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tv   Aspen Economic Strategy Group on Economic Oppotunities - Opening Remarks ...  CSPAN  February 5, 2019 4:49am-5:59am EST

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determined as americans. if there is a mountain, we climb it. if there is a frontier, we cross it. if there is a challenge, we tame it. if there is an opportunity, we seize it. so, let's begin tonight by recognizing that the state of our union is strong because our people are strong. [applause] the state of the union, first postponed because of the government shutdown, will take place tonight. watch president trump delivers his state of the union address live from the house chamber beginning at 9:00 p.m. eastern on c-span, followed by the democratic response from stacey abrams. the state of the union, live tonight at 9:00 eastern on c-span, c-span.org, or listen with the free c-span radio app /
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>> next, a discussion on barriers to economic opportunity and what local, state, and federal governments can do to help. speakers included kevin hassler and jared bernstein. from the aspen institute, this is just over an hour. >> good morning, everyone. welcome to expanding economic opportunity for more americans. i'm the deputy director of the aspen economic strategy group and i'm pleased to introduce our cochair and the president emeritus of the university of north carolina. [applause] thank you. you just met amy, the heart and soul and the guts of all of the aspen economic strategy group. thank you for all you do. good morning on behalf of my old
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pal hank paulson and myself, let me welcome each of you to our meeting this morning. i'm personally delighted to look out in the audience and see so many familiar faces and old friends. i thank you for joining us. let me begin this morning by thinking for people who have been instrumental in the success of this effort. they have provided not just phenomenal leadership for the aspen institute, but have also been an enormous help in forming the economic strategy group. i'm going to start with something you may find to be strange and unusual. hopefully wenews, can go from there. we have just witnessed of the longest government shutdown in history of our country.
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have a real first glimpse of what divided government is going to look like. see onlynction we fuels the disintegration of trust in our already weak political institutions. from congress to the presidency to our political parties, americans have lost trust, lost confidence, and lost faith in the building blocks of our american democracy. and that, my friends, is truly tragic. since we are here today to talk it iseconomic policy, clear that economic agendas on the right and left are further apart today than and any other point in my memory. at 73, while my memory is not -- hank and, it is
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i did not come here this morning to talk to you about only the bad news. there is without question a silver lining. i have witnessed as we have traveled around the country a hunger for new ideas and an better to create structures and smarter policies. there are many groups similar to this one that we have formed at aspen throughout the country, groups that seek to reinforce the importance of facts and evidence in the policymaking process. there are also many groups committed to strengthening the and political institutions that preserve and protect the principles, the principles of good governance that sustain our democratic policymaking process. i believe your attendance here today speaks to this.
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at least i certainly hope it does. for sure, this new era of divided government presents many obstacles, but it also demonstrates to us quite clearly the necessity of bipartisanship. working in a bipartisan manner is highly frustrating. both hank and i have the scars to prove it. spent any who has meaningful time in this city knows that we are not going to solve any of the pressing economic issues, such as trade, immigration,ation, income inequality, or the lack of economic mobility, without first having the ability and the will to make principled compromise. as my old pal alan simpson once said, "if you can't compromise
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without compromising your principles, you better never be a legislator, you better never get a job, and for god's sake, you better never get married." [laughter] this is why we established the economic strategy group. we established it to promote economic policy ideas that are rooted in fact, and rigorous analysis, and to facilitate bipartisan dialogue about these ideas, dialogue that would lead relationships, relationships that enable us to build trust, and hopefully to meaningful progress to solving some of our problems. are hope is this will be one andl step toward restoring rejuvenating the norms of bipartisan good faith in our policy process.
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i believe the panels we have set up today and the work of the economic strategy group we have set up that underpins them will shed light on these challenges and help move fact-based policy discussion forward here in washington. hank has more to say about this. without further ado, let me turn it over to my longtime friend and cochair of the aspen economic strategy group and the 73rd secretary of the treasury, hank paulson. [applause] hank: thank you. so, thank you very much erskine, and thank you for being here today. you a look atven the political backdrop, so i thought i would give you some
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economic context. if you are just reading the economic headlines about job numbers and growth, you might think everything is all going pretty well. that far too is many american workers and families are falling behind. and middle income wages have stagnated for decades. geographic disparities and income opportunities have widened. the ability of american children to earn -- grow up and earn more than their parents is eroding. these problems stem from profound economic changes. they are structural and they are not easy to reverse.
