Federal Spending and Revenue Needs Will Grow

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Federal Spending and Revenue Needs Will Grow // Center on Budget: Comprehensive News Feed
https://www.cbpp.org/blog/federal-spending-and-revenue-needs-will-grow

Spending and revenues will have to grow significantly as a share of the economy in coming years just to enable the federal government to continue carrying out existing functions that the public widely supports, our new analysis concludes. As policymakers consider tax reform this fall, ensuring adequate revenues to fund national needs should be a primary consideration.


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A Labor Day Cheer For Economic Nationalism [feedly]

A Labor Day Cheer For Economic Nationalism
http://www.huffingtonpost.com/entry/a-labor-day-cheer-for-economic-nationalism_us_59aca193e4b0b5e530ff6e6d

Kuttner makes some interesting points on the fascist nationalism of Trump/Bannon. But what is "progressive nationalism"? We charge low wage nations a "social tariff"? Plus lots of big rock candy mountain infrastructure investment -- what kind of infrastructure? This sounds like Brexit with a lot of sugar laid on top. Nationalism is not the answer. Serious internationalism is.

 -- via my feedly newsfeed

To read the mainstream press, you would think that using national policies to assure that American workers have decent jobs is the most flat-earth sort of protectionism.

But consider this. The social contract of the booming postwar years was designed so that the U.S. and other nations could protect workers from exploitation, accept strong trade unions, create full-employment economies, contain the excesses of financial speculation and make sure that prosperity was broadly shared.

Keeping predatory capitalism from playing one nation off against another required national rules. And the rules of that era worked well, both economically and politically.

There was plenty of trade, but trade deals were not used to dismantle national regulation. Ordinary working people thrived. There was no appeal of neo-fascism.

That protected form of managed capitalism must have been doing something right, for not only did the economy turn in an annual growth rate of close to 4 percent for three decades, but the economy became more equal. The bottom gained income faster that the top. Far from America prospering at the expense of our neighbors, Europe and Japan grew even faster. And Latin America grew at a far better rate than in the free-market globalist period that began in the 1970s.

In the U.S., blacks actually gained at a slightly higher rate than whites, less because of the civil rights revolution (which occurred towards the end of the postwar boom), but because most blacks were working class and the working class as a whole gained.

Here's the point: there is more than one brand of globalization. The ground rules of the brand of globalism created after World War II allowed room for nations to manage capitalism in a broad public interest. The other sort of globalism, the one that resurged after the 1970s, was intended to liberate private finance and weaken labor.

This was great for the 1 percent. Not so great for working people or for democracy. Punish ordinary people long enough and you get the likes of Donald Trump.

And this brings me to the strange case of Stephen Bannon. As I learned in my unexpected interview with Bannon in the American Prospect, Bannon actually has a very shrewd and coherent strategy that blends white nationalism with economic nationalism. 

Bannon tutored Trump on how to bash immigrants, demonize Mexicans, do the dog-whistle routine with the far right and cultivate race consciousness on the part of alienated white people for whom life used to be a lot sweeter. Hence: Make America Great Again. This history is well told and thoroughly documented in Josh Green's must-read book on Bannon and Trump, Devil's Bargain. 

Bannon wanted to bait Democrats and liberals to do the right thing on race and stand up for people of color, immigrants and sexual minorities. "The Democrats," he said, "the longer they talk about identity politics, I got 'em. I want them to talk about racism every day. If the left is focused on race and identity, and we go with economic nationalism, we can crush the Democrats."

To bookend the strategy of white nationalism, Bannon hoped to sell his boss,  President Trump, on economic nationalism. This included getting tough with China, renegotiating NAFTA and other trade deals, and investing seriously in infrastructure. But here, Bannon ran into a brick wall, otherwise known as corporate America.

Trump had no intention of delivering for American workers, except at the level of rhetoric. His actual policies are viciously anti-labor. His infrastructure program is a complete phony, using privatization of vital public facilities with no net increase in public investment. The Goldman-Sachs wing of the administration has taken control of trade policy, and with Bannon gone that control will be complete.

