Expanding the Earned Income Tax Credit is worth exploring in the U.S. tax reform debate

Posted on by Emilie Openchowski
Sen. Sherrod Brown, D-Ohio, co-sponsor of the GAIN Act, speaks on Capitol Hill in Washington.

In recent years, lawmakers on both sides of the congressional aisle have proposed expanding refundable tax credits for low-income workers across the United States such as the Earned Income Tax Credit, which provides them with additional earnings through the tax code. But a new proposal by Rep. Ro Khanna, D-CA, and Sen. Sherrod Brown, D-OH, hopes to go much further to make up for decades of stagnant wages.

The Grow American Income Now, or GAIN, Act proposed by Rep. Khanna and Sen. Brown would expand the Earned Income Tax Credit not only for low-wage working families with children but also for middle-income families and childless workers by increasing the income level for EITC eligibility. The EITC already is one of the country’s largest poverty-fighting cash-transfer programs—as a result of the program’s expansion in the early 1990s and then again under the American Recovery and Reinvestment Act of 2009—designed to explicitly boost the living standards of low-wage workers and families, but research shows the program could be even more successful if expanded further.

Last year, economists Hilary Hoynes and Jesse Rothstein of the University of California, Berkeley examined (open access version) how well the EITC accomplished its goals of redistribution, encouraging work, and limiting administrative costs and noncompliance. Hoynes and Rothstein argued then that policymakers could make the tax credit more progressive by expanding it for workers without children. This is one major revision that the GAIN Act has taken on board. In addition, the proposed bill would lower the qualifying age for the EITC from 25 years to 21 years, expanding eligibility to an even larger group of low-wage workers. What’s more, the GAIN Act proposes to nearly double the EITC for working families and increase the credit for childless workers almost sixfold.

As would be expected for such an ambitious proposal, it would be very expensive. The nonpartisan Tax Policy Center estimates the proposal would cost $1.4 trillion from fiscal year 2017 to fiscal year 2026. Under the proposal, the maximum tax credit available increases to $12,131 for families with three or more qualifying children; $10,783 with two qualifying children; $6,528 with one qualifying child; and $3,000 with no qualifying children. (See Figure 1.)

Figure 1

The proposed legislation also would allow for recipients to receive EITC advances capped at $500 each taxable year, which is subtracted from their total credit when they file their annual tax return. As Congress takes on tax reform in the next few months, there is sure to be talk of reforming the EITC. The GAIN Act is an interesting proposal and is worth exploring as part of tax reform to boost low- and moderate-wage workers’ earnings.

U.S. tax cuts for the rich won’t deliver gains for everyone

Posted on by Emilie Openchowski
Speaker of the House Rep. Paul Ryan, R-Wis., left, and Senate Majority Leader Mitch McConnell, R-Ky., right, look on as President Donald Trump speaks during a meeting with Congressional leaders and administration officials on tax reform.

Distribution tables—estimates of who wins and who loses from changes in tax law—are central to any debate about tax reform. Such analyses frequently show the plans put forward by Republican politicians to be severely regressive, delivering large income gains for high-income families and little for the overwhelming majority of families. The blueprint for tax reform released by House Republicans in 2016, for example, would increase after-tax incomes for the top 1 percent of families by 13 percent in the first year after enactment but would increase incomes for the bottom 95 percent of families by less than half of 1 percent.

In response, proponents of regressive tax plans often assert—either implicitly or explicitly—that distribution analysis is flawed and fails to account for the benefits of the additional economic growth that the plans would purportedly generate. This view is mistaken. A traditional distribution analysis provides an approximation of the change in economic well-being resulting from a change in tax law. Distribution analysis is thus useful precisely to determine whether tax reform delivers gains for people across the income distribution or only for those at the top.

In the special case of revenue-neutral reform—an ostensible target for current reform efforts in Congress—distribution tables capture the primary gains from increases in economic efficiency in their estimates of changes in after-tax income. In the case of revenue-losing reform, distribution tables overstate the gains from reform, as apparent increases in after-tax incomes will ultimately need to be clawed back through offsetting tax increases or spending cuts. Only in the case of revenue-raising reform will distribution tables understate the gains. Thus, in the most likely cases for tax legislation this fall, distribution tables will either reflect or overstate the gains from any increases in economic efficiency, to the extent they exist at all.

Simply stated, invocations of growth cannot be used to wave away regressive distribution results. Reforms such as the 2016 House Republican blueprint would boost incomes for high-income families at the expense of working- and middle-class families. As Republicans in Congress and the Trump administration continue to develop a proposal for tax reform, it is worth revisiting in this column—and an accompanying issue brief—why traditional distribution tables are precisely the analytical tool they will need to determine if their tax reform plan does, in fact, deliver equitable growth.

