➔ Phenomenal World

February 18th, 2020

➔ Phenomenal World

The Importance of Being Evergreen

ADMINISTRATION PRIMARY

A comparative overview of national healthcare systems

In an employer-sponsored healthcare system like that of the United States, deteriorating labor market protections have immediate consequences for access to healthcare. Democratic primary candidates have presented a number of proposals to address declining rates of insurance, ranging in degrees of accessibility, coverage, and number of providers.

In her 1992 book, Healthcare Politics, ELLEN M. IMMERGUT seeks to explain America's healthcare system through a comparison of its history to Switzerland's, France's, and Sweden's. From the author's preface:

"I compare the politics of three countries where national health insurance had been proposed, but where, as a result of political struggles, the final policy results are diverse. Medical associations in all three countries had opposed national health insurance on the grounds that doctors preferred to work as private practitioners and not as government employees. How then could one explain the fact that Switzerland rejected national health insurance, France accepted it, and Sweden not only enacted national health insurance, but later converted its health system to a de facto national health service? The history of each case pointed insistently to the role played by standard political institutions. The Swiss referendum, the French parliament, and the Swedish executive bureaucracy emerged as key elements in an explanation of national health insurance politics in those countries.

The resulting book argues for the primacy of these institutions in explaining policy outcomes precisely because they facilitate or impede the entry of different groups into the policy-making process. In Switzerland, the public interest on any specific policy issue is viewed as the sum of the demands of individual citizens as expressed in national referenda. In Sweden, on the other hand, proper representation for policy issues is a matter of consensual agreements between interest groups, whose large memberships and democratic procedures ensure their responsiveness to the public. In France, the rules of representation stress the importance of an impartial executive standing above the particularistic claims of interest groups. But there is no linear relationship between a specific set of political institutions and the interest groups that will succeed or the health system that results. These histories are filled with unexpected events, sudden about faces, and new strategies. This book is a call to look at these histories, not just at the broad sweep of major events, but also at the seemingly minor struggles that make up daily political life. These are the battles that establish the constraints on politics, but they are also the junctures that extend the limits of the possible."

Link to a downloadable copy of the book.

  • "The postwar growth of public expenditures in the health sector and the growth of universalism in coverage of benefits is tied to the strength of the labor movement in each country." Vincent Navarro's influential 1989 paper situates healthcare policies within a broader distributional framework. Link.
  • "The idea of a British hospital system funded by its users is one which emerged only late in the 19th century. Before this, care was provided through thousands of voluntary hospitals." Martin Gorsky, John Mohan, and Tim Willis on "Mutualism and Healthcare" in the UK. And in a similar vein, David T. Beito's 2000 book on the fraternal societies which provided healthcare to millions of Americans throughout the 19th and early 20th centuries. Link and link.
  • A recent paper by Stefan Bauernschuster, Anastasia Driva, and Erik Hornung uses "the introduction of compulsory health insurance in the German Empire in 1884 as a natural experiment to study the impact of social health insurance on mortality," finding that "Bismarck’s health insurance generated a significant mortality reduction." Link.
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July 15th, 2019

The River

APPROPRIATION FRICTION

Swedish wage earner funds and their limitations

Beyond growing calls for welfare expansion and a more progressive tax system, recent policy debates have begun to consider alternative models of firm ownership. Last year, the UK Labour party published a report outlining a path towards a more diverse set of ownership arrangements, including worker cooperatives and municipally owned service providers. The party also articulated an intention to transition ownership of up to 10% of shares to workers in large firms. More recently, the Bernie Sanders campaign announced a proposal for the formation of inclusive ownership funds, whereby large corporations contribute a portion of their stocks to an employee controlled fund. This comes in addition to Elizabeth Warren’s Accountable Capitalism Act, which calls for increased workers representation on company boards.

