Worthy reads from Equitable Growth:

1. If the distribution of U.S. income and wealth is not moving much, and if one is (for reasons that are largely tactical-political) willing to submerge questions about the current state of the distribution of income and wealth, then there is some sense in taking measures of national income as a summary statistic of the state of the U.S. economy. If not, not. For a generation and a half it has been clear that neither of those conditions holds anymore, if they ever really held at all. And yet we are still using national income as our summary statistic—when we are not using the stock market, that is. Read Austin Clemens, “Measuring economic outcomes for all U.S. workers and their families will hold policymakers accountable for creating broad-based growth,” in which he writes: “U.S. GDP is completely inadequate for understanding our modern economy or the well-being of U.S. workers and their families. It cannot tell economists or policymakers anything about the informal work sector, inequality in the economy, sustainability, and myriad other issues that are essential for policymaking in the 21st century. The problems with the GDP measure are emblematic of the work by the Washington Center for Equitable Growth to improve economic measurements. We know from research that changes in GDP have a huge impact on the tenor of economic narratives in the United States. But we also know that GDP is increasingly disconnected from the experience of most U.S. workers and their families, most of whom generally see increases in their own incomes that are well below headline GDP figures.”

2. I find myself returning to this often: U.S. society and its family organization setups did make some (although not a great deal of) sense with respect to economic efficiency and the societal work of child care back in the large-family era before the demographic transition, but that is now a century ago. And today there remain mammoth failures of readjustment, many of them linked to the survival of the expectation that the past denial of female opportunity creates a large captive care-work labor force that can be paid low salaries. Read Sam Abbott,” The child care economy,” in which he writes: “Investments in early care and education can fuel U.S. economic growth immediately and over the long term. Fast facts: 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 more with women’s labor supply and employment outcomes than with men’s. This leaves potential economic growth unrealized, as women’s labor force participation is significantly associated with Gross Domestic Product growth. 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. 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. Adequate funding is necessary for human capital development. 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. 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. 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.”

3. Another one of my favorite moments from the Equitable Growth 2021 conference. Watch Michelle Holder and Lisa Cook, “Michele Holder on child care and the economy.”

Worthy reads not from Equitable Growth:

1. Dan Alpert is right. The cutting-off of income support to the unemployed in the United States after the coronavirus recession is a huge, huge shock. Yet this past Friday’s employment numbers show not a ripple. This powerfully reinforces the view that the end of income support is having no effect on U.S. labor supply whatsoever. Thus everybody who has been talking about the adverse labor-supply effects of income support really needs to take a hard look at their thought processes. Read Dan Alpert’s twitter response to the those numbers, in which he notes: “Second only to the lockdowns in spring of 2020, the biggest pandemic-era shock to the U.S. employment situation was the elimination—by law, not economics—of nearly 10 million workers from the unemployment benefit rolls in September. Will that register yet in payrolls? Stay tuned.”

2. In the world in which there are powerful psychological and institutional reasons why nominal wage and price levels in many, many sectors and for many, many occupations are sticky downward, structural adjustment via the market requires some inflation. And the more structural adjustment there is to be done in a shorter time, the more inflation is a desirable addition to rather than a subtraction from the supply-side potential of the economy. And yet there are a remarkably large number of people who do not factor this into their thinking. They continue to hold, no matter what the underlying realities of the fundamental economic situation, the inflation target that Alan Greenspan kicked out of the air in the 1990s as if it were a sacred totem. Read Andrew Elrod, “The Specter of Inflation,” in which he writes: “What are we to make of the jump? Thirteen years ago the bulge in prices was concentrated in petroleum products and food; today the spike is driven by used cars, airfare, and restaurants—sectors acutely impacted by the pandemic. But unlike 2008, there is little reason to suspect today’s rising prices are evidence of an overactive economy. The U-6 rate of total unemployment, which includes those working part-time involuntarily and those who have quit looking for work, remains 9.2 percent. Total capacity utilization, meanwhile, remains sharply depressed at 76 percent. … The history of inflation politics has a very different lesson. … Inflation is not always a problem of excess demand; it can also be caused by mismatch between existing demand and existing supply—a problem of shifting supply to changing demands. (Arguably this is what we are seeing now.) Moreover, reducing the level of spending in the economy can prevent us from achieving other, higher goals. … Both Harry Truman and Franklin Roosevelt confronted inflation without hiking rates and tightening budgets, and there is no reason governments can’t manage their economies similarly today. Inflation, in short, does not have to be a totalizing problem, and we certainly have better prescriptions for dealing with it than those on offer today. The far greater threat, history shows, is inflation fearmongering.”

