Category Archives: Economy

Why Does Immigration Matter So Much?

Source: Dante DeAntonio, Regional Financial Review, Vol. 29 no. 9, May 2019
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Given the demographic hurdles facing the U.S. economy, it becomes more clear that increasing immigration should be seen as a net positive. Although the changing face of immigration may provide slightly less support in terms of combating an aging workforce, the benefits of stronger labor force growth and the potential to fuel birthrates with a robust first generation remain clear.

Will Trump Push Too Far?

Source: Ryan Sweet, Regional Financial Review, Vol. 29 no. 9, May 2019
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The trade war between the U.S. and China continues to dominate the geopolitical sphere and cloud the global economic outlook. In this article we assess the damage so far from the trade tensions between the U.S. and China. We examine whether the tariffs have had their desired effect and highlight their costs. Finally, we present two scenarios, Trade War Standoff and Trade War Conflagration, to quantify how trade tensions could play out.

Big city growth stalls further, as the suburbs make a comeback

Source: William H. Frey, Brookings Institution blog, May 24, 2019

As we approach the end of the 2010s, the biggest cities in the United States are experiencing slower growth or population losses, according to new census estimates. The combination of city growth declines and higher suburban growth suggests that the “back to the city” trend seen at the beginning of the decade has reversed.

These trends are consistent with previous census releases for counties and metropolitan areas that point to a greater dispersion of the U.S. population as the economy and housing market pick back up, perhaps propelled by young adult millennials who may be finally departing dense urban cores as they make a delayed entrance into marriage and the housing market.

Express busways and economic development: Case study of the Miami-Dade South Express Busway

Source: Arthur C. Nelson, Robert Hibberd, Research in Transportation Economics, In Press – Corrected Proof, Available online June 10, 2019
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From the abstract:
This is the first study reporting the association between economic development and express bus transit (XBT) service. Using shift-share analysis applied to the South Miami-Dade express busway transit system, this study assesses differences in shift-share outcomes over three time periods: before the Great Recession (2004–2007), during the Great Recession and early recovery years (2008–2011), and after the Great Recession (2012–2014). Over the entire study period (2004–2014), total jobs grew within one-half mile of XBT stations. Using shift-share analysis, we find that (a) XBT station areas gained share of jobs relative to the central county (Miami-Dade) before the Great Recession, (b) continued to gain share albeit at a slower pace during the Great Recession, but (c) lost share during the post Great Recession period. Over the entire study period, land-extensive jobs (such as in manufacturing and non-manufacturing industry) lost share as did lower-wage retail-lodging-food service jobs. Jobs in knowledge, office, education and arts-entertainment-recreation economic groups gained share overall. Since the Great Recession, we surmise that XBT stations have shifted firm dynamics mostly by displacing land extensive or lower wage jobs away from station areas. Planning and policy implications are offered.

U.S. States Take Advantage Of A Prolonged Economic Expansion

Source: S&P Global Ratings, May 16, 2019
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– Consistent with a prolonged national economic expansion, overall state credit quality remains high.
– Even oil- and gas-reliant states have shown recent gains.
– Most states forecast improvement in fiscal 2019 fund balances, and preliminary indications are that April income tax collections will be strong.
– Most states project to build or maintain reserves in fiscal 2020, despite cautious revenue projections.
– Some states propose raising top taxpayers’ income taxes; others will increase gas taxes; and marijuana, sugary drinks, and plastics bags might become the new “sin” tax targets.
– Other state budgets will include funding for education, workforce development, and infrastructure.

The radical plan to change how Harvard teaches economics

Source: Dylan Matthews, Vox, May 22, 2019

Raj Chetty has an idea for introducing students to econ that could transform the field — and society…..

….Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he’s focused on the roots and consequences of economic and racial inequality. He used huge amounts of IRS tax data to map inequality of opportunity in the US down to the neighborhood, and to show that black boys in particular enjoy less upward mobility than white boys.

Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.

And while most economics courses at Harvard require Ec 10 as a prerequisite, Ec 1152 does not. Freshmen can take it as their first economics course…..

