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September 11, 2015

Latest Posts from Economist's View

Posted: 08 Sep 2015 12:06 AM PDT
Posted: 07 Sep 2015 10:02 AM PDT
Brad DeLong:
Against What Benchmark Should We Measure Equitable Growth Performance?: I find the very sharp Marty Felstein engaging in a goalpost-moving effort that I cannot endorse:
There may be some powerful argument that the true consumer price index has risen more for the rich than for the middle class and the poor. But if there is, I am not aware off it. And so I think: The existence of downward bias from failure to measure the value of new good and new kinds of goods in official statistics of real income growth does not reduce the rise in inequality over the past generation–although it does mean that we collectively are richer now relative to our predecessors than we would be if official statistics were gospel.
Here I think we need to draw some distinctions. If you are not tech-savvy–if you are not a relatively intensive user of modern information, entertainment, and communication technologies–then you do not benefit from them. Then the official statistics showing declining median incomes over the past generation apply to you. And you are certainly much poorer now than you reasonably expected back then to be now. And it is wholly reasonable for you to believe that, while the economy has worked for the rich, it has not worked for you and somebody should be held accountable.
If you are tech-savvy, then it is still reasonable for you to complain. You do need to praise the bureaucrats of DARPA and the other pieces of government support for what became Silicon Valley. You do need to be grateful for California entrepreneurship and enterprise. But that enormous outpouring of wealth and enterprise is orthogonal to the rest of the economy–which has still failed you. And, especially, it is not irrational for you to feel upset by the fact what you thought were the standard indicia of middle-class status now seem beyond your grasp and getting further beyond every day. ...
In my view, reduced marginal tax rates and their result of still less social insurance is not the road to faster growth of median incomes. Rather, it is a government that pragmatically identifies the true industries of the future and makes it easy for the economy to move into them...
Martin Feldstein: The U.S. Underestimates Growth: "Statisticians are supposed to measure price inflation and real growth…
… The official method of calculating the price index doesn't incorporate this new product until total spending on it exceeds some threshold level…. The main effect of raising well-being… [by] introduc[tion] is completely ignored…. The result is that the rise in real incomes is underestimated….
Over the past two decades…. the… [measured] increase of [median] real household income [is] down to less than 5%… [in] official statistics also… a 10% decline… since 2000, fueling economic pessimism. But these low growth estimates fail to reflect the remarkable innovations in everything from health care to Internet services to video entertainment that have made life better…. We should worry less about the appearance of slower growth of middle-class incomes and do more to increase that growth in the future.
Posted: 07 Sep 2015 09:17 AM PDT
From the NBER:
Support for Redistribution in an Age of Rising Inequality: New Stylized Facts and Some Tentative Explanations, by Vivekinan Ashok, Ilyana Kuziemko, and Ebonya Washington, NBER Working Paper No. 21529 Issued in September 2015 [open link to earlier version]: Despite the large increases in economic inequality since 1970, American survey respondents exhibit no increase in support for redistribution, in contrast to the predictions from standard theories of redistributive preferences. We replicate these results but further demonstrate substantial heterogeneity by demographic groups. In particular, the two groups who have most moved against income redistribution are the elderly and African-Americans. We find little evidence that these subgroup trends are explained by relative economic gains or growing cultural conservatism, two common explanations. We further show that the elderly trend is uniquely American, at least relative to other developed countries with comparable survey data. While we are unable to provide definitive evidence on the cause of these two groups' declining redistributive support, we offer additional correlations which may offer fruitful directions for future research on the topic. One story consistent with the data on elderly trends is that older Americans worry that redistribution will come at their expense, in particular via cuts to Medicare. We find that the elderly have grown increasingly opposed to government provision of health insurance and that controlling for this tendency explains about 40% of their declining support for redistribution. For blacks, controlling for their declining support of race-targeted aid explains nearly 45% of their differential decline in redistributive preferences (raising the question of why support for race-targeted aid has fallen during a period when black economic catch-up to whites has stalled).
Posted: 07 Sep 2015 08:53 AM PDT
The Republican base "doesn't actually share the Republican establishment's economic delusions":
Trump Is Right on Economics, by Paul Krugman, Commentary, NY Times: So Jeb Bush is finally going after Donald Trump. ... Mr. Bush has chosen to attack Mr. Trump as a false conservative, a proposition that is supposedly demonstrated by his deviations from current Republican economic orthodoxy: his willingness to raise taxes on the rich, his positive words about universal health care. And that tells you a lot about the dire state of the G.O.P. For the issues the Bush campaign is using to attack its unexpected nemesis are precisely the issues on which Mr. Trump happens to be right, and the Republican establishment has been proved utterly wrong.
To see what I mean, consider what was at stake in the last presidential election, and how things turned out after Mitt Romney lost.
During the campaign, Mr. Romney accused President Obama of favoring redistribution of income from the rich to the poor, and the truth is that Mr. Obama's re-election did mean a significant move in that direction. Taxes on the top 1 percent went up substantially...
Conservatives were very clear about what would happen as a result. Raising taxes on "job creators," they insisted, would destroy incentives. And they were absolutely certain that the Affordable Care Act would be a "job killer."
So what actually happened? As of last month, the U.S. unemployment rate, which was 7.8 percent when Mr. Obama took office, had fallen to 5.1 percent..., lower than it ever got under Ronald Reagan. And the main reason unemployment has fallen so much is job growth in the private sector, which has added more than seven million workers since the end of 2012. ...
And here's what's interesting: all indications are that Mr. Bush's attacks on Mr. Trump are falling flat, because the Republican base doesn't actually share the Republican establishment's economic delusions.
The thing is, we didn't really know that until Mr. Trump came along. ... This is a real revelation, which may have a lasting impact on our politics. ...
I'm not making a case for Mr. Trump. There are lots of other politicians out there who also refuse to buy into right-wing economic nonsense, but who do so without proposing to scour the countryside in search of immigrants to deport, or to rip up our international economic agreements and start a trade war. The point, however, is that none of these reasonable politicians is seeking the Republican presidential nomination.

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