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Article Artículo

Latin America and the Caribbean

Mexico

World

Mexican Elections and Morena’s Challenge

The June 4 governor’s election in the State of Mexico (or Edomex), the most populous state in Mexico, came close to ending the Partido Revolucionario Institucional’s (PRI) nearly nine-decade-long control over the state.

Throughout the campaign and its aftermath, PRI’s illegal election interference, or what the New York Times called “business as usual in the State of Mexico,” 1 was widely documented by independent observers. Even as PRI-controlled election monitors proclaimed their candidate the victor with a slim plurality, evidence of extensive irregularities undermined the results’ legitimacy. The absence of a clear mandate produced a scandal and strengthened the prospects of the leading opposition party ahead of the 2018 presidential elections.

It wasn’t the Partido de Acción Nacional (PAN), the right-wing party that had interrupted the PRI’s grip on the presidency with the elections of Vicente Fox in 2000 and Felipe Calderón in 2006, that threatened PRI’s stranglehold on the state. Rather, a new political force, the Movimiento Regeneración Nacional (Morena), emerged as the most credible challenger to the PRI.

CEPR and Jared Flanery / July 27, 2017

Article Artículo

Economic Growth

United States

Workers

Will Lower Taxes Get Us Higher Growth? The Labor Market Doesn’t Seem to Think So

Last week four prominent Republican economists, John Cogan, Glenn Hubbard, John Taylor, and Kevin Warsh released a short paper arguing that it would be possible to have substantially more rapid growth if we cut taxes and reduced regulation. A big part of their story was that we would see substantially more labor force participation if workers faced lower tax rates, and therefore got to keep a larger share of their pay.

While there are many factors that affect people’s decision to work other than tax rates, such as before tax pay and access to child care, it is worth looking at what happened to employment in the years following the tax cuts put in place by President George W. Bush in 2001. This is an interesting question because President Clinton raised taxes in 1993, although the tax increase almost exclusively affected upper income people. Nonetheless we can compare a higher tax period, 1993-2001, with a lower tax period, 2001-2012. Taxes for high-end earners rose in 2012.

Dean Baker and Brian Dew / July 26, 2017

Article Artículo

Low Inflation: Should We Worry?

Binyamin Appelbaum had an interesting discussion of inflation in the NYT yesterday. As he notes, it has been below the Fed's target throughout the recovery and, contrary to expectations, it has been falling in recent months. This suggests that the economy could be operating at a higher level of output with more employment. That would put more upward pressure on wages and lead to somewhat higher inflation. That suggests that the Fed may have been wrong in its recent interest rates hikes which were intended to slow growth.

There are a few other points worth noting about inflation while we are on the topic. While it is common to say that inflation hurts investment, at least in the U.S. this does not appear to have been the case.

fredgraph13

 

As can be seen the investment share of GDP peaked in the late 1970s and early 1980s when inflation was also running at its most rapid pace in the post-World War II era. Investment has been considerably lower as a share of GDP in the last three decades of moderate inflation. The one exception when investment got close to its peak of the high inflation era was at the end of the 1990s during the stock bubble.

CEPR / July 25, 2017