Distribution analysis estimates the change in tax burden resulting from a change in tax law assuming no change in behavior. These estimates of the change in the tax burden can then be used to compute a range of summary statistics, including the average tax change, the percentage change in income, or the percent of families getting a tax cut or tax increase for various subgroups of the population.

Critics of distribution analysis often point to the assumption that behavior does not change when tax reform is enacted as a flaw in the analysis. Yet the assumption that behavior is unchanged provides a better approximation of the change in economic well-being resulting from a proposal than allowing behavior to change because the behavioral responses have little direct value to the people changing their behavior.

Why are the behavioral changes of little direct value to families? Because families generally do the best they can in the economic circumstances in which they find themselves; modest changes in behavior due to tax reform do not change their own well-being much at all. If the behavioral changes were to matter a great deal, then it would imply that families were knowingly making choices against their own interest—such as turning down good job offers—before tax reform.

While distribution analysis is appropriately conducted under an assumption of fixed behavior, that does not mean there are no potential economic benefits from behavioral changes that result from tax reform. Gains are possible, but they primarily manifest through their impact on the government budget. For instance, if people change their consumption patterns in response to a new limitation on an unjustified tax expenditure that finances a rate reduction, then those changes will generally improve the government’s fiscal position. This improvement in the government’s fiscal position will make it possible for legislators to provide what appears to be a net tax cut under the assumption of unchanged behavior at no cost to the government. In other words, if a revenue-neutral tax reform plan generates increases in economic efficiency, then the distribution analysis will show a net tax cut even if the cost of the tax reform to the government is zero.

It is precisely legislators’ choices about how to design a tax plan that will determine how that free-to-the-government tax cut is allocated across the income distribution. Indeed, it should not be surprising that the impact of changes in public policy are determined by legislators’ choices about how to change public policy. Recognizing that the potential gains in economic well-being for U.S. families derive from how legislators choose to distribute tax cuts made possible by improvements in the government’s fiscal position appropriately places the focus on the choices legislators make.

Focusing on growth in economic output rather than changes in well-being as measured by distribution analysis not only ignores the potential for tax reform to have different impacts across the income distribution, but also overstates the economic gains from reform by counting increased output as a benefit without accounting for the costs of generating that output. Indeed, the greater risk in the coming months is not that distribution analysis will understate the gains from tax reform, but rather that distribution analysis will overstate the gains and understate the regressivity due to its treatment of increased borrowing should policymakers turn from revenue-neutral tax reform to tax cuts.

Issue brief: If U.S. tax reform delivers equitable growth, a distribution table will show it

Posted on by Emilie Openchowski
The Capitol is seen at dawn in Washington.

Overview

Distribution tables—estimates of who wins and who loses from changes in tax law—are central to any debate about tax reform. Such analyses frequently show the plans put forward by Republican politicians to be severely regressive, delivering large income gains for high-income families and little for the overwhelming majority of families. The blueprint for tax reform released by House Republicans in 2016, for example, would increase after-tax incomes for the top 1 percent of families by 13 percent in the first year after enactment but would increase incomes for the bottom 95 percent of families by less than half of 1 percent.1

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If U.S. tax reform delivers equitable growth, a distribution table will show it

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In response, proponents of regressive tax plans often assert—either implicitly or explicitly—that distribution analysis is flawed and fails to account for the benefits of the additional economic growth that the plans would purportedly generate.2 This view is mistaken. A traditional distribution analysis provides an approximation of the change in economic well-being resulting from a change in tax law. Distributional analysis is thus useful precisely to determine whether tax reform delivers gains for people across the income distribution or only for those at the top.

In the special case of revenue-neutral tax reform—an ostensible target for current reform efforts—distribution tables capture the primary gains from increases in economic efficiency in their estimates of changes in after-tax income. In the case of revenue-losing reform, distribution tables overstate the gains from reform because apparent increases in after-tax incomes will ultimately need to be clawed back through offsetting tax increases or spending cuts. Only in the case of revenue-raising reform will distribution tables understate the gains. Thus, in the most likely cases for tax legislation this fall, distribution tables will either reflect or overstate the gains from any increases in economic efficiency, to the extent they exist at all.

Simply stated, invocations of economic growth cannot be used to wave away regressive distribution results. Reforms such as the 2016 House Republican blueprint would boost incomes for high-income families at the expense of working- and middle-class families.

