Senin, 31 Desember 2012

President rejects his bipartisan commission

The fiscal deal struck last night makes one thing clear: President Obama must have really hated the recommendations of the bipartisan Bowles-Simpson commission that he appointed. The commission said that we needed to reform entitlement programs to rein in spending and that increased tax revenue should come in the form of base broadening and lower marginal tax rates. The deal appears to offer no entitlement reforms, no tax reform, and higher marginal tax rates. After all the public discussion over the past couple years of what a good fiscal reform would look like, it is hard to imagine a deal that would be less responsive to the ideas of bipartisan policy wonks.

The Neverending Quest for a More Redistributionist Tax System

I just listened to President Obama's latest remarks on fiscal policy.  This passage caught my attention:
I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced, because, remember, my principle always has been let’s do things in a balanced, responsible way. And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts, as well as spending cuts.

Now, the same is true for any future deficit agreement. Obviously we’re going to have to do more to reduce our debt and our deficit. I’m willing to do more, but it’s going to have to be balanced. We’re going to have do it in a balanced responsible way.

For example, I’m willing to reduce our government’s Medicare bills by finding new ways to reduce the cost of health care in this country. That’s something that we all should agree on. We want to make sure that Medicare is there for future generations. But the current trajectory of health care costs has gone up so high, we’ve got to find ways to make sure that it’s sustainable.

But that kind of reform has to go hand and hand with doing some more work to reform our tax code, so that wealthy individuals, the biggest corporations, can’t take advantage of loopholes and deductions that aren’t available to most of the folks standing up here; aren’t available to most Americans.

So there is still more work to be done in the tax code to make it fair, even as we’re also looking at how we can strengthen something like Medicare.

Translation: The deal we are about to strike will raise taxes on the rich. But the fiscal imbalances we face will remain unsustainably large.  So I will ask for more tax increases on the rich later.

Jumat, 28 Desember 2012

Theater Recommendation

For those in the Boston area: Yesterday, my family and I enjoyed one of our Christmas presents from Santa and went to the new production of the musical Pippin at the American Repertory Theater in Cambridge. I recall seeing the original Broadway production in the 1970s when I was in high school and liking the play then. I went to see it yesterday with a bit of trepidation, wondering whether my sensibilities had changed too much over the past four decades for me to still enjoy it. But the play did not disappoint, not even one bit. This new production is absolutely terrific: great acting, music, dancing, and even acrobatics. Everyone had a blast, from my teenage sons to my 85-year-old mother.

The play's run lasts until January 20. Go see it if you can.

Kamis, 27 Desember 2012

Glaeser on Disability

Ed considers what might be behind this fact:
Thirty years ago, there was a 40-to-1 ratio between the total labor force and those workers receiving Social Security disability payments. Today that ratio is less than 18-to-1.

Senin, 24 Desember 2012

A Reading for Christmas

My favorite Christmas-themed economics article is this one by Steve Landsburg. From 2004, but truly timeless.

A Krugman Puzzler

I often disagree with Paul Krugman, but I usually understand him.  Lately, however, I have been puzzled about his view of the bond market.  In a recent post, he takes President Obama to task for believing that the failure to deal with our long-term fiscal imbalance might cause a spike in interest rates:
America can’t run out of cash (except politically, if Congress refuses to raise the debt ceiling); it basically can’t experience an interest rate spike unless people see an increased chance of economic recovery and hence a rise in short-term rates. And the people who have been predicting an interest rate spike any day now for four years shouldn’t have any credibility at this point.

But back in 2003, when the fiscal imbalance was much smaller, he wrote:
With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.... 
How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. 
And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future. 
I think that the main thing keeping long-term interest rates low right now is cognitive dissonance. Even though the business community is starting to get scared -- the ultra-establishment Committee for Economic Development now warns that ''a fiscal crisis threatens our future standard of living'' -- investors still can't believe that the leaders of the United States are acting like the rulers of a banana republic. But I've done the math, and reached my own conclusions -- and I've locked in my rate.
I am having trouble reconciling these points of views.  Has Paul changed his mind since 2003 about how the bond market works?  Or are circumstances different now?  If anything, I would have thought that the fiscal situation is more dire now and so the logic from 2003 would apply with more force.  I am puzzled.

Update: Several people have emailed me possible resolutions of the puzzle, but none is really satisfying.

One group of emailers says that things are different now because we are in a liquidity trap.  But back in 2003 the federal funds rate was at about 1 percent, so we were very close to the zero lower bound.

Another group of emailers says that Paul has admitted that his 2003 forecast was mistaken.  But that is not the issue.  Of course, we can look back and say it was mistaken.  No big deal.  Any economist who has ever made a forecast has made some mistaken forecasts.  The puzzle to me is how Paul can act so certain that the outcome he viewed as likely in 2003 is now beyond the realm of the plausible, even though the fiscal imbalances are much larger.

By the way, my column coming out in Sunday's NY Times touches on these issues, which is why the puzzle came to mind.

Kamis, 13 Desember 2012

Interpreting the Fed

My friend and sometime coauthor Larry Ball sends me his quick analysis of the Federal Reserve's recent announcement:

I think the FOMC announcement is big news: for the first time, the Fed clearly says it will be more dovish in the future than the pre-crisis Taylor Rule (TR) dicates.

In my estimation, the pre-crisis TR is something like the following for the real interest rate r:

r = 2.0 - (1.5)(u-u*) + (0.5)(pi-2.0).

Let’s say u* is still 5.0. Then if u=6.5 and pi=2.5, the TR says r = 0, which implies the nominal interest rate is i = 2.5. Yet the Fed says that i will still be zero!

Some argue that u* has risen above 5.0. That would raise the i implied by the TR, strengthening the conclusion that the Fed’s new rule is more dovish than the TR.

Some argue that r* [the constant term in the TR] has fallen from 2.0 to 1.0. I doubt it, but even with that change, the TR still implies i = 1.5. My conclusion about dovishness is robust.

This deviation from the TR has not happened since the TR was discovered. In particular, the Fed was NOT more dovish than the TR in 2003. I believe the numbers for 2003 are roughly u=6.0, u*=5.0, and pi=1.0. For the TR shown above, the 2003 numbers imply r =0 and i=1.0, which is about the same as the actual i.

