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Brad DeLong: Worthy reads on equitable growth, July 27-August 2, 2021

Summary:
Worthy reads from Equitable Growth: 1. Read this policy analysis by former Equitable Growth senior policy advisor Liz Hipple to understand what it would mean if the federal Child Tax Credit becomes permanent, Back in March, in “The child allowance will pay dividends for the entire U.S. Economy far into the future,” she wrote: “Economists, other social scientists, and policymakers alike already know from research into other, similar income support programs, such as the Earned Income Tax Credit and the Supplemental Nutrition Assistance Program, that increasing the economic resources that families have helps them make investments in their children’s human capital development, which, in turn, improves children’s school performance and completion and boosts their

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Worthy reads from Equitable Growth:

1. Read this policy analysis by former Equitable Growth senior policy advisor Liz Hipple to understand what it would mean if the federal Child Tax Credit becomes permanent, Back in March, in “The child allowance will pay dividends for the entire U.S. Economy far into the future,” she wrote: “Economists, other social scientists, and policymakers alike already know from research into other, similar income support programs, such as the Earned Income Tax Credit and the Supplemental Nutrition Assistance Program, that increasing the economic resources that families have helps them make investments in their children’s human capital development, which, in turn, improves children’s school performance and completion and boosts their future earnings. A 2018 study finds that an extra $1,000 in the Earned Income Tax Credit increases the probabilities of children graduating high school by 1.3 percent, completing college by 4.2 percent, and being employed as a young adult by 1 percent, and grows their earnings by 2.2 percent. Other recent research finds that a $1,000 tax credit increases children’s math and reading scores by 6 percent to 9 percent of a standard deviation. These are just two examples of the extensive body of research into the positive effects of the EITC on children’s human capital, with future benefits of higher earnings accruing both to the beneficiaries, as well as the wider economy in the form of increased tax revenue on those higher earnings.”

Worthy reads not from Equitable Growth:

1. A very good point from Diane Lim about the Biden administration needing to think less of where the aggregate demand sweet spot is and thinking more of what the optimal demand sectoral mix is. Read her “Will the infrastructure bill fail to create jobs where we most need them?,” in which she writes: “Two months. That’s how long our most recent economic recession … lasted … February to April 2020. … Does the latest policy effort focused on physical infrastructure (predominately roads and bridges) funding make sense given the economic condition it is intended to treat? … Consumer demand is largely back, especially in the leisure and hospitality sector. … The trouble  with… leading with the physical infrastructure investments and not the family investments in caregiving and other “human infrastructure” is that it might not create the kinds of jobs in the industries and occupations where our economy is still operating below our full capacity.”

2. Smart words about how to create a robust semiconductor sector for our post-industrial economy from Laura Tyson and John Zysman. Read their “America’s Vital Chip Mission,” in which they write: “This year’s semiconductor shortages underscore the need for a comprehensive strategy. … Competitive market conditions must prevail throughout the industry, because excessive market power in any one segment can jeopardize supply … [so] the US should cooperate closely with the European Union, Japan, Singapore, Israel, and others who form core parts of its secure supply base. … [This] does not mean preventing China from purchasing or selling semiconductors on global markets, or from developing its own semiconductor industry in ways that do not violate global trade and investment rules. Weaponizing trade and investment restrictions to thwart China’s long-run semiconductor ambitions will be costly and counterproductive.”

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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