Focusing on changes in economic output rather than on the distribution of economic gains and losses not only ignores the potential for tax reform to have different impacts for people up and down the income ladder, but also overstates the economic gains from reform by counting increased output as a benefit without accounting for the costs of generating that output. Indeed, the greater risk in the coming months is not that distribution tables will understate the gains from tax reform, but rather that distribution tables will overstate the gains of reform and understate its regressivity if policymakers turn to tax cuts rather than tax reform and include a slate of temporary policies such as a one-time tax on overseas profits.

As Republicans in Congress and the Trump administration continue to develop a proposal for tax reform, it is worth revisiting why traditional distribution tables are precisely the analytical tool they will need to determine if their tax reform plan does, in fact, deliver equitable growth. This brief first explains why static distribution tables are informative about the improvements in economic well-being resulting from revenue-neutral tax reform. It then identifies three reasons that distribution tables may overstate the gains from reforms. Specifically:

  • Distribution tables typically do not impose budget balance on the policy changes they assess, which means that in the case of deficit-financed tax cuts, a distribution table will show gains attributable to increased borrowing even though that borrowing must ultimately be financed with spending cuts or tax increases that would make families worse off.
  • Timing gimmicks can affect distribution tables just as they can affect revenue estimates. A one-time tax on the repatriation of overseas corporate profits, for example, could reduce the apparent regressivity of a tax cut if distribution tables are estimated only (or primarily) for years in which the temporary policies are in effect.
  • If tax reform increases the federal budget deficit, then traditional approaches to measuring the incidence of certain reforms may be invalid.

Despite these limitations, distributional analysis will be critical in understanding the potential gains of any tax reform plan put forward by congressional Republicans and the Trump administration in the coming months. An understanding of what distribution analysis does and does not measure will be essential for policymakers and the public.

Distribution tables reflect the economic gains from revenue-neutral tax reform

To estimate the approximate change in economic well-being from a change in tax law, a static distribution table computes the change in tax burden assuming no change in behavior. The distribution tables produced by the Tax Policy Center and the U.S. Treasury’s Office of Tax Analysis are of this type.3 Assuming unchanged behavior provides a better approximation to the change in economic well-being resulting from a proposal than allowing behavior to change because the behavioral responses have little direct value to the people changing their behavior.4

This perhaps counterintuitive conclusion arises from the analytical assumption that people are always doing the best that they can in the economic circumstances they face. From this assumption, it follows that people equate the gains from small changes in behavior to the costs of those changes in making choices about work, consumption, and savings. If they did not do so, then there would be a small change in behavior that made them better off.

As a concrete example, consider workers earning $20 an hour, working 40 hours per week, and facing a 25 percent tax rate. Under current law, the workers’ after-tax wage is $15 per hour. The maintained assumption is that the workers could choose to increase or decrease their hours slightly at this wage rate if they wished to do so. As they choose not to, then the value to the workers of that additional $15 is roughly equal to the costs of working more such as increased commuting costs, childcare, or less time for household chores. If the cost of working that additional hour exceeded $15, then reducing hours would make them better off. If the cost were less than $15, then increasing hours would make them better off.

If the tax rate for these workers is reduced to 20 percent and the workers decide to pick up an additional two hours per week, then the net value of those hours to them is not the full $32 in additional take-home pay from working more, but rather only about $1. The reason: At the new, higher number of hours worked, the cost of working longer is roughly $16, again equal to the take-home pay. The total cost of work for those two hours would be roughly $31, or about $15 for the first hour and $16 for the second, leaving our hypothetical workers with only an extra dollar to show for the effort.

Notably, the change in well-being resulting from the behavioral response of these workers to a 5 percentage point reduction in the tax rate is far smaller than both the direct impact of the tax cut ($40 in reduced income taxes) and the impact of the change in behavior on government revenues ($8 in new revenue resulting from the increased working hours: 20 percent of the $40 in additional gross pay).

The economic logic of this simplified example generalizes to other choices about work, consumption, and savings. For a small change in tax rates, changes in behavior provide essentially no direct benefits. For a larger tax change, the value of the change in behavior would tend to be small relative to the other effects of the proposal. Note, however, that the conclusion that a family is approximately indifferent to changes in behavior applies only to changes in behavior under its control and only for those decisions where the family is unconstrained in its choices. In more complex models, the relevant assumptions could fail in other ways such as through informational imperfections.

The above analysis treats the conclusion that changes in behavior provide little direct benefit as a justification for static distribution tables, but an alternative and likely preferable mode of analysis would be to determine the types of behavior that should be held fixed in a distribution table as precisely those for which small changes leave families indifferent. Changes in behavior that do not satisfy this property should be included, though the details of doing so can be complex. In fact, implicitly, static distribution tables typically allow at least one form of behavioral response: a switch from claiming the standard deduction to itemizing (or the reverse). One justification for including such changes is that they are essentially costless and thus there is no offsetting cost to the gains delivered by making such a change.

