The New York Times has gotten hold of the “House Republican Playbook” on Obamacare, and I have to admit that it brought back warm memories. It’s just like the launch kits I used to produce for our sales force…. It’s all pretty predictable stuff: Obamacare is an abomination; people are losing their insurance; small companies are being ruined; etc. etc. But I have to say that this is my favorite talking point:
Millions more uninsured: the number of Americans left uninsured by ObamaCare has risen by 8 million from the initial estimate.
Needless to say, this is primarily because Republicans governors have refused to implement Obamacare’s Medicaid expansion, even though it’s 100 percent paid for at first and 90 percent paid for forever. These governors literally prefer to have their state’s residents pay taxes and get nothing in return rather than give so much as an extra dime to poor people who need health care. It’s truly hard to fathom what kind of human being is callous enough to do this, but apparently there are a bunch of them in the Republican Party. And then, just to add a cherry of chutzpah on top of this ice cream sundae of spitefulness, they crow about how Obamacare isn’t covering as many people as Obama hoped it would. You really have to marvel.
John Podesta delivered opening remarks at the launch event for the Washington Center for Equitable Growth on November 15, 2013.
Good morning. Thank you all for joining us as we launch the Washington Center for Equitable Growth. And thank you, Heather, for your kind words and your hard work to make Equitable Growth a reality.
We would not be here today if not for the efforts of many passionate, intelligent people. Before I begin, a few thank-yous are in order:
The members of our steering committee for their time and energy; led by our intellectual godfather and inspiration for this project, Bob Solow;
The talented academics and researchers who have joined our Research Advisory Board, whose help and expertise we will call on often in the months and years to come;
And, of course, all of our distinguished panelists, some of whom have traveled a long way to be with us today. Thank you for being here.
I also want to make a special thank you to my friend Herb Sandler and the foundation he and his late wife, the wonderful Marion, founded, for their leadership and support.
I also want to acknowledge and thank Neera Tanden, the President of the Center for American Progress, for supporting and housing Equitable Growth at the Center for American Progress and for sustaining an environment of open inquiry and a constant search for deeper understanding about how our economy works.
It’s wonderful to be in this historic synagogue, this beautiful old building which has been a cornerstone of the District of Columbia’s civic and community life for more than a hundred years.
I trust it won’t come as a shock to anyone in this room when I say we live in a country where incomes have been increasingly unequal since 1979. Today, our income distribution more closely resembles that of El Salvador than Canada.
Over the last three decades, the top 1 percent of earners have seen their incomes increase by 279 percent. But the incomes of the bottom fifth of workers have risen by less than 20 percent.
Since the end of the Great Recession, the top of 1 percent of earners have captured 95 percent of income gains. Last year, the top 10 percent of earners took home more than half of the country’s total income.
Income inequality in the United States today has reached levels not seen since the Roaring ’20s.
These trends aren’t abstractions. They have real and serious consequences for the American people. The unemployment rate at the bottom of the income scale is above 20 percent, while unemployment among the richest Americans stands at just 3.2 percent. That’s not abstract. Last year, one in five children under 18 lived in poverty, the highest rate since the early 90s. All the gains we made in the fight against poverty during the Clinton administration have been washed away. That’s not abstract.
The conventional wisdom says that inequality, even dramatic inequality like we have today, is an inevitable byproduct of a competitive market economy. For many years, certainly among conservatives but also among some progressives, the notion that policy interventions that dampen inequality would also hurt growth has not been adequately challenged.
For some, these assumptions go further: that the ingenuity of the American people can flourish only in an atmosphere of small government, limited regulation, and low taxes on the rich. Growth comes from high-income investors, the so-called “job creators.” Inequality may be unfortunate—it may insult our sense of fairness—but tolerating it is necessary if we want strong economic growth. Or so we often hear. Despite the lack of evidence that it’s true.
We think that is far too narrow a way to understand how an economy like ours actually grows and thrives. Today, the U.S. has rates of inequality comparable to developing countries, despite having a far more complex economy—but we’re largely in the dark about the implications of that fact.