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we would not be working on these issues if we thought they were insurmountable. progress is possible and as erskine has just said, we see many opportunities for both sides, democrats, republicans, to come together to address a range of frustrating issues from wage stagnation to low levels of labor force participation to the need to upscale the workforce. we are notine said, going to get very far on these issues without a commitment to evidence-based analysis and principled compromise. these are the principles that have guided the aspen economic strategy group over the past year. we believe they have served us well in our pursuit to craft smart and effective economic policies and we are pleased to share some of our ideas this morning here at today's event. now, we have an extraordinary
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lineup of speakers for you today. a big thank you to each of them for their time and contributions. thank you to jared bernstein, joshua gottlieb, kevin hassett, chris lindel, david newmark, juan still gotto, rahm emanuel for lending us your expertise today. to the following authors and members of the economic strategy group who will be joining today's panels. finally, a thank youfinally, the members of the economic strategy grew who are here today and those who could not be here today for your contributions to our work. i'm looking towards our discussions today into learning.
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great pleasure to turn the meeting over to melissa kearney, who is the director of the aspen strategy group. moderate theto first panel. melissa. [applause] melissa: comeo n up. we are waiting for one more to join us in thank you for being with us morning. the back drop for this panel is the erosion of economic security that so many americans have experienced in the past two decades.
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decline ined to the employment, many adults, those without a college degree, wage incomeion, the growth in inequality driven by disproportionate gains at the top. this panel is focused on particular policy aims, specifically aims of increasing employment rates and increasing wages for workers who have been struggling in the u.s. we have a fabulous lineup and we grateful to have -- have three of our outside all authors. is widelyieb recognized as an expert in urban and housing economics. also health care. is the director for
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the center of prosperity research. preeminentof the experts on poverty and social safety programs. director of the economic self-sufficiency policy research to. expert on the labor market and labor market economy. the currentt is chairman of the council of economic advisors. jared bernstein is the senior center onthe budget and also priorities. he served as advisor to vice president biden the obama
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administration. i will stop the panel conversation with the 10 to 15 minutes remaining. you will notice there are index cards in your seat. someone will come around or the end of the session clerk to those. let's start with josh. josh wrote a proposal that is in your volume is focused on zoning reform. the point of this reform is to make housing more audible in some of the superstar areas and as part of the background motivation in your raboso, you mention what i find is a startling statistic very you say u.s. gdp is nearly $2 trillion below its potential as a result of land-use regulations and zoning restrictions. there getting into
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specifics of your proposal, why is zoning and house prices linked to wages and productivity? >> this comes to the fact you just alluded to. regions are very different in their productivity and the opportunities to provide. places like san francisco, boston, new york, washington, when it is not shut down, provide different opportunities because they are more productive. they have ideas. they have links between suppliers and customers. these create a lot of opportunities, and americans who are looking for opportunity often would like to move to these places. those municipalities in these areas have a tendency to tell outsiders you cannot come in. they use strict zoning and outblocks to keep outsiders . because of the basic forces of
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supply and demand, you raise prices and cause people to choose not to go to these places even though they would increase their skills and opportunities. different authors have run the numbers on this and added up all the lost productivity and wages from these research and and come up with these anonymous numbers on the order of 10% of gdp. >> tell us what you propose that government can do to the military these challenges. because itchallenge comes from government. i propose we look at the different levels of government. localities, municipalities are the sources of many of these problems. it makes sense from the perspective of self-interest. if you are a menace pali, and you want to raise housing values, one way to do that is by restricting supply. they don't take into account the knock on effect of these supply
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restrictions on people elsewhere, people who are not current members of the location. i propose that state governments should take a hard look at what they are allowing their municipalities to do. i call it minimum zoning mandates. you can think of it as an alternative zoning code or permitting process or state governments would say, look, there are certain types of residential construction that are sensible, and you should be able to build them anywhere you are allowed to do so. builds not to say you can an industrial plant in the middle of a residential neighborhood. the medium density places that create a lot of opportunity and interesting neighborhoods, that should be allowed without giving neighbors the opportunity to keep it away. >> given the legality of our
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fiscal federalism system, can states do this? >> states can do this. states create municipalities. if the federal government were to come in and tell municipalities to do, that would be more challenging. none would give financial encouragement to states or municipalities. you cannot tell states here is how your zoning processes work. states can do this. >> who are the winners and losers? >> the winners are pretty diffuse. opportunity, the people who might move to san francisco or washington or new york, they could be anywhere. they would benefit from lower rent, more affordable housing that would emerge when zoning wstrictions are
