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13 Aspen Economic Strategy Group Reports related to the American Jobs and Families Plans

The Biden Administration’s American Jobs Plan and American Families Plan propose over $4.1 trillion in new government spending over the next 10 years, aiming to fundamentally reshape and expand the social safety net, increase the economy’s productive potential through investments in physical and human capital, and make major public investments in green infrastructure and technology. 

The Aspen Economic Strategy Group (AESG) has produced a number of reports in recent years that speak directly to the policy challenges addressed in these plans. We highlight 13 directly relevant AESG reports below. Some of the proposals contained in the administration’s plans are consistent with the evidence and suggestions of AESG authors; some are not.

 

Climate

“The President is calling on Congress to invest $35 billion in the full range of solutions needed to achieve technology breakthroughs that address the climate crisis and position America as the global leader in clean energy technology and clean energy jobs.”

“[President Biden’s plan] targets investments to support infrastructure in those communities most vulnerable physically and financially to climate-driven disasters and to build back above existing codes and standards.”

-American Jobs Plan Fact Sheet, 2021

The Biden plan recognizes the need for climate change reduction, mitigation, and adaptation policies. More than 100 countries have already pledged to achieve net-zero emissions within the next 30 years. While emissions reduction is a necessary step, AESG authors have argued that it is only one component of the four-pronged approach that’s needed to address climate change.

  1. In their 2020 report, David Keith and John Deutch highlight the potential and necessity of technological breakthroughs to reduce carbon emissions and mitigate the effects of climate change. They observe that four “climate control mechanisms” have the capacity to create a politically stable and economically sound climate policy: (1) emissions reduction; (2) carbon dioxide removal; (3) adaptation; and (4) solar radiation modification. Embracing all four approaches will require a robust, multiyear R&D program and adoption of a stable greenhouse gas emission charge. The authors also recommend changes to climate governance in the United States, including the creation of a single, joint congressional committee to oversee all climate policy. 

Biden’s American Jobs Plan acknowledges that climate challenges disproportionately affect disadvantaged communities in the U.S. and around the world, noting that “… people of color and low-income people are more likely to live in areas most vulnerable to flooding and other climate change-related weather events.”

  1. Trevor Houser’s 2020 AESG report documents the unequal distribution of climate-related damages, drawing on recent econometric research and climate models to project geographical changes in climate patterns. He underscores the varying impact of warming on social and economic outcomes and highlights the need for adaptation policies, such as preparing for climate displacement and promoting infrastructure resilience.

The Biden plans offer several strategies to pay for increased spending. However, a carbon tax, which could raise substantial revenues while also correcting market failures, is notably absent.

  1. In his 2020 report, Gilbert Metcalf argues that a pledge to net-zero emissions is infeasible without putting a price on carbon. He also addresses common political concerns about adopting such a tax, including potential impacts on American international competitiveness, distributional consequences, and the potential for job displacement.  He demonstrates that a border tax adjustment would ameliorate concerns about the tax’s impact on competitiveness, while revenues can be redistributed in such a way to address distributional concerns. He also shows that such a tax can be designed to change the composition of jobs in the economy without reducing the total quantity of jobs.

 

Human Capital Investments

“President Biden is calling for … $109 billion for two years of free community college so that every student has the ability to obtain a degree or certificate. In addition, he is calling for an over $80 billion investment in Pell Grants, which would help students seeking a certificate or a two- or four-year degree. Recognizing that access to postsecondary education is not enough, the American Families Plan includes $62 billion to invest in evidence-based strategies to strengthen completion and retention rates at community colleges and institutions that serve students from our most disadvantaged communities.”

-American Families Plan Fact Sheet, 2021

“President Biden is calling on Congress to invest $12 billion to … invest in community college facilities and technology… [The President is also] calling on Congress to invest a combined $48 billion in American workforce development infrastructure and worker protection. This includes registered apprenticeships and pre-apprenticeships, creating one to two million new registered apprenticeships slots.”

-American Jobs Plan Fact Sheet, 2021

The Families Plan calls for enhanced funding to higher education institutions to invest in evidence-based strategies to strengthen completion and retention rates at community colleges and institutions that serve students from our most disadvantaged communities.

  1. A 2019 AESG report by Amy Ganz, Austan Goolsbee, Glenn Hubbard, and Melissa Kearney highlights the critical role of community colleges in the U.S. higher education landscape. Community colleges serve millions of students each year, disproportionately minority and low-income students. However, completion rates at community colleges are low. Their proposal calls for increased funding (on the order of $20 billion) to community colleges contingent on improved institutional outcomes. The report highlights evidence showing that enhanced student support improves retention and completion outcomes.
  1. A 2019 report by AESG author Robert Lerman emphasizes the promise of work-based learning programs as a means to skill development. Lerman argues that a large-scale apprenticeship program could address stagnant wages and waning career prospects for non-college educated workers, while also providing additional gains for employers and for the U.S. economy.

 

Investments in Innovation and R&D

“U.S. leadership in new technologies–from artificial intelligence to biotechnology to computing–is critical to both our future economic competitiveness and our national security. President Biden is calling on Congress to invest $50 billion in the National Science Foundation (NSF), … provide $30 billion in additional funding for R&D that spurs innovation and job creation, … [and] invest $40 billion in upgrading research infrastructure in laboratories across the country.”

-American Jobs Plan Fact Sheet, 2021

U.S. federal funding of R&D has substantially declined since the early 1960s. The Jobs Plan calls for increased federal funding of R&D and innovation research. 

  1. In a 2019 AESG report, John Van Reenen highlights the significance of the decline in federally funded R&D, showing that it has coincided with lackluster productivity and wage growth for several decades. To combat these challenges and spur technological progress, Van Reenen recommends three groups of innovation policies: tax credits, direct subsidies, and human capital investments.
  1. AESG author Chad Syverson makes the case for broad government investment policies, rather than subsidizing specific industries, to spur innovation and productivity growth. Syverson argues that a multifaceted approach to addressing negative productivity patterns is most sensible. He recommends adopting policies aimed at targeting infrastructure investment, improving managerial practices, increasing product market competition, and reducing input frictions in markets.