These recent proposals are distinctly reminiscent of programs put forward throughout the twentieth century, the most famous of which is Sweden’s 1976 Meidner Plan. In his 1992 book, Princeton politics professor JONAS PONTUSSON analyzes the origins of the plan, and the barriers to its successful implementation. He compares the movement for wage earner funds with that of co-determination, suggesting that the failure of the former has to do with the politics of legislation:

"In unfavorable political circumstances, it made sense for organized business to avoid major political confrontation and instead use post-legislative bargaining to define co-determination. By contrast, the Meidner Plan and subsequent wage-earner funds proposals left very little room for post-legislative bargaining. In other words, the co-determination offensive was a legislative success for the same reason that the implementation of new legislation became a disappointment for labor.

Organized business spent about as much on its advertising and media campaign against wage earner funds in 1982 as the five parliamentary parties spent on the election campaign that same year. But couldn’t the labor movement have devoted more resources to acquiring the expertise needed to influence industrial policy? The final lesson seems to be that when industrial policy, and investment policy more generally, fails to address wage earner’s immediate concerns, they are bound to become less supportive of further efforts to democratize investment decisions."

Link to the book chapter, and link to an article in which Pontusson assesses the diluted version of the plan which was implemented in 1983.

  • "The concept of a society which is built on moral values remains, in my view, too promising to be extinguished by inhuman market forces." The disintegration of the Swedish model, in Rudolf Meidner’s words: Link. See also this interview with Meidner from 1998. Link.
  • In the largest study of its kind, Joseph Blasi, Douglas Kruse and Dan Weltmann explore the impact of employee stock ownership plans (ESOP) on firm performance, concluding that "Privately held ESOP companies were only half as likely as non-ESOP firms to go bankrupt or close, had significantly higher post-adoption annual employment and sales growth, and demonstrated higher sales per employee." Link.
  • In 1987, political theorist Jon Elster argued that the plan’s failure was the result of a fundamental problem in its conception of justice, which would leave much of the real decision making capabilities in the hands of the union bureaucracy. Link.
  • A report on Public-Common Partnerships, an "alternative institutional design that moves us beyond the overly simplistic binary of market/state." Link.
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July 8th, 2019

Model of a Cabin

SELECTED MOBILITY

Examining the college premium

Higher education is widely understood to be a major driver of intergenerational mobility in the United States. Despite the clear (and growing) inequalities between and within colleges, it remains the case that higher education reduces the impact that parental class position has on a graduate's life outcomes.

In an intriguing paper, associate professor of economics at Harvard XIANG ZHOU scrutinizes the implied causal relationship between college completion and intergenerational mobility. Specifically, Zhou uses a novel weighting method "to directly examine whether and to what extent a college degree moderates the influence of parental income" outside of selection effects, seeking to distinguish between the "equalization" and "selection" hypotheses of higher ed's impact on intergenerational mobility.

From the paper:

"Three decades have passed since Hout’s (1988) discovery that intergenerational mobility is higher among college graduates than among people with lower levels of education. In light of this finding, many researchers have portrayed a college degree as 'the great equalizer' that levels the playing field, and hypothesized that an expansion in postsecondary education could promote mobility because more people would benefit from the high mobility experienced by college graduates. Yet this line of reasoning rests on the implicit assumption that the 'college premium' in intergenerational mobility reflects a genuine 'meritocratic' effect of postsecondary education, an assumption that has rarely, if ever, been rigorously tested.

In fact, to the extent that college graduates from low and moderate-income families are more selected on such individual attributes as ability and motivation than those from high-income families, the high mobility observed among bachelor’s degree holders may simply reflect varying degrees of selectivity of college graduates from different family backgrounds."

In sum, Zhou finds that the "selection" hypothesis carries more weight than the "equalization" hypothesis. One implication of this finding is that "simply expanding the pool of college graduates is unlikely to boost intergenerational income mobility in the US." Link to the paper.

