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Articles by Economic Studies
Tidal Wave or Drop in the Bucket? Differences in Water Use Across the United States
See the accompanying interactive feature, County Water Use Map, to compare water use for irrigation, thermoelectric, total domestic, and domestic per capita by state and county. A serious drought in the American West has called national attention to our country’s water resources. U.S. businesses report substantial concerns over water supply, while the current drought in California has cost the state billions of dollars in economic losses.
Why are interest rates so low, part 2: Secular stagnation
Three of the most important objectives for economic policy are: Larry Summers’ secular stagnation hypothesis holds that achieving these three goals simultaneously may prove very difficult.
Building the soft skills for success
It is hard to succeed in life without skills in reading and math, but they are not the only ones that count or the only ones children learn in school. Education is a broader enterprise, as a recent survey by the Pew Research Center demonstrates. Pew asked a national sample of adults to pick select skills from a list of ten, which “are most important for children to get ahead in the world today.” Reading and math are considered important by most, which is no surprise.
Five years old, going on ten: The future of the Affordable Care Act
Anniversaries are times for taking stock. And so it is with the Affordable Care Act—aka the ACA or Obamacare. On this, the fifth anniversary of the law’s passage, the law remains in existential jeopardy. The Supreme Court is considering whether the law, as drafted, permits payment of tax credits in the 34 states that use HealthCare.Gov as their administrative agent. These credits make insurance affordable and the law sustainable.
Why are interest rates so low?
Interest rates around the world, both short-term and long-term, are exceptionally low these days. The U.S. government can borrow for ten years at a rate of about 1.9 percent, and for thirty years at about 2.5 percent. Rates in other industrial countries are even lower: For example, the yield on ten-year government bonds is now around 0.2 percent in Germany, 0.3 percent in Japan, and 1.6 percent in the United Kingdom.
Inaugurating a new blog
When I was at the Federal Reserve, I occasionally observed that monetary policy is 98 percent talk and only two percent action. The ability to shape market expectations of future policy through public statements is one of the most powerful tools the Fed has. The downside for policymakers, of course, is that the cost of sending the wrong message can be high.
The ACA reminded us how little we know about long-run Medicare spending
Editor's note: This post is part of a Health360 special series that provides a look back at the impact of the Affordable Care Act since it was signed in March 2010. To view additional posts, click here. Official projections of long-term Medicare spending were lowered sharply in response to the ACA. In 2009, the Medicare Trustees projected that Medicare spending would reach 10 percent of GDP in 2065.
5 ways that Obamacare might have changed your doctor's office visit
In the five years since its passage into law, the Affordable Care Act has and will continue to attract criticism and scrutiny. Whether it is the GOP commitment to repeal the Act or the current Supreme Court case that could potentially undermine the health insurance exchanges, there is no lack of controversy around the ACA. But behind the noise and confusion, there are some major forces at work that are driving new models of care and changing the way we practice, pay for, and evaluate health care.
Declining business dynamism: What does it mean for social mobility?
Business dynamism has been declining over the past two to three decades in the United States, as a number of papers I have co-authored with Ian Hathaway demonstrate. This decline is manifested in two disturbing trends: more or less steady drops in the “startup rate” (the ratio of firms one year old or less to total firms) and in a measure of employee churn among firms. Startups, associated with innovation, are unambiguously good for economic growth.
Health spending growth picks up
Inflation-adjusted spending on health services increased 4.1 percent in 2014, after having increased just 1.9 percent in 2013, according to the most recent release of the Census Bureau’s Quarterly Services Survey (QSS). Spending stepped across a wide variety of categories, including hospitals, nursing homes, home health, and physician and other clinical services.
Keeping up with the expansionists: The latest Medicaid action from the states
Currently, 28 (mostly liberal) states plus D.C. have expanded their Medicaid programs, but over the past several weeks significant political maneuvering has occurred on expansion even in very conservative places.
California dreaming: Social mobility in the Golden State
California is often held up as a warning to those with misplaced aspirations for upward mobility. Yes, Hollywood and Silicon Valley hold out the promise of fame and wealth, but observers from Rick Perry to Woody Guthrie have denounced that story as mere myth: for the average Californian, they say, taxes are high, regulations onerous, and the workers outnumber the jobs.
The Hamilton Project's Jobs Gap Analysis: An Historical Perspective
According to today’s employment report from the Bureau of Labor Statistics (BLS), employers added 295,000 jobs in February, marking fifty-three consecutive months of positive job creation. Over the past twelve months, the average rate of job growth has been 275,000 jobs per month, the fastest pace since 2000.
