Macro Roundup

why is the level of violence in the young black male population so high…The murder rates for black men are roughly 10 times higher than the rate for white men in most years…. and how has this level of violence persisted for so long?..The violence in this population is driven by guns. As we outline below, by the end of our sample, 97 percent of murders of young black males are via guns, a rate substantially larger than the rate for the general population. Surveys spanning nearly forty years suggests that young black males carry guns at high rates primarily as protection against others who are also armed...With so many people carrying weapons, disagreements are settled with deadly consequences…To derive specific predictions from our model, we specialize to the case where the two dimensions of a person’s type follow a bivariate normal distribution. If the average instrumental value of carrying a gun is low, gun carry rates are also low. As that value increases, the equilibrium carry rate shifts dramatically. The problem is that returning to a low-gun equilibrium among non-criminals is difficult. The situation can be understood as a coordination failure. Most non-criminals would be better off if everyone stopped carrying guns, but getting there is difficult without a coordinating device. Hence, gun violence persists.The comparative statics are troubling. Once a high gun carry equilibrium is reached, large drops in the benefits of carrying a gun are necessary to revert to a low gun equilibrium. Furthermore, an important asymmetry prevails. The equilibrium gun carry rate, and (by implication in our model) the level of danger and violence, is much more sensitive to changes in the average instrumental value of a gun than its average defensive value, even though the vast majority who arm do so for perceived protection. Our reading of the existing gun policy research suggests these conclusions conflict with real-world policy options in that it has been easier for policy makers to attempt to change the costs of owning guns for non-criminals than criminals. These results suggest the problem may be particularly difficult to solve through legislative means… The homicide rate has ballooned as the COVID-19 pandemic has progressed. In Figure 1, we showed that murder rates increased by 27 percent from 2019 to 2020. Much of this was due to an increase in gun murders, which rose 34 percent compared to 9.4 percent for non-gun murders. Many urban counties have experienced substantially larger increases including Jefferson County, KY, home to Louisville (81.3 percent),Milwaukee County, WI (72.3 percent), Alameda County, CA, home to Oakland (65.2 percent), and Orleans Parish, LA, home to New Orleans (64.2 percent), just to name a few. The groups with the highest murder rates already also had the greatest change in murder rates between 2019 and 2020. Breaking the population into three age groups (15-24, 25-34, 35 and up), four races (white, black, Asian/Pacific Islander, American Indian/Alaskan Native) and 2 genders, there are 24 groups. The three groups that saw the biggest increase in murder rates were white males 15-24 (36.0 percent), black males 25-34 (38.2 percent), and black males 15-24 (39.7 percent). The preliminary data for 2021 looks even worse. Murder counts for the first six months of 2021 are up 13.9 percent over the same time period in 2020.

William Evans and Maciej Kotowski, "The Demand For Protection and the Persistently High Rates of Gun Violence Among Young Black Males,"National Bureau Of Economic Research, April 2022, https://www.nber.org/papers/w29969

“…In Figure 5, the black dashed line reports the fraction of murders of young black males from 1976 to 2019 where an offender is identified in the SHR. This has declined steadily over time from 80 to about 52 percent. In the same graph, the solid line reports the fraction of murders of young black males with known offender where at least one of the offenders is from this same demographic group. This number starts at 44 percent in 1976 rises to 70 percent in 1994 and has been near 60 percent since 2002. When we increase the age range by another decade, the fraction known offenders that are black males ages 15-34 has been hovering around between 77 and 81 percent since 1992…”