It is not clear whether the Fed’s announcement of future dovishness will have significant effects today. The efficacy of announcements about future monetary policy is unproven.

Rabu, 12 Desember 2012

Watch: Brand new official video for "So Many Details"

Check out the brand new official video for "So Many Details."  Once the video hits 250K views it will automatically unlock our next video release so please share with your friends!

Option C

In the negotiations over the fiscal cliff, many people think the House Republicans are in a tough spot.  The logic is that they have little leverage, because they face only two choices:

A. Concede to most of the president's demands.
B. Take the economy over the cliff, and get blamed for it.

As a result, the logic goes, they will end up doing A, because B is so much worse.

Keith Hennessey points out that there is also option C: Extend the tax cuts, except at the top, for one year. Apparently (and I was not aware of this), Senate Democrats passed a bill doing exactly this back in July.  If the House passes it now, it goes to the President's desk, and he would have a hard time vetoing it.

This is not great policy, as it sets up another fiscal cliff one year from now, and it does not address all the spending cuts that are part of the fiscal cliff.  But from the Republicans' point of view, it may be better than either A or B.  Keith argues that the ability of Speaker Boehner to fall back on this option should give him more bargaining power as he negotiates with the president.  That is, because the president won't like option C either, the possibility that it could occur may make him more willing to compromise.  From the president's perspective, it is better to make concessions today than having to do this whole fiscal-cliff thing again a year from now.

Selasa, 11 Desember 2012

Anything In Return pre-order packages now available

You can now pre-order the new Toro y Moi album, Anything In Return at in your favorite audio format along with special premium packages. Don't forget to also get your tickets in advance for the upcoming tour dates. Many dates are selling fast.

The Poverty Trap in France

From Forbes:
Let’s take an unemployed mother living alone with two children between six and 10 years old. In 2010, there were 284,445 French families in this situation that were on welfare.
This mother will be given the “Active Solidarity Income.” Since she has two children, the amount will be $1,100. If she is renting an apartment with a $650 rent, she will be given the “Housing Customized Aid,” amounting to $620. Then she will receive “Family Allowances,” which amounts to another $160. Finally, let’s add the payment known as “Allowance for the start of the school year,” which is $750 once a year, or $62.50 per month. (She might even benefit from other aids, but these are the most common.) She will be given a total of $1,942.50 per month.
Now imagine that this mother has found work and will be paid the “legal minimum wage,” which amounts to $1,820 gross—or $1,430 after taxes. Since she would be earning $1,430, she will no longer receive the “Active Solidarity income.” Her “Housing Customized Aid” will be lowered to $460, but she will still be given “Family Allowances” and the “Allowance for the start of the school year.” Therefore, her total income will amount to $2,112.50....
For this mother of two, working again will bring her family an additional income of only $170. Moreover, this $170 is likely to be lost in the cost of transportation to work, since the cost of gas in France is $7 per gallon. In any case, such a small amount of money is not an incentive to go back to work. Between staying home and working, the choice is simple: welfare is a better deal.

Make Your Own Deficit-Reduction Plan

The Wall Street Journal's interactive graphic lets you choose from a menu of options.

Minggu, 09 Desember 2012

Fiscal Cliff Fact of the Day

As reported in the NY Times:
Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years.

Rabu, 05 Desember 2012

An Unfortunate Broken Promise

Back in 2008, when President Obama was running for his first term, he promised to be a post-partisan leader.  While a Democrat, he said he would accept good ideas when they came from Republicans.  At the time, I believed him, at least to some degree.  And I wrote about it in this NY Times column.

Sadly, I was wrong.  The short version of the story is this: As a candidate, President Obama campaigned on a platform of raising taxes on the rich.  Yet he and his economic advisers also said they wanted to raise dividend taxes only slightly, from 15 to 20 percent.  For reasons I explained in the Times article, keeping dividend taxes low was a position bolstered by good economics. Now, however, the president wants to raise dividend taxes to ordinary income tax rates (plus, for high-income taxpayers, the new tax of 3.8 percent that is part of the Obamacare legislation).

To put it another way, he campaigned as a moderate, willing to concede that the other party had some good ideas on tax policy.  Once in office, he gave up on those ideas.

A similar thing happened with Bowles-Simpson.  During his first term, he appointed a bipartisan panel, which concluded we could address our long-term fiscal problem with lower tax rates and a broader tax base.  Now, the President goes around the country lambasting that approach.

Reasonable people can disagree about whether President Obama is a good or bad president.  But the claim that he has tried to transcend partisanship and find a middle ground is just impossible to square with the facts.

Senin, 03 Desember 2012

A Reading for the Pigou Club

From The New Yorker.  One disappointing quotation:
"We would never propose a carbon tax, and have no intention of proposing one," [White House spokesman Jay] Carney told reporters.

Some Advice on Tax Planning

I don't normally give advice on personal finances, but in light of the fiscal situation we are facing, I will pass along one tidbit.  Consider converting some of your retirement savings into a Roth IRA. Over the past few years, I have converted all that I can, which is about half of my retirement savings. 

To make the best of a Roth conversion, you need liquid assets outside of retirement accounts to pay the resulting tax liability.  But if you can do this, you will shelter more of your savings from capital taxation, and you will avoid required minimum distributions when you turn 70 1/2, which means tax-free accumulation for a longer period of time.

To read more about this option, click here.

Sabtu, 01 Desember 2012

Toro y Moi Boiler Room Los Angeles Mix

Why the President is Not So Keen on Just Limiting Deductions

From the White House blog.  Bottom line: If you apply a $25,000 deduction cap only to households with income above $250K, phase in the cap gradually as income rises above $250K, and exclude charitible giving from the cap, you increase revenue by only $450 billion over ten years.

Jumat, 30 November 2012

The Gray Lady's Misleading Headline

Over my coffee this morning, I read the following headline on the front page of The New York Times: "Complaints Aside, Most Face Lower Tax Burden Than in the Reagan ’80s."  Below it was a graphic comparing average tax rates for various income groups in 1980 and 2010.

