1. The stakes involved in pushing the U.S. congressional reconciliation bill to the goalposts are very large indeed. Read Alix Gould-Werth and Sam Abbott, “Congressional investments in social infrastructure would support immediate and long-term U.S. economic growth,” in which they write: “President Joe Biden’s Build Back Better agenda … boasts the potential to reshape the U.S. economy … [by] supporting workers and families with investments in care infrastructure, including a comprehensive paid family and medical leave program and increased investment in early care and education, as well as income supports, such as a permanent fully refundable Child Tax Credit and structural reforms to the Unemployment Insurance program. Common sense, as well as a robust body of research, suggests these investments would improve workers’ and families’ personal well-being, especially for families of color. …. But policymakers should not lose sight of the economywide impact these investments will have as well.”
2. This will, I think, be Equitable Growth’s best policy conference yet—if only because the United States now has huge amounts of running room given the chaos caused by the coronavirus pandemic and by the ongoing disruptions to U.S. politics I believe its aftermath is likely to bring. Read Maryam Janani-Flores, Kate Bahn, and Carmen Sanchez Cumming, “Equitable Growth’s 2021 policy conference features key speakers and panelists discussing inclusive U.S. economic growth after the coronavirus recession,” in which they write: “More expansive, more transformative, and more equitable economic policies have helped power a far more rapid recovery, compared to the years following the Great Recession. … Our virtual policy conference … [features] pathbreaking leadership and cutting-edge scholarship that recognizes how a stronger economic future is built on the linkages between racial justice, climate resilience, access to care and family economic security, financial stability, and rebalancing power, so that all can share in the gains of economic growth. Headlining the conference in a series of fireside chats and remarks are the new Equitable Growth President and CEO Michelle Holder, U.S. Secretary of Labor Marty Walsh, U.S. Rep. Hakeem Jeffries (D-NY), Michigan State University economist and Equitable Growth Steering Committee member Lisa Cook, University of California, San Diego assistant finance professor Carlos Fernando Avenancio-León, and Marketplace host and correspondent Kimberly Adams.”
Worthy reads not from Equitable Growth:
1. That technological disruption affects U.S. workers already in declining industries but does not harm the prospects of future entrants may be a durable lesson from the past of technological disruption and change. Read James Feigenbaum and Daniel P. Gross, “Automation and the Future of Young Workers: Evidence from Telephone Operation in the Early 20th Century,” in which they write: “Telephone operation, one of the most common jobs for young American women in the early 1900s, provided hundreds of thousands of female workers a pathway into the labor force. Between 1920 and 1940, AT&T adopted mechanical switching technology in more than half of the U.S. telephone network, replacing manual operation. Although automation eliminated most of these jobs, it did not affect future cohorts’ overall employment: the decline in demand for operators was counteracted by growth in both middle-skill jobs like secretarial work and lower-wage service jobs, which absorbed future generations. Using a new genealogy-based census linking method, we show that incumbent telephone operators were most impacted by automation, and a decade later were more likely to be in lower-paying occupations or have left the labor force entirely.”
2. The point of Critical Race Theory: don’t make African Americans poor and excluded from networks, keep them poor and excluded from networks, then discriminate against the poor and those excluded from networks, and claim that you are not then discriminating on the basis of race. Read Noah Smith, “The Negro Subversive on Critical Race Theory,” in which he writes: Critical Race Theory’s founders sought to understand how a society that had officially disowned racism managed to continue being racist. … To understand how law impacts society, we must understand how law exists in society, which means applying insights from … the social sciences. … What all three social objects under the name “Critical Race Theory,” have in common is the idea of politicizing the allegedly apolitical. … The social sciences … rose in the midst of various national projects and served to justify them. Their (very incomplete) transition away from this heritage has traced an arc similar to their growth toward greater objectivity. The legacy of this transition continues, as the social sciences both reflect and condition how the public thinks about society. The fault lines of the critical race theory “debate,” reflect the fault lines early social science practitioners faced as they developed their disciplines out of “social philosophy,” into social science. Recognizing that these faults still condition our thinking about the social world is crucial to recognizing what’s at stake right now.”
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
Despite the essential role that child care plays in the lives of U.S. workers and their families, the current child care market in the United States is not meeting families’ needs. This not only impacts families themselves, but also the overall economy, as high-quality care has far-ranging impacts on economic activity and growth. Sam Abbott explains why public investments are needed in early care and education to support immediate and long-term economic growth, as well as bolster human capital development in the next generation of workers. He then details how public investments in particular can offset deficiencies in the private child care market and support child care workers, who play a vital role in the U.S. economy. These investments, he concludes, are some of the best bets policymakers can make, with research showing that every dollar in spending on early care and education generates more than $8 in economic activity. Accompanying Abbott’s report is a factsheet laying out what the economic research has found about the impacts of child care and early childhood education on the U.S. economy.
Policymakers should also seize the opportunity in the current 2022 budget reconciliation negotiations to invest in U.S. social infrastructure, Abbott and Alix Gould-Werth write. Much like investments in early care and education, they explain, increasing spending on other social infrastructure and income support programs would give a much-needed boost to the overall economy in addition to supporting those workers and families most in need. The co-authors detail recent economic findings about the role of care infrastructure, paid family and medical leave, early care and education, and income supports in ensuring strong, stable and broadly shared economic growth. As the United States emerges from the greatest health, economic, and caregiving crises in decades, they conclude, Congress should boost public investments in these critical programs to correct years of neglect and underinvestment.
Though some policymakers are fearful of making these investments due to overblown fears of increasing the national debt, University of California, Berkeley’s Barry Eichengreen urges them to ignore the deficit fearmongering on Capitol Hill. Detailing arguments from his new co-authored book, In Defense of Public Debt, he shows how governments throughout the years have issued public debt to address emergencies and pressing social needs, and makes the case that our current conditions demand similar action. Not only is our current physical infrastructure crumbling due to decades of underinvestment and the heightened threat of climate change, but social infrastructure programs are also far behind where they should be. Eichengreen effectively rebuffs the critiques of President Joe Biden’s Build Back Better agenda and encourages policymakers to pass it while they have the chance.
Equitable Growth is hosting its biennial policy conference on Monday and Tuesday. The virtual event, “Equitable Growth 2021: Evidence for a Stronger Economic Future,” will gather policymakers, academics, activists, and thought leaders to discuss pressing economic issues and policy solutions. (Click here to register.) The first day of sessions will feature a keynote address from U.S. Secretary of Labor Marty Walsh and a conversation between Equitable Growth President and CEO Michelle Holder and Michigan State University’s Lisa Cook. Maryam Janani-Flores, Kate Bahn, and Carmen Sanchez Cummingdetail the sessions on day 2, and highlight speakers who will participate in panel sessions on topics such as envisioning a new economic future, rebalancing Big Tech’s grip on the economy, boosting aggregate demand and managing debt burdens, and social infrastructure as an engine for economy growth. The September edition of Expert Focus—Equitable Growth’s monthly series highlighting scholars at the forefront of economic and social science research—also showcases featured speakers from this year’s policy conference.