It's a good thing Bannon did not prevail on the economic nationalism part of the package, because the combination of white nationalism and economic nationalism might actually have improved Trump's dwindling popular support, though an a manner more reminiscent of Mussolini than Roosevelt.

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Now that right-wing economic nationalism is defunct, there is an opening for progressive economic nationalism. It would include serious spending on public infrastructure and a green transition both to modernize made-in-USA technology and to create good domestic jobs. If taxpayer dollars or public debt is funding these investments, it's perfectly fair play to demand that they produce made-in-USA employment.

It's also fair play to ask countries that don't respect decent labor or environmental standards to pay a social tariff so that we don't import the wretched standards along with the products (and under Trump, America could barely pass such a test). It's time to clean up our own act.

We could also use a Tobin tax on speculative financial transactions, which would damp down Wall Street abuses and provide revenue.

These are some of the ingredients of progressive economic nationalism. They would be sound economics and smart politics. Let's make them national policy.

A Happy Labor Day to all.

Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. 

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The workload they’re facing would be tough for a functional Congress [feedly]

The workload they're facing would be tough for a functional Congress
http://jaredbernsteinblog.com/the-workload-theyre-facing-would-be-tough-for-a-functional-congress/

Just a quick note of the mass of portentous stuff on Congress's plate as they return to DC this week.

–The debt ceiling.

To do: They've got to raise it by late-Sept, maybe mid-Oct. at the latest.

Frictions: Hard right typically wants to extract promises of less future spending, but grownup R's are calling for a clean bill.

Probabilistic Outcome: Look for some House R's to team up with D's to pass clean bill on time. I'm 85% confident they'll do the right thing here.

–Funding the gov't and paying for Harvey recovery.

To do: Congress must appropriate funds to run the gov't be the end of Sept.

Frictions: Trump's wall was a big stumbling block here, but with Harvey recovery in the mix, he appears to have backed down.

Probabilistic Outcome: There's no chance they'll pass a budget through "regular order" so we're looking at another budget patch/"continuing resolution." Prior to Harvey, I had the shutdown as a coin toss. Updating priors, I'd put it at 25% tops. In fact, I now expect emergency funding for Harvey (which doesn't count against the official budget caps) to be in the CR.

–Tax reform

To do: R's want to pass a big, regressive tax cut.

Frictions: Remarkably, they still don't have a plan. But they're working on it. They'll likely get no help from D's on tax cuts, so this is about getting their majorities on board. I'd guess their biggest task is coming up with payfors and figuring out how to sell the big increase in the deficit that these cuts will engender, at least as scored by CBO/JCT. ("Bespoke" scores, with dynamic scoring tricks, will be more favorable, of course.)

Probabilistic Outcome: I think the likelihood they get this over the legislative bar this year is low, around 20%. Next year…well, let's cross the bridge when we get to it.

–DACA!

To do: A new entry, thanks to the Pres. And just a completely, freakin' horrible idea. Trump wants to phase out the program that blocks deportation for undocumented immigrant kids. He's supposed to announce today that he's giving Congress 6 months to either legislate the program or end it.

Frictions: Xenophobia intersecting with our dysfunctional immigration laws. It's possible that there's bipartisan support for DACA, but I don't see how they get to 'yes' in six months.

Probabilistic outcome: I don't have a good feel for this yet, but I'll say 50% with downside risk. And I really hope I'm being pessimistic. Also, I could see the volatile Trump say "never mind" at some point.

Healthcare and North Korea are also in the mix, with the thermonuclear sabre rattling among the latter really existentially scary. As my title suggests, for a functional Congress is mid-season form, this agenda would pose a challenge. For these guys and gals…Oy.