“…Third, during the height of SQF use in New York City, murders of young black males fell dramatically. In Figure 15a, we report in solid lines the murder rate for black males 15-24 and 25-34 from New York City while the dotted lines of the same color represent the same numbers for the rest of the country. The police reforms that started in New York City in 1994 occur at a time when the crack epidemic was receding and murder rates for young black males were falling. This makes it difficult to assign how much of the decline is due to SQF or other factors, like mean reversion. That said, the rates for young black males in the rest of the country retreat to their pre-crack levels and do not decline, whereas the decline is dramatic in New York City. In Figure 15b, we report the time series of murder rates in New York City and the rest of the country for everyone who is not a black male 15-34. Here, there is conflicting data on the impact of the SQF program. A result consistent with those favorable to SQF is that New York City had persistently higher murder rates than the rest of the country and starting in 1994, these murder rates drop quickly and are now below the rest of the country. The percent drop in murder rates in New York City for those that are not black males 15-34 is comparable to the drop for younger black males, the primary targets of SQF. This could mean some other policy was impacting murder rates... The model developed in section 3 suggests that once a high-gun carry equilibrium is obtained, it would take a massive reduction in the protective value of guns to return the world to a low gun equilibrium. There may have been no more targeted policing strategy for gun violence among young black males that SQF in New York City. The numbers above suggest it was especially targeted to young black males, but the low yield of arrests, guns and contraband suggest the program was not targeted to likely criminals but to a much larger group. The increased risk of sanction for carrying aweapon along with improved in community safety reduce the attractiveness of guns as a protective means to non-criminals. If we were to make the generous assumption that all of the decline in murders in New York City were attributable to SQF, then this program illustrates the degree to which jurisdictions must police in order to obtain large reduction in the protective value of guns and hence a large reduction in murders. This conclusion is consistent with the relative rigidity of equilibria with respect to changes in… Large and costly interventions along this dimension are necessary to shift outcomes…

“…For completeness, we report in Figure 3 the same graph for white male. The basic time series patterns are quite similar to those of black males. The startling distinction between Figures 2 and 3 is the scale.The murder rates for black men are roughly 10 times higher than the rate for white men in most years. The time series movement in the murder rate for young black males is driven almost exclusively by gun violence. In Figure 4, we report the murder rate, the gun murder rate and the non-gun murder rate for this group since 1968. The non-gun murder rate has fallen steadily since 1968. In contrast, the overall murder rate essentially follows the gun murder rate. Moreover, the fraction of murders attributable to guns is now much higher than 50 years ago, climbing from about three-quarters of murders in 1968 to 98 percent in 2020..”

“…In Figure 2, we report the national time series from 1968 through 2020 for murder rates among black males in three age groups: 15-24, 25-34, and 35-plus. The murder rate for older black men has fallen from 98.3 in 1972 to a low of 21.2 in 2010, a drop of 78 percent. Since 2010, the murder rate in this group has edged up, but is still 63 percent below its peak and 55 percent lower than the 1968 value. The murder rate for black men in the 25-34 age category has been much more volatile, seeing peaks almost every decade. The long term trend is decidedly negative. Between 1968 and 2020, murder rates fell 26 percent. The peak (176.6 in 1972) to trough (67.7 in 2014) changes represents a 62 percent decline. The numbers for young black males follow a completely different series. Between 1978 and 1994 there was a 137 percent increase in murders, then over the next 21 years, murder rates fell by 60 percent. However, the murder rate in 2019 (77) was at about the same as it was in 1968 (81) and the rate and the rate in 2020 (108) is 33 percent higher than in 1968. This is a staggering difference compared to the rest of the country. The rate in 2020 is 17 times what it is for people not in that demographic. Although young black males are about 1 percent of the population, the fraction of murders in this group represented 17 percent of murders in 1994 and 17 percent in 2020…”

Trends in Murder Rates

“…In Figure 1, we graph the national murder rate as reported by the National Vital StatisticsData (NVSD) from 1968 through 2020.The time series was volatile for the first 23 years with peaks in 1974, 1980, and 1992. The national murder rate declined consistently from 1992 through 2015, with a substantial increase after that, especially in 2020 when murder rates for the nation rose by 27 percent, more than twice the second largest annual percent increase in the murder rate in the series. The rate in 2020 is about the same as it was in 1968 and the number for 2019 was 20 percent lower than the value in 1968. In the same graph, we also report the gun and non-gun murder rates. The variation in murders over time is driven mainly by changes in gun murders. Of the increase between 1968 and 1992, 81 percent was attributable to gun violence and of the decline from 1992 to 2015, 65 percent was due to a drop in gun murders. The murder rate for black males differs fundamentally in level and time series than the rest of the country…”

I think this is their key point, at some point faster wage growth is correlated with slower "real" wage growth. IE wage growth in a sense is/can be another measure of "core" inflation