3. Yes, it would be nice to have cheap reliable zero-carbon fission power. Yes, France got there. Yes, it would be even nicer to have even cheaper and more reliable fission power. Yes, it would be nicer still to have cheap reliable fusion power. But it really looks like, for the next generation at least, the low-hanging economic fruit is all in solar power. It would be silly to make a difficult-to-attain second-best the enemy of a first best that is already at hand. Read Noah Smith, “Nuclear vs. Solar,” in which he writes: “One has promise for the future. The other is changing our world right now. … I would love to see technological breakthroughs that solve fission power’s basic problems, and fusion, if it works would be even more exciting. … France’s experience powering itself largely with nuclear reactors (thanks to massive government financing and coordination) shows that we could have done so safely and efficiently—and reduced our carbon emissions enormously in the process—had we chosen to do so. Furthermore, scrapping existing nuclear power plants, like the one at Diablo Canyon, is crazy, and will increase carbon emissions for no good reason. … ‘Clean firm’ power is key to rapidly decarbonizing the grid, and nuclear power is one of the ways we get that. In sum, I am pro-nuclear. But I also feel that many of my techno-optimist friends, in their focus on the promise of nuclear, are giving short shrift to the even greater technological revolution happening right under their noses—the unbelievable progress in both solar power and battery storage. If you are a true techno-optimist, you should definitely be excited by this! It’s not the kind of thing that happens once in a generation—it’s the kind of thing that has never happened before.” 

Worthy reads from Equitable Growth:

1. A good society will need an extremely robust income support program. But the problem has always been that enough voters in the United States would rather see 10 people who would be appropriate users not get social insurance than to see 1 person among the “undeserving” actually receive benefits. Curiously, however, this set of judgments is never—or rarely—applied to systems that reward the undeserving rich. Their comeuppance is limited to entertainment fantasies. Read Liz Hipple and Alix Gould-Werth, “Weak income support infrastructure harms U.S. Workers and their families & constrains economic growth,” in which they write: “Economists Jesse Rothstein … and Sandra Black … argue it is inefficient to have families self-insure against unpredictable risks they cannot reasonably calculate. … Black and Rothstein explain, ‘The federal government can provide social insurance protections at a much lower overall cost, and … enable families to stretch their market earnings further.’ … Most people will need income support at some point in their lives. … In any given month, nearly 1 in 5 people benefit from SNAP, Supplemental Security Income, TANF, public or subsidized housing, the Women, Infants, and Children, or WIC, program, or the Child Care and Development Fund.”

2. I wonder if the government can be flexible enough to handle this problem, and I certainly doubt the ability of our current legal system to handle it. So I would rather focus on mechanisms to give more workers more bargaining power, and more channels and intermediary institutions through which they can bargain and to bargain on their behalf. Read Kathryn Zickuhr, “Workplace surveillance is becoming the new normal for U.S. workers,” in which she writes: Invasive and exploitative workplace surveillance in the United States is now growing largely unchecked due to weak worker power and a lack of legal protections or regulatory restrictions. … Workplace surveillance … enables illegal discrimination, hampers worker organizing … [and] is part of a cycle of fractured work arrangements through which firms de-skill work and misclassify employees. … The dangers posed by workplace surveillance fall most heavily on the most vulnerable.”

