Must-read: Dan Davies: Comment on “The Euro Area Crisis Five Years After the Original Sin”

Posted on by Brad DeLong

Must-Read: Dan Davies: Comment on “The Euro Area Crisis Five Years After the Original Sin”: “The IMF took two decisions on Greece, not one…

…They decided that they could lend without a debt restructuring, and they decided to implement a completely unprecedented front-loaded fiscal consolidation program. The first of these was the subject of the ‘mea culpa’ exercise, but the second has never been revisited… they actually defended it in the lessons-learnt paper…. It seems clear to me that it is the second mistake, not the first, which deserves the name ‘austerity’, and it is blindingly obvious that the overwhelming majority of the economic damage was done by the front-loaded nature of the fiscal cuts. (The IMF occasionally tries to claim that the headline number of the debt/GDP ratio had a negative effect on business confidence, but this seems pretty desperate to me when you’re trying to explain what happened to Greek GDP and the alternative explanation is simply the cut in government spending).
But having noted that the decision to slash and burn the primary deficit might have been a bad idea, Orphanides then spends the rest of the paper talking about the minor mistake which made hardly any difference!…

Must-read: Tim Duy: “FOMC Minutes and More”

Posted on by Brad DeLong

Must-Read: But being “behind the cycle” is good, no? On a lee shore you need more sea room, lest the wind strengthen, no?

Tim Duy: FOMC Minutes and More: “The Fed may be turning toward my long-favored policy position…

…the best chance they have of lifting off from the zero bound is letting the economy run hot enough that inflation becomes a genuine concern. That means following the cycle, not trying to lead it. And I would argue that if the recession scare is just that, a scare, they are almost certainly going to fall behind the curve. The unemployment rate is below 5 percent and wage pressures are rising. The economy is already closing in on full-employment. If we don’t have a recession, then how much further along will the economy be by the time the Fed deems they are sufficiently confident in the economy that they can resume raising rates? And note the importance of clearly progress on inflation….

Bullard noted that the FOMC has repeatedly stated in official communication and public commentary that future monetary policy adjustments are data dependent. He then addressed the possibility that the financial markets may not believe this since the SEP may be unintentionally communicating a version of the 2004-2006 normalization cycle, which appeared to be mechanical…. You might forgive market participants for believing that the SEP infers some calendar-based guidance when Federal Reserve Vice Chair Stanley Fischer says things like:

WELL, WE WATCH WHAT THE MARKET THINKS, BUT WE CAN’T BE LED BY WHAT THE MARKET THINKS. WE’VE GOT TO MAKE OUR OWN ANALYSIS. WE MAKE OUR OWN ANALYSIS AND OUR ANALYSIS SAYS THAT THE MARKET IS UNDERESTIMATING WHERE WE ARE GOING TO BE. YOU KNOW, YOU CAN’T RULE OUT THAT THERE IS SOME PROBABILITY THEY ARE RIGHT BECAUSE THERE’S UNCERTAINTY. BUT WE THINK THAT THEY ARE TOO LOW. 

Saying the markets are wrong implies that the policy direction is fairly rigid. In any event, I am not confident there is yet much support for Bullard’s position…. Bullard has also gone full-dove. He remembered that he thought inflation expectations were supposed to be important, and the decline in 5-year, 5-year forward expectations has him spooked. And he thinks that the excess air has been released from financial markets, so his fears of asset bubbles has eased. Hence, the Fed can easily pause now….

Bottom Line: The Fed is on hold, stuck in risk management mode until the skies clear. If you are in the ‘recession’ camp, the path forward is obvious. The Fed cuts back to zero, drags its heals on more QE, and fumbles around as they try to figure out if negative rates are a good or bad thing. Not pretty. But if you are in the ‘no recession’ camp, it’s worth thinking about the implications of a Fed pause now on the pace of hikes later. Being on hold now raises the risk that by the time the Fed moves again, they will be behind the cycle.

Explore the link between race and student debt—and read our new report on inequality and innovation

Posted on by David Hudson

Earlier today, we released the second set of maps in our interactive Mapping Student Debt project, examining the relationship between race and student loan delinquency across the United States. Unsurprisingly, these new maps show that the two are highly correlated.

Here are the key takeaways:

  • Student loan delinquency disproportionately affects minority communities.
  • Even after controlling for income, race still has a strong impact on student loan delinquency.
  • Middle-class minorities are hurt the most by student loan delinquency.