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eakened. on the winner side, firms. you have more workers and more ideas flowing. losers are more complicated. existing homeowners are worried about what more zoning would do to their home values. it is important to think about the difference between land and homes. i am proposing to use land more efficiently. exclusionary zoning actually might the press land values because it is keeping land being used for its most productive use. no one is suggesting we go in and tell a particular landowner you have to build a lot here. if the landowner wants to build more, presumably it is because it is beneficial for them. they are currently not allowed to replace a single-family home with row houses. if they do it, their land value may go up. >> one more quick question,
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aside from the cities you mentioned, how big of a deal is this elsewhere? are there other places this is a problem? >> this is very widespread. let me give you a sense of the magnitude we are talking about. there is work that calculated how restrictive and difficult it is to get new housing in different areas. one statistic i found looking at his numbers is that in order to get an equal number of extra housing units built in washington, d.c., versus charlotte, north carolina, prices in washington have to go up by twice as much. charlotte is a perfectly reductive city as well. it is somewhere near the middle of this distribution. this problem is very widespread to the extent that to train dollars of gdp is lost. you focus on economic
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productivity. jim's piece is one of the most striking i have read outlining just how far behind america has been faring as compared to more metro or urban areas. you had one statistic in your piece that only one into low skilled men in nonmetro areas are currently working. not that long ago, employment rates among men in metro and nonmetro areas were not all that different. you have depressing statistics about how far behind adults and rural areas have fallen in educational attainment. on what isborate going on in rural areas, rural labor markets as compared to urban areas? >> thank you so much. andeally defies logic
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statistics in the u.s. and especially educational attainment in the u.s. things look pretty good if you look at the course of the last 50 years. if you break the data by location of residence, things have changed quite a bit between urban america and rural america. for example, the fraction of men with college degrees in rural america is the same today as it was in 1985, only about 15%. gap between% point urban america that did not exist 50 years ago. what we are seeing with that slowdown in educational attainment is a real slowdown in earnings. another statistic in the paper is the fact that college-educated men in rural america are earning the same in inflation adjusted terms as they were in -- about $1000 a week.
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josh thinks hard about that in his work. high skilled men in urban areas. rural communities are left behind. that big push for technology and the payoff and return to schooling has not really affected rural america. portable we are seeing as a consequence is that young people tend to move. the population is aging faster in role america then urban america. we used to have greater return migration from young people after they finished college. they are less likely to return home today. fertility rates are not enough to offset the decline in population. there is return migration, but it tends to be people older in their 50's and above who return to their home place after their
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careers. this is creating a substantial economic challenge for role. -- rural places. >> you have this phrase, the lack of supply and the lack of demand for skill in these rural markets. you have been studying these trends, and you know the evidence more than anyone. what do you propose to do about this? a twofold strategy of bringing people the jobs and jobs to people. , there is ao jobs subset of the world population who are mobile. they are willing to move to work, either permanently or temporarily. they lack the resources to make that change. i am going to be chewing on this i guess. they lack the resources to make that change. for ae have is a proposal
quote
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permanent move, a relocation and assistance program. this would offer people who are capable of moving to new opportunities and locations at least two communing zones beyond their current residence, offer them assistance for moving costs, down payment on housing as well as a temporary statement that would last for about the first six months of their move. we have a history on these types of programs in the u.s., not a lot. program isll-known that move into opportunity program. that was a housing assistance program. the goal was to reduce poverty across generations. it was not an efficient jobs program. it was more of a neighborhood change program where improved access to better jobs might be a positive byproduct. after the 1966 welfare reform, to locations offered
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relocation assistance to welfare recipients. kentucky andwas the other was a county in california. there was one formal evaluation of the kentucky program that showed real positive change in terms of earnings for people that did move. there has not been a formal evaluation of the california experiment demonstration. it suggested that it had a positive effect on the people that participated. the most solid evidence is in germany, which has a very active labor market program overall, where they had done these relocation assistance programs showing earnings of movers relative to stayers have risen 25%. a related policy proposal is a commuters credit. transportation is the second-largest budget item for the typical american. it takes a larger share out of the budget for rural americans
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then urban americans. there are many people that don't want to move or cannot move from their current location. if they want to find access to better jobs, they often have to commute several counties. this would be a temporary commuters credit that would last up to 12 months that would provide a subsidy to workers to help cover these transition costs. these strategies are for people who have been displaced for work for at least half a year, what we would typically referred to as long-term unemployed workers. the reason is to assist those who are having a harder time kicking themselves back up economically. picking themselves back up economically. the other is a jobs proposal.
