On December 4, I made a presentation to a student group on Carbon Pricing and Its Enemies. Here is a link to the slides for the presentation. Watch this space for a narrative version, hopefully available soon,
Ed Dolan's Econ Blog
A Resource for Understanding Economics
Wednesday, December 4, 2019
Friday, November 15, 2019
Can We Put Everyone to Work?
Temporary link to slideshow "Can We Put Everyone to Work," presented at Economic Club of Traverse City, MI, November 15, 2019.
Monday, October 28, 2019
Can Pete Buttigieg Save Democrats from the Medicare for All Trap?
The Democratic Party is at risk of falling into a trap on
health care — a trap called “Medicare for All.” But at the Democrats’ October
15 debate for presidential candidates, Pete Buttigieg offered a plan that could
allow a timely escape.
Buttigieg began by characterizing his plan, Medicare
for All Who Want It (M4AWW), as one that “trusts you to make the
right decision for your health care and for your family. Unlike the purist form
of Medicare for All promoted by Warren and Bernie Sanders, Buttigieg maintained
that his plan could be “delivered without an increase on the middle-class
taxes.”
Warren replied, “So, let’s be clear. Whenever someone hears
the term Medicare for All Who Want It, understand what that really means. It’s
Medicare for all who can afford it,” clearly implying that M4AWW would leave
some Americans still unable to afford the health care they need.
This attack on the Buttigieg plan misses the mark. Contrary
to Warren’s claim, the approach taken by Buttigieg — and shared by several
related reform proposals — would not, regardless of their income, leave out
“the family whose child has been diagnosed with cancer” or “the person who’s
just gotten an MS diagnosis.” It would instead protect everyone from ruinous
medical bills, but do so in a way that avoids, as Buttigieg puts it, blowing a
“giant multi-trillion-dollar hole” in the federal budget.
All this is easily understood by anyone who takes the time
to see how Medicare for All Who Want It, and related proposals, actually work.
Here are some of the plan’s key points.
Friday, October 11, 2019
What Can Welfare Experiments of the 1970s Tell Us About a UBI?
In a recent commentary, I examined
what economic theory can tell us about the effects a universal basic income
would have on work incentives. But theory alone is not enough. We need also to
look at evidence. The following will review the evidence from a set of
experiments that were conducted in the 1970s as part of an attempt to make
antipoverty policies of that era more effective.
These welfare experiments — or income maintenance
experiments (IMEs) as we should more properly call them — were true
randomized field trials. Such trials are considered the gold standard for
testing new medicines or new crop varieties, but they are used all too rarely
for testing economic policies. (By way of exception, another
set of welfare experiments were conducted in the 1990s in conjunction
with the welfare reforms of the Clinton years.)
Critics often say that UBI supporters pay insufficient
attention to the IMEs. As Bryan
Caplan puts it, in a recent piece for at the Library of Economics and
Liberty,
If I were an enthusiastic UBI advocate, I would know this experimental evidence forwards and backwards. Almost all of the advocates I’ve encountered, in contrast, have little interest in numbers or past experience. What excites them is the “One Ring to Rule Them All” logic of the idea: “We get rid of everything else, and replace it with an elegant, gift-wrapped UBI.” For a policy salesman, this evasive approach makes sense: Slogans sell; numbers and history don’t. For a policy analyst, however, this evasive approach is negligence itself. If you scrutinize your policy ideas less cautiously than you read Amazon reviews for your next television, something is very wrong.
Writing on the Heritage Foundation website, Robert Rector and Mimi
Teixeira echo Caplan’s sentiments. They point to the IMEs of the 1970s to
support their view that a UBI would harm recipients and increase dependence on
government. Their conclusion:
Universal basic income policy is an idea with a record of failure; policymakers seeking to reform the welfare state should focus instead on policies proven to work.
But are those really the lessons of the IMEs?