Robust job gains despite lackluster hiring by governments
Employment continued to expand at a rapid clip in February, even while government hiring remained subdued (see the latest on Janet Yellen’s Dashboard). Overall, the economy added almost 300,000 new jobs while the unemployment rate dropped to 5.5 percent. Despite continued meager wage gains, the recovery appears to be on solid ground, with over 3.2 million jobs added over the past year.
Continued surge in private payrolls, but sluggish gains in hourly pay
The robust pace of employment gains continued unabated in February. U.S. employers added 295,000 jobs last month, capping a 6-month span in which they boosted payrolls by 293,000 a month. Virtually all the job gains—97 percent of them—were in the private sector. Over the past year, private payrolls have grown 3.2 million. In percentage terms this gain is the fastest we have seen since the 12-month period ending in September 1998.
The Hutchins Center Explains: King v. Burwell
A court case set to be considered by the Supreme Court over who is eligible to receive the health insurance subsidies contained in the Affordable Care Act (ACA). There are a lot of detailed explanations of the ACA (see Vox and NPR). But what’s important to know for King v. Burwell is that the ACA relies on two major provisions to increase insurance coverage: The issue in King v.
As King case begins, Ryan, Kline, and Upton offer an important Obamacare alternative
Just a few weeks after Senate Finance Chairman Orrin Hatch and others unveiled a plan to replace the Affordable Care Act (ACA), or Obamacare, House Ways and Means Chairman Paul Ryan and two other House Republican chairmen have also announced the outlines of a proposal with an accompanying op-ed. Ryan is joined by John Kline, chairman of the Education and Workforce Committee, and Fred Upton, chairman of Energy and Commerce – all key committees when it comes to health care.
The implications of inequalities in contraception and abortion
A poor woman is about five times as likely as an affluent woman to have an unintended birth, which further deepens the divides in income, family stability, and child outcomes. But what is behind the gap? That is the question we address in our new paper, Sex, contraception, or abortion? Explaining class gaps in unintended childbearing, and accompanying data interactive.
Born equal? Prenatal care and social mobility
It is close to a cliché in social policy circles that “earlier is better”— but it is also largely true. While we should avoid the early years determinism of assuming that life chances are fixed by five, it is clear that it is typically more effective and more cost-effective to act early.
What are the effects of not expanding Medicaid?
An essential provision of the Affordable Care Act (ACA) is expanding Medicaid coverage to low-income Americans (those with incomes less than 138 percent of the federal poverty level (FPL)). However, a Supreme Court decision in 2012 made Medicaid expansion optional for states and currently 38 states plus the District of Columbia have agreed to do so. From 2014 to 2016, the federal government will cover 100 percent of expansion cost.
The diversity of Hispanic child poverty
Among low-income Hispanic children with at least one foreign-born parent, 36 percent live in married, two-parent households; about half live under the same roof as their father; and over 80 percent live in a household with an employed adult. These figures are significantly higher than for low-income black and white children—but also higher than for US-born Hispanic households. Hispanic children with foreign-born parents also tend to live in households with an extra mouth to feed.
How open data can reveal--and correct-- the faults in our health system
In April 2014, the Centers for Medicare and Medicaid (CMS) released millions of lines of Medicare Part B physician payment data, that led many researchers, analysts, journalists, and the general public to use the data to answer a number of pressing health care questions.
The Anti-Poverty Case for “Smart” Gentrification, Part 2
Poverty is heavily concentrated in a growing number of urban neighborhoods, which as we argued yesterday, is bad news for social mobility. By breaking up semi-permanent poverty patterns, a degree of gentrification can bring in new resources, energy and opportunities.
The Anti-Poverty Case for “Smart” Gentrification, Part 1
Gentrification – the migration of wealthier people into poorer neighborhoods – is a contentious issue in most American cities. Many fear that even if gentrification helps a city in broad terms, for instance by improving the tax base, it will be bad news for low-income residents who are hit by rising rents or even displacement. But this received wisdom is only partially true.
Another Upbeat Report on Job Market Gains; Real Wages Finally Edge Up
Private employers continued to add to their payrolls in January, boosting employment by 267,000. This is slightly faster than the average pace of growth in the previous 12 months, indicating that the good news on private job gains in 2014 continued into 2015. Robust gains in the private sector were somewhat offset by payroll losses in the government sector, which shed 10,000 workers in January 2015.