 

Place-Based Policy

“For decades, exclusionary zoning laws–like minimum lot sizes, mandatory parking requirements, and prohibitions on multifamily housing–have inflated housing and construction costs and locked families out of areas with more opportunities. President Biden is calling on Congress to enact an innovative, new competitive grant program that awards flexible and attractive funding to jurisdictions that take concrete steps to eliminate such needless barriers to producing affordable housing.”

“President Biden is calling on Congress to invest $31 billion in programs that give small businesses access to credit, venture capital, and R&D dollars.”

“President Biden’s plan will turn idle rural and urban property into new hubs of economic growth and job creation [and] bring these communities new critical physical, social, and civic infrastructure. … The President’s plan prioritizes building “future proof” broadband infrastructure in unserved and underserved areas so that we finally reach 100 percent high-speed broadband coverage.”

-American Jobs Plan Fact Sheet, 2021

There is ample evidence of persistent divergence in economic outcomes across U.S. localities. The Jobs Plan recognizes the need for investments in economically depressed localities. It also recognizes that barriers to geographic mobility, including land use restrictions that drive up housing prices in high-productivity areas, impede the ability of people to move to places where they would encounter better economic opportunities. Such barriers ultimately decrease overall employment, productivity, and earnings. 

  1. In a 2019 AESG report, Joshua Gottlieb estimates U.S. GDP and wages are $2 trillion and $1.3 trillion below their potential, respectively, as a result of restrictive land use policies. To address these challenges, Gottlieb proposes the adoption of state-level Minimum Zoning Mandates (MZMs) that would allow landowners to build at a state-guaranteed minimum density. He argues that such MZMs would not only improve housing affordability, but also spread economic opportunity more broadly and limit the environmental impact of new development. The American Jobs Plan highlights the problem of exclusionary zoning and calls for a federal competitive grant program that rewards jurisdictions that relax unnecessary barriers. This approach likely reflects constitutional limits of federal legislators to directly restrict local zoning regulations. However, as Gottlieb highlights, state-level policies may provide another promising avenue for reducing such restrictions.
  1. James Ziliak’s 2019 AESG report also discusses the barriers to increased economic opportunity in rural labor markets, highlighting the large urban-rural divide in U.S. employment and wage rates. He proposes a two-fold strategy of bringing “people to jobs” through policies such as relocation assistance payments and short-term credit for commuting expenses, and “jobs to people” by way of recurring loans and grants for small businesses and the creation of a federal jobs program. The Biden plan emphasizes the latter approach, with investments dedicated to increasing local innovation, supporting domestic manufacturers, and expanding access to broadband services, although it does not include a federal jobs program. Ziliak also underscores the importance of rural broadband access, noting that expanded telework both increases access to stable jobs and decreases congestion in high-density urban areas.
  1. In a 2020 AESG report, Timothy Bartik argues that large and persistent differences in employment rates across U.S. places highlight the need for local economic development policies to better promote cost-effective job creation in distressed areas. The vast majority of funding spent by state and local governments each year—roughly $47 billion—is allocated to tax breaks and financial incentives for specific firms.  Bartik recommends state-level policy reforms to direct resources to the most distressed areas, where the initial rate of employment is low. Bartik also recommends “export-based industry targeting,” which aims to promote local growth beyond the specific industries they target to create a multiplier effect in the local economy and avoid drawing business away from other local firms. Additionally, he highlights two potential federal interventions: capping the size of tax or other large discretionary incentives awarded by state or local governments; and a new federal block-grant program for local economic development that would be awarded to local labor markets that are 5 percentage points or more below the U.S. average in prime-age employment rates.

 

Inequality and the Middle Class

“President Biden is committed to strengthening and reforming the system for the long term. … [He] wants to work with Congress to automatically adjust the length and amount of UI benefits unemployed workers receive depending on economic conditions.”

“President Biden’s plan uses the resulting revenue to rebuild the middle class, investing in education and boosting wages. It will also give tax relief to middle-class families, dramatically reducing child poverty and cutting the cost of child care in half for many families.”

“Make the Earned Income Tax Credit Expansion for childless workers permanent.”

-American Families Plan Fact Sheet, 2021

Rebuilding the American middle class is a central theme of the Biden Administration’s Families Plan. Proposals such as free community college, an expanded EITC for childless workers, and new childcare benefits would increase redistribution to the middle class. When combined with the administration’s pledge to not raise taxes on families with annual incomes below $400,000, the plan would increase benefits without raising revenues from many middle-income families. 

  1. Despite prevailing political narratives, a 2020 AESG report from Adam Looney, Jeff Larrimore, and David Splinter shows that government tax and transfer policies have increasingly benefited the middle class since the 1970s. Their analysis also raises the question of whether future federal tax and transfer policies can continue to boost middle-class income without also increasing tax revenue from the middle class.
  1. In a 2018 AESG memo, Jason Furman and Phill Swagel weigh the pros and cons of two alternative policy approaches that aim to promote increased earnings for the lower and middle quintiles: (1) tripling the EITC among childless workers (based on 2017 levels); and (2) implementing a wage subsidy for low-income workers that would be administered through employers. The wage subsidy would be delivered through employers of low-income workers and would be based on hourly wages rather than annual household income. Another important difference is that the benefits to workers would be in the form of wage compensation which would require no filing or other administrative effort by workers. However, the implementation of a wage subsidy would need to be administered through state unemployment insurance (UI) systems, creating an administrative burden for states and employers.

The Covid-19 pandemic underscored the importance of the federal safety net for providing support for the unemployed, underemployed, and most vulnerable. However the pandemic also exposed weaknesses and gaps in the safety net, as program benefit amounts and payments were poorly timed with economic conditions. In response, the American Families Plan proposes implementing automatic adjustments to the length and amount of UI benefits depending on economic conditions. 

  1. AESG members Jason Furman, Timothy Geithner, Glenn Hubbard, and Melissa Kearney suggest reforming the UI system by automatically phasing in and out benefits based on economic circumstances, employing automatic triggers for UI extended benefits, along with bolstering short-time compensation benefits.

 

 

Photo Credit: Unsplash – Euan Cameron

How much have childcare challenges slowed the US jobs market recovery?