  • A 2011 paper by Michael Bastedo and Ozan Jaquette looks at the stratification dynamics affecting low-income students within higher ed. Link. A paper from the same year by Martha Bailey and Susan Dynarski surveys the state of inequality in postsecondary education. Link.
  • An op-ed by E. Tammy Kim in the Times argues for higher-education as a public good. Link.
  • Marshall Steinbaum and Julie Margetta Morgan's 2018 paper examines the student debt crisis in the broader context of labor market trends: "Reliance on the college earnings premium [as a measure of success] is that it focuses primarily on the individual benefit of educational attainment, implying that college is worthwhile as long as individuals are making more than they would have otherwise. But in the context of public investment in higher education, we need to know not only how individuals are faring but also how investments in higher education are affecting our workforce and the economy as a whole." Link.
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July 1st, 2019

Quandary

HOW RESEARCH AFFECTS POLICY

Results from Brazil

How can evidence inform the decisions of policymakers? What value do policymakers ascribe to academic research? In January, we highlighted Yale's Evidence in Practice project, which emphasizes the divergence between policymakers' needs and researchers' goals. Other work describes the complexity of getting evidence into policy. A new study by JONAS HJORT, DIANA MOREIRA, GAUTAM RAO, and JUAN FRANCISCO SANTINI surprises because of the simplicity of its results—policymakers in Brazilian cities and towns are willing to pay for evidence, and willing to implement (a low-cost, letter-mailing) evidence-based policy. The lack of uptake may stem more from a lack of information than a lack of interest: "Our findings make clear that it is not the case, for example, that counterfactual policies' effectiveness is widely known 'on the ground,' nor that political leaders are uninterested in, unconvinced by, or unable to act on new research information."

From the abstract:

"In one experiment, we find that mayors and other municipal officials are willing to pay to learn the results of impact evaluations, and update their beliefs when informed of the findings. They value larger-sample studies more, while not distinguishing on average between studies conducted in rich and poor countries. In a second experiment, we find that informing mayors about research on a simple and effective policy (reminder letters for taxpayers) increases the probability that their municipality implements the policy by 10 percentage points. In sum, we provide direct evidence that providing research information to political leaders can lead to policy change. Information frictions may thus help explain failures to adopt effective policies."

Link to the paper.

  • New work from Larry Orr et al addresses the question of how to take evidence from one place (or several places) and make it useful to another. "[We provide] the first empirical evidence of the ability to use multisite evaluations to predict impacts in individual localities—i.e., the ability of 'evidence‐based policy' to improve local policy." Link.
  • Cited within the Hjort et al paper is research from Eva Vivalt and Aidan Coville on how policymakers update their prior beliefs when presented with new evidence. "We find evidence of 'variance neglect,' a bias similar to extension neglect in which confidence intervals are ignored. We also find evidence of asymmetric updating on good news relative to one’s prior beliefs. Together, these results mean that policymakers might be biased towards those interventions with a greater dispersion of results." Link.
  • From David Evans at CGDev: "'The fact that giving people information does not, by itself, change how they act is one of the most firmly established in social science.' So stated a recent op-ed in the Washington Post. That’s not true. Here are ten examples where simply providing information changed behavior." Link. ht The Weekly faiV.
  • For another iteration of the question of translating evidence into policy, see our February letter on randomized controlled trials. Link.
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February 10th, 2020

Part of Some Totality

DELIBERATE ETHOS

"Informality" and globalization

Standard theories of development have been predicated on the goal of an industrialized economy with the potential for full and regularized employment. Such a view necessitates a host of statistical categories to define and measure labor markets. In a 2000 paper, PAUL E. BANGASSER writes an institutional history of the International Labor Organization's (ILO) evolving attempts to understand and quantify the category of the "informal sector"—by now a permanent feature of the global workforce.

From the paper:

"Over the past three decades, the ILO has been both the midwife and the principal international institutional home for the concept of the informal sector. While the phrase 'informal sector' came onto the development scene in 1972, its roots reach back into the economic development efforts of the 1950s and 1960s. With the surprisingly successful rebuilding of Europe and Japan following the Second World War, there seemed no reason why a similar sort of deliberate economy-building effort could not also be applied to the newly emerging countries in the Third World. This technical ethos towards development was especially strong in UN Specialized Agencies like the ILO. It allowed them a measure of protection from Cold War political crossfire without undercutting either their raison d’être nor their universality.