Three Reasons College Matters for Social Mobility
Americans have been getting better educated in the last half-century, but class gaps in post-secondary educational attainment have widened. There are bigger gaps in terms of who attends college, who completes college, and how students pay for college, as shown in a recent report from the Pell Institute for the Study of Opportunity in High Education Income gaps in college attendance rates have narrowed some since 1970 but remain high, according to the Pell Institute.
What the anti-vaxxers are getting dangerously wrong
Despite being declared eliminated from the United States in 2000, a recent Disneyland-centered measles outbreak has since spread to 14 states and may be responsible for an estimated 102 reported cases. This alarming resurgence has once again brought the safety and effectiveness of vaccines to the forefront of national debate.
A primer on Medicare physician payment reform and the SGR
If there is an equivalent of “Groundhog Day” in the legislative arena, it may be the semi-annual exercise to defer the physician payment rate cuts called for in Medicare’s Sustainable Growth Rate (SGR) legislation. Ever since 2003, Congress has legislated an alternative to the automatic cuts scheduled under the law. This time, absent legislative action, payments to physicians under Medicare will but cut by 21.2 percent starting in April.
Chronic Stress Gets Under the Skin, Impacts Brain Development, and Hurts Social Mobility
What doesn’t kill you makes you stronger? Not always. For kids growing up in chronically stressful environments—think children living in poor housing conditions, frequently witnessing domestic violence, or suffering abuse or neglect—the experience can get under their skin and affect their behavior for a lifetime.
Wealth, Inheritance and Social Mobility
President Obama has called for higher taxes on capital gains, to generate revenue to help middle and lower-income families. Is there also a social mobility case for action? One specific proposal has gained a lot of attention: closing a loophole in our laws concerning inheritance. Currently, any capital gains accrued over a person’s lifetime are not taxed when the person dies, because the value of the assets is “stepped up” at death, creating a new basis for one’s heirs.
Could Free Community College Change Norms Like Welfare Reform Did?
First, because plenty of financial assistance is already available to poor students, most of the benefit would go to the non-poor. (This is the main criticism from the political left). Second, tuition is a small part of most people’s college costs; board and lodgings are often a greater expense. Third, getting people to stay in community college is a bigger challenge than attracting them in the first place (most enrolled students do not return the following year).
Why the GOP needs an alternative to the Obamacare repeal strategy
Any member of Congress who ran in 2014 pledging to vote for the repeal of the Affordable Care Act (ACA or Obamacare) should of course do so. That was a campaign pledge. But having done that, and seen it lead to nothing, opponents of the ACA need to move on to a more productive and realistic strategy to achieve the core elements of a more conservative vision of health care reform.
Arkansas Governor Signals Uncertain but Hopeful Future for Medicaid Private Option
During remarks at the University of Arkansas for Medical Services last Thursday, newly minted Arkansas Governor Asa Hutchinson announced the continuation of Arkansas’ innovative Medicaid coverage approach, known as the “private option,” albeit with somewhat unclear plans for the future beyond 2016.
Nearly 30 Percent of Workers in the U.S. Need a License to Perform Their Job: It Is Time to Examine Occupational Licensing Practices
When hiring an electrician, it’s important to be able to figure out whether the person knows what they're doing. Selecting an amateur might send your house up in flames. When the electrician says he’s an expert, you don’t have to take his word for it. In the United States, a third party does the job of sorting out the charlatans from the pros. Like doctors and lawyers, electricians have to get a license from the government before they can work.
An Uncertain Outlook for Medicare Spending
In its latest report on the budget outlook, the Congressional Budget Office projects that net Medicare expenditures will increase from 2.9 percent of GDP in 2015 to 3.6 percent of GDP by 2025—an almost 25 percent increase in the share of GDP allocated to Medicare.
Central Banking After the Financial Crisis
Donald Kohn: My answer is yes, to some extent. It changed my view on asset purchases. Before the crisis I was skeptical that asset purchases, particularly the possibility of U.S. Treasury bond purchases that we were talking about in the U.S. before the crisis, would have much effect. I thought that the Treasury market was extremely liquid and dominated by expectations about future Federal Reserve policy and other things, so that it would take massive purchases to change interest rates.
State of the Union: Is the American Middle Class in Need of Government Assistance?
This was a speech that reflected President Obama's judgment on the nation’s priorities for investment, the state of the tax code, and the correct calibration of foreign policy. But it showed more than anything his judgment on the Republican Congress. The President didn't come make deals, he came to make distinctions; not to bridge the gaps between the parties, but to dramatize them: between a GOP for the ‘rich’, and Democrats for the ‘middle class’.
