Got to stick up for my old macroeconomics teacher Arthur Okun. I don't think it is fair to say the thought all transfer buckets were very leaky. It is just true that there are better and worse ways to transfer income. A higher EITC, jiggled to be more like a wage subsidy than a family income supplement, is better than minimum wage, etc.
Wage subsidy sounds a lot like corporate welfare unless you are planning to raise business taxes to pay for it. It will after all help to keep wages artificially low as people can afford to work for less.
And afford to work in sectors of the economy that are unproductive. But then American consumers seem to love cheap services from unproductive sectors of the economy. Not sure how a higher minimum wage vs more generous EITC cuts with Americans.
I agree we should allow more skilled immigrants into the country.
I can't wrap my head around the Democrats' insistence on tying better immigration policy to dealing with the undocumented folks already here. I get why they do it politically, but it's not like the harm caused by their stubbornness only affects Republicans. I would argue teaming up with Republicans on this would increase the Democrats' vote share. This is another case where Matt's right that the Democratic approach to Republican election theft seems to be to ensure Republicans can easily win fair and square.
On the Republican side, I see very little support for making it tougher for companies to hire undocumented workers. As I understand it, illegal entry is tightly coupled with job prospects across the border. Better enforcement of rules against hiring undocumented workers would drop illegal entry significantly.
So basically, neither side really cares about regaining control over who comes into the country. Both sides seem more interested in scoring political points and supporting their donors' financial interests than solving any real problems.
"So basically, neither side really cares about regaining control over who comes into the country"
Senate Democrats and Republicans came together to pass a sweeping immigration bill with 68 votes back in 2013. It would've added 40k border patrol agents, advanced talent/skills-based immigration, and fixed/improved the H1B program. Boehner and the House Republicans didn't even consider it and as far as I can tell they didn't propose anything serious of their own.
These days there aren't as many Senate Republicans interested in immigration reform and I think there isn't an option for Dems besides going it alone.
Of course I'm a clown and forgot to include that it would've provided a path to legal status (paying a fine + fees + not having a criminal record) for people here illegally before 2012.
The point is that there used to be something resembling a bipartisan wish to "get something done" and now one party has abandoned that almost entirely.
I think that is an overly complicated read. Republicans are pretty consistently supportive of laws that would tighten rules around undocumented workers. DeSantis is pushing one through the Florida legislature right now. Portman introduced a bill to reform & tighten E-Verify this year.
I know there's the meme that Republicans *like* illegal immigration because of big business interests, but I think that's an outdated analysis based on the Romney version of the party. The current incarnation of the GOP would just like all illegal immigrants out of the country.
Republican politicians say they are, but here's a Bloomberg piece from a few years ago about how E-Verify can't be enforced even in the deepest red states, due to agricultural interests. The political will even in the heart of Trump territory just isn't there
We shall see. Republican politicians are certainly aware that their voters are very in favor of cracking down and the donor class is very not. That leads to saying one thing while doing another. We shall see how it all works out in practice.
As long as the filibuster exists, and you need 10 Republican Senators' votes, there will be no immigration bill passed. The two parties are not going to "team up" on this.
Do you think that's because there aren't 10 Republican Senators who want to solve the immigration problem or is it because the distance between the parties on how to solve the problem is too great?
I think it 's mostly because the Republicans have become an ethnic nationalist party. Casting a gimlet eye toward the idea of immigrants has become totemic for them so they're not open to any practical compromise.
Since the Democrats are more of a big coalition, I think they'd be more open to a compromise, despite the opposition of some of their more "decriminalize the border" elements, but that's irrelevant as long as you need 60 votes in the Senate.
It's amazing that in one year, 1986, we were able to pass not one, but two superb bills, one on immigration the other on taxation. Both very good bills (and signed by Reagan!), and passed on bipartisan terms.
The past is indeed another country. We won't be going back there very soon.
I'd just add that this would be a good time to switch from taxing wages to finance SS and Medicare (and ideally generous Federal employment insurance) to a VAT. this would shift the incentives toward working and (to the extent that employers are fooled into thinking the *they* pay part of the wage tax) incentive$ to hire. I'm surprised that this is not on Progressives' wish list like taxation of net CO2 emissions, a $15 minimum wage, higher immigration flows, and single payer health insurance.
A federal sales tax would be giganticly unpopular. And the disparity of state sales taxes, ranging from zero to 10 percent, would make this politically impossible. Red states generally have much higher sales taxes than blue states.
I said on the "wish list," something that Progressive should be talking about all the time like other things that are not going to pass Congress next week. And the tax on wages is something they could whine a little about.
Not so sure about the line "... macroeconomic management has been quite good." If the core problem is a supply shortage, then it would seem that the third stimulus package was a critical mistake. It would have been a good solution to a lack of demand. But given that the problem was lack of supply, it exacerbated the problems in the economy and boosted inflationary tendencies.
What makes things worse is that so far, I have not seen any evidence of regret about the stimulus, or any tendency to correct course.
The bills were not "stimulus" they were "relief," income transfer. Lets remember what we should have learned yesterday. The spike in Inflation was the result of the Fed not perfectly forecasting the supply chain and labor force under-growth that turned out, not "stimulus." If there is a criticism to be made of the relief bills, it is that their contribution to the structural deficit (becasue the were not "paid for" with taxes) will mean slightly slower growth in the future.
I see deficits as "stimulus" only when the Fed buys more umphs becasue of the deficit than it would have w/o the deficit. I think that generally does not happen. The financial crisis of 2009 + was probably an exception becasue the Fed (unfortunately) felt felt constrained not to be doing more QE than it was, so having more ST treasury bonds to by DID lead to more umph. I don't think that was the case in early 2021 and the Federal borrowing just crowded out a bit of private sector borrowing. Net stimulus zero.
If Congress voted to send checks to increase the GDP it was a mistake. The should have voted only becasue they wanted more of GDP spent by check receivers than by non-Federal bond issuers.
I think one of the most important lessons we'll learn from the Great Pandemic is that there are no lessons to learn from the Great Pandemic. It's a one-off. It's a huge, once-in-a-century (probably) thing that threw everything into turmoil, and created a huge mess from which we will slowly recover.
You have to put someone in an induced coma and then slowly bring them out, they're not going to jump up and run a marathon. Especially if they get the frequent twinge that suggests that they're not yet fully recovered. It sucks, but it's where we are. You shut down the national/global economy, and it's going to take a while to get things back to normal. I'm amazed we've bounced back as far as we have. I'm not surprised that there have been knock-on effects, whether people being hesitant to rejoin the workforce (but how do they pay rent?), airline passenger rage, increased homicide rates, and all that other stuff that probably reflects that we've all been through a traumatic experience and are not yet all back.
I don't know how many people are hesitant to rejoin the workforce. But it probably describes people in one of two situations:
1) Older people who are in some actual danger from covid but don't want to get vaccinated or are scared by the smattering of new stories suggesting the vax don't work all that well. They can pay rent because they own their house, or otherwise have such cheap rent, and have an income from SS or a pension or a kid taking care of them
2)Younger parents (mostly moms) for whom the marginal value of going back to work is very small because they'd need to pay for more daycare or babysitting. They make rent because they were already making rent and going back to work won't help as much as it would if they didn't have to replace the childcare.
"While the unemployment rate continues to fall quickly, labor force participation has made no progress since August 2020. ... Most of the 5.0mn persons who have exited the labor force since the start of the pandemic are over age 55 (3.4mn), largely reflecting early (1.5mn) and natural (1mn) retirements that likely won’t reverse. The outlook for prime-age persons who have exited the labor force (1.7mn) is more positive, since very few are discouraged and most still view their exits as temporary."
