Economic policy

Cecilia Rouse on Biden’s Economic Policy, Part II

Yesterday I posted on the zoom talk that Biden CEA Chair Cecilia Rouse gave to a Stanford audience last Thursday. Here is part II. Part III will arrive tomorrow.

11:40 a.m.: Rouse notes the dramatic drop in labor market compensation from February 2020 to April 2020, “when we asked everyone to go home.”

Not quite correct. There weren’t many “requests” going on. It was mostly revealing. While I found Rouse to be someone I would find very likable if I met her, I see that she has already picked up, in just over 13 months of work, this government way of describing government coercion.

1:58 p.m.: Rouse discusses real GDP growth figures that had just come in that morning at -1.4% on an annual basis. She states that imports subtract from GDP. I’m sure she knows that’s not literally true; it simply explains arithmetic. She points out that one factor has been reduced inventory investment and another has been reduced government spending (yay!). She also notes that consumer and investment spending grew at an annual rate of 3.7%, so the news isn’t all bad. I am okay. Incidentally, I pointed this out to someone at pickleball who is almost tasked with criticizing Biden but also “gets” the economy — and he got it.

3:50 p.m.: The computer systems used to pay unemployment insurance in many states are “pretty outdated.” “They run on software like COBOL and FORTRAN.” Yes really. FORTRAN was created in 1957, COBOL in 1959. This meant that it was not easy to have a federal program giving federal unemployment benefits to people without giving away too much to many. She admits what a number of establishment economists admitted at the time, that increasing state unemployment benefits with additional federal benefits of $600 a week gave million people more money out of work than they earned while employed. Rouse concludes that “our unemployment system needs investment”. True. And do a lot of state governments do that? She didn’t say anything.

6:00 p.m.: Discussion on vaccines and positive externalities. Cost per life saved $50,000, assuming the number of lives saved in the United States is one million. (I’m pretty skeptical of his one million lives saved.) But the $50,000 is insignificant compared to the value of life. I haven’t checked his data.

9 p.m.: Climate change.

10:00 p.m.: Rouse implicitly attributes the increase in wildfires to climate change.

11:20 p.m.: Rouse says, using UK data, that there is no big trade-off between economic growth and using carbon taxes to reduce carbon use.

24:00: Increase in inequalities.

11:20 p.m.: Immigration can play an important role in expanding the labor force. Immigrants are often innovators. Moreover, they are often complementary to the American workforce, which increases productivity. The CEA estimates that due to Trump’s immigration policies and the pandemic, we have approximately one million fewer immigrants than we would have had otherwise.

11:30 p.m.: The administration can make reforms without Congress by catching up on green card renewals and ensuring adequate numbers of H-2B visas and H1-B visas. To maintain our economic growth, we will have to welcome immigrants. Good for her.

As I said, Part III is tomorrow.