Why Obama's Free Community College Idea is a Bad One
It’s true as well that community colleges can be an important first rung up the higher education ladder for many young Americans from lower-income households, and an associate degree from a community college typically provides a boost to the graduate’s income. Compared with a four-year degree, these colleges provide an alternative and less expensive two-year credential.
Policies to Expand Women’s Opportunity
What is the best way to expand opportunity for women? A week after the White House produced their own recommendations about female economic opportunity, Aparna Mathur and Abby McCloskey over at AEI have produced a report on how to improve economic opportunity for women.
The Other Debt Bomb in Public Employee Benefits
Unlike pension plans, governments are not required to contribute to separate trusts to support health-care promises. As a result, only 11 states have funded more than 10% of retiree health-care liabilities, according to a November 2013 report from the credit-rating agency Standard & Poor’s. For example, New Jersey has almost no assets backing one of the largest retiree health-care liabilities of any state—$63.8 billion.
Is It Time for K-16?
The educational conveyor belt has stalled in the U.S.—at least for low-income children, argue Greg Duncan and Richard Murnane in their new book, Restoring Opportunity: The Crisis of Inequality and the Challenge for American Education. For more than seventy years, the United States has enjoyed a steady increase in educational attainment.
Health Spending Growth: The Effects of the Great Recession
The recent slowdown in U.S. health spending still is not fully understood. Is it a sign of lasting change to the workings of the U.S. health system? Or is it a transitory result of a very severe recession? Recent research makes clear that the Great Recession was an important factor. In work Sheiner presented at the American Economic Association meetings (slides and preliminary paper), she focused on the channels through which the business cycle can affect health spending.
Will the Greek Election Ultimately Break the Euro?
From a U.S. perspective, the key question is whether the election will reignite the Euro Crisis, producing recession over there and some level of financial instability and slower growth here. Some predict this, but it seems quite unlikely, although it cannot be ruled out. There are two routes by which it could happen. First, a Syriza victory and dramatic breakdown of negotiations with the Troika could, with serious mismanagement on both sides, lead Greece to fall out of the Euro.
Weight and Social Mobility: Taking the Long View on Childhood Obesity
Obesity is one of the largest health issues facing our country. More than one-third of adults and around one-fifth of teenagers are obese. Childhood obesity is more common among low-income children and those with less-educated parents. In this Long Memo, we examine class gaps in obesity and how they might inform the conversation about economic mobility. What is the relationship between income and weight while growing up, and how does that relationship carry through to adulthood?
Impressive Job Gains Cap a Year of Steady Labor Market Improvement
Employers added 252,000 to their payrolls in December capping the best year for employment gains since 1999. Over the course of the year nonfarm employment climbed 249,000 a month, or 2.1% for the full year. This was the fastest pace of growth since the end of the 1990s economic boom. The rate of payroll gains in December was just slightly above the rate for the full year but below that for the previous three months.
Reimagine College
Sometimes things change dramatically and quite quickly in our daily world. When was the last time you used a travel agent to book a flight? Have you ever told your kids about the days, not so long ago, before cell phones? Or about life before texting? Remember when you bought everything from actual stores, rather than so much from Amazon?
Prizes for Savings: A Bipartisan Success in Congress
In a rare display of bipartisanship last week, the U.S. Senate unanimously passed the American Savings Promotion Act (HR 3374), following passage in the House in September. The legislation removes legal impediments that currently prevent federally chartered banks and thrift institutions from offering “prize-linked savings” accounts (PLS). The legislation now goes to the President, who is expected to sign the measure.
Sources of Real Wage Stagnation
Most importantly, the growth in the average real wage is largely determined by improvements in labor productivity, output per worker hour. Without such gains, an increase in the average nominal wage will simply be passed forward in the form of higher prices, and higher real wages for some can only come at the expenses of lower wages for others–a zero-sum game. However, the growth in the real wage can deviate from that of productivity due to changes in labor’s share of total income.
Do Future Retirees Have a Future?
Forty years ago, Democrats and Republicans in Congress worked with both business and labor to craft the Employee Retirement Income Security Act, ERISA. Forty years later, we don’t have more retirement security -- we have less. Semanticians quibble whether this is a “crisis,” but today more people worry about their retirement than their health care. In the late ‘70s only 25 percent were concerned about their retirement; today it’s 61 percent -- and rising. Many fear they can never retire at all.
The Fed: QE Done, Lift Off to Come?
The year 2014 was marked by some important transitions for the Federal Reserve. In personnel, Ben Bernanke stepped down as Chairman when his term was over at the end of January to take up residence at Brookings, and Janet Yellen, who had been vice chair, succeeded him.
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