Recent research in the international context suggests that more equal societies generally experience longer periods of economic growth. Other studies point to the importance of issues ranging from investing in human capital to encouraging political inclusion as ways to support long-term economic growth and stability.
But evidence remains thin on how worsening inequality affects these economic components: how it may alter demand for goods and services, or hinder entrepreneurialism, or undermine our political or economic systems.
We are launching the Washington Center for Equitable Growth to help accelerate new, cutting-edge research into how these deep structural changes affect growth and stability. We want to facilitate a deeper dive, through a competitive, peer-reviewed grant program, into understanding the mechanisms through which inequality affects growth. We want to help make important new research on economic growth and stability relevant to policymaking. We want to help support and elevate excellent work from talented younger scholars, a number of whom are joining us here this morning. And we want to shift the debate away from polemics and back towards a substantive, evidence-backed conversation here in Washington.
Ten years ago, I worked with Neera, Sarah Wartell, and a small group of people to start the Center for American Progress. We wanted to build an institution where progressive leaders could hone their policy ideas and collaborate across a range of critical issues, from national security to clean energy to education. I’m tremendously proud of what we have achieved, and I know CAP will continue to be a leader in Washington for decades to come.
But I’ve always thought that academic research is an underutilized resource in the policy debate. Too often, rigorous research and analysis, even when it concerns our most critical social and economic issues, doesn’t make its way from the academy to the shores of the Potomac, where policymaking by anecdote or instinct too often takes precedence. But when academic economists tell us that they don’t have clear evidence yet, it’s hard for policymakers to know the best road forward. Even where we do have answers, it can be difficult for academic research to have an impact on the policy debate given the separation between these two communities.
So we’re fortunate to be guided by a truly outstanding group of academics with interest or expertise in policy. Throughout our planning, we’ve engaged with three generations of leading economic thinkers: one represented by Bob Solow; the second by Laura Tyson and Alan Blinder; and the third by Raj Chetty, Emmanuel Saez, Melody Barnes, and Brad DeLong.
Today, we’ll hear from some of these leading scholars, who are really well-positioned to dive into the questions, and from some of those policymakers, who are demanding a more rigorous evidence-based point of departure for the policy battles that lie ahead. What you will hear today are the kinds of interesting and insightful conversations on which we believe the debate on inequality and growth must be based.
Now, it gives me great pleasure to introduce a true lion of the economics profession, Professor Robert Solow, who I know wishes he could be here with us in person today, but who’s such an inspiration to this effort we went to him to get his thoughts on the matter.
It would be hard to say that better or more succinctly. Today would not be possible without the support and expertise of dozens of passionate, dedicated people. There are representatives from many organizations and foundations here today who have been leaders in supporting important research and casting a critical eye on unanswered economic questions.
One of those people is Rob Johnson, the president of the Institute for New Economic Thinking. We’re thrilled to have Rob here with us today to say a few words. Under Rob’s extraordinary leadership, INET has sponsored some truly cutting-edge, exciting research on the economic challenges of the future. We’re looking forward to a long and fruitful partnership with Rob and with INET.
Maryn McKenna:Imagining the Post-Antibiotics Future: “A few years ago, I started looking online to fill in chapters of my family history…. My great-uncle Joe…. Through one of the scrapes, an infection set in…. Desperate to save his life, the men from his firehouse lined up to give blood. Nothing worked. He was thirty when he died, in March 1938…. Five years after my great-uncle’s death, penicillin changed medicine forever. Infections that had been death sentences—–from battlefield wounds, industrial accidents, childbirth–suddenly could be cured in a few days…. Lately, though, I read it differently. In Joe’s story, I see what life might become if we did not have antibiotics any more…”
Tim Duy:Desperate to Taper: “The minutes of the October FOMC meeting leave little doubt that the Fed increasingly desires to end the asset purchase program, enough so to contemplate tapering regardless of seeing satisfactory improvement in labor markets…. The discussion of the specifics of the asset purchase program began with: ‘During this general discussion… participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.’ The mythical taper–just a few months away. And it will always be just a few months away given the broad weakness in the labor chart. Recall the Yellen Charts: Unless they narrow their focus to only the unemployment rate, the argument to taper is challenged to say the least. It is even more challenged considering inflation indicators. Knowing that the data continuously refuses to cooperate, the Fed explores plan B: ‘However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent…”
Norm Ornstein:Republicans Forced Reid’s Hand On The Nuclear Option: “For whatever reason, the Republicans decided to go nuclear first, with this utterly unnecessary violation of their own agreement and open decision to block the president from filling vacancies for his entire term, no matter how well qualified the nominees. It was a set of actions begging for a return nuclear response. McConnell’s threat, it seems to me, makes clear the strategy: let Dems take the first step, and we will then bear no blame when we entirely blow up the Senate’s rules after we take all the reins of power. That other Republicans like Corker, McCain, Alexander, Murkowski and so on, went along, shows how much the radicals and anti-institutionalists now dominate the Republican Party. Which is sad indeed.”
