I’ll be the first to admit that I ‘m shocked at Biden, like so many others, I assumed he’d continue with politics as is (aka continuation of Obama). I really didn't expect him to do what he did. But a much more important question is what will happen when Republicans consolidate their hold on the House/Senate and State Houses. The so called minority/majority governance model (aka South Africa) In the short term I expect they will simply block everything the Democrats propose.
Longer term is the next presidential election. Will the GOP candidate be a Trump wannabe or even Trump himself or someone who models himself on Brazilian president Jari Bolsonaro. Right on culture wars, left on economic issues.
The big unknown is how far state Republicans will go to block the Dems from winning the next presidential election. Scorched earth is what comes to mind.
Keep up the good work really enjoying the newsletter!
The GOP isn't ideologically opposed to this. I wrote this as a reply to a comment about McConnell for a different site:
"Clearly there is ideology at play" Clearly there isn't. Mitch is a lot of things, ideological isn't one of them. He'd gladly perform abortions himself and officiate at gay weddings if it secured him the senate majority leadership a bit longer. But as it stands, he just finished pushing his exit plan through the KY legislature. He won't leave before 2023 though because he wants to hold the record for longest majority/minority leader. He practically handed the democrats the senate by refusing to pass the $2k checks. He'd much rather let the democrats run up the deficit (which he knows is BS but can't get his caucus to figure out) so that the billion things that need to get funded can get rammed through. If he (or any other republican senator) actually objected to any of the spending they would throw the temper tantrum he keeps alluding to if they touch the filibuster. He also quite specifically handed the democrats a 2nd bite at reconciliation by just passing CFR's instead of an actual budget last year. He, and the Fox News outrage machine are waiting for the Democrats to overstep on some stupid culture issue and are hoping to ride it and what is guaranteed to be by far the worst gerrymandering anyone can possibly imagine to a solid win in mid-terms. E.G. If democrats get more than 3 of Georgia’s 14 congressional districts the GOP did them a favor. They have 6 now.
Not that the GOP will be the only ones with their hands dirty... Good bye to MD's lone gop rep, NY will have 3 republicans out of their 25 or 26 seats. IL will also loose a few repubs. But TX alone will more than undo all that for Republicans and with FL it won't even be close. Send your thank you's to SCOTUS for making partisanship non-justiciable and gutting pre-clearance. Any challenges will have to be race based or through state courts which take forever.
2018 was not a redistricting year. None of those states even had different maps than they did in 2016. The entire decade was a very strong GOP gerrymander. The Democrats needed to win the two party vote by at least 3 points for a shot at winning the house. They won it by 7 in 2018. My guess is they'll need to win it by 5 next decade and won't come close until there is a republican in the white house.
If you're saying that the GOP pushed the maps further and in more places, then I agree. I just think it was a matter of degree not a significant difference in approach. The California example is why I'm somewhat cynical of attempts to reform it. California's map was done by a "non partisan commission," which gave Democrats a 5-10 seat advantage for the decade. If Democrats pass HR1 and force the same level of "non partisan commissions" everywhere it will be to their distinct advantage.
In 2012 the GOP won ~37% of the vote in CA. Had they won 37% of the seats they would have won 4 more. So that is the upper limit for CA. And literally no one expect maps to actually result in a perfect % of votes = % seats won. CA, unlike real gerrymanders (eg Oh, IN, +NC and PA's original maps) had plenty of actually competitive races, the fact that the state moved significantly more democratic over the decade is what gave them the advantage. AZ's independent commission maximised competitive districts and that also ended up helping the Democrats. WA and NJ's commissions have been gifts to republicans though. NJ is a BLUE state that had a 6-6 delegation until 2018. Commissions are a crap shoot but when all is said and done are MUCH more likely to do better maps than legislatures.
1) Wasn't Trump at least somewhat "left on economic issues". Forsaking standard Republican trust in free markets and courting industrial workers and coal miners left behind by economic change?
2) Bolsonaro, who, as a Congressman, had among his strongest selling points defending military/police workers interests, was actually elected with a "right-wing economic rhetoric". His stated recipe to overcoming the crisis which had engulfed Brazil's economy was cutting public expenses, streamlining bureaucracy, deregulating businesses and making workers choose between labor rights and jobs. His Economy Minister is a former fund manager and old supporter of Chicago Boys-style free market policies. It seemed like the old Republican playbook: to insist on cultural issues to gather popular support to advance free market (supposedly plutocratic) policies. Obviously, political realities have asserted themselves as they usually do, and Bolsonaro has ruled more like a economic populist without much of guiding star or coherence.
The comment, "perception that progress for the average American had stalled" after the personal income graph clearly shows a steady up trend may highlight the real issue of the difference between perception vs. reality.
Your conclusion "Thus it was clear that the Reagan policy program of tax cuts, deregulation, and welfare cuts wasn’t working" is also a perception, but doesn't appear to be supported with facts. Almost any measure shows regulations have never dropped. The closest they came to a drop was staying flat:
While there are regulations that are absolutely essential for our health and safety, there are too many others that seemed like a good idea at the time but have either outlived their usefulness or have had unintended consequences. It's been too long since there has been a focused effort on stripping out regulations to make government and our country more efficient. Even though Trump made a big show of cutting regulations, he still supported growing government in his other pet areas.
IMO a big reason why growth has slowed is due to a major regulation that has cut off funds from the small businesses that are responsible for most of the job growth, Dodd-Frank. As a small business owner I know this significantly reduced my opportunities and I know many others who agree. That's just one example of a regulation gone bad. I'm sure others can add many more to the list.
So here's what I don't understand. The system as we know it has been developed and directed by continuous increases to the size and scope of government. Now, public opinion seems to have decided that that system doesn't function as it should and needs to be overhauled. Bidenomics says we now need more government involvement to make it all better. Doesn't it seem the opposite is more likely what we need?
This x100. Republicans have the right idea - the regulatory state needs to be destroyed - but always get caught up in stupid culture war bullshit and fail to actually dismantle the regulatory state.
You don't seem to understand exactly how much the smooth and safe function of your day-to-day depends on what Republicans call the "regulatory state". Republicans get caught up in stupid culture war bullshit because they know actually dismantling the "regulatory state" would collapse the economy. But, sure, let's destroy the "regulatory state".
We'll start with food safety regulations, vehicle safety regulations, traffic safety regulations, data transmission and encryption standards, and weight & measurement standards. Then we'll move on to radio emission standards and the national fire prevention and electrical codes. Throw it all out. And finally, the regulations the Republicans are really after, the ones that eat into corporate profits by keeping corporate America from poisoning the world around their plants and making them clean up after themselves...not that those regulations have worked all that well up to now.
Although I feel like I should point out that American food is terrible for you and the government encourages that. Our road safety is terrible, and the government encourages that. Our internet is terrible, ditto. We spy on people and leak data all the time. I can't speak to the radio and fire codes, maybe they are OK? And as you say, our pollution regulation is suicidally bad. I support good regulation, but our system can stand a lot of teardown and rebuilding more or less from scratch IMO. Throw in healthcare, there is another highly regulated monstrosity. Might as well throw the legal system in there too, it is huge, highly regulated and awful.
Regulations have dropped, especially in comparison to the economy. Look at that last graph of active regulatory actions.
Even the other graphs: the # of pages, etc - they're barely growing. Those graphs are linear. Economic growth is exponential. Plot any of those against a graph of the stock market, GDP, etc, and you'll see that regulations haven't been keeping up.
A linear rate of increase doesn't mean that regulations have 'dropped'. Measuring amount of regulations vs the total size of the economy is silly. If the number of cars produced doubles next year, would you expect to need twice the amount of regulations as well?
With regards to your point, don't you think that the # of regulations, or at least the # of pages of regulations, should be compared to *something*? Everything that it could be compared to shows exponential growth: the economy, the US population, the # of patents each year, new products, new technologies, etc.
It is pretty clear that we have been experiencing deregulation for a while now.
If you want something to compare, let's compare the total number of regulations to the cost of starting up and running a business. Clearly more regulations increase these costs making it more difficult for small businesses to comply. Large established companies have no problem with higher regulations since they can afford them and they provide barriers to entry for any competition.
Some regulations are necessary and provide benefits, but just because someone says "there ought to be a law" doesn't mean there should be. The one law always in effect is the law of diminishing returns, which definitely applies to regulations.
“taking a bit of money from the Elon Musks of the world” just isn’t going to do it. Let’s say we take *all* the income from the top 1%, or about $2.6T. That gives us about $7,800 per person to redistribute. But we already take about 1/3, so there’s only enough income there to give everyone $5200 per year. Realistically, you can’t take all their income, so let’s say we move the effective rates to 50% from 30% (I’m talking total tax rate here, not marginal). That gives us about $1600 per person per year, still just taking from the 1%. Now, the top 50% don’t need the money, so give $3200/yr/person to the bottom 50%. So a single parent with two kids gets $9600/yr in redistribution. That’s a not-inconsequential amount of money, but it doesn’t even begin to cover childcare for many areas.
So two important things to take away:
1) the reality is it’s the top ~20% that will be paying for this kind of spending, and there will be political consequences when they realize that, and
2) the cost problem *must* be addressed in order to have equitable lifestyles. We can’t just pay workers to move piles of dirt around (or do more paperwork, or more accurately, do all the useless and wasteful things you do at work and would certainly prefer not to have to do) and expect that to result in a better country. All that work funded by more taxes or debt needs to result in something *useful*.
An excellent summary of what is emerging as Bidenomics. The author correctly raises the alarm about ruinous costs. How and why these costs have become so high? How to get them in control and make them comparable and competitive with other developed countries? How to structure the new programs and how to invest public funds (tax dollars) in the infrastructure and care economy? We must come up with new ideas and far better implementation rooted in a competitive and transparent market without unnecessary regulation and corruption to contain the cost of healthcare and elderly care, and improve the quality of child care, early childhood education and standards of K-12 education. Doing these things will be critical to the success of the massive transformation sought. To get the necessary bang for the buck, these sectors have to opened to fair and rules based foreign competition and not shielded from it.
I can see excessive deference to unions being one of the other major concerns worth highlighting about how Bidenomics could go wrong, for several reasons:
1. we know he's an old-line union guy, so is likely biased toward deferring to them
2. unionism arguably plays a significant part in the cost disease problem you correctly say is a major risk, e.g. via Davis-Bacon
3. public sector unions may be in pretty bad political odor for the next couple of years based on their easily visible, outrage-provoking behavior in the past year (police unions shielding abusive cops, teachers' unions stonewalling on school reopening), and Republicans are unlikely to miss the chance to use that as a wedge issue and an excuse to denigrate unions generally.
If only my dear fellow democrats could use a bit of the venom they reserve for the police unions for the teacher’s unions - we’d be all the better for it.
Once upon a time I would of been against Student Loan cancellation, but I decided to lean in. Had daughter take out max loans this school year. Will do the same for next.
We don’t need it, she has pell grants and GI Bill, so we invested it.
Figure we could clear 12-15K if things go right.
Investment return hopefully beats interest and fees.
Also, I support big infrastructure spending, though I assume lots will be wasted and the rest we will overpay, since as Noah as pointed out, our costs are higher than other countries.
This doesn’t make any sense. You invested your daughters debt seeking returns above whatever interest rate you were given? I get it’s a bull market but that’s beyond the pale and somewhat disturbed. To say you are simply for student loan forgiveness now that you can invest your daughters loan seems pretty tone deaf to the issue.
It is unfortunate, but college doesn’t particularly make you more skillful or a better person. What it *does* do is signal certain qualities that you have - are you diligent? Are you intelligent? Do you conform to society’s expectations? Etc. If we cancel student loans, that means more people will go to college - but that defeats the purpose entirely. The point is to differentiate yourself! So, when more people go to college, people just need a higher degree to get the same jobs. It’s already happened before - we had an explosion in the number of people going to college after world war two, and all of a sudden, you couldn’t get an office job off a high school degree anymore.
I very much hope, for your daughter’s sake and for yours, that she will complete college and get the higher earnings that will come from getting the degree. But I hope too, for her sake, that we do not forgive student loans and render her degree worthless.
Excellent. Plus your paragraph rounds very well with the following:
"And that distribution of income via domestic industries is supplemented by active government redistribution of income — taking a bit of money from the Elon Musks of the world and using it to make sure the mass of people have a claim to food and houses and schools and medical care."
And in fact assisting the creation, nutrition and "care" of the craddle from where those investors get born, grow, study, train and live. In sum, focusing on the aggregate and dedicate investment that require the latest and best of long term research on well being, on creativity, on cohesion, on communication on values that are needed at least to fill the variety and richness that propels those Idea centers, industries and the complementary endeavors that through interaction made the national and international growth and welfare in the broadest terms.
This is an excellent viewpoint/summary and I hope it is true. At this stage, I wonder if anyone knows what Biden’s grand strategy really is. But I hope his people read this and say “yeah, yeah that’s it.”
The vision you are advancing feels in some ways very much like the SOEs that dominate so much of China's economy. They have large workforces, are provided high government subsidies, and not really allowed to fail even though they are significantly less productive.
This doesn't seem like a path we should attempt to emulate.
Not extreme social tension, What???? where have you been??/ the Chinese are putting a whole group in gulags and kidnapping protesters and imprisoning them (I've heard selling their organs to wealthy people but that may be a sad rumor, who knows). These totalitarian regimes do not last forever. But they are clear, they want to dominate the world (economically at least) and what comes next. Read your history!!
I think the idea is that there is not really a lot of class tension in China. Obviously ethnic minorities like the Uighurs and Tibetans as well as political minorities like Hong Kongers are repressed, but among the poor, uneducated, unproductive Han population there's not some brewing street violence, which is what is relevant to whether the US should adopt a model akin to SOEs
Those unproductive Han are also being repressed. They're not allowed to move to cities, and the gov't controls the internet, social media, etc. It's also a state of constant surveillance. That doesn't mean that the people are happy.
Most of their growth has been catch up growth though. When that started to slow, they started debt financing at a remarkable pace. The problem is that their debt financing isn't increasing productivity so it doesn't pay for itself. The US seems have decided this debt financed growth approach is the correct approach with Bidenomics, but unless we see productivity growth, it won't pay for itself or be self sustaining.
Good post! I'd like to see a follow-up post on "ruinous costs". My impression is that the primary drivers of those costs are generally things that the left supports (such as burdensome environmental reviews). One reason why infrastructure sucks in the US is because democrats tend to care more about infrastructure, but it's hard for them to deliver because they won't try to end-run these kinds of regulations -- so blue states initiate infrastructure projects, but they inevitably become costly boondoggles (California HSR, SF's Van Ness bus lanes, NYC subway expansions, Boston's Big Dig, etc.) which piss away amazing amounts of money and accomplish very little. On the other hand, republicans are happy to end-run any regulations in their way (one recent example: Operation Warp Speed), so they actually can get things done, but they tend not to care about infrastructure. So infrastructure never improves.
Nailed it. Frankly, there's no reason to even discuss the rest of this stuff unless costs can somehow be reined in. And the costs won't be reined in - can you imagine Biden (or anyone on the Left) opposing environmental impact statement requirements? The whole idea is a joke - a very, very, very expensive joke. I was snookered into voting for California high speed rail. Can't fool me twice.
There is a fairly straightforward argument that post-1980 policies incentivized paying MORE of net income out as dividends and stock buybacks, and hence actually caused the decline in business investment. With lower taxes, more money actually lands in shareholders' pockets. If you have extremely high taxes on dividend income, and you want to make shareholders richer, you don't pay dividends. You find ways to _actually grow the company_. This argument appears rather concisely in one of MattY's all-time best posts from his time at Slate: https://slate.com/business/2012/07/xerox-parc-and-bell-labs-brought-to-you-by-high-taxes.html
This idea of the dual-track economy with a highly productive innovation sector at the top and a massive service sector at the bottom reminds me of the worst stereotypes of the Gilded Age, as well as current day Manhattan (finance bro) and San Francisco/Bay Area (tech bro).
More concretely, sounds a lot like California/Bay Area with a lot more income redistribution. But I’m not confident that there will be enough income redistribution, and I worry about it creating backlash, like techlash in San Francisco and Occupy Wall Street in NYC, which I largely blame on income inequality.
I think even liberal minded tech bros will discover opposition to the taxation necessary to sustain the Nordic scale income redistribution necessary to keep income inequality low. Chamath is an imperfect example of this—his short lived candidacy for Governor had anti tax and anti redistributive elements. (Admittedly his platform had redistributive elements as well, but no real plan for funding them.)
Compare the experience of early industrial revolution factory workers (many of whom were _literally children_) to the experience of factory workers in 1950s America, who could support a family on one income.
The exact reforms required to make service work into something that supports a dignified life may not be precisely the same, but it's not hard to see the parallel.
Where you greet with enthusiasm "policy entrepreneurs," I am deeply concerned. I see wholesale politicization of economics going on. Ionescu's research is a great example because she makes clear, e.g., on Twitter, that she has strong priors about the right answer from the outset. Similarly, the minimum wage research you point to is centered among people at famously leftwing econ departments like UMass-Amherst and people like Michael Reich who publish in the Journal of Radical Economics. You know what people like these folks are going to find.
"The pipeline here was 1) policy entrepreneurship —> 2) empirical studies —> better theory. Not the other way around."
It always works like this. Better theory always follows from the experiment, whether the theory is flight (we have better theories AFTER the Wright Brothers than we did before - BECAUSE of the Wright Brothers) or INSERT_EXAMPLE_HERE
You never start from theory. Theory always follows data. Always. We see bird fly before we come up with a theory of flight. Better theories of flight can only come after further data.
Over the past years we used to enjoy good capital flow even though we import more than we export. We are still having positive capital flow. We were worried over Trade deficits and went on a tariff war. What did we do with all those inflow of capital? Foreigners buy or bonds and they invest. We are enjoying low rates very cheap rates and we should have used those cheap rates to build our infrastructure because sooner or later those rates could go up making it more costly to borrow to build. We were not wise we were going back to the era of mercantilism to deal with trade deficits.
I’ll be the first to admit that I ‘m shocked at Biden, like so many others, I assumed he’d continue with politics as is (aka continuation of Obama). I really didn't expect him to do what he did. But a much more important question is what will happen when Republicans consolidate their hold on the House/Senate and State Houses. The so called minority/majority governance model (aka South Africa) In the short term I expect they will simply block everything the Democrats propose.
Longer term is the next presidential election. Will the GOP candidate be a Trump wannabe or even Trump himself or someone who models himself on Brazilian president Jari Bolsonaro. Right on culture wars, left on economic issues.
The big unknown is how far state Republicans will go to block the Dems from winning the next presidential election. Scorched earth is what comes to mind.
Keep up the good work really enjoying the newsletter!
Thanks!!
The GOP isn't ideologically opposed to this. I wrote this as a reply to a comment about McConnell for a different site:
"Clearly there is ideology at play" Clearly there isn't. Mitch is a lot of things, ideological isn't one of them. He'd gladly perform abortions himself and officiate at gay weddings if it secured him the senate majority leadership a bit longer. But as it stands, he just finished pushing his exit plan through the KY legislature. He won't leave before 2023 though because he wants to hold the record for longest majority/minority leader. He practically handed the democrats the senate by refusing to pass the $2k checks. He'd much rather let the democrats run up the deficit (which he knows is BS but can't get his caucus to figure out) so that the billion things that need to get funded can get rammed through. If he (or any other republican senator) actually objected to any of the spending they would throw the temper tantrum he keeps alluding to if they touch the filibuster. He also quite specifically handed the democrats a 2nd bite at reconciliation by just passing CFR's instead of an actual budget last year. He, and the Fox News outrage machine are waiting for the Democrats to overstep on some stupid culture issue and are hoping to ride it and what is guaranteed to be by far the worst gerrymandering anyone can possibly imagine to a solid win in mid-terms. E.G. If democrats get more than 3 of Georgia’s 14 congressional districts the GOP did them a favor. They have 6 now.
thanks good points
Not that the GOP will be the only ones with their hands dirty... Good bye to MD's lone gop rep, NY will have 3 republicans out of their 25 or 26 seats. IL will also loose a few repubs. But TX alone will more than undo all that for Republicans and with FL it won't even be close. Send your thank you's to SCOTUS for making partisanship non-justiciable and gutting pre-clearance. Any challenges will have to be race based or through state courts which take forever.
Keep in mind that in 2018, it took the combined efforts of TX, FL, and OH GOP partisan gerrymandering to balance CA Dem "non partisan" gerrymandering.
I'm also curious how the suburbs changing political direction will impact maps being drawn.
2018 was not a redistricting year. None of those states even had different maps than they did in 2016. The entire decade was a very strong GOP gerrymander. The Democrats needed to win the two party vote by at least 3 points for a shot at winning the house. They won it by 7 in 2018. My guess is they'll need to win it by 5 next decade and won't come close until there is a republican in the white house.
If you're saying that the GOP pushed the maps further and in more places, then I agree. I just think it was a matter of degree not a significant difference in approach. The California example is why I'm somewhat cynical of attempts to reform it. California's map was done by a "non partisan commission," which gave Democrats a 5-10 seat advantage for the decade. If Democrats pass HR1 and force the same level of "non partisan commissions" everywhere it will be to their distinct advantage.
In 2012 the GOP won ~37% of the vote in CA. Had they won 37% of the seats they would have won 4 more. So that is the upper limit for CA. And literally no one expect maps to actually result in a perfect % of votes = % seats won. CA, unlike real gerrymanders (eg Oh, IN, +NC and PA's original maps) had plenty of actually competitive races, the fact that the state moved significantly more democratic over the decade is what gave them the advantage. AZ's independent commission maximised competitive districts and that also ended up helping the Democrats. WA and NJ's commissions have been gifts to republicans though. NJ is a BLUE state that had a 6-6 delegation until 2018. Commissions are a crap shoot but when all is said and done are MUCH more likely to do better maps than legislatures.
The worst offenders and how to tell are spelled out here. https://election.princeton.edu/2012/12/30/gerrymanders-part-1-busting-the-both-sides-do-it-myth/
1) Wasn't Trump at least somewhat "left on economic issues". Forsaking standard Republican trust in free markets and courting industrial workers and coal miners left behind by economic change?
2) Bolsonaro, who, as a Congressman, had among his strongest selling points defending military/police workers interests, was actually elected with a "right-wing economic rhetoric". His stated recipe to overcoming the crisis which had engulfed Brazil's economy was cutting public expenses, streamlining bureaucracy, deregulating businesses and making workers choose between labor rights and jobs. His Economy Minister is a former fund manager and old supporter of Chicago Boys-style free market policies. It seemed like the old Republican playbook: to insist on cultural issues to gather popular support to advance free market (supposedly plutocratic) policies. Obviously, political realities have asserted themselves as they usually do, and Bolsonaro has ruled more like a economic populist without much of guiding star or coherence.
The comment, "perception that progress for the average American had stalled" after the personal income graph clearly shows a steady up trend may highlight the real issue of the difference between perception vs. reality.
Your conclusion "Thus it was clear that the Reagan policy program of tax cuts, deregulation, and welfare cuts wasn’t working" is also a perception, but doesn't appear to be supported with facts. Almost any measure shows regulations have never dropped. The closest they came to a drop was staying flat:
https://regulatorystudies.columbian.gwu.edu/reg-stats
While there are regulations that are absolutely essential for our health and safety, there are too many others that seemed like a good idea at the time but have either outlived their usefulness or have had unintended consequences. It's been too long since there has been a focused effort on stripping out regulations to make government and our country more efficient. Even though Trump made a big show of cutting regulations, he still supported growing government in his other pet areas.
IMO a big reason why growth has slowed is due to a major regulation that has cut off funds from the small businesses that are responsible for most of the job growth, Dodd-Frank. As a small business owner I know this significantly reduced my opportunities and I know many others who agree. That's just one example of a regulation gone bad. I'm sure others can add many more to the list.
So here's what I don't understand. The system as we know it has been developed and directed by continuous increases to the size and scope of government. Now, public opinion seems to have decided that that system doesn't function as it should and needs to be overhauled. Bidenomics says we now need more government involvement to make it all better. Doesn't it seem the opposite is more likely what we need?
This x100. Republicans have the right idea - the regulatory state needs to be destroyed - but always get caught up in stupid culture war bullshit and fail to actually dismantle the regulatory state.
You don't seem to understand exactly how much the smooth and safe function of your day-to-day depends on what Republicans call the "regulatory state". Republicans get caught up in stupid culture war bullshit because they know actually dismantling the "regulatory state" would collapse the economy. But, sure, let's destroy the "regulatory state".
We'll start with food safety regulations, vehicle safety regulations, traffic safety regulations, data transmission and encryption standards, and weight & measurement standards. Then we'll move on to radio emission standards and the national fire prevention and electrical codes. Throw it all out. And finally, the regulations the Republicans are really after, the ones that eat into corporate profits by keeping corporate America from poisoning the world around their plants and making them clean up after themselves...not that those regulations have worked all that well up to now.
Although I feel like I should point out that American food is terrible for you and the government encourages that. Our road safety is terrible, and the government encourages that. Our internet is terrible, ditto. We spy on people and leak data all the time. I can't speak to the radio and fire codes, maybe they are OK? And as you say, our pollution regulation is suicidally bad. I support good regulation, but our system can stand a lot of teardown and rebuilding more or less from scratch IMO. Throw in healthcare, there is another highly regulated monstrosity. Might as well throw the legal system in there too, it is huge, highly regulated and awful.
Regulations have dropped, especially in comparison to the economy. Look at that last graph of active regulatory actions.
Even the other graphs: the # of pages, etc - they're barely growing. Those graphs are linear. Economic growth is exponential. Plot any of those against a graph of the stock market, GDP, etc, and you'll see that regulations haven't been keeping up.
A linear rate of increase doesn't mean that regulations have 'dropped'. Measuring amount of regulations vs the total size of the economy is silly. If the number of cars produced doubles next year, would you expect to need twice the amount of regulations as well?
That doesn't explain the last graph.
With regards to your point, don't you think that the # of regulations, or at least the # of pages of regulations, should be compared to *something*? Everything that it could be compared to shows exponential growth: the economy, the US population, the # of patents each year, new products, new technologies, etc.
It is pretty clear that we have been experiencing deregulation for a while now.
If you want something to compare, let's compare the total number of regulations to the cost of starting up and running a business. Clearly more regulations increase these costs making it more difficult for small businesses to comply. Large established companies have no problem with higher regulations since they can afford them and they provide barriers to entry for any competition.
Some regulations are necessary and provide benefits, but just because someone says "there ought to be a law" doesn't mean there should be. The one law always in effect is the law of diminishing returns, which definitely applies to regulations.
“taking a bit of money from the Elon Musks of the world” just isn’t going to do it. Let’s say we take *all* the income from the top 1%, or about $2.6T. That gives us about $7,800 per person to redistribute. But we already take about 1/3, so there’s only enough income there to give everyone $5200 per year. Realistically, you can’t take all their income, so let’s say we move the effective rates to 50% from 30% (I’m talking total tax rate here, not marginal). That gives us about $1600 per person per year, still just taking from the 1%. Now, the top 50% don’t need the money, so give $3200/yr/person to the bottom 50%. So a single parent with two kids gets $9600/yr in redistribution. That’s a not-inconsequential amount of money, but it doesn’t even begin to cover childcare for many areas.
So two important things to take away:
1) the reality is it’s the top ~20% that will be paying for this kind of spending, and there will be political consequences when they realize that, and
2) the cost problem *must* be addressed in order to have equitable lifestyles. We can’t just pay workers to move piles of dirt around (or do more paperwork, or more accurately, do all the useless and wasteful things you do at work and would certainly prefer not to have to do) and expect that to result in a better country. All that work funded by more taxes or debt needs to result in something *useful*.
It's working for Japan.
An excellent summary of what is emerging as Bidenomics. The author correctly raises the alarm about ruinous costs. How and why these costs have become so high? How to get them in control and make them comparable and competitive with other developed countries? How to structure the new programs and how to invest public funds (tax dollars) in the infrastructure and care economy? We must come up with new ideas and far better implementation rooted in a competitive and transparent market without unnecessary regulation and corruption to contain the cost of healthcare and elderly care, and improve the quality of child care, early childhood education and standards of K-12 education. Doing these things will be critical to the success of the massive transformation sought. To get the necessary bang for the buck, these sectors have to opened to fair and rules based foreign competition and not shielded from it.
I can see excessive deference to unions being one of the other major concerns worth highlighting about how Bidenomics could go wrong, for several reasons:
1. we know he's an old-line union guy, so is likely biased toward deferring to them
2. unionism arguably plays a significant part in the cost disease problem you correctly say is a major risk, e.g. via Davis-Bacon
3. public sector unions may be in pretty bad political odor for the next couple of years based on their easily visible, outrage-provoking behavior in the past year (police unions shielding abusive cops, teachers' unions stonewalling on school reopening), and Republicans are unlikely to miss the chance to use that as a wedge issue and an excuse to denigrate unions generally.
If only my dear fellow democrats could use a bit of the venom they reserve for the police unions for the teacher’s unions - we’d be all the better for it.
Once upon a time I would of been against Student Loan cancellation, but I decided to lean in. Had daughter take out max loans this school year. Will do the same for next.
We don’t need it, she has pell grants and GI Bill, so we invested it.
Figure we could clear 12-15K if things go right.
Investment return hopefully beats interest and fees.
Also, I support big infrastructure spending, though I assume lots will be wasted and the rest we will overpay, since as Noah as pointed out, our costs are higher than other countries.
This doesn’t make any sense. You invested your daughters debt seeking returns above whatever interest rate you were given? I get it’s a bull market but that’s beyond the pale and somewhat disturbed. To say you are simply for student loan forgiveness now that you can invest your daughters loan seems pretty tone deaf to the issue.
It is unfortunate, but college doesn’t particularly make you more skillful or a better person. What it *does* do is signal certain qualities that you have - are you diligent? Are you intelligent? Do you conform to society’s expectations? Etc. If we cancel student loans, that means more people will go to college - but that defeats the purpose entirely. The point is to differentiate yourself! So, when more people go to college, people just need a higher degree to get the same jobs. It’s already happened before - we had an explosion in the number of people going to college after world war two, and all of a sudden, you couldn’t get an office job off a high school degree anymore.
I very much hope, for your daughter’s sake and for yours, that she will complete college and get the higher earnings that will come from getting the degree. But I hope too, for her sake, that we do not forgive student loans and render her degree worthless.
Excellent. Plus your paragraph rounds very well with the following:
"And that distribution of income via domestic industries is supplemented by active government redistribution of income — taking a bit of money from the Elon Musks of the world and using it to make sure the mass of people have a claim to food and houses and schools and medical care."
And in fact assisting the creation, nutrition and "care" of the craddle from where those investors get born, grow, study, train and live. In sum, focusing on the aggregate and dedicate investment that require the latest and best of long term research on well being, on creativity, on cohesion, on communication on values that are needed at least to fill the variety and richness that propels those Idea centers, industries and the complementary endeavors that through interaction made the national and international growth and welfare in the broadest terms.
This is an excellent viewpoint/summary and I hope it is true. At this stage, I wonder if anyone knows what Biden’s grand strategy really is. But I hope his people read this and say “yeah, yeah that’s it.”
The vision you are advancing feels in some ways very much like the SOEs that dominate so much of China's economy. They have large workforces, are provided high government subsidies, and not really allowed to fail even though they are significantly less productive.
This doesn't seem like a path we should attempt to emulate.
Dunno. China has managed terrific growth with not extreme social tension with SOEs alongside an extremely competitive private sector.
Not extreme social tension, What???? where have you been??/ the Chinese are putting a whole group in gulags and kidnapping protesters and imprisoning them (I've heard selling their organs to wealthy people but that may be a sad rumor, who knows). These totalitarian regimes do not last forever. But they are clear, they want to dominate the world (economically at least) and what comes next. Read your history!!
I think the idea is that there is not really a lot of class tension in China. Obviously ethnic minorities like the Uighurs and Tibetans as well as political minorities like Hong Kongers are repressed, but among the poor, uneducated, unproductive Han population there's not some brewing street violence, which is what is relevant to whether the US should adopt a model akin to SOEs
Those unproductive Han are also being repressed. They're not allowed to move to cities, and the gov't controls the internet, social media, etc. It's also a state of constant surveillance. That doesn't mean that the people are happy.
Most of their growth has been catch up growth though. When that started to slow, they started debt financing at a remarkable pace. The problem is that their debt financing isn't increasing productivity so it doesn't pay for itself. The US seems have decided this debt financed growth approach is the correct approach with Bidenomics, but unless we see productivity growth, it won't pay for itself or be self sustaining.
Good post! I'd like to see a follow-up post on "ruinous costs". My impression is that the primary drivers of those costs are generally things that the left supports (such as burdensome environmental reviews). One reason why infrastructure sucks in the US is because democrats tend to care more about infrastructure, but it's hard for them to deliver because they won't try to end-run these kinds of regulations -- so blue states initiate infrastructure projects, but they inevitably become costly boondoggles (California HSR, SF's Van Ness bus lanes, NYC subway expansions, Boston's Big Dig, etc.) which piss away amazing amounts of money and accomplish very little. On the other hand, republicans are happy to end-run any regulations in their way (one recent example: Operation Warp Speed), so they actually can get things done, but they tend not to care about infrastructure. So infrastructure never improves.
Nailed it. Frankly, there's no reason to even discuss the rest of this stuff unless costs can somehow be reined in. And the costs won't be reined in - can you imagine Biden (or anyone on the Left) opposing environmental impact statement requirements? The whole idea is a joke - a very, very, very expensive joke. I was snookered into voting for California high speed rail. Can't fool me twice.
There is a fairly straightforward argument that post-1980 policies incentivized paying MORE of net income out as dividends and stock buybacks, and hence actually caused the decline in business investment. With lower taxes, more money actually lands in shareholders' pockets. If you have extremely high taxes on dividend income, and you want to make shareholders richer, you don't pay dividends. You find ways to _actually grow the company_. This argument appears rather concisely in one of MattY's all-time best posts from his time at Slate: https://slate.com/business/2012/07/xerox-parc-and-bell-labs-brought-to-you-by-high-taxes.html
This idea of the dual-track economy with a highly productive innovation sector at the top and a massive service sector at the bottom reminds me of the worst stereotypes of the Gilded Age, as well as current day Manhattan (finance bro) and San Francisco/Bay Area (tech bro).
More concretely, sounds a lot like California/Bay Area with a lot more income redistribution. But I’m not confident that there will be enough income redistribution, and I worry about it creating backlash, like techlash in San Francisco and Occupy Wall Street in NYC, which I largely blame on income inequality.
I think even liberal minded tech bros will discover opposition to the taxation necessary to sustain the Nordic scale income redistribution necessary to keep income inequality low. Chamath is an imperfect example of this—his short lived candidacy for Governor had anti tax and anti redistributive elements. (Admittedly his platform had redistributive elements as well, but no real plan for funding them.)
I think if people have good respectable jobs that aren’t miserable, and can afford housing, this won’t happen.
Where you get serious rage is when people feel like their modest life goals — house, family — have become impossible.
I think relatively high inequality, but with a high floor, will probably be tolerable.
Compare the experience of early industrial revolution factory workers (many of whom were _literally children_) to the experience of factory workers in 1950s America, who could support a family on one income.
The exact reforms required to make service work into something that supports a dignified life may not be precisely the same, but it's not hard to see the parallel.
Where you greet with enthusiasm "policy entrepreneurs," I am deeply concerned. I see wholesale politicization of economics going on. Ionescu's research is a great example because she makes clear, e.g., on Twitter, that she has strong priors about the right answer from the outset. Similarly, the minimum wage research you point to is centered among people at famously leftwing econ departments like UMass-Amherst and people like Michael Reich who publish in the Journal of Radical Economics. You know what people like these folks are going to find.
"The pipeline here was 1) policy entrepreneurship —> 2) empirical studies —> better theory. Not the other way around."
It always works like this. Better theory always follows from the experiment, whether the theory is flight (we have better theories AFTER the Wright Brothers than we did before - BECAUSE of the Wright Brothers) or INSERT_EXAMPLE_HERE
You never start from theory. Theory always follows data. Always. We see bird fly before we come up with a theory of flight. Better theories of flight can only come after further data.
Over the past years we used to enjoy good capital flow even though we import more than we export. We are still having positive capital flow. We were worried over Trade deficits and went on a tariff war. What did we do with all those inflow of capital? Foreigners buy or bonds and they invest. We are enjoying low rates very cheap rates and we should have used those cheap rates to build our infrastructure because sooner or later those rates could go up making it more costly to borrow to build. We were not wise we were going back to the era of mercantilism to deal with trade deficits.
Bidenomics, the driver of inflation.