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VA Senate Committee Kills Vote Rigging Plan

Crooks and Liars - Mon, 2038-01-18 21:14

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ProgressVirginia reported Tuesday afternoon that the Virginia Senate’s Privileges and Elections Committee killed Sen. Charles “Bill” Carrico Sr.’s electoral college-rigging bill, despite an offer by Carrico to amend the bill to award electors in proportion to the state’s popular vote. The vote was 11-4 against the bill, although it will not be official until the close of the committee meeting.

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The 9th problem with the Common Core standards

Washington Post National - Sat, 2017-09-16 08:30

The previous post, in support of the Common Core State Standards, is a response to an August piece by veteran educator Marion Brady that was highly critical of the standards initiative. Here Brady takes another wack at the standards.

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Categories: News, US

**Must_Read: Alisdair McKay and Ricardo

Grasping Reality with Tractor Beams - Wed, 2016-07-27 17:33

Must_Read: Alisdair McKay and Ricardo Reis: Designing effective automatic stabilisers of the business cycle: "Brexit has raised the possibility of a recession on both sides of the Atlantic. Unable to use traditional remedies like monetary or fiscal policy stimulus, policymakers may consider automatic fiscal stabilisers. This column examines the impact of automatic stabilisers through social insurance on the business cycle, and how its impact can be used to mitigate recession. Unemployment insurance or food stamps would be better than progressive taxes at stimulating aggregate demand. The main economic channels policymakers must consider are those related to risk and precautionary savings. 

? AA Related The long-term decline in US prime-age male labour force participation and policies to address it Sandra E. Black, Jason Furman, Emma Rackstraw, Nirupama Rao Fiscal policy for enduring growth Marco Buti, Vitor Gaspar Automatic stabilisers and the global crisis Mathias Dolls, Clemens Fuest, Andreas Peichl As the prospects of a recession in the near term have risen on both sides of the Atlantic in the wake of the Brexit referendum, there is a strong concern that traditional aggregate demand policies will not be available. Monetary policy may be running out of stimulative tools, and the political mood is against the use of discretionary fiscal stimulus. A remaining available option is the use of automatic fiscal stabilisers.

The social insurance system stands at the centre of automatic stabilisers, yet we still know too little about how it affects the macroeconomy (Blanchard et al. 2010). There is a large literature on optimal social insurance systems, and how to balance the insurance value of insulating individuals from fluctuations in their market income against the incentive cost of reducing the return to work (Mirrlees 1971, Varian 1980, Baily 1978). But much less is known about how these policies stabilise the business cycle.

In a new paper, we investigate how the social insurance system affects the dynamics of the business cycle, and whether its stabilising effects call for a more or less generous social insurance system (McKay and Reis 2016a).  We focus on two key programmes: a progressive tax system, and unemployment insurance.  We find that unemployment insurance has a substantial stabilising effect on the business cycle, and as a result the optimal policy is to have a more generous unemployment benefit than would be optimal in a world without macroeconomic fluctuations.  On the other hand, the progressivity of the tax appears to have little effect on the business cycle.

Why does unemployment insurance stabilise the business cycle? When households become unemployed, they reduce their consumption sharply (e.g. Browning and Crossley 2001). As a result, in a recession, the low consumption of unemployed individuals relative to the employed leads to a decline in aggregate consumption demand. By reducing the consumption impact of unemployment, a more generous unemployment insurance system mitigates this fall in aggregate demand. Unemployment insurance is a transfer from employed workers to unemployed workers and the marginal propensity to consume seems to be larger for individuals experiencing a period of low income such as unemployment (Parker et al. 2013). This transfer component of unemployment insurance is particularly important because households that  have been unemployed for more than a few months have often depleted many of their other resources to smooth their consumption in the face of unemployment, leaving them more likely to spend out of the transfer (Kekre 2016).

While this redistribution channel based on marginal propensities to consume is the classic explanation of how unemployment benefits function as an automatic stabiliser, we find that benefits have an even more important effect on the economy. Households face considerable uncertainty over employment and over the wages they earn when employed. The fear of losing their income because of an unemployment spell in the future leads workers to want to save, and so reduce their consumption.  That is, unemployment reduces aggregate consumption demand not just by reducing the current income of unemployed workers but also by inducing precautionary savings by all workers who fear the possibility of unemployment.  By making unemployment less painful, unemployment benefits reduce these concerns and give workers confidence to spend. 