The US economy lost a net of 8 million jobs between February 2020 and April 2021. Agreement is growing that people not actively seeking employment (inadequate labor supply) has been playing a major role in the slow recovery, as evidenced by factors including record job openings, the largest wage increases in decades, and other signs of a tighter labor market than would generally be expected given the still low levels of employment. Why has labor supply been slow to return? There are many candidate explanations, including the ongoing worry among some adults about getting COVID if they return to the workplace, the increased availability and generosity of unemployment insurance benefits, and challenges for working parents associated with closed schools and inadequate childcare, among others. Diagnosing the sources of ongoing weak labor supply is important to inform the types of policies that are needed now to speed the recovery. 

In this analysis, we quantify the effect of childcare challenges on the labor market by examining how much of the overall decline in employment can be explained by excess job loss among parents, and mothers specifically. We do this by constructing counterfactual employment rates, or employment-population ratios, as well as labor force participation rates, that assign to parents with young children the percent change in employment and labor force participation rates experienced by comparable people without young children. The results of this exercise imply that differential job loss among parents, or even mothers specifically, accounts for a negligible share of aggregate job loss and could even have led to a small increase in jobs between the first quarters of 2020 and 2021. 

This analysis demonstrates that despite the widespread challenges that parents across the country have faced from ongoing school and daycare closures, excess employment declines among parents of young children are not a driver of continuing low employment levels. In fact, while women with young children have left the workforce at a slightly higher rate than other women, men with young children have left the workforce at a lower rate than men without. Overall, the employment rates of parents of young children have declined by 4.5 percent as compared with 5.2 percent among people that are not parents of young children (the decline is also smaller for parents of young children when adjusting for age differences between the two groups). 

Furthermore, this conclusion holds even if we consider only the excess declines in employment among mothers with young children without accounting for the offsetting effect among men. The reason why is twofold. First, women with young children account for only 12 percent of the workforce. Second, mothers with young children left the workforce by only slightly more than comparable women without young children. Combining these two facts means that any childcare issues that have pushed mothers out of the workforce accounts for a negligible share of the overall reduction in employment since the beginning of the pandemic adjusting only for age differences. The estimated amount of the overall decline in employment that can be explained by challenges particular to mothers of young children is even smaller (zero, in fact), if we adjust the comparisons between mothers of young children and other women to control for education and industry of work. 

School closings and ongoing childcare challenges have been a tremendous source of stress for parents during the pandemic. They are also likely to have lasting, negative impacts on the learning and social development of children. In this analysis, however, our focus is on the one specific, empirical question—how has parenting affected the aggregate employment numbers over the course of the pandemic. Instead, parents of young children have suffered about equally as others in the widespread and, in many cases, damaging employment losses that have occurred throughout the economy.

 

Employment declines among parents

Women with young children have experienced the greatest rate of job loss over the past year, which is descriptively consistent with the hypothesis that school closures and childcare struggles have lowered women’s work during the pandemic. Employment counts from the Current Population Survey in January, February, and March of 2020 and 2021 confirm that between the first quarter of 2020 and the first quarter of 2021, employment rates fell more for women with young children (defined as any own child under 13 in the household, including adopted children and stepchildren) than for all other women. Among all women, the employment rate fell by 5.7 percent (3.9 percentage points) for those with at least one child under 13, as compared with 5.0 percent (2.6 percentage points) for those without a child under 13. 

The pattern is reversed among men, with larger declines among men without young children than among men with young children. The employment rate fell by 3.3 percent (3.0 percentage points) for men with at least one child under 13, as compared with a decline of 5.3 percent (3.2 percentage points) for men without a child under 13. Though explaining this finding is beyond the scope of this analysis, one possible explanation is the substitutability of labor supply between parents. 

The gap in employment declines between mothers with young children and other women is driven by women without a bachelor’s degree. Figure 1 shows changes in the employment rates for individuals with any child under 13 and those without, separately for men and women with and without a bachelor’s degree. As can be seen in the figure, among women with a bachelor’s degree, there is no difference in the percent change in employment between mothers of young children and other women. But, among women without a bachelor’s degree, women with young children experienced a larger decline in employment, as compared with women without young children. This affected group comprised 6 percent of the overall employment in the first quarter of 2020.

Figure 1.

These comparisons are noteworthy, but they are not necessarily indicative of an effect of childcare struggles, school closures or other factors associated with parenting on employment declines, even for mothers without a bachelor’s degree. The reason is because women with and without young children differ on other dimensions that are related to employment outcomes, such as age, industry, marital status, income, and race and ethnicity We next turn to a counterfactual analysis to estimate how much of the decline in employment – both overall and for mothers in particular – is attributable to having a young child (and the associated challenges), adjusting for a range of factors. 

 

Counterfactual analysis: what if the pandemic labor market experience of parents with young children was like that of otherwise-similar people without young children? 

The heart of our analysis is a counterfactual: what would have happened to aggregate employment rates if parents with young children experienced the same rate of employment decline as individuals without young children? This provides a reasonable estimate of the potential role of factors that affect families with young children, especially school closures and lack of childcare.

The motivation for this exercise is the observation that the fact that millions of mothers have lost jobs or left the labor force is not, by itself, evidence that childcare, school closings, or other child-related reasons are to blame. Hypothetically, if employment rates or labor force participation rates fell by the same proportion for similar people with and without young children, primary causes of the decline are likely to be factors other than childcare challenges or school closures. In such a case, the source of the decline in employment among parents with young children would likely be something that was affecting everyone in a similar manner, such as workplaces being closed, jobs being undesirably unsafe, or unemployment insurance benefits being more generous and available.

A very simple, naive counterfactual exercise is to ask what would have happened to the overall employment rate if the employment of mothers with young children changed in the same way it did for women without young children. That is, what if women with young children only experienced a 5.0 percent decline in employment, instead of the 5.7 percent decline they actually did? Given that mothers with young children were 12 percent of total employment at the beginning of 2020, this would have resulted in the aggregate employment rate falling by 0.05 percentage point, less than the 3.1 percentage points it actually did. If we apply this counterfactual calculation to both mothers and fathers with young children, the decline in employment would have been even larger than actually observed. 

The naive counterfactual ignores the myriad ways that people with and without young children are different, including their age and education profiles and the industries they tend to work in. For instance, if women with young children are more likely to be young or work in industries that still have high levels of job loss, then what looks like a disparate impact of having young children during the pandemic, might actually reflect different rates of job loss for young and older workers or for workers in certain industries.