Both nominal wage growth and real wage growth reflect a variety of economic forces. Our suspicion about the best way to understand the documented relationship is that in environments of stable inflation, increases in wages are primarily driven by increases in productivity growth, which justify higher real wages. But past a certain point, it is likely that most increases in wages are driven either by adverse supply shocks or by increases in nominal aggregate demand, both of which are naturally associated with decreases in real wages….Table 1 shows the historical relationship between nominal wage growth and real wage growth going back to 1965. We show the correlation coefficient using alternating wage measures and inflation measures, and include both the contemporaneous correlation and the correlation between lagged nominal wages and real wages. Across all our series, the correlation between nominal wage growth and real wage growth is very low, and usually becomes negative with a lag….It’s useful to look at nominal wages over the last 25 years to understand the challenge of taming accelerating wage growth. Since the late 1990s, nominal wage growth has reduced rapidly on two occasions — from 2001 to 2002 and 2008 to 2009 — and both times coincided with significant recessions and increases in unemployment (see Figure 3). Between 2001 and 2002, wage growth reduced by 2.4 percentage points, which required unemployment to remain above 5 percent for 4 years and 4 months. Between 2008 and 2009, wage growth reduced by 2.8 percentage points, which required unemployment to remain above 5 percent for 7 years and 10 months….Historically, wage growth and price inflation have tracked each other very closely, implying that bringing down price inflation will likely require sharp reductions in wage growth, and large increases in economic slack. Table 2 below shows the relation between nominal wage growth (measured using the Employment Cost Index) and price inflation over the last two decades, using both the PCE and CPI. Since 2001, annual nominal wage growth has been 0.7 percentage points higher, on average, then annual price inflation (using the PCE), with a standard deviation of 0.9. Wage growth has never been more than 2.5 percentage points higher than price inflation….These results imply that it is highly improbable that average price inflation will fall below 3 percent by 2023 — as predicted by the Federal Reserve — without a significant drop in wage growth from its current level of 6.5 percent. We have shown that such declines in wage growth have historically been associated with recessions and large increases in unemployment. Overall, the historical evidence presented in this note thus suggests that we have reason to be wary that higher nominal wages are always good for workers: on an economy wide basis, wage growth that runs too far ahead of productivity can contribute to underlying inflation and reverse the very gains in worker purchasing power that we are trying to achieve.

Alex Domash and Lawrence Summers, "The relation between nominal and real wage growth,"Medium, April 11, 2022, https://medium.com/@alex.domash/the-relation-between-nominal-and-real-wage-growth-2bfd2e1b27b8

The relation between nominal and real wage growth

While it is tempting to think that higher average wages categorically make workers’ richer, we believe there is reason for uncertainty. It is useful to consider the following football analogy made by Arthur Okun to differentiate between individual and aggregate outcomes: When an individual football fan stands up in the crowd, he can see the football game better. But if everyone in the crowd stands up, then nobody sees any better, and everyone is made less comfortable and worse off. Similar to this logic, we believe there is reason to question whether aggregate wage increases are always better for workers.

We first highlight that in general, the correlation between economy-wide wage increases and worker purchasing power is close to zero or negative. Table 1 shows the historical relationship between nominal wage growth and real wage growth going back to 1965. We show the correlation coefficient using alternating wage measures and inflation measures, and include both the contemporaneous correlation and the correlation between lagged nominal wages and real wages. Across all our series, the correlation between nominal wage growth and real wage growth is very low, and usually becomes negative with a lag.

It’s useful to look at nominal wages over the last 25 years to understand the challenge of taming accelerating wage growth. Since the late 1990s, nominal wage growth has reduced rapidly on two occasions — from 2001 to 2002 and 2008 to 2009 — and both times coincided with significant recessions and increases in unemployment (see Figure 3). Between 2001 and 2002, wage growth reduced by 2.4 percentage points, which required unemployment to remain above 5 percent for 4 years and 4 months. Between 2008 and 2009, wage growth reduced by 2.8 percentage points, which required unemployment to remain above 5 percent for 7 years and 10 months.

A trove of IRS data obtained by ProPublica has the definitive answers, revealing the incomes and tax rates of the 400 Americans with the highest incomes from 2013 to 2018. It took an average of $110 million per year in income to crack that list...The “income” described in this article is adjusted gross income.To calculate income taxes, we used the IRS definition of “total income tax,” which excludes self-employment tax and a few other non-income taxes that appear on Form 1040. The effective income tax rates we present are weighted averages — that is, the sum of income tax from 2013 to 2018 divided by the sum of adjusted gross income over that period… On average, the rate of income tax that people pay does climb as incomes ascend into the top 1%, but when you get to the range of $2 million to $5 million, that trend stops. The group earning in this range, composed mostly of business owners and workers with extremely high salaries, paid an average income tax rate of 29% from 2013 to 2018. After that, average tax rates actually drop the further up in income you go.