New research examines the value of racial and gender diversity at the Federal Reserve. As the Federal Open Market Committee meets next week, the 12-member body should consider the findings of a working paper published this week by Francesco D’Acunto at Boston College’s Carroll School of Management, Andreas Fuster at the Swiss Finance Institute, and Michael Weber at the University of Chicago’s Booth School of Business. The co-authors study the influence that the race and gender of FOMC members has on public perception and trust of their opinions on inflation and Unemployment Insurance. They find that Black men and women, as well as White women, are more likely to align their economic expectations with those of FOMC members from diverse backgrounds, while White men and Hispanic respondents trusted FOMC members regardless of race or gender. The research highlights the importance and salience of diversity and representation at the highest levels of policymaking and decision-making—as well as the current and historical lack of non-White male economists at the Fed and within the field more broadly.
Links from around the web
A new U.S. Treasury Department report says that the nation’s child care system is failing families, reports CNBC’s Ylan Mui, finding that market failures keep high-quality and affordable care out of reach for many families. Similar to the Equitable Growth report released this week, the Treasury report details the challenges many families face in finding affordable, accessible, and quality care options for their children and examines the often poor working conditions that many child care workers experience, from low pay to high stress. The Treasury report also recommends policymakers pass President Biden’s Build Back Better agenda. Mui runs through the details of the Treasury report, interviewing several policymakers and previewing the next steps in Congress.
Unions can play a major role in wealth building and bridging the wealth divide between families of color and their White counterparts, write Aurelia Glass and David Madland in an op-ed published in The Hill. They detail the findings of a recent analysis they and a co-author, Christian Weller, performed on Federal Reserve data from the Survey of Consumer Finances. While unions alone are not a silver bullet, they allow families to make significant gains in growing wealth and establishing more financial security. Their study finds that “the median union family has over double the wealth of the median nonunion family” and that “the wealth gap between white families and Black and Hispanic families was significantly smaller for union households compared to nonunion households.” This, they explain, has significant implications for President Biden’s plan to rebuild the middle class, which is currently shrinking and out of reach for many U.S. households.
The coronavirus pandemic has disrupted the trajectories of millions of college students in the United States. Men make up the majority of drop-outs, according to some estimates—but, Kevin Carey writes in The New York Times’ The Upshot, women are still playing catch up in the U.S. economy. The college gender imbalance is not a new phenomenon, as women have outnumbered men on campuses for decades. Carey details the data on gender disparities in college and beyond, noting that despite higher female enrollment at universities, the gender pay gap is still pervasive across the U.S. labor force.
Inflation is on everyone’s mind. NPR’s Scott Horsley reports that high meat prices are contributing to inflation and that concentration in agriculture and meatpacking could be to blame. Horsley details the Biden administration’s efforts to target what they call “Big Meat,” in their campaign against anticompetitive behavior and market dominance. The administration’s goal, he writes, is to restore competition in the U.S. meatpacking and processing industry—in which more than 80 percent of beef is slaughtered and processed by just four companies—which would work in consumers’ favor by lowering prices.
The coronavirus pandemic and resulting historic economic and societal shock revealed underlying systemic fragility driven by longstanding economic inequalities and structural racism. More expansive, more transformative, and more equitable economic policies have helped power a far more rapid recovery, compared to the years following the Great Recession of 2007–2009. But now, the coronavirus pandemic is surging anew while most of those underlying structural fragilities exacerbated by the coronavirus recession, as well as ongoing consequences of climate change, remain exposed and raw.
These economic policy challenges provide an opportunity for policymakers to rebuild a more resilient and inclusive U.S. economy and society. In a nutshell, this is what is on our agenda at our virtual policy conference, “Equitable Growth 2021: Evidence for a Stronger Economic Future,” on Monday and Tuesday, September 20–21.
The Washington Center for Equitable Growth, over the course of these 2 days, will examine the progress to date in building a resilient and inclusive economy and the needs for the future by bringing together policymakers, academics, advocates, and thought leaders. The remarks and sessions at the conference will highlight pathbreaking leadership and cutting-edge scholarship that recognizes how a stronger economic future is built on the linkages between racial justice, climate resilience, access to care and family economic security, financial stability, and rebalancing power, so that all can share in the gains of economic growth.
Headlining the conference in a series of fireside chats and remarks are the new Equitable Growth President and CEO Michelle Holder, U.S. Secretary of Labor Marty Walsh, U.S. Rep. Hakeem Jeffries (D-NY), Michigan State University economist and Equitable Growth Steering Committee member Lisa Cook, University of California, San Diego assistant finance professor Carlos Fernando Avenancio-León, and Marketplace host and correspondent Kimberly Adams. Notable panelists are featured in our four panel sessions, taking place in two concurrent blocks on the second day of the conference, focused on the key economic questions of the day.
Equitable Growth 2021: Evidence for a Stronger Economic Future
Below is a preview of the second day of conference and our featured panelists and moderators in the upcoming sessions, as well as their relevant work and experience that will be brought to bear during these discussions. And here is a complete agenda and details about attending the conference.
Concurrent sessions: Block 1
Envisioning a new economic future: What’s next?
Tuesday, September 21, 2:05 p.m. – 2:50 p.m.
As U.S. communities and the economy recover from the coronavirus recession, there is an opportunity to build a new economic future defined by investment centered on racial equity and climate mitigation and adaptation. This requires re-envisioning industrial, labor, and macroeconomic policies and redefining economic success beyond aggregate statistics. Panelists will discuss how to leverage deficits to invest in a green future and build broadly shared and sustainable economic growth while ensuring Black, Latinx, Indigenous, and Asian American, Native Hawaiian, and Pacific Islander communities can fully benefit from any such investments.
The panelists are:
Olivier Blanchard, the Robert Solow professor emeritus at the Massachusetts Institute of Technology and the Fred Bergsten senior fellow at the Peterson Institute for International Economics. He is a macroeconomist and has worked extensively on issues including monetary and fiscal policy, labor markets, and the recent global financial crisis. When the coronavirus pandemic hit, French President Emmanuel Macron asked Blanchard, as a leader in the field of macroeconomics, along with Jean Tirole, to chair a commission and write a report on the major structural challenges societies will face in the aftermath of the pandemic, as well as policy solutions to address them. These challenges include climate change, economic inequality and insecurity, and economic disruptions stemming from demographic changes.
Dania Francis, an assistant professor of economics at the University of Massachusetts Boston. She studies the structural causes behind racial and socioeconomic achievement divides. Francis’ work includes analyses and research-based policy recommendations for implementing a reparations program for the descendants of enslaved African Americans, economic inequality and the digital divide, school racial segregation,and the link between racial, mental health, labor market, and educational disparities. Her work demonstrates how addressing racial divides are core to addressing the structural challenge imposed by economic inequality.
Brenda Mallory, the chair of the White House Council on Environmental Quality. She has worked alongside academics and in a number of senior roles in public office to advance environmental protections for low-income and communities of color. In her current role, Mallory advises President Joe Biden on policies that foster public health, environmental justice, and the resiliency of U.S. communities to the effects of climate change and natural hazards such as floods and sea-level rise and hurricanes, as well as the best practices to develop carbon capture, utilization, and sequestration projects.