Our baseline counterfactual accounts for some basic demographic differences between people with and without a child under 13. Specifically, we collapse the data into cells defined by sex, four age groups, and whether someone has a bachelor’s degree. For each sex-age-education cell, we calculate what employment would have been if those with a child under 13 experienced the same percent change in employment as those in the same sex-age-education cell but who did not have a child under age 13. This allows us to compare parents of young children to otherwise similar individuals. We use the same methodology for labor force participation.

 Table 1 reports the results of this baseline counterfactual calculation. This calculation implies that the effect of any excess impact of the pandemic on parents with young children can explain none of the decline in aggregate employment rates. In fact, this calculation implies there would have been even more jobs loss if parents of young children experienced the same employment decline as similar people without a young child, on account of fathers with young children experiencing relatively less employment loss than other men. If we only do the counterfactual calculation for women, the excess effect of the pandemic on mothers with young children can explain 2 percent of the aggregate employment rate change. Looking at the full childcare situation facing families, the sign flips, meaning the excess job loss among parents of young children can explain -2 percent of the aggregate employment-to-population decline.

Table 1: Change in employment and labor force participation rates, observed and simulated under counterfactual scenario assuming no disproportionate effect on adults with children under age 13

Note: Under baseline counterfactual, individuals with a child under age 13 are assigned the percent change in the employment rate or labor force participation rate as individuals without a child under age 13 within the same sex, educational attainment (bachelor’s degree vs. not), and age (16-24, 25-39, 40-54, 55+) group. Percentage points denoted p.p..
Source: Bureau of Labor Statistics, Current Population Survey via IPUMS CPS; authors’ calculations.

Table 2 presents the results of numerous alternative counterfactual constructions, in addition to the baseline counterfactual and the naive unadjusted counterfactual, in order to examine the robustness of the baseline counterfactual finding. The top panel reports results from changing the age cutoff of children, looking alternately at parents of children less than age 6 or less than age 18. As shown in the top panel of the table, the qualitative conclusions are not dependent on age cutoff. If we consider the excess impact on mothers with children less than 6, the share of the aggregate employment decline that can be explained is 0 percent under the baseline counterfactual; if we consider the excess impact on mothers with children less than 18, the share that can be explained is 1 percent under the baseline counterfactual.

Table 2: Change (in p.p.) in employment and labor force participation rates,
simulated under alternative counterfactual approaches

Source: Bureau of Labor Statistics, Current Population Survey via IPUMS CPS; authors’ calculations.

Next, we construct the counterfactual changes with different sets of demographic adjustments. We redefine the sets of demographic characteristics used for comparisons to alternately exclude education, to include industry, to include marital status, to include income group, and to include race/ethnicity. This allows us to compare parents of young children to people who are similar along various different dimensions. 

As a conceptual matter, defining cells based on age, education, and industry seems the most appropriate to us but we do not make it our baseline in order to be conservative. For example, to the extent that mothers with young children tend to work in a different set of industries than women without young children – even conditional on age and college-degree attainment – they would have experienced a differential degree of job loss. Constructing the counterfactual employment numbers adjusting for age, educational attainment, and industry implies a change in employment of 0.00 percentage point attributable to women, which can account for none of the total employment-to-population decline. The fact that the estimated share explains goes to zero when industry is included indicates that much of the variation between women with children and without (adjusted for age and education) is driven by the fact that women with children are disproportionately working in industries that faced greater declines. 

For each different demographic adjustment we consider, the simulated change in the employment rate from assigning mothers with young children the corresponding change in employment of comparable women without young children is very small, below 0.10 percentage points across all counterfactuals, explaining at most 3 percent of the total decline in the overall employment rate. 

One concern with these counterfactuals might be that to the extent that all women – including those without young children – disproportionately experienced caregiving burdens that reduced their employment, assigning the employment changes of women without young children to the employment changes of women with young children still incorporates caregiving burdens into the simulated effect. To address this concern, we consider a different counterfactual approach that assigns women with young children the change in employment experienced by similar men without young children. As with the results of the other alternative counterfactuals reported in Table 2, this counterfactual still leads to the conclusion that differential employment changes for mothers with young children explain very little of the total change in employment.  

While our discussion has primarily focused on the effects of parenting on employment, the same series of counterfactual exercises show similar results for labor force participation. Our results indicate that differential declines in labor force participation for parents of young children explains essentially none of the 1.7 percentage point decline in the labor force participation rate between the first quarter of 2020 and the first quarter of 2021. For mothers of young children, differential declines in labor force participation can explain, at most, 0.10 percentage point, or 6 percent, of the total decline. Results for full-time employment are similarly small, and, if anything, generally indicate that full-time employment would have been slightly lower if parents of young children experienced the same change in full-time employment rates as individuals without young children.

We also tried to find direct evidence for the impacts of school closures. One method was to compare states that had above and below median rates of in-person schooling (according to this tracker) as of early May 2021. States with below median in-person schooling had larger percent reductions in employment rates for almost all groups by sex and educational attainment—whether or not they had young children—consistent with these states either having more serious problems with the virus or a greater level of mandatory or culturally-induced social distancing. The differences between people with and without young children were not, however, systematically different in states with below median in-person schooling.

We also estimated regression models to obtain the conditional estimated impact of having a young child on employment rates for men and women in places with below median rates of in-person schooling as of early May 2021. The estimated regression coefficients do not show an excess negative effect on employment for men or women with young children in places with relatively low rates of in-person instruction. These results bolster our confidence in the results of our counterfactual analysis.

Finally, we also examined the patterns of employment losses specific to parents in the 2001 and 2007-09 recessions. We found that they were similar to the patterns observed over the past year. This suggests that there has not been something very different about how the pandemic and associated school and daycare closings have differentially affected the labor market outcomes of parents with young children relative to other workers who have also experienced the adverse impacts of the combination of the pandemic and associated recession.

 

Conclusion

Our examination of data on employment declines among parents with young children and others over the course of the pandemic suggests that overall, parents of young children did not leave the workforce substantially more than other comparable individuals. We constructed counterfactual estimates of what employment declines would have been if mothers and fathers with young children experienced the same change in employment as comparable people without young children. These estimates indicate that a negligible share of the overall decline in employment can be attributed to challenges specific to parents with young children. 