 -- via my feedly newsfeed

Is Poor Health Hindering Economic Growth? [feedly]

Is Poor Health Hindering Economic Growth?
http://economistsview.typepad.com/economistsview/2017/08/is-poor-health-hindering-economic-growth.html

Ellyn Terry at the Atlanta Fed's macroblog:

Is Poor Health Hindering Economic Growth?: It is well known that poor health is bad for an individual's income, partially because it can lower the propensity to participate in the labor market. In fact, 5.4 percent of prime-age individuals (those 25–54 years old) reported being too sick or disabled to work in the second quarter of 2017. This is the most commonly cited reason prime-age men do not want a job, and for prime-age women, it is the second most often cited reason behind family responsibilities (see the chart). (Throughout this article, I use the measure "not wanting a job because of poor health or disability" as a proxy for serious health problems.)

In addition to being prevalent, the share of the prime-age population citing poor health or disability as the main reason for not wanting a job has increased significantly during the past two decades and tends to be higher among those with less education (see the chart).

Yet by some standards, the health of Americans is improving. For example, compared to two decades ago the average American is living two years longer, and the likelihood of dying from cancer or cardiovascular disease has fallen. These specific outcomes, however, may have more to do with improvements in the treatment of chronic disease (and the resulting reduction in mortality rates) than improvements in the incidence of health problems.

Another puzzle—which is perhaps also a clue—is the considerable variation across states in the rates of being too sick or disabled to work. For example, people living in Mississippi, Alabama, Kentucky, or West Virginia in 2016 were more than three times likelier to indicate being too sick or disabled to work than residents of Utah, North Dakota, Iowa, or Minnesota (see the maps below).

This cross-state variation is useful because it allows state-by-state comparisons of the prevalence of specific health problems. Among a list of more than 30 health indicators, the two factors that most correlate with the share of a state's population too sick or disabled to work were high blood pressure (a correlation of 0.86) and diabetes (a correlation of 0.83). Both of these conditions are associated with risk factors such as family history, race, inactivity, poor diet, and obesity. Both of these health issues have increased significantly on a national basis in recent years.

So how might poor health hinder economic growth? Health factors accounts for a significant part of the decline in labor force participation since at least the late 1990s. After controlling for demographic changes, the share of people too sick or disabled to work is about 1.6 percentage points higher today than it was two decades ago (see the interactive charts on our website). Other things equal, if this trend reversed itself during the next year, it could increase the workforce by up to 4 million people, and add around 2.6 percentage points to gross domestic product (calculated using our Labor Market Sliders).

Of course, such a sudden and large reversal in health is highly unlikely. Nonetheless, significant improvements to the health of the working-age population would help lessen the drag on growth of the labor supply coming from an aging population. Public policy efforts centered on both prevention and treatment of work-impeding health conditions could play an important role in bolstering the nation's workforce.

 -- via my feedly newsfeed

Monopoly Rents and Corporate Taxation [feedly]

Monopoly Rents and Corporate Taxation
http://economistsview.typepad.com/economistsview/2017/08/monopoly-rents-and-corporate-taxation.html

Paul Krugman:

Monopoly Rents and Corporate Taxation (Wonkish): At one level it's hard to take the Trump administration's tax "reform" push seriously. A guy gets elected as a populist and his first two big proposals are (a) taking away health insurance from millions (b) cutting corporate taxes. Wow.

Furthermore, Trump is invincibly ignorant on taxes (and everything else) — he keeps declaring that America is the highest taxed nation in the world, which is nearly the opposite of the truth among advanced countries. And his allies in Congress aren't ignorant, but they're liars: Paul Ryan is the master of mystery meat, of promising to raise and save trillions in unspecified ways.

But there is an actual interesting question here, even if we shouldn't give any credence to Republican answers. Who does, in fact, pay the corporate profit tax? Does it fall on corporations, and hence eventually on their shareholders? Or is the ultimate incidence mainly on wages, as the administration claims?

Skipping forward to the punchline:

...much corporate taxation probably doesn't fall on returns to physical capital, but rather on monopoly rents. ... As long as the local source of profit is some kind of monopoly rent, corporate tax incidence is going to fall on shareholders, not workers. ...

And there's a lot of reason to believe that market power is an increasingly big deal. ...

This changes the narrative, doesn't it? Instead of focusing on rising capital mobility as a reason profits taxes might fall on workers, maybe we should focus on rising market power as a reason why profits taxes fall on capitalists.