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the policy rollout first on the most disadvantaged population in our country. 11% of counties that the u.s. department of agriculture characterizes as consistently poor. they have poverty rates in excess of 20% or more every year since 1980. these communities are spread throughout the u.s. they are predominantly rural communities in the south as well as the west. proposal ispeople threefold. one would be a major expansion overall broadband. -- rural broadband. 50 years ago, the major challenges in world america were water,rtation, potable the basics that we took for granted in urban places. today it is the digital world, digital infrastructure. rural americans, only about 40% broadbands to
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compared to 4% in urban america. there is a real divide. the idea is to create opportunities for local manufacturers, craftspeople, and to open up the opportunity for telework. wired ine people are these rural communities, local firms need access to capital. the usda has run a number of programs assisting local communities, often through state and local governments and institutions of higher ed. there are real partnerships between state and local governments to help provide small loans in business development for micro-enterprise and other firms located in those communities. the other third is for the most this advantage part of the
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population and rural america. these are the people who are not equipped to take a commuters financiale not entrepreneurs, cannot take advantage. ofs would be a program public works. if you go around rural america, a lot of the work that was done infrastructure wise was done after the great depression. for many of these communities, not much has been done to maintain that infrastructure. for that population that struggles most in finding work, we would create a system of public works programs. one thing that strikes me about your jobs to the people proposal is i appreciated the specificity of it. you had an idea of what these people would do. it is more specific and much
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more targeted and perhaps more some of theope that other universal jobs programs that are floating around. why did you decide to propose something this targeted as opposed to just guaranteeing a job for any american that wants one? >> part of it is cost containment. system we have to have a where jobs are available to people who struggle the most, and that is the second part. there are other people who are much closer to the margin. they don't need the access to the government provided job, but they need the financial boost to allow them to see that opportunity. >> some of these other proposals i have seen come with a price tag that would create an entitlement program on the order of medicare.
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can you give us rough numbers on something like your proposal? >> on the people to jobs, those would range, maximum credit you would be eligible for and relocation would be just over 100,000 long-term unemployed, we would be looking at roughly around a $1 billion allocation for that, which is tiny compared to medicare for example. if we look at the commuters credit, it would be between half a billion and $1 billion. broadband, there was a proposal put out through the brookings institution about a year ago posting about a $20 billion investment in rural broadband. that seems to be about the right number for that program. that is a major infrastructure change in some of these hard to
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build communities. it ranges from relatively small investments to much more sizable financial investment. >> you have a menu of policy options. question, which would have the greatest bang for the buck? >> that is tough. one thing before i answer your , we are in d.c., so it is deflect. one thing i want to make clear in the policy proposals is that what i am suggesting in my agenda today is what we might call activate market policy for the current population of adults. to adjust systemic poverty in rural america requires a massive investment in our children through education, pre-k, higher ed, which will lead to the discussion in the next panel,
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and also health. it is important to recognize this is current active labor market policy. what do i think would be the most important long-term investment of these active labor market policies? i think the rural broadband is the one that is the most important one. i think there is just too many missed opportunities right now in the current marketplace that rural america is not able to participate in. >> thank you. let's move on to david. for those of you that don't know, he has written numerous papers over the years on all sorts of wage and higher income credit and labor market policies. david has proposed a higher wages tax credit. what issues are you trying to address with this proposal? >> as some of you may know,