Attention to the informal sector crescendoed in the early 1990s. The 1991 Director General’s Report, The dilemma of the informal sector, notes that 'Contrary to earlier beliefs, the informal sector is not going to disappear spontaneously with economic growth. It is, on the contrary, likely to grow in the years to come, and with it the problems of urban poverty and congestion will also grow.' A growing urbanization is consistent with the developmental expectations of the 1950s and 1960s. However, that this trend towards urbanization would represent a nexus of seemingly unsolvable problems of grinding urban poverty is quite different from that earlier thinking. The upward spiraling dynamics of 'modernization' which were supposed to accompany urbanization, and lead to economic 'takeoff,' didn’t kick in; there wasn’t any trickle-down of any significance, nor should any be expected, at least not within any reasonable time frame. This is an important conclusion, with fundamental implications for the conventional development paradigm."

Link to the paper.

  • Keith Hart's 1973 paper "Informal Income Opportunities and Urban Employment in Ghana" coined the phrase "informal sector." From the paper: "The distinction between formal and informal income opportunities is based essentially on that between wage-earning and self-employment. The key variable is the degree of rationalization of work—that is to say, whether or not labour is recruited on a permanent and regular basis for fixed rewards." Link.
  • A 2019 paper by Aaron Benanav (previously shared here) critically appraises the ILO's attempts at defining informality, situating the emergence of the "informal sector" as tied to the mid-century efforts to "generate a globally operational concept of unemployment for use in the 'developing world.'" Link. (For a broader, less empirical take along similar lines, see Michael Denning's 2006 article "Wageless Life." Link.)
  • A new IZA paper by Andrea Brandolini and Eliana Viviano looks at contemporary employment statistics and proposes supplemental indices that "account for people's experience in labor market states (e.g. work intensity for the employed and search intensity or unemployment duration for the unemployed)." Link.
  • "All the materials and human instruments of production are present in abundance, nay in excess. But their normal collaboration is impossible, because they cannot market the goods they could produce, so as to cover even the barest costs of the production." From 1924, The Economics of Unemployment by J. A. Hobson. Link.
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June 24th, 2019

Push Pull

PROGRESS UNCOUPLE

Debating growth and the Green New Deal

In past newsletters, we have highlighted research and policy proposals relating to the Green New Deal and the literature surrounding "degrowth"—the idea that the growth imperative is at odds with human flourishing. In a recent exchange, economist Robert Pollin debates sociologists Juliet Schor and Andrew Jorgenson on the relative merits of "decoupling" and "degrowth." The former asserts that "economies can continue to grow while advancing a viable climate-stabilization project, as long as the growth process is decoupled from fossil-fuel consumption." The latter holds that public discussions over combating climate change must turn "from growthcentricity to needs- and people-centered policies."

The authors share a commitment to increased public investment, and both sides emphasize the distributional consequences of decarbonization. Their debate turns on, and illuminates larger conversations regarding the discursive frameworks and metrics we use to understand economic life. Schor and Jorgenson see reducing GDP in the global north as one element of a program to radically restructure the principles of society; Pollin understands these efforts to muddy the mandate for immediate climate action.

From Pollin:

"Let’s assume that global GDP contracts by 10 percent over the next two decades, following a degrowth scenario. That would entail a reduction of global GDP four times larger than what we experienced over the 2007–2009 financial crisis and Great Recession. In terms of CO2 emissions, the net effect of this 10 percent GDP contraction, considered on its own, would be to push emissions down by precisely 10 percent—that is, from 32 billion tons to 29 billion. So, the global economy would still not come close to bringing emissions down to 20 billion tons by 2040.

The overwhelming factor pushing emissions down will not be a contraction of overall GDP but massive growth in energy efficiency and clean renewable energy investments (which, for accounting purposes, will contribute toward increasing GDP) along with similarly dramatic cuts in fossil-fuel production and consumption (which will register as reducing GDP). In my view, addressing these matters in terms of their specifics is much more constructive than presenting broad generalities about the nature of economic growth, positive or negative."

Link to Pollin's initial paper, link to Schor and Jorgenson.