The problem is that Reagan did not become president until January 1981, and his tax policy was not fully implemented until a couple of years later (and arguably not until his second term, when we got very significant tax reform).  So the headline should have read, "Complaints Aside, Most Face Lower Tax Burden Than in Carter's 1980."  That makes the story very different, as 1980 was the year the incumbent Carter was defeated by the challenger Reagan, who was proposing significant tax reduction as a key part of his campaign.

By the way, the online version of The Times omits the mention of Reagan in the headline.  There, the headline is the more accurate "Complaints Aside, Most Face Lower Tax Burden Than in 1980."

Addendum: Using the Times online interactive graphic, you can compare the average tax rates between any two years.  Here, by income level, is how the average tax rate changed from 1988, Reagan's last year in office, to 2010, the most recent year available.

0 to 25K, fell by 4 percentage points
25 to 50K, fell by 3 percentage points
50 to 75K, fell by 2 percentage points
75 to 100K, fell by 2 percentage point
100 to 125K, fell by 1 percentage point
125 to 150K, fell by 1 percentage point
150 to 200K, unchanged
200 to 350K, rose by 2 percentage point
350K+, rose by 1 percentage point

That is, according to the Times numbers, since Reagan left office, tax rates have risen at the top and fallen for the middle class and especially the poor.

Kamis, 29 November 2012

Quick Movie Reviews

Over the last week, I saw two of the movies that critics have been raving about: Lincoln and ArgoLincoln was okay but a bit disappointing compared to expectations.  It is too hagiographic for my taste.  Argo was great.

Rabu, 28 November 2012

The Coming Tax Hikes

Donald Marron of the Urban-Brookings Tax Policy Center explains the tax increases that are part of the upcoming fiscal cliff.

Dividing Household Chores

Advice from economist Emily Oster.  A good reading to assign when teaching the theory of comparative advantage.

Senin, 26 November 2012

A Master of Tax Avoidance

Warren Buffett has an op-ed in today's NY Times on one of his most popular themes: The rich should pay more in taxes.  At first blush, his position seems noble: A rich guy says that people like him should pay more to support the commonweal.  But on closer examination, one realizes that Mr Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively.  In particular:

1. His company Berkshire Hathaway never pays a dividend but instead retains all earnings.  So the return on this investment is entirely in the form of capital gains.  By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.

2. Mr Buffett is a long-term investor, so he rarely sells and realizes a capital gain.  His unrealized capital gains are untaxed.

3. He is giving away much of his wealth to charity.  He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.

4. When he dies, his heirs will get a stepped-up basis.  The income tax will never collect any revenue from the substantial unrealized capital gains he has been accumulating.

To be sure, there are pros and cons of changing the provisions of the tax code of which Mr Buffett takes advantage. Tax policy always involves difficult tradeoffs.  But it seems odd to me that whenever Mr Buffett talks about taxing the rich more, the "loopholes" that he uses never seem to enter into the conversation.

Solow on Hayek and Friedman

From The New Republic.

Rabu, 21 November 2012

Response to Diamond and Saez

In a widely discussed recent paper, Peter Diamond and Emmanuel Saez have suggested that the top tax rate should be very high--about 73 percent.  Tax Notes has a new commentary on their conclusion.

Minggu, 18 November 2012

The U.S. has a flat tax (in effect)

The Congressional Budget Office has a new study of effective federal marginal tax rates for low and moderate income workers (those below 450 percent of the poverty line).  The study looks at the effects of income taxes, payroll taxes, and SNAP (the program formerly known as Food Stamps).  The bottom line is that the average household now faces an effective marginal tax rate of 30 percent.  In 2014, after various temporary tax provisions have expired and the newly passed health insurance subsidies go into effect, the average effective marginal tax rate will rise to 35 percent.

What struck me is how close these marginal tax rates are to the marginal tax rates at the top of the income distribution.  This means that we could repeal all these taxes and transfer programs, replace them with a flat tax along with a universal lump-sum grant, and achieve approximately the same overall degree of progressivity. 

Minggu, 11 November 2012

An Interview with Eugene Fama Bob Litterman.  (A great piece to assign undergrads when teaching about financial markets and institutions.)

Sabtu, 10 November 2012

How To Raise Tax Revenue From The Rich Without Increasing Tax Rates

According to the Tax Policy Center, if we cap itemized deductions at $50,000 and keep tax rates as they are today, we would raise $749 billion in tax revenue over ten years.  Moreover, according to the TPC's distribution table, 96.2 percent of the extra revenue would come from the top quintile, with 79.9 percent from the top one percent.

This may be the germ of a possible deal between President Obama and Speaker Boehner: The speaker agrees to this tax hike if the president agrees to some fundamental reform of the entitlements, such as gradually but significantly raising the age of eligibility for Social Security and Medicare.

Jumat, 09 November 2012

"Anything In Return" gallery and listening event in New York this weekend

Toro y Moi and Red Bull Music Academy have teamed up to produce a special art installation at Project Parlor in Brooklyn this weekend where you'll be the first to preview the new album.  The show will feature 13 original drawings from Chaz himself, and thanks to InCase headphones, each piece is paired with a song from Toro y Moi's new album, Anything In Return.

*  Friday 5-10pm OPENING NIGHT
*  Saturday 5-10pm SPECIAL EVENT w/ 1 hour comp Red Bull + Kru Vodka and a DJ set by Toro y Moi (Chaz)
*  Sunday General viewing

Rabu, 07 November 2012

No Exit

With the President reelected and the House and Senate largely unchanged in composition, the first thought that came to my mind was the classic Sartre play No Exit, with President Obama, Speaker Boehner, and Majority Leader Reid playing the three characters.

Selasa, 06 November 2012

"So Many Details" (Remix featuring Hodgy Beats)


Today is the day. If you are a reader of this blog, it is a good bet that you are better informed than average on the key economic issues of the day. So get to the polls.

BTW, for two of my three children, this is the first presidential election in which they can vote.