The assumption of no (or extremely limited) changes in behavior used in a static distribution table differs from the behavioral assumptions used in both a conventional revenue estimate and a dynamic revenue estimate. A conventional revenue estimate allows for microeconomic behavioral responses—responses that do not change macroeconomic aggregates such as labor hours or the capital stock. For instance, a decrease in the use of an itemized deduction in response to a limitation on that deduction would be a microeconomic behavioral response. A dynamic revenue estimate allows for microeconomic behavioral responses and changes in macroeconomic aggregates. Because the behavioral assumptions underlying a static distribution table and a revenue estimate are not the same, the aggregate tax change shown in a distribution table will not necessarily match the revenue estimate under either conventional scoring or dynamic scoring.

This gap between the revenue estimate for a proposal and the implied aggregate change in tax liability per the distribution table captures the primary economic gains from a proposal. If tax reform delivers positive revenue feedback—whether through microeconomic behavioral responses included in a conventional score or macroeconomic behavioral responses included in a dynamic score—then the revenue cost of the proposal will be smaller than the tax cut implicit in the distribution tables. An efficiency-enhancing tax reform that is revenue neutral including dynamic feedback would thus show a tax cut in the distribution table at no revenue cost to the government. That free-to-the-government tax cut reflects the primary economic benefits of the reform.

Consider a second example. Suppose a person making $50,000 and facing a tax rate of 25 percent can deduct from income certain expenses equal to $10,000. The government then replaces the deduction with a 20 percent tax credit and provides a $900 tax credit instead. The individual responds by reducing spending on the deductible expenses to $8,000. The government collects the same amount of revenue under this reform as it would under current law. In other words, the revenue estimate is zero.

Moreover, because the amount of the deductible expense was chosen freely prior to the reform, the person was roughly indifferent between an additional dollar of the deductible expense and nondeductible expenses. This will remain approximately the case after the reform, and thus the person realizes only a very modest gain from the behavioral change. Importantly, however, the new tax credit is worth $900 and the limitation on the deduction costs only $500 (before the reduction in such spending), which means the distribution table would show a net tax cut of $400 that was provided at no net cost to the government.

In other words, if policymakers can deliver tax reform with real economic benefits that is revenue neutral on a dynamic basis, then an appropriately constructed distribution table for that tax reform would show a net tax cut. And if the tax reform delivers equitable growth in living standards, then the table will show robust increases in well-being for working- and middle-class families, as well as high-income families.

The validity of the static distribution as a measure of the change in economic well-being also highlights the role of government policy in determining the way the economic gains from tax reform are translated into increases in well-being for families up and down the wealth and income ladders. As the behavioral changes resulting from tax reform are of relatively little direct value to families and the broader efficiency gains generally arise from the impact of reform on the government budget, it is government policy that determines how those gains are allocated. Notably, since the behavioral changes are of relatively little direct value to families, if the static tax cuts are concentrated among high-income families, then growth will not change that fact.

Of course, static distribution tables remain an approximation to the change in economic well-being, and there is plenty to debate about their construction. The quality of the approximation declines as the rate change gets larger, though for a revenue-neutral reform, the overall rate change should be small. A higher-quality approximation would show slightly higher benefits of efficiency-enhancing reform.5 Many of the assumptions underlying a distribution table and the associated revenue estimates are uncertain such as the responsiveness of labor supply to tax changes and the allocation of the incidence of the corporate income tax to labor and capital. Changes in wage rates and investment returns resulting from behavioral responses can affect the results. Distribution tables do not capture the benefits or costs of simplification proposals, though these are typically modest. Interactions between federal and state revenue streams often receive insufficient attention in federal policymaking.

There is much to debate about the details of distribution tables, but their importance in assessing changes in economic well-being is clear. Static distribution tables provide a reasonable approximation to the change in economic well-being across the income distribution, and economic growth does not. If revenue-neutral tax reform delivers equitable growth, then a static distribution table will show it.

Distribution tables are more likely to overstate the gains of reform

The greater analytic risk in the coming months is not that distribution tables will understate the gains from reform, but rather that they will overstate the gains from reform and understate its regressivity.