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minimum wages are going up. my colleagues like to tease me that i am clearly losing this battle, to which i respond they would only be higher if not for my research. the point is higher minimum wages are popular with the voters. are popular with politicians, perhaps because of the first point. also perhaps because they can appear to be doing something about inequality without having to raise taxes, which is out of these you i'm trying to address -- the issue i am trying to address. there is debate that while minimum wage clearly delivers some benefits, there are some adverse effects in unemployment and hours worked. obviously those of you who follow the literature know that not everybody agrees. i think all economists of every
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stripe are comfortable with some of the high minimum wages we in some parts of the country. the idea behind this is -- policy is to recognize and wages rather than say don't do it, how might we ameliorate this policy to make it somewhat more effective, reduce some of the rebalancefects, and the discussion about redistribution of policies. >> this is a creative and out-of-the-box proposal. outline for us. >> the basic idea. franciscoas a san liberal by some folks and an antiworker conservative by others. i am probably more of the first and the second good i tried very
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hard not just for my homework here to think about all sees that might attract support from both sides as they are more likely to be adopted that is important. we are trying to make better policy. the idea is way simpler. idea simply, the basic idea, and this can be done at any level of jurisdiction. when a jurisdiction passes a minimum wage increase, he put in place a higher income that offsets roughly half the reese. it is a calculation of the average wage of those who were paid below the minimum wage, what is the increase up to the new minimum wage, that way you don't have to worry about workers. you share have to cost of the increased between the employers and the taxpayers who are saying
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you should pay this higher wage. aside from that there are only two other details. how do you work this out so that with inflation as the minimum wage becomes less relevant, how do you structure it if it the minimum raises wage two years later, that is taken account of. the other thing i suggest is that we consider having this credit only for people with high school education or less. that is to improve the targeting of little bit. we know the minimum wage does not target low income people very well. there are a lot of minimum wage workers in high income families. it is hard to tie a family to family income. if you tie it to educated people come you are more likely to be
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hitting families with low. in the simulations we do, you see that. the last point is about the point i was making about policy discussion. right now, we think about -- we know there is rising volume. both parties talk about it, different solutions. politicians are trying to respond to the only problem. we have a number of possible solutions. the minimum wage has intuitive appeal. quality wages. policymakersn to and the public is that it comes with zero price tag. it is not. if you ask me what does this cost them i will say it does not cost any more because we are paying her anyway. wageax credit for higher
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thatlled a recognition this is like any other redistribution of policy. it has a cost. better on the is merits, we should pay for it. we have done a more sensible accounting. essentially cleverly attached a price tag below or state governments that want to raise their minimum wage. a cynic might say you have shifted the cost burden from the businesses to the government and in so doing this would contribute to a stalling of minimum wage legislation. thatam sensitive to criticism that i'm just throwing sand in the wheels. we cannot really ship cost government.
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we can ship cost the taxpayers. money trying to get more in the hands of low income people. we know minimum wage does that to some extent. think other redistribution of policies, we like to take that money from those make the most. if we are going to do it, that is the sensible way to do it. the minimum wage does not really do that now. the guy who owns the laundromat paceman wage, investment banker does not. obviously there are versions out there making a lot of money to hire a lot of low-wage workers. not for taxpayers are this at all. it does redistribution the way it should be done. a lot of the opposition to higher minimum wages comes from businesses this would lower the price to businesses.
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you might get more buy-in because this is now a shared burden to help people at the bottom. that could ease the policy. >> one of the things it seems your proposal would achieve is the newly reading the potential adverse employment effects of higher minimum wage. why did you not propose something more direct like a higher income tax credit? >> depending on how it is structured, and i read the proposals by jason and phil, that is not at the end of the day that different. coulder income tax credit work the same way or not depending on how you do it. the higher income tax credit based on the minimum wage will respond to something that is essentially a distortion introduced by the government and try to ameliorate the effects.
