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Free Money…

Ezra Klein with a useful reminder…

Just a reminder: The market will literally pay us to borrow money from them for 5, 7 or 10 years. Pretty good deal for a country that has, say, trillions of dollars in infrastructure repairs it needs to make, or millions of workers who are unnecessarily unemployed. More here.

via If America was run like a business… – The Washington Post.

Real interest rate on Treasury’s TIPS:


To read: The Impact of Economics Blogs

McKenzia and Ozler: The Impact of Economics Blogs HT/ Greg Mankiw’s Blog: The Impact of Economics Blogs.




There’s more to inequality than education

[Cross-posted at Working Economics]

In a blog post yesterday, Paul Krugman again noted that the growth in income inequality is not all about education.

He pointed to two different charts to illustrate: one showing the growth of the top 1 percent relative to other income groups and a second with wage growth by education levels. Since the two charts had different scales, it was hard to see just how out of whack the education-explains-inequality story really is.

Below is a chart that combines the two series in one chart, showing that the top 1 percent has outpaced, by a very wide margin, not just those with less formal education, but college grads as well. And this gap between the growth of the top 1 percent and the rest is much larger than the growth gap between education levels.

This is not to say that education is not important. The chart also shows that those with a college (or post-secondary) degree have outpaced others. But it’s also clear that this trend only explains a small part of the broader inequality story.

(Note: The top 1 percent line shows the growth in average after-tax incomes for this group, via the CBO, data from Figure 2. The education lines show the growth in wages for all workers, via EPI’s State of Working America data onwage and compensation trends by education. Both are inflation adjusted.)


Cutting Taxes for the Rich Never Ends Well | Debate Club | US News Opinion

Live over at US News… vote it up if you like it!

You can call it 9-9-9, the Perry two-step, or a national sales tax. But the various flat tax plans being proposed by Republican candidates, right-wing think tanks, and media commentators share some common characteristics that should worry most middle-class Americans.

via Cutting Taxes for the Rich Never Ends Well | Debate Club | US News Opinion.


Broadband access and adoption

Interesting article by Gregory Rosston and Scott Wallsten on broadband. Useful reminder that there are two challenges – the initial build-out to ensure access, and then facilitating adoption by making sure it’s affordable to people.

The Path to Universal Broadband: Why We Should Grant Low-Income Subsidies, and Use Auctions and Experiments to Determine the Specifics

As the discussion above demonstrates, expanding wired coverage in rural areas will require large investments, yet it will generate fairly small returns in terms of increased broadband use. Instead, the most effective way to increase broadband adoption is likely to be inducing subscription by low-income people to whom broadband is available, but who do not currently subscribe.




Paradox of Choice

Barry Schwartz of Swarthmore College (who taught me intro psychology) challenges the notion that more choices are better.

Good reality check for us economists….


MacroAdvisers on GOP jobs plan: “enormous economic and social upheaval”

Some of my EPI colleagues suggested breaking down the Macroeconomic Advisors analysis into an easy-to-read graphic:




Macroadvisers: AJA vs. JTGA

Macroeconomic Advisers has a new analysis of the Republican alternative to the American Jobs Act.

Bottom line job impact through 2013 according to MA:

Obama’s American Jobs Act: +1.3 million
Republican’s Jobs through Growth Act: zero (or worse).

via Macroadvisers: Man Up: AJ(obs)A vs. J(obs)TGA. (Emphasis added)

Last week the Republican leadership unveiled the Jobs through Growth Act (JTGA) as a counterpoint to the President’s proposed American Jobs Act (AJA).[1] JTGA includes a Balanced Budget Amendment (BBA), reform of the income tax code, repeal of “Obamacare,” Dodd-Frank, and other regulations, fast-track authority for the President to negotiate new trade agreements, and the easing of restrictions on the exploration for new domestic sources of energy.

Without more detail on the Republican plan, we cannot offer a firm estimate of its economic impact in either the short or long run. However, if what we do know of JTGA were enacted now, we would not materially change our forecasts for either economic growth or employment through 2013.

If actually enforced in fiscal year (FY) 2012, a BBA would quickly destroy millions of jobs while creating enormous economic and social upheaval.



Pigou and energy

Greg Mankiw–Harvard prof, textbook author, and adviser to Mitt Romney — points us to a good article by Nordhouse on energy, and again endorses a tax on carbon…

via Greg Mankiw’s Blog.

A smart friend recommends this article by Yale economist Bill Nordhaus.  The Pigou Club endorses the conclusion:

The need for taxes on energy externalities such as carbon emissions is central to our ability to reduce the harmful side effects of economic growth. It is striking how the political dialogue in the US has ignored a policy that has so many desirable features. Perhaps, in the near future, faced with the deadline of a dire economic situation, negotiators will formulate such a policy. It would generate substantial revenues while bringing so many long-run economic and environmental benefits. Simply put, externality taxes are the best fiscal instrument to employ at this time, in this country, and given the fiscal constraints faced by the US.


EPI is looking for an editor. Please share.


JD – Editor October2011.doc Download this file


Notes and audio from Brookings event re: Wireless Broadband Infrastructure

Yesterday I was at Brooking on a Panel re: wireless broadband and economic growth.  Audio from the event is posted on the Brookings website here and also embedded below. My notes for the opening remarks are below.

