1/During a financial crisis, @USTreasury Sec Paulson understood in transition it was his job to help the Fed and the incoming Admin establish a basis for strong, cooperative efforts to contain the crisis. Sec.Mnuchin has done just the opposite. wsj.com/articles/mnuch…
2/In these complex times, there is room for debate on what types of government intervention in credit markets are appropriate.
There's not much room for debate on the merits of maintaining stanbdy capacities.
3/ We cannot predict when or if a panicky cascade will happen in credit markets. Aftershocks after financial crises (and earthquakes) are not uncommon. Removing a capacity to respond as @stevenmnuchin1 has sought to do is wrong.
Told @FareedZakaria on GPS @CNN, America’s failure on COVID-19 is almost unimaginable. Heck, if the U.S. had handled the pandemic as well as Pakistan, we would have saved in neighborhood of $10 trillion.
The costs of an expanded testing system are trivial compared to the costs of tens of thousands of early deaths. Expanding testing should be a matter of utmost urgency.
Interest rates are essentially zero, telling us that the funds are available and won’t crowd out anything important. Instead it will push economy forward. All the dangers are on spending too little, not too much.
As I say in the story, @Harvard investment in @broadinstitute was one of the easiest decisions made during my time as President. In many ways you can measure it, Harvard’s investment in the Broad has been a spectacular success.
I don’t know any other philanthropists who have turned the same rigor, exacting standards and persistence that made them wealthy to their philanthropy in the way Eli Broad, supported by Edye’s shrewd human judgment, has done. @UnreasonableEli
I have a Viewpoint out in JAMA with my colleague @Cutler_econ – The COVID-19 Pandemic and the $16 Trillion Virus. It is particularly relevant today ja.ma/3diC0U9
We estimate the cost of the COVID virus for the US. Bottom line cost: $16 trillion. This is $200,000 per family or 90% of a year’s GDP.
Some other metrics: this is 4x the output loss of the Great Recession, 2x the cost of all wars since 9/11, and roughly the cost of climate change in the next 50 years. Let me explain the estimates.
We need a different paradigm while thinking about the deficit. Of course we need more stimulus. The difficult question is: What do we need in the future?
A move to austerity as soon as possible is dangerous & misguided. Fails to appreciate the big structural changes in our economy, which is the emergence of a massive excess of private savings over private investments at a reasonable interest rate. What I call secular stagnation.
Glenn Hubbard asked me today at a talk with the @EconClubNY, "How do you expect higher-ed to be evolving both in terms of delivery and addressing opportunity?" I told him I think the two things go together.
I am very proud of the fact that I put in place a set of policies during my time as President of @Harvard that was widely emulated, that basically said if your family had an income below $60,000, you didn’t have to pay a cent to come to @Harvard.
This changed the composition of student body, the applicant pool and influenced what other universities did. It was a really great thing.
My conversation with @HarvardHBS Prof. Robin Greenwood on public health, economic policy, politics, financial markets and what the crisis means to higher education. Watch here: hbs.edu/mba/blog/post/…
These events are not a huge surprise. As President of @Harvard, I said global health should be a priority b/ two of most important things to happen in 21st century were the rise of developing world & the century of biology. Those two things come together @ global health issues.
It’s mostly not our policy that is reducing the performance of the economy, it’s the disease itself. You can open the economy all you want but not many people are going go shopping when they think 10 percent of their neighbors have a potentially fatal, contagious disease.
As @federalreserve & other central banks have expanded their balance sheets in previously unimaginable ways, the international community needs to do Mario Draghi’s famous phrase "whatever it takes" to maintain functioning global financial system. Here are 3 ways to do it.
First, the IMF, World Bank and regional development banks need to be as aggressive as the world’s central banks in expanding their lending. This means recognizing both that the current near-zero interest rate environment makes it possible to use more leverage.
If airline industry wants no payback to government, let them try their luck with other funders. If airline execs were not complaining, we could be sure the terms were too generous.
Airlines running of their business on a high leverage, low cash reserve basis was a strategic choice which for years worked great for their shareholders. Now it hasn’t. Too bad. Not a rationale for a bailout.
1st, central banks should develop a facility to assure that credit is not cut off to key sectors of the economy, come what may. Steadily available credit is much more important than lower-priced credit.
2nd, as huge excess capacity at major global ports suggests, this is a moment for less-not more-interference w trade flows. Though it may go against @POTUS instincts, USA should lead global effort to reduce tariffs as a source of stimulus for duration of the health emergency.
I hope observers will look back on the wealth tax debate as an extremely clever way of broadening the tax reform Overton window. If so, it could be very valuable, as much needs to be done to address stagnant middle class wages and the excess political power of moneyed interests.
There may also be some areas—particularly involving corporations—where taxes based on market value could usefully replace or backstop income tax approaches.
The right progressive agenda around money and power involves political reform directed at changing campaign finance rules, limiting lobbying and revolving-door activities.
The SZ revenue estimates are overstatements by a factor of 2 or more. First, as work by Matt Smith, @omzidar, and Eric Zwick shows, SZ overstate the wealth of those with more than $50M by a wide margin.
2nd, experience w the estate tax demonstrates that this kind of tax is very hard to enforce. Wealth can be spread among family members, it can be mis-valued where there are not liquid markets, and it can be given to charity. All of this would happen if a wealth tax was introduced
Last week, I had the chance to debate Emmanuel Saez at the @PIIE. Here is a video of the discussion and a series of tweets explaining my disagreements with Saez and Zucman’s approach; and proposing alternatives to a singular focus on wealth taxation.
Lack of income growth and opportunity for middle class families is a fundamental problem in American society. So too is rising inequality.
The role of monied interests in shaping policy is also a crucial political problem. Wealth taxation is not an effective approach to any of these problems.
It is hard for me to think about carrying on my career as an economist without Marty Feldstein. I first met Marty in 1973, when he hired me as part of his flotilla of a dozen or so research assistants.
My project involved extending Marty’s work on social security and saving by looking at international comparisons.
Coming into Jackson Hole, economists are grappling with a major issue: Can central banking as we know it be the primary tool of macroeconomic stabilization in the industrial world over the next decade? In my forthcoming paper w/ @annastansbury, we argue that this is in doubt. 1/
There is little room for interest rate cuts. In every US recession since the 1970s, the fed funds rate was cut >500bps. In most, the real rate fell >400bps below the neutral rate. Now, the max. feasible cut is 200-300bps, bringing the real rate only 150-250bps below neutral. 2/
This limited space for interest rate cuts is true of the US, which has the highest interest rates in the industrialized world. It is even more true of Europe and Japan. 3/
@PikettyLeMonde I am less familiar with income tax debates of 1913. Was it the case as of then that 75 percent of the countries who had tried income taxes had abandoned them? This is the case in 2019 with respect to wealth taxation. 1/8
During my time in the Treasury Department, I do not recall any politically sensitive request or other requests from a tax-writing committee. But motivated by recent controversies, I have asked myself how I would have responded had such a request been made.
As best I can determine, the appropriate response of the treasury secretary is very clear: Under a long-standing delegation order, the secretary does not get involved in taxpayer-specific matters and has delegated to the IRS commissioner.