Fiscal Stimulus but for Whom

Bernstein: “As long as there is still slack in corners of the labor market then this kind of fiscal stimulus of the economy near full employment is a kind of test I support.” From the article, The Republican Fiscal Stimulus Could Be Bigger Than Obama’s. The devil is in the details. What is the composition of this spending? Democrats are fighting for funding increases to domestic programs that match any increases in military spending. How much spending will go towards creating new infrastructure, securing healthcare for all, supporting education, supporting environmental regulation and studies, and clean energy? How much spending will go towards homeland security, towards subsidies for fossil fuel extraction, etc? Spending will create jobs yes, but will those jobs enhance the productivity of our economy, or will they squander natural resources, will they endanger the livelihood of workers? While we are embarking on a stimulus, we are well off to ask these questions in advance.

Approaching Challenges with a Model

Techie people on the Internet have opinions on how YOU should live your life! “Here, take my advice; I wasn’t using it.” Well I will take you up on that, stranger:

(1) Focus on High-leverage Activities — “Leverage should be the central, guiding metric that helps you determine where to focus your time.” (related: Eisenhower decision matrix — “what is important is seldom urgent, and what is urgent is seldom important.”, “The best time to plant a tree was 20 years ago. The second best time is now.”

Gabriel Weinberg’s blog has more mental models-.

The Web vs the Trinet

The 2018 elections are coming and our networks are still vulnerable to manipulation….

The Web Began Dying in 2014:

What has changed over the last 4 years is market share of traffic on the Web. It looks like nothing has changed, but GOOG and FB now have direct influence over 70%+ of internet traffic. Mobile internet traffic is now the majority of traffic worldwide and in Latin America alone, GOOG and FB services have had 60% of mobile traffic in 2015, growing to 70% by the end of 2016. The remaining 30% of traffic is shared among all other mobile apps and websites. Mobile devices are primarily used for accessing GOOG and FB networks.

Modular Housing as a Construction Alternative

A study from the Berkeley Terner Center on roughly 800 prefabricated housing units suggests that offsite construction could lend more housing at cheaper prices if it could be brought to scale:  

The Case for Off-site Multifamily Construction

While a number of other countries such as Sweden have already broadly integrated off-site construction, only a few off-site factories are currently in operation in the United States. Today, the Terner Center is releasing a new paper exploring the benefits, barriers, and breakthroughs needed to significantly expand this construction method in the American market, particularly in the multifamily development sector. The paper documents the potential cost savings, time savings and other benefits of off-site construction, identifies some of the key reasons it hasn’t yet taken off, and puts forth several ideas for how to overcome these challenges to bring it to scale.

Economics for a New Progressive Era

What can people tell their representatives and their neighbors about economics and policy to ensure more fair, more equitable outcomes for all? Featuring Stephanie Kelton, William Mitchell, Warren Mosler, L. Randall Wray.

Tax Cuts and Labor Supply Elasticity

Dietrich E. Vollrath on why tax cuts don’t lead to growth:

We think that if you lower the tax rate, and hence raise the returns to inputs, we should get more of them. But to “supercharge” growth in GDP, or to have any appreciable effect on GDP at all, you need that the elasticity of that input supply with respect to those returns is really big.

For labor, there appears to be good evidence that this elasticity is in fact small. There is not some pent-up store of workers and human capital out there that is just a 35% tax bracket away from getting off their ass and going to work. This labor supply elasticity is found to be essentially zero in almost every case, with the exception of married women. You can see some citations on this in the review paper by Saez, Slemrod, and Giertz (SSG). With an elasticity close to zero, no matter how much you lower the tax rate, and raise the return to labor (i.e. the wage), you can’t induce a substantial increase in labor supply. And without a substantial increase in labor supply, you don’t get a big increase in GDP.

Deficits and Spending

Stephanie Kelton with an NYT editorial on why the deficit doesn’t matter, but the economy does:

The trick is to adjust the budget to make efficient use of the people, factories and raw materials we have…. But all of this goes unrecognized on Capitol Hill, where the very words “debt” and “deficit” have been weaponized for political ends. They serve as body armor to politicians who would deny resources to struggling communities or demand cuts to popular programs.

Mark Dow on the distinction between liquidity(i.e. the recent quantitative easing at the Federal Reserve) vs credit in banks– then, if reserves are not used directly to prop up the stock market, and if the Federal Reserve keeps yields low for the future to encourage people to put their cash to work, it would be safe to assume that the policy is working to keep inflation low; yet, my perception is that demand is weak and unemployment is higher than desirable(where’s the beef?):

The other, more mechanical, implication is that financial sector lending is neither nourished nor constrained by base money growth. The truth is the Fed’s monetary policy can influence only the price at which lending transacts. The main determinant of credit growth, therefore, really just boils down to risk appetite: whether banks and shadow banks want to lend and whether others want to borrow. Do they feel secure in their wealth and their jobs? Do they see others around them making money? Do they see other banks gaining market share?