WORÞY READS: from 2021-03-26
A preview of my weekly read-around for the Washington Center for Equitable Growth...
Worthy Reads from Equitable Growth:
1) This is truly excellent. Brand new:
Daniel Reck, Max Risch, & Gabriel Zucman: Tax Evasion at the Top of the U.S. Income Distribution & How to Fight It: ‘How much taxes do high-income Americans evade? And what kinds of evasion tactics do they use?… In collaboration with researchers at the U.S. Internal Revenue Service, we show that American taxpayers with incomes in the top 1 percent are much more sophisticated than the other 99 percent at tax evasion. As a result, conventional estimates significantly underestimate the income and taxes evaded by the rich. Our findings point to several key steps that policymakers could take to combat widespread tax evasion by the very top income earners in the United States. First and foremost is the need for greater fiscal support for the IRS. Second, the IRS and Congress can target the ways in which the rich hide their incomes and obscure their actual tax obligations via so-called pass-through businesses and hidden offshore accounts…
2) How should economic policy be shaped over the next 4 to 8 years for equitable growth and inclusive prosperity? The Washington Center for Equitable Growth is re-launching our research happy-hour conversations. I always found this to be an extremely excellent series. And it looks like the relaunch will be definitely up to par:
Equitable Growth: Research on Tap: Investing in an Equitable Future: ‘April 6, 2021 :: 3:00 PM–4:30 PMET: Join the Washington Center for Equitable Growth and the Groundwork Collaborative for the relaunch of our popular event series Research on Tap, a space for drinks, dialogue, and debate. In this installment, we’ll discuss the role of increasing investments and revenues to address the underlying structural inequalities laid bare by the coronavirus recession and advance a sustained economic recovery that puts the United States on a path to strong, stable, and broadly shared growth…. Featuring a fireside Firechat with Cecilia E. Rouse…
LINK: <https://web.cvent.com/event/3c55e844-d0e2-4392-9d1c-5a2dd4e08199/summary>
3) Why I believe that the Democratic center left has to accede to the leadership of those of us further to the left, for the next four years at least. Yes, some of the things that a Democrats-only coalition will do will be low-value things. But the alternative is to do nothing at all. While Republicans are no longer pushing to eliminate Medicare and privatize Social Security, they remain unwilling to vote for anything that they cannot spin as a big defeat for a Democratic President. I did see this coming. Two years ago:
Brad DeLong (2019): “Passing the Baton”: The Interview: Here’s Zack Beauchamp…. ”DeLong believes that the time of people like him running the Democratic Party has passed…. It’s not often that someone in this policy debate — or, frankly, any policy debate — suggests that their side should lose. So I reached out to DeLong to dig into the reasons for his position: Why does he believe that neoliberals’ time in the sun has come to an end? The core reason, DeLong argues, is political. The policies he supports depend on a responsible center-right partner to succeed…. This is no longer the case, if it ever was…" Here’s me: We are still here, but it is not our time to lead…. Our current bunch of leftists are wonderful people… social democrats… very strong believers in democracy… very strong believers in fair distribution…. And: We learned more about the world… [which] appears to be more like what lefties thought it was than what I thought it was for the last 10 or 15 years…
LINK: <https://braddelong.substack.com/p/hoisted-from-the-archives-2019-passing-d0e>
4) The individual checks are very badly targeted—neither an efficient relief nor a powerfully redistributive program. The rest of Biden-Rescue is, in my judgment, doing the right things at the right time. Is it at the right scale? I certainly would not be happier if it were much smaller. And I really do not understand the judgments of those who say that it is too large—unless they, somehow, have 15 Republican senators in their back pockets, willing to vote for infrastructure provided their debt-size “concerns” can be paid some lip-service:
Erica Handloff: Equitable Growth Responds to Passage of American Rescue Plan: ‘Biden yesterday signed the American Rescue Plan, which provides $1.9 trillion in critical public health investments to fight COVID–19, support struggling families, and grant aid to states, localities, tribes, and territories. The Washington Center for Equitable Growth commends Congress and the president for passing a federal rescue package that meets the scale of the problem and for taking steps to put our nation on a path to recovery that is strong, stable, and broadly shared. In particular, the plan provides a third round of critical relief checks in response to the coronavirus recession and extends enhanced Unemployment Insurance, ensuring workers who have lost their jobs or had their hours cut will continue receiving the supplemental $300 per week through September 6. Research supported by Equitable Growth shows that robust UI benefits and direct stimulus, scaled to meet economic needs, can help mitigate hardship for individuals and families while also boosting the wider economy, preventing a more severe downturn. Also notable is the law’s commitment to invest so that our nation emerges from the coronavirus recession stronger, more resilient, and more equitable. Key investments include: Nearly $100 billion to combat the public health crisis… $350 billion in funding for state and local governments… More than $100 billion to expand and improve the Child Tax Credit and Earned Income Tax Credit… $130 billion to help schools reopen safely and $45 billion for child care relief… $12 billion for nutritional assistance… But while the investments made in the American Rescue Plan are at an appropriate scale given current conditions, a growing body of research highlights the ongoing structural reforms that are necessary to address the underlying racial, climate, and economic crises laid all the more bare by the coronavirus pandemic…
LINK: <https://equitablegrowth.org/press/equitable-growth-responds-to-passage-of-american-rescue-plan/>
Worthy Reads from Elsewhere:
1) The useful part of macroeconomic theory have always been very very small. The fact that we now recognize that is progress, of a sort:
Noah Smith: The Return of the Macro Wars: ‘Everyone quietly stopped believing in the usefulness of academic macro theory. Macro profs are still out there doing their jobs…. With folks like Emi Nakamura, Jon Steinsson, Yuriy Gorodnichenko, and Ivan Werning on the job, the field of macro theory is chock full of top talent…. But… macro theory is just really, really hard…. The financial crisis and the Great Recession really exposed the fact that macro theory wasn’t ready for prime time. When I gave a talk at the bank of England in 2013, the central bankers there lamented how little usable insight and advice their complex academia-derived models had offered in a crunch…. Macro theory is going to remain confined to the ivory tower for a while. In the meantime… heuristics, rules of thumb, and simple calculations… are the order of the day…
LINK: <https://noahpinion.substack.com/p/the-return-of-the-macro-wars>
2) No. The United States is not yet close to exceding its debt capacity. And refusing to run up the national debt to finance the war against global warming carries with it much, much greater risks than does doing so:
Peter Orszag: Joe Biden’s Climate Bill Deserves Bold Fiscal Support: ‘Finally, and perhaps most crucially, the nature of the underlying risks is fundamentally different…. Government policy alone is clearly insufficient to bend down the carbon emissions curve. Innovation and changes in business and private activity must do a lot of the work. Yet if we are to have any chance of meeting the 2050 goal of net zero emissions, we can’t afford to miss this moment on the policy front. Climate change is irreversible; the world will never be the same. But fiscal risk is not and, if a fiscal crisis were to arise, we would still have options available. Over the next few months, the US is going to choose between these two. In this unusual moment, the priority should be protecting the globe rather than the budget…
LINK: <https://www.ft.com/content/d080f09e-efcd-490c-91be-8db8dccc56b0>
3) Dani Rodrik tries to make peace among and find common ground for economists, sociologists, ethnographers, and so forth. I agree with Dani that an exclusive focus on “internal validity” does not get us nearly took where we need to be. But I have a different view of where the low-hanging fruit is. I think it lies in using reduced forms and correlations to constrain our set of possible scenarios about how the world might be. We need to recognize more that, even where we cannot conclusively fix either a supply or demand curve, we can say intelligent things about how the data correlations constrain their possible positions:
Dani Rodrik: How Economists and Non-Economists Can Get Along : ‘Other sleights of hand… cause economists problems… “identification”… that answer[s] either a narrower or a somewhat different version of the question… randomized social experiments… may not apply to other regions or countries… variation across space may not yield the correct answer to a question that is essentially about changes over time…. Economists’ research can rarely substitute for more complete works of synthesis…. Judgment necessarily plays a larger role… which in turn leaves greater room for dispute…. Nevertheless, such work is essential. Economists would not even know where to start without the work of historians, ethnographers, and other social scientists who provide rich narratives of phenomena and hypothesize about possible causes, but do not claim causal certainty…
