FT: Corporatism versus Capitalism
Yuval Levin discusses
And Tyler Cowen
Ryan proposes a broad set of reforms including an expansion of the EITC and the creation of “opportunity block grants”. The central theme of the plan is reducing poverty through incentive-based aid delivery mechanisms instead of rigid command-and-control programs. There is a mix of reactions to the plan overall but the plan importantly moves the conversation away from the cost of anti-poverty efforts to the structure and benefits of alternative aid models.
Scott Sumner argues that consumption is a much more reflective variable than income when evaluating the level of economic inequality in society. Accordingly, a progressive consumption tax is more effective than income tax as a response if the goal is to limit inequality.
A progressive consumption tax is somewhat difficult to imagine, however, as standard consumption taxes are regressive in theory. I am not sure exactly what Sumner has in mind for a progressive consumption tax but one such scheme was explored by economist David Bradford. His idea was to tax a business’ cash flow at a flat rate and wages at a progressive rate (X Tax). In doing so, the non- distortionary benefits associated with a consumption tax or VAT are preserved.
“[P]laintiffs’ economist Roger Noll, a professor emeritus at Stanford University, developed the framework for plaintiffs’ rule of reason antitrust case.
Noll characterized the NCAA as a cartel that implements a price-fixing agreement among its member schools, and harms competition in two markets: (1) the higher education services market in which schools compete for the best athletic prospects; and (2) the sub-market of the collegiate licensing market, in which broadcasters and video game developers compete for licenses to make commercial use of athlete’s names, likenesses, and images.”
Taylor is supporting a legislated rules-based approach to monetary policy that would potentially limit the autonomy and discretion of the federal reserve board. Under the proposed legislation, the Fed Reserve would have to report to Congress for any Federal Funds rate deviations from the “Taylor rule” (Fed funds rate = 2+ rate of inflation + 1/2(difference between real and target inflation) + 1/2 (difference between real GDP and potential GDP)).
This additional oversight may have some benefits (explained here) with respect to predictable actions by the Fed but the concept is likely not without cost. First, there is significant debate as to even what type of rule should be implemented (inflation, interest rates, different monetary aggregates, NGDP). Although the legislation doesn’t seem to preclude the Fed from setting policy using a different set of monetary indicators, it does add a layer of potential politicization. Second, Congressional oversight may amplify some problems with implementation and policy timing lag, two critiques usually associated with fiscal policy levers.
Overall, the pretense of knowledge risk associated with monetary policy is already high and the effect of external dialogue with Congress is ambiguous as to whether it increases or decreases that risk.
Rothernberg Report: Senate Up for Grabs
538: Senate Breakdown
It seems non-controversial that Republicans will add at least two Senate seats to the R-column. 538’s data models suggest that a Republican sweep of 10 seats is not out of the question but a pick up in the range of four to six in more likely.
Alaska, Arkansas, Colorado, Georgia, Kentucky, Iowa, Louisiana, Michigan and North Carolina are all considered toss up races at this point. The Arkansas race may be the best bellwether as polling continues to swing back and forth between incumbent Mark Pryor and challenger Tom Cotton.
Bernanke and Friedman disagreed on the underlying cause of the Great Depression– Bernanke looked to the destruction of credit induced by bank failures while Friedman focused on a contraction in the money supply. The diagnosis has subtle, yet important, differences in the treatment of the recent recession.
Friedman’s diagnosis tracks more closely with Scott Sumner’s nominal GDP solution, that is to keep the money supply (while counting velocity) stable or growing. Bernanke’s, on the other hand, requires emergency lending to banks in order to maintain credit in the system. One solution focuses on liquidity while the other focuses on credit.