Michelle Holder, president and CEO of the Washington Center for Equitable Growth, will moderate the panel.
Rebalancing Big Tech’s grip on the economy
Tuesday, September 21, 2:05 p.m. – 2:50 p.m.
From digital marketplaces to invasive worker surveillance, tech companies play an outsized role in the everyday lives of U.S. workers and their families while evading sufficient scrutiny and providing few consumer and worker protections. Dominant tech platforms stifle innovation and hinder entrepreneurship opportunities, and ubiquitous and invasive management tools risk exacerbating longstanding inequities for workers. Panelists will discuss how sound policy, coupled with a strong, organized advocacy strategy, are needed to manage technological integration so the gains from these advancements are fairly distributed, spurring competition and broadly shared economic growth.
The panelists are:
New York Attorney General Letitia James, who is at the forefront of tackling anticompetitive behavior in the technology industry. James will provide opening remarks to the panel. She has led multipleantitrustsuits that allege monopolistic behavior by tech giants, including the acquisition of smaller rivals and other activities that limit competition by other players in the ecosystem.
Antoine Prince Albert III, the government affairs policy counsel at Public Knowledge, a tech-focused think tank. He examines what policymakers are doing and can do when it comes to fostering online platform governance and competition, as well as addressing privacy concerns, with a recent detailed piece on how Congress is approaching these issues. Albert has explored questions related to how technology functions within Black, Latino, and Indigenous communities in the United States, which helps illuminate how technology integration and oversight influences different communities and interacts with people’s social and economic lives.
Ryan Gerety, a senior advisor to United for Respect, an advocacy organization for retail workers. She focuses on the economic and political implications of new technology and its impact on structural inequality. Gerety has also explored the issue of workplace technologies, such as face recognition, worker surveillance, and just-in-time scheduling, as worker monitoring and discipline tools that disproportionately harm Black, Indigenous, and other people of color.
Fiona Scott Morton, the Theodore Nierenberg professor of economics at the Yale University School of Management. She is renowned for her research on competition in the areas of pricing, entry, and product differentiation. In a piece for Equitable Growth, Scott Morton wrote about the importance of antitrust enforcement for economic redistribution and proposed policies for the U.S. Congress and the Biden administration to adopt that confront market power, including in the technology industry. She also has explored the importance of an interoperability remedy in the technology industry to address entry barriers created by network effects.
Lydia DePillis covers economic policy for ProPublica and will moderate the panel.
Concurrent sessions: Block 2
Boosting aggregate demand amid decreased debt
Tuesday, September 21, 2:55 p.m. – 3:38 p.m.
The relief and recovery efforts following the coronavirus recession offset the financial hardship that families in the United States often face in economic contractions and averted a long-term aggregate demand shock. But the sharp recession and ongoing pandemic came after decades of rising income inequality, featuring wealthier households saving more while most households leveraged debt to sustain demand. This session will dive deep into who takes on debt and how different households along the income distribution spend and save, influencing aggregate demand and U.S. macroeconomic stability. Coming out of a unique economic crisis featuring broad-based relief to families, but against a backdrop of inequality and a continuing pandemic, panelists will discuss the opportunities that will lead to a more stable future for families and the U.S. macroeconomy.
The panelists are:
Kristen Broady, a fellow at the Brookings Institution’s Metropolitan Policy Program and professor of financial economics on leave from Dillard University in New Orleans. Her research includes an exploration of mortgage foreclosure risk, and she recently wrote that, with the expiration of the Centers for Disease Control’s rental eviction moratorium, a looming eviction crisis will hit Black-majority neighborhoods the hardest. She has also explored how the Black-White wealth gap, coupled with labor market disparities, left Black households more vulnerable to the pandemic’s economic shocks, which provides insight into the path forward for maintaining aggregate demand through centering policymaking on the economic well-being of historically excluded communities.
J.W. Mason, an associate professor at John Jay College, City University of New York and fellow at the Roosevelt Institute. He has written on issues of government debt and household debt. In his paper titled, “Income Distribution, Household Debt, and Aggregate Demand: A Critical Assessment,” he finds that income inequality, household debt, and aggregate demand were closely linked during the housing boom period of 2002–2007, but that those linkages are not as clear following the post-1980 rise in household debt.
Atif Mian, the John H. Laporte, Jr. Class of 1967 professor of economics, public policy, and finance at Princeton University and director of the Julis-Rabinowitz Center for Public Policy and Finance at the Princeton School of Public and International Affairs. Mian, a member of Equitable Growth’s Steering Committee, has proposed a theory of indebted demand, resulting from rising income inequality and financial deregulation, that leads to lower aggregate demand. This research follows the argument in his book, House of Debt, co-authored with Amir Sufi at the University of Chicago, which finds that a significant increase in household debt and then drop in household spending caused the Great Recession and Great Depression.
Bharat Ramamurti, the deputy director at the White House National Economic Council. He focuses on financial reform and consumer protection and also has worked on pandemic support for smallbusinesses, as well as assessing the consequences for consumers from consolidation in the meat processing industry. Ramamurti previously served as the chief economic advisor and senior counselor on banking to Sen. Elizabeth Warren (D-MA), with a focus on the financial reforms that came out of the Great Recession.
Social infrastructure as an engine for equitable growth
Tuesday, September 21, 2:55 p.m. – 3:38 p.m.
Policy debates on infrastructure spending following the coronavirus pandemic pushed forward our collective understanding of the importance of social infrastructure investments such as child care and the Child Tax Credit, early education, community-based services and support for older adults and people with disabilities, paid sick time, paid leave, and Unemployment Insurance. These social infrastructure programs are core to the health and stability of the U.S. economy. Investments in social infrastructure reap benefits for the families of today and into the future, especially families of color. Panelists will explore potential economic impacts of these investments with a focus on the specific policy levers that will yield significant increases in labor force participation and productivity.
The panelists are:
Hilary Hoynes, a University of California, Berkeley professor of public policy and economics. Her research focuses on social infrastructure programs, including food and nutrition programs, as well as government tax and transfer programs for low-income families, which form the floor of our social infrastructure. She has authored research that shows that social infrastructure is a long-term investment in our children, based on an evaluation of the food stamps program from 1961 to 1975. She has also written about strengthening the Supplemental Nutrition Assistance Program as an automatic stabilizer in economic downturns, in the Equitable Growth-Hamilton Project co-published book Recession Ready.
Shilpa Phadke, special assistant to the president and deputy director at the White House Gender Policy Council, which covers a range of issues, including economic security, with a focus on gender equity and equality. In her work, Phadke has written about the pandemic’s impact on economic inequality and the caregiving crisis, particularly experienced by women of color, who felt the brunt of the shock of the pandemic, highlighting anew the need to invest in social infrastructure that centered the role of caregiving and gender equality as a priority for a new economic policy agenda in the recovery.