Why is stabilising the business cycle valuable? Economists have pointed out many welfare costs of business cycle fluctuations. First, recessions can result in inefficient levels of unemployment and hours worked, because different frictions and deviations from perfect competition do not allow the invisible hand to operate. Second, recessions are times of elevated risk for individual households (Guvenen et al. 2014, Davis and von Wachter 2011), which lead to increased income inequality. From a utilitarian perspective, for a given level of aggregate consumption, inequality reduces welfare as it creates differences in marginal utilities of consumption. Finally, with nominal rigidities, fluctuations in inflation lead to unwarranted dispersion in relative prices, which result in an inefficient allocation of demand across firms.

What is an automatic stabiliser? Our analysis leads to a natural definition of the term ‘automatic stabiliser’. The unemployment insurance system is an automatic stabiliser because even with a fixed generosity of benefits, the system stimulates aggregate demand in a recession more than it does in an expansion. One way to put this is that there is a negative correlation between the output gap and the elasticity of output with respect to the level of benefits. This property is the hallmark of an automatic stabiliser.

Are these considerations quantitatively important? When we quantify our model, we find that business cycle stabilisation considerations increase the optimal unemployment benefit replacement quite substantially.  We find that in the optimal unemployment insurance replacement rate is 49%, while it would be 36% in the absence of business cycles. This finding reflects two components of our analysis. First, the unemployment insurance system is very effective at stabilising the business cycle by dampening the cyclical swings in household precautionary savings motives. Second, recessions have large welfare costs due to the increase in uninsurable risks that households face.

While similar arguments can be put forward for the benefit of more progressive income taxes, both in terms of redistributing resources in a recession and by lowering precautionary savings, progressive income taxes have a stronger negative effect on average economic activity and a more limited effect on volatility, because of the comparatively small variation in income of those continuously employed during the business cycle. Therefore, we find that considering automatic stabilisation has a negligible effect on the desired level of progressivity.

Conclusion Recent estimates suggest that existing automatic stabilisers provide little actual stabilisation, with the exception of small programmes like food stamps in US (McKay and Reis 2016b). In great part, this happens because of the way these programmes were designed, with optimal social insurance in mind, while business-cycle stabilisation was treated as a fortuitous side benefit. Fiscal policy in recessions has then ended up relying on large discretionary fiscal stimulus packages that are too often slow to be adopted, imprecisely targeted, time inconsistent, and as distortionary as they are potentially stimulative.

Designing better automatic stabilisers holds the promise of achieving a more efficient business cycle and reducing the use of ad hoc fiscal stimulus packages. The new research described here tries to understand how large redistributive programmes like unemployment insurance and progressivity of income taxes affect the business cycle, and how to trade off their macroeconomic stabilisation role with their social insurance role. While the policy conclusions from this work are still far from being definite, they already point to unemployment insurance or food stamps as programmes to focus on (as opposed to progressive income taxes), and to the main economic channels at play and variables to measure being those related to risk and precautionary savings (as opposed to marginal propensities to consume).

References Baily, M N (1978), 'Some aspects of optimal unemployment insurance', Journal of Public Economics, 10 (3), 379-402

Blanchard, O, G Dell’Ariccia, and P Mauro (2010), ‘Rethinking macroeconomic policy’, Journal of Money, Credit and Banking, 42 (s1), 199–215

Browning, M, and T F Crossley (2001), 'Unemployment insurance benefit levels and consumption changes', Journal of Public Economics, 80 (1), 1-23

Davis, S J, and T von Wachter (2011), 'Recessions and the Costs of Job Loss', Brookings Papers on Economic Activity, 2011-2, 1-72

Guvenen, F, S Ozkan, and J Song (2014), 'The Nature of Countercyclical Income Risk', Journal of Political Economy, 122 (3), 621-660

Kekre, R (2016), ‘Unemployment Insurance in Macroeconomic Stabilization’, working paper

McKay, A, and R Reis (2016a), ‘Optimal Automatic Stabilizers’, CEPR Discussion Paper 11337

McKay, A, and R Reis (2016b), ‘The Role of Automatic Stabilizers in the U.S. Business Cycle’, Econometrica, 84 (1), 141-194

Mirrlees, J A (1971), 'An exploration in the theory of optimum income taxation', The Review of Economic Studies, 38 (2),175-208

Parker, J A, N S Souleles, D S Johnson, and R McClelland (2013),'Consumer spending and the economic stimulus payments of 2008.' The American Economic Review, 103 (6), 2530-2553

Varian, H R (1980), 'Redistributive taxation as social insurance', Journal of Public Economics, 14 (1), 49-68"

McKay and Reis:

"Unemployment insurance or food stamps... better than progressive taxes.... The main economic channels policymakers must consider are those related to risk and precautionary savings.... When households become unemployed, they reduce their consumption sharply.... A more generous unemployment insurance system mitigates this fall.... We find that in the optimal unemployment insurance replacement rate is 49%, while it would be 36% in the absence of business cycles....

