Thursday, July 29, 2021

Haven't gotten the COVID-19 vaccine? Now's the time.

Get your COVID-19 vaccine

Getting the COVID-19 vaccine is more important than ever. The Delta variant, a new variant of the virus now in the U.S., is more easily spread and can cause severe disease.

If you're fully vaccinated, that's great. The COVID-19 vaccines are highly effective against this variant. But if you're unvaccinated, you're at risk.

Find a Vaccine

The more a virus spreads, the more it mutates, and the more variants can emerge. Help stop the spread of Delta and other COVID-19 variants by getting vaccinated as soon as you can.

How to find a COVID-19 vaccine near you:

Search http://www.vaccines.gov
Text your ZIP code to 438829
Call 1-800-232-0233

Reminder: Medicare covers the COVID-19 vaccine, so there's no cost to you.

Sincerely,

The Medicare Team

USA Department of Health and Human Services This message is paid for by the U.S. Department of Health and Human Services. It was created and distributed by the Centers for Medicare & Medicaid Services.

3 things you can do to prevent injuries

How to prevent injuries

Getting older doesn't mean having to give up activities you enjoy. According to the CDC, you can prevent many common injuries by taking simple steps, so you can stay healthy and independent longer.

Here's how to age without injury:

Talk with your doctor about fall prevention, and health conditions like osteoporosis or hypotension (low blood pressure) that can increase your risk of falling. Medicare covers bone mass measurement, the best way to know if you have (or are at risk for) osteoporosis, if you meet certain conditions.
Ask your doctor or pharmacist to review the medicines you take. Some medicines may make you dizzy or sleepy, which can increase your risk of injury.
Stay active. Do exercises to strengthen your legs and improve your balance.

Learn More

Sincerely,

The Medicare Team

Inversions and the Global Minimum Tax

Inversions and the Global Minimum Tax

In the early 2010s, it seemed there was a parade of major firms announcing their intention to escape a U.S. tax code that had gotten substantially out of step with the rest of the world. These cross-border mergers were an evolution of a long-standing phenomenon known as “expatriations,” or “inversions.” Indeed, policymakers were well aware of this trend. The 1990s and early 2000s saw a series of corporate inversions, whereby U.S. firms re-domiciled abroad to reduce their tax burden. This phenomenon was the subject of congressional hearings, and Congress passed legislation in 2004 to limit tax benefits resulting from inversion transactions.

This policy somewhat staunched “naked” inversions, whereby firms simply reorganized in a lower-tax jurisdiction but otherwise did not change ownership or operations. But the reform did not fundamentally reduce the relative disadvantage placed on U.S.-headquartered firms. The result was that cross-border mergers and acquisitions took the place of the naked inversion as the means of achieving corporate expatriations and continued through the last decade.

Previous administrations tried and failed to arrest this corporate flight through regulation. Though there is some evidence that regulation did reduce some of these incentives, the yawning gap between the U.S. tax system and that of other major trading partners was simply too great to fully address the problem. The Tax Cuts and Jobs Act (TCJA) did just that in 2017, bringing the U.S. corporate rate down to a more competitive rate. Today, the United States imposes a combined rate of 25.75 percent, which is the 12th highest in the Organisation for Economic Co-operation and Development (OECD), and a bit above the 22.85 percent average among the 37 OECD nations. The TCJA also moved the tax treatment of foreign-sourced income to a territorial system consistent with the overwhelming majority of major U.S. partners.

The evidence of this policy change’s success is perhaps best understood by what we are not seeing: corporate inversions. Indeed, one company that had announced its intention to merge with an overseas partner restructured the transaction to remain in the United States after the TCJA became law.

But the Biden Administration has proposed moving the tax code back to the 1990s by raising the corporate rate to 28 percent and reverting to an outmoded style of taxing foreign income. The rate hike would restore the United States to its prior status as having the highest corporate tax among major world economies. Recall that the nonpartisan Joint Committee on Tax found that the TCJA would result in greater investment in the United States. The Biden Administration’s tax policies would reverse those incentives and make the United States less attractive to investment.