William E. Spriggs, the chief economist at AFL-CIO and a professor in, and former chair of, the Department of Economics at Howard University. He has written about how Unemployment Insurance has not kept up with the changing workforce composition and values of racial and gender equity, and has noted that the result is a system that does not adequately protect part-time workers or workers in the service sector who receive very low wages and who are disproportionately Black. In recent congressional testimony, Spriggs argued that the United States was less resilient than our trading partners during this pandemic due to “outdated and overwhelmed” Unemployment Insurance and “lack of paid leave,” making the argument that income supports are an aspect of our social infrastructure that supports the economy.
Jessie Ulibarri, the co-executive director of the State Innovation Exchange, a nonprofit policy resource and strategy organization, and a former Colorado state senator. His work focuses on pushing for and supporting transformational policy change at the state level and, over the past two decades, has passed hundreds of economic, racial, and gender justice policies into state law. While a state senator, Ulibarri led efforts to expand paid sick leave and paid family and medical leave in Colorado and brings practical insight to paving the way toward an expansive social infrastructure.
Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth, focuses on various social infrastructure programs in her research and will moderate the panel.
To read more about these panelists, please visit our event website, which houses their bios, and register for the event here. We hope you will join us for this 2-day conference to hear from these panelists, and bring your curiosity and questions for the Q&A sessions sprinkled throughout the event!
The Federal Reserve’s so-called dual mandate to maintain overall price stability and maximum sustainable growth in U.S. employment is always on the minds of the U.S. central bank’s Federal Open Market Committee. The 12-member FOMC sets benchmark interest rates, which indirectly affect both inflation and the U.S. labor market. But the reverse also is true: How members of this committee communicate their views on achieving their dual mandate to the U.S. public can indirectlyaffect future macroeconomic trends.
A new working paper in Equitable Growth’s Working Paper series examines the importance of communicating Fed macroeconomic forecasts through the lens of racial and gender diversity. Specifically, the three co-authors of the new working paper— Francesco D’Acunto at Boston College’s Carroll School of Management, Andreas Fuster at the Swiss Finance Institute, and Michael Weber at the University of Chicago’s Booth School of Business—examine whether the race and gender of FOMC members who communicate their views on inflation and unemployment influence the beliefs of diverse members of the U.S. public when it comes to their subjective views on inflationary expectations and the level of unemployment. As the three co-authors note, policymakers stress the importance of the public’s “trust in the central bank for an effective transmission of monetary policy, and public trust is a necessary condition for central banks’ independence.”
The new research, “Diverse Policy Committees Can Reach Underrepresented Groups,” finds that Black men and women and White women are much more likely to align their economic expectations with that of FOMC members from a diverse demographic of the members who took part in the approval of the Fed’s macroeconomic forecast. Yet the three co-authors also find that Hispanic respondents and White men trusted the views of FOMC members regardless of their race or gender. The lack of representation of races other than Black and White among the 12 permanent and rotating members of the Federal Open Market Committee, who are drawn from the Federal Reserve’s regional presidents and the Federal Reserve Board in the nation’s capital, made it impossible to draw conclusions on their potential influence on consumers’ expectations.
These findings offer important insights into how the diverse composition of the Federal Open Market Committee can directly affect expectations about future U.S. unemployment levels and, to a lesser extent, inflationary expectations—perhaps the key measure of medium- to long-term inflation. The findings indicate that diversity at the highest levels of the Federal Reserve System alone can influence the macroeconomic expectations of the U.S. public.
To test the effect of the “diversity salience” of FOMC members with the U.S. public, the three co-authors conduct a series of surveys on underrepresented groups of the U.S. population, alongside White men, who comprised 25 percent of the 9,000 survey respondents. The co-authors assess these respondents’ unemployment and inflation projections before and after being presented with a curated memo that included one of three photos of demographically diverse FOMC committee members.
Their findings highlight why the lack of diversity at the highest level of decision-making matters at the Fed. According to a recent research report by The Brookings Institution, “there have only been three Black members of the Fed’s Board of Governors, only one Black Federal Reserve Bank President, and only three nonwhite Federal Reserve Bank presidents in the entire system’s history.” A similar, though “less dire” pattern is evident in the case of women directors in the Federal Reserve System, according to the Brookings report. There has never been a Hispanic Federal Reserve System president or Federal Reserve Board member.
But there are some important caveats to the findings in the new working paper by D’Acunto, Fuster, and Weber—caveats that emerge when looking at how the three co-authors conducted their surveys of individual members of the U.S. public. First of all, the importance of diversity among FOMC members is more telling when communicating the Fed’s views on unemployment forecasts than on inflationary expectations. The co-authors argue that the survey responses related to inflation are positively correlated with the diversity of the FOMC members communicating that information, but that unemployment was more of a tangible concept to respondents, who could see how their particular demographic groups were affected.
Then, there’s the issue of diversity in the economics profession itself and how that shapes research and policymaking. Recognizing this problem, the three co-authors (all White male scholars) registered their proposed experimental design and analyses in the American Economic Association RCT Registry before implementing the experiment so that the broader research community could comment on and assess the impartiality of their methods before the data were collected. Due to the lack of diversity detected also in the broader research community, though, expanding the diversity of scholars researching economics—and, in the case of this research specifically, on the impact of FOMC members’ communications on the central bank’s macroeconomic forecasts—could well improve future economics communications and academic literature.
Still, the overall findings in this new research demonstrate that diverse representation alone among FOMC members, regardless of the information they are conveying, has the power to influence U.S. communities that are underrepresented in high-level policy committees. Importantly, FOMC members from historically excluded groups of Americans are better able to reach underrepresented groups without leading to decreased trust or lower attention levels among other groups, including White males. Hence, committee diversity can improve the aggregate transmission of monetary policy to the U.S. public.
The U.S. Congress this month began voting on a bevy of bills and amendments designed to shore up the nation’s social infrastructure as part of a legislative process known as budget reconciliation. Based on President Joe Biden’s Build Back Better agenda, this process boasts the potential to reshape the U.S. economy in meaningful ways, by supporting workers and families with investments in care infrastructure, including a comprehensive paid family and medical leave program and increased investment in early care and education, as well as income supports, such as a permanent fully refundable Child Tax Credit and structural reforms to the Unemployment Insurance program.
Common sense, as well as a robust body of research, suggests these investments would improve workers’ and families’ personal well-being, especially for families of color who have largely been denied access to the middle class due to underinvestment in these types of public goods over the past decades. But policymakers should not lose sight of the economywide impact these investments will have as well.
To support policymakers in crafting the size, scope, and details of these investments, the Washington Center for Equitable Growth has released four factsheets summarizing the research evidence that demonstrates the economic growth potential of key programs and areas considered in the Fiscal Year 2022 budget reconciliation process:
Through reconciliation, Congress this month can make a once-in-a-generation investment in the nation’s care infrastructure—an umbrella term for the policies, resources, and services necessary to help U.S. families meet their caregiving needs. Specifically, care infrastructure describes high-quality, accessible, and affordable child care, paid family and medical leave, and home- and community-based services and support.
Already, insufficient investment in care infrastructure strains U.S. economic growth, trapping paid care workers in low-wage jobs and forcing many unpaid family caregivers to forgo work to take care of their loved ones, costing families and the economy trillions of dollars. These challenges were exacerbated by the coronavirus pandemic and remain unforgiving amid the continuing public health crisis, as many family caregivers—disproportionately people of color—still find their caregiving arrangements disrupted and struggle rebalance work, caregiving, and other family responsibilities.
