Category: Equitablog

Must-Read: Matt O’Brien: For the last time: Tax cuts don’t pay for themselves: “Republican politicians will pretend their tax cuts will largely pay for themselves, and… Republican economists will largely indulge them…

…Susan Collins (R-Maine). On Sunday, she seemed to suggest that, because of all the growth it would supposedly generate, the Senate’s $1.5 trillion tax cut bill wouldn’t actually cost a thing and might even “lower the debt.”… Collins said that three top Republican economists… Glenn Hubbard… Douglas Holtz-Eakin and… Larry Lindse… told her that something close to this was possible….

There are varying degrees of wishful thinking going on here. First, “no serious economist” thinks that tax cuts fully pay for themselves. Anyone who does is “detached from empirical reality.” That, at least, is what Holtz-Eakin—yes, one of the economists Collins talked to—said in April…. Most economists don’t think this is anywhere near a close call. “At best, according to the prevailing consensus, the positive feedback effect from tax cuts would recoup in the range of 25 percent to 35 percent of the cost,” wrote, you guessed it, Holtz-Eakin.

Which makes you wonder, then, why he and other Republican economists seem to think that the Senate plan might pay for… as much as 67 percent of its costs…. Their answers weren’t the most rigorous…. Holtz-Eakin… “it has elements that are atypical”… a territorial tax system… immediately deduct their investments…. Hubbard said that while he hadn’t run the numbers, the “feedback effects from corporate tax reform can be larger depending on the type of reform.” In other words, these are extra special tax cuts. Just take their word for it. You have to because there isn’t really an economic model that tells the same story they do. The only one that comes close is from the right-wing Tax Foundation, but, as I’ve reported, there are serious concerns about its methodology. Mainstream estimates, meanwhile… show… nowhere near the additional 3 percent to 4 percent jump that the Republican economists are predicting.

How do they come up with such optimistic numbers? Easy… assume the best and then say that if this scenario played out over the next 10 years—which it almost certainly wouldn’t—then these tax cuts really would add 0.3 to 0.4 percentage points to growth…. The Republican economists also seem to have misstated or misunderstood some of the studies that they claim show the economy would grow…. The point… is more about coming up with a case that these tax cuts would recoup much of their costs than it is about coming up with a convincing case  that they would—without, of course, explicitly saying so. Better to let the politicians make that leap….

We shouldn’t be having this debate again. We know that tax cuts don’t pay for themselves. Ronald Reagan’s didn’t in 1981, George W. Bush’s didn’t in 2001, and there’s no reason to think Donald Trump’s would…. And yet here we are playing the same game…. Republican politicians… trying to convince themselves that deficit-financed tax cuts would not be fiscally irresponsible… Republican economists are trying to come up with reasons that might be right…

Should-Read: Enghin Atalay, Phai Phongthiengtham, Sebastian Sotelo, and Daniel Tannenbaum: The evolving U.S. occupational structure: “Using the text from help wanted ads, we construct a new data set of occupational task content from 1960 to 2000…

…We document that within-occupation task content shifts are at least as important as employment shifts across occupations in accounting for the aggregate decline of routine tasks. Motivated by these patterns, we first apply our new task measures to a reduced-form statistical decomposition. We then embed our measures in an equilibrium model of occupational choice. These two exercises indicate that shifts in the relative demand for tasks account for a 25 log point increase in 90-10 earnings inequality over our sample period…

Should-Watch: Josh Blumenstock: Fighting Poverty with Data: Research at the Intersection of Machine Learning and Global Development: “Work that capitalizes on recent advances in machine learning to tackle some of the problems affecting poor and marginalized populations…

…Afghanistan, Indonesia, and Rwanda… how large-scale data from mobile phone and satellite networks can be combined with on-the-ground experiments and surveys to better understand the causes and consequences of global poverty. Throughout, I will highlight open technical research questions where the right computer scientist or statistician has the opportunity to make a lasting real-world impact…

Should-Read: Ann Marie Marciarille: Anthem-CVS: What Would Consumers Get Out of It?: “The claim that all chronic care  delivery will be miraculously transformed by the Anthem-CVS merger (and inevitable “me too” mergers between other drugstore chains/PBMs and other health insurers) requires a skeptical view…

…I get the claim, that re-aligning the incentives in chronic care so that PBMs/drug stores are on the same side for chronic disease management and not in a war of treatment modalities will produce better chronic disease management….

CVS-branded minute clinics for diabetes management counseling, for example… better cheaper access… diet? exercise? the risks of unmonitored polypharmacy? the need for group diabetes education and support, sometimes called diabetes self-management education? Think again. Have the people proposing this ever even been to a CVS minute clinic? Continuity of care is not  their watchword. Or, perhaps they are talking about the CVS minute clinic of the future, analogous to the CVS-V.A. alliances being piloted in Arizona or elsewhere, complete with electronic medical record information sharing. In the meantime, minute clinics work on a business model that skims the easier less complex cases from primary care….

Would the combined Anthem-CVS turn its CVS housed minute clinics into Diabetes diagnosis and prevention centers targeting the real challenges of individuals with diabetes in the community? After all, wouldn’t that be what it would take to create those synergies of better chronic disease management for diabetes in the post-merger world? Well, it depends on how the business would be structured and how the services would be reimbursed. Color me skeptical in a world where one of the newest CMS posted-regulations guts or undermines some of the most promising outcome-based bundled reimbursement experiments ever proposed…

Should-Read: Sarah Kliffe: A health merger expert explains the CVS-Aetna deal: ” Martin Gaynor…. There are a lot fewer ‘vertical mergers’ of actors in the health care system that do different things…

…CVS… one of the country’s largest pharmacy benefit managers… contract with large health insurance plans to manage their drug benefits… sits down and negotiates prices with pharmaceutical manufacturers…. This is the integration between CVS and Aetna that health wonks are especially interested in…. It’s possible this type of merger could actually be good for consumers…. Even if the merger does eliminate some of the costs of a middleman, that doesn’t mean consumers necessarily benefit…. “It could pass merger review, but that doesn’t necessarily mean it will end up being a great thing for consumers…”

Should-Read: Todd Vasos: The Dollar General CEO just accidentally made clear how screwed up the economy is: “The economy is continuing to create more of our core customer…

…[who] doesn’t look at her pantry or her refrigerator and say, ‘You know, I’m going to be out of ketchup in the next few days. I’m going to order a few bottles. The core customer uses the last bit of ketchup at the table the night prior, and either on her way to work or on her way home picks up one bottle…. We are putting stores today [in areas] that perhaps five years ago were just on the cusp of probably not being our demographic, and it has now turned to being our demographic…