First, as noted above, distribution tables typically do not impose budget balance on the policy changes they assess. In the case of deficit-financed tax cuts, a distribution table will thus show gains attributable to increased borrowing even though that borrowing must ultimately be financed with spending cuts or tax increases. Incorporating those offsetting fiscal policies into the analysis would reduce the apparent gains in the distribution table. In fact, the primary scenario in which static distribution tables understate the gains from tax reform is one in which Congress enacts tax reform that is revenue neutral on a conventional basis and uses the economic gains to reduce the deficit and debt. In this case, the distribution table would show a near-zero change in well-being even though gains have been realized.

Second, timing gimmicks can affect distribution tables just as they can affect revenue estimates. A time-limited policy such as a one-time tax on the repatriation of overseas corporate profits could reduce the apparent regressivity of a tax cut if distribution tables are estimated only or primarily for years in which the temporary policies are in effect. More broadly, practical considerations make the construction of distribution tables on a present-value basis difficult, but there would be substantial analytic value to such an exercise. In the absence of a present-value analysis, caution is required in interpreting distribution tables for policies that differ substantially across years or for which a substantial adjustment period is likely.

Third, if tax reform increases the federal budget deficit, then traditional approaches to measuring tax incidence may be invalid. Distribution tables, for example, typically assign a portion of the incidence of a corporate tax cut to labor and a portion to capital. Most analysts assume a partial pass-through to labor based on anticipated changes in the capital stock. But the capital stock will change only over time, and whether it will grow—and whether that growth will be sustained—depends on whether increased federal budget deficits drive up interest rates and discourage private-sector activity. Thus, deficit financing not only can reverse short-run gains from a proposal and ultimately harm growth, but can also result in misleading distribution estimates that assume labor benefits from capital deepening even as the proposal reduces the capital stock.

Must- and Should-Reads: September 21, 2017

Posted on by Brad DeLong

Interesting Reads:

Should-Read: Will Wilkinson: What Drives Opposition to Immigration? In-Group Favoritism, Out-Group Hostility, and Donald Trump

Posted on by Brad DeLong

Should-Read: Will says: “The standard form of liberal civic nationalism is egalitarian within the in-group of shared citizenship…” There has been something more with American civic nationalism: it is a nationalism of people who have come and whose ancestors have come from all over the world to a place where they can live freely, work hard, raise each other up, and build a utopia to show the rest of the world how good things can be: “He shall make us a praise and glory that men shall say of succeeding plantations, ‘may the Lord make it like that of New England’. For we must consider that we shall be as a city upon a hill. The eyes of all people are upon us…”, in the words of my ancestor John Winthrop.

All that seems to be lost in the minds of an aging group of greedy white guys, scared that mysterious others are going to take away what they have somehow:

Will Wilkinson: What Drives Opposition to Immigration? In-Group Favoritism, Out-Group Hostility, and Donald Trump: “Friedman contrasts ‘xenophobia’ and ‘nationalism’, but I’d like to reframe… (To many of us, xenophobia and nationalism go hand in hand.)… https://niskanencenter.org/blog/drives-opposition-immigration-group-favoritism-group-hostility-donald-trump/

…In-group favoritism (“nationalism”) need not imply hostility to out-groups (“xenophobia”). He goes on to argue that opposition to immigration is driven mainly by in-group favoritism; out-group hostility is less important…. I think opposition to immigration is drive… at least as much by out-group antipathy as by in-group favoritism….

Voters know next to nothing about politics and policy, aren’t very ideological, and tend to vote in groups defined by personal and social identities—race, religion, class, etc…. Once we’ve assumed a partisan identity, usually on the basis of a more fundamental social identity (e.g., union member, African American, evangelical Christian, etc.), we mostly just go along with whatever our party happens to be currently saying—if… we happen to be sufficiently clued in to what our party is saying…. Policy positions of voters—and even politicians—can be quite malleable in response to new signals from respected group leaders….

This is pretty telling to me. Most Republicans seem to think you need to be a Christian non-immigrant to count as a full-fledged member of the national in-group, and these views were especially prevalent among Trump primary supporters….

Xenophobia… an aversion to foreignness and those who seem strangely other, is an element of nationalism, in the sense of “nationalism” currently under public discussion…. Xenophobic sentiment and a drive to exclude non-white, non-Christian, non-English-speaking Americans from full and equal membership in the political community seem obviously related…. Out-group hostility drives opposition to immigration. And, as Sides shows, it drove Democrats who had voted for Obama to support Trump. Comparing the determinants of the 2012 and 2016 presidential vote share, Sides writes: “What stands out most… is the attitudes that became more strongly related to the vote in 2016: attitudes about immigration, feelings toward black people, and feelings toward Muslims.”…

Trump’s nationalism is a form of in-group partiality, for sure. But the relevant in-group is, as Müller suggests, a subset of American citizens who approximate an exclusive populist conception of American national identity. The relevant out-group, then, includes other American citizens, as well as foreigners. The form of nationalism Friedman examines in his piece is more legalistic and less cultural, drawing the in-group/out-group distinction in terms of shared citizenship…. The standard form of liberal civic nationalism is egalitarian within the in-group of shared citizenship. Citizens get equal weight, period. Nativity, race, religion, languages spoken, etc. simply don’t matter…. In our current political context, that seems like a dream. Populist nationalism, in contrast, is inegalitarian within the in-group of shared citizenship…. You’ve got xenophobia, [and] nationalism comes along as part of the bargain.