4) This is a remarkably superb piece of work, and a great deal of it comes as a considerable surprise to me. Why is labor-side hysteresis not a bigger thing? How do I reconcile the fact that productivity-side hysteresis is a very big thing with what I think I know about technological progress during the boom of the 1930s? Big questions that I need to grapple with:
Òscar Jordà, Sanjay R. Singh, & Alan M. Taylor: The Long-Run Effects of Monetary Policy: ‘Does monetary policy have persistent effects on the productive capacity of the economy? Yes, we find that such effects are economically and statistically significant and last for over a decade based on: (1) identification of exogenous monetary policy fluctuations using the trilemma of international finance; (2) merged data from two new international historical cross-country databases reaching back to the nineteenth century; and (3) econometric methods robust to long-horizon inconsistent estimates. Notably, the capital stock and total factor productivity (TFP) exhibit strong hysteresis, whereas labor does not; and money is non-neutral for a much longer period of time than is customarily assumed. We show that a New Keynesian model with endogenous TFP growth can reconcile these empirical findings…
LINK: <https://www.nber.org/papers/w26666>
5) It is already the case that everything that takes place is potentially observable. Access to the cameras and the satellites is, however, about to become democratized. How will human society change when, once again as it once was, everything takes place in public in the village square?:
Economist: Small, Cheap Spy Satellites Mean There’s No Hiding Place: ‘Fleets of them will eavesdrop on every part of Earth’s surface: In the middle of last year, Ecuadorians watched with concern as 340 foreign boats, most of them Chinese, fished just outside the Exclusive Economic Zone (eez)…. There were more than 550 instances of vessels not transmitting their locations for over a day…. Both local officials and China’s ambassador to Ecuador… said all the boats were sticking to the rules. In October, however, HawkEye 360… announced it had detected vessels inside Ecuador’s eez on 14 occasions when the boats in question were not transmitting ais (see map)… faint… from… navigation radars and radio communications…. Smallsats… the size of a large microwave oven… cheap to build and launch…
6) Trump lawyer Sidney Powell now says that all her claims about Dominion Voting Machines and Venezuela—and many other claims as well—were transparently and obviously false. Trump’s criminal insurrectionists say that they are entitled to believe that what the president says is the truth—and then act on that belief. The United States is still in huge, huge trouble—because of the current state of the Republican Party. Economic policy may well be the most important long-run issue facing America. But maintaining democracy—in the public sphere and in the voting booth—is a much more important short-run issue:
Heather Cox Richardson: March 19, 2021: ‘Asked about what happened at the Capitol on January 6, 87% percent of Americans say it is either “very important” (69%) or “somewhat important” (18%) for law enforcement officials to find and prosecute the insurrectionists. Where those numbers fall apart is among Republicans who believe that former president Trump won the 2020 election…. 66% of people who believe that Trump won the election say that the riot at the Capitol is getting too much attention. Eighty-two percent of them said Trump’s conduct leading up to the insurrection was not wrong and that the House should not have voted to impeach him. The danger of the Big Lie—the false idea that Trump actually won the 2020 election—was always that it would convince Trump supporters to fight for him not because they thought they would be fighting to overturn the U.S. government, but because they thought they would be defending it…. The lawyer for Schaffer, the Indiana man, is trying to get leniency for his client by arguing that the man was encouraged by Trump. “People have the right to believe the highest elected official…. My client is not responsible for what happened on January 6”…
LINK: <https://heathercoxrichardson.substack.com/p/march-19-2021>
7) The use of one word "populism" to describe (a) the circa 1900 American movement for antitrust, utility regulation, access to finance, and easier monetary policies; (b) Latin-American post-WWII inflation-redistribution leftist governance; and (c) current xenophobic ethnicism—that has led to a great deal of fuzzy thinking.