Progressive income taxes... have... a more limited effect on volatility, because of the comparatively small variation in income of those continuously employed.... Existing automatic stabilisers provide little actual stabilisation, with the exception of small programmes like food stamps in US. In great part, this happens because of the way these programmes were designed, with optimal social insurance in mind.... Designing better automatic stabilisers holds the promise of achieving a more efficient business cycle and reducing the use of ad hoc fiscal stimulus packages.

Baily, M N (1978), 'Some aspects of optimal unemployment insurance', Journal of Public Economics, 10 (3), 379-402

Blanchard, O, G Dell’Ariccia, and P Mauro (2010), ‘Rethinking macroeconomic policy’, Journal of Money, Credit and Banking, 42 (s1), 199–215

Browning, M, and T F Crossley (2001), 'Unemployment insurance benefit levels and consumption changes', Journal of Public Economics, 80 (1), 1-23

Davis, S J, and T von Wachter (2011), 'Recessions and the Costs of Job Loss', Brookings Papers on Economic Activity, 2011-2, 1-72

Guvenen, F, S Ozkan, and J Song (2014), 'The Nature of Countercyclical Income Risk', Journal of Political Economy, 122 (3), 621-660

Kekre, R (2016), ‘Unemployment Insurance in Macroeconomic Stabilization’, working paper

McKay, A, and R Reis (2016a), ‘Optimal Automatic Stabilizers’, CEPR Discussion Paper 11337

McKay, A, and R Reis (2016b), ‘The Role of Automatic Stabilizers in the U.S. Business Cycle’, Econometrica, 84 (1), 141-194

Mirrlees, J A (1971), 'An exploration in the theory of optimum income taxation', The Review of Economic Studies, 38 (2),175-208

Parker, J A, N S Souleles, D S Johnson, and R McClelland (2013),'Consumer spending and the economic stimulus payments of 2008.' The American Economic Review, 103 (6), 2530-2553

Varian, H R (1980), 'Redistributive taxation as social insurance', Journal of Public Economics, 14 (1), 49-68"

Browning and Crossley 2001

(McKay and Reis 2016b)

(Parker et al. 2013) Kekre 2016

Recessions are times of elevated risk for individual households (Guvenen et al. 2014, Davis and von Wachter 2011), which lead to increased income inequality....

recessions have large welfare costs due to the increase in uninsurable risks that households face.

Davis, S J, and T von Wachter (2011), 'Recessions and the Costs of Job Loss', Brookings Papers on Economic Activity, 2011-2, 1-72

Categories: Blog, Econonmics

**Must-Read: Danny Yagan**: [Is the

Grasping Reality with Tractor Beams - Tue, 2016-07-26 17:31

Must-Read: Danny Yagan: Is the Great Recession Really Over?: "" Longitudinal Evidence of Enduring Employment Impacts∗ Danny Yagan UC Berkeley and NBER July 2016 Abstract The severity of the Great Recession varied across U.S. local areas. Comparing two million workers within firms across space, I find that starting the recession in a below- median 2007-2009-employment-shock area caused workers to be 1.0 percentage points less likely to be employed in 2014, relative to starting the recession elsewhere. This enduring impact holds even when controlling for current local unemployment rates, which have converged across space. The results demonstrate limits to U.S. local labor market integration and suggest hysteresis effects culminating in labor force exit.