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outright higher income tax credits i have some sympathy for, but they are hard to structure well. i tried to build into this something that will target the people whose price has been pushed up and try to do less to have the problem that many higher credits have them witches windfalls to employers for hiring they would have done anyway. >> outside of your proposal for a minute. how do you think about the substitutability of minimum wage policy and the itc. >> people often say why not both? >> e itc is the earned income tax credit. >> it induces employment among low skilled people with kids because they are eligible for the most generous credit. it pushes down market
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rates to some extent. the simple view that you need to is thethe wage reduction wrong way to think about it. eitc increases employment. i have some work that says when you raise the minimum wage and eitc together, you increase the positive effects of eitc. skilledce more low labor into the market. the teenagers who compete with them get absolutely clobbered. i have a strong preference for the eitc. it encourages work. it increases employment. donee work that i have which shows beneficial long-term effects of the eitc.
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omenn's growing up -- w growing up in their 20's and 30's with the eitc earn more in their 40's and 50's. for some people they shut down labor market opportunities. >> now for the reality check. we are going to hear from our economists that lived in the policy world as opposed to the academic world. give us your general reaction to the ideas we have heard about an anyent on whether you think of these might get some legs in the policy world. >> i really like not just the ideas, but i want to associate myself with comments hank made to kick us off. if anyone has read my work, and , i have no reason to do so co e
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tend to be amplifying a lot of these very bold left ideas that are coming out that are much down the political continuum than what we're talking about today. the reason i like this project so much and the reason i associate myself with the comments that introduced us is what is missing is precisely space,re moderate policy which my experience now is that there are members on the hill who are somewhat hesitant to even go there because they don't want to be accused of not passing a further left litmus test. the fact that you are developing this policy set is really ,mportant even if we are able if the democrats stop negotiating with ourselves, which would be good, and make a run for the boulder ideas.
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we are going to have to step back. what are we going to snap back to? it may be some of the ideas we are talking about today. is perhaps some ,olitical space for jim's idea for josh's idea, that is not a federal thing so much. that is a level down. i wanted to talk about the political viability of that. i think it is a very heavy lift. i suspect you would not disagree. for david's idea, i don't really know. i will talk a little -- about the politics. i will talk a little about that idea. can i say a few things about the policy? i read these papers carefully, and i very much enjoyed them. they are very well written. in terms of josh's point during your conversation, the zoning idea.
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governments make rules. well, that is true. in a way, the zoning rules you are talking about, the local ones are almost the most representative level of government you can think of because it comes down almost to the block level. your idea should be something that should be in place already. it is a great idea. it is really hard to find anyone in the policy world who opposes it. this is an idea that left and right agree on. when i am in debates, and someone says can you come up with one idea that somebody on the other side would like? we talk about opening up zoning. his is something that has wide analytic support. leapfrog theg to level of powerful local politics. i live in virginia, somewhat controversial government right
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now, current events being what they are. it is really hard to imagine richmond telling alexandria or arlington what to do at this level. we are sort of purple. i don't know that that gets easier in other places. the only other critique i have of your program is that i work with the housing team at the center on budget. that thea theme supply-side approach you are advocating while critically important and valuable would not reach some of the lowest income people that faced housing shortfalls, and we really need to be talking about subsidies, and that is a federal these. leave, makeore you sure you look at jim's wage data. i'm going to highlight something you did not. it is not really about your paper, but about the situation
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that was talked about in the introduction. look at jim's picture of real median wages over the last 30 years or so. you gave a description of the relative dynamics. if you look at the most favored group given the partitioning him did, the metro college-educated workers, their real median wage has been flat since 2000. it is almost two decades. the extent of the wage problems you are talking about don't just affect less than high school workers or high school workers, they affect college educated workers. i think that is something we need to be mindful of. what is so great about jim's idea is his willingness to approach both sides of the problem, people to jobs and jobs to people. in the interest of time, i want to be great. there are a couple of things i
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would open up in the design of the program. i understand cost-containment. i don't think you want to be penny wise, pound foolish with something like this. i would not restrict this to people who are unemployed or long-term unemployed. what about someone who is stuck in a lovely job and wants to move somewhere to improve their lives. intention toyour cut off the commuting subsidy after a year, but what if -- there is a lot of immobility and wage stagnation on there. what if someone is still stuck where they were 12 months ago? i would want to condition that on their economic situation because you could cut their legs out from under them. , one of the statistics i read is that 50% of rural areas have broadband. i don't know anyone who is against this idea. this is another one that sort of
