.org/research-products/report/the-conservative-case-against-child-allowances/

AI Summary. Spain and Italy have recorded negative total factor productivity growth over the past two decades, meaning output has not improved even as labor productivity remains high. Germany and France, by contrast, appear to use modern technology effectively, though their workers put in fewer hours than US workers.

John Cochrane The Grumpy Economist
Date Posted:
Is Database:
Database

Chad Jones “It Is Stunning To Me That Spain And Italy Have Had Negative TFP Growth For 20 Years”.

Are some European economies seeing negative total factor productivity growth?

Core argument: Spain and Italy have recorded negative Total Factor Productivity growth over the past two decades, an outcome Chad Jones describes as astonishing.

Over the past two decades, Spain and Italy have experienced negative Total Factor Productivity (TFP) growth, a phenomenon that Chad Jones finds astonishing. This stagnation suggests that while labor productivity may remain high, the productivity of other inputs is severely lacking. In contrast, countries like Germany and France appear to utilize modern technology effectively, yet their workers tend to work fewer hours than their US counterparts. The persistent negative TFP growth in Spain and Italy raises concerns about their ability to leverage technological advancements and optimize resource use, potentially hindering economic growth and competitiveness in the global market. This situation underscores the importance of addressing structural inefficiencies to enhance overall productivity.

Takeaways by Macro Roundup® AI

  1. Spain and Italy have recorded negative Total Factor Productivity growth over the past two decades, an outcome Chad Jones describes as astonishing.
  2. Negative TFP growth in Spain and Italy suggests that labor productivity may remain high while the productivity of other inputs lags badly, raising concerns about those countries' ability to leverage technological advances.
  3. Germany and France appear to use modern technology effectively, though their workers put in fewer hours than their US counterparts.

Did you email Cochrane? He updated his post with productivity per hour worked. Chad Jones seems to have emailed him re: his post we looked at yesterday

He updated his post with a Productivity per hour worked series and contrasts that with TFP growth, “…In the top graph you get the impression that German and French workers are using up to date technology, including both machines, firm organization, opportunities to trade in a wide market, etc. but that they simply choose to, are incented to, or forced to work fewer hours than US workers. Italy and UK are still plodding along 20% or so inside the frontier.The bottom graph points a bleaker picture. I'm not an expert, but if labor productivity is high and total productivity is low, that means that the productivity of other inputs must be atrocious. Chad (amazing expert on all things growth) "It is stunning to me that Spain and Italy have had negative TFP growth for 20 years." I remember when real business cycles came out, and many were incredulous at the idea of negative productivity shocks. How can you forget how to do things?Well, maybe not for business cycles, but a society clearly can forget, and retrench. For centuries, remember, Italians looked up in wonder at the cupola of the Pantheon, the arches of the dry aqueducts, and wondered how they had been built….”

John Cochrane, "Europe productivity -- and US too," The Grumpy Economist, March 4, 2021, https://johnhcochrane.blogspot.com/2021/03/europe-productivity.html

(the guy who Chad got the TFP data via Jesus Fernandez-Villaverde is the “that’s just your opinion man” guy you had the back and forth with)

Monday, March 8, 2021

AI Summary. Analysis of the National Crime Victimization Survey and FBI arrest data finds no statistically significant difference between the race of offenders reported by victims and the race of those arrested for nonfatal violent crimes: whites were 48% of offenders and 46% of arrestees, Blacks 35% and 33%.

Jeffrey H. Anderson Wall Street Journal
Date Posted:
Is Database:
Database

@JeffreyHAnderson in terms of non-fatal violent crimes, no statistically significant difference btw reported race of offenders by victims and percentage of arrestees by race.

Do arrest rates by race match victims' reports of offenders?

Core argument: Analysis of the 2018 National Crime Victimization Survey and the FBI's Uniform Crime Reporting Program finds no statistically significant difference between the race of offenders reported by victims and the race of arrestees for nonfatal violent crimes.

Analysis of the 2018 National Crime Victimization Survey (NCVS) and FBI's Uniform Crime Reporting Program reveals no statistically significant difference between the race of offenders reported by victims and the race of arrestees for nonfatal violent crimes. Whites accounted for 48% of offenders and 46% of arrestees, Blacks for 35% of offenders and 33% of arrestees, and Asians for 2% of offenders and 1% of arrestees. These findings suggest that police arrest rates align closely with victim reports, challenging claims of systemic racism in policing practices. This data-driven insight underscores the importance of relying on empirical evidence when evaluating systemic issues within law enforcement, highlighting the need for policy discussions to be grounded in statistical analysis rather than assumptions.

Takeaways by Macro Roundup® AI

  1. Analysis of the 2018 National Crime Victimization Survey and the FBI's Uniform Crime Reporting Program finds no statistically significant difference between the race of offenders reported by victims and the race of arrestees for nonfatal violent crimes.
  2. Whites accounted for 48% of offenders reported by victims and 46% of arrestees, Blacks 35% and 33%, and Asians 2% and 1%.
  3. The author argues these findings challenge claims of systemic racism in policing and that policy discussions on law enforcement should be grounded in statistical analysis rather than assumptions.