As Marshall Steinbaum and Kavya Vaghul explain, a substantial body of research establishes that these outcomes are the result of structural racism in higher education, the credit and labor markets, and the wealth distribution in the United States.

Explore the new maps here.

Yesterday, we published a new report that asks the question, “What do trends in economic inequality imply for innovation and entrepreneurship?” Authored by Elisabeth Jacobs, Senior Director for Policy and Academic Programs here at Equitable Growth, the report develops a framework that connects rising economic inequality with declining levels of innovation and economic dynamism in the United States.

Briefly, the new report finds that economic growth and inequality, innovation, and entrepreneurship are inexorably linked, but in very different ways when examined across the wealth and income spectrum rather than through the usual lens of overall small business creation and direct investments in technology and innovation.

Read the full report here.

To stay in the loop about future products from Equitable Growth, make sure to sign up for email updates below.

Concrete Economics: The Hamilton Approach to Economic Growth and Policy

Posted on by Brad DeLong
Concrete Economics The Hamilton Approach to Economic Growth and Policy Stephen S Cohen J Bradford DeLong 9781422189818 Amazon com Books

Stephen S. Cohen and J. Bradford DeLong: Concrete Economics: The Hamilton Approach to Economic Growth and Policy: (Allston, MA: Harvard Business Review Press: 1422189813) http://amzn.to/1XxIyPV

Steve Cohen and I have a new book coming out from Harvard Business Review Press on March 1, 2016. A very short book. Easy and quick to read. Easy and quick to read because it tries to make one big and very important point, and avoid being distracted from it:

America’s debate about economic policy goes way wrong whenever it is ruled by ideology.

It doesn’t matter much which ideology—a rigid and ideologized Hamiltonianism would have been (almost) as bad as rigid-Jeffersonianism, an excessive attachment to outmoded industries or to ways of delivering social-insurance that were merely emergency expedients when adopted in the 1930s would be (almost) as bad as the market-worshipping sects of neoliberalism.
Thus we say:

America’s debate about economic policy goes largely right whenever it is ruled by pragmatism.

Successes come whenever the question asked and answered is: What concrete steps can we take, here and now, to make America more prosperous and to share the fruits of growth equitably? Failures come whenever the question asked and answered is: Do these policy proposals conform to the ideas of Adam Smith or Edmund Burke or William Beveridge or even John Maynard Keynes?—let alone those of the Karl Marxes, the Friedrich von Hayeks, and the Ayn Rands.

So I now have a problem. HBR Press would be extremely annoyed if I were to simply dump the book (or large parts of the book) online. But I really do want to do so. I am excited about the big idea. And I want this big idea to get out into the world undistorted.

So how should Steve and I tease this little book of ours?

Why the mismeasurement explanation for the U.S. productivity slowdown misses the mark

Posted on by Bridget Ansel
After a period of strong growth during the late 1990s and the early 2000s, U.S. productivity growth has slowed since 2004.

With the rise of new internet-based companies and the smartphone as an essential part of many people’s lives, it can be hard to believe that the U.S. economy is lacking for innovation and productivity enhancement. But that’s exactly what research on the state of U.S. productivity growth says. After a period of strong growth during the late 1990s and the early 2000s, U.S. productivity growth has slowed since 2004.

This apparent decline in the face of seeming technological bounty has caused some economists and analysts to wonder if the productivity statistics are accurately capturing the gains from new technology. In other words, our measures of economic output—and therefore productivity—may be understating reality. A new working paper, however, throws some cold water on that argument.

The mismeasurement explanation for the slowdown in productivity growth can be summarized as such: Many of the technological advances of the last decade are seemingly free to consumers as they don’t have to directly pay for the service. Google, for example, can greatly enhance one’s productivity, although there’s no fee to use it. The rise of these “free” internet services understates the output growth of the U.S. economy and therefore productivity growth.

On its face, this argument makes sense. But a look at the data, such as this analysis by economist Chad Syverson of the University of Chicago Booth School of Business, shows how implausible it is that mismeasurement can explain the vast majority of the decline in productivity growth. Syverson takes four cuts at the data and finds the mismeasurement story lacking.

First, the United States isn’t the only country where productivity growth has declined. In fact, it’s declined in pretty much every country that’s a member of the Organisation for Economic Co-operation and Development, whose membership is usually a sign of a high-income economy. But there’s quite a bit of variation in the extent to which those countries produce and consume the information and communications technologies at the heart of the supposed mismeasurement. If traditional measures weren’t capturing the gains of these technologies, we’d expect countries with higher levels of ICT production and consumption to have productivity drop more. But that’s not what Syverson finds; instead, he finds that there’s no relationship at all between the two.