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has at least rhetorical bipartisan support. is there any work that compares the folks to have it to the folks that don't that would lead you to believe this has the impacts you are suggesting? i want to do it anyway. does this mean everyone gets a connection,netflix or doesn't really have the entrepreneurial affects your talking about. david's work for a long time, i don't to say surrendering, but the idea of reality being what it is, maybe in his case you can make lemons. out of david is pretty skeptical of these minimum wage agreements. i think the paper suffered a bit from not citing the work on the other side of the elasticity fight in terms of disappointment
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effects. i made a point of reading this zipper, daviden this is an important paper. board, insignificant impacts of employment of minimum wage increases relative to implement changes. that is a debate out there. david has done serious work on one side. other people have done serious work on the other side. he is much more aware of this argument than i am. that along with some aspects of the policy that gave me pause button me to wonder whether it is something we want to push very far. i would like you to talk about this. i think the administrative burden of getting firms to track the extent to which their
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minimum-wage workers are diverging from the average between the old and the new, you can get into the mechanics of your thing, is considerably more challenging than your presentation suggested. would come down is that you are scratching and ase that may not be as itchy you think. a lot of research would suggest that. you are adding an administrative burden that i think is quite serious. third, the income targeting of your thing is not very good. that is because you are trying it to the minimum wage, which is not as well income targeted as the eitc. what i would do is take whatever money you were going to put into your tax credit and just boost the earned income tax credit, which actually does and up
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scratching a similar itch in terms of lowering the costs of low-wage employment to low-wage workers. targeting, i actually think skill targeting by cutting it off at high school or less is not necessarily great skill targeting either. if you look at the association between low wages and skills, it is not nearly as clean-cut as you think were the policy would imply. there are people right above the high school level who face roughly the same labor market as read below. administrative burden, and we already have a tool in place that can do this better in my view. thing, we live in a country right now where we have very serious deficit problems as we will talk about offstage
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perhaps. i think -- i don't want to be around, wheregoes is your pay for? i want to pay attention to that. >> you have been very patient. do you want to push for all of these policies? if i am on alf, panel with jerry, i will bring some benadryl lotion. hank and amy for inviting me here. if i had not gone into government, i would have been down that and a little bit. is important as an economist to sit back and think about this bipartisan space that we have defined in the conversation. i think it is interesting. i can create kind of a mental image that helps characterize
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the policy problem and identify places a possible agreement. i think there are people who think that markets work and the result is the closest you'll get to just. other people worry about what happens with markets. i think i can say if you think about a mental model, let's just start with a map of the u.s. do people just parachute down onto a map of the u.s., and we let them trade with each other and move around and so on, then any can definitely create optimal equilibrium that is beneficial to all. the problem in the real world is something that used to talk about way back in the day when glenn and i were still in grad school. problem is if we parachute people down to a map of the u.s., a lot of times people land on flypaper. they are kind of stuck.
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that is true geographically. you can think about the exercise of starting our economic model where you land is where you determine your skill. you parachute down and determine your skills. getou can move around and new skills, depending on how the economy evolves, you get a really efficient equilibrium. i grew up near a distressed community where everybody worked at a paper no. had really great skills for making paper, but then the paper mill closed, and then they are stuck with those skills. if we think about one of the main problems we have in society is that we can all agree that markets are not always going to work if there's a lot of flypaper around. one of the things that happened in the literature, there are a lot of people that have
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documented there is a lot of flypaper today. when jarede you that and i started worked on -- five years ago, maybe more, i made an investment of my own into this space. one of the first experiences i had in the white house. we made a presentation about this flypaper problem to the president about how people are moving from high unemployment to low unemployment places that much lower frequency than they used to. after i left the oval, the president tweeted, if you are having trouble finding a job, you should consider moving. [laughter] i could say in the administration that we have got lots of policies that they are
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working on that address this stickiness problem. one of the main ones that is ari out there is something that started with charity stuff because occasionally he has a good co-author. we wrote a paper long time ago about distressed communities. that paper led to the opportunities out tax law that law about a year ago. send capitalefully to places him and send the jobs to the places where people are stopped. another thing we are worried about is the stickiness of skills. we have paid a lot of attention to the fact that with andnological innovation artificial intelligence we are increasingly moving towards a world where people may be stuck with the lon long skills.