Should-Read: Josh Barro: Graham-Cassidy healthcare bill has Alaska Purchase for Lisa Murkowski

Posted on by Brad DeLong

Should-Read: Republicans: worse than you can imagine, even after you have compensated for the fact that they are worse than you can imagine: http://www.businessinsider.com/graham-cassidy-health-care-bill-alaska-purchase-lisa-murkowski-vote-2017-9

Josh Barro: Graham-Cassidy healthcare bill has Alaska Purchase for Lisa Murkowski: “Making things odder: Neither VerBruggen nor I could locate the provision in the bill…

…So I asked a staffer in Cassidy’s office…. The spreadsheet came down off the senator’s website after I inquired about it…

“Any Community… Flourishes only When Our Members Feel Welcome and Safe…”

Posted on by Brad DeLong

Somehow I do think the New York Times could have put more thought into their questions for the community of the University of California at Berkeley https://www.nytimes.com/interactive/2017/09/19/us/formacist-ucberkeley-callout.html?_r=0.

I think that they could have written better questions if only they had read the “Terms of Service” they require those of us answering their questions to agree to.

From the “Terms of Service”:

You shall not… [write]… any libelous, defamatory, obscene, pornographic, abusive, or otherwise illegal material.

Be courteous. You agree that you will not threaten or verbally abuse other Members, use defamatory language, or deliberately disrupt discussions with repetitive messages, meaningless messages or “spam.”

Use respectful language. Like any community, the online conversation flourishes only when our Members feel welcome and safe. You agree not to use language that abuses or discriminates on the basis of race, religion, nationality, gender, sexual preference, age, region, disability, etc. Hate speech of any kind is grounds for immediate and permanent suspension of access to all or part of the Services.

Debate, but don’t attack. In a community full of opinions and preferences, people always disagree. NYT encourages active discussions and welcomes heated debate on the Services, but personal attacks are a direct violation of these Terms of Service and are grounds for immediate and permanent suspension of access to all or part of the Service….

The NYT… is not responsible for the content of [yours it publishes, but] NYT reserves the right to delete, move, or edit Submissions that it, in its sole discretion, deems abusive, defamatory, obscene, in violation of copyright or trademark laws, or otherwise unacceptable…

Their questions and my answers:

Is there any type of speech you think should not be allowed on campus?

A university has three goals:

  1. A university is a safe space where ideas can be set forth and developed.
  2. A university is a safe space where ideas can be evaluated and assessed.
  3. A university is a safe space where young scholars can develop, and gain intelligence and confidence.

Speech whose primary goal is to undermine and defeat one or more of those three goals does not belong on a university campus.

If you come to Berkeley, and if your speech is primarily intended to—or even, through your failure to think through what you are doing, has the primary effect of (1) keeping us from developing ideas that may be great ones, (2) keeping us from properly evaluating and assessing ideas, or (3) driving members of the university away, your speech does not belong here.

 

Did U.C. Berkeley’s history as a beacon of free speech influence your decision to attend?

Of course.

 

Has the issue of free speech come up in any of your classes? If so, how was it raised and what was the context?

I raised it last spring in one of my lectures, at the start, when we could hear the helicopters and the sirens.

 

Are you concerned about campus safety during Free Speech Week?

Of course. There are lots of people who want to take advantage of free speech week to neither:

  1. develop ideas that may be great ones,
  2. thoughtfully and rationally evaluate and assess ideas, nor
  3. make the university a welcoming place for young scholars.

Some will want blood in the streets. Some will hope to take advantage of blood in the streets. Somebody may wind up dead, or maimed, as part of a game of political-cultural dingbat kabuki largely orthogonal to the three proper missions of the university.

It is a serious concern.

Must-Read: Ezra Klein: Graham-Cassidy could’ve been the GOP’s best Obamacare replacement

Posted on by Brad DeLong

Must-Read: Stuart Butler is the person who knows something about health care who should, given his values and his analytical judgments, be most favorably inclined toward Graham-Cassidy. He is strongly opposed: “[a] high probability of really bad outcomes…” is his bottom line.