Second, there’s already research on the extent to which the internet and related technology has given consumers added utility, increasing what economists call “consumer surplus.” As Syverson shows, even the largest of these estimates can only explain a third of the supposed gap in output from mismeasurement. Furthermore, all this consumer surplus would have to not be included in the price of things like broadband internet services. This seems unlikely.

The third test Syverson runs is to look at the specific sectors’ contributions to the overall U.S. economy—their value added—to see how much larger they would have to be for the mismeasurement story to make sense. For mismeasurement to explain even a third of the hypothesized output gap, the value added of internet-related industries would have needed to increase by 170 percent from 2004 to 2015, which is three times the actual growth rate.

Finally, Syverson looks at the difference between U.S. gross domestic product and gross domestic income. Both are measurements of economic output that should be the same in theory but come from different data sources—GDP is based on expenditure and GDI on income. For the last several years, GDI has been higher than GDP. The difference between the two may be an indication that GDP isn’t capturing technological gains. But the difference started in 1998 during an increase in productivity growth, and most of the difference is due to higher payments to capital.

It’d be nice if the recent spate of internet-related advances could rescue the U.S. economy from a low-growth future in deus ex machina fashion. But that just doesn’t seem to be the case. Instead, we need to hunker down and really think through the sources of innovation and productivity growth.

How the student debt crisis affects African Americans and Latinos

Posted on by David Hudson
A student hugs family during the procession at commencement ceremonies at Hampton University in Hampton, Virginia. (AP Photo/Steve Helber)

Our first Mapping Student Debt interactive released this past December revealed a striking negative relationship between income and delinquency across zip codes. Not surprisingly, we found that higher levels of income are associated with fewer problems with student loan delinquency. In this second installment of the Mapping Student Debt project, we document that the geography of delinquency is highly racialized.

Zip codes with higher shares of African Americans or Latinos show much higher delinquency. What’s more, our analysis finds that among minority student borrowers, those most adversely affected are the middle class—those who have taken out debt to go to college but who haven’t been able to find jobs or don’t have sufficient family wealth to pay it back.

Delinquency disproportionately affects minority communities

Our findings are stark. They show the strong relationship between a zip code’s minority population and its delinquency rate at both the city and national levels. In the Washington, D.C. metro region, for example, zip codes in the northeastern part of the District of Columbia and east of the Anacostia River and adjacent suburbs—all of which have the largest shares of African Americans and Latinos—also have delinquency rates that range from somewhat high to extremely high. The same pattern holds in Los Angeles, where areas with large African American or Latino populations, such as Compton, Linwood, and Huntington Park, are also where delinquency is highest. (See Figure 1.)

Figure 1

At the national level, too, we find that zip codes with higher shares of African Americans or Latinos have much higher delinquency rates. This relationship suggests that minority communities disproportionately suffer from student loan delinquency. (See Figures 2 and 3.)

Figure 2

Figure 3

Controlling for income

The geography of race and of income are similar, so a natural question that arises is whether race has an independent effect on delinquency, and, if so, what is it? The answer turns out to depend on income, but not in an obvious way.

In order to investigate the effect of race independent of income, we first ranked zip codes by median income and divided them into 100 groups of equal size. Within each of these income groups, median income levels are nearly identical, which means we can look at how delinquency varies across zip codes with different shares of African Americans or Latinos but otherwise very similar income levels. In Figures 4 and 5, we plot how an increase in the minority share of the zip code population changes the rate of delinquency. Points above zero mean that as a zip code’s minority population increases (relative to zip codes with a similar income), so does the share of delinquent loans in that zip code. Conversely, a negative number implies that zip codes with larger minority populations have lower loan delinquency rates.

Figure 4

Figure 5

In both Figures 4 and 5, the positive correlation between the share of minorities in a zip code and loan delinquency rates is highest for the middle of the income distribution. Among zip codes with a median income of about $20,000, for example, zip codes with a large share of Latinos and those without have approximately the same rates of delinquency. But among zip codes with a median income of around $60,000, those with large Latino share have much higher rates of loan delinquency than those without.

We see a similar pattern for the share of African American in zip codes, and there the effect is even more pronounced. For zip codes with median incomes above $60,000, the effect of race on delinquency either stays roughly constant or declines slightly.