  • Pollin elaborates on this point in his follow-up statement with a case study of Japan: "Despite the fact that Japan has been close to a no-growth economy for twenty years, its CO2 emissions remain among the highest in the world, at 9.5 tons per capita." Link. Another recent article reviews and recaps the decoupling vs. degrowth exchanges. Link.
  • Schor and Jorgenson’s follow-up challenges Pollin's conviction that decoupling is either possible or efficient: "After decades of promises from advocates of green growth that absolute decoupling will happen, the record is dismal. The simple point about growth is therefore that it makes the nearly impossibly high mountain that we need to climb even steeper. Why rule out an important source of emissions reductions before we’ve even started?" Link.
  • Another iteration of the debate in a compilation of INET papers: Schröder et al argue that "if past performance is relevant for future outcomes, our results should put to bed the possibility of 'green growth.'" Michael Grubb takes a different tack: "Before declaring that history has set limits on what is possible, we need to be extremely careful. The future has already started, though its beginnings may be modest." Link.
  • From Autonomy, a proposal for a shortened work week—a key element of several green degrowth arguments. Link.
  • Mark Paul, Anders Fremstad, and JW Mason offer a brand new paper on US decarbonization. "In an economy facing persistent demand constraints and weak labor markets, public spending on decarbonization will raise wages and living standards." Link.
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June 17th, 2019

Insulators (Magritte machine)

MOBILE COGNITION

The political history of economic statistics

Debates over the relevance of indicators like GDP for assessing the health of domestic economies are persistent and growing. Critics of such measures point to the failures of such measures to holistically capture societal wellbeing, and argue in favor of alternative metrics and the disaggregation of GDP data. These debates reflect the politics behind the economic knowledge that shapes popular understanding and policy debates alike.

In his 2001 book Statistics and the German State, historian Adam Tooze examined the history of statistical knowledge production in Germany, covering the period from the turn-of-the-century to the end of the Nazi regime, "driven by the desire to understand how this peculiar structure of economic knowledge came into existence… and the relationship between efforts to govern the economy and efforts to make the economy intelligible through systematic quantification."

From the book's conclusion:

"We need to broaden our analysis of the forces bearing on the development of modern economic knowledge. This book has sought to portray the construction of a modern system of economic statistics as a complex and contested process of social engineering. This certainly involved the mobilization of economists and policy-makers, but it also required the creation of a substantial technical infrastructure. The processing of data depended on the concerted mobilization of thousands of staff. In this sense the history of modern economic knowledge should be seen as an integral part of the history of the modern state apparatus and more generally of modern bureaucratic organizations… The development of new forms of economic knowledge can therefore be understood as part of the emergence of modern economic government and as a sensitive indicator of the relationship between state and civil society."

Link to the book preview, link to the book page on Tooze's website.

  • For a more generalized account of the political history of statistical knowledge (inclusive of economic statistics), see the The Politics of Large Numbers by Alain Desrosières. Link. Another excellent item in the history of statistical knowledge: A History of the Modern Fact, on the advent and impact of double-entry bookkeeping. Link.
  • In the Winter 2019 issue of the Journal of Economic Perspectives, Hugh Rockoff examines the political history of American economic statistics, and tracks the emergence and institutionalization of measures of "prices, national income and product, and unemployment." Link.
  • Previously shared here, research by Aaron Benanev examines the institutional history linking the concept of "informality" and unemployment metrics developed by the International Labor Organization. Link to his paper.
  • A recent paper by Andrea Mennicken and Wendy Nelson Espeland surveys the quantification literature. Link. And a (previously shared) panel discussion on the historiography of quantification. Link.
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June 10th, 2019

Sketch for a Counter-Sky

MECHANICAL SHADOWS

On central bank independence and the rise of shadow money

Debates over the political impacts of Central Bank Independence (CBI) reached their peak in the late 90s and early 2000s, due to rising inequality and the volatility of financial markets. Initiated with the 1977 Federal Reserve Act and Paul Volcker’s subsequent term as chairman of the Fed, CBI was, and remains, a means of isolating the more "mechanical" field of monetary policy from the fleeting interests of politicians. In order to preserve stability and credibility, independent central banks have made inflation targeting the center point of their agenda. Critics of CBI have argued that the distinction between economic science and political incentives are not as clear as they might seem; low levels of inflation may benefit creditors and investors, but they harm those whose income entirely depends on rising wages. While monetary policy has distributional and political consequences, its decision makers are insulated from public accountability.