Wireless Broadband and Economic Growth


Notes for Brookings Event re: Wireless Broadband Infrastructure
J. Irons | October 17, 2011

1. Thank you for inviting me to participate in today’s forum.

2. While I am first and foremost an economist, I have also had a long-standing interest in technology and the internet. I built my first website back in the winter of 1994 when I was a graduate student at MIT – I thought it would be a good way to improve my writing skills in a place no one would ever see it. I guess I was wrong about that one.

3. When I think about the economic impact of broadband infrastructure, I tend to think about it in two ways.



Construction, Infrastructure and jobs

Used this presentation for my presentation yesterday. Credit to Ethan Pollack for pulling much of this together.


Testimony today re job impact of advertising to kids before house energy and commerce cmtee

Remarks as Prepared for Delivery

Thank you for the invitation to speak with you today about this important topic.

My organization, the Economic Policy Institute, has been a leading nongovernmental voice emphasizing the need for more jobs in this weak economy. As an economist, I am very concerned about the impact of high and prolonged levels of unemployment on families and on the long-term health of the economy.

As you know, the Interagency Working Group on Food Marketed to Children is considering a set of voluntary guidelines to improve the nutrition quality of foods marketed to children.

With the current economic weakness in the labor market, it is important to assess the economic and employment effects of the voluntary marketing guidelines.

Let me briefly outline the prime impact of the proposed guidelines on employment. In my view, to the extent that companies follow the guidelines, the impact would be primarily a shift in advertising and a shift in product sales, not necessarily a reduction overall in these industries.

First, to restate the obvious, the IWG proposed guidelines are voluntary, and thus there is no automatic reduction in advertising as a result of the guidelines.

Second, if companies do choose to adopt the voluntary IWG guidelines, a primary change that would result is a shift in consumption across food categories; for example, from foods with high levels of fats, sodium, and sugars, toward foods lower in those nutrients.

This shift—in either advertising dollars and/or sales—could occur across product lines within a single firm, or across firms within the industry. There might not be a net reduction in advertising, in sales, or in employment even within the industry.

It is also possible that advertising dollars would be shifted from marketing to children, towards advertising on other products and/or to advertising on the same products to other people, such as parents.

Over time we can expect firms and the industry to respond to the guidelines by establishing new, healthier products and product lines that could be then marketed to kids.

In fact, a surge in advertising might result as companies seek to expand product recognition for new product lines among kids and parents. For example, as the FDA was considering adopting regulations to require trans-fat labeling, many companies reformulated products to remove trans-fat and invested in marketing those reformulated products.

For example, Frito-Lay launched an advertising campaign in 2003 placing print ads in top-25 newspapers announcing “zero grams of trans-fat” in their products.

Further, industry advertising is often designed to compete with other brands, transferring market share across companies, but resulting in little to no change in final industry sales.

A report by IHS Consulting has been cited widely that claims to show that the guidelines could result in a 20% reduction in ad sales and a loss of 74,000 jobs. My submitted testimony includes a more detailed critique, but let me summarize that the assumed 20% reduction in ad sales would seem to be a significantly exaggerated response given existing advertising patterns, the voluntary nature of the guidelines, and the likely shifting of ad dollars to other products or to targeting other age groups.

Even if it were the case that an advertising reduction led to fewer sales in the food and beverage industry, consumers would simply shift some or all of those expenditures to products in other industries.

A realistic assessment is that the proposed guidelines would have, at most, a modest impact on overall advertising levels, and an even more modest impact on industry-level sales and employment. Even if there were a job impact at the industry level, then shifts to other industries would yield job increases that would offset some or all of the impact on the food and beverage industry.

As I said earlier, as an economist, I am a concerned with the health of the economy.

However, as a father, I am primarily concerned with the health of my two daughters. I am well aware of the challenges of getting a 3 year old to eat healthy – in my house fruit and vegetables too often means ketchup and french fries.

I realize that my girls will see thousands of ads while they grow up, but I would much prefer that the advertising that they do see, be for healthier products.

As an economist, I believe that the IWG guidelines would primarily result in a shift of ad dollars towards healthier products, and not a reduction in overall industry advertising, sales, or jobs.

Thank you.


Busy Week.

Q: What do the following have in common? 1) advertising food to kids, 2) construction jobs, 3) deficit reduction, and 4) wireless broadband.

A: I’ll be speaking on all of these topics over the next 7 days:

I think the first and last events are open to the public – stop by and say hi!


Solow on Keynes (and others)

Bob Solow does a good job of summarizing a couple of Keynes’ basic insights about savings, investment, and recessions. It’s worth reading the longer book review for his thoughts on some other famous economists.

One reason why Keynes’s great book is so difficult to explain is that it is no masterpiece of clarity. There are still learned arguments about “what Keynes really meant.” I want to emphasize two of its themes, because they seem to be central to his place in the story of economic genius, and because they point directly to the reason why Keynesian economics, born in the 1930s, has become dramatically relevant again today. Back then, serious thinking about the general state of the economy was dominated by the notion that prices moved, market by market, to make supply equal to demand. Every act of production, anywhere, generates income and potential demand somewhere, and the price system would sort it all out so that supply and demand for every good would balance. Make no mistake: this is a very deep and valuable idea. Many excellent minds have worked to refine it. Much of the time it gives a good account of economic life. But Keynes saw that there would be occasions, in a complicated industrial capitalist economy, when this account of how things work would break down.



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