By making meaningful investments in the care economy, policymakers can undo these trends. These investments could create twice as many new jobs as investments in physical infrastructure alone while shrinking the U.S. gender employment gap in the process. (See Figure 1.)
Federal paid family and medical leave, a central component of care infrastructure, is a missing piece in the nation’s social insurance system. The United States stands alone among economic competitors in failing to guarantee workers paid time off should they need to care for a new child, a sick loved one, or themselves in the event of a health crisis. The absence of these protections is a drag on economic growth, as many workers are forced to forgo income or exit the labor force entirely when health or caregiving challenges arise.
Another important component of U.S. care infrastructure is the nation’s early care and education system. This includes a wide range of arrangements for providing care to children of all ages, ranging from informal care arrangements with family or friends to licensed child care facilities, and from universal pre-Kindergarten to targeted pre-Kindergarten programs such as Head Start.
Currently, this system is in crisis. Early care is hard to find, of inconsistent quality, and extremely expensive even though the workers caring for our nation’s children are some of the lowest-paid workers in the economy. By investing meaningfully in early care and education, policymakers can accelerate economic growth immediately through higher rates of parental labor force participation and boosted wages among the child care workforce. At the same time, child care investments support long-term growth by facilitating the human capital development of children in care.
These investments are some of the safest bets policymakers can make. Research on early care and education programs finds that every dollar in spending generates roughly $8.60 in economic benefits in the long term.
The 2022 budget reconciliation process provides Congress with the opportunity to correct ingrained weaknesses in the nation’s income support infrastructure. Income support programs help households ensure that they have the income they need, whether through direct cash transfers in programs such as Temporary Assistance for Needy Families, Social Security Disability Insurance, and Unemployment Insurance, or by providing essential goods such as food or housing.
But work remains to be done to ensure that these income support programs meet their full economic potential. Eligibility remains too strict, benefits are too hard to access for those who are eligible, and benefit levels remain too low to support families’ personal and economic well-being. Unemployment Insurance benefits, for example, are too low in every state to cover families’ basic needs. (See Figure 2.)
Figure 2
Conclusion
Economic growth that is strong, stable, and broadly shared will only be achieved by making choices that prioritize robust public investments in people and communities and sustain the workers and families who are the foundation of our economy. An adequate social infrastructure program that can deliver on its economic promise is worth the cost. And now, with the cost of borrowing at record lows, policymakers can prioritize investments in the nation’s social infrastructure at an effective discount, further accentuating the short- and long-term economic benefits of caregiving, paid family and medical leave, early care and education, and income support programs.
As the United States works to emerge from the greatest health, economic, and caregiving crisis in decades, Congress has the opportunity to correct decades of neglect to our nation’s social infrastructure. Rather than shirking this opportunity due to unfounded concerns over cost, policymakers must use the budget reconciliation process to seize this historic moment and invest in the programs and people who will grow our economy immediately and in the long term.
Sufficient income is one of the most important components of a stable and healthy household budget. Income support programs help ensure that U.S. households have the income they need to cover the basic expenses of daily life. Some income support is delivered through direct cash transfers, including in programs such as Temporary Assistance to Needy Families, Supplemental Security Income, Social Security Disability Income, and Unemployment Insurance, while others provide essential goods such as food or housing to families, thus freeing up existing household income to be used for other purposes.
Yet the COVID-19 crisis demonstrates that existing income support infrastructure in the United States is wholly insufficient in providing relief to those who needed it.1 Pandemic-specific income supports delivered through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act and related programs successfully blunted some of the worst pain of the coronavirus recession, but they failed to deliver for all who needed income support due to sustained underinvestment in these vital programs over the past half-century.2
While both common sense and a robust body of literature make clear that income support improves the economic well-being of the people who access it, it’s important not to overlook the effects these programs also have on the U.S. economy as a whole.3 This factsheet discusses the economic impacts of income support programs, who they reach, how racism prevents them from serving their economic function, and what policymakers can do about it, starting with the upcoming 2022 budget reconciliation negotiations.
The immediate economic impact of income support programs
During recessions, income support ensures people are still able to purchase goods and services, which softens the aggregate impact of economic downturns on the U.S. economy.4 For every dollar spent on UI benefits during the Great Recession, there was an additional $1.61 in economic activity, and for every dollar spent on the Supplemental Nutrition Assistance Program, there was an additional $1.74 in economic activity.5
Most studies find that income support from state paid leave programs increases labor force participation among mothers. Under California’s paid leave law, for example, new mothers are estimated to be 18 percentage points more likely to be working a year after the birth of their child.6
Other income support programs for families with children also boost labor force participation among mothers. A research review by Taryn Morrissey of American University finds that providing income support to cover 10 percent of a household’s child care costs results in a 0.5 percent to 2.5 percent increase in mothers’ employment.7 Likewise, a study of the 1986 Earned Income Tax Credit expansion finds that this expanded income support resulted in a 2.8 percentage point increase in the labor force participation rate of single women with children.8
Income supports facilitate job matching, benefitting workers who find higher-paying jobs and firms that hire workers with the right skills for the job. Recent research finds that when U.S. workers have the income they need to meet their basic needs, they can take the time to find the right job for them, rather than taking the first work opportunity that comes along. For each additional week that a worker receives Unemployment Insurance, for example, the likelihood increases that they will be re-employed at a job that requires a higher level of education than their previous job.9 (See Figure 1.)
Figure 1
These benefits extend to those who relocate because of a partner’s job, with one study finding a $4,500 annual wage difference between female “trailing spouses”—those who relocate because of a partner’s job—who live in a state that provides income support and similar women who live in states without the policy.10 This suggests that income supports help female trailing spouses match with jobs that will use their most highly compensated skills.