The point for now is that when someone tells you that changes in the world have made old-style corporate taxes obsolete, be skeptical. Some changes in the world may have made profit taxation a better idea than ever.

 -- via my feedly newsfeed

Job Growth Slows in August [feedly]

Job Growth Slows in August
http://economistsview.typepad.com/economistsview/2017/09/job-growth-slows-in-august.html

Dean Baker:

Job Growth Slows in August: Weakness in wage growth and drop in prime-age EPOPs shows slack in labor market.

The Bureau of Labor Statistics reported that the economy added 156,000 jobs in August, somewhat less than most economists had expected. This figure, combined with downward revisions of 41,000 to the prior two months data, brought the average over the last three months to 185,000. The household survey also showed some evidence of weakness with the unemployment rate edging up to 4.4 percent and the employment-to-population ratio (EPOP) falling back 0.1 percentage point to 60.1 percent.

Perhaps more noteworthy was a drop of 0.3 percentage points in the EPOP of prime-age (ages 25 to 54) workers to 78.4 percent. The EPOP for both prime-age men and women dropped by 0.3 percentage points. ...

Other data in the household survey were mostly positive. The number of people involuntarily working part-time fell by 27,000, it is now only slightly larger as a share of the workforce than before the recession. The number of people choosing to work part-time increased by 187,000, reaching a new high. This number has increased by more than 2.6 million since the end of the 2013 when the Affordable Care Act took effect. It indicates that many people are taking advantage of the opportunity to get insurance outside of employment and therefore opting to work part-time.

The percentage of people who are unemployed because they quit their jobs increased to 11.3 percent, but this is still 1.2 percentage points below the peak for the recovery reached last November. One peculiar item in the August report was a big drop in the number of people who are multiple job holders, especially among women. This number, which is not seasonally adjusted, is down 0.4 percentage points from its year-ago level for women and now stands at 4.8 percent of employed women. (It is 4.3 percent for employed men.) This could mean that fewer women feel they need to work more than one job, or it could just be an anomaly that will be reversed in future months.

Wage growth continues to be moderate, with the average hourly wage up 2.5 percent over the last year. The annual rate of increase in the average hourly wage, comparing the last three months with the prior three months, is also 2.5 percent. As a result of the weak growth in the hourly wage and a modest decline in the length of the average workweek, average weekly earnings actually fell slightly in the month. ...

On the whole, this is a mixed report. The rate of job growth is respectable but certainly should not raise concerns about being too rapid, especially given continued weakness in wage growth. And the drop in prime-age EPOPs indicates the labor market still has considerable slack.

See also: Calculated Risk, Jared Bernstein.

 -- via my feedly newsfeed

New thinking about causal mechanisms

New thinking about causal mechanisms

Anyone interested in the topic of causal mechanisms will be interested in the appearance of Stuart Glennan and Phyllis Illari's The Routledge Handbook of Mechanisms and Mechanical Philosophy. Both Glennan and Illari have been significant contributors to the past fifteen years of discussion about the role of mechanisms in scientific explanation, and the Handbook is a highly interesting contribution to the state of the debate.

The book provides discussion of the role of mechanisms thinking in a wide range of scientific disciplines, from physics to biology to social science to engineering and cognitive science. It consists of four large sections: "Historical perspectives on mechanisms", "The nature of mechanisms", "Mechanisms and the philosophy of science", and "Disciplinary perspectives on mechanisms." Each section consists of contributions by talented experts on genuinely interesting topics.

A good introduction to the general topic of mechanisms is the introduction to the volume by Glennan and Illari, and more especially their article, "Varieties of mechanisms." They directly confront one of the large issues in the field, the wide dispersion of definitions and applications of the idea of a causal mechanism. They correctly observe that the concept of mechanism is used fairly differently in various areas of science and philosophy, but they argue that there is a common core of elements that underlie most or all of these usages. The variety that exists is the result of differences in the nature of the phenomena across different areas of scientific investigation, and differences in methodology in use in various sciences. They provide a rather general definition of a mechanism:

A mechanism for a phenomenon consists of entities (or parts) whose activities and interactions are organized so as to be responsible for the phenomenon. (92)

They then attempt to provide a basis for classifying different kinds of mechanisms according to several different criteria. The dimensions of variation they identify include the kind of phenomenon produced, the kind of entities and activities constituting the mechanism, the way in which entities and activities are organized, and the etiology of the mechanism.