Expanding the literature on the politics of CBI, BENJAMIN BRAUN and DANIELA GABOR examine its financial consequences. In a recently published paper, they argue that the anti-inflationary policies of central banks have catalyzed dependence on shadow money and shadow banking, key components of a broader trend towards financialization:

"In the late 1990s, the US Federal Reserve was confronted with a peculiar predicament. While the world was celebrating central bank independence as a mark of 'scientific' economic governance after the populist era of monetizing government bonds, the US Federal Reserve worried about projections that the US government would pay down all its debt by 2012. A world without US government debt, they worried, was a world filled with monetary dangers. Market participants would not have a safe, liquid asset to turn to in times of distress.

Rather than seeking to limit shadow money supply, the Fed actively encouraged its expansion, seeking market solutions to political problems. It lobbied Congress to ensure that holders of shadow money backed by private (securitized) collateral had the same legal rights to collateral as those holding shadow money issued against US government debt. The Fed also changed its lending practices, allowing banks to issue shadow money backed by private collateral to borrow from the Fed. These concrete steps contrast starkly with the picture of central banks watching passively from the margins, as financial institutions find new ways to monetize credit and circumvent rules."

Link to the article.

  • More contemporary iterations of the debate over CBI can be found in the comparison between a 2018 HKS working paper, which distinguishes between "political oversight" and "operational independence," and a 2014 Levy Institute working paper which argues there is no practical meaning of operational independence at all. Link and link.

  • A primer on shadow banking, from Stijn Claessens and Lev Ratnovski at Vox EU. Link.

  • A new article by Andreas Kerna, Bernhard Reinsbergc, and Matthias Rau-Göhring finds that the IMF’s targeted lending practices actively encouraged the proliferation of independent central banks in low income economies. Link.

  • On CBI, inflationary targets, and the 2010 Eurocrisis, by Mark Copelovitch, Jeffry Frieden, and Stefanie Walter. Link.

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June 3rd, 2019

Convex Mirror

GREEN PLAN(K)

Growing the Green New Deal in the US and Europe

Jay Inslee, the governor of Washington State and Democratic presidential candidate, has made climate policy the center of his longer-than-long-shot campaign. On May 3rd, he released 8 pages of goals, and on May 16th, he released the 35-page, 28-policy “Evergreen Economy Plan,” with several more similarly lengthy reports on the way. David Roberts, an energy commentator at Vox, had a representative reaction to Inslee’s policies: “Inslee’s campaign is systematically translating the Green New Deal’s lofty goals — to decarbonize the economy sector by sector, in a way that creates high-quality jobs and protects frontline communities — into policy proposals.”

The report includes policies on infrastructure, manufacturing, R&D, and policies for energy workers, including a “GI Bill” and 8 million new jobs over the next 10 years. But beyond its extremely detailed recommendations, a key point of interest is seeing how the GND’s idealistic goals are cashed out. The introduction emphasizes a restorative approach:

“Inherent throughout ... is the urgent need to support frontline, low-income, and Indigenous communities, and communities of color. These communities are being impacted first and worst by the accelerating damages of climate change, and have endured a legacy of air, water, toxics and climate pollution, along with a deficit of public investment and support. Through an assertive agenda of reinvestment that is guided by strong local input, Governor Inslee’s plan seizes the opportunity to build a clean energy economy that provides inclusive prosperity — upon a foundation of economic, environmental, racial and social justice.”

Link to the report.

