Many pointing to studies that $600/week did not increase disincentives. Those studies relevant in saying that policy was good in April, May and June. But they have limited relevance for how to set policy in Dec and Jan when economy will be very different than it was in lockdown.
Moreover, part of why the $600 didn’t cause disincentives is that many expected them to be temporary so would rather be in a job. If they had been smoothly extended through January as many originally wanted that would have undone some of that temporary expectation.
Supporters of triggers and enhanced automatic stabilizers should ask themselves what formula they would have for unemployment benefits. Would you pre-specify that at 8% UR it would be $600/week? And if so was it WAY too low with UR of 15% in the spring?
Even if the weekly boost came down to $400 that would be much higher than the $25 per week in the last recession and enough to ensure that about two thirds of workers were getting more from unemployment benefits than they had been paid on their jobs:
It is too late to shift to replacement rates instead of flat dollar amounts. But that should be a priority for the future. Until then, we should adjust the flat weekly amount based on economic circumstances to balance support for consumption with fairness/work incentives.
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Core PCE inflation came in a little above the already high expectations in Feb. The pattern is the opposite of what you want to see--the shorter the window the higher the annualized rate (and still high at 12 months):
Here are the full set of numbers. They were uniformly ugly in February.
If you're looking for some slivers of reassurance, market-based core (which excludes imputed items like portfolio fees) was only up 2.4% over the last 12 months. And "only" 3.0% annualized over the last three, less than the regular core.
Income taxes are distort trade by reducing purchases of imports. At least they do so as much as VATs do. Which is to say not any more than they reduce purchases of domestic goods.
A hopefully irrelevant thread.
A simple toy example.
Consider a person in Spain with 100€ in income that they use to buy oranges. Absent taxes oranges cost 1€. They must spend all their income this year.
In this case they could buy 100 total oranges--imported plus Spanish.
Now assume there's a 25% VAT.
VAT raises the cost of imported oranges to 1.25€, this is the way it is supposed to be like a tariff.
Of course, also raises the cost of Spanish oranges to 1.25€. This is not a tariff & is trade neutral.
This was as expected, consistent with a very gradual slowing, and ~2.5% underlying inflation.
Here are the full set of numbers.
On the favorable side of the ledger, market-based core inflation--which is a better predictor of future inflation than regular core--has been somewhat lower. This excludes things like implied price of portfolio management fees.
COVID ripped apart economies around the world. Amazingly most rich countries snapped back almost completely very quickly. By the end of 2021, 12 of 27 advanced OECD economies had unemployment rates below pre-COVID forecasts. The US did not. In fact, it was the fourth worst.
A 🧵
This🧵looks at unemp rates cross countries. I'll do another w/ GDP growth across countries which tells a similar story.
But unemp rates preferable because a cleaner answer speed/fullness of RECOVERIES. Growth differences can be more structural (e.g., productivity & demography).
My aim in this and the thread that I'll post later is to be much more systematic than @Noahpinion was in his response to my @ForeignAffairs piece. He had some good arguments there but his international macro comparisons were, at best, unsystematic. noahpinion.blog/p/anti-anti-ne…