Rachel Pearson:Life and Death in the “Safety Net”: “The first patient who called me ‘doctor’ died a few winters ago…. His belly was swollen, his eyes were yellow and his blood tests were all awry. It hurt when he swallowed and his urine stank…. His disease seemed serious, but… the tests… are beyond our financial reach…. We decided to send him to the emergency room…. There’s a popular myth that the uninsured–in Texas, that’s 25 percent of us–can always get medical care through emergency rooms…. The myth is based on a 1986 federal law called the Emergency Medical Treatment and Labor Act (EMTALA), which states that hospitals with emergency rooms have to accept and stabilize patients who are in labor or who have an acute medical condition that threatens life or limb. That word ‘stabilize’ is key: Hospital ERs don’t have to treat you. They just have to patch you up to the point where you’re not actively dying…. My patient went to the ER, but didn’t get treatment…. He’d finally gotten so anemic that he couldn’t catch his breath, and the University of Texas Medical Branch (UTMB), where I am a student, took him in. My friend emailed me the results of his CT scans: There was cancer in his kidney, his liver and his lungs. It must have been spreading over the weeks that he’d been coming into St. Vincent’s…. UTMB sent him to hospice, and he died at home a few months later. I read his obituary in the Galveston County Daily News. The shame has stuck with me through my medical training—not only from my first patient, but from many more…”
Benjamin Wallace-Wells:50 Years of Conspiracy Theories: “Every good conspiracy theory begins with the pawn…. Consider… Ricky Donnell Ross circa 1980… high-school dropout… part-time [crack] dealer…. Oscar Danilo Blandon…. Within two years, as drug use exploded and he supplied crack to both the Bloods and Crips, Ross became one of the dominant dealers in Los Angeles, moving 100 kilos each week…. Blandon was… a contra, a member of the militias organized and deployed by the CIA to overthrow the left-wing government in Managua. The contras had, it seems, long supplemented the funds Washington sent by helping Colombian traffickers ship cocaine north…. Because of Ross’s pivotal role in the early crack trade in L.A., this episode soon became fuel for perhaps the last great conspiracy of the twentieth century: that the CIA had spread crack throughout America’s inner cities…. The wider the aperture around this theory, the harder its proponents work to implicate Washington, the shakier it seems…. But keep the aperture tighter, around Ross himself, and you see American intelligence officials working comfortably in close proximity to drug traffickers in Central America and a remarkably short chain from powerful figures in American intelligence to this crack dealer in Los Angeles. What is left is a general sense that something is amiss…. If Ross sensed that he had been a pawn for forces he could barely understand, he probably wasn’t wrong. The question was: What forces? That the Ricky Ross story follows a familiar plot, that we know what a pawn is and that we understand the patterns of conspiracy, owes a great deal to the Kennedy assassination, which took place 50 years ago this month and which gave birth to the modern golden age of conspiracy…”
Joseph Cotterill:The Fed and Treasury default: a coda: “At some point in the great collective peyote dream that was last month’s debt ceiling crisis, we asked you to imagine the Fed buying defaulted US Treasuries. Fortunately, the US central bank was thinking about it too: ‘Meeting participants saw no legal or operational need in the event of delayed payments on Treasury securities to make changes to the conduct or procedures employed in currently authorized Desk operations, such as open market operations, large-scale asset purchases, or securities lending, or to the operation of the discount window. They also generally agreed that the Federal Reserve would continue to employ prevailing market values of securities in all its transactions and operations, under the usual terms…’ That’s from the latest Fed minutes’ account of an unscheduled videoconference held on October 16–ironically, the day John Boehner cracked, leading to a late-night House vote to raise the ceiling. Still, the Fed knows what to do next time.”