….If this were just a pedagogical shift at Harvard, that would be one thing. But Chetty is aiming to make the course a model for other schools. After the financial crisis, many economists have concluded that Econ 101 is broken across the university system and is not preparing students for a world where markets frequently fail. Chetty’s class offers a new way to teach an introductory course, yet at the same time is more closely aligned with what contemporary economic research looks like. The course’s lecture videos are already available online, for students at other institutions to use…..

The Economic Effects of the 2017 Tax Revision: Preliminary Observations

Source: Jane G. Gravelle, Donald J. Marples, Congressional Research Service, CRS Report, R45736, May 22, 2019

The 2017 tax revision, P.L. 115-97, often referred to as the Tax Cuts and Jobs Act, and referred to subsequently as the Act, was estimated to reduce taxes by $1.5 trillion over 10 years. The Act permanently reduced the corporate tax rate to 21%, made a number of revisions in business tax deductions (including limits on interest deductions), and provided a major revision in the international tax rules. It also substantially revised individual income taxes, including an increase in the standard deduction and child credit largely offset by eliminating personal exemptions, along with rate cuts, limits on itemized deductions (primarily a dollar cap on the state and local tax deduction), and a 20% deduction for pass-through businesses (businesses taxed under the individual rather than the corporate tax, such as partnerships). These individual provisions are temporary and are scheduled to expire after 2025. The Act also adopted temporary provisions allowing the immediate deduction for equipment investment and an increase in the exemption for estate and gift taxes…..

….This analysis examines the preliminary effects of the Act during the first year, 2018. In some cases it is difficult to determine the effects of the tax cuts (e.g., on economic growth) given the other factors that affect outcomes. In other cases, such as the level of repatriation and use of repatriated funds, the evidence is more compelling. This report discusses these potential consequences in light of the data available after the first year…..

Pensionomics 2018: Measuring the Economic Impact of Multiemployer DB Pension Expenditures

Source: Diane Oakley, Ilana Boivie, National Institute on Retirement Security, Issue Brief, January 2019

From the abstract:
This study analyzes data on specific private sector pension plans (referred to as “multiemployer plans”) to assess the overall national economic impact of benefits paid by these plans to retirees.

We estimate the employment, output, value added, and tax impacts of pension benefit expenditures from multiemployer plans at the national level, and find that the economic gains attributable to private sector multiemployer DB pension expenditures are considerable.

In 2016, $41.8 billion in pension benefits were paid to 3.5 million retired Americans covered by multiemployer plans. The average benefit paid to retirees covered by these plans was $11,935 per year. Expenditures made out of those pension payments collectively supported:

– Nearly 543,000 American jobs that paid nearly $28 billion in labor income
– $89 billion in total economic output nationwide;
– $50 billion in value added (GDP); and
– $14.7 billion in federal, state, and local tax revenue.

The largest employment impacts occurred in the real estate, food services, health care, and retail trade sectors.

Most states have the financial flexibility and reserves to manage a recession

Source: Emily Raimes, Timothy Blake, Daniel Ortega, Nicholas Samuels, Moody’s, Sector In-Depth, State government – US, May 20, 2019
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Economic conditions in the US are strong, and the probability of a recession beginning within the next year appears to be low. States are aware that a downturn will come eventually, however, and are building reserves to prepare. According to our scenario analysis, most states will be able to weather a moderate recession without significant adverse credit impact, in large part because of healthy reserves and inherently strong fiscal flexibility. Recession preparedness is stronger for 22 states, moderate for 26 and weaker for two…..

Traditional Measures of Unemployment Are Missing the Mark

Source: Mark Paul, Dollars & Sense, no. 341, web-only, May/June 2019

We’ve heard it countless times in recent media accounts: The economy is at “full employment.” The most recent jobs numbers, out the first week in May, show the official unemployment rate, and applications for unemployment benefits are at a 50-year low. The last time a recovery was able to push the unemployment rate to these levels was in 1969, when my mom was just entering elementary school and the United States was in the heyday of the “Golden Age” of capitalism.

But economists are puzzled. Despite low unemployment (the current rate is just 3.6%), significant wage increases remain elusive. In other words, workers aren’t benefiting much. This is deeply troubling in an era of unprecedented inequality, driven in large part by decades of a falling wage share. The size of our economic pie may be getting bigger, but the wage share, or the share of the economic pie going to workers, has been contracting. Furthermore, a lack of wage growth isn’t allowing for the true recovery that Main Street so desperately needs…..