Another interesting feature of the data is that among the zip codes with the poorest populations, an increase in the share of African Americans is associated with a decline in delinquency rate, whereas the share of the Latino population has no impact on delinquency. We do not think our data are rich enough to meaningfully address this particular fact, which merits further research.

The role of race in student loan delinquency

Minority populations disproportionately suffer from high delinquency, and, within minority populations, the middle class seems most adversely affected. What can we make of these findings? We believe that these two facts reflect the impact of structural racism in the U.S. higher education system, credit and labor markets, and distribution of wealth.

African Americans and Latinos are, on average, less likely than white students to complete college once they start. According to the National Center for Education Statistics, in 2013 roughly 57 percent of recent African American high school graduates and 60 percent of recent Latino high school graduates were enrolled in college compared to 69 percent of white students. Yet the National Center for Education Statistics reports that for the 2005 starting cohort of college students, about 21 percent of African Americans and 29 percent of Hispanics complete a four-year institution within four years compared to a four-year completion rate of 42 percent for white students.

The college enrollment gap between whites and minorities is narrowing, but the college completion gap is not. One likely explanation for higher student loan delinquency among African Americans and Latinos is that the borrowing is concentrated among those who either attended for-profit or other non-traditional institutions or who dropped out—exactly the population at the margin of attending college in the first place. Furthermore, we know that higher education is racially segregated, with minorities less likely to attend—or even consider applying to—selective institutions.

Even after controlling for key risk factors, African Americans and Latinos are disproportionately served by high-cost credit providers who provide less generous terms and more onerous repayment requirements, implying that discrimination occurs through market segmentation and sorting.

Another explanation for high delinquency rates among minorities is that after college, graduates still confront significant discrimination in labor markets, with minority applicants less likely to get job offers, even after factors such as education are taken into account. Even minority students who successfully complete college suffer from higher unemployment rates and lower earnings than their white counterparts. These disadvantages extend across college majors, occupations, and the type of higher education institution that these recent graduates attended. In combination, these factors leave minority students and their families substantially more vulnerable to delinquency than comparably situated white students and their families.

A closely related issue is that, holding income constant, African American and Latino households have substantially lower levels of wealth than do white households, including financial assets that can act as a buffer against student loan delinquency in the event of job loss or some other misfortune.

Middle-class minorities are hurt the most by student loan delinquency

Why are middle-class African American and Latino students and their families the most adversely affected by student debt delinquency? The poorest minority populations generally lack access to any kind of formal credit, instead relying on payday lending and other types of informal credit access. This means that they cannot be delinquent by our measure that is based on credit reports. What’s more, they rarely go to college, so in many cases, they do not acquire student debt.

The housing crisis revealed a similar dynamic in the late 2000s. The poorest minority households lost relatively little wealth because they didn’t have any to begin with, whereas somewhat richer minority households were among the biggest losers from the Great Recession. That was because they earned enough to have bought a house under the relatively generous terms available before the housing market crash, but then they were more likely to lose their jobs and less likely to have any cushion of family wealth. It is out of these very dynamics that persistent, multi-generational racial wealth gaps are born. And it seems likely that student debt is on the same path now—a signpost of relative economic success among minorities, but also a threat. Many young people of color have gone into debt to ascend to the middle class, and been supported by their families to do so, yet it’s not having the intended effect.

These data tell us that at least with respect to longstanding group and individual income and wealth gaps between minorities and the overall population, debt-financed higher education is not the solution, and may even be contributing to the problem. The fact that, among minorities, the middle class is most strongly affected implies the problem is structural racism, not poverty. Any solution to the student debt crisis has to recognize that.

Methodology

This geographic analysis uses two primary datasets: credit reporting data on student debt from Experian and income data from the American Community Survey.

The Experian data includes eight key student debt variables (see Figure 6) aggregated from household-level microdata to the zip code level. The underlying household data are a snapshot of the entire U.S. population at a single point in time—in this case, the autumn of 2015.

Figure 6

There are a number of caveats regarding the Experian data file that have guided our methodology for constructing variables and analyzing results:

  • The universe of households contains only those with “any type of credit” and which, therefore, have a credit report. Relative to the population as a whole, this likely excludes the poorest households without any official credit access whatsoever.
  • It is unclear how Experian constructs “households” since credit reports pertain to an individual’s credit history.
  • If the same student loan has more than one signatory, then the loan may be assigned to multiple households and hence to multiple zip codes or even counted more than once within the same household.
  • Experian claims that the universe of their geographically-aggregated data is all households with credit, but the levels of the data on loan balance and delinquency are more consistent with the idea that the universe is only households that have student loans. In other words, Experian claims their data include households that have credit but no outstanding student loans, but if that is the case the reported levels for average delinquency are much higher than other sources would suggest. Average delinquency rates, however, are comparable to reliable outside estimates if interpreted as delinquency among only those households with student debt.