Categories: Blog, Econonmics

Equitable Growth Announces Third Annual Class of Grantees - Equitable Growth

Grasping Reality with Tractor Beams - Mon, 2016-07-25 16:13

: Equitable Growth Announces Third Annual Class of Grantees - Equitable Growth: "Macroeconomics

Three academic grants will support research on how economic inequality affects macroeconomic growth and stability:

Jess Benhabib, Alberto Bisin, and Mi Luo of New York University will assess how the distribution of earned income, the rate of return for various assets, and the nature of bequests determine wealth inequality. Gauti Eggertsson and Neil Mehrotra of Brown University will build a model to demonstrate how higher income inequality has reduced the natural rate of interest through increased overall saving. Adriana Kugler and Ammar Farooq of Georgetown University will examine whether extensions of unemployment insurance benefits improve job-match quality, and the role that unemployment insurance plays in improving worker outcomes. Three doctoral grants will support further research on the macroeconomy:

Alexander Bartik of the Massachusetts Institute of Technology will explore the distributional implications of fracking and mass transit expansions using longitudinal U.S. Census Bureau microdata. John Coglianese of Harvard University will construct a comprehensive measure of underemployment and integrate it into commonly-used economic models to showcase the effects of underemployment on the functioning of the labor market. Andrew Elrod of the University of California-Santa Barbara will examine how the reorganization of the U.S. banking sector after World War II altered the relationship between profitable investment and macroeconomic stability. Human Capital and the Labor Market

Two academic grants will support research on how economic inequality affects the development of human capital, and to what extent aggregate trends in human capital explain inequality dynamics:

Christopher Jencks and Beth Truesdale of Harvard University will investigate the relationship between inequality and health outcomes, which will further research on the relationship between income and life expectancy. Marta Murray-Close and Joya Misra of the University of Massachusetts-Amherst will construct estimates of how parenthood contributes to the gender wage gap and, in turn, how supporting working parents is key to promoting gender equity. Three doctoral grants will support further research on human capital:

Sydnee Caldwell of the Massachusetts Institute of Technology will draw on employer-employee data to document access to high-wage firms and movements between high- and low-wage firms over the span of a worker’s career. Blythe George of Harvard University will focus on the lack of employment options and life outcomes on the Yurok and Hoopa Valley Native American tribal reservations. Mariana Zerpa of the University of Arizona will explore the impact of large-scale, publicly-funded preschool education programs on health and developmental outcomes for children ages 4 to 12. Innovation

Two academic grants will support research on how economic inequality affects the quantity and quality of innovation, and whether technology innovations, in turn, impact inequality:

Kyle Herkenhoff of the University of Minnesota and Gordon Phillips of Dartmouth College will study access to credit, via the removal of bankruptcy flags, on key outcomes, including business formation rates, earnings, and profitability. Heidi Williams of the Massachusetts Institute of Technology, Patrick Kline of the University of California-Berkeley, Neviana Petkova of the U.S. Department of the Treasury, and Owen Zidar of the University of Chicago will create a new dataset that links patent applications to business tax records to estimate the relative effects of patent-generated monopoly rents on firm returns and worker wages. Two doctoral grants will support further research on innovation:

Xavier Jaravel of Harvard University will examine whether economic inequality affects the type of innovation that takes place and who benefits from that innovation. Hannah Rubinton of Princeton University will analyze how trends in firm start-up rates affect consumer welfare and productivity growth. Governance and Institutions 

Three academic grants will support research on how levels and trends in economic inequality affect the quality of social and political institutions that contribute to economic well-being and economic growth:

Manasi Deshpande of the University of Chicago, Tal Gross of Columbia University, and Jialan Wang of the U.S. Consumer Financial Protection Bureau will quantify how public assistance affects households’ financial well-being through increasing access to credit. Jane Waldfogel and Ann Bartel of Columbia University, Maya Rossin-Slater of the University of California-Santa Barbara, and Christopher Ruhm of the University of Virginia will investigate inequality in employer-provided paid parental leave in New York, New Jersey, and Pennsylvania. Joan Williams of the University of California-Hastings College of the Law, Susan Lambert of the University of Chicago, and Saravanan Kesavan of the University of North Carolina Kenan-Flager Business School will continue research on whether shifting hourly workers to more stable schedules results in cost savings and increases business productivity. One doctoral grant will support further research on governance and institutions:

Ellora Derenoncourt of Harvard University will use online lab experiments and employee-employer matched data to look at labor market decisions, testing for individual social preferences over payoff distributions.

#

The Washington Center for Equitable Growth is a research and grantmaking organization founded to accelerate cutting-edge analysis into whether and how structural changes in the U.S. economy, particularly related to economic inequality, affect growth. For more information, see www.equitablegrowth.org or follow us on Twitter @equitablegrowth.

"

Categories: Blog, Econonmics

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Grasping Reality with Tractor Beams - Mon, 2016-07-25 00:51

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KDE Plasma 5.7 Released

Slashdot: Linux - 31 min 4 sec ago

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