While school closures and ongoing childcare challenges have substantially burdened parents and children alike, they do not appear to be a meaningful driver of the slow employment recovery. This means that the factors responsible for the slow employment recovery and depressed labor supply are issues that are not exclusively related to the struggles of working parents, such as the continued concern about the threat of getting COVID at work or expanded unemployment insurance benefits and eligibility. 

Furthermore, the fact that aggregate job losses do not appear to be explained by excess job losses among mothers with young children (after accounting for other factors like age, education, and industry) does not mean that mothers with young children have not been especially burdened over the past year. The fact that these women did not disproportionately retreat from the workforce in substantially larger numbers, while shouldering increased childcare and educational responsibilities for their children, might very well be an indication of excess burden that represents a shortcoming of the safety net established to respond to the COVID crisis.

Data Disclosure:

The data underlying this analysis are available here.

This post was co-produced with the Peterson Institute for International Economics (PIIE). Jason Furman is a nonresident senior fellow at PIIE; Wilson Powell III is a research associate at the Harvard Kennedy School. Copyright Peterson Institute for International Economics; re-posted with permission. 

 

Photo credit: Unsplash – Vitolda Klein

Biden should embrace a carbon tax

President Biden deserves credit for his actions to date on climate change. In rejoining the Paris agreement, directing new energy standards, pushing for bold congressional action, convening world leaders and announcing dramatic emissions reduction targets, he is showing that American climate leadership is back. But there is one major climate policy arena where the United States needs to take a bold step forward: carbon pricing.

A carbon tax, which taxes carbon dioxide and other greenhouse-gas emissions, is a proven means to raise large sums of much-needed revenue while read more in The Washington Post

Aspen Economic Strategy Group welcomes seven new members

New members replace outgoing Biden-Harris administration appointees and include Atlanta Fed President & CEO Raphael Bostic and former U.S. Treasury Secretary Jacob Lew.

The Aspen Economic Strategy Group (AESG) today announces seven new members to the sixty-five member, invitation-only group made up of distinguished leaders and thinkers who share the goal of promoting evidence-based solutions to significant challenges confronting the American economy.  Established in 2017, the AESG is co-chaired by Henry M. Paulson, Jr., former secretary of the U.S. Treasury and chairman of Goldman Sachs, and Erskine Bowles, former White House chief of staff to President Bill Clinton and president of the University of North Carolina system.

The bipartisan group fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship building among current and future generations of policy leaders. Members are drawn from the civic, business, academic, and public sectors and share a commitment to policy making based on facts and evidence, respectful disagreement, and principled compromise.

New members include:

Raphael W. Bostic
President and Chief Executive Officer, Federal Reserve Bank of Atlanta

Susan M. Collins
Provost and Executive Vice President for Academic Affairs, University of Michigan

Michael Froman
Vice Chairman and President, Strategic Growth, Mastercard

Vickee Jordan Adams
Partner, Finsbury Glover Hering, Financial Services Co-Leader

Jacob J. Lew
Managing Partner, Lindsay Goldberg; Visiting Professor of International and Public Affairs, Columbia University

Matthew J. Slaughter
The Paul Danos Dean of the Tuck School of Business; Earl C. Daum 1924 Professor of International Business, Dartmouth College

Michael R. Strain
Director, Economic Policy Studies; Arthur F. Burns Scholar in Political Economy, American Enterprise Institute

Five members recently departed to serve in the Biden-Harris administration, including Deputy Treasury Secretary nominee Adewale Adeyemo, NEC Director Brian Deese, White House Deputy Chief of Staff Bruce Reed, Treasury Secretary Janet Yellen, and Jeffrey Zients, who heads the White House COVID-19 response team.

“We are thrilled to welcome these new members, who bring a wide range of expertise and experience,” said Director Melissa S. Kearney who is also an AESG member and the Neil Moskowitz Professor of Economics at the University of Maryland. “There is no shortage of economic challenges facing our country. In today’s hyperpolarized political climate, the AESG’s ability to convene a bipartisan group of leaders who share a commitment to evidence-based policy solutions is rare but essential for building a stronger and more equitable economy.”

The full list of Aspen Economic Strategy Group members may be viewed here. 

New Member Biographies

 


Raphael W. Bostic
President and Chief Executive Officer, Federal Reserve Bank of Atlanta

 

 

RAPHAEL W. BOSTIC is the 15th president and chief executive officer of the Federal Reserve Bank of Atlanta, which serves the Sixth Federal Reserve District covering Alabama, Florida, and Georgia, and parts of Louisiana, Mississippi, and Tennessee. He is responsible for all of the Bank’s activities, including monetary policy, bank supervision and regulation, and payment services. He is also a member of the Federal Open Market Committee.

Prior to the Atlanta Fed, Bostic served as the Judith and John Bedrosian Chair in Governance and the Public Enterprise at the Sol Price School of Public Policy at the University of Southern California (USC). His research interests include home ownership, housing finance, neighborhood change, and the role of institutions in shaping policy effectiveness. While at USC, he served as director of the master of real estate development degree program and was the founding director of the Casden Real Estate Economics Forecast. Bostic also served as interim director of the USC Lusk Center for Real Estate and chaired the center’s Governance, Management, and Policy Process department.

Bostic has held a number of government and non-profit leadership roles, including as assistant secretary for policy development and research at the U.S. Department of Housing and Urban Development (HUD).

Bostic holds a bachelor’s degree from Harvard and a doctorate in economics from Stanford University.

 

 

Susan M. Collins
Provost and Executive Vice President for Academic Affairs, University of Michigan

 

SUSAN M. COLLINS is provost and executive vice president for academic affairs at the University of Michigan, and is the Edward M. Gramlich Collegiate Professor of Public Policy and professor of economics. She served as the Joan and Sanford Weill dean of Michigan’s Gerald R. Ford School of Public Policy from 2007 to 2017.  Dr. Collins is a member of the Federal Reserve Bank of Chicago Board of Directors and a board member of the National Bureau of Economic Research and the Peterson Institute for International Economics.  She has served as President of the Association of Professional Schools of International Affairs, and as chair of the American Economic Association’s Committee on the Status of Minority Groups in the Economics Profession.  Prior to joining Michigan’s faculty, Dr. Collins was professor of economics at Georgetown University and senior fellow in the Economic Studies Program at the Brookings Institution.  She received a B.A. in economics in 1980 from Harvard University (summa cum laude) and a Ph.D. in economics in 1984 from the Massachusetts Institute of Technology.