And nobody else of any reputation or note has even as favorable a judgment…

Ezra Klein: Graham-Cassidy could’ve been the GOP’s best Obamacare replacement: “Instead, Lindsey Graham and Bill Cassidy wrote the worst plan yet… https://www.vox.com/policy-and-politics/2017/9/20/16333384/graham-cassidy-obamacare-health-care

…Here’s where they went wrong.

It didn’t need to be this way.

Squint, and you can see how Graham-Cassidy, the latest Republican repeal bill, could have been the basis for a grand compromise on health care.

To hear Sens. Lindsey Graham and Bill Cassidy explain it, their bill takes Obamacare’s money and hands it over to the states to do with it as they will, unleashing them to be, in Louis Brandeis’s immortal phrase, the laboratories of democracy. Blue states can keep Obamacare or try to build on it — Obamacare-plus, single-payer, whatever. Red states can reject Obamacare and prove that they can get better results by going a different path.

“Instead of a Washington-knows-best approach like Obamacare, our legislation empowers those closest to the health care needs of their communities to provide solutions,” Graham said in a statement. “Our bill takes money and power out of Washington and gives it back to patients and states.”

This would be, as I’ve argued before, the smartest Republican approach to replacing Obamacare. It frees Republicans from making tricky decisions about subsidy levels and structures, about what gets covered and what doesn’t, about how insurers are regulated and how deductibles are managed.

Crafting legislation like this would take work, but Graham and Cassidy seemed ready to do that work. The hyperpartisan, truncated, underinformed, secretive process that led to the previous GOP bills repelled them. As Graham tweeted back in May, “A bill — finalized yesterday, has not been scored, amendments not allowed, and 3 hours final debate — should be viewed with caution.”

And both Graham and Cassidy have good relationships with Senate Democrats. Graham is known for bipartisan cooperation; Cassidy is known as the rare Republican who cared deeply about insurance coverage. If any two Republicans could run a process with hearings, with amendments, with analysis, with bipartisan negotiation, with the time and space to get the bill right, it would be them.

The ugly reality of Graham-Cassidy: But Graham-Cassidy, as it actually exists, doesn’t look anything like that bill, and it’s not going through anything like that process. Instead, it uses federalism as rhetorical cover for gutting spending on both Obamacare and Medicaid, punishing states that expanded health coverage, and violating virtually every policy and process argument Graham and Cassidy have made over the past year.

The legislation would lead to tens of millions of people losing coverage, insurance markets collapsing across the country, and yet more bitter fighting over health care policy. It would make protections for preexisting conditions optional and redistribute funding from states that expanded Medicaid to states that didn’t.

This isn’t a bill that gives states the resources they have now but hands over the control and the tools to innovate and make their health systems better. It’s a bill that slashes the resources states are getting now and leaves them responsible for managing the ugly aftermath. As a careful analysis produced by the left-leaning Center on Budget and Policy Priorities shows, the cuts envisioned in Graham-Cassidy reach $80 billion a year by 2026 — and states are left holding the bag. Making matters both worse and weirder, the bill’s entire funding stream expires in 2027, meaning Congress either needs to reauthorize it or the country’s entire health system falls into chaos:

Center on Budget and Policy Priorities: But the politics of Graham-Cassidy are uglier even than that graph suggests. The complex formula they use to redistribute their shrunken pool of funds punishes states that earnestly expanded Medicaid and tried to make Obamacare’s exchanges work. Asked about these disparities, the bill’s backers have repeatedly argued that it’s just math. “I like Massachusetts, I like Maryland, I like New York, I like California, but I don’t like them that much to give them a bunch of money that the rest of us won’t get,” Graham said.

Of course, that money is available to any state that chose to expand Medicaid, to any state that put real effort into enrolling the uninsured, and it still is. This redistribution from states that tried to make their health systems work to states that didn’t is the reason a number of Republican governors — including John Kasich of Ohio, Bill Walker of Alaska, Charlie Baker of Massachusetts, and Brian Sandoval of Nevada — have come out against the legislation.

Finally, the bill sends its lump-sum payments to the states with few standards or guardrails. States don’t have to build systems that insure more people or as many people; they don’t have to show better results or higher quality care. It’s easy to imagine these payments becoming a slush fund used to make state budgets easier to manage, as has happened in previous block grant programs.

Given these dangers, and given the difficulties of figuring out the right funding formulas and thinking through the needs of different states, you might imagine Graham and Cassidy would hold dozens of hearings, solicit feedback from governors across the nation, and seek amendments from senators representing diverse states. You would definitely assume they’d be working with experts to run deep, thorough analyses of their bill’s likely effects.

