Casey has gone and done it again and I learn something new about James Tobin.
His solution was radical: he actually read the bills. Mulligan printed out the relevant section of one highly touted Medicare for All bill and carried it around so that he could disabuse fellow Trump administration officials who thought he exaggerated. One person who listened was Donald Trump. When Trump publicly claimed that Medicare for All would ban private insurance, CNN’s White House correspondent attacked him for lying. But Trump kept it up and by January 2019, CNN, without apologizing, acknowledged the fact. Indeed, notes Mulligan, CNN even asked candidates for the Democratic presidential nomination about the prohibition.
This is an excerpt from David R. Henderson, “Economic Savvy in the White House,” Defining Ideas, October 8, 2020. It’s my review of economist Casey B. Mulligan’s book You’re Hired: Untold Successes and Failures of a Populist President.
It turns out that Casey has done it again. He actually read every page of the $3.5 trillion, 2,465 page budget bill before Congress. And, as comes out in this 45-minute interview he did with Hoover’s John Cochrane, he paid particular attention to incentives and disincentives within the bill.
Some highlights follow with approximate times.
9:45: The biggest item in the bill is the expansion of ObamaCare along with increased disincentive to work.
10:40: Cochrane makes the point that the limit on rent for subsidized housing of 30% of income makes for an implicit 30-percent tax on each additional dollar of income for those who are rent-subsidized. (That’s already there, even without this bill.)
11:10: Casey says that food stamps are essentially an unemployment program.
16:30: The child care tax credit in the bill doesn’t require you to work. DRH comment: That seems counterintuitive, but that’s if you care about people working.
21:00: Employers who have 5 or more employees must fund an IRA for their employees. State governments get to decide what the IRA can be invested in.
26:30: $10 per day fine if you don’t enroll your employees in an IRA. Per employee not enrolled? He doesn’t say but I think so.
27:00: $220 billion for affordable housing.
27:45: Casey’s comment on the subsidies for housing: “Here, you can have this as long as you remain poor.”
32:20: Casey estimates the value of the housing subsidy to tenants at about 30 cents on the dollar.
33:40: Somewhat good news on transportation. Casey finds that the spending is about 20% of the amount he expected based on Biden’s promises during the campaign.
34:20: $30 billion for rail; $30 billion for mass transit, which, Cochrane points out, is for things like the commuter rail that goes by Stanford every day almost empty.
35:18: $150 billion in spending for climate. This does not count tax credits. For things like climate-resilient housing and USPS purchase of electric trucks.
36:40: Given the amount of carbon reduction the climate subsidies will lead to, they are way overpaying.
37:40: Pro tip: if you’re thinking of buying an EV, then wait. This bill just might pass.
38:50: Family medical leave. Government will pay for some. Unclear to what extent employers will be reimbursed by feds if they already provide it.
43:20: New taxes on marriage. Casey points out that the late James Tobin of Yale University, who was a member of President Kennedy’s Council of Economic Advisers, was critical of government programs that discouraged marriage. Tobin’s comment: We’re subsidizing desertion. (Here’s my bio of Tobin for The Concise Encyclopedia of Economics.)
READER COMMENTS
Richard A.
Oct 5 2021 at 10:06pm
A very cheap way to help achieve carbon dioxide reduction is to remove the trade restrictions we have on solar panels and solar cells.
David Henderson
Oct 5 2021 at 10:34pm
Good idea.
Tim G
Oct 6 2021 at 12:34pm
Reducing permiting times on Natural Gas projects, pipelines, and export terminals will also go a long way.
Niko Davor
Oct 6 2021 at 1:51am
Most of us can’t do anything about the bill, so why read it? And most of us are already committed to a political viewpoint that we are unlikely to change.
Thomas Lee Hutcheson
Oct 6 2021 at 6:49am
Kudos for seeing some discussion of the pros and cons of individual provisions instead of just the politics of “how big.”
Re Individual IRA’s: Have fairly high contribution ceilings and make the tax subsidy for them a partial tax credit rather than a “deduction.”
Re ACA expansion and “disincentive” to work: Is this just the removal of the tax incentive for employer-purchased insurance, the Medicaid expansion, or what?
He had no comments on the tax increases/structural deficit implications?
robc
Oct 6 2021 at 2:01pm
I thought you favored a progressive consumption tax? The easiest way there is to uncap IRA contributions and make them fully deductible.
Alan Goldhammer
Oct 6 2021 at 7:44am
Anyone can throw darts at these kinds of legislative proposals. The bigger issue is how to solve real problems. Bad roads and bridges are an easy fix in terms of the types of repairs and funds that are needed. Broadband has been largely left to the private sector and that’s OK but how do you deal with under-served areas? Minimum wage post-Covid seems to be moving up on its own.
Affordable housing seems to be an intractable problem in many areas. Is there a practical way to deal with this that does not involve subsidies. Zoning alone (and getting rid of NIMBY) will not solve the problem as builders want to maximize income and if real estate and construction prices are high they won’t build moderate or low end housing. If such housing moves further out, one is faced with transportation problems.
Best thing that could be done is totally reform the tax code by eliminating all preferences. This is perhaps the one major way to level the playing field. Put in a VAT so consumption gets taxed at all levels.
John hare
Oct 6 2021 at 8:02am
Absent zoning, subsidies, and other hurdles, low income housing could be easy and profitable. 20 travel trailers on an almost unimproved acre for one example. Mini warehouse type construction for another. I could list several more that could rent profitably for under $500.00 a month
Jon Murphy
Oct 6 2021 at 8:30am
That’s the glory of the science that is economics and the price system. The builders do not have to build more moderate or low end housing.
Although it doesn’t strictly follow that if prices are high then the profit maximizing point is only high-income housing, let’s take that assumption as given. As builders increase supply, the price of housing falls. Thus, houses that were marginally high-income now become moderate-income, and marginally moderate income houses become low-income. And so on down the line.
Increase supply and prices fall. Econ 101.
Knut P. Heen
Oct 6 2021 at 9:02am
You could also add that building quality tends to deteriorate over time. Hence, new buildings are of high quality and old buildings are of lower quality.
Jon Murphy
Oct 6 2021 at 10:32am
That is true, but doesn’t have to be the case.
BS
Oct 6 2021 at 2:07pm
Most people who move into high-cost housing are also moving out of somewhere, creating a vacancy. I suppose in most cases the created vacancy is lower cost.
zeke5123
Oct 6 2021 at 10:45am
Elon Musk is trying to solve the broad band problem. Look up Starlink.
Bet it will be better to let him (or someone like him) try to solve it compared to Biden.
Christophe Biocca
Oct 6 2021 at 1:33pm
Plus there’s already a massive subsidy program for rural broadband, which Starlink is getting a good chunk of. It’s not clear why that program is insufficient (or whether it’s necessary in the first place).
David Henderson
Oct 6 2021 at 4:17pm
Alan,
You wrote:
I handle that question here.
Comments are closed.