Minggu, 28 Oktober 2012

Tax Expenditure Fact of the Day

The NY Times reports:
[T]he people who tend to derive the greatest dollar benefit from the mortgage interest deduction are households earning $100,000 to $500,000 a year.  
“About two-thirds of the total benefit go to that group in the 80th through the 99th income percentiles,” Mr. Rosenberg said.  
For those households, by the center’s calculations, the tax benefit of the deduction amounts to about 1.5 percent of after-tax income. By way of comparison, the value to households earning $40,000 to $50,000 is closer to 0.3 percent of after-tax income; for households earning $50,000 and $75,000, it is 0.7 percent.
These numbers compare the status quo to a system without any mortgage deduction at all.  If instead we lowered the size of the mortgage eligible for this deduction from the current $1 million to, say, $250,000, the base broadening would have an even smaller effect on middle-income housholds.

Jumat, 26 Oktober 2012

Anything In Return listening events announced in NY & SF

This November, Toro Y Moi will team up with Red Bull Music Academy to give fans the opportunity to hear his upcoming third album, Anything In Return, more than two months in advance of release through a unique experience in select cities. Red Bull Music Academy will be presenting the events with Toro Y Moi that will take place at Project Parlor in Brooklyn Nov. 9-11 and Public Works in San Francisco Nov. 16-18. At each gallery, 13 original drawings from Chaz Bundick will be on display, each paired with a corresponding song from the album that fans can listen to via Incase headphones. These events, conceived by Bundick himself, will be free and open to the public.

Anything In Return listening events:

11-02−11/04 - Brooklyn, NY - Project Parlor #
11-16−11/18 - San Francisco, CA - Public Works #

Toro y Moi's third LP, Anything In Return is due on Carpark Jauary 22nd.

Stream: Toro y Moi - "So Many Details"

The Effects of Government Debt on Growth

An analysis from Stanford's Michael Boskin.

Senin, 22 Oktober 2012

Blinder and Mankiw Webcast

Alan Blinder and I will be speaking at the 8th Annual Gulf Coast Economics Association Teaching Conference on November 8th and 9th, 2012.  Even if you can't make it to the conference in Orlando, Florida, you can watch us via a free webcast.  For more information, click here.

2013 US Tour Dates Announced

We've announced the first dates of our 2013 US tour in support of the new album, Anything In Return. For the first time you can purchase tickets direct from the band through their fan club ticketing page. View all upcoming tour dates here:

01-30 Phoenix, AZ - The Crescent Ballroom
01-31 El Paso, TX - Tricky Falls *
02-01 Dallas, TX - Trees *
02-02 Austin, TX - Emo's East *
02-04 Houston, TX - Fitzgerald's *
02-05 New Orleans, LA - One Eyed Jacks *
02-06 Atlanta, GA - Masquerade (Heaven Stage) *
02-08 Carrboro, NC - Cat's Cradle *
02-09 Richmond, VA - The National *
02-10 Washington, DC - 9:30 Club *
02-11 Philadelphia, PA - Union Transfer *
02-13 New York, NY - Webster Hall *
02-15 Boston, MA - Paradise *
02-16 Montreal, Quebec - Club Soda *
02-17 Toronto, Ontario - Lee's Palace *
02-19 Chicago, IL - Metro
02-20 Minneapolis, MN - Fine Line Music Cafe
02-21 Lawrence, KS - The Granada Theatre
02-23 Denver, CO - Bluebird Theater
02-24 Salt Lake City, UT - Urban Lounge
02-26 Vancouver, British Columbia - Biltmore Cabaret
02-27 Seattle, WA - The Crocodile
02-28 Portland, OR - Wonder Ballroom
03-03 Los Angeles, CA - The Fonda Theatre
* with Wild Belle

Listen to "So Many Details" from Anything In Return here.

Rabu, 17 Oktober 2012

People Respond to Incentives

Even in France:
France's new 75 percent income tax on the rich may not be popular with millionaires. But it's being cheered by another group: Paris real-estate buyers. Real estate agents say that the number of multi-million-dollar real-estate listings in Paris has jumped more than 25 percent over last year -- due in part to the threat of the new income tax....[B]rokers say the 75 percent tax on the wealthiest French citizens has contributed to the decision by many of the them to sell their homes in anticipation of a possible move to another country.

Russ Roberts talks with John Taylor

Part 1 Part 2

Senin, 15 Oktober 2012

Optimal Tax Policy

A group of top economists was asked what they thought about this statement:

"Taxing capital income at a permanently lower rate than labor income would result in higher average long-term prosperity, relative to an alternative that generated the same amount of tax revenue by permanently taxing capital and labor income at equal rates instead."

There was not unanimity, but about three times as many economists agreed than disagreed.

Listen to "So Many Details" from forthcoming new album Anything In Return

Roth and Shapley

Congratulations to Al Roth and Lloyd Shapley for winning the Nobel Prize today!  It is well deserved.

FYI to teachers of introductory economics:  I use Al's article on Repugnance as a Constraint on Markets as an ancillary reading in ec 10.

The Value of Consensus Building

As seen by Larry Summers:

"If there is no consensus on the causes or solutions to serious problems, it is unreasonable to ask a political system to implement forceful actions in a sustained way. Unfortunately, this is to an important extent the case with respect to current economic difficulties, especially in the industrial world."

Kamis, 11 Oktober 2012

Paul Ryan's Early Aspirations

"As a young man, Ryan held numerous amusing summer jobs, including a stint as an Oscar Mayer salesman in which he drove a Wienermobile. He envisioned eventually going to the University of Chicago for an advanced degree in economics and becoming an economist/academic, but he says he 'kept getting lured into politics.'"


Rabu, 10 Oktober 2012

Sabtu, 06 Oktober 2012

The Two Labor Market Surveys

If you go to the recent release from the BLS, you can find these two sentences a few paragraphs apart:

Total employment rose by 873,000 in September.

Total nonfarm payroll employment increased by 114,000 in September.

To a layman, this may seem confusing.  The first statement suggests a robust labor market, the second a more lackluster one.  What is going on?