3. From two years ago. Read Austin Clemens, “Eight graphs that tell the story of U.S. economic inequality,” in which he writes: “Rising economic inequality over the past 40 years has redrawn the U.S. wealth and income landscape, shifting many of the gains of prosperity into the hands of a smaller and smaller group of people and marginalizing members of vulnerable communities. This transformation is in turn reducing income mobility and opening gulfs in educational achievement and health outcomes between different levels of income. The eight graphs in the three sections below visually illustrate these findings. … The first graphic tracks the share of all earned income accrued by the top 1 percent of earners, along with the next 9 percent, the upper 40 percent (from the 50th percentile to the 90th) and the bottom 50 percent. The share of income controlled by the top 10 percent bottomed out in the 1970s but has reached new highs—the top 10 percent of all income earners now control around 38 percent of national income.”

Worthy reads not from Equitable Growth:

1. I confess that the correlation between political polarization and COVID denialism at the state level makes me significantly more depressed than I believe Bradley L. Hardy and Trevon D. Logan are. Read their “The Way Back: Assessing Economic Recovery Among Black Americans During COVID–19,” in which they write: “Varying state and local public health and economic policy choices could present clear challenges to the speed and persistence of a broader national economic recovery. … Recent federal policies will mandate that employers require employees to either be vaccinated or submit to weekly testing. Economic policy evidence and theory show that businesses value and benefit from a consistent application of regulatory policies. Federal policy is converging with a private sector that is increasingly adopting a more consistent, aggressive stance on mask-wearing and vaccination policy for employees as a mechanism to avoid another large-scale shutdown of economic activity. Black Americans have experienced an especially large, harmful public health and economic shock from COVID–19. The consequences from historically high job loss and COVID–19 mortality and morbidity, along with K–12 learning loss, will likely transmit a substantial intra- and intergenerational consequence onto Black families and their communities. These communities will benefit from sustained public health, economic policy, and educational interventions to moderate the effects of COVID–19.”

2. Heather Boushey is doing a good job from her perch in the Executive Office Building. Read her “I’m One of Biden’s Advisers. Here’s How I Think About His Economic Agenda,” in which she writes: “In the early 1980s … my father was “pink slipped” from his machinist job building 747s at Boeing, an event that upended our family finances. … We were lucky; the recession was relatively short, and between my mom’s paycheck and my dad’s benefits, we got by until the orders for planes resumed. … I recall being shocked by how much power Boeing had over our lives. When my dad was laid off, the economic security my parents had long worked for disappeared overnight. … It got me thinking about … how can … things like unions and democratic governments that respond to crises … [and] cushion individual families against the whims of the marketplace? … Biden has set out to mend broken supply chains as aggressively as he tackled other challenges with the American Rescue Plan. But getting back to where we were is not enough. We need to emerge stronger and more resilient. And that’s why we need a more robust government. … Congress has a choice to make. Does it want to grow our economy by investing in the middle class and the public sector, and fundamentally recalibrating the relationship between government and the people it represents, or continue giving billions in tax handouts to the wealthiest Americans and multinational corporations? It’s time to build back better.”