I am at this point in my life very pro immigration. But, I see a proposal with adding mostly higher skilled immigrants. High skilled immigrants tend to be in the top 10% of income earners do we really want a situation where the top 10% the elite is like 60% immigrant and the rest of the country is like 5% immigrant. There is a bit of racial tension between Indian Americans and everyone else in Silicon Valley. I know I’m the UK where this has been done the top 1% is actually much more diverse than the rest of country.
I don’t know what the %threshold is that it gets weird but keep in mind the 1% of workers is like 1.5 million workers it is easy overwhelm that groups culture. With immigrants. The USA admits 1.5 million immigrants a year. It is actually believable that we could admit 500k Rick skilled people a year. The EB-5 visas are at there cap where have 500k.
I don't follow, or if I do I don't think this makes too much sense.
So suppose we admit 500K high-skill immigrants. For starters, that is not the same as 500k "Rich skilled people". People with huge savings in the bank and the potential to be influential elites, say your Ariana Huffingtons or George Soros aren't going to be more than a small handful of those numbers.
The 500k high-skilled immigrants are going to be tech workers, or perhaps one day doctors. They're going to make a decent salary but not have the kind of wealth, or the kind of social connections (due to limited social networks and possibly english skills) to have a huge amount of influence in politics. Many won't even vote as they wait for citizenship or delay getting it. Or because they're less involved in the politics of their new country.
The exceptions are going to be disproportionately guys like the Google Founders, who although technically immigrants, arrived at a very young age and so we're fully assimilated and not viewed as "others".
If we really are admitting 500k high-skilled immigrants who take and or create top jobs, their families will rapidly assimilate and their children will no longer be immigrants. In which case what's the problem?
I think 500k skilled workers we can maybe handle. But I don’t think we can handle 1.5 million. The top 20% of workers is 30 million households. In 1.5 x 20-30 years = the majority of the upper middle class being seen by every one else as other. That is a recipe for class warfare.
It would be interesting if upper class and upper middle class was mostly Asian with a few black immigrants with a few white holdovers. And an angry middle and working class that was Hispanic Black and White. Given the history of American that would be an interesting movie, but I don’t see a happy ending.
I think about the Tulsa riots and any other time minorities where seen as better off than “real America”
I guess there could be some political constraint along these lines but this math seems based on a) all immigrants effectively landing in the b) constant-size "upper class and c) remaining "other." I though Brexit was about Polish plumbers, not Indian physicians and BBC presenters.
... though a large fraction of the high-skill immigrants can't actually get work in their fields because of not having Canadian experience or lack of credential recognition, and end up taking jobs for which they're very overqualified.
> guys like the Google Founders, who although technically immigrants, arrived at a very young age and so we're fully assimilated and not viewed as "others".
ObPedantry: only one (Brin) was an immigrant; Page was born in Michigan and his grandfather was part of the Flint Strike in 1937.
I can't speak to Silicon Valley, but I don't think there's any tension around this issue in science (or at least academic science), where native-born citizens are much below their level in the population overall.
Industry isn’t where the resentment will be. It will be in community at large. When the poor and the homeless are all native born Americans and the rich people in the gated communities are 60% immigrants. Like think what that would look like. You don’t think that would cause resentment.
Like the fancy shops restaurants etc. would all cater to immigrant tastes. Imagine going into Nordstroms and everything is written in Arabic I would be ok with it because I can’t afford Nordstroms.
I am making the “cultural” case for low skilled immigrants.
Also apologize for the typos above I write those before I even get out of bed at 5 am PST.
There's too much money and ambient success for real tension, but you can see the seams.
Managers often have a strong ethnic bias- hire an X manager for the perf team, suddenly all the new hires are X. Companies too- Cisco has long had a bit of a reputation for being Indian biased. Other companies are disproportionately Chinese, San Francisco companies tend to skew younger and native born, blah blah blah.
Different departments are also often ethnic strongholds- white men in sales, for instance.
Almost none of these people are Latinos. The people who do all of the physical labor in the valley are. There used to be Okies, but they have mostly been pushed out to the central valley. The only concentration of black people is part of the remaining East Palo Alto slum in the shadow of Facebook. The divisions between the rich immigrants, poor immigrants, and poor natives are entirely predictable.
Thanks, this is enlightening as far as how things are in Silicon Valley. But this is no different from the types of seams that form whenever you have large shares of immigrants living and working side by side, whether they are high or low income. Some of them are the seams that form in cities where there are rich and poor living side by side.
The original comment from Troy was specifically about issues with having the highest income earners in the US be disproportionately immigrants. I'm not understanding how it relates to whatever Troy is talking about.
Well I live in the SF Bay Area. And that kinda of bias/resentment is what I am kinda of talking about. But, It isn’t that bad at the moment, but if 100% of the 1.5 million legal immigrants went to the richest 10% of the country I honestly think we would have more anti immigration sentiment than we currently do not less.
I think our culture can handle 5%-10% more people a year. As long they are even spread out. But 1 million people a year who make 200k+ would have a massive cultural impact on the 200k+ community.
I think this also misses the impact of growing the upper middle class that quickly on the economy at large. This would result in growth in construction, restaurants, sales, healthcare, etc. The economy would be booming. This is the advantage of importing high earners.
I am also from Silicon Valley. I worry when my industry (semiconductors) uses imported labor to keep wages down using(H1-Bs). I am not concerned with immigrant labor because they compete on a level playing field for wages. And I am strongly in favor of tech immigration as a way to grow the economy.
I'm still struggling to get what the point is. Yes, sometimes immigration breeds resentment, epecially among people who feel their jobs are being displaced. That's partly why there's resentment against illegal immigrants amongst low-skill GOP voters. Yes, racial/ethnic resentment is also a thing, and if you combine the two types of resentment they could support each other.
But...is this ever going to happen? High-skill immigrants aren't the easiest immigrants to entice, especially if they really do have generational wealth. I'm having a hard time seeing a world where immigration is both expanded in numbers and restricted to high skill.
To the extent it could happen, it already is happening. The homeless on the West Coast are almost all native-born Black and White people. Asians are vastly over-represented in the upper classes by income there. Where do you see the resentment? From blue collar people towards upper class immigrants for racial/class resentment reasons? Or from white collar people toward immigrants for job competition.
It doesn't seem to be a big issue as yet on the west coast, and every decade there's more and intermarriage of immigrants with native-born. It would have to massively increase from here to become a national issue and I don't see that happening. If anything it's headed the other way.
The other nice thing about high-skilled immigrants is it's much less controversial that they grow the economy and expand the pie for everyone.
The world isn’t as poor as it used to be relative to the USA. There are absolutely a million people a year who would be well paid in the USA. It is trope that you should be a doctor lawyer or engineer. What if those 3 groups where “the other” I think if poorly handled you would add class hate on top of race hate.
Also, people get weirdly angry when people with money move in. Like in MT their is lots of anger at Californians moving in and buying all the nice houses.
Rich immigrants and well educated immigrants are bringing generations of wealth with them. And from an economic view it is awesome to have 500k people a year coming in who all make 250k a year and have 1 million in assets. It is trillions and trillions added to the GDP.
But the naive suggestion that we all stop focusing on race and love each other as human almost proves my point.
So what trait do we target if race off the table? language? Class? religion? I suppose Language would be a very large in-group but, It would have issues with accents and regional dialects.
I would like to make it work because we are leaving a ton money on the table by not taking these immigrants. But these cultural concerns are not a joke.
Agree but colonialism must be counted as a “wealth destroying catastrophe “. From New Yorker article about UK’s mansions:
“In 2003, Angus Maddison, a British economist, calculated that India’s share of the global G.D.P. went from 24.4 per cent to 4.2 per cent during two and a half centuries of colonial rule. In 1884, the British state had a total income of two hundred and three million pounds, of which more than half came from its overseas territories, including seventy-four million pounds from India. Taxes were levied across the world and sent to burnish the metropole. “It’s not about feelings. It’s not about emotions. It’s not about ideas, or memories. It’s about basic economic facts,” Gurminder K. Bhambra, a professor at the University of Sussex, who studies the colonial global economy, said. “I think that’s possibly what terrifies people. Because if you think about the amount of money that Britain extracted from India, in two centuries, there isn’t enough money in the world today to compensate.”
That quote implies the decline was all due to British extraction. To 1884 is the same period during which the Americas were integrated into the world economy and the industrial revolution was launched. Japan, NW Europe and the United States were becoming manufacturing powerhouses and global superpowers (The US, Japan and Germany without much benefit from colonies). Brazil, Argentina and to a lesser extent Mexico were exporting massive amounts of trade goods that they weren't 2 and a half centuries prior.
Not to mention the 24.4% figure is a bit of a cherry-picked starting point. According to wikipedia, "[India under the Mughal Empire] was one of the largest empires to have existed in the Indian subcontinent".
Two paragraphs later in in wikipedia: "The empire went into decline thereafter [following the death of Emperor Aurangzeb". You have to read 6 more paragraphs about wars and sacked cities until you get to your first mention of the British. The first mention of defeat to the British comes in the year 1805, which would seem a much more natural starting point for comparisons about world GDP.
1805 (mid-Napoleonic Wars) seems late to me. The East India Company was founded in 1600, the Portuguese were in Goa even earlier. In the 17th and 18th centuries, the Portuguese, French and English fought continuously over exclusive trading rights, establishing private armies for their trading companies, allying with and betraying various Nawabs. Clive of India and Warren Hastings were both 18th century plunderers of India. The French were expelled after Britain prevailed in the Seven Wars War. British imperial policy after the East India Company had its wings clipped was one of explicit wealth extraction. William Dalrymple has written well on this in many books (try 'The Anarchy' for a start) and he's a much better source than Wikipedia. I'm sure India's done a lot of dumb things from an economic growth perspective since independence, but if you want to measure the impact of British imperialism on India's economy, your period of measurement should be 1600-1947 (or perhaps a bit later to allow for lagging effects even after independence).
Not to mention, I'm naturally also quite suspicious of that end point. The British left India in 1947 - I'd like to see the GDP numbers up until that point.
Would also like to see what the GDP/Capita numbers look like in these comparison, because population growth should also factor into an understanding of how much total GDP changed and why.
I would *love* for someone to provide me a causal mechanism by which the poorest two quintiles capture a higher proportion of national income that doesn’t involve higher-than-2010’s inflation.
Of course not. Just like we’re fundamentally unserious about untangling our ratfuck of a healthcare sector, building housing at anything like the necessary speed, or streamlining infrastructure regulatory obstacles.
So there are a couple things I want to drill down on here.
The first is the "productivity question" as it relates to China and India. I've made a study of "development states" out of personal interest and some relevance to my work in the past. I've worked in China and currently work for a European company. Based on both anecdote and data, I can tell you that the most of the United States, along with bits of Northern Europe, and some sectors in Japan and South Korea, are at the absolute frontier of what's technologically possible in terms of productivity. The vast majority of productivity growth in Northern Europe, the US, and Japan comes from incremental improvements to technology and marginally better integration of recent technology into a productive paradigm.
What you say about India and (especially) China is obviously true. It's also completely irrelevant to the United States, which could not possibly leverage a "development state" model to increase productivity growth because there's no catch-up to be done, no low-hanging fruit to be plucked, no clearly apparent best practices to be adopted. The remaining several low-productivity sectors in the United States (construction, non-staple agriculture, and childcare being the stand-outs) experience low productivity growth because we *don't know how* to automate them economically. In every other sector, our productivity is world-beating or at least tied with the best.
The second is to question the notion that productivity growth is a cure-all. While American productivity growth was slower from 1975 to 2010 than it was from 1940 to 1975, it was still moving at a decent clip. Yet, depending on the measure used, between 60% and 80% of that growth went into the pockets of capital, rather than labor. Virtually all of the rest went to the managerial class, i.e. the top quintile less the top 1%. Productivity growth is an unabashed good, one we must be careful to preserve from unintended consequences... but it's hardly a guarantee that the fruits of that productivity will be distributed in a way that society considers acceptable. In fact, with the "free market" system used by the US so heavily captured by capital and so shot through with rent-seeking, it's virtually guaranteed that growth will NOT be distributed in a reasonably equal manner.
Finally, let me explain what I mean by my original post. I wasn't clear this time, because I've posed the topic before in more detail. I am in no way saying that inflation is always a means of redistribution, or that it's always good.
What I am saying is that, in a situation where the last 50 years have seen virtually *all* productivity gains go to capital and upper-tier management, any "rebalancing" will cause price inflation. It *must*. We're seeing nominal wages rising against a backdrop of relatively stagnant productivity; that is 100% guaranteed to produce cost-push inflation. But we have also seen, over the last three years of relatively high (compared to the 2010's) inflation, wages for the bottom 30-60% of the income distribution growing faster in nominal terms than inflation, often *considerably* faster. It matters, in context, on whom the burdens of inflation fall, and right now the answer is "on the top two quintiles."
What that means, to me, is that labor is finally holding the whip hand long enough to rebalance some of the fruits of *past* productivity growth in its favor. That means that they are quite literally taking it out of the pocket of the top third of the income distribution as our wages and compensation rise more slowly than inflation, and theirs rise more quickly. That is directly against my interests, except insofar as I'm heavily hedged against inflation, and I'm not terribly happy about it, but I think it's probably healthy for the nation as a whole so long as we keep inflation leashed and don't slip into Argentine territory.
Now, I follow my own 401(k) and real estate asset values quite closely, and can see that *capital* seems to be doing just fine right now, in the short-term. It's *management* that's currently paying for increased wage bills for labor. How returns play out in the long run is anyone's guess, but my current assumption is that it will take significant policy changes to effectively pick capital's pocket of 40 years of accumulated productivity growth and hand it to the masses. At minimum, we need to break the near economy-wide "protection racket" that capital has successfully put in place over most key sectors to really see their returns slip to a level that's sustainable.
Increasing productivity of low wage workers makes it so that you need fewer of them and thus drives down wages. Minimum wage increases would increase the share of income of the lower quintiles. Productivity increases might reduce the impact on employers.
On the plus side, the labor supply shock is inducing firms to invest even more heavily in automation. See Bloomberg’s Nov 6th article, “Rise of the Robots Speeds Up in Pandemic With U.S. Labor Scarce”. [1] This will hopefully lead to a continuous boom in productivity and further enrich our populace with extremely low cost goods and services.
> Labor shortages and rising wages are pushing U.S. business to invest in automation. A recent Federal Reserve survey of chief financial officers found that at firms with difficulty hiring, one-third are implementing or exploring automation to replace workers. In earnings calls over the past month, executives from a range of businesses confirmed the trend.
I’m particularly hoping that the port congestion will finally gives us the political capital to upgrade our legacy ports
> Unions have long seen automation as a threat. At U.S. ports, which lag their global peers in technology and are currently at the center of a major supply-chain crisis, the International Longshoremen’s Association has vowed to fight it.
I recently read about a similar historical event whereby a shrinking labor supply forced industry to invest in automation with extreme and positive long term effects on society: the productionization of the spindle cotton picker in the late 1930s. [2]
> Eli Whitney’s cotton gin had created the Cotton South, but the Rust picker threatened to destroy it.
This invention accelerated the northern migration of black laborers to industrial jobs and out of the extreme poverty of substance sharecropping. Whereas previously the white establishment had implemented brutal measures to fight black migration and thereby maintain their exploited labor supply, the mechanization of cotton picking changed the incentives. In some cases, the local white establishment reversed their position and started to encourage black migration north due to their racist hatred.
You can read more about the social impact of this technological revolution in David Halberstam’s, “The Fifties”. There’s an excerpt on this specific chapter that covers the spindle cotton picker. [3] Strongly recommend the book for the numerous interesting stories it tells.
Good points. I think it’s important to note that the landowning class was peeved for several reasons.
Changes in the local economy of which new cotton picking technologies were but one example played a big part but so too did a desire not to pay for laborers in between the limited periods when there was a need for their work.
There was an article in the WP featuring an Indian American hotel owner. He was having to work the desk and clean rooms because he couldn’t find staff. He said there are jobs Americans just won’t do and he therefore needs to bring in people from India.
Left out of that discussion - won’t do for $10/hr. It seems quite clear that while immigration may be great for the country as a whole, it’s not great for those who don’t have the ability to write popular substack content or write code or sell ERP systems.
That’s true if hotel rooms are going empty. But if occupancy levels stay high, then you can raise the price of rooms to cover the increased costs of cleaning them.
Yes *unless* you expect occupancy levels to stay high even if you don't improve your room-cleaning, in which case you could just raise prices without increasing cleaning costs.
“The restaurant had just gone viral — in a good way — thanks to the urging of the Pooles’ teenage son, who told his parents that the way to get more young diners was to go on TikTok. More than a million viewers later, Izola’s videos showing off each day’s lunch dishes was bringing in swarms of new customers….
The Pooles gave Brewton a raise last year, from $8.75 to $9 an hour.”
In addition to David’s point there is also the value in labor being in a sellers market. A perfect example of this is pre-pandemic low wage workers often had to deal with variable and ever changing hours. Some weeks 40 hours other weeks 10. Now employers are complaining that workers are telling them when they are willing to work rather than the other way around.
I think the debate around supplemental unemployment is worthy of deeper analysis.
In a labor market where supply is the binding constraint, paying supplemental unemployment absolutely must cause shortages. If we are observing that removing that benefit has not increased labor supply, then either (a) our observation is incorrect or (b) the negative costs associated with working exceed the value of the benefit, so it wasn't actually affecting the market on the aggregate.
I think there is probably some argument to be made that all of the ARP/CARES/Other Benefits provided to lower income people have provided enough savings to eat the cost of not working until, ideally, the experience of working improves.
Housing policies seem to have started moving in the right direction recently. A bunch of cities and states just ended single family zoning over the past year or two, and the transit oriented automatic upzoning bill in California keeps getting closer each year. The biggest question is whether Texas tries to stay ahead of California on this, or decides to own the libs by adopting restrictive housing policies like old school California just as California eases up on them.
I have such mixed views as to if it really is getting better. I am DC area and have clear east coast bias, and my experience is that counties and cities keep paying lip service to increasing density in optimal places and releasing really nice 10 year plans. Then they change zoning to allow for slightly more density where some density already exists and leave exclusive single-family zoned areas entirely untouched. A fantastic example is where I live in College Park, where PG country rezoned the area directly next to the university that had some larger apartment complexes already to allow for more density. Then the metro station less than a mile away is all single family homes on one side, with the new zoning leaving it untouched. This is similar to changes in nearby Montgomery county and Howard county and DC proper. I guess its slightly better than nothing, but if you're keeping exclusive single family zoning right across the street (which are just rented out by college kids anyways) I am very skeptical of your commitment to actually fixing housing scarcity. Given how few areas have legitimate density already in the DC area of Maryland, you are quickly going to hit a limit on how much this eliminates scarcity.
I am a Californian, and have followed that progress eagerly, but I do not believe in my heart that it will succeed. The law is the law, but its interpretation is in the hands of the people, and they don't really want things to change.
Maybe I'm wrong- this SF fight over the Nordstroms parking lot might prove something for example.
I suspect San Francisco will always be a NIMBY bulwark, but you can get at least some housing in the Bay Area by going around it. YIMBYs should continue to highlight SF since it's so egregious and useful in the battle for public opinion, but if they make headway in public opinion, the places where that will show up are in other municipalities. In deciding where to actually live, YIMBYs should pick a few other towns like Emeryville and go berserk with densification there.
The privileges and immunities clauses in the body of the Constitution as well as in the 14th Amendment apply only to "citizens", which non-naturalized immigrants are not. The due process clause of the 14th Amendment, by contrast, which immediately follows the privileges and immunities clause, applies to "any person".
You mean, of course, that closing your eyes and pretending that "the stimulus multiplier doesn't exist," is an unbreakable article of faith(as you are demonstrating).
Of course even below unity it is not in fact below unity. The multiplier = the additional money spent in addition to the money the government spent. Thus 0.25 means you got 1.25x the value of your money.
Well that's an interesting take. It sure seems like we have had two fairly controlled experiments over the last two massive crisis that definitively prove that the stimulus in both cases provided a multiplier effect. And also that the GFC multiplier was far weaker than the Pandemic multiplier as it was too focused on tax cuts vs cutting checks. Why do you think it is an article of faith?
I think you can do your own research...the direct multiplier has been studied several times and it ranges between .29-1.5 depending on the current liquidity situation and MPC..we're also talking about the special situation of being at the ZLB, with the real rate on borrowing being negative. The *debate* is usually a smokescreen to get people angry about gov't borrowing.
>>” I think 20th-century free-market economics rather than any faddish leftist ideas is the ultimate misguided blank-slate ideology that ignores the biological foundations of the human experience.”
Picking fights with IDW/UofA now? That might be fun!
I loved this moment in today's essay, too. The Blank Slate was a great book until Pinker made the claim that its thesis proved Virginia Woolf was bad -- and that it supported his strange view of what right wing politics was really all about (catchy beats in pop music). At that point the argument fell to pieces.
I don't understand how this view that inflation is caused by real supply shocks is consistent with Matt's other view that monetary policy controls inflation solely via expectations.
He has not said that recently, and he has said he has changed his mind on this because the economy has less slack now than it did in 2019-2020. He writes a ton easy to miss.
Crude analogy, but if you think of the economy as an engine, monetary policy is manipulating the fuel, fiscal policy or other 'real world' events manipulate the engine itself. Either, or both, can change the performance of the engine.
Got to stick up for my old macroeconomics teacher Arthur Okun. I don't think it is fair to say the thought all transfer buckets were very leaky. It is just true that there are better and worse ways to transfer income. A higher EITC, jiggled to be more like a wage subsidy than a family income supplement, is better than minimum wage, etc.
Wage subsidy sounds a lot like corporate welfare unless you are planning to raise business taxes to pay for it. It will after all help to keep wages artificially low as people can afford to work for less.
Yes, I would pay for a higher EITC/wage subsidy with higher taxes on high incomes. Plus/or There's my VAT for wage tax substitution.
And afford to work in sectors of the economy that are unproductive. But then American consumers seem to love cheap services from unproductive sectors of the economy. Not sure how a higher minimum wage vs more generous EITC cuts with Americans.
I agree we should allow more skilled immigrants into the country.
I can't wrap my head around the Democrats' insistence on tying better immigration policy to dealing with the undocumented folks already here. I get why they do it politically, but it's not like the harm caused by their stubbornness only affects Republicans. I would argue teaming up with Republicans on this would increase the Democrats' vote share. This is another case where Matt's right that the Democratic approach to Republican election theft seems to be to ensure Republicans can easily win fair and square.
On the Republican side, I see very little support for making it tougher for companies to hire undocumented workers. As I understand it, illegal entry is tightly coupled with job prospects across the border. Better enforcement of rules against hiring undocumented workers would drop illegal entry significantly.
So basically, neither side really cares about regaining control over who comes into the country. Both sides seem more interested in scoring political points and supporting their donors' financial interests than solving any real problems.
"So basically, neither side really cares about regaining control over who comes into the country"
Senate Democrats and Republicans came together to pass a sweeping immigration bill with 68 votes back in 2013. It would've added 40k border patrol agents, advanced talent/skills-based immigration, and fixed/improved the H1B program. Boehner and the House Republicans didn't even consider it and as far as I can tell they didn't propose anything serious of their own.
These days there aren't as many Senate Republicans interested in immigration reform and I think there isn't an option for Dems besides going it alone.
https://en.wikipedia.org/wiki/Border_Security,_Economic_Opportunity,_and_Immigration_Modernization_Act_of_2013#Developments_following_June_2013_Senate_passage
https://www.thirdway.org/memo/how-republicans-abdicated-on-immigration-reform
Of course I'm a clown and forgot to include that it would've provided a path to legal status (paying a fine + fees + not having a criminal record) for people here illegally before 2012.
The point is that there used to be something resembling a bipartisan wish to "get something done" and now one party has abandoned that almost entirely.
The GOP definitely moved first, but do you think you could find 34 Democrats who would vote for the 2013 reform bill today?
I think that is an overly complicated read. Republicans are pretty consistently supportive of laws that would tighten rules around undocumented workers. DeSantis is pushing one through the Florida legislature right now. Portman introduced a bill to reform & tighten E-Verify this year.
I know there's the meme that Republicans *like* illegal immigration because of big business interests, but I think that's an outdated analysis based on the Romney version of the party. The current incarnation of the GOP would just like all illegal immigrants out of the country.
Republican politicians say they are, but here's a Bloomberg piece from a few years ago about how E-Verify can't be enforced even in the deepest red states, due to agricultural interests. The political will even in the heart of Trump territory just isn't there
https://www.bloomberg.com/news/articles/2018-08-23/e-verify-laws-across-southern-red-states-are-barely-enforced
We shall see. Republican politicians are certainly aware that their voters are very in favor of cracking down and the donor class is very not. That leads to saying one thing while doing another. We shall see how it all works out in practice.
As long as the filibuster exists, and you need 10 Republican Senators' votes, there will be no immigration bill passed. The two parties are not going to "team up" on this.
Do you think that's because there aren't 10 Republican Senators who want to solve the immigration problem or is it because the distance between the parties on how to solve the problem is too great?
I think it 's mostly because the Republicans have become an ethnic nationalist party. Casting a gimlet eye toward the idea of immigrants has become totemic for them so they're not open to any practical compromise.
Since the Democrats are more of a big coalition, I think they'd be more open to a compromise, despite the opposition of some of their more "decriminalize the border" elements, but that's irrelevant as long as you need 60 votes in the Senate.
It's amazing that in one year, 1986, we were able to pass not one, but two superb bills, one on immigration the other on taxation. Both very good bills (and signed by Reagan!), and passed on bipartisan terms.
The past is indeed another country. We won't be going back there very soon.
I'd just add that this would be a good time to switch from taxing wages to finance SS and Medicare (and ideally generous Federal employment insurance) to a VAT. this would shift the incentives toward working and (to the extent that employers are fooled into thinking the *they* pay part of the wage tax) incentive$ to hire. I'm surprised that this is not on Progressives' wish list like taxation of net CO2 emissions, a $15 minimum wage, higher immigration flows, and single payer health insurance.
A federal sales tax would be giganticly unpopular. And the disparity of state sales taxes, ranging from zero to 10 percent, would make this politically impossible. Red states generally have much higher sales taxes than blue states.
I said on the "wish list," something that Progressive should be talking about all the time like other things that are not going to pass Congress next week. And the tax on wages is something they could whine a little about.
Not so sure about the line "... macroeconomic management has been quite good." If the core problem is a supply shortage, then it would seem that the third stimulus package was a critical mistake. It would have been a good solution to a lack of demand. But given that the problem was lack of supply, it exacerbated the problems in the economy and boosted inflationary tendencies.
What makes things worse is that so far, I have not seen any evidence of regret about the stimulus, or any tendency to correct course.
The bills were not "stimulus" they were "relief," income transfer. Lets remember what we should have learned yesterday. The spike in Inflation was the result of the Fed not perfectly forecasting the supply chain and labor force under-growth that turned out, not "stimulus." If there is a criticism to be made of the relief bills, it is that their contribution to the structural deficit (becasue the were not "paid for" with taxes) will mean slightly slower growth in the future.
"The bills were not "stimulus" they were "relief," income transfer"
Income transfer requires that you tax on one side, and then spend on the other. Since this was all financed by debt it is stimulus.
The inflation is related both to the Fed's easy money policy AND the stimulus.
I see deficits as "stimulus" only when the Fed buys more umphs becasue of the deficit than it would have w/o the deficit. I think that generally does not happen. The financial crisis of 2009 + was probably an exception becasue the Fed (unfortunately) felt felt constrained not to be doing more QE than it was, so having more ST treasury bonds to by DID lead to more umph. I don't think that was the case in early 2021 and the Federal borrowing just crowded out a bit of private sector borrowing. Net stimulus zero.
If Congress voted to send checks to increase the GDP it was a mistake. The should have voted only becasue they wanted more of GDP spent by check receivers than by non-Federal bond issuers.
I think one of the most important lessons we'll learn from the Great Pandemic is that there are no lessons to learn from the Great Pandemic. It's a one-off. It's a huge, once-in-a-century (probably) thing that threw everything into turmoil, and created a huge mess from which we will slowly recover.
You have to put someone in an induced coma and then slowly bring them out, they're not going to jump up and run a marathon. Especially if they get the frequent twinge that suggests that they're not yet fully recovered. It sucks, but it's where we are. You shut down the national/global economy, and it's going to take a while to get things back to normal. I'm amazed we've bounced back as far as we have. I'm not surprised that there have been knock-on effects, whether people being hesitant to rejoin the workforce (but how do they pay rent?), airline passenger rage, increased homicide rates, and all that other stuff that probably reflects that we've all been through a traumatic experience and are not yet all back.
I don't know how many people are hesitant to rejoin the workforce. But it probably describes people in one of two situations:
1) Older people who are in some actual danger from covid but don't want to get vaccinated or are scared by the smattering of new stories suggesting the vax don't work all that well. They can pay rent because they own their house, or otherwise have such cheap rent, and have an income from SS or a pension or a kid taking care of them
2)Younger parents (mostly moms) for whom the marginal value of going back to work is very small because they'd need to pay for more daycare or babysitting. They make rent because they were already making rent and going back to work won't help as much as it would if they didn't have to replace the childcare.
Seems right.
I just read this Goldman Sachs take (https://www.calculatedriskblog.com/):
"While the unemployment rate continues to fall quickly, labor force participation has made no progress since August 2020. ... Most of the 5.0mn persons who have exited the labor force since the start of the pandemic are over age 55 (3.4mn), largely reflecting early (1.5mn) and natural (1mn) retirements that likely won’t reverse. The outlook for prime-age persons who have exited the labor force (1.7mn) is more positive, since very few are discouraged and most still view their exits as temporary."
I am at this point in my life very pro immigration. But, I see a proposal with adding mostly higher skilled immigrants. High skilled immigrants tend to be in the top 10% of income earners do we really want a situation where the top 10% the elite is like 60% immigrant and the rest of the country is like 5% immigrant. There is a bit of racial tension between Indian Americans and everyone else in Silicon Valley. I know I’m the UK where this has been done the top 1% is actually much more diverse than the rest of country.
I don’t know what the %threshold is that it gets weird but keep in mind the 1% of workers is like 1.5 million workers it is easy overwhelm that groups culture. With immigrants. The USA admits 1.5 million immigrants a year. It is actually believable that we could admit 500k Rick skilled people a year. The EB-5 visas are at there cap where have 500k.
I don't follow, or if I do I don't think this makes too much sense.
So suppose we admit 500K high-skill immigrants. For starters, that is not the same as 500k "Rich skilled people". People with huge savings in the bank and the potential to be influential elites, say your Ariana Huffingtons or George Soros aren't going to be more than a small handful of those numbers.
The 500k high-skilled immigrants are going to be tech workers, or perhaps one day doctors. They're going to make a decent salary but not have the kind of wealth, or the kind of social connections (due to limited social networks and possibly english skills) to have a huge amount of influence in politics. Many won't even vote as they wait for citizenship or delay getting it. Or because they're less involved in the politics of their new country.
The exceptions are going to be disproportionately guys like the Google Founders, who although technically immigrants, arrived at a very young age and so we're fully assimilated and not viewed as "others".
If we really are admitting 500k high-skilled immigrants who take and or create top jobs, their families will rapidly assimilate and their children will no longer be immigrants. In which case what's the problem?
I think 500k skilled workers we can maybe handle. But I don’t think we can handle 1.5 million. The top 20% of workers is 30 million households. In 1.5 x 20-30 years = the majority of the upper middle class being seen by every one else as other. That is a recipe for class warfare.
It would be interesting if upper class and upper middle class was mostly Asian with a few black immigrants with a few white holdovers. And an angry middle and working class that was Hispanic Black and White. Given the history of American that would be an interesting movie, but I don’t see a happy ending.
I think about the Tulsa riots and any other time minorities where seen as better off than “real America”
I guess there could be some political constraint along these lines but this math seems based on a) all immigrants effectively landing in the b) constant-size "upper class and c) remaining "other." I though Brexit was about Polish plumbers, not Indian physicians and BBC presenters.
Canadians are not like Americans.
... though a large fraction of the high-skill immigrants can't actually get work in their fields because of not having Canadian experience or lack of credential recognition, and end up taking jobs for which they're very overqualified.
> guys like the Google Founders, who although technically immigrants, arrived at a very young age and so we're fully assimilated and not viewed as "others".
ObPedantry: only one (Brin) was an immigrant; Page was born in Michigan and his grandfather was part of the Flint Strike in 1937.
I can't speak to Silicon Valley, but I don't think there's any tension around this issue in science (or at least academic science), where native-born citizens are much below their level in the population overall.
Industry isn’t where the resentment will be. It will be in community at large. When the poor and the homeless are all native born Americans and the rich people in the gated communities are 60% immigrants. Like think what that would look like. You don’t think that would cause resentment.
Like the fancy shops restaurants etc. would all cater to immigrant tastes. Imagine going into Nordstroms and everything is written in Arabic I would be ok with it because I can’t afford Nordstroms.
I am making the “cultural” case for low skilled immigrants.
Also apologize for the typos above I write those before I even get out of bed at 5 am PST.
There's too much money and ambient success for real tension, but you can see the seams.
Managers often have a strong ethnic bias- hire an X manager for the perf team, suddenly all the new hires are X. Companies too- Cisco has long had a bit of a reputation for being Indian biased. Other companies are disproportionately Chinese, San Francisco companies tend to skew younger and native born, blah blah blah.
Different departments are also often ethnic strongholds- white men in sales, for instance.
Almost none of these people are Latinos. The people who do all of the physical labor in the valley are. There used to be Okies, but they have mostly been pushed out to the central valley. The only concentration of black people is part of the remaining East Palo Alto slum in the shadow of Facebook. The divisions between the rich immigrants, poor immigrants, and poor natives are entirely predictable.
Thanks, this is enlightening as far as how things are in Silicon Valley. But this is no different from the types of seams that form whenever you have large shares of immigrants living and working side by side, whether they are high or low income. Some of them are the seams that form in cities where there are rich and poor living side by side.
The original comment from Troy was specifically about issues with having the highest income earners in the US be disproportionately immigrants. I'm not understanding how it relates to whatever Troy is talking about.
Well I live in the SF Bay Area. And that kinda of bias/resentment is what I am kinda of talking about. But, It isn’t that bad at the moment, but if 100% of the 1.5 million legal immigrants went to the richest 10% of the country I honestly think we would have more anti immigration sentiment than we currently do not less.
I think our culture can handle 5%-10% more people a year. As long they are even spread out. But 1 million people a year who make 200k+ would have a massive cultural impact on the 200k+ community.
I think this also misses the impact of growing the upper middle class that quickly on the economy at large. This would result in growth in construction, restaurants, sales, healthcare, etc. The economy would be booming. This is the advantage of importing high earners.
I am also from Silicon Valley. I worry when my industry (semiconductors) uses imported labor to keep wages down using(H1-Bs). I am not concerned with immigrant labor because they compete on a level playing field for wages. And I am strongly in favor of tech immigration as a way to grow the economy.
I'm still struggling to get what the point is. Yes, sometimes immigration breeds resentment, epecially among people who feel their jobs are being displaced. That's partly why there's resentment against illegal immigrants amongst low-skill GOP voters. Yes, racial/ethnic resentment is also a thing, and if you combine the two types of resentment they could support each other.
But...is this ever going to happen? High-skill immigrants aren't the easiest immigrants to entice, especially if they really do have generational wealth. I'm having a hard time seeing a world where immigration is both expanded in numbers and restricted to high skill.
To the extent it could happen, it already is happening. The homeless on the West Coast are almost all native-born Black and White people. Asians are vastly over-represented in the upper classes by income there. Where do you see the resentment? From blue collar people towards upper class immigrants for racial/class resentment reasons? Or from white collar people toward immigrants for job competition.
It doesn't seem to be a big issue as yet on the west coast, and every decade there's more and intermarriage of immigrants with native-born. It would have to massively increase from here to become a national issue and I don't see that happening. If anything it's headed the other way.
The other nice thing about high-skilled immigrants is it's much less controversial that they grow the economy and expand the pie for everyone.
The world isn’t as poor as it used to be relative to the USA. There are absolutely a million people a year who would be well paid in the USA. It is trope that you should be a doctor lawyer or engineer. What if those 3 groups where “the other” I think if poorly handled you would add class hate on top of race hate.
Also, people get weirdly angry when people with money move in. Like in MT their is lots of anger at Californians moving in and buying all the nice houses.
on a postive note cricket will finally be more popular in US
Fair
Rich immigrants and well educated immigrants are bringing generations of wealth with them. And from an economic view it is awesome to have 500k people a year coming in who all make 250k a year and have 1 million in assets. It is trillions and trillions added to the GDP.
But the naive suggestion that we all stop focusing on race and love each other as human almost proves my point.
So what trait do we target if race off the table? language? Class? religion? I suppose Language would be a very large in-group but, It would have issues with accents and regional dialects.
I would like to make it work because we are leaving a ton money on the table by not taking these immigrants. But these cultural concerns are not a joke.
Agree but colonialism must be counted as a “wealth destroying catastrophe “. From New Yorker article about UK’s mansions:
“In 2003, Angus Maddison, a British economist, calculated that India’s share of the global G.D.P. went from 24.4 per cent to 4.2 per cent during two and a half centuries of colonial rule. In 1884, the British state had a total income of two hundred and three million pounds, of which more than half came from its overseas territories, including seventy-four million pounds from India. Taxes were levied across the world and sent to burnish the metropole. “It’s not about feelings. It’s not about emotions. It’s not about ideas, or memories. It’s about basic economic facts,” Gurminder K. Bhambra, a professor at the University of Sussex, who studies the colonial global economy, said. “I think that’s possibly what terrifies people. Because if you think about the amount of money that Britain extracted from India, in two centuries, there isn’t enough money in the world today to compensate.”
That quote implies the decline was all due to British extraction. To 1884 is the same period during which the Americas were integrated into the world economy and the industrial revolution was launched. Japan, NW Europe and the United States were becoming manufacturing powerhouses and global superpowers (The US, Japan and Germany without much benefit from colonies). Brazil, Argentina and to a lesser extent Mexico were exporting massive amounts of trade goods that they weren't 2 and a half centuries prior.
Not to mention the 24.4% figure is a bit of a cherry-picked starting point. According to wikipedia, "[India under the Mughal Empire] was one of the largest empires to have existed in the Indian subcontinent".