The issue is that there are two surveys.  The first estimate of employment comes from the survey of households; the second is from the survey of establishments.  I thought readers might like to hear what my favorite intermediate macro textbook says about this issue.  Here is an excerpt:


Because the BLS conducts two surveys of labor-market conditions, it produces two measures of total employment. From the household survey, it obtains an estimate of the number of people who say they are working. From the establishment survey, it obtains an estimate of the number of workers firms have on their payrolls.

One might expect these two measures of employment to be identical, but that is not the case. Although they are positively correlated, the two measures can diverge, especially over short periods of time. A particularly large divergence occurred in the early 2000s, as the economy recovered from the recession of 2001. From November 2001 to August 2003, the establishment survey showed a decline in employment of 1.0 million, while the household survey showed an increase of 1.4 million. Some commentators said the economy was experiencing a “jobless recovery,” but this description applied only to the establishment data, not to the household data.

Why might these two measures of employment diverge? Part of the explanation is that the surveys measure different things. For example, a person who runs his or her own business is self-employed. The household survey counts that person as working, whereas the establishment survey does not because that person does not show up on any firm’s payroll. As another example, a person who holds two jobs is counted as one employed person in the household survey but is counted twice in the establishment survey because that person would show up on the payroll of two firms.

Another part of the explanation for the divergence is that surveys are imperfect. For example, when new firms start up, it may take some time before those firms are included in the establishment survey. The BLS tries to estimate employment at start-ups, but the model it uses to produce these estimates is one possible source of error. A different problem arises from how the household survey extrapolates employment among the surveyed households to the entire population. If the BLS uses incorrect estimates of the size of the population, these errors will be reflected in its estimates of household employment. One possible source of incorrect population estimates is changes in the rate of immigration, both legal and illegal.

In the end, the divergence between the household and establishment surveys from 2001 to 2003 remains a mystery. Some economists believe that the establishment survey is the more accurate one because it has a larger sample. Yet one recent study suggests that the best measure of employment is an average of the two surveys. [George Perry, “Gauging Employment: Is the Professional Wisdom Wrong?,” Brookings Papers on Economic Activity (2005): 2.]

More important than the specifics of these surveys or this particular episode when they diverged is the broader lesson: all economic statistics are imperfect. Although they contain valuable information about what is happening in the economy, each one should be interpreted with a healthy dose of caution and a bit of skepticism.

Jumat, 28 September 2012

The Price of Fiscal Uncertainty

I have been reading Bob Woodward's new book, The Price of Politics.  It is a detailed recounting of the back-and-forth negotiations among President Obama's White House, the Republican leaders in the House of Representatives, and the major players in the Senate regarding the debt ceiling and long-term fiscal outlook.  The book is primarily an objective narrative, rather than a foaming-at-the-mouth polemic (unlike the over-the-top book The Amateur, which I read over the summer).  Nonetheless, the story Woodward tells does not make this White House look particularly good.

Woodward seems to believe that if we had a President more like Bill Clinton, a fiscal deal could have been struck.  President Obama is described as disdainful of schmoozing with other pols, as mishandling the negotiation process, and as unwilling to move sufficiently toward the political center to get a deal done.  One gets the sense that the Democratic President who signed the 1996 welfare reform would have more easily reached a compromise with House Republicans.

This story brought to my mind recent research by Baker, Bloom, and Davis, which suggests that policy uncertainty has impeded the economic recovery.  If Baker et al. are right that uncertainty depresses the economy, and if Woodward is right that the uncertainty we now face with the upcoming "fiscal cliff" is attributable mostly to the inability of Barack Obama to work with Congress, then the implication is clear: The meagerness of this recovery is not simply a hangover from a financial crisis, but rather a reflection of a fundamental political failure.  The price of politics, indeed.

Rabu, 26 September 2012

The Taxation of Capital Income

Many economists believe capital income should be taxed at a lower rate than labor income, perhaps even at a zero rate.  Matthew Yglesias explains why.

Selasa, 25 September 2012

Economics Teaching Conference

You can still register for the economics teaching conference on November 8 and 9 in Orlando, Florida.  Early bird registration is open until October 10.  Click here for more information.

FYI, I am among the keynote speakers.

Sabtu, 22 September 2012

Mankiw vs. DeLong and Krugman on the CEA’s Real GDP Forecasts in Early 2009: What Might a Time Series Econometrician Have Said?

This post takes its title from a new article at Econ Journal Watch.  Here is the abstract:

In early 2009, the incoming Obama administration’s Council of Economic Advisers predicted real GDP would rebound strongly from recession levels. In a blog post, Greg Mankiw expressed skepticism. In their blogs, Brad DeLong and Paul Krugman sighed. Of course there would be strong growth, they maintained, because the recovery of employment would mandate it via Okun’s Law. Mankiw challenged Krugman to a bet on the issue, but there was no response. Of course we now have a good idea of the likely outcome, but I posit a hypothetical time series econometrician who, at the time of the blog entries, applies some standard forecasting methods to see whether DeLong and Krugman’s confidence was justified. The econometrician’s conclusion is that Mankiw would likely win the bet and furthermore that a rebound of any significance is unlikely. The econometrician has no idea how DeLong and Krugman could have been so confident in the CEA’s rebound forecast.

Sabtu, 15 September 2012

A Break from Economics

My younger son and I attended a great concert last night by Florence + The Machine. If you aren't familiar with their music, here is a sample:

Kamis, 13 September 2012

Rabu, 12 September 2012

A Reading for the Pigou Club

Here.  A tidbit:
According to economists crunching the numbers, this makes mileage standards somewhere between 2.4 and 13 times more expensive than a gasoline tax as a tool to reduce our use of fuel. Indeed, by some calculations, raising fuel-economy standards is more costly than climate change itself.

Selasa, 11 September 2012

Help Wanted

I am looking to hire a Harvard student to work with me as I revise my principles textbook (along with several other less time-consuming tasks). The part-time job requires strong writing/editing skills, the ability to proofread carefully, some facility with data, and an interest in pedagogy. Work would start soon, and it would continue throughout the academic year.

If you are interested, please drop off a brief letter, resume, and transcript with my assistant Lauren LaRosa in Littauer 236.

Jumat, 07 September 2012

Harvey Rosen on the Romney Tax Plan

You can read what the Princeton public finance expert says at this link.  Here is the bottom line:
I analyze the Romney proposal taking into account the additional income that might be generated by economic growth. The main conclusion is that under plausible assumptions, a proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on high-income individuals about the same. That is, an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral.

Rabu, 05 September 2012

Ranking Universities

Last month, the Center for World-Class Universities at Shanghai Jiao Tong University released the 10th edition of its annual global university ranking.  Click here to see the economics ranking.

Minggu, 02 September 2012

A Reply from Martin Feldstein

I am happy to lend this space to my Harvard colleague Martin Feldstein. -- Greg
Feasibility of the Romney Tax Plan – Reply to Comments

Martin Feldstein

This note is a reply to those who commented on my August 28 WSJ article (available here) about the Romney Tax Plan. The Romney income tax plan includes a 20% cut in all individual tax rates, eliminating the AMT, and eliminating the taxes on interest, dividends and capital gains for those with incomes under $100,000.  The resulting revenue loss is balanced in the plan by broadening the tax base for high-income taxpayers.

The Tax Policy Center (and others citing their report) claimed that the Romney plan is “mathematically impossible” and that the plan would inevitably lead to a large middle class tax increase or a rise in the budget deficit.

I found that that conclusion is not correct. It is possible to cut taxes as Gov. Romney indicates and to finance it with base broadening for taxpayers with AGI over $100,000. Governor Romney has not specified the base broadening that he would propose. My calculations presented here and in the WSJ are not estimates of the Romney plan but an indication that such a plan is feasible.

For the WSJ article I analyzed the most recent published IRS data (for 2009).  The cost of the Romney proposed tax cuts would be $219 billion in that year with no behavioral response (the “static estimate”) or $186 after a $33 billion reduction in cost caused by the behavioral response to lower marginal rates (with an elasticity of the tax base with respect to the net-of-tax share of 0.5.)   Those IRS data also implied that eliminating all deductions for taxpayers with AGI above $100,000 would increase the tax base by $636 billion.  I multiplied the $636 billion by a 30 percent marginal tax rate for the high-income taxpayers, implying $191 billion of extra revenue. That would be enough to finance the $186 billion revenue loss.  All taxpayers with AGI below $100,000 would have tax cuts and no tax increase. I concluded that even without further base broadening the plan is feasible and would not involve either a middle class tax increase or a rise in the budget deficit.

The critics of my WSJ piece raised 4 objections: (1) The 30 percent marginal tax rate is too high for these taxpayers because of the 20% Romney rate reduction. (2) The behavioral response (reducing the cost of rate reduction by $33 billion) is too large because the elasticity of the tax base would be lower than the 0.5 I assumed. (3) Applying the base broadening to those with incomes above $100,000 would create a “notch” with a jump in tax liabilities near that level. (4) The Tax Policy Center defined the middle class as all taxpayers with incomes under $200,000 while I used $100,000.

While I still believe the assumptions that I used in my analysis, I can modify them as suggested by the critics and still support my original conclusion by broadening the tax base in ways suggested but not developed in my WSJ piece. Eliminating a few of the “tax expenditure” exclusions and credits that are important for high-income taxpayers would raise more than enough revenue to compensate for assuming a smaller marginal tax rate, cutting the behavioral response effect in half, and phasing in the base broadening for individuals with incomes over $100,000 to avoid the notch.

More specifically, using a 25% marginal tax rate instead of 30% would reduce the revenue from eliminating deductions by 5% of $636 billion or $32 billion.  Cutting the behavioral response in half (i.e., using a taxable income elasticity of just 0.25) would raise the cost of the tax cut by $17 billion.  The cost of the “phase in” would depend on just how it was done but say another $15 billion of reduced revenue.  So instead of my conclusion that the revenue from eliminating deductions would exceed the cost of the tax cuts by $5 billion, these assumptions would imply a shortfall to be made up by other base broadening of $64 billion.

One part of that broadening could be eliminating the exclusion of employer payments for health insurance for those with AGI over $100,000. That  would increase income tax revenue by about $40 billion (out of the total revenue loss from the health insurance exclusion for all taxpayers of  $168 billion) plus an additional $10 billion of additional payroll tax revenue. (My estimate of this $40 billion is based on an imputation method developed by John Gruber based on data collected in the Medical Expenditure Panel Study.)

Eliminating the exclusion of municipal bond interest for taxpayers with AGI over $100,000 would increase tax revenue by an additional $15 billion.

Eliminating the child credit for those with incomes over $100,000 would increase revenue by an additional $10 billion.

So just those three changes to the list of base broadening measures would raise $75 billion or more than enough to exceed the $64 billion of potential shortfall with the very conservative assumptions noted above.

Additional tax revenue could be raised without reducing incentives to save or to invest efficiently by eliminating the exclusion for high-income taxpayers of such things as capital gains on home sales, the “cafeteria plan” benefits, and the capital gains at death.

One further point on the appropriate marginal tax rate (objection 1 above): although the top statutory rate is 35 percent, the effective top marginal tax rate is higher because of various phase-out provisions that affect high-income taxpayers (PEP, Pease, etc.) so my original assumption of a 30 percent marginal tax rate could be appropriate even with the Romney rate reductions.

The final objection is to my use of the $100,000 level to show that the middle class (i.e., those below $100,000 AGI) would experience no tax increases. The $100,000 level corresponds to 21 percent of all taxable returns and a significantly smaller fraction of all households.  I think it is very reasonable to say that people in that high-income group are not the “middle class.” The TPC focus on those with AGI over $200,000 limits that group to the top 4 million taxpayers who are three percent of all returns and five percent of all taxable returns.

So I think my conclusion stands: it is feasible to combine tax cuts and base broadening as Governor Romney suggests without raising the budget deficit or imposing any middle class tax increase. Critics might not like the Romney plan but they cannot call it “mathematically impossible.”

Jumat, 31 Agustus 2012

Live from Stockholm

Next week you can listen in on a Nobel symposium on growth and development and another conference on climate change.  For more information, click here.