  • Leah Stokes, a climate and energy policy expert, contextualizes the expense on Twitter: “Spending $300 bn annually on climate is about 10% of the federal budget. Warren’s plan aggressively targets climate action by the military, which is about 20% of the federal budget. Hence, Inslee’s plan is about half the size of military spending. That’s BIG.” Link to the thread. - -
  • Noah Smith also takes up the cost question: "It’s probably less than 20 percent of what Ocasio-Cortez’s plan would cost, and only a quarter of the total would be paid by the government, so new budget deficits or taxes would be relatively modest. And because Inslee’s plan is more narrowly focused on value-generating investments like infrastructure rather than new entitlement spending, a higher percentage of the cost would be recouped down the road." Link.
  • As the GND gains momentum in the US, some in Europe are taking similar steps. DiEM25 (a pan-European organization co-founded in 2015 by Yanis Varoufakis) and the European Spring have released a report on a Green New Deal for Europe. Link. (Their candidates fell short in last week’s elections.)
  • An article in the World Economic Forum on the Green New Deal for Europe explains some of the theoretical differences between the US and European plans. "Whereas the Americans are building on a century-old tradition of the original New Deal, we’re trying to marry that language with existing programs." Link.
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May 28th, 2019

Interior Spring

CONTINGENT REFORM

The history and theory behind the Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is the country's largest anti-poverty program. In 2018, over 20 million filers received $63 billion in EITC refunds. Because of its bipartisan popularity and its secure position in the tax code, with no distinct administrative unit managing its payouts, it is also at the center of several substantial anti-poverty programs recently floated in the House and Senate. These proposals variously expand and modify the EITC, often in concert with the Child Tax Credit, in order to offer a more robust benefit.

A look into the history of the EITC reveals that, at its formation, the credit was an unlikely candidate for a major anti-poverty vehicle. In a CONGRESSIONAL RESEARCH SERVICE paper, MARGOT KRANDLE HOLLICK lays out its legislative history, showing that its 1972 introduction by Senator Russell Long was an intervention against proposed guaranteed income programs, and that "the bill had originally included a provision that would have required states to reduce cash welfare by an amount equal to the aggregate EITC benefits received by their residents." From the paper:

"The origins of the EITC can be found in the debate in the late 1960s and 1970s over how to reform welfare—known at the time as Aid to Families with Dependent Children (AFDC). Some policymakers were interested in alternatives to cash welfare for the poor. Some welfare reform proposals relied on the 'negative income tax' (NIT) concept. The NIT proposals would have provided a guaranteed income to families who had no earnings (the 'income guarantee' that was part of these proposals). For families with earnings, the NIT would have been gradually reduced as earnings increased. Influenced by the idea of a NIT, President Nixon proposed in 1971 the 'family assistance plan' (FAP) that 'would have helped working-poor families with children by means of a federal minimum cash guarantee.'

Senator Russell Long, then chairman of the Senate Finance Committee, did not support FAP because it provided 'its largest benefits to those without earnings' and would, in his opinion, discourage people from working. Instead, Senator Long proposed a 'work bonus' plan that would supplement the wages of poor workers. Senator Long stated that his proposed 'work bonus plan' was 'a dignified way' to help poor Americans 'whereby the more he [or she] works the more he [or she] gets.'"

Link to that paper.

  • A 1999 Brookings paper by historian Dennis Ventry also examines the unique political history of the EITC, writing that its emergence appealed to legislators as "both an anti-poverty and an anti-welfare program." Link.
  • Brian Steensland's excellent book The Failed Welfare Revolution: America's Struggle Over Guaranteed Income Policy surveys this history in depth. Link. And link to a 2006 paper that preceded its publication, on cultures of "worth" and anti-poverty programs.
  • A 2015 Duke Law Review Note titled "Earned Income Tax Credit: Path Dependence and the Blessing of Undertheorization," examines "the credit’s path-dependent past, which has resulted in a present-day EITC that manifests a diverse, uncoordinated assortment of policy purposes." Link.
  • The above-linked recent proposals have focused on expanding the program's breadth, but retain in some form the "phase-in" structure originally proposed by Long, which excludes non-waged workers from claiming the return. Link to a (previously shared) critique of this structure—and work-tied benefits more broadly—by Matt Bruenig. Link to an also previously shared paper by JFI Fellow Max Kasy, which proposes expanding the EITC into a universal benefit.
  • Our colleagues at the Economic Security Project have developed a proposed "Cost of Living Refund," which tackles several important issues with the EITC. It includes proposals for monthly disbursements and expanding eligibility to un-waged care work. Link to the project's website, which hosts research and model legislation.
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