The benefits of income support programs for long-run economic growth
Income support programs develop the human capital of the next generation. For instance, an extra $1,000 from the Earned Income Tax Credit reduces the chance of a baby being born with low birth-weight—a factor hindering brain development and overall health—which, in turn, translates into better educational outcomes later in life.11 Likewise, a study on the mental and physical health outcomes of elementary school students whose parents had access to a state paid leave in California finds lower rates of attention deficit/hyperactivity disorder, obesity, ear infections, and hearing problems.12
Investing in children’s human capital development today means more educated and higher-earning workers in the future, spurring economic growth. In adulthood, people who accessed income support from the Supplemental Nutrition Assistance Program as children have statistically significantly higher scores on the human capital index, a measure that looks at years of schooling, degrees completed, and occupation type.13
Income support programs must be strengthened to realize their full economic potential
Strict eligibility requirements limit who is eligible for income support programs, limiting their reach. People can lose program eligibility because they get married, maintain a modest rainy day fund, or keep a reliable car. Additionally, many income support programs require a person to be employed in order to be eligible—despite the lack of income being a possible factor that is preventing a person from maintaining employment.14
Income support benefits are difficult to access even for those who are eligible, dampening their economic impact. Many people struggle to navigate state Unemployment Insurance websites, travel to Social Security Administration field offices to complete disability applications, complete the paperwork necessary to recertify for the Supplemental Nutrition Assistance Program, and correctly document their work participation to remain eligible for the Temporary Assistance for Needy Families program.15
When access to income support is gained, benefits amounts are often very low, preventing them from serving as effective economic stabilizers. The income support provided by the Temporary Assistance to Needy Families program, for example, leaves a family of three below half of the poverty line in almost every state and is time-limited, as its name suggests.16 Combined with eligibility and access limitations, this prevents the use of this income support from increasing during recessions.17
Structural racism drives the weaknesses in U.S. income support programs
While some assume that the U.S. income support system is weak because few people need it, most people need income support at some point in their lives. Americans have a 54 percent chance of experiencing poverty at least once during adulthood—more than the chance of having appendicitis or getting divorced over the course of a lifetime.18
In fact, almost everyone in every racial category uses income supports at some point.An Urban Institute study finds that in any given month, nearly 1 in 5 people benefit from SNAP benefits, Supplemental Security Income, the TANF program, public or subsidized housing, the Women, Infants, and Children, or WIC, program, or the Child Care and Development Fund. A U.S. Treasury Department analysis also finds that nearly every single U.S. household receives some form of income support, when one considers Medicare and Social Security.19
A large body of academic work shows that racism weakens income support programs.20Research that compares social infrastructure in European countries with that of the United States finds that racism is a major reason why the United States spends less on income support than peer nations.21
Within the United States, states with higher proportions of Black residents also provide less income support than other states.Research that compares U.S. states finds that states with a greater share of Black residents provide lower levels of income support through the Temporary Assistance to Needy Families program than states with fewer Black residents.22 (See Figure 2.)
Figure 2
Weaknesses in the U.S. system of income supports constrain and limit the overall strength of the U.S. economy, unnecessarily deepening recessions, depressing labor force participation, and harming future growth potential by underinvesting in the human capital of the next generation of workers. The inability to access income support programs to weather unexpected storms has serious consequences, especially for many workers of color, women, and their families. Indeed, the coronavirus recession exposed already-deep inequalities in access to income supports along lines of race and gender.23
Policy solutions
There are several options for policymakers who want to remedy these weaknesses and build a system of income supports that will fulfill its potential to help the economy grow, including:
Enact a comprehensive paid family and medical leave program.
Extend the monthly, fully refundable Child Tax Credit.
Reform our Unemployment Insurance system so that all workers can receive adequate benefits regardless of the state in which they live.24
Strengthen food, housing, and child care assistance programs.
The upcoming budget reconciliation negotiations offer a promising opportunity to enact these and other reforms to U.S. social infrastructure, including income support programs. These actions would not only benefit those U.S. workers and their families who need help the most, but also bolster the overall U.S. economy as it continues to recover from the coronavirus recession.
Despite the important role that child care plays in the lives of many U.S. families, the private child care market is not meeting their needs. This is not just an issue for families with young children in the United States—accessible, affordable, and high-quality care also has the potential to generate substantial economic activity and growth that benefits the entire economy.25
Public investments in child care can help eliminate the drag on growth that the lack of child care options creates. These investments, in turn, facilitate economic gains for families, businesses, and the U.S. economy as a whole.
This factsheet will review the research on the short- and long-term economic growth potential of a high-quality, accessible, and affordable early care and education system as well as the evidence supporting greater public investment in this market. For more information, see Equitable Growth’s companion report on the child care economy.
The current child care market doesn’t meet U.S. families’ needs
Licensed child care is hard to find. Roughly half of U.S. families live in “child care deserts,” or U.S. Census Bureau tracts where there are three young children for every licensed child care slot.26
In recent years, it has gotten even harder to find licensed child care options. Overall, the number of licensed child care facilities shrunk by nearly 32 percent in recent decades, primarily due to small in-home providers exiting the market. From 2005 through 2017, nearly half of these providers left the market.27 The coronavirus pandemic has only worsened these supply challenges.
When families can find child care, it is often unaffordable. In 2019, the average annual price of center-based care was more than $11,000 for infants and more than $9,000 for 4-year-olds.28 In 28 states, the annual price of full-time child care can exceed that of in-state college tuition.29
Insufficient child care options can prevent parents who wish to work from doing so, with mothers often bearing the brunt of this challenge. Among parents who wish to work, child-rearing tends to interfere with women’s labor supply and employment outcomes more than men’s. 30 This leaves potential economic growth unrealized, as women’s labor force participation is significantly associated with Gross Domestic Product growth.31
Accessible and affordable early care and education options can help parents who wish to work do so, promoting economic growth in the short term
When more child care options are available, labor force participation increases. A 2007 study using data from Maryland finds that when there are more child care options nearby, women’s labor supply increases. For every 100 additional child care slots, the women’s labor force participation rate goes up by 0.3 percentage points.32
When the price of child care decreases, maternal employment increases. Studies generally find that a 10 percent reduction in child care costs increases maternal employment between 0.25 percent and 11 percent, with more precise estimates suggesting a 0.5 percent to 2.5 percent increase.33 This leads to greater household economic security and higher consumer spending, a larger labor pool from which employers can find workers, and, ultimately, short- and long-term economic growth.
Dependable and affordable child care options keep parents in the workforce, which benefits employers who count on dependable workers. A 2008 study of mothers in low-wage jobs found that 19 percent stopped working entirely in the same quarter in which they experienced a disruption to their child care arrangements, compared to only 9 percent who did not experience such a disruption.34
High-quality early care and education promotes long-term economic growth because the workers of tomorrow develop their skills early
High-quality early care and education provides critical socialization and learning opportunities when the brain is developing rapidly and is particularly responsive to the outside environment.35 Young children in pre-Kindergarten programs experience positive developmental outcomes and are better prepared for school, scoring higher than their peers on standardized measures of reading, spelling, math, and problem-solving skills.36
The positive human capital development effects persist long past childhood.37 One study shows that 40-year-olds who participated in the High/Scope Perry Preschool program as children were significantly more likely to be employed, uninvolved with the criminal justice system, and become high school graduates and high earners than their peers who did not complete the program.38 (See Figure 1.)
Figure 1
Similarly, enrollment in Boston’s universal preschools increases the likelihood of high school graduation by 6 percentage points, SAT completion by 9 percentage points, and on-time college enrollment by 8 percentage points, as well as decreases the likelihood of juvenile justice system involvement and school suspensions by 1 percentage point and 2 percentage points, respectively.39
Greater public investment is needed to unlock the full economic potential of high-quality early care and education
Child care subsidies can increase employment among mothers. In one 2020 study, a 10 percent increase in child care subsidies was associated with a 2 percent increase in employment among married mothers. Prior research also indicates that a $100 increase in child care subsidies could increase employment among single mothers by 2 percentage points.40
Unfortunately, access to these subsidies remains limited. A recent Government Accountability Office report estimates that only 14 percent of qualifying children receive any subsidies.
Adequate funding is necessary for human capital development. Subsidy dollar amounts are generally low and primarily cover staffing costs, leaving insufficient funds to invest meaningfully in the activities and materials that promote quality care and education for young children.41 Fully funding the subsidy programs and devoting resources for state-level agencies to assist providers in qualifying for subsidies are two ways in which greater public investment could increase child care availability and quality.
