Tuesday, December 31, 2019

Krugman: The Legacy of Destructive Austerity [feedly]

The Legacy of Destructive Austerity
Paul Krugman
text only: 

A decade ago, the world was living in the aftermath of the worst economic crisis since the 1930s. Financial markets had stabilized, but the real economy was still in terrible shape, with around 40 million European and North American workers unemployed.

Fortunately, economists had learned a lot from the experience of the Great Depression. In particular, they knew that fiscal austerity — slashing government spending in an attempt to balance the budget — is a really bad idea in a depressed economy.

Unfortunately, policymakers on both sides of the Atlantic spent the first half of the 2010s doing exactly what both theory and history told them not to do. And this wrong turn on policy cast a long shadow, economically and politically. In particular, the deficit obsession of 2010-2015 helped set the stage for the current crisis of democracy.

Why is austerity in a depressed economy a bad idea? Because an economy is not like a household, whose income and spending are separate things. In the economy as a whole, my spending is your income and your spending is my income.  

What happens if everyone tries to cut spending at the same time, as was the case in the aftermath of the financial crisis? Everyone's income falls. So to avoid a depression you need to have someone — namely, the government — maintain or, better yet, increase spending while everyone else is cutting. And in 2009 most governments engaged in at least a bit of fiscal stimulus.  In 2010, however, policy discourse was taken over by people insisting, on one side, that we needed to cut deficits immediately or we would all turn into Greece and, on the other side, that spending cuts wouldn't hurt the economy because they would increase confidence.

The intellectual basis for these claims was always flimsy; the handful of academic papers purporting to make the case for austerity quickly collapsed under scrutiny. And events soon confirmed Macroeconomics 101: America didn't turn into Greece, and countries that imposed harsh austerity suffered severe economic downturns.

So why did policy and opinion makers go all in for austerity when they should have been fighting unemployment?  

One answer, which shouldn't be discounted, is that inveighing against the evils of deficits makes you sound responsible, at least to people who haven't studied the issue or kept up with the state of economic research. That's why I used to mock centrists and media figures who preached the need for austerity as Very Serious People. Indeed, to this day, billionaires with political ambitions imagine that dire warnings about debt prove their seriousness.

Beyond that, the push for austerity was always driven in large part by ulterior motives. Specifically, debt fears were used as an excuse to cut spending on social programs, and also as an excuse for hobbling the ambitions of center-left governments.

Here in the United States, Republicans went through the entire Obama era claiming to be deeply concerned about budget deficits, forcing the country into years of spending cuts that slowed economic recovery. The moment Donald Trump moved into the White House, all those supposed concerns vanished, vindicating those of us who argued from the beginning that Republicans who posed as deficit hawks were phonies.

This politically weaponized Keynesianism is, by the way, probably the main reason U.S. economic growth has been good (not great) over the past two years, even though the 2017 tax cut completely failed to deliver the promised surge in private investment: federal spending has been growing at a rate not seen since the early years of the past decade.

But why does this history matter? After all, at this point unemployment rates in both the United States and Europe are near or below pre-crisis levels. Maybe there was a lot of unnecessary pain along the way, but aren't we O.K. now?

No, we aren't. The austerity years left many lasting scars, especially on politics.

There are multiple explanations for the populist rage that has put democracy at risk across the Western world, but the side effects of austerity rank high on the list.

In Eastern Europe, white nationalist parties came to power after center-left governments alienated the working class by letting themselves be talked or bullied into austerity policies. In Britain, support for right-wing extremists is strongest in regions hit hardest by fiscal austerity. And would we have Trump if years of wrongheaded austerity hadn't delayed economic recovery under Barack Obama?