Former Bureau of Justice Statistics reports on a report from his former agency (though he didn’t write it)"...The new BJS report took victims’ responses on the 2018 NCVS and compared them with arrest rates by police, supplied by the FBI’s Uniform Crime Reporting Program. It found that for nonfatal violent crimes that victims said were reported to police,whites accounted for 48% of offenders and 46% of arrestees. Blacks accounted for 35% of offenders and 33% of arrestees. Asians accounted for 2% of offenders and 1% of arrestees. None of these differences between the percentage of offenders and the percentage of arrestees of a given race were statistically significant...."

Bottomline, “…It’s good news that police are arresting those who actually commit crimes, and that the data doesn’t support the claim of “systemic racism.”…”

Jeffrey H. Anderson, "Biden, Claiming ‘Systemic Racism’ in Policing, Defies Science,"Wall Street Journal, March 5, 2021, https://www.wsj.com/articles/biden-claiming-systemic-racism-in-policing-defies-science-11614969593

AI Summary. U.S. victimization and arrest data show Black individuals accounted for 29% of offenders in nonfatal violent crimes while making up 13% of the population, including 51% of robbery and 34% of aggravated assault offenders, and 33% of arrests; White individuals were 52% of offenders versus 60% of the population.

Barbara Oudekerk U.S. Department Of Justice
Date Posted:
Is Database:
Database

Blacks overrepresented among offenders in nonfatal violent crimes, 29% of offenders vs 12.5% of population. Whites underrepresented, 52.2% of offenders vs 60.4% of population.

How do violent crime offender and arrest shares compare across racial groups?

Core argument: Black individuals accounted for 29% of offenders in nonfatal violent crimes while comprising 13% of the U.S. population, and white individuals accounted for 52% of offenders versus 60% of the population.

In 2018, black individuals were overrepresented among offenders in nonfatal violent crimes, accounting for 29% of offenders despite comprising only 13% of the U.S. population. This contrasts with white individuals, who were underrepresented, making up 52% of offenders compared to 60% of the population. Specifically, black offenders constituted 51% of those involved in robbery and 34% in aggravated assault. The data, derived from the National Crime Victimization Survey (NCVS) and Uniform Crime Reporting (UCR), highlights disparities in crime involvement and arrest rates, with black individuals representing 35% of offenders in incidents reported to police and 33% of arrests. Meanwhile, Hispanic offenders were overrepresented in arrests (18%) relative to their involvement in violent crimes (14%). These statistics underscore significant racial disparities in crime and arrest patterns, raising questions about systemic factors influencing these outcomes.

Takeaways by Macro Roundup® AI

  1. Black individuals accounted for 29% of offenders in nonfatal violent crimes while comprising 13% of the U.S. population, and white individuals accounted for 52% of offenders versus 60% of the population.
  2. Black offenders made up 51% of those involved in robbery and 34% of those in aggravated assault, according to the National Crime Victimization Survey and Uniform Crime Reporting data.
  3. Black individuals represented 35% of offenders in violent incidents reported to police and 33% of arrests, while Hispanic offenders accounted for 18% of arrests versus 14% of violent crime involvement.

I read the DOJ report with the claims made in the WSJ in mind. Bottomline to quote the report,"..White and black people were arrested proportionate to their involvement in serious nonfatal violent crime overall and proportionate to their involvement in serious nonfatal violent crime reported to police…."

Note this report excludes fatal crime, "....Excludes murder, non-negligent manslaughter, and other assault...."

I'm not sure how to think about using arrests as a metric, can't think of a better one, but I suppose somebody could argue that reflect bias against blacks if the police spend more time chasing them in a way they don't whites (though there is no evidence of that) But outside of that the data is relatively straightforward (though they do use the race of criminal as reported by victim which I suppose could be another source of bias)"... Tese UCR data on incidents of nonfatal violent crime can be compared to data from the National Crime Victimization Survey (NCVS) to determine how much offense and arrest differences by race and ethnicity can be attributed to differences in criminal involvement. Te NCVS collects information on victims’ perceptions of offenders' race, ethnicity, and other characteristics in incidents of violent crime..."

Allen Beck, Barbara Oudekerk, Heather Brotsos, Jenna Truman and Alexia Cooper, " Race and Ethnicity of Violent Crime Offenders and Arrestees, 2018," U.S. Department Of Justice, January 2021, https://www.bjs.gov/content/pub/pdf/revcoa18.pdf

Findings on violent crime involvement by race/ethnicity relative to population, “…Relative to their share of the U.S. population (60%), white people were underrepresented among offenders in nonfatal violent crimes overall (52%)(table 8). they accounted for 45% of offenders involved in aggravated assaults and 31% of offenders involved in robbery. They were not underrepresented to a statistically significant degree among offenders involved in rape or sexual assault (56%) or simple assault (59%). Black people were overrepresented among offenders in nonfatal violent crimes overall (29%) relative to their share of the U.S. population (13%).Half of all offenders involved in robbery (51%), a third involved in aggravated assault (34%), and more than a fifth involved in simple assault (23%) and rape or sexual assault (22%) were black….”

Core finding, “…Based on the 2018 NCVS and UCR, black people accounted for 29% of violent-crime offenders and 35% of violent-crime offenders in incidents reported to police, compared to 33% of all persons arrested for violent crimes.... When limited to offenders in incidents reported to police, white people were found to be arrested proportionate to their criminal involvement (48%). Hispanic offenders were overrepresented among persons arrested for nonfatal violent crimes (18%) relative to their representation among violent offenders (14% of all violent offenders and 13% of violent offenders in incidents reported to police)....