Rabu, 29 Agustus 2012

Feldstein on the Romney Tax Plan

Marty runs some numbers.

Updates: The TPC responds to Marty, and Marty responds to his critics.

A Tax Level Cheat Sheet

A nice summary from Keith Hennessey:

  • Over the past 50 years federal taxes have averaged 18% of GDP.
  • Governor Romney proposes taxes “between 18 and 19 percent” of GDP.
  • The House-passed (“Ryan”) budget proposes long-term taxes of 19% of GDP.
  • President Obama’s budget proposes long-term taxes at 20% of GDP.
  • The Bowles-Simpson plan proposes long-term taxes at 21% of GDP.
  • Jumat, 24 Agustus 2012

    More Competition

    Glenn Hubbard and Tim Kane have started a blog.

    What is the best way to reduce the government's budget deficit?

    New research by Alberto Alesina, Carlo Favero, and Francesco Giavazzi suggests an answer:
    This paper studies whether fiscal corrections cause large output losses. We find that it matters crucially how the fiscal correction occurs. Adjustments based upon spending cuts are much less costly in terms of output losses than tax-based ones. Spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all. Tax-based adjustments have been associated with prolonged and deep recessions.

    I am number 88

    ...on the Amazon list of bestselling books.  I believe it is the first time one of my texts has made it into the top 100.

    Jumat, 17 Agustus 2012

    The Economist Platform

    NPR has a list of policies that economists across the political spectrum love.  It has some overlap with my list from few years back.

    Sabtu, 11 Agustus 2012

    My Annual Field Trip

    Every year around this time, I take a trip to do an extensive study of economy of Nantucket.  As you might imagine, this activity requires large quantities of hard work and concentration sun screen.

    One implication is that I won't be blogging much until classes start up in September.  And if you are a reporter trying to get a quote for a story, sorry, but you are out of luck.

    Selasa, 07 Agustus 2012

    Jumat, 03 Agustus 2012

    David Brooks on the Joys of Middle Age

    The most common question I have been asked lately is, "Why the hell did you agree to become department chairman?"  It is a bullet I have been dodging for some years, but I finally capitulated when the dean asked me this time. Why, at the age of 54, did I change my mind? David Brooks's wonderful column today offers as good an answer as any I have come up with.
    Then in your 50s and 60s, you will become a sociologist, understanding that relationships are more powerful than individuals. The higher up a person gets, the more time that person devotes to scheduling and personnel. As a manager, you will find yourself in the coaching phase of life, enjoying the dreams of your underlings. Ambition, like promiscuity, is most pleasant when experienced vicariously.
    You’ll find yourself thinking back to your own mentors, newly aware of how much they shaped your path. Even though the emotions of middle-aged people are kind of ridiculous, you’ll get sentimental about the relationships you benefited from and the ones you are building. Steve Jobs said his greatest accomplishment was building a company, not a product.

    Selasa, 31 Juli 2012

    The President's Rosy Scenario

    I have been looking through the Obama administration's midsession review, which was released a few days ago.  I found the comparison between the adminstration's economic forecast and the Blue Chip consensus of private forecasters noteworthy.  (See the table called "Table 3. Comparison of Economic Assumptions.")  Here is the projected growth of real GDP, fourth quarter to fourth quarter, of Team Obama in red, and private forecasters in blue.

    2012 2.6 2.0
    2013 2.6 2.5
    2014 4.0 3.1
    2015 4.2 3.0
    2016 3.9 2.9

    Of course, the Administration's optimistic forecast feeds directly into its budget projection.  If we get the slower growth that private forecasters predict, we will get less tax revenue and larger budget deficits than the Administration projects.

    Kamis, 26 Juli 2012

    What I've been reading

    I am down here on Long Beach Island, NJ, visiting my mom with my younger son.  It has given me a chance to catch up on some reading, and I have a recommendation to pass along: Unintended Consequences by Edward Conard.  The subtitle (Why everything you've been told about the economy is wrong) is unnecessarily contentious and not really an accurate description.  But the book, written by a former Bain partner, gives a good overview of the forces behind the financial crisis.  It is far smarter and more thought-provoking than most economics written for the general public.

    You can read the beginning of the book by clicking here.  Be sure to check out Figure 1-6 on page 22, which I found quite illuminating.

    Rabu, 18 Juli 2012

    What I've been watching

    I am a latecomer to this, but a friend suggested to me that I would enjoy the TV show Breaking Bad, and boy was he right. It has occupied me almost every evening for the past month, as I have caught up to the current season five.

    The show tells the story of a particularly destructive mid-life crisis, as a mild-mannered high school teacher slowly descends into the underworld of drug manufacturing. It is not the best TV drama of all time (I would probably vote for The Wire), but it is close. It is important to watch in sequence, so be sure to start with season one.

    Selasa, 17 Juli 2012

    Harry Reid's Wardrobe

    Having learned that the U.S. olympic uniforms were manufactured in China, Senator Harry Reid said, "I think they should take all of the uniforms put them in a big pile and burn them and start all over again."

    Will some enterprising reporter please ask Senator Reid for the opportunity to inspect the senator's closet and check the labels of his clothing to make sure they are all American-made?   I look forward to seeing Mr. Reid's bonfire.

    In the alternative, I would be happy to send the senator of copy of my favorite textbook.  He should pay particular attention to Chapters 3 and 9.

    Sabtu, 14 Juli 2012

    The Progressivity of Taxes and Transfers

    To update one of the tables for the next edition of my favorite textbook, I have been looking at the new CBO report on the distribution of income and taxes.  I found the following calculations, based on the numbers in the CBO's Table 7, illuminating.

    Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received.  For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):

    Bottom quintile: -301 percent
    Second quintile: -42 percent
    Middle quintile: -5 percent
    Fourth quintile: 10 percent
    Highest quintile: 22 percent

    Top one percent: 28 percent

    The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned.

    The most surprising fact to me was that the effective tax rate is negative for the middle quintile.  According to the CBO data, this number was +14 percent in 1979 (when the data begin) and remained positive through 2007.  It was negative 0.5 percent in 2008, and negative 5 percent in 2009.  That is, the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess.

    I recognize that part of this change is attributable to temporary measures to deal with the deep recession.  But it is noteworthy nonetheless, as other deep recessions, such as that in 1982, did not produce a similar policy response.

    Update: A reader points out the CBO's transfer data includes state and local transfers, but the tax data includes only federal taxes.  If state and local taxes were included, or if state and local transfers were excluded, the middle quintile might well turn positive, though the CBO does not provide the data to establish that conclusion definitively.

    Jumat, 13 Juli 2012

    Anti-poverty programs raise effective marginal tax rates

    Eugene Steuerle calculates the effective marginal tax rates from the system of taxes and transfers:

    we calculate the effective average marginal tax rate if this household increases its income from $10,000 to $40,000. That is, how much of the additional $30,000 of earnings is lost to government through direct taxes or loss of benefits? The average marginal tax rate in the first bar of Table 3, 29 percent, is based simply on federal and state direct taxes, including Social Security and the EITC. The rate rises appreciably as the family enrolls in additional transfer programs in bars 2 and 3. For a family enrolled in all the more universal non-wait-listed programs like SNAP, Medicaid, and SCHIP, the average effective marginal tax rate could be 55 percent. Enrolling the family in additional waitlisted programs, like housing assistance and TANF, ratchets the rate up above 80 percent....

    Some caveats are in order. A number of eligible households do not apply for benefits, such as the food subsidies for which they are eligible. We have performed some analyses of the population as a whole at the Urban Institute and find that the average rates across households will be lower than what you see in the table because of less than full participation in the programs. By the same token, we have not included the child care grants in these calculations. Add those in, and the rate can exceed 100 percent.

    Rabu, 11 Juli 2012

    A Tribute to Anna Schwartz

    Here are some words from David Romer, spoken at the beginning of the NBER Summer Institute, Monetary Economics program:

    Before we begin, we have a sad milestone to note. Anna Schwartz, who was a towering figure not just in the Monetary Economics program of the NBER, but in the field of monetary economics, died last month.

    The usual way to mourn someone’s passing is with a moment of silence. I think everyone who knew Anna even a little realizes that that would be absolutely the wrong way to remember her. So instead, let’s remember her this week by being loud, forceful, and argumentative, and by interrupting one another when we feel really strongly about something. To honor her, we also need to keep our discussions and debates focused on the substantive questions at hand and firmly grounded in the evidence. And we need to be flexible and open-minded, willing to cheerfully change our minds even if it’s about a position we’ve argued for tenaciously for decades – as Anna did on the question of whether targeting monetary aggregates is a good way to conduct monetary policy.

    But to truly honor Anna, what you need to do is to go back to your university or wherever you work after the conference is over, and do work that’s so damn good that it changes the way we think about basic questions in macroeconomics, and that’s so damn careful and thorough that fifty years from now, it’s still the first place that people look when they want to learn about an issue that your work addresses.

    And, you’ll keep doing that work for decades. To put Anna’s research longevity in perspective, if you’re currently finishing your second year in graduate school, you’re probably about the same age that Anna was when she published her first paper. To match Anna’s research longevity, you’ll need to stay actively involved in important research until about 2080.

    With those lofty goals in mind, let’s turn to the conference program.

    Selasa, 03 Juli 2012

    Pigou Club news

    From my inbox:
    I thought you might be amused to see this. At Metrovino, a restaurant in Portland, Oregon where I run the bar, we needed a name for a drink we serve that's a slight variation on the Pegu Club (a classic gin cocktail). "Pigou Club" was the first thing to come to mind. I doubt many guests know what the name alludes to but it makes me happy and the drink has become one of our bestsellers. A photo of the menu is attached.  The recipe and background are here.

    Also, by the way, Australia has joined the club, amidst significant controversy.

    Jumat, 29 Juni 2012

    Chief Justice Roberts disses economists

    From his recent opinion on the health care law, page 24:

    To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce. But the distinction between doing something and doing nothing would not have been lost on the Framers, who were "practical statesmen," not metaphysical philosophers.

    Kamis, 28 Juni 2012

    Senin, 18 Juni 2012

    I inspire a contest

    The folks over at New Economic Perspectives are sponsoring a contest "offering t-shirts to the top three readers who identify passages that contain the worst predictive and policy follies in Mankiw’s textbook."

    That is very helpful.  Thanks!  I am always trying to find mistakes, omissions, and ambiguities in the book so I can improve the next edition.  I look forward to seeing what they come up with.

    Elinor Ostrom has passed away

    Here is the Nobel prize winner's NY Times obituary.

    Kamis, 14 Juni 2012

    Minggu, 10 Juni 2012

    On my to-read pile

    A new book by economist Ariel Rubinstein.  You can read it for free by clicking here.  (And in case you are wondering, the second link is legit, not pirated.)

    Addendum: Here is a review of the book.

    Selasa, 05 Juni 2012

    Barro on the Slow Recovery

    Robert says incentives are the key:
    Consider the expansion of social-safety-net programs, including food stamps, unemployment insurance, Medicaid (prospectively) and housing and mortgage programs. In a study published last month by the National Bureau of Economic Research, University of Chicago economist Casey Mulligan observed that, because these programs were means-tested (falling or ending as income rises), expanding them raised the effective marginal tax rate on labor income.
    Specifically, Mr. Mulligan estimates that the effective marginal tax rate for low-income households went from around 40% in 2007, before the recession started, to about 48% in 2009, at the start of the recovery. Thus, while these programs may be attractive from the standpoint of assisting poor families, they dilute incentives to work.
    To achieve a real recovery, government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.

    Summers on Quantitative Easing

    Larry is skeptical:

    There is also an oddity in this renewed emphasis on quantitative easing. The essential aim of such policies is to shorten the debt held by the public or issued by the consolidated public sector comprising both the government and central bank. Any rational chief financial officer in the private sector would see this as a moment to extend debt maturities and lock in low rates – exactly the opposite of what central banks are doing. In the U.S. Treasury, for example, discussions of debt-management policy have had exactly this emphasis. But the Treasury does not alone control the maturity of debt when the central bank is active in all debt markets.