None of this is particularly new – indeed successive administrations presided over a broken tax code that induced major companies to relocate abroad. It was just the cost of a tax code no one could fix. But the major push by the Biden Administration to convince the rest of the world to impose a minimum corporate tax is a novel development. It is also a tacit acknowledgement of the risks the corporate tax proposals otherwise pose to U.S. firms. The effect of the minimum tax is to shrink the gap between high-tax and low-tax countries, which animates where corporations chose to invest.

The outlook on the Biden Administration’s tax plans and agreement on a global minimum tax remains unclear. What is clear is that some policymakers have learned the lesson that inversions make for bad economics and bad press. Unfortunately, they continue to fail to know how to avoid them.

Who Benefits from Student Loan Forgiveness

Eakinomics: Who Benefits from Student Loan Forgiveness

It’s been infrastructure week so long, I nearly forgot that there are other policy issues. It was unsurprising, however, that the minute I started looking the first thing I ran into was student debt forgiveness, with Fortune reporting, “On Friday, the U.S. Department of Education announced it will discharge student loans totaling $55.6 million by students who attended troubled schools like Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute.” This forgiveness took place under the auspices of the “borrower defense” policy, but the whole notion of widescale forgiveness remains on the table.

Fortunately, Tom Lee has run the numbers on the implications of blanket loan forgiveness and they are stunning. To begin, “More than 60 percent of federal student loan holders have entered and remained in forbearance on their loans since the third quarter of 2020, a 47.8 percentage point increase from the previous quarter, while just 1 percent of all borrowers are regularly making payments right now.” One, 1, uno percent. So, at least at the moment, nobody is paying their student loans. (The chart is reproduced from Lee’s paper.)

Chart 1: Distribution of Federal Direct Loans by Status

Change in Federal Direct Student Loan Status

The next step being contemplated is a blanket forgiveness of $10,000 using administrative authorities. The table below, reproduced from Lee’s paper, shows the dramatic implications of doing this. Such a policy would fully eliminate the balances from the smallest categories of balances, but would have a large impact on those with large balances as well.

Table 1: Federal Student Loan Portfolio by Borrower Debt Size as of the Second Quarter of 2021

As it turns out, those larger balances are concentrated among more affluent borrowers. As a result, the policy would “reduce outstanding federal student loan debt by $380 billion, but more than half of this relief would go toward families in the top 40 percent of income, while the bottom 40 percent would receive just a quarter of the relief.”

There are lots of reasons to be skeptical of student loan forgiveness, but blanket, untargeted approaches should be off the table.

Is the Child Tax Credit Really Progress on Poverty?

Eakinomics: Is the Child Tax Credit Really Progress on Poverty?

To great fanfare, yesterday the Internal Revenue Service began distributing the reformed Child Tax Credit (CTC) of $3,000 for every child 17 years of age and younger and $3,600 if under 6 years old. It is available in full to families making $150,000 or less, with the credit phased out at higher incomes. Per The Washington Post, “The administration previously said that about 88 percent of all children nationwide would receive the aid. At an event at the White House on Thursday afternoon with Vice President Harris, Biden extolled the benefit as representing a ‘historic’ achievement and said it would be one of the administration’s proudest accomplishments.”

In contrast, in 2016 the Brookings Institution and the American Enterprise Institute convened a “Working Group on Poverty and Opportunity,” consisting of experts from across the ideological spectrum (I was part of the rollout event). The result was a set of consensus recommendations:

To strengthen families in ways that will prepare children for success in education and work:

Promote a new cultural norm surrounding parenthood and marriage.
Promote delayed, responsible childbearing.
Increase access to effective parenting education.
Help young, less-educated men and women prosper in work and family.

To improve the quantity and quality of work in ways that will better prepare young people—men as well as women—to assume the responsibilities of adult life and parenthood:

Improve skills to get well-paying jobs.
Make work pay more for the less educated.
Raise work levels among the hard-to-employ, including the poorly educated and those with criminal records.
Ensure that jobs are available.

To improve education in ways that will better help poor children avail themselves of opportunities for self-advancement:

Increase public investment in two underfunded stages of education: preschool and postsecondary.
Educate the whole child to promote social-emotional and character development as well as academic skills.
Modernize the organization and accountability of education.
Close resource gaps to reduce education gaps.

That’s right: When serious experts grapple with the key issue of economic self-sufficiency, the focus is on effective parenting, work, and education.