 

 

Michael Froman
Vice Chairman and President, Strategic Growth, Mastercard

 

MIKE FROMAN serves as vice chairman and president, Strategic Growth for Mastercard. In that role he is responsible for growing strategic partnerships, scaling new business opportunities, and advancing the company’s efforts to partner with governments and other institutions to address major societal and economic issues. He and his team drive financial inclusion and inclusive growth efforts and work to develop new businesses key to the company’s strategic growth. Mike is chairman of the Mastercard Center for Inclusive Growth and is a member of the company’s management committee.

Prior to joining Mastercard, Mike was affiliated with the Council on Foreign Relations and continues to serve as a distinguished fellow. In September 2018, Mike joined the Board of Directors of The Walt Disney Company.

From 2013 to 2017, Mike served as the U.S. Trade Representative, President Barack Obama’s principal advisor and negotiator on international trade and investment issues. During his tenure, Mike worked to open foreign markets for U.S. goods and services, reach landmark trade agreements and enforce the rights of American workers, farmers and firms. From 2009-2013, he served at the White House as assistant to the President and deputy national security advisor for international economic affairs.

Prior to joining the Obama Administration, Mike held several executive positions at Citigroup, including CEO of its international insurance business, COO of its alternative investments business and head of its infrastructure and sustainable development investment business. He helped shape the company’s strategy in China, India, Brazil and other emerging markets. Earlier in his career, during the Clinton Administration, he worked at the White House and the Treasury Department.

Mike received a bachelor’s degree in public and international affairs from Princeton University, a doctorate in international relations from Oxford University, and a law degree from Harvard Law School, where he was an editor of the Harvard Law Review.

 

 

Vickee Jordan Adams
Partner, Finsbury Glover Hering, Financial Services Co-Leader

 

VICKEE JORDAN is a Partner at Finsbury Glover Hering, with decades of experience in reputation and risk management. She is co-leader of Financial Services client engagements, navigating responses to shareholder demands, investigative reporting or events associated with public offerings. Whether brand building with integrated marketing campaigns or conducting advocacy events for underserved consumer needs, Vickee’s reputation for providing wise counsel and memorable feedback is highly regarded.

Prior to joining Finsbury Glover Hering, Vickee led national media relations for Wells Fargo Home Mortgage and its Consumer and Small Business Banking division. She led Consumer Lending’s Responsibility Center for the LIBOR transition and increased awareness for housing policy reform by enhancing the bank’s relationships with real estate trade groups and federal housing authorities. Her team navigated and placed numerous national media inquiries.

Previously at H&K and Ketchum, Vickee counseled financial services teams at J.P. Morgan Chase, Standard & Poor’s, Citi, AIG and The Federal Reserve, offering guidance on congressional testimony and quarterly reporting. Known for her attention to confidentiality, Vickee advised highly placed executives and offered insight into sensitive, complex transactions. As Director of Communications for Dow Jones & Company, Vickee was the spokesperson for the Wall Street Journal.

A frequent diversity and inclusion moderator or panelist, Vickee is a University of Pennsylvania graduate, and a founding member of Count Me In for Women’s Economic Independence and served as a board Trustee for Granite Broadcasting, WNYC and Iowa Public Radio.

 

 

Jacob J. Lew
Managing Partner, Lindsay Goldberg; Visiting Professor of International and Public Affairs, Columbia University

 

JACK LEW served as the 76th United States Secretary of the Treasury from 2013 to 2017. Previously, he served as White House Chief of Staff to President Barack Obama and Director of the Office of Management and Budget in both the Obama and Clinton Administrations.   He has also served as Deputy Secretary of State and as principal domestic policy advisor to House Speaker Thomas P. O’Neill, Jr, in addition to holding a variety of private sector and nonprofit roles.  Jack is currently a Managing Partner at Lindsay Goldberg and a member of the faculty at the School of International and Public Affairs at Columbia University.

 

 

Matthew J. Slaughter
The Paul Danos Dean of the Tuck School of Business; Earl C. Daum 1924 Professor of International Business, Dartmouth College

 

MATTHEW J. SLAUGHTER is the Paul Danos Dean of the Tuck School of Business at Dartmouth, where in addition he is the Earl C. Daum 1924 Professor of International Business. He is also a member of the American Academy of Arts and Sciences, a life member of the Council on Foreign Relations, a Research Associate at the National Bureau of Economic Research, a member of the academic advisory board of the International Tax Policy Forum, and an academic advisor to the McKinsey Global Institute.

From 2005 to 2007, Dean Slaughter served as a Member on the Council of Economic Advisers in the Executive Office of the President. In this Senate-confirmed position he held the international portfolio, advising the President, the Cabinet, and many others on issues including international trade and investment, currency and energy markets, and the competitiveness of the U.S. economy. He has also been affiliated with organizations including the Federal Reserve Board, the International Monetary Fund, the World Bank, the Congressional Budget Office, and the National Academy of Sciences.

Dean Slaughter’s area of expertise is the economics and politics of globalization. Much of his recent work has focused on policy responses to the World Financial Crisis; on the global operations of multinational firms; and on the labor-market impacts of international trade, investment, and immigration.