Supporting child care workers is crucial for promoting quality care and human capital development. Child care workers have a median hourly wage of $12.88, or $26,970 per year.42 Low pay leads to high turnover and high stress in the profession, which can undermine the quality of care that children receive. Using public funds to support higher compensation would help stabilize the child care workforce, ensuring that these workers can afford to stay in their jobs.43
Investing in the nation’s children is one of the safest bets policymakers can make.Research on early care and education programs finds that $1 in spending generates $8.60 in economic activity. The work of Nobel Prize-winning macroeconomist Paul Romer and others suggests that spending on human capital is one of the most effective ways to use government dollars to strengthen the economy and should be a priority for policymakers who seek to spur economic growth.44
By neglecting the child care market for decades, policymakers have shifted the burden of child care onto the shoulders of U.S. families already bearing the weight of childrearing, employment, and other responsibilities at home—despite research showing that the U.S. economy has much to gain from a functional and equitable child care system.
Addressing the child care crisis has the potential to improve families’ economic security and well-being in the United States, all while accelerating economic growth in the short- and long-term. To do so, policymakers must unburden families with meaningful, targeted, and evidence-based investments in the nation’s early care and education system.
Equitable Growth is committed to building a community of scholars working to understand how inequality affects broadly shared growth and stability. To that end, we have created the monthly series, “Expert Focus.” This series highlights scholars in the Equitable Growth network and beyond who are at the frontier of social science research. We encourage you to learn more about both the researchers featured below and our broader network of experts.
The United States currently has a unique opportunity to enact structural changes that will have long-lasting and wide-ranging effects for workers and their families. Next week, Equitable Growth will host its biennial policy conference, virtually gathering experts from the academic, policymaking, and advocacy communities to discuss ways to capitalize on this moment and ensure strong and stable economic growth for all. Participants and speakers will discuss and debate the most pressing challenges facing the U.S. economy and society, from containing the spread of the coronavirus to mitigating the effects of climate change and addressing the roots and effects of structural and institutional racism.
The event, “Equitable Growth 2021: Evidence for a Stronger Economic Future,” will take place on September 20 and 21, featuring concurring sessions on a range of topics, among them Big Tech and competition, social infrastructure and policy, debt and consumer spending, and structural economic reforms. There will also be several fireside chats, opening remarks from our new President and CEO Michelle Holder, and a keynote address by U.S. Secretary of Labor Marty Walsh. This month’s installment of Expert Focus showcases the remarkable diversity and breadth of experience of just some of the many confirmed speakers and panelists at our conference next week. Many other featured speakers—including Michelle Holder, Carlos Fernando Avenancio-León, Lisa Cook, Dania V. Francis, and Hilary Hoynes—have been highlighted in previous Expert Focus entries.
MIT; Peterson Institute for International Economics
Olivier Blanchard is Robert Solow professor emeritus at the Massachusetts Institute of Technology and Fred Bergsten senior fellow at the Peterson Institute for International Economics. He is a macroeconomist and has worked on a wide range of issues, including the role of monetary and fiscal policy, the nature of the labor market and the determinants of unemployment, and forces behind the global financial crisis. Blanchard has recently focused on the economic implications of the coronavirus and major future economic challenges, including climate change, inequality, and demographic change. In 2020, he contributed a column to Equitable Growth’s website on how policymakers can use fiscal policy to fight COVID-19 and counteract the coronavirus recession. At “Equitable Growth 2021,” Blanchard will participate in a session on envisioning a new economic future in the United States and designing structural reforms to achieve that vision.
Kristen Broady
Dillard University (on leave); The Brookings Institution
Kristen Broady is a fellow at The Brookings Institution’s Metropolitan Policy Program. She is a professor of financial economics on leave at Dillard University in New Orleans, where she was formerly the dean of the college of business. Her areas of research include mortgage foreclosure risk, labor and automation, and racial health disparities. At Brookings she often writes about how Black workers are navigating the economy and the labor force in the United States and, since the onset of the coronavirus pandemic, has focused on why Black Americans have experienced worse outcomes, particularly related to unemployment, education, and coronavirus relief programs. At “Equitable Growth 2021,” Broady will participate in a session on boosting aggregate demand and managing consumer debt burdens in the aftermath of the coronavirus recession.
J.W. Mason
John Jay College, City University of New York; Roosevelt Institute
J.W. Mason is an associate professor of economics at John Jay College, City University of New York. His scholarly work centers on macroeconomic policy, finance, and debt. Mason is also a fellow at the Roosevelt Institute and an economist with the Macroeconomic Analysis and Progressive Thought team, where he focuses on public spending and government debt, finance and monetary policy, and the importance of strong demand and full employment. His work seeks to expand the conversation around public management of the economy, pushing for more ambitious targets for macroeconomic policy and a wider set of tools to achieve those goals. In 2015, Mason received an Equitable Growth grant to examine how household debt affects the macroeconomy and has implications for monetary policy, and he has co-authored two working papers for our Working Paper series. At “Equitable Growth 2021,” Mason will participate in a session on boosting aggregate demand and managing consumer debt burdens in the aftermath of the coronavirus recession.
Atif Mian
Princeton University
Atif Mian is John H. Laporte, Jr. Class of 1967 professor of economics, public policy, and finance at Princeton University and director of the Julis-Rabinowitz Center for Public Policy and Finance at the Princeton School of Public and International Affairs. Mian’s work studies the connections between finance and the macroeconomy. His 2014 book with Amir Sufi, House of Debt, explores how debt precipitated the Great Recession of 2007–2009. Mian is a member of Equitable Growth’s Steering Committee, guiding the organization’s efforts to study economic inequality, and in 2015, received an Equitable Growth grant, with Sufi, to expand their research on household debt as it relates to employment imbalances. He has written for Equitable Growth’s website, most recently on the macroeconomic consequences of rising inequality in the United States. At “Equitable Growth 2021,” Mian will participate in a session on boosting aggregate demand and managing consumer debt burdens in the aftermath of the coronavirus recession.
Fiona Scott Morton
Yale University
Fiona M. Scott Morton is the Theodore Nierenberg professor of economics at the Yale University School of Management. Her area of academic research is industrial organization, with a focus on empirical studies of competition in areas such as pricing, entry, and product differentiation. From 2011 to 2012, Scott Morton served as the deputy assistant attorney general for economics at the Antitrust Division of the U.S. Department of Justice, where she helped enforce the nation’s antitrust laws. Scott Morton is a leading expert on antitrust and market competition, and haswrittenextensively on the topic for Equitable Growth, including co-authoring a 2020 report with proposals for how the Biden administration could improve antitrust enforcement in the United States. She also received an Equitable Growth grant in 2018 to investigate the impact of antitrust enforcement on competition and innovation. At “Equitable Growth 2021,” Scott Morton will participate in a session on rebalancing Big Tech’s grip on the economy in order to boost innovation and spur competition.