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Monday, December 30, 2019

Non-action in times of catastrophe [feedly]

Dan Little: Non-action in times of catastrophe

Sociological Research by reputation varies highly in quality, especially to folks trained as physicists and mathematicians. Dan Little favors studies that track the adherence of statistical studies to MODELS -- which are simplifications, but structured to fit as closely as possible to existing data pertinent to some class or instances of social behavior, and then to refit models via AI techniques that permit auto re-eval of errors in prediction or classification by the models. The variable is sometimes the quality or skills of the researcher, but increasingly simply the amount, availability  and accumulation of sufficient data for the AI models to do their work.  The question below on the phenomenon of  "collective abdication" is an example of analytical model building embracing opposite and intermediary collective reactions to similar or comparable catastrophes. Still you can no doubt tell, by the abstractness of some of the classifications and modeling that the OMB is enthusiastic about incorporating them in official reports, despite that its the kind of analyses that are political cocaine to candidates and elected pols. Here, it is really an exercise in trying to fit serious explanations on contradictory phenomenon. (Little's research often wanders in search of a dialectical computer or calculator... but it is fascinating.

van Ermakoff's 2008 book Ruling Oneself Out: A Theory of Collective Abdications is dense, rigorous, and important. It treats two historical episodes in close detail -- the passing of Hitler's enabling bill by the German Reichstag in the Kroll Opera House in March 1933 ("Law for the Relief of the People and of the Reich") and the decision by the National Assembly of the French Third Republic in the Grand Casino of Vichy to transfer constitutional authority to Marshal Pétain in July 1940. These legislative actions were momentous; "the enabling bill granted Hitler the right to legally discard the constitutional framework of the Weimar Republic," and the results in France were similar for Pétain's government. In both events major political parties and groups acquiesced in the creation of authoritarian legislation that predictably led to dictatorship in their countries and repression of their own parties and groups. Given that these two events largely set the terms for the course of the twentieth century, this study is of great importance.

The central sociological category of interest to Ermakoff here is "abdication" -- essentially an active decision by a group not to continue to oppose a social or political process with which it disagrees. Events are made by the actions of the actors, individual and collective. But Ermakoff demonstrates that sometimes events are made by non-action as well -- deliberate choices by actors to cease their activity in resistance to a process of concern.
Abdication is different from surrender. It is surrender that legitimizes one's surrender. It implies a statement of irrelevance. When the act is collective, the statement is about the group that makes the decision. The group dismisses itself. It surrenders its fate and agrees to do so, thereby justifying its subservience. This broad characterization sets the problem. Why would a group legitimize its own subservience and, in doing so, abdicate its capacity for self-preservation? (xi)
Based on a great deal of archival research as well as an apparently limitless knowledge of the secondary literature, the book sheds great light on the actions and inactions of the individual and collective actors involved in these enormously important episodes of twentieth-century history. As a result it provides a singular contribution to the theories and methods of contentious politics as well as comparative historical sociology.

The book is historical; but even more deeply, it is a sustained contribution to an actor-centered theory of collective behavior. Ermakoff wants to understand, at the level of the actors involved, what were the dynamics of decision making and action that led to abdication by experienced politicians in the face of anti-constitutional demands by Hitler and Pétain. Ermakoff believes that the obvious theories -- coercion, ideological sympathy, and the structure of existing political conflicts -- are inadequate. Instead, he proposes a dynamic theory of belief formation and decision making at the level of the actor through which the political actors arrive at the position they will adopt based on their observations and inferences of the behavior of others with regard to this choice. Individuals retain agency in their choices in momentous circumstances: "Individuals fluctuate because (1) they are concerned about the behavioral stance of those whom they define as peers and (2) they do not know where these peers stand. Individual oscillations are the seismograph of collective perceptions. Their uncertainty fluctuates with the degree of irresolution imputed to the group." Ermakoff wants to understand the dynamic processes through which individuals arrive at a decision -- to abdicate or to remain visibly and actively in opposition to the threatened action -- and how these decisions relate to judgments made by individuals about the likely actions of other actors.

Ermakoff's key theoretical concept is alignment: the idea that the individual actor is seeking to align his or her actions with those of members of a relevant group (what Ermakoff calls a "reference group"). "By alignment I mean the act of making oneself indistinguishable from others. As a collective phenomenon, alignment describes the process whereby the members of a group facing the same decision align their behavior with one another's." For individuals within a group it is a problem of coordination in circumstances of imperfect knowledge about the intentions of other actors. And Ermakoff observes that alignment can come about through several different kinds of mechanisms (sequential alignment, local knowledge, and tacit coordination), leading to substantially different dynamics of collective behavior.

Jon Elster and other researchers in the field of contentious politics and collective action refer to this kind of situation as an "assurance game" (link): an opportunity for collective action which a significant number of affected individuals would join if they were confident that sufficient others would do so as well in order to give the action a reasonable likelihood of success.

Though Ermakoff does not directly suggest this possibility, it would appear that the kinds of decision-making processes within groups involved here are amenable to treatment using agent-based models. It would seem straightforward to model the behavior of a group of actors with different "thresholds" and different ways of gaining information about the likely behavior of other actors, and then aggregating their choices through an iterative computational process.

Much of the substance of the book goes into evaluating three common explanations of acquiescence: coercion, miscalculation, and ideological collusion. And Ermakoff argues that the only way to evaluate these hypotheses is to gain quite a bit of evidence about the basis of decision-making for many of the actors. A meso-level analysis won't distinguish the hypotheses; we need to connect the dots for individual decision-makers. Did they defer because of coercion? Because of miscalculation? Or perhaps because they were not so adamantly opposed to the fascist ideology as they professed? But significantly, Ermakoff finds that individual-level information fails to support any of these three factors as being decisive.

Part III moves from description of the cases to an effort at formulating a formal decision model that would serve to explain the processes of alignment and abdication described in the first half of the book. This part of the book has something in common with formal research in game theory and the foundations of collective action theory. Ermakoff undertakes to provide an abstract mid-level description of the processes and mechanisms through which individuals arrive at a decision about a collective action, illustrating some of the parameters and mechanisms that are central for the emergence of abdication as a coordination solution. This part of the book is a substantial addition to the literature on the theory of collective action and mobilization. It falls within the domain of theories of the mechanics of contentious politics along the lines of McAdam, Tarrow, and Tilly's Dynamics of Contention; but it differs from the treatment offered by McAdam, Tarrow, and Tilly by moving closer to the mechanics of the individual actor. The level of analysis is closer to that offered by Mancur Olsen, Russell Hardin, or Jon Elster in describing the logic of collective action.

Consider the logic of the "abdication game" that Ermakoff presents (47):

The "authoritarian challenger" is the leader who wishes to extend his powers beyond what is currently constitutionally permissible. The "target actors" are the groups and parties who have a say in modification of the constitution and legislative framework, and in this scenario these actors are assumed to have a blocking power in the legislative or constitutional process. If they remain unified in opposition the constitutional demands will be refused and either the status quo or an attempt at an unconstitutional seizure of power will occur. If they acquiesce, the authoritarian challenger will immediately undertake a transformation of the state that gives him unlimited executive power.

There is a difficult and important question that arises from reading Ermakoff's book. It is the question of our own politics in 2020. We have a president who has open contempt for law and political morality, who does not even pretend to represent all the people or to respect the rights of all of us; and who is entirely willing to call upon the darkest motivations of his followers. And we have a party of the right that has abandoned even the pretense of maintaining integrity, independent moral judgment, and a willingness to call the president to account for his misdeeds. How different is that environment from that of 1933 in Berlin? Is the current refusal of the Republican Party to honestly judge the president's behavior anything other than an act of abdication -- shameful, abject, and self-interested abdication?

It seems quite possible that the dilemmas created by authoritarian demands and less-than-determined defenders of constitutional principles will be in our future as well. This book was published in 2008, at the beginning of what appeared to be a new epoch in American politics -- more democratic, more progressive, more concerned about ordinary citizens. The topic of abdication would have been very distant from our political discourse. Today as we approach 2020, the threat of an authoritarian, anti-democratic populism has become an everyday reality for American society.

One other aspect of the book bears mention, though only loosely related to the theory of collective action and abdication that is the primary content of the book. Ermakoff's discussion of the challenges that come along with defining "events" is excellent (chapter 1). He correctly observes that an event is a nominal construct, amenable to definition and selection by different observers depending on their theoretical and political interests.
Events are nominal constructs. Their referents are bundles of actions and decisions that analysts and commentators abstract from the flow of historical time. This abstraction is based on a variety of criteria—temporal contiguity, causal density, and significance for subsequent happenings—routinely mobilized by synthetic judgments about the past. Because events are temporal constructs, their temporal boundaries can never be taken for granted. They take on different values depending on whether we derive these boundaries from the subjective statements left by contemporary actors (Bearman et al. 1999) or construct them in light of an analytical relevance criterion derived from the problem at hand (Sewell 1996, 877).
Ermakoff returns to this theme at the end of the book in chapter 11. The approach here taken towards "events" is indicative of one of the virtues of Ermakoff's book (as well as the work of many of the comparative historical sociologists who have influenced him): respect for the contingency, plasticity, and fluidity of historical processes. We have noted elsewhere (linklinklink) Andrew Abbott's insistence on the fluidity of the social world. There is some of that sensibility in Ermakoff's book as well. None of the processes and sequences that Ermakoff describes are presented as deterministic causal chains; instead, choice and contingency remain part of the story at every level.

(Levitsky and Ziblatt's How Democracies Die provides a stark companion piece for Ermakoff's historical treatment of the ascendancy of authoritarianism  

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DeLong: Hyman Minsky (1988): Review of "Secrets of the Temple: How the Federal Reserve Runs the Country" by William Greider. Ne... [feedly]

I concur with DeLong on Greider, and some other Left-liberal popular econ writers, whose spin style (or shallow knowledge) undermines the intended message.

Hyman Minsky (1988): Review of "Secrets of the Temple: How the Federal Reserve Runs the Country" by William Greider. Ne...

Hyman Minsky (1988): Review of "Secrets of the Temple: How the Federal Reserve Runs the Country" by William Greider. New York: Simon and Schuster, 1987, 799 pp. , $24.95 https://www.jstor.org/stable/pdf/40720477.pdf: 'Secrets of the Temple is a long and tedious book with a core that could have been interesting and important. The subtitle of William Greider's book... announces... its chief conceit: the Federal Reserve runs the country. As the only unqualified true proposition in economics is that there are no unqualified true assertions, the conceit is false.... Embellished with sleep-inducing asides on psychology, history, anthropology, and politics. The tone is iconoclastic; implicit conspiracies are suggested, but the evidence is anecdotal. The aim might be to demythicize money and the Federal Reserve, but ultimately Greider' s weak command over the relevant economic theory blunts his message. This reader feels that Greider set out to prove a conspiracy but he couldn't marshall the evidence. The main policy recommendation-to bring the Federal Reserve under the control of the administration-is weak, especially in light of Greider' s strong views. Given the economic weirdos that recent administrations have favored, I am reluctant to endorse such a concentration of power.... During the 12 years of Nixon, Ford, and Carter, the Federal Reserve and the central banks of the advanced capitalist countries seemed impotent validators of price levels resulting from the exercise of market power by unions, firms, and cartels of raw material suppliers. No strong claims that the Federal Reserve runs the country were put forth. Proposals for incomes policies were rife.... The Reagan Administration had an incomes policy... high unemployment... welcom[ing] imports, it kept the minimum wage constant, and it bashed unions. Breaking the air controllers strike was the key anti-inflationary act of the Reagan Administration. The second most important such act may have been the acceptance of the flood of imports.... Ultimately, Greider cannot sustain his conceit because his command of economics is incomplete.... Especially when the financial structure is fragile, the Federal Reserve is mainly a crisis-containing mechanism, rather than the agency of a conspiracy to bias income distribution.... In spite of the evident shortcomings in his understanding of economics, Greider had the makings of a good, forceful, 200-page book that could have... opened a public discussion of the proper use of the Federal Reserve. His text runs to 717 pages. In this case, more is clearly less...  

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DeLong: Not a surprise: Aaron Flaaen and Justin Pierce : Disentangling the Effects of the 2018-2019 Tariffs on a Globally Conne... [feedly]

Not a surprise: Aaron Flaaen and Justin Pierce : Disentangling the Effects of the 2018-2019 Tariffs on a Globally Conne...

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25 charts that show Amazon's explosive growth over the past decade (AMZN) [feedly]

the charts are as strong an argument for public intervention in too big to fail corps as any speech or text.

25 charts that show Amazon's explosive growth over the past decade (AMZN)


Clodagh Kilcoyne/Reuters

  • Over the past decade, Amazon has turned into a tech juggernaut selling everything from books to cloud computing power and hardware devices.
  • It is now one of the most richly valued companies in the world.
  • These 25 charts illustrate the company's growth over the past decade.
  • Read more BI Prime stories here.

Amazon has seen unprecedented growth over the past decade — going from an upstart e-commerce company to one of the most powerful tech giants in the world.

Amazon's business now goes far beyond just online retail. It's the market leader in the massive cloud computing industry, and has a rapidly growing advertising and hardware segment. It's also significantly expanded its in-house delivery arm that could one day rival the services offered by the likes of FedEx or UPS.

A lot of that expansion happened over the past decade: Its stock price has more than doubled since 2010, and went from $34.2 billion in revenue to a projected $279.1 billion over the same period.

These 25 charts show what Amazon's explosive growth over the last decade looks like:

Amazon's share price grew more than tenfold since 2010, becoming one of the most popular stocks among investors. In 2018, it briefly passed $1 trillion in market cap for the first time. It is currently worth over $900 billion and is one of the most richly valued public companies in the world.

Markets Insider 

Amazon's revenue consistently grew at a 20% to 30% clip every year over the past decade — an unusually high rate of growth for a company of its size. This year, Amazon is expected to record $279.1 billion in total revenue.

Ruobing Su/Business Insider 

As the business grew, Amazon had to hire more. In 2010, Amazon employed just 33,700 people. Now it has 750,000 employees worldwide — a 22-time increase from 10 years ago.

Ruobing Su/Business Insider 

See the rest of the story at Business Insider

See Also:

SEE ALSO: In leaked recording of internal meeting, Jeff Bezos and Amazon's top execs respond to employee questions about some of the company's biggest challenges

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Monday, December 23, 2019

Back-up evidence for WaPo piece on most important econ lessons of the decade [feedly]

Back-up evidence for WaPo piece on most important econ lessons of the decade

Here are the companion figures to my WaPo piece today on econ lessons of the decade.

1) The unemployment rate can fall a lot lower than most economists thought without triggering inflationary pressures.

2) Budget deficits cannot be assumed to place upward pressure on interest rates.

3) Weak worker bargaining power has long been a factor driving inequality. In the last decade, the increasing clout of certain employers has joined the mix.

Source: NY Times

4) Progressive health care reform, wherein the government plays a larger role in coverage and cost control, works.

Source: Paul Van de Water, CBPP

5) [Lesson re-learned] Trickle-down tax cuts don't work.

Source: Goldman Sachs

6) Antipoverty programs don't just reduce poverty today; they improve the outcomes of their beneficiaries many years hence.

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Noah Smith: Worst Case for Climate Change Doesn’t Look Realistic [feedly]

Worst Case for Climate Change Doesn't Look Realistic

Noah Smith (noahopinion.blogspot.com) -- a "progressive capitalist" economist, not a socialist. But, a thoughtful, fact-based economist.

text only:

In recent years, much of the commentary about climate change has gone from sternly serious to wildly despairing. A new report from the United Nation's Intergovernmental Panel on Climate Change warns that the effects of climate change are accelerating and that the world has barely more than a decade to make deep cuts to greenhouse gas emissions and limit warming to 1.5 degrees Celsius by century's end. Such reductions are extremely unlikely, given that global emissions rose this year and last. China, the world's biggest emitter by far, is still building coal-fired power plants, while the U.S. under President Donald Trump has abdicated leadership on the climate issue. Warming of more than 1.5 degrees seems certain at this point and the world will have to deal with the consequences.

But how much, exactly, will Earth warm before the fossil-fuel era runs its course? That's harder to forecast because it depends not just on climate science but also on assumptions about emissions. And that, in turn, depends on technology and economics, both of which are notoriously hard things to predict. The IPCC lays out several business-as-usual scenarios for how much greenhouse gas would be emitted without major policy action, but it doesn't say which scenario it thinks is more likely. The direst of these, called RCP8.5, implies that the planet would warm by an average of 5 degrees Celsius (about 9 degrees Fahrenheit) by 2100 -- an absolutely catastrophic, civilization-ending level of warming. It's typically this doomsday scenario that motivates some observers to despair and others to call for reckless, flailing policies like the dismantling of capitalism.

But a growing chorus of climate scientists and energy policy analysts has begun to question whether the dreaded RCP8.5 scenario should be taken seriously. The scenario assumes that after a brief flirtation with natural gas and renewable energy, the world returns to fueling industrialization primarily with coal. But it seems vanishingly unlikely that the global coal industry will increase sevenfold, as RCP8.5 envisions, even if natural gas proves to be a temporary phenomenon.

First of all, there probably just isn't that much accessible coal in the ground. Second, burning coal creates air pollution in addition to greenhouse gases, which gives countries an additional incentive to reduce its use. Third, the price of renewables has dropped to the point where building new coal plants is simply not economical in most places. Despite China's new plants, overall global coal use fell 3% in 2019. India is turning away from coal, and so is Southeast Asia:

End of the Road

Coal generator construction in southeast Asia is drying up

Source: Global Energy Monitor

Even Trump, despite his promise to restore the coal industry to its former glory, has managed to do nothing of the kind:

Burning Less and Less Coal

U.S. coal consumption, trailing 12 months, in short tons

Source: U.S. Energy Information Administration

And as renewables get cheaper, it will become economical to retire existing coal and gas plants. McKinsey predicts that this will be the case in most of the world by 2030. Banks are already beginning to pull out of the coal-power industry, not because of environmental pressure (since they're still funding coal for other industrial uses), but because they know there's just no future in coal plants. Gas won't be far behind, though a few gas plants will probably remain in service to back up solar plants when the sun isn't shining.

So the IPCC's commonly cited doomsday scenario looks like a rash flight of imagination. A group of climate scientists recently got together on Twitter and tried to figure out what a more realistic scenario looked like. They fed energy predictions from the International Energy Agency into climate models and found out that 3 degrees of warming is a much more likely business-as-usual scenario than 5 degrees. But as the climate scientists noted, the IEA has consistently underestimated the growth of solar power; each year the international agency predicts that growth in solar-power generation will slow, and each year it grows rapidly. If renewable technologies continue to surprise on the upside, warming could be limited to 2.5 degrees.

Now for the bad news: 2.5 degrees of warming will still be catastrophic for many people and countries, and 3 degrees even more so. Heat waves will become unbearable without air conditioning, even in high latitudes. All coral reefs will probably die. Many major cities will be drowned. Even just 2 degrees of warming, which will be exceeded in any business-as-usual scenario, will have very serious global repercussions.

That's why a business-as-usual scenario is unacceptable. The human race probably isn't doomed, but climate change is still an enormous catastrophe in the making. Big policy changes are needed -- in the U.S., in China and in many other countries. Instead of embarking on the fool's errand of trying to dismantle capitalism, governments should utilize the combined resources of the public and private sectors. They should retire all coal plants as quickly as possible, steadily reduce natural gas usage and convert to all electric vehicles. Buildings need to be retrofitted to use electricity instead of gas. And new technologies for producing low-carbon steel and cement, and for carbon-free aviation, need to be researched, scaled up and disseminated internationally.

More rational climate scenarios don't give any excuse for complacency. But they do give human civilization a fighting chance.

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Friday, December 20, 2019

Jared Bernstein: CBPPs best graphs of 2019! [feedly]

CBPPs best graphs of 2019!

For a certain breed of wonk and nerd, it's not the holiday season until some of CBPP's best graphs of the year are collected and briefly annotated. This year, Kathleen Bryant and I took a stab at picking some of the figures we thought were most important to document the economic and policy landscape facing economically vulnerable people.

One of the most important and positive trends of the last decade was the decline in share of Americans without health coverage due to the Affordable Care Act. Their numbers fell from about 45 million to 27 million, a gain in coverage for ~18 million people. But this year's release of the Census Bureau's health insurance data revealed a troubling reversal of this trend. In 2018 (the data lag one year), the uninsured rate increased for the first time since the ACA's passage. These findings illustrate the grave consequences of the Trump Administration's repeated attempts to undermine the ACA over the past several years.

One reason the reversal shown above is of such concern is that health coverage saves lives. Reviewing a recent academic study, Matt Broadus and Aviva Aron-Dine report that the ACA's Medicaid expansion prevents thousands of premature deaths each year and saved the lives of at least 19,200 adults aged 55 to 64 between 2014 and 2017. Matt and Aviva find that if all states had expanded Medicaid in 2017, the number of lives saved by full expansion would almost equal the number saved by seatbelts. Given such magnitudes, and considering that the federal government pays 90 percent of the costs of the expansion, these findings underscore the cruelty of remaining state resistance to the expansion.

The positive aspects of the current U.S. economy, such as our low unemployment rate, mask the fact that there's an affordability crisis for low- and middle-income housing, both purchased and rental. Alicia Mazarra's analysis shows one reason why: a large, persistent gap in the growth of incomes and rents of the median rental household. Federal rental assistance programs make a dent in the income-rent gap by helping 10 million people keep roofs over their heads – but these programs are woefully underfunded: only one in four eligible families get the rental vouchers to which they're entitled, a huge shortfall that could be ameliorated simply by adequately funding the voucher program.

The official poverty measure leaves out the impact of some of our most important anti-poverty programs, including the market value of SNAP and tax credits for working families. CBPP's Danilo Trisi and Matt Saenz showed that when we account for the full spate of anti-poverty programs (some of which are counted in the official measure), the national poverty rate falls by almost half, from 24 to about 13 percent. That amounts to 37 million people, including 7 million kids, lifted out of poverty. We can and should argue that 13 percent is still far too high in the world's richest economy, but claims that the safety net fails to cut poverty are demonstrably wrong.

As just noted, one of the programs that reduces poverty is the SNAP program. Most people reasonably think of SNAP as a consumption program; i.e., it raises recipient families' ability to meet their basic needs. But as the figure shows, it's also an investment program, with long term benefits for children in households that receive it. Because the national program was originally phased in state-by-state, researchers were able to compare adult outcomes of kids in SNAP households to those in households that did not receive nutritional assistance. SNAP receipt had long-term benefits, improving both health and educational outcomes.

The U.S. labor market creates a lot of jobs, which is, of course, a good thing. But too many of those jobs are of dubious quality. About half of working-age Black and Latino workers are in low-wage jobs (it's about a third for whites). That's one reason why CBPP's tax team touted the Working Families Tax Relief Act, an earnings subsidy for low- and moderate wage workers which builds on the EITC. The WFTRA "would improve the economic well-being of 46 million low- and moderate-income households with 114 million people." Along with higher minimum wages, it's a surefire way to improve the quality of lower-paid jobs.

As I argued in recent testimony before the House Budget Committee, the 2017 Trump tax cuts have broken a key linkage in advanced economies: that between a strengthening economy and more tax revenues flowing into the Treasury. The figure above shows that the average revenue flow as a share of GDP is about 17 percent, but in periods like the present, with low unemployment, that share rises to 18 percent. However, in 2019, it fell to 16.3 percent, about two percentage points of GDP, or over $400 billion, below where it should be.

Source: Goldman Sachs Research

Sticking with the Republican tax cuts, the package was sold as not only "paying for itself," an obviously false claim, but as a stimulus for business investment. The cuts were particularly generous to corporate shareholders and wealthy households, and trickle-down tax lore maintains, against decades of evidence, that such tax cuts will boost business investment. As the above chart shows, the opposite occurred: since the tax cuts were passed, investment in plants, equipment, and research have grown more slowly.

One of our more important papers from the past year was Chye-Ching Huang and Roderick Taylor's analysis of ways the federal tax code maintains racial inequality in income and wealth. Of course, the code does not explicitly target race or ethnicity but centuries of racist policies – such as the laws upholding slavery, the confiscation of Native American tribal lands, and the policies that racially segregated schools and neighborhoods – have so dramatically shaped today's income and wealth distributions that almost any federal tax policy change will inevitably raise or lower racial barriers and disparities. The gif illustrates the racial disparities that are the culmination of centuries of barriers that people of color have faced to accruing wealth.

And, with that, thanks for following these econo-musings, and seasonally-adjusted greetings to all

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