The CTC does not go to children. It goes to their parent or parents and there is nothing that will change the effectiveness of their parenting. The fact that the $3,000-$3,600 per child CTC is now available regardless of work status makes it less (not more) likely that the parents will work, hurting their ultimate economic self-sufficiency. (Recent AAF work on child poverty programs takes a much more detailed approach to the self-sufficiency question and reaches a similar conclusion). The CTC does nothing to improve the organization or accountability of a K-12 education system that annually fails another 25 to 33 percent of America’s young.

Is spending hundreds of billions of dollars without addressing the root issues really progress?

The Recession Is Over!!!

Eakinomics:The Recession Is Over!!!

It is now official: The recession is over. So sayeth the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER): “The committee has determined that a trough in monthly economic activity occurred in the US economy in April 2020. The previous peak in economic activity occurred in February 2020. The recession lasted two months, which makes it the shortest US recession on record.” It is a relief to have the burden of recession removed from our collective shoulders, even if it actually occurred over a year ago.

As everyone is well aware, this announcement does not mean that the economy has fully recovered. Per the Committee, “In determining that a trough occurred in April 2020, the committee did not conclude that the economy has returned to operating at normal capacity. An expansion is a period of rising economic activity spread across the economy, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.”

While there is a rule of thumb that a recession is two successive quarters of economic decline, the NBER has always used monthly data to identify peaks and troughs of business cycles. And, perhaps surprisingly, the NBER has always been the official arbiter of business cycles in the United States.

The NBER itself is the product of a need for better data. According to its history, “The National Bureau of Economic Research was founded in 1920, largely in response to heated Progressive-era controversies over income distribution. The two leading figures in its launch — Malcolm Rorty, an executive at the American Telephone and Telegraph Company, and Nachum Stone, a socialist labor organizer with a PhD in economics from Columbia University — had widely different views on many economic policy issues. They agreed, however, that there was little data on which to base discussions of these issues. With the support of a group of business and labor leaders, as well as university-based economists who were committed to uncovering and disseminating important facts about the economy of the United States, they created the NBER to address this information gap.”

Among the initial projects of the NBER was the publication of Wesley Mitchell’s Business Cycles, which put it in the business of providing the dates for business cycle peaks and troughs. It has stayed in that business ever since. In doing so, it makes no attempt to judge turning points in real time. This announcement follows that norm: Well after the fact and when the data are (more) clear, business cycle peaks and troughs are announced.

60 Or Bust

Eakinomics: 60 or Bust

Votes, that is. If the Senate proceeds as advertised today, it will vote on a “motion to proceed” – a Senate procedure to take up a bill – that would allow consideration of the bipartisan infrastructure bill. As it turns out, there is not yet a deal. But the discussion surrounding negotiations has painted a pretty clear picture.

The bill would contain about $600 billion in new spending. Most of the attention has focused on the fact that it concentrates on “hard” infrastructure: roads, bridges, ports, waterways, multimodal connections, water infrastructure, and public transit. There is also money for “resiliency,” cybersecurity for critical infrastructure, flood mitigation, wildfire, drought, and coastal resiliency.

The bill includes some things that seem to an unnamed Eakinomics author like they might best be the responsibility of the private sector – money for low-carbon buses and ferries, electric vehicle infrastructure, power and grid dollars, and passenger and freight rail funds. But evidently the case has been made

Finally, the definition of infrastructure has been modernized to include broadband. This inclusion represents one lesson genuinely learned during the pandemic. Bridging the digital divide is a social imperative, but it is also an opportunity to improve labor productivity beyond the pandemic. The administration’s version of broadband funding has been restricted to the failed municipal broadband model; one hopes this package includes incentives for the private sector, which delivered enormous resiliency during the worst of 2020. Regardless, one would hope no infrastructure bill would go forward without broadband as one of its features.

Of course, the sticking point has been how to pay for this very large investment. There is an agreement to not touch the 2017 tax law, or raise taxes more generally. There is also an agreement to include an infrastructure bank, and both sides are looking to dynamic scoring to reduce the top-line budget cost.

More work evidently remains to be done. Today’s vote is a key moment in finding out whether that time will be permitted and the Senate will vote on a finished product.

Remember the Federal Debt Limit?

Eakinomics: Remember the Federal Debt Limit?