Jérémie Cohen-Setton:Blogs review: Understanding New-Keynesian models: “A recent tractable formulation of the New-Keynesian liquidity trap by Ivan Werning has helped streamline the model to its essence and has generated important contributions that help clarify its mechanics…. Johannes Wieland writes that New-Keynesian models… robustly make two predictions at the ZLB… demand-side policies are very stimulative and, second, negative supply shocks are expansionary…. Paul Krugman writes the liquidity trap is puts us in a world of topsy-turvy…. Paul Krugman writes that the reason the classic Keynesian multiplier isn’t in NK models is not because it has been disproved, but because such models deliberately give hostages…. Johannes Wieland… writes that a less restrictive Euler equation is needed… if nominal wages are sticky and a large fraction of consumers are hand-to-mouth, then a negative supply shock can be contractionary… negative supply shocks [may] endogenously raise uncertainty…. Johannes Wieland focuses on another mechanism… In the calibrated model with credit frictions, demand-side policies are up to 50% less effective than in a standard new Keynesian model.”
Aside from the bartender who recorded the notorious “47 percent” video, Jonathan Gruber may have become Mitt Romney’s least favorite person during the 2012 campaign. Gruber damned the former governor of the Bay State with praise that certainly did little to shore up his standing in the Republican base: “He is in many ways the intellectual father of national health reform.”… Recently, Gruber spoke with National Memo executive editor Jason Sattler….
Jason Sattler: You’re estimating that a few million of the insured are in that so-called “losers” category. And you’ve recently described these people as winning the “genetic lottery” — suggesting they’ve been underpaying in the past?
Jonathan Gruber: So basically there’s two different issues. One of them is, what does it mean to be a “loser?”… How many people are being asked to find more generous plans than before? That’s probably about six million people…. The other issue is, how many people going to end up paying more than they did before? That’s probably about four million people…. The point is that a lot of people who are healthier have benefited from existing discrimination in the market….
Sattler: Is the refusal of 25 states to expand Medicaid distorting the market?
Gruber: I think in those states, by my own estimates, it’s going to raise premiums by about 15 percent in the exchange because sicker people will be in the exchange. I think it’s really disgusting that these states aren’t providing their poorest residents free insurance [financed] by the federal government. It’s pretty amazing that they can get away with that.
Sattler: What do you think about the right-wing argument that having no insurance at all is better than Medicaid?
Gruber: It’s just incorrect. There’s no credible evidence to support that….
Sattler: What would success for this law look like?
Gruber: We’re looking for several million people to sign up by March 31. And we’re looking for a reasonable mix of not just sick people, but also healthy people joining too…
Sattler: What did the proportions look like in Massachusetts during the first year?
Gruber:The New England Journal of Medicine study [that] I was part of found that the healthiest people tended to wait until the very end. There was a huge spike among the healthy right near the end of the enrollment period…
That the political maneuvering so often–like now–appears incomprehensible: foolish actions by people who do not understand their own position or incentives–is why I am much happier talking and thinking about policy substance.
But let me note this from Markos Moulitsas Zuniga:
CNN reports that by a vote of 52-48, the filibuster of judicial and executive branch nominees has been eliminated. The nuclear option has been detonated.