For these reasons, we do not report any student loan data in rate amounts. Instead, we have used the Experian variable to construct an analog to relative delinquency.

To create the delinquency variable, we calculate a “delinquency rate” for each zip code by dividing the average number of student loans that are delinquent by 90 or more days per household by the average number of outstanding loans per household. Then, after winsorizing the top 1 percent of observations to the 99th percentile value, we project the “delinquency rate” onto a scale that ranges from 0 to 10.

For user-friendliness, we assign the student debt scale variable a qualitative category. If the delinquency reads “very low,” for example, it corresponds to a scale level between 0.067 and 0.091. Figure 7 summarizes the relationship between the delinquency scale variable’s levels and its qualitative descriptions.

Figure 7

Next, we merge zip code-level household median income with data from the 2013 American Community Survey on the share of African Americans and Latinos in those zip codes along with our imputed scaled delinquency variable in order to construct choropleth maps.

The actual map uses two different techniques to display the variables on a choropleth scale. For delinquency, we created 10 quantiles (or equal counts) to account for the right-skewed data. And for the two minority share variables, we used 10 jenks (or natural breaks in the data) to assign the color scale. Higher numbers and darker shading correspond to higher shares of outstanding loans that are delinquent by 90 or more days in the previous 24 months and higher shares of African Americans and Latinos in a zip code.

Additional reading

Adam Looney and Constantine Yannelis, “A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults.”

Benjamin Backes, Harry J. Holzer, and Erin Dunlop Velez, “Is It Worth It? Postsecondary Education and Labor Market Outcomes for the Disadvantaged.”

Caroline M. Hoxby and Sarah Turner, “What High-Achieving Low-Income Students Know about College,” American Economic Review.

Devah Pager, Bruce Western, and Bart Bonikowski, “Discrimination in a Low-Wage Labor Market: A Field Experiment.”

Fenaba R. Addo, Jason N. Houle, and Daniel Simon, “Young, Black, and (Still) in the Red: Parental Wealth, Race, and Student Loan Debt,” Race and Social Problems.

Janelle Jones and John Schmitt, “A College Degree is No Guarantee.”

Jeffrey P. Thompson and Gustavo A. Suarez, “Exploring the Racial Wealth Gap Using the Survey of Consumer Finances.”

Jess Bricker and others, “Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances.”

John Schmitt and Heather Boushey, “The College Conundrum: Why the Benefits of a College Education May Not Be So Clear, Especially to Men.”

Joshua Angrist, David Autor, Sally Hudson, and Amanda Pallais, “Leveling Up: Early Results from a Randomized Evaluation of Post-Secondary Aid.”

Martha J. Bailey and Susan M. Dynarski, “Gains and Gaps: Changing Inequality in U.S. College Entry and Completion.”

Marianne Bertrand and Sendhil Mullainathan, “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination.”

Neil Bhutta, Paige Marta Skiba, and Jeremy Tobacman, “Payday Loan Choices and Consequences.”

Patrick Bayer, Fernando Ferreira, and Stephen L. Ross, “Race, Ethnicity and High-Cost Mortgage Lending.”

Rakesh Kochhar and Richard Fry, “Wealth inequality has widened along racial, ethnic lines since end of Great Recession.”

Stephanie Chapman, “Student Loans and the Labor Market: Evidence from Merit Aid Programs.”

Must-read: Paul Krugman: “Bonds on the Run”

Posted on by Brad DeLong

Must-Read: Paul Krugman: Bonds on the Run: “Something scary is going on in financial markets…

…Bond prices in particular are indicating near-panic…. Bond markets are a bit less flighty than stocks, and also more closely tied to the economic outlook. (A weak economy has mixed effects on stocks–low profits but also low interest rates–while it has an unambiguous effect on bonds.)… Plunging rates tell us is that markets are expecting very weak economies and possibly deflation for years to come, if not full-blown crisis…. A very bad place into which to elect a member of a party that has spent the past 7 years inveighing against both fiscal and monetary stimulus, and has learned nothing from the utter failure of its predictions to come true.