Also interesting is Petri Ylikoski's contribution, "Social mechanisms." Ylikoski structures his exposition of the theory of social mechanisms around the Coleman boat diagram (link). To provide a mechanism for a social phenomenon is to provide an account at the level of the actors of how a macro-level event or entity causally brings about another macro-level event or entity. Ylikoski insists that this is a matter of explanatory adequacy rather than reductive analysis, and is therefore not ontologically reductionist. But it does fundamentally imply that social mechanisms occur at the level of interactions among actors. In prior posts I have argued against this presupposition (link). I argue that it is perfectly intelligible to suggest that there are meso-level causal mechanisms. Ylikoski also underlines the affinity that exists between social mechanisms and agent-based modeling: a good ABM demonstrates the process through which a set of conditions at the micro-level aggregate to a certain kind of macro-level outcome. See this earlier post for a small amount of doubt about the adequacy of ABM models to perform this kind of social aggregation for realistic social scenarios; link. (Several of these points are developed in my New Directions in the Philosophy of Social Science.)

Povich and Craver address the topic of the relationship that exists between mechanisms, levels, emergence, and reduction in their contribution, "Mechanistic levels, reduction, and emergence". This is a key question within the philosophy of social science. And the idea of  mechanism seems to have great relevance to the idea of various levels of phenomena. At the level of the organization we see, perhaps, chronic inefficiency in the use of certain kinds of resources. In searching for the mechanisms that cause this inefficiency we may choose to drop down a level and examine the incentives and constraints that guide the behavior of individuals within the organization. And we arrive at a theory of the individual-level mechanism that produces the meso-level outcome. This is a mechanism that falls along strut 3 of Coleman's boat; it is an aggregative mechanism. But not all social mechanisms have this nature. If we want to know why rebellious segments of an agrarian society locate themselves in remote, mountainous areas, it is enough to know a few meso-level facts about the functioning of traditional military forces and the meso-level fact that mountainous terrain gives a tactical advantage to rebel commanders. This appears to be a meso-level mechanism from start to finish.

A particularly intriguing and original contribution is Abrahamsen, Sheredos, and Bechtel's "Explaining visually using mechanism diagrams." We tend to think of scientific explanations as mathematical demonstrations or text-based derivations of outcomes. Abrahamsen, Sheredos, and Bechtel point out that visual diagrams play a crucial role in the presentation of many scientific results; and these diagrams are not merely heuristic or illustrative. A visual presentation serves to designate how the hypothesized mechanism works: what its parts are, how the parts influence each other, and how the functioning of the mechanism over time produces the outcome in question. The authors make an admirable attempt to provide a philosophy-of-science analysis of the components and logic of a visual diagram as an expository device for presenting a causal mechanism or process. They highlight the logical problems of representing entities, spatial location, and temporal duration within a diagram in a way that permits the viewer to gain an accurate understanding of the hypothesized mechanism or process. And they note that it is a conceptually simple step to introduce computational modeling into the graphical representation described here, so the processes in question can step through their interactions on-screen.

Taken together, the essays collected here constitute a valuable contribution to the literature on mechanisms and explanation. The handbook also gives the reader a concrete experience of how deeply varied the mechanisms literature is, leading to very interesting questions about cross-disciplinary communication. It appears to be genuinely challenging to formulate an abstract analysis of the idea of a causal mechanism that will mean approximately the same thing to researchers trained within significantly different research traditions. Unlike many handbooks, this collection warrants reading cover to cover. Researchers who believe that the mechanisms approach provides a valid way of understanding the metaphysics of causal inquiry and explanation will find every article stimulating and helpful.

(Here are a couple of prior posts on the challenge of providing a classification scheme for social mechanisms; link, link.)

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John Case
Harpers Ferry, WV

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