Brad DeLong: Worthy reads on equitable growth, April 27-May 3, 2021

Worthy reads from Equitable Growth:

1. If you read one thing about why the Biden administration is trying to do what it is trying to do, read David Mitchell,” The evidence behind Biden’s big plans for rebuilding infrastructure, reducing poverty, and combating inequality,” in which he writes: “The American Jobs Plan and the American Families Plan … [are] designed to complement the temporary economic boosters included in the American Rescue Plan … Many of the big ideas included in the two new plans are backed by extensive academic evidence, much of which has been funded and featured by the Washington Center for Equitable Growth.”

2. Robert Manduca provides powerful documentation of a large-scale societal failures in the United States relative to the yardstick provided by other global-north societies. Read his “The American Dream is less of a reality today in the United States, compared to other peer nations,” in which he writes: “The hope that children will grow up to have higher standards of living than their parents is widespread around the world. In the United States, this concept is considered by many to be a core component of the American Dream … [yet] more than 90 percent of U.S. children born in 1940 had higher real incomes at age 30 than their parents did, but only about 50 percent of children born in 1980 can say the same. This raises the question: Was this decline part of a global trend, or is the United States alone in its low rates of upward mobility? In short, does the American Dream live on, but in other countries? … Contrary to the self-conception that the United States is the “land of opportunity,” relative social mobility—the likelihood of a child born to low-income parents climbing to the top of the income distribution as an adult—is low in the United States, compared to many European countries.”

Worthy reads not from Equitable Growth:

1. Yes, the United States has been underinvesting in science since president Roland Reagan took an axe to the federal discretionary budget decades ago. Any more questions? Read Jonathan Gruber and Simon Johnson, “Infrastructure for the Next American Century,” in which they write: “America’s post-World War II prosperity was based on more than good roads and bridges; it drew on a much broader push to generate shared scientific knowledge and put it to work productively…. By the mid–1960s, the U.S. government was spending nearly 2 percent of GDP on public science investments—and the returns were extraordinary … And yet the United States has since retreated from its commitment to public funding of basic science. Federal science spending has fallen toward 0.6 percent of GDP, placing it 12th in the world … China now spends roughly 1.3 percent of GDP on government-supported science.”

2. Tracking the U.S. recovery. There is going to be inflation—you cannot merge onto the superhighway without leaving skid marks. But that is a very different thing than the stagflationary problems of the 1970s. Read Neil Irwin, “The Economy Is (Almost) Back. It Is Looking Different Than It Used To,” in which he writes: “Americans’ spending on durable goods—cars and furniture and other goods meant to last a long time—rose at a stunning 41.4 percent annual rate in the first three months of the year. Enjoy your Pelotons and Big Green Eggs, everybody … The economy is recovering rapidly, and is on track to reach the levels of overall G.D.P. that would have been expected before anyone had heard of Covid–19. But that masks some extreme shifts in composition…. The United States is on track to surge above that 2019 trend in the second quarter currently underway. But … spending on cars and trucks is 15.1 percent higher than it would have been on the 2019 trajectory; spending on furnishings and durable household equipment is 16.6 percent higher; and spending on recreational goods is a whopping 26 percent higher. Altogether, durable goods spending is running $348.5 billion higher annually … The housing sector is experiencing nearly as big a surge. Residential investment was 14.4 percent above its prepandemic trend … Spending on transportation services remains 23 percent below its prepandemic trend, recreation services 31 percent, and restaurants and hotels 19 percent. Those three sectors alone represent $430 billion in “missing” economic activity—largely equivalent … to the combined shift of economic activity toward durable goods and residential real estate … Less widely understood is a steep pullback in the energy sector … Consumer spending on gasoline and other energy goods is down 11 percent from its prepandemic trend line. And business spending on structures is down 19 percent.”