But none of that is happening. Graham and Cassidy aren’t even waiting for a full Congressional Budget Office score before moving forward with their legislation, which they’ve decided has to pass by next Saturday because they want it to qualify for the rapidly expiring reconciliation process.

This is a process without the information or the time to fully work out the consequences. No one, including Graham and Cassidy, has any real idea what this legislation would mean for America’s health care system, and they’re not waiting around to find out.

As my colleague Sarah Kliff wrote, Graham-Cassidy is “the most radical Republican health plan to date,” and they’re jamming it through the most bizarre, underinformed, truncated process yet.

A “waste of both of our time”: On Tuesday, I asked both Cassidy and Graham’s offices why they didn’t do this the other way. Why not create state flexibility without joining it to massive spending cuts? Why not go through the normal order and give legislators the time to work through the bill’s details, amend its approach, and build real support? Cassidy’s office never responded. Graham’s spokesperson Kevin Bishop pointed to previous Vox articles critical of Graham-Cassidy and said that answering these questions would be a “waste of both of our time.”

Bishop’s answer is unintentionally revealing: Since winning the White House, Republicans have treated the basic work of legislating on health reform as a waste of precious time. There has never been time to hold hearings, to consider amendments, to negotiate with Democrats, to explain provisions, to consider counterarguments, to work through details.

Republicans justify this mad dash by pointing to September 30, when their ability to use the 51-vote budget reconciliation process in 2017 ends. But that objection is hollow on two levels: They wouldn’t need reconciliation if they could win over Democratic votes, which they haven’t tried, and if that failed, they could spend a few months working on their bill and use reconciliation again next year, or the year after. There is no external force that justifies a process this slipshod and partisan. This is a choice Republicans are making, and it is the wrong one.

Graham-Cassidy is a sweeping, ambitious bill that will completely upend America’s health care system. It has the germ of a good idea in it, and you could imagine a legislative effort building on it toward a worthwhile result. But the bill as written is a mess and the process it’s being jammed through is a disaster. The idea that legislation like this must be passed by next Saturday, even in the absence of CBO analysis or time to discuss and amend, would be farcical if it weren’t so dangerous.

But don’t take it from me. Brookings’ health policy expert Stuart Butler has been pushing federalist health reforms for years. When I emailed him, I expected him to be enthused by Graham-Cassidy. But he wasn’t. “I am a conservative, not a radical, even if I want to see major reform,” he replied. “You just can’t transform the massive health system as quickly as the GOP is trying to do under Cassidy (and other previous approaches this year) without the high probability of really bad outcomes.”

Bad outcomes weren’t the only outcomes possible here. They’re just the ones Graham and Cassidy, for reasons known only to themselves, chose.

Should-Read: Kristie De Peña: Entrepreneurial Visas

Posted on by Brad DeLong

Should-Read: It is hard for me to see why anybody who is not a white nativist would be opposed to this—and thus hard to see why it has not already become law—unless you take a very pessimistic view of the present and future shape of the Republican coalition indeed…

Kristie De Peña: Entrepreneurial Visas: “Some of the most powerful and effective innovators are immigrant entrepreneurs looking to capitalize on the unique opportunities the United States offers… https://niskanencenter.org/wp-content/uploads/2017/07/EntrepreneurialStartupVisas.pdf

…Immigrants are twice as likely to start a business, and immigrants and their children created 40 percent of the Fortune 500 companies. Forty-two spots on the Forbes 400 list are occupied by U.S. billionaires from 21 foreign countries, who have a combined net worth of $250 billion…. Unfortunately, the only opportunity for most foreign entrepreneurs to come to America to start is a business is to secure an H-1B visa and launch a venture on the side—a notoriously difficult endeavor—or to secure work authorization through a family visa. Just 85,000 H-1B visas—20,000 of which are reserved for master’s degree holders—are granted annually, but the past few years have seen increasing demand… for the fifth consecutive year, the cap was met within five days…. We need a new visa that makes it easier for entrepreneurs to contribute positively to the economy…

Should-Read: Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb: Are Ideas Getting Harder to Find?

Posted on by Brad DeLong

Should-Read: “Harder”… I am not sure this is the way to look at it. Yes, it is becoming harder in the level-log specification they adopt. But why should that be the benchmark? And it is certainly true that innovations have less of an effect on human “utility” because we are so much richer. But why should that come as a surprise?

I have to think about this more…

Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb: Are Ideas Getting Harder to Find?: “In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms… http://www.nber.org/papers/w23782

…the effective number of researchers and their research productivity. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity…