Economic policy

Cecilia Rouse on Biden’s Economic Policy, Part I

Last Thursday, Cecilia Rouse, chair of President Biden’s Council of Economic Advisers, gave a Zoom talk at the Stanford Institute for Economic Policy Research (SIEPR). I “attended” for the first 20 minutes, but then signed on to “attend” another Stanford Zoom talk presented by Scott Atlas.

But I went back, as Jen Psaki would say, to watch the rest of the lecture, which you can find here. I was particularly wondering if and how Rouse would treat the graph on declining black and Hispanic poverty that I’ve highlighted and discussed here, which, by the way, the wall street journal used as “Noteworthy and Quotablein their April 28, 2022 print issue (April 27 online.)

Here is the relevant part, at point 24:50:

Rouse shows the graph I commented on. Notice the little gray bar at the end. There are two interesting things here. First, she introduces the problem by talking about inequality. But then she talks about the decline in poverty. That’s what she should be talking about. I don’t care, and I bet most poor people don’t care, if inequality increases if the poorest improve dramatically, as the graph shows. Notice the accelerating decline in black and Hispanic poverty from 2017 to 2020. Rouse seems to care about blacks and Hispanics. But what is she focusing on? The little gray at the end: the decline in poverty from 2019 to 2020, which happened, as she correctly said, because of the huge child care tax credit in the law CARES from March 2020. Is she so uncurious not to wonder why poverty among black and Hispanic households fell from 2017 to 2019, without the increase in the Child Care Tax Credit? If anyone cares about reducing poverty, isn’t it important to examine why these reductions took place before the increase in the child tax credit?

This, to me, was the most disappointing part of his speech. The doorman for questions was the host, economist Mark Duggan. I don’t know if anyone asked about this. If so, Duggan didn’t ask them.

Much later, around 46:08, when she talks about the 2017 tax bill, she focuses on some of the tax breaks it created for the very wealthy, without mentioning what they are. She should be aware of the tax relief for the wealthy that the bill significantly reduced, namely the restriction of deductions for state and local taxes for those who itemize.

Rouse says it’s “not at all clear” that the tax cut had good effects. We haven’t seen any big positive effects from the tax bill. Really? One of his predecessors, Trump CEA Chairman Kevin Hassett, did a fairly careful analysis of the growth effects of the tax cut. His analysis helps us understand how the tax cut could actually be the cause of the sharp drop in poverty. This is far more cautious than anything Rouse and her colleagues have done on the same issue in their 2022 report. Is this just bad propaganda or does she know something we don’t?

In Part II, I will highlight other parts of his speech, including some parts that I liked, especially on immigration and the FDA.