 

 

Michael R. Strain
Director, Economic Policy Studies; Arthur F. Burns Scholar in Political Economy, American Enterprise Institute

 

MICHAEL R. STRAIN is Director of Economic Policy Studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. An economist, Dr. Strain’s research focuses on labor economics, public finance, and social policy, and his papers have been published in academic and policy journals. He is the author of the recently published book, “The American Dream Is Not Dead: (But Populism Could Kill It),” which examines longer-term economic outcomes for workers and households. He is the editor of the book “The US Labor Market: Questions and Challenges for Public Policy” and the coeditor the book “Economic Freedom and Human Flourishing: Perspectives from Political Philosophy.” He is a research fellow with the Institute for the Study of Labor (IZA) in Bonn. He was a member of the AEI-Brookings Working Group on Poverty and Opportunity, which published the report “Opportunity, Responsibility, and Security: A Consensus Plan for Reducing Poverty and Restoring the American Dream.” He also writes frequently for popular audiences, and his essays and op-eds have been published by The New York Times, The Wall Street Journal, The Washington Post, The Atlantic, and National Review, among others. He is a columnist for Bloomberg Opinion. A frequent guest on radio and television, Dr. Strain is regularly interviewed by broadcast news networks, including CNBC, MSNBC, and NPR. He has testified before Congress and speaks often to a variety of audiences. Before joining AEI, Strain worked at the U.S. Census Bureau and the Federal Reserve Bank of New York. He holds a Ph.D. in economics from Cornell, and lives in Washington.

Climate Policy Enters Four Dimensions

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SUMMARY:
In this chapter, authors David Keith, the Gordon McKay Professor of Applied Physics at Harvard’s School of Engineering and Applied Sciences, and John Deutch, emeritus Institute Professor in the Department of Chemistry at MIT, describe what needs to be done to craft a politically stable and economically sound climate policy that includes balanced reliance on the four mechanisms to manage climate risks, which they call the climate control mechanisms: emissions reduction, carbon dioxide removal (CDR), adaptation, and solar radiation modification (SRM).

Emission reduction is the process of lowering carbon emissions without reducing economic growth. The authors assert that deep emissions cuts will be achieved primarily by replacing the high-emissions capital stock with low-emission capital stock in the energy system through an increased investment in clean energy. However, as the energy system becomes more decarbonized, it will become increasingly costly to further reduce the carbon content and thus require massive amounts of capital over a very long time period. Unfortunately, the U.S. and Europe have largely failed to live up to previous commitments to new investments and there is little coordination between countries on developing an overarching strategy.

CDR refers to the technologies that have the potential to transfer carbon dioxide from the atmosphere at gigatonne scales into physical or chemical storage, or into biological sinks, such as biomass or soils. Keith and Deutch note that CDR technologies, particularly those that involve physical or chemical storage methods, are at an early stage of technology readiness. Some technologies, such as aforestation/reforestation, forest management, uptake and storage in agricultural soils, and biofuels with carbon dioxide capture and storage (CCS) are ready for development but will require large, multi-year budgets extending into the tens of billions to be realized. Other methods, such as direct air capture—the chemical scrubbing processes for capturing carbon dioxide directly from the atmosphere via absorption or adsorption separation—are still under development, making it difficult to assess their costs.

Adaptation mechanisms are human-designed programs that aim to protect communities, commerce, and the environment from anticipated damage and adverse impacts from climate change. Adaptation does not slow climate change; but rather acts as an insurance policy that reduces the costs of damage from the impacts of a global temperature increase should it occur. The diversity of adaptation actions presents a challenge to its analysis as a control mechanism and to setting a common scale for comparing the costs and benefits of different proposed adaptation efforts. The authors also highlight the inequality associated with implementing adaptation methods, as poor countries often lack the necessary access to capital and investments that are readily available to rich countries.

The final mechanism discussed is SRM: the deliberate use of technical methods to alter the Earth’s radiative balance and reduce global temperatures along with other adverse climate changes. These methods include adding aerosols to the stratosphere, adding cloud condensation nuclei to specific low-lying clouds, adding ice nuclei to specific high-altitude cirrus clouds, or using space-based reflectors. However, the authors emphasize caution when using a SRM approach given that, while it’s possible to restore the global average surface temperature, the resulting climate would be different from the climate without GHGs.

There is no silver bullet for addressing the climate crisis, and any course of action will require extensive coordination and mobilization. The authors recommend:

  • Adoption of a multi-year RD&D program plan with input from climate experts, private sector firms, government officials, and the public;
  • A single federal agency with the responsibility and authority to implement the approved program;
  • Multi-year climate budgets to finance this program overseen by a single joint congressional climate action committee;
  • Adoption of a stable GHG emission charge that will stimulate private sector investment;
  • Greater global climate data collection, modeling, and simulation.

Climate Convexity: The Inequality of a Warming World

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SUMMARY:
In this chapter, author Trevor Houser of the Rhodium Group summarizes current forecasts of climate damages in the years ahead and their implications for the global economy, inequality, and health. Houser asserts that if carbon emissions and associated damages are left unaddressed, the climate crisis will not only become more costly to global health and the global economy, but also will exacerbate inequality within the U.S. and around the world.

As Houser explains, statistics about changes in global average temperatures do a poor job of communicating the significance of the shift in the climate that has occurred in recent decades. A relatively modest increase in average temperatures is accompanied by a much larger increase in temperature extremes, which, combined with high humidity, can prove enormously damaging to human health. Additionally, projected changes in the frequency and severity of climate events vary starkly across local geographies and how these changes manifest is a major factor in shaping the economic impact of climate change around the world.

After reviewing recent advancements in models of the economic impact of climate change, Houser provides U.S. estimates of climate damages under the different emissions scenarios. In a high emissions scenario, Houser estimates climate change costs the U.S. 1.4 percent of GDP by 2030, growing to 2.4 percent of GDP by mid-century.

Houser highlights the unequal distribution of damages, both within the United States and around the world. This is due to two factors. First, the directional impact of warming on various social or economic outcomes depends on the starting climatology of a given place. Second, the ability to adapt to these changes, at an individual, community, or country level, is dependent on income. Both within the United States and globally, hotter places tend to be poorer and less developed, leaving them vulnerable to the most pronounced effects of climate change without the resources needed to adapt.

To combat these challenges, Houser presents four policy recommendations for the U.S.:

  • Aggressively reduce GHG emissions at home and re-engage other developed and emerging economies to do the same.
  • Address inequality through emission reduction policies by adopting climate econometric models that incorporate the Social Cost of Carbon measurement.
  • Prepare for the irreversible effects of climate change yet to come, including making coastal communities in the U.S. more resilient, expanding access to low-cost air conditioning, promoting climate-resistant crops in the plains states, and reducing wildfire risk.
  • Preparing for climate displacement, anticipating large-scale climate migration both domestically and internationally.