Thursday, October 3, 2019
Would a UBI Reduce Work Incentives? Some Answers from Econ 101
More than half of all U.S. college students take a
basic economics course. A lot of them hate it. The course is full of graphs and
charts. That would be bad enough, but what makes it worse is that the graphs in
a typical Econ 101 textbook are about boring stuff — whether a farmer should
grow beans or peas, whether a student should eat pizza or burritos for lunch.
Who cares?
But, what if we put those Econ 101 tools to work on
something we do care about — something like a Universal Basic
Income? Then things could get interesting. Read on to see how we can use some
basic econ graphs to answer one of the most frequently asked questions about
basic income: Would a UBI reduce work incentives?
How our welfare system kills work incentives
We can begin by showing how our current welfare system kills
work incentives. Welfare as we know it is based on means testing.
The concept of means testing, as applied to programs like SNAP, TANF, and
Medicaid, is that if you are really poor, the government gives you benefits,
but if you try to work and get ahead on your own, the government takes your
benefits away. Not surprisingly, that is not the way to encourage work.
Rather than go through the incentive effects of existing
programs one by one (I’ve done that elsewhere), this post will keep things simple by looking at
a generic means-tested income support (MTIS) policy.
Tuesday, October 1, 2019
How Generous a Basic Income Could We Afford?
Summary: Basic income advocates often
encounter the objection, “We can’t afford it!” To counter that objection
convincingly, they need to address several key questions:
- What
resources can a basic income draw upon? Which existing income support
programs would be rendered unnecessary if an adequate basic income were in
place?
- How
would a basic income mesh with other social programs, especially health
care, child care, and social security?
- Who
would be eligible for a UBI? The entire population? Citizens only? Adults
only?
- Does an adequate basic income have to be generous enough to raise everyone out of poverty by itself, or would something less than that be enough?
__________________________________________
In search of a baseline UBI
To many people, a universal basic income (UBI) sounds like a
good idea — until you start thinking about whether we could afford it.
Robert Greenstein, President of the Center for Budget and
Policy Priorities, is no enemy of robust government programs to help the poor, yet he is an outspoken critic of a UBI. Affordability is Greenstein’s number one concern. He argues that giving a UBI of $10,000 a
year to the entire U.S. population of 327 million people would cost $3.27
trillion, about equal to the entire
annual revenue of the U.S. government. It’s hard to imagine that
such a UBI would advance very far, he says.
But is asking whether we could afford a UBI of any given
size really the right question? A more sensible starting point might be to
ask how much basic income we could afford if we used only what the government
is already spending on income support, without raising taxes or total spending
at all. The answer to that question gives us a baseline UBI that
that we can use as a point of reference.
Determining how generous that baseline UBI would be involves
two steps: First determining how much money could be made available by
redirecting existing income support spending to a basic income (the numerator),
and second, determining how many people would be eligible to receive benefits (the
denominator). The baseline UBI is then equal to total funds divided by the
eligible population.
Here goes.
Thursday, September 12, 2019
Latest Data on Poverty and Inequality Show Small Improvements but No Break in Long-Term Trends
On Tuesday, the Census Bureau released the latest data on poverty and
income distribution for U.S. households. They show small improvements for 2018
compared with the year before, as would be expected with unemployment nearing
50-year lows. However, the short-term gains were not large enough to constitute
a break with long-term trends.
One piece of welcome news was a drop in the percentage of
people living in poverty from 12.7 percent in 2017 to 11.8 percent in 2018.
Still, as the following chart shows, the 2018 poverty rate remains above the
lows reached in the 1970s and again at the turn of the century. The longer-term
trend of the official poverty rate since the late 1960s remains upward even
when recent decreases are taken into account.
The official poverty rate is only one of several ways of
looking at income distribution in America. The Gini
index provides another perspective. This statistic varies from a
possible value of zero, when distribution is perfectly equal (like a cake cut
into equal slices) and 100 for a winner-take-all situation (like a hand of
poker where the winner gets everyone else’s chips). The same statistic is
sometimes on a scale of zero to one, in which case it is called the Gini
coefficient or Gini ratio.
Subscribe to:
Posts (Atom)