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-- with the wrong skills. is the perspective from the administration. i think once you think about it as a flypaper problem, you will see there are a lot of good ideas that should get bipartisan support. i think zoning reform is one. the question is whether there is a federal role is for the think tanks. there have been times where the federal government has come up with a carrot or stick to try to get stuff to improve. i am convinced by the literature that zoning restrictions are probably a major harm for the economy. we think about the way the drinking age got moved. maybe there is stuff that could happen in that space. i think the relocation subsidies , that has been pushed for a
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while. if you think about the fundamental economic problem as flypaper, that is something that .ould address it i think there is other stuff in the flypaper space where there should be broad bipartisan support. economic reports all the way back to 1946 is sitting on my bookshelf by my desk, and i at the grab it sometime and of the day. there are a lot of great chapters. jason furman's last economic report to the president, they had a great chapter that talked about occupational licensing and how that creates this flypaper effect. the final thoughts on the minimum wage is as an economist, and i have been a fan of david's , is i am writing it down
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the problem of social justice. i have the social where -- welfare function. the mathematical problem is to move things around so we get a more just equilibrium. it never made sense to me that if we think we want to redistribute the optimal way to redistribute would be to impose a tax on the guy who gives the low income guide the job. for me the conversation always struck me as being more logical if we viewed it as maximizing a social welfare problem and recognize that collectively we should share the burden of social justice. we should not target the burden on one segment of society. >> thank you. we have time for a couple of questions. if you could pass your index card with your question to
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someone who is walking around, we will pose your questions to the extent there is time for our panel. i am glad you brought up skills. our next panel will all be about skills, which is why we cannot continue this conversation for another hour. there is clearly plenty of material. want aer one of you quick response? >> a quick response, and not to debate the minimum wage evidence. why not increase the eitc? i am on board with increasing the eitc. i am not on board with increasing the minimum wage. tolowers the cost of labor employers the simile this credit does. the eitc reaches a lot more people. it is more targeted in that sense. >> there are a couple westerns
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trainingo the idea of and upscaling. i am going to punt on those for the next panel. that is a topic of your station for the next panel. here is a question about essentially the fact that what we have been talking about has been for a long-term or middle run issue. this points out that there are people who are vulnerable to the recession shock. do one of you want to say something about how you think about cyclical challenges and the best response? >> i'm going to speak to that because it is an issue that relates to my proposal. one way that people would be able to react structural or
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cyclical downturns is by moving. one of the things that happens with the zoning issues i am racing and the general their virgins of urban and rural areas is for that channel for people to take into their own hands how to resolve my problem is being hampered. about openingoint these programs up, don't he so stingy. there is a countercyclical problem. commuter credits could be a very effective countercyclical policy during this period. >> i want to stick with you on that. might have listened to david when he mentioned that low skilled workers in urban areas are not doing so hot anymore.
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lowther places for skilled people to move to? to an are going to move area with job opportunities. the challenge is wage stagnation, which pervades the entire skill distribution. the difference is employment versus not. that is the big difference. point, thisclical is a technical point. and i have talked about a lot over the years. they are not separable in the sense that if the unemployment insurance extends to 99 weeks then you run the risk of encouraging people to stay out of the labor force so long that they get hard to reattach. effecteraction cyclical
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and long-run effect could be large. imagine if instead of extending to 99 weeks you made it so you could take some money to relocate. that is a policy space i encourage folks to dig into. >> final word. >> quick macro point. one thing that keeps me up at night as i am very worried that when we hit the next downturn, we are to have two little monetary space into little perceived asto really hit back as hard as we need to. >> i agree with that. >on the issue of what to do abot global phenomenon, i have written another work that i think we should have a higher -- me policy that turns on they talked and talked about higher income credit and finally did something two years too
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late. countercyclical higher income credits actually work. in just something that kicks automatically. if we kick in quickly, it works counter to the long-term unemployment problem because it encourages people to hire you. >> i don't want to eat into the next panel. join me in thanking our panelists. [applause] , state, and federal governments can do to improve community college programs. the whi included

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