Two paragraphs later in in wikipedia: "The empire went into decline thereafter [following the death of Emperor Aurangzeb". You have to read 6 more paragraphs about wars and sacked cities until you get to your first mention of the British. The first mention of defeat to the British comes in the year 1805, which would seem a much more natural starting point for comparisons about world GDP.
1805 (mid-Napoleonic Wars) seems late to me. The East India Company was founded in 1600, the Portuguese were in Goa even earlier. In the 17th and 18th centuries, the Portuguese, French and English fought continuously over exclusive trading rights, establishing private armies for their trading companies, allying with and betraying various Nawabs. Clive of India and Warren Hastings were both 18th century plunderers of India. The French were expelled after Britain prevailed in the Seven Wars War. British imperial policy after the East India Company had its wings clipped was one of explicit wealth extraction. William Dalrymple has written well on this in many books (try 'The Anarchy' for a start) and he's a much better source than Wikipedia. I'm sure India's done a lot of dumb things from an economic growth perspective since independence, but if you want to measure the impact of British imperialism on India's economy, your period of measurement should be 1600-1947 (or perhaps a bit later to allow for lagging effects even after independence).
Not to mention, I'm naturally also quite suspicious of that end point. The British left India in 1947 - I'd like to see the GDP numbers up until that point.
Would also like to see what the GDP/Capita numbers look like in these comparison, because population growth should also factor into an understanding of how much total GDP changed and why.
I've heard a fair amount of anecdata that suggest that it isn't entirely COVID19 that made the workplace worse, but the customer behavior as well.
Much of that customer behavior is probably related to COVID, though.
I would *love* for someone to provide me a causal mechanism by which the poorest two quintiles capture a higher proportion of national income that doesn’t involve higher-than-2010’s inflation.
Because I’m just not seeing it.
There would seem to be room for improvement of public education. But no one is very serious about doing that.
Of course not. Just like we’re fundamentally unserious about untangling our ratfuck of a healthcare sector, building housing at anything like the necessary speed, or streamlining infrastructure regulatory obstacles.
It isn't possible lol (Ken's suggestion of fixing public education is the closest thing to a real option)
I’ll get to this when I have time, but for now, “they could increase their productivity” is absolutely hilarious.
Channeling the “let them do code” vibes very well!
I don’t entirely disagree, but there’s more nuance to it than you make clear. Again, I’ll come back to this when I can later today.
So there are a couple things I want to drill down on here.
The first is the "productivity question" as it relates to China and India. I've made a study of "development states" out of personal interest and some relevance to my work in the past. I've worked in China and currently work for a European company. Based on both anecdote and data, I can tell you that the most of the United States, along with bits of Northern Europe, and some sectors in Japan and South Korea, are at the absolute frontier of what's technologically possible in terms of productivity. The vast majority of productivity growth in Northern Europe, the US, and Japan comes from incremental improvements to technology and marginally better integration of recent technology into a productive paradigm.
What you say about India and (especially) China is obviously true. It's also completely irrelevant to the United States, which could not possibly leverage a "development state" model to increase productivity growth because there's no catch-up to be done, no low-hanging fruit to be plucked, no clearly apparent best practices to be adopted. The remaining several low-productivity sectors in the United States (construction, non-staple agriculture, and childcare being the stand-outs) experience low productivity growth because we *don't know how* to automate them economically. In every other sector, our productivity is world-beating or at least tied with the best.
The second is to question the notion that productivity growth is a cure-all. While American productivity growth was slower from 1975 to 2010 than it was from 1940 to 1975, it was still moving at a decent clip. Yet, depending on the measure used, between 60% and 80% of that growth went into the pockets of capital, rather than labor. Virtually all of the rest went to the managerial class, i.e. the top quintile less the top 1%. Productivity growth is an unabashed good, one we must be careful to preserve from unintended consequences... but it's hardly a guarantee that the fruits of that productivity will be distributed in a way that society considers acceptable. In fact, with the "free market" system used by the US so heavily captured by capital and so shot through with rent-seeking, it's virtually guaranteed that growth will NOT be distributed in a reasonably equal manner.
Finally, let me explain what I mean by my original post. I wasn't clear this time, because I've posed the topic before in more detail. I am in no way saying that inflation is always a means of redistribution, or that it's always good.
What I am saying is that, in a situation where the last 50 years have seen virtually *all* productivity gains go to capital and upper-tier management, any "rebalancing" will cause price inflation. It *must*. We're seeing nominal wages rising against a backdrop of relatively stagnant productivity; that is 100% guaranteed to produce cost-push inflation. But we have also seen, over the last three years of relatively high (compared to the 2010's) inflation, wages for the bottom 30-60% of the income distribution growing faster in nominal terms than inflation, often *considerably* faster. It matters, in context, on whom the burdens of inflation fall, and right now the answer is "on the top two quintiles."
What that means, to me, is that labor is finally holding the whip hand long enough to rebalance some of the fruits of *past* productivity growth in its favor. That means that they are quite literally taking it out of the pocket of the top third of the income distribution as our wages and compensation rise more slowly than inflation, and theirs rise more quickly. That is directly against my interests, except insofar as I'm heavily hedged against inflation, and I'm not terribly happy about it, but I think it's probably healthy for the nation as a whole so long as we keep inflation leashed and don't slip into Argentine territory.
Now, I follow my own 401(k) and real estate asset values quite closely, and can see that *capital* seems to be doing just fine right now, in the short-term. It's *management* that's currently paying for increased wage bills for labor. How returns play out in the long run is anyone's guess, but my current assumption is that it will take significant policy changes to effectively pick capital's pocket of 40 years of accumulated productivity growth and hand it to the masses. At minimum, we need to break the near economy-wide "protection racket" that capital has successfully put in place over most key sectors to really see their returns slip to a level that's sustainable.
Increasing productivity of low wage workers makes it so that you need fewer of them and thus drives down wages. Minimum wage increases would increase the share of income of the lower quintiles. Productivity increases might reduce the impact on employers.
On the plus side, the labor supply shock is inducing firms to invest even more heavily in automation. See Bloomberg’s Nov 6th article, “Rise of the Robots Speeds Up in Pandemic With U.S. Labor Scarce”. [1] This will hopefully lead to a continuous boom in productivity and further enrich our populace with extremely low cost goods and services.
> Labor shortages and rising wages are pushing U.S. business to invest in automation. A recent Federal Reserve survey of chief financial officers found that at firms with difficulty hiring, one-third are implementing or exploring automation to replace workers. In earnings calls over the past month, executives from a range of businesses confirmed the trend.
I’m particularly hoping that the port congestion will finally gives us the political capital to upgrade our legacy ports
> Unions have long seen automation as a threat. At U.S. ports, which lag their global peers in technology and are currently at the center of a major supply-chain crisis, the International Longshoremen’s Association has vowed to fight it.
I recently read about a similar historical event whereby a shrinking labor supply forced industry to invest in automation with extreme and positive long term effects on society: the productionization of the spindle cotton picker in the late 1930s. [2]
> Eli Whitney’s cotton gin had created the Cotton South, but the Rust picker threatened to destroy it.
This invention accelerated the northern migration of black laborers to industrial jobs and out of the extreme poverty of substance sharecropping. Whereas previously the white establishment had implemented brutal measures to fight black migration and thereby maintain their exploited labor supply, the mechanization of cotton picking changed the incentives. In some cases, the local white establishment reversed their position and started to encourage black migration north due to their racist hatred.
You can read more about the social impact of this technological revolution in David Halberstam’s, “The Fifties”. There’s an excerpt on this specific chapter that covers the spindle cotton picker. [3] Strongly recommend the book for the numerous interesting stories it tells.
[1] https://www.bloomberg.com/news/articles/2021-11-06/rise-of-the-robots-speeds-up-in-pandemic-with-u-s-labor-scarce
[2] https://encyclopediaofarkansas.net/entries/john-daniel-rust-2272/
[3] https://waverlyhs.weebly.com/us-history-blog-may-2016---may-2017/the-1950s-the-great-migration-the-mechanical-cotton-picker
Good points. I think it’s important to note that the landowning class was peeved for several reasons.