WCEG: Things to Read at Lunchtime on November 21, 2013
Must Reads:
Ezra Klein and Evan Soltas:Three reasons filibuster reform might actually happen today: “Could Democrats back out at the last minute, as they have so many times before? Absolutely. But there’ve been three big changes…. (1)… Back in January, the best arguments against filibuster reform had… to do with the rest of the Democrats’ agenda…. But gun control died in the Senate…. Boehner refused to consider the Senate’s immigration legislation…. So in pure ‘getting-things-done’ terms, Democrats are faced with a choice: keep the filibuster and get nothing done. Change the filibuster and get nothing done aside from staffing the federal government and filling a huge number of judicial vacancies with lifetime appointments. (2) Democrats believe Republicans will shred the filibuster as soon as they get a chance…. Senate Democrats just watched Republicans mount a suicide mission to shut down the government. Their confidence that Republicans will treat the upper chamber’s rules with reverence is low, to say the least.
This has led to some fatalistic thinking about filibuster reform: If Republicans are going to blow the filibuster up anyway, Democrats might as well take the first step and get some judges out of the deal. (3) Senate Democrats feel betrayed by Republicans. It’s hard to overstate the pride senior Senate Democrats took in cutting their January deal…. But then Republicans filibustered more judges and executive-branch nominees. And the pride top Democrats took in their deal to avert filibuster reform has turned to anger that Republicans made them look like trusting fools…”
Lawrence Mishel, Heidi Shierholz, and John Schmitt:Don’t Blame the Robots: Assessing the Job Polarization Explanation of Growing Wage Inequality | Economic Policy Institute: “The tasks framework that Acemoglu and Autor developed… is a distinct improvement… [but] suffers from its own empirical failings…. The relatively smooth, long-standing nature of job polarization… appears poorly suited to explaining the abrupt rise in inequality at the end of the 1970s or… the sharp change in the path of the 50/10 wage differential after 1986–1987; the failure of the most conventional measure of job polarization… to show… occupational employment polarization in the 2000s, even as wage inequality continued to grow; and, the consistent lack of correspondence across the 1980s, 1990s, and 2000s between changes in occupational employment, occupational wages, and the overall wage distribution. Recent research that has focused on the role of typically low-wage service occupations has not rescued the tasks framework from these shortcomings…. Technology may be a factor in widening wage inequality, but, if so, the tasks framework is not the model that captures those dynamics.”
Should-Reads:
David Keohane and Izabella Kaminska:Zhou seems a little flustered: “We were going to be slightly snarky in the face of Zhou Xiaochuan, head of the People’s Bank of China… the lack of a timetable and the ambiguity of phrasing making this seem rather similar to what we’ve heard in the past–but then we saw this from Neil Mellor at BoNYM and felt bad: ‘However, although a timetable was absent… this announcement constituted the beginnings of a new era for financial markets and no superlative would overstate its significance.’ Oops. Mellor may well have a point… rowing back a bit on timetable-snark [does] seem sensible…”
… people are still willing to look for a good deal on the Exchanges…”
Yao Yang:Yao Yang breaks down China’s new reforms and considers what’s missing: “This is related to the final document’s most significant lacuna: political reform. In fact, a Singapore-style approach–combining a freewheeling market economy and an authoritarian regime–has clearly emerged from the plenum. It is an approach that awaits the test of time…. Given China’s much greater size and complexity, the Chinese government’s pursuit of the Singaporean model, with its suppression of any and all social disorder, would ultimately undermine economic dynamism. To build the innovative economy envisioned by the third plenum, the CCP’s leadership needs to find a new governance model that fosters a vibrant society. Sooner rather than later, the crucially important economic reforms that have just been unveiled will not be enough.”
Austin Frakt:Are Republicans really anti-exchange?: “My view is that Republicans are not generally, ideologically opposed to exchanges. Deep down, I think any pro-market health reformer knows exchanges are sensible. Consequently, at least some of the broad structure of the Affordable Care Act should be appealing to conservatives. To the extent elected officials most sympathetic to right-of-center health policy aren’t behaving accordingly, there would seem to be a disconnect between policy preferences and political tactics.[1] As I tweeted earlier this week: ‘The ACA is a conservative reform not because of its pedigree, but because it is a sound chassis for almost everything conservatives propose’. [1] Just so you don’t have to, I will accuse myself of putting it mildly.”
