Brad DeLong: Worthy reads on equitable growth, August 11-17, 2020

Worthy reads from Equitable Growth:

1. Read this excellent and brand-new analysis by John Sabelhaus, “Restoring the federal estate tax is a proven way to raise revenue & address wealth inequality,” in which he writes: “There are four principal reasons why expanding the estate tax could well be the most effective and efficient way … First, policymakers have repeatedly cut the estate tax over the past 20 years, without regard for the true economic and distributional consequences … Second … the estate tax, in practice, is better described as an effective backstop to the federal income tax … Third, the very failure to collect taxes on the true incomes of the very wealthy increases wealth inequality within generations and amplifies the inequality due to intergenerational wealth transfers … Fourth … reviv[ing] the estate tax … would greatly improve the overall fiscal outlook of the federal government, and in a highly progressive way.”

2. I have talked about this before, but now it is back on the agenda for a large number of reasons. Read Bradley Hardy and Trevon Logan, “Race and the lack of intergenerational economic mobility in the United States,” in which they write: “Geographic and racial differences in economic mobility are particularly important from a policy perspective for three reasons. First, racial differences in mobility can exacerbate racial differences in other areas … Second, inequalities in opportunity are antithetical to our nation’s creed … Third, structural differences in mobility limit the potential for overall U.S. economic growth … [because of] the historic links between intergenerational economic mobility and race and income inequality … The known policy remedies for persistently low intergenerational economic mobility among African Americans … [is] a mix of policies to promote more equitable housing and educational opportunities alongside moves to boost income security and wealth accumulation.”

Worthy reads not from Equitable Growth:

1. It now looks like there was enough of a bounce back in July to give the U.S. economy a 5 percent boost to third quarter GDP—that is a 20 percent reported annualized growth rate for the current quarter—unless the economy is falling off a cliff now or does so in September. Unfortunately, the economy may well fall off a cliff this month or next. The renewed spread of the coronavirus, plus the decision by the Trump administration and the Senate leadership that they would rather have no fiscal stimulus at all then negotiate with the leaders of the House of Representatives, are not pieces of good news for aggregate demand. Read Tim Duy, “Fiscal Follies Continue,” in which he writes: “Incoming data still reflects the push-pull dynamics of the shutdown and reopening; we don’t have a clear picture of the growth trajectory after those dynamics play out. Fiscal policy in the United States is a mess.”

2. We kinda-sorta understood the economies of the past—the agrarian-age economy based on agriculture in handicrafts, the succeeding commercial-age economy to which was added commerce, the industrial-revolution economy based more on manufacturing and non-animal power sources, and then modern economic growth based on mass production and engineering communities. But now we have a problem. Our problem now is that, increasingly, our computer age information and attention economy works differently. And we do not understand it terribly well. Read John Quiggin, “Intangibles = Monopoly,” in which he writes: “The most profitable companies, particularly tech companies, don’t have all that much in the way of capital assets compared to their market value. What they have is monopoly power … Intangibles … can’t be reproduced by anyone else … There’s a complicated relationship here between the rise of monopoly and the development of the information economy … There is very little relationship between the value of information and the ability of corporations to capture value from it … Traditional ideas about capital and investment are largely irrelevant in the information economy.”

August 17, 2020


Brad DeLong


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