Changes in the local economy of which new cotton picking technologies were but one example played a big part but so too did a desire not to pay for laborers in between the limited periods when there was a need for their work.
There was an article in the WP featuring an Indian American hotel owner. He was having to work the desk and clean rooms because he couldn’t find staff. He said there are jobs Americans just won’t do and he therefore needs to bring in people from India.
Left out of that discussion - won’t do for $10/hr. It seems quite clear that while immigration may be great for the country as a whole, it’s not great for those who don’t have the ability to write popular substack content or write code or sell ERP systems.
At a certain point, the cost of the wage exceeds the benefit of cleaning rooms faster.
That’s true if hotel rooms are going empty. But if occupancy levels stay high, then you can raise the price of rooms to cover the increased costs of cleaning them.
Yes *unless* you expect occupancy levels to stay high even if you don't improve your room-cleaning, in which case you could just raise prices without increasing cleaning costs.
The number of times I want to shake the reporter and scream, “Ask what he’s paying them!!!!”…
From someone else in the article:
“The restaurant had just gone viral — in a good way — thanks to the urging of the Pooles’ teenage son, who told his parents that the way to get more young diners was to go on TikTok. More than a million viewers later, Izola’s videos showing off each day’s lunch dishes was bringing in swarms of new customers….
The Pooles gave Brewton a raise last year, from $8.75 to $9 an hour.”
In addition to David’s point there is also the value in labor being in a sellers market. A perfect example of this is pre-pandemic low wage workers often had to deal with variable and ever changing hours. Some weeks 40 hours other weeks 10. Now employers are complaining that workers are telling them when they are willing to work rather than the other way around.
There is substantial value in that.
Based on Milans’s Sunday post, we know that to be untrue for the bottom third or more of the income distribution.
I think the debate around supplemental unemployment is worthy of deeper analysis.
In a labor market where supply is the binding constraint, paying supplemental unemployment absolutely must cause shortages. If we are observing that removing that benefit has not increased labor supply, then either (a) our observation is incorrect or (b) the negative costs associated with working exceed the value of the benefit, so it wasn't actually affecting the market on the aggregate.
I think there is probably some argument to be made that all of the ARP/CARES/Other Benefits provided to lower income people have provided enough savings to eat the cost of not working until, ideally, the experience of working improves.
I feel like realistically, fixing housing isn't possible but immigration restriction is. So there is a fun place to leave things.
Housing policies seem to have started moving in the right direction recently. A bunch of cities and states just ended single family zoning over the past year or two, and the transit oriented automatic upzoning bill in California keeps getting closer each year. The biggest question is whether Texas tries to stay ahead of California on this, or decides to own the libs by adopting restrictive housing policies like old school California just as California eases up on them.
I have such mixed views as to if it really is getting better. I am DC area and have clear east coast bias, and my experience is that counties and cities keep paying lip service to increasing density in optimal places and releasing really nice 10 year plans. Then they change zoning to allow for slightly more density where some density already exists and leave exclusive single-family zoned areas entirely untouched. A fantastic example is where I live in College Park, where PG country rezoned the area directly next to the university that had some larger apartment complexes already to allow for more density. Then the metro station less than a mile away is all single family homes on one side, with the new zoning leaving it untouched. This is similar to changes in nearby Montgomery county and Howard county and DC proper. I guess its slightly better than nothing, but if you're keeping exclusive single family zoning right across the street (which are just rented out by college kids anyways) I am very skeptical of your commitment to actually fixing housing scarcity. Given how few areas have legitimate density already in the DC area of Maryland, you are quickly going to hit a limit on how much this eliminates scarcity.
You might really enjoy this proposal- https://www.sfchronicle.com/sf/article/S-F-supervisor-wants-affordable-housing-to-focus-16626349.php
I am a Californian, and have followed that progress eagerly, but I do not believe in my heart that it will succeed. The law is the law, but its interpretation is in the hands of the people, and they don't really want things to change.
Maybe I'm wrong- this SF fight over the Nordstroms parking lot might prove something for example.
I suspect San Francisco will always be a NIMBY bulwark, but you can get at least some housing in the Bay Area by going around it. YIMBYs should continue to highlight SF since it's so egregious and useful in the battle for public opinion, but if they make headway in public opinion, the places where that will show up are in other municipalities. In deciding where to actually live, YIMBYs should pick a few other towns like Emeryville and go berserk with densification there.
https://www.sfchronicle.com/eastbay/article/The-city-that-is-happy-to-cast-shade-How-16683334.php
Sonja Trauss lives in SF I think, which matters.
Place-based visas: Let in immigrants conditionally on them living in cities like Cleveland or St. Louis.
Out of the frying pan, into the fire.
Lol.
The privileges and immunities clauses in the body of the Constitution as well as in the 14th Amendment apply only to "citizens", which non-naturalized immigrants are not. The due process clause of the 14th Amendment, by contrast, which immediately follows the privileges and immunities clause, applies to "any person".
It’s gonna take another generation before the conventional wisdom admits that the Great Recession was a deflationary debacle of mismanagement.
The people who orchestrated that debacle are still the economic thought leaders of the Democratic Party.
The Democrats have a zombie leadership problem. For them, a new idea is an old idea that was discarded for being wildly unpopular.
The stimulus multiplier is an unbreakable article of faith.
You mean, of course, that closing your eyes and pretending that "the stimulus multiplier doesn't exist," is an unbreakable article of faith(as you are demonstrating).
The multiplier is real, no doubt. Under some conditions it is potentially above unity.
Of course even below unity it is not in fact below unity. The multiplier = the additional money spent in addition to the money the government spent. Thus 0.25 means you got 1.25x the value of your money.
No, that's not how it works.
Well that's an interesting take. It sure seems like we have had two fairly controlled experiments over the last two massive crisis that definitively prove that the stimulus in both cases provided a multiplier effect. And also that the GFC multiplier was far weaker than the Pandemic multiplier as it was too focused on tax cuts vs cutting checks. Why do you think it is an article of faith?
I’d love to see your proof.
No, you wouldn't. Come on now.
Of course I would. The topic is subject to much debate among economists and central bankers, but he says there is definitive proof of the multiplier.
I think you can do your own research...the direct multiplier has been studied several times and it ranges between .29-1.5 depending on the current liquidity situation and MPC..we're also talking about the special situation of being at the ZLB, with the real rate on borrowing being negative. The *debate* is usually a smokescreen to get people angry about gov't borrowing.
>>” I think 20th-century free-market economics rather than any faddish leftist ideas is the ultimate misguided blank-slate ideology that ignores the biological foundations of the human experience.”
Picking fights with IDW/UofA now? That might be fun!
I loved this moment in today's essay, too. The Blank Slate was a great book until Pinker made the claim that its thesis proved Virginia Woolf was bad -- and that it supported his strange view of what right wing politics was really all about (catchy beats in pop music). At that point the argument fell to pieces.
I reread Louis Menand’s evisceration of that book every few years. https://www.newyorker.com/magazine/2002/11/25/what-comes-naturally-2
I don't understand how this view that inflation is caused by real supply shocks is consistent with Matt's other view that monetary policy controls inflation solely via expectations.
He has not said that recently, and he has said he has changed his mind on this because the economy has less slack now than it did in 2019-2020. He writes a ton easy to miss.
Crude analogy, but if you think of the economy as an engine, monetary policy is manipulating the fuel, fiscal policy or other 'real world' events manipulate the engine itself. Either, or both, can change the performance of the engine.
That becasue you are leaving out the Fed. Supply shocks/labor supply growing ,<b>less than the Fed expected<b> caused the inflation.
Dont blame me I pay my peons (or more accurately pee-ons) more than $15 an hour