Aaron Carroll:A pickle for conservative states refusing the Medicaid expansion: “The ACA covers most Americans making less than 138% of the poverty line through the Medicaid expansion. Because everyone thought the expansion would happen nationwide, they only wrote in subsidies for people making more than 100% of the poverty line…. Now there’s a problem–people making too little in states that refuse the expansion may not get subsidies, and therefore they may not be able to get insurance in the exchanges…. Things are different for legal immigrants…. In order to make sure that all legal residents were covered, the ACA instead provides subsidies for legal immigrants to go get inurance in the exchanges, no matter how little they make. So we’re going to have a potential situation next year where poor non-immigrants will get nothing in states that refuse the Medicaid expansion, but poor immigrants will get subsidies to buy private insurance…. It’s hard to see this playing out well politically…”
David Glasner:The Internal Contradiction of Quantitative Easing: “I can’t help observing… that the two main arguments made by critics… do not exactly coexist harmoniously…. QE is ineffective… dangerous…. The tension might at least have given a moment’s pause…. Nor… does the faux populism of the attack on a rising stock market and… crocodile tears for helpless retirees living off… interest… coexist harmoniously with… the same characters… (e.g., Freedomworks, CATO, the Heritage Foundation, and the Wall Street Journal editorial page) for privatizing social security…. I am also waiting for an explanation of why abused pensioners… can’t cash in the CDs…. In which charter… does one find it written that a perfectly secure real rate of interest of not less than 2% on any debt instrument issued by the US government shall always be guaranteed?”
The Seven Cardinal Virtues of Equitable Growth for America
Manage the macroeconomy to match aggregate demand to potential supply. Take the dual mandate seriously: maintaining full employment is as important a central bank goal as low and stable inflation–and much more important than preserving healthy margins for the banking sector. Run large deficits–run up the national debt–in times of war, depression, or other national emergency calling for government action. Pay down the debt in other times.
Invest. Invest in ideas, in equipment capital, in structures capital, in education: we need more of all forms of investment. Boost public and private investment: we need both kinds.
Over the past generation, America has shifted enormous resources into value-subtracting industries: health-care administration, prisons, finance, carbon energy. We need to reverse those shifts. We need to focus the American economy on the value-creating sectors rather than the value-subtracting ones.
We ought to have had a carbon tax 20 years ago. We still need one.
We need more immigration. It is much easier, worldwide, to move the people to where the institutions are already good than to make good institutions where the people are. More immigration produces a richer country for those already here. More immigration is a mitzvah for immigrants. More immigration is, to a a lesser degree, a mitzvah for those in poor countries outside, who see less population pressure on resources. And a U.S. in 2070 that has 600 million people is more of an international superpower than a U.S. in 2070 that has only 400 million people. If you would rather have the U.S. than China or Russia be the world’s superpower in 2070, you should want more immigration into the U.S. now.
We need more equality. If we want to have equality of opportunity 50 years from now, we need substantial equality of result right now.
We are going to need a bigger and better government. The private unregulated market does not do well at health-care finance, at pensions, or at education finance. The private unregulated market does not do well at research and early-stage development. The private unregulated market does not do well with commodities that are non-rival, or non-excludible, or produced under conditions of greatly-increasing returns to scale. We are, in all likelihood, moving into a twenty-first century in which these sectors will all be larger slices of what we do. Thus in the twenty-first century a well-functioning economy will need a larger government share in the economy than was needed in the twentieth century.
I can understand Barack Obama not yet realizing that after the news has filtered through five layers of bureaucracy, each with a direct incentive to take a step in the optimistic direction, what is reported to you is not what really exists. But Kathleen Sibellius was Governor of Kansas. And Marilyn Tavenner? They really have no excuse for not knowing better…
Unless they narrow their focus to only the unemployment rate, the argument to taper is challenged to say the least. It is even more challenged considering inflation indicators. Knowing that the data continuously refuses to cooperate, the Fed explores plan B: ‘However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent…”