I have long noted current movements’ much greater similarity to itay’s Mussolini than to Nebraska’s William Jennings Bryan or Brazil’s Getulio Vargas. Frank Fukuyama says that we should not do what would then be the natural thing, and call our current movements “fascist”, because fascism’s essence is one of military expansion and social darwinist struggle against other nations. I am not sure that that is right. The current movements want to wage a war against a weak enemy—internal dissenters and immigrants—in a struggle to keep the nation “pure”. That seems to me to be an effective substitute:
Sergei Guriev & Elias Papaioannou: The Enduring Populist Threat: ‘With so many populists still firmly in power, the notion that the trend will simply dissipate following Trump’s defeat seems like wishful thinking…. Trump’s brand of right-wing populism has not been definitively repudiated…. Economists often used “populism” as shorthand for a particular brand of inefficient macroeconomic policy… Latin American-style left-wing…. [Now] a right-wing variant… xenophobic nationalism and religious conservatism… identity and morality, not class… a “thin-centered ideology” that divides society into two “homogenous and antagonistic” groups: the pure people and the corrupt elite… brooks no nuance…. Post-crisis austerity only intensified voters’ resentment…. The coronavirus pandemic… could well fan the populist flame…. Not… a conflict between haves and have-nots. If it did, a cartoon plutocrat like Trump would not have been able to campaign as the voice of the people…. Populism reflects the rejection of… freedom of expression, environmental protection, gender equality, racial and cultural diversity, and tolerance…. Economic insecurity likely compounds… feelings of uncertainty and isolation…. The link between cultural and economic insecurity… may explain why immigration is so central…. As for Trump… his policies did not have a profound economic impact. But, like many populists, he did mount attacks on institutions, undermining confidence… significantly undermined civility and trust, with its associated impact on productivity and well-being…
8) I do not understand how global public health did not recognize immediately what it was dealing with. Think of it: a disease that evolved to spread from bat lung to bat lung while the bats hang upside down in their batcaves. Such a thing would not spread from human to human by touch. It would spread, overwhelmingly, through the air under conditions of low air circulation. Surface disinfectants? Fomites? That's touch things with their feet, and do not then bring their feet up to their noses. And now millions are unnecessarily dead. Please explain this to me:
Zeynep Tufekci: Aerosols: ‘Incredible New Zealand study on a mystery transmission in a quarantine hotel. For a while, a garbage can was suspected—one of the very, very few known suspected cases of fomite transmission. Turns out… it’s aerosols. What a Kuhnian year this has been…. This year will clearly force an updating of our understanding of role of aerosol transmission for respiratory pathogens. PLUS it’s almost text-book Kuhnian in how it’s happening: resistance, “epicycling” and then paradigm shift. Yes, feels like cold-comfort now as we are and have been late, but we’re here. The new CDC director has already cited importance of aerosols as one of things that most surprised her—along with a good chunk of people…. Nothing wrong with a (sensible) amount of hand-washing but the issue is that our mitigations need a hierarchy of energy and resources. Deep cleaning is still a big thing, parks/beaches are still shut down. Clearly—very clearly—our stack was wrong-ordered…. It’s places like Japan and South Korea and Hong Kong etc., whose scientists knew from day one that airborne transmission was a key route—disregarding global official guidance essentially—that managed to beat back outbreaks to get back to near normalcy…. Many had been through SARS and they have top-notch infectious disease specialists and epidemiologist. Reading their documents from February/March of 2020 is mind-blowing. They went their own way. It’s all there. I’m still not sure why the global orgs were so wrong on this. Did these countries have special institutional knowledge (e.g. from previous outbreaks) that just wasn’t considered by the rest of the world? What happened?… Sometimes people say “wait, doesn’t everybody know airborne transmission is important?” If you follow the right experts on Twitter, I guess? Meanwhile, a library in one of the highest-educated US counties is “quarantining” returned books for seven days…
LINK: <https://twitter.com/zeynep/status/1373825780384432130%3E%3>
My hope is that some stacks email push and discovery frameworks will allow me to return my weblogging audience to the state it was five years ago, back before the decline. I do not think that this will ever become a profit center. But if you think that this is worthwhile enough that I should hire a research assistant to work on it, in addition to what time I can spare, please subscribe:
Re: Tax evasion at the top of the U.S. income distribution and how to fight it
The remedies seem to avoid an obvious one: jail for tax evasion. Wealthy people must learn that they cannot negotiate or buy their way out of evasion. Tax evaders need to spend time in jail, and not at a "Club Fed" but in a regular jail. Al Capone was put in Alcatraz when it was operating. I see no reason why such unpleasant conditions shouldn't be used as a big stick to increase compliance for all but the most criminal. A few high-profile cases to "encourage the others" seems a worthwhile investment.
You know that I love you, Brad. However, you need to do a better job of proof-reading. I know that autocorrect is a huge part of the problem.