Securing Our Economic Future: Foreword

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The American economy is in the midst of a wrenching crisis, one caused by the COVID-19 pandemic, intensified by the worst social unrest in a generation, and aggravated further by a series of climate-driven natural disasters.

The effects of the economic contraction are enormous. Over a ten-week period this spring, some 40 million Americans lost their jobs. Millions remain unemployed and tens of thousands of businesses remain closed. And while the economy has made some steps to recovery, the pandemic has laid bare that too many Americans are unable to meet many of their urgent and basic needs.

At the same time, it has become painfully clear that American society is not equipped to deal with the risks emerging from our changing climate. Hundreds of thousands have evacuated their homes in recent months due to raging wildfires on the West Coast and flooding in the South. And while these climate-driven shocks are a short- term certainty, we have not built the infrastructure needed to withstand them, nor have we adapted our policies to meaningfully reduce their likelihood in the future.

American policymakers need to tackle these crises head on, but they cannot afford to lose sight of the larger vulnerabilities that today’s crises have exposed. The challenge facing the United States is not simply to recover. We must rebuild an economy that is more secure, equitable, and better insulated from the risks of the 21st century.

How can we restore a sense of economic security to American workers and families? What policies will expand opportunities across large geographic, social, economic, and racial disparities? How can we adjust our economic policies to guard against the worst effects of climate change? These are questions that many Americans are asking—to which policy makers will need answers.

This book is a contribution toward this end. It was largely written before the pandemic crises beset our country. But the analyses, diagnoses, and prescriptions contained within, all shed new light on the underlying fragilities that have since been exposed. The book is divided into three sections, covering the ‘Economics of the American Middle Class’; the ‘Geographic Disparities in Economic Opportunity and Place-Based Economic Development’; and the ‘Geopolitics of the Climate and Energy Challenge and the US Policy Response.’ Even after the pandemic recedes, the larger forces covered in this book will continue to shape our economy and lives.

As with previous publications, this volume is not intended to represent the consensus view of Economic Strategy Group members. It does, however, bring the best evidence to bear on some of the deep challenges facing the American economy, and does so in the same non-partisan spirit in which the Economic Strategy Group was conceived.

Securing Our Economic Future: Introduction

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The United States is currently gripped by deep uncertainty and economic anxiety. At the time of this writing, the United States is six months into the COVID-19 pandemic. More than 190,000 Americans have died from COVID (CDC 2020); more than 13 million Americans remain unemployed (Bureau of Labor Statistics 2020); and tens of thousands of businesses remain closed (Grossman 2020). Meanwhile, protests against racial injustice continue across the country, and in a number of tragic instances, they have been overtaken by violence. Wildfires rage through the northern Pacific states. In Oregon, 40,000 people have been evacuated and more than 1,500 square miles have burned. California has already experienced three of the top four largest wildfires in its history in this year alone. Perhaps more than any time in recent memory, the economic future of our country feels uncertain.

The overarching theme of this book “Securing our Economic Future” and the specific topics therein—the economics of the middle class, geographic divergence and place- based economic development, and the global climate challenge and U.S. policy response—were chosen in early 2020, before the COVID pandemic and associated recession had taken hold of the nation. But the acute challenges before us make the goal of securing our economic future even more imperative. Today’s alarming and immediate crises expose deep, structural weaknesses that have been building. The pandemic-induced recession has exposed the economic fragility of so many American households. The wildfires of historic proportion reveal the effects of environmental pressures. Bitter partisan and social divides that characterize the country during this Presidential campaign season reflects—among other things—increased economic divergence that often falls along geographic lines. These divides fall along racial lines as well, but those critical challenges are beyond the scope of this single volume.

By the time this volume appears in print, the election will have been decided. We fervently hope that the public health crisis will be abating, the labor market will be recovering, the wildfires will be under control, and that social change will progress peacefully. But without a doubt, the elected administration will face critical economic policy challenges. This volume focuses on three of the most important ones.

Keep reading.

Is the Decline of the Middle Class Greatly Exaggerated?

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SUMMARY:
In his chapter, Professor Bruce Sacerdote of Dartmouth College argues that increased inequality and declines in the number of manufacturing and middle-skill jobs is a distinct issue from declines in middle-class living standards and even the disappearance of the middle class. Sacerdote also asserts that claims about a vanishing middle class are not well-founded. Instead, the real challenges, he argues, are the rapidly changing nature of work and the skills demanded in the labor market; the unequal distribution of income growth in the United States in which median income and consumption are growing less quickly than the economy as a whole; and the deterioration of happiness and mental health indicators.

Because the income distribution has widened over time, the number of households falling within a given income range has also declined. However, these trends do not necessarily result in a “hollowed out” middle class, in which there are poor households, rich households, and no one in the middle. Sacerdote documents that middle-income households have become more likely to transition into the upper part of the income distribution over time than they are to move lower in the distribution. 

As a result, Sacerdote finds that key measures of consumption, such as the likelihood of owning a home, having two cars, or sending a child to college, have increased among households at all income levels including the middle class, which he defines as those in the middle 60 percent of the distribution. Sacerdote also finds that although the cost of higher education has risen tremendously in the last two decades, tuition at selective private institutions and two year public institutions have remained quite affordable, especially after Federal Aid is taken into account. Costs of attendance at four year public institutions have risen dramatically. Sacerdote also notes that growth in inequality in the upper-middle of the distribution and lower-middle of the distribution is not as severe as the pre-tax income inequality of everyone relative to the very top. 

Despite these positive indicators of middle-class economic well-being, rising inequality and slower economic growth have led to lower rates of intergenerational mobility, while advances in global trade and automation have disproportionately negatively affected many longstanding middle-class occupations. 

Perhaps more concerning to Americans than statistics of inequality, Sacerdote writes, are visible losses of the jobs that have traditionally been stable, well-paying sources of employment for non-college-educated workers. As automation and technology become a larger part of routine cognitive and manual tasks, evidence of job polarization—particularly among non-college educated workers—becomes more noticeable. 

Sacerdote also points to the cost of housing, which has risen unequally across the U.S. In addition mental health and wellbeing have declined among segments of working-class Americans, while the positive time trend in happiness has leveled off and has potentially started to decline. He also notes the finding that a combination of rising inequality and slower growth has significantly reduced the probability that children are better off than their parents.