Paul Kiel, Ash Ngu, Jesse Eisinger and Jeff Ernsthausen, "America’s Highest Earners And Their Taxes Revealed,"Pro Publica, April 13, 2022, https://projects.propublica.org/americas-highest-incomes-and-taxes-revealed/

America’s Highest Earners And Their Taxes Revealed

Which people and professions rake in the most income year after year? Which are most adept at shielding that money from the taxman? And what does this tell you about America?

The top earners, of course, are often fodder for lists — but those are usually based on estimates or even speculation.

A trove of IRS data obtained by ProPublica has the definitive answers, revealing the incomes and tax rates of the 400 Americans with the highest incomes from 2013 to 2018. It took an average of $110 million per year in income to crack that list — with plenty of names you would expect and some that may surprise you.

We’ll also show how much the 400 paid in federal income taxes. (ProPublica is naming the 15 highest income earners, along with an assortment that represent income patterns that we’ve identified.)

In theory, our tax system is designed to tax the rich at higher rates than everyone else. That’s not the way it works at the loftiest incomes. The data reveals a system where the very highest earners, on average, pay far lower tax rates than the merely affluent do. And even among the top 400, some groups have it better than others: Tech billionaires pay rates well below even other business owners.

We sought comment from every person named in this story. Most did not respond or declined to comment. See their responses.

In an era of widening gaps between the rich and everyone else, ProPublica’s analysis shows that the U.S. tax system is making inequality worse.

Let’s walk you through the world of the highest-earning Americans.

So what kind of taxes do these 400 people pay?

In a progressive tax system, the more income you make, the higher your tax rate is. But in the U.S., that’s only partly true.

On average, the rate of income tax that people pay does climb as incomes ascend into the top 1%, but when you get to the range of $2 million to $5 million, that trend stops. The group earning in this range, composed mostly of business owners and workers with extremely high salaries, paid an average income tax rate of 29% from 2013 to 2018. After that, average tax rates actually drop the further up in income you go.

In the American system, there’s a huge difference between how we tax wages and how we tax investments. Income from financial assets is generally taxed at a lower rate.

Taxing long-term capital gains at lower rates than income is not new. The U.S. has done so for most of the past century. But in 2003, under President George W. Bush, that special rate was extended to most stock dividends, or money paid out to owners of a company’s stock, for the first time in U.S. history.

That change particularly benefited the wealthy. Together, the top 400 saved an average of $1.9 billion in taxes each year — due solely to the lower rate on dividends. These five benefited the most.

Those two factors — the amount of income taxed at the advantageous rate and the ability to muster large deductions — are the main drivers of lower tax rates for those with the highest incomes.

Collectively, the top 400 paid an average tax rate of 22% from 2013 to 2018.

Among the top 400, rates between different groups ranged widely, depending on the interplay of those two factors. Tech billionaires paid rates well below that average. By contrast, we found nine owners of privately held manufacturing companies who paid relatively higher tax rates, because the income from their businesses is largely taxed at the ordinary rate.

While the income tax rates paid by the richest Americans can be surprisingly low, they are still generally much higher than the income tax rates paid by average working people.

But income taxes are only part of the story. A majority of workers actually pay more in taxes for Social Security and Medicare than income taxes. These payroll taxes are automatically deducted from paychecks every month.

The rich, meanwhile, tend to pay proportionally little of these types of taxes because wages are a small portion of their total income.

Because payroll taxes hit low- and middle-income workers disproportionately, they can wipe out the progressivity of income taxes. It’s common for wage earners to pay a higher rate of personal federal taxes than even the highest-earning Americans.

As we showed last year, the richest avoid income when they can. Then they pay very little in tax when it’s measured against their growing wealth. The top 25 wealthiest Americans got $401 billion richer from 2014 to 2018, but paid just $13.6 billion in federal income taxes, a “true tax rate,” as we called it, of 3.4%.

Even the conventional income tax rate for this top 25 is remarkably low: 16%.

Over time, the gap between those at the top and ordinary Americans has gotten wider. This is evident when looking at both wealth and income.