We haven’t heard much about the federal debt limit for a while, but yesterday the Congressional Budget Office (CBO) issued a timely (and scintillatingly titled) wake-up call: “Federal Debt and the Statutory Limit, July 2021.” At present, the federal debt limit has been suspended until July 31 of this year. On August 1, the debt limit will come back and be reset at its old value ($22 trillion) plus any new borrowing through July 31. CBO estimates that there is an additional $6.5 trillion through June, so the new limit will be somewhere north of $28.5 trillion.

Regardless of the exact number, the important point is that on August 1 the federal government will be at the debt limit. As CBO puts it, “If the current suspension is not extended or if a higher debt limit is not legislated before August 1, from that date forward, under normal procedures, the Treasury will have no room to borrow other than to replace maturing debt. To avoid breaching the limit, the Treasury would then begin to take the extraordinary measures that, along with cash inflows, should allow it to finance the government’s activities for a limited time without an increase in the debt ceiling.”

So, what, exactly, does a “limited time” mean? Again, CBO indicates, “Treasury would probably run out of cash sometime in the first quarter of the next fiscal year (which begins on October 1, 2021), most likely in October or November, the Congressional Budget Office estimates. If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both.”

Is it plausible that the government could delay payment on some of its activities? No. So-called prioritization of payments is just too risky.

Is it reasonable to entertain the possibility of default? No. Default would shake the market for Treasury securities to its core. Since Treasuries are the foundation of the global financial system, any impairment of their liquidity would be tantamount to a global financial crisis. It is simply unthinkable.

So, Congress will have to raise or suspend the debt limit, which is politically unpopular. Expect both parties to blame the other for the need to raise the limit. Similarly, expect each to try to place the onus of passing the increase on the other. None of this maneuvering is new or desirable. Far too often,approaching the debt limit has engendered legislative brinksmanship. This fosters toxic politics, endangers the underpinnings of the global financial system, and exposes the taxpayer to risk. Many believe that a solution must be found that automates raising the debt limit, perhaps as a reward for passing a sensible budget resolution (for example).

But, until some alternative is found, Congress will have to deal with the debt limit the old-fashioned way: by voting. Get ready; the fun is just starting.

Just Add a Pinch of Collective Bargaining

Eakinomics: Just Add a Pinch of Collective Bargaining

Unions are the not-so-secret sauce of Bidenomics. Need to solve income inequality issues? Get some good-paying, union jobs. Need to cool the planet? Order up some good-paying, union clean energy jobs. Tired of any kind of inequity – gender, racial, pay, conduct, dress, comfort animals – in the workplace? Add a pinch of collective bargaining to mix and then just sit back and…Nirvana (NOT the band).

To this end, the president has formed a White House Task Force on Worker Organizing and Empowerment, stating, “it is the policy of my administration to encourage worker organizing and collective bargaining.” The task force is chaired by Vice President Kamala Harris, with Secretary of Labor Marty Walsh as vice-chair. Heads of federal agencies and cabinet members are well-represented. AAF’s Isabel Soto has a deep dive here.

It is hard to make sense of the unionization obsession. Granted, when unionization was at its peak (35 percent of workers) in the 1950s, single-earner families headed by high school graduates could live pretty well. That’s a far cry from 2021. But there is no way that one can replicate the situation of the 1950s today. The United States was an industrial monopoly as countries around the globe literally rebuilt from the devastation of World War II. There were lots of monopoly profits that could fund wages and still permit corporations to be the vessel of social benefits such as health insurance, pensions, and the like. In 2021, mandating pensions, paid leave, child care, health insurance, pensions and more is a recipe to see offsets in cash wages, reduced employment, and damaged international competitiveness.

The Biden platform implicitly recognizes this reality by proposing that the taxpayer pick up health insurance, paid leave, child care, child support, and more. What are the unions supposed to bargain for? And while you are answering that one, if unions are such a bonanza, why has private sector unionization fallen below 7 percent? If the demand for a product falls by more than 50 percent, one might start to wonder about the product.

The 21^st century labor force is much more diverse, requires more flexibility, and demands greater education and skills than in the past. As Soto discusses, “Many independent workers value their flexibility, and when asked, fewer than 1 in 10 independent contractors would prefer traditional employment.” A relentless push to restore unions and the employer-employee relationship of 70 years ago will not work and is not the route to a successful future.