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Article Artículo

Economic Growth

Globalization and Trade

IMF

Paper from IMF Shows That Recovery Is Far from Complete

Researchers at the International Monetary Fund (IMF) released a paper earlier this year on the decrease in labor force participation since 2007. They conclude that although structural components have played a role in the decline, there is a large cyclical component present as well, meaning that labor force participation can still recover significantly without risking accelerating inflation. While we can quibble with some of their exact numbers—they argue that up to 43 percent of the drop in participation rates between 2007 and 2013 can be attributed to cyclical effects, while I’d argue that it’s a bit higher—their more general findings are surely correct.

CEPR and Nicolas Buffie / July 16, 2015

Article Artículo

Affordable Care Act

Birthday Boasts: 2015

I seem to have missed the annual boastfest last year, but I will put in a few words this time. (For those interested, you can find the original set here and a 2013 sequel.)

Financial Transactions Taxes

First, one of big five predictions of things to come seems to be happening. The idea of a financial transactions tax (FTT) has made it into polite circles. Two of the declared presidential candidates openly support it, with long-time proponent Bernie Sanders leading the way. The Tax Policy Center of the Brookings Institution and the Urban Institute did an analysis showing that a tax could raise more than $50 billion a year and would be highly progressive. And Representative Chris Van Hollen, a member of the Democratic Party leadership in the House, proposed an economic plan that had a FTT as its financing mechanism.

The financial industry is of course hugely powerful. The cost of the tax to the industry swamps the cost of Dodd-Frank and any other financial reform measures currently being discussed. For this reason, the Wall Street folks will do almost anything to stop a FTT, so we are very far from having a bill passed into law or even being seriously debated. But we have made enormous progress. The FTT is no longer treated as a nutty idea.

The Death of the Young Invincibles and the Affordable Care Act

There are a few other areas where I will take some credit. First, I helped to kill the young invincibles. This is the idea that healthy “young” people are somehow essential for the smooth workings of the health care exchanges created by the Affordable Care Act. It is essential that healthy people sign up for the exchanges, but it doesn’t matter that they are young. In fact, it is actually better for the system to get an older healthy person since they will pay three times as much on average in premiums as a healthy young person.

Reporters seem to have come to understand this basic point. (A Kaiser Family Foundation study was very helpful.) There is much less talk of the need for young people to sign up for the exchanges.

The End of “Free Trade”

In another area, reporting on trade agreements seems to be improving as it is less common to hear reports refer to these deals as “free trade” agreements. There appears to be a growing recognition among reporters that these deals are primarily about putting in place a new regulatory structure. (In fact, the goal is a business friendly regulatory structure, but we’ll leave that one aside for now.) For the most part these regulations have little to do with trade and some quite explicitly involve more protection, such as patent and copyright protection.

Dean Baker / July 13, 2015