William E. Spriggs
Howard University; AFL-CIO
Bill Spriggs is a professor in, and former chair of, the Department of Economics at Howard University. He also currently serves as chief economist to the AFL-CIO, the largest federation of unions in the United States, chairing the Economic Policy Working Group for the Trade Union Advisory Committee to the Organisation for Economic Co-operation and Development. His policy focus is on securing better pay and benefits for workers, and he has extensive experience in economic policy development, having previously served as assistant secretary for the Office of Policy at the U.S. Department of Labor from 2009 to 2012 under President Barack Obama. He frequently discusses the root causes and impacts of the Black-White employment divide in the U.S labor market, as well as how unions ameliorate wage disparities and stagnation and how government investment spurs economic growth. At “Equitable Growth 2021,” Spriggs will participate in a session on expanding U.S. social infrastructure to support workers and increase theirlabor force participation and productivity.
Equitable Growth is building a network of experts across disciplines and at various stages in their career who can exchange ideas and ensure that research on inequality and broadly shared growth is relevant, accessible, and informative to both the policymaking process and future research agendas. Explore the ways you can connect with our network or take advantage of the support we offer here.
1) Sixty-two very good people were funded for the next year, “Equitable Growth announces a record $1.39 million in research grants for scholars examining economic inequality and growth.” I confess that this program has been even more of a success than I had projected. It turns out a lot of very good people really were budget-constrained in doing the very good work that they wanted to do. And I confess that I had underestimated how much the research-university system as it worked a decade ago was constraining visible economic research away from policy-relevant and equitable growth-relevant topics. :
2. It was the economist Martha Bailey who first hammered home to me how incredibly important fertility control and child spacing has been for women’s economic opportunity in the United States over the past century—how huge a friction it was that you might, any year, find yourself bearing a child. This was the case even after the demographic transition. Before the demographic transition in the time of astronomical child and maternal mortality the biosocial fertility load on women was enormous, but even afterwards the inability to engage in reliable family planning was extraordinarily disruptive for women’s economic activity. Kate Bahn and Maryam Janani-Flores review the evidence, “Economic security and opportunity for women under threat after U.S. Supreme Court takes anti-abortion stance in Texas,” in which they write: “Nearly 1 in 4 women in the United States … will have an abortion by the age of 45, and nearly 1 in 20 … will have an unintended pregnancy. … An intrinsic link between reproductive justice and economic opportunity … contraception … access to abortion. … [b]odily autonomy and a person’s ability to decide when, how, and under what circumstances to plan for a family is critical to … a woman’s job opportunities and financial security”
3. Ever since the days of Alexander Hamilton, investors have regarded the debt of the U.S. government as a very valuable and safe asset. In all but rare and exceptional times, the only return debt purchasers and holders have demanded from the U.S. government is that it maintain the real value of the wealth they have entrusted to it. The U.S. government should invest this wealth wisely and prudently in the highest societal-value projects. But the main consideration and the bottom line is that—except in the 1870s and 1880s, and in the 1980s—the U.S. government has never faced a debt-financing constraint as long as long as its investments yield any possible positive return in the form of additional taxes collected downstream at all. Worried that this may change in the future if interest rates rise sharply? Then issue inflation-adjusted debt, and lock in real debt payments permanently. Read Barry Eichengreen, “The coming public debt scare should not spook U.S. policymakers from investing in physical and social infrastructure,” in which he writes: “In Defense of Public Debt, my co-authors and I show how governments, through the ages, have resorted to issuing public debt to meet emergencies and address pressing social needs … [and that] expenditure restraints that limit the U.S. economy’s capacity to grow would be counterproductive from even the narrow standpoint of debt sustainability. … Do our nation’s infrastructure problems rise to the level of a national emergency? Some answer yes, on the grounds that our physical infrastructure is old, dangerously vulnerable to climate change, and inadequately green and digital. A significant minority in the U.S. Senate insists otherwise. … One way of adjudicating the dispute is to ask whether additional infrastructure investments will pay for themselves. …We really should be comparing apples with apples—real returns with real returns. Currently … any investment that yields a positive real return is effectively self-financing.”
Worthy reads not from Equitable Growth:
1. I take Matthew Yglesias’s point here. But is this the right way to frame the question? The answer to “should local governments commit the additional money to make the bus free?” is almost surely yes. The answer to “should local governments that have a fixed pool of money to spend on buses provide a lower-quality free bus than the current system?” is almost surely no. To fail to distinguish between these two questions leaves Matt, I think, somewhat confused. The real question is: which of the many worthwhile things that bus systems could do with more money can be framed so as to win voter support and enthusiasm? Read his “Should the bus be free?,” in which he writes: “In most cases, the better investment is to make the buses better. … In a very abstract way, free transit makes sense. Cars generate pollution and traffic externalities. Ideally, we would fully price those externalities with a carbon tax and congestion charges. But in the real world, both are politically difficult, so an equivalent way of addressing the issue would be to subsidize the low-externality option—the bus—by making it free. … [but] the question becomes: if you assume your transit agency has a bunch of extra money, is eliminating fares the best way to turn money into ridership? Bus riders want better buses, not cheaper. … Cutting fares is a relatively low priority compared to other things you can straightforwardly achieve with more money, like improving bus frequency and reducing bus crowding.”
2. This is not an existential threat to the pharmaceutical industry. It is an existential threat to a PhRMA CEO who has pushed the line of maximum confrontation vis-a-vis a government seeking to reduce the growth rate of the cost of the pharmaceutical part of the public health care programs. Read Margot Sanger-Katz, “Biden Administration Goes Bigger on Cutting Drug Prices,” in which she writes: “The administration endorses a proposal for the government to negotiate on prices for all U.S. purchasers, not just Medicare. … It amounts to a signal to congressional Democrats… Senators working on the package have released few policy details as they wrestle with their approach. Steve Ubl, the C.E.O. of the industry trade group PhRMA, called the policy “an existential risk to the industry.” Major across-the-board price reductions would result in reduced revenues for drug companies, and could hurt companies’ ability to spend on research as well as cause smaller companies to close if investors leave the sector, he said. His group and the companies it represents have mobilized to fight such a plan.”
3. This is an extremely good introduction for U.S. policymakers about what the Chinese government is hoping to do with respect to semiconductor independence, and now nearly impossible it will be for the Chinese government to do it Read Jordan Nel, “China, Semiconductors, & the Push for Independence—Part 1,” in which he writes: “China is chasing technological independence. Broadly, they’re doing a remarkable job at it barring perhaps in the field of semiconductors. And what is the crux of all modern tech? Semiconductors. … The 14th 5 year plan is the first to emphasize complete self-reliance and suggest building a near end-to-end chain locally. It is also the first time where China is in a strong enough position nationally to fund this foray and the first time where it is considered a matter of national security. …[But] the only way China can become technologically independent is … foundries. But foundries need equipment, processes, a large talent pool, clients, and an incredible amount of know-how. While money goes a long way to creating these, there are some things money can’t buy. Each equipment manufacturer has built up expertise developing that particular equipment (and maintenance) stack over decades of cycles and consolidation. For real independence, China needs to be self-sufficient not just in producing foundries, but also producing the equipment that foundries rely on. Otherwise, the chokepoint just moves further up the chain.”