Email chatter:

JGB ten years at 0. Wow. Just wow. What a widowmaker…. Excepting buying assets at the dawn of QE, every EXPLICIT trade that hinged on relying on industrial core Central Bank inflation credibility has been a widowmaker…

It is starting to look, I must say, that [the U.S. Fed’s] triggering the taper tantrum and then doubling down on the proposition that triggering the taper tantrum was not an error is going to be judged very harshly when people look back at this decade or so from now…

I’m adding [U.S.] Q4 at a bit over 1%…. Q1 gets to 2%, but some of that is the mild winter. I do have growth staying in the 2 to 2 1/2% range after that, but I have to admit that assumes that exports crawl back to some growth, the consumer stays steadfast, there’s some inventory rebuilding, and S&L spending holds up–much of that is a wing and a prayer…

I have been much more wrong about, and much more worried by, their failure to deliver in the last 12-18 months when their intent was to raise inflation. Nowhere so more than Japan, where they did everything largely as prescribed…

it is over-ambitious to assume that projections about exchange rate expectations dominate over other factors. There is long demonstrated home bias, reinforced by Reinhart-esque longstanding structures and practices of financial repression. In the data, it is bizarre but evident over decades that Japanese private capital flows are opposite of most places: when the economy slows (speeds up), net capital flows are in (out), so the exchange rate moves the ‘wrong’ way…

Richard Koo has been saying that stout talk from the Fed about boosting rates (Jim Bullard is one thing, but say it ain’t so, Stan) is helping to spook the market. I’m getting inclined to agree…

“Whatever it takes” worked for Draghi as a signal of long-term commitment and a regime shift from Trichet. From Kuroda, my take is it was viewed as an act of desperation. Accordingly, Japanese investors took more about this as bad news on the Japanese economy and about BOJ capabilities than they did as evidence of stimulus…

The tendency of my dear friends to never admit error or wish to retrace steps bug[s] me…. Independence is to be used, and stop being so frigging afraid of Paul Ryan! QE4, anybody?…

The broader and more significant issue of why what the BOJ has done has not been enough to sustainably raise inflation, and it hasn’t worked in EU and US either…

Must-read: Josh Barro: “Rubio Tax Cut Got Bigger and Bigger”

Posted on by Brad DeLong

Must-Read: Josh Barro: Rubio Tax Cut Got Bigger and Bigger: “If you want an insight into what Senator Marco Rubio’s instincts on policy are…

…just look at what happened when he got his hands on another senator’s tax cut plan: It became about three times larger, and way more tilted toward the rich. Mr. Rubio’s recently announced tax plan is a descendant of the ‘Family Fairness and Opportunity Tax Reform Act,’ introduced in 2013 by Mr. Rubio’s fellow Senate Republican, Mike Lee…. The Lee plan went for a sizable tax cut: $2.4 trillion over 10 years, or about 6 percent of then-projected federal revenues…. The top 1 percent of taxpayers would have gotten a 2.8 percent increase to their after-tax income…. (The top 0.1 percent did better, with a 3.8 percent increase to income.)…

As Mr. Rubio got involved, the price started to soar. The plan was rebranded as the Economic Growth and Family Fairness Tax Plan, and as usual, ‘economic growth’ was code for large tax cuts for owners of capital…. Rich people with capital income weren’t the only big winners under the Rubio-Lee plan; there was also a large new benefit for people with low incomes. The original Lee plan had included a $2,000-per-person tax credit replacing the standard deduction, but you could take the credit only against income tax you actually owed. The Rubio-Lee plan generously revised this credit to be ‘refundable,’ meaning it could lead to a negative income tax bill for people with low incomes. But there’s a catch: It’s not clear the senators had decided exactly how refundable the tax credit would be….

Rubio apparently was not yet done with his Oprah act. In October, now running for president, Mr. Rubio announced his own stand-alone version…. Mr. Rubio’s current plan would cost $6.8 trillion over the 10-year budget window. That is, 16 percent of currently projected federal tax revenues over that period, and nearly three times the size of Mr. Lee’s plan from less than three years ago…. Rubio’s biggest tax cuts, by far, are at the top. His new plan would raise incomes for the top one-thousandth of taxpayers by 8.9 percent — that is, an average tax cut of more than $900,000 per year — because of its sharp cuts in tax rates on business income and capital income. Of course, all that assumes Mr. Rubio could find a way to finance a 16 percent overall cut in federal taxes…