My Agnosticism about UI – Greg Mankiw – I have avoided commenting on the topic because I am ambivalent on the issue, largely because I am agnostic about what economists know about optimal UI. But perhaps it would be useful to explain my agnosticism. UI has pros and cons. The pros are that it reduces households’ income uncertainty and that it props up aggregate demand when the economy goes into a downturn. The cons are that it has a budgetary cost (and thus, other things equal, means higher tax rates now or later) and that it reduces the job search efforts of the unemployed