3. Remember, the collapse of Lehman Brothers in 2008 should not have been a Lehman moment for the U.S. economy. There is no good reason that Evergrande today should be for China. Whether what I now tend to think of as the safe-asset-shortage problem is about to come to China big time, and trigger an example of the middle-income trap—that is a very interesting idea that I think I need to spend significant amounts of time trying to assess. Read Paul Krugman, “Wonking Out: This Might Be China’s ‘Babaru’ Moment,” in which he writes: “Suppose that the conventional wisdom is right and that Evergrande isn’t another Lehman moment. That still won’t mean that things are OK. For it seems quite possible, at least to me, that China is having a “babaru” moment … the Japanese bubble economy—or as the Japanese themselves called it, the “babaru economy”—of the late 1980s, when prices of many assets, above all commercial real estate, went completely crazy. At one point it was widely claimed that the land under the Imperial Palace was worth more than the whole state of California. Then everything crashed. … The bursting of the Japanese bubble didn’t lead to a financial meltdown. But it was followed by a prolonged period of economic weakness. At first many observers attributed that weakness to a hangover from previous financial excess: Japanese corporations had too much debt, they argued, or Japanese banks had too many nonperforming loans. But the weakness went on and on, and indeed in some ways continues to this day. … Japan has been able to maintain more or less full employment only through constant economic stimulus: ultralow interest rates and persistent budget deficits that have pushed the national debt above 200 percent of GDP. True, that debt hasn’t posed any problems so far, and the Japanese arguably deserve praise for managing a difficult economic situation with relatively little mass suffering. … Here’s the thing: While China is vastly different from Japan in many ways, China’s macroeconomic situation bears a striking resemblance to that of Japan around the time the Japanese bubble burst.”

Worthy reads from Equitable Growth:

1. Back in the real old days, large family sizes meant that the economies of scale in child care were captured for the most part within the family, and certainly within the extended family. In our time of nuclear families and low fertility a great deal of this essential work and life is done at a much greater societal resource load per child than a better organized society would do. Read Sam Abbott, “The child care economy,” in which he writes: “Insufficient child care options can prevent parents who wish to work from doing so, with mothers often bearing the brunt of this challenge. … High-quality early care and education provides critical socialization and learning opportunities when the brain is developing rapidly. … Adequate funding is necessary for human capital development. … Supporting child care workers is crucial for promoting quality care and human capital development. … 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.”

Worthy reads not from Equitable Growth:

1. There is a very large fiscal contraction coming down the tracks, targeted at the non-rich in the United States. It is not at all clear that macroeconomic forecasters optimistic about production and employment are taking full and proper account of it. Read Asha Banerjee and Ben Zipperer, “All pain and no gain: Unemployment benefit cuts will lower annual incomes by $144.3 billion and consumer spending by $79.2 billion,” in which they write: “Congress and the Biden-Harris White House have let expanded unemployment benefits expire in the middle of the ongoing COVID–19 pandemic, even while employment is still well below pre-pandemic levels. As a result, annual incomes across the United States will fall by $144.3 billion and annualized consumer spending will drop by $79.2 billion, according to the best available evidence on the effects of recent unemployment benefit cuts. … About half of states prematurely terminated these programs between June and late July 2021, and then, by letting the federal law expire in September, Congress and the White House cut off pandemic UI entirely. In total, more than 10 million workers lost all of their unemployment benefits because of either the state-level program terminations or the September program expiration.”

2. Behind the belief that Black people just happen to make bad choices is blame: either of the culture, or (more often) of the genes—although that is mostly whispered in polite society. Until we can convince the overwhelming majority of Americans that people are, at bottom, the same, and that groups where “bad choices” are more common arise from structural causes, equitable growth will be a nearly impossible task. Read Alberto Alesina, Matteo F. Ferroni, and Stefanie Stantcheva, “Perceptions of Racial Gaps, Their Causes, and Ways to Reduce Them,” in which they write: “Using new large-scale survey and experimental data, we investigate how respondents perceive racial inequities between Black and white Americans, what they believe causes them, and what interventions, if any, they think should be implemented to reduce them. We intentionally over- sample Black respondents, cover many cities in the United States, and survey both adults and very young people aged 13 to 17. In the experimental parts, we consider the causal impact of information on racial inequities (such as the evolution of the Black-white earnings gap or the differences in mobility for Black and white children) and explanations for these inequities (i.e., the deep-seated roots and long-lasting consequences of systemic racism) on respondents’ views. Although there is heterogeneity in how respondents perceive the magnitude of current racial gaps in economic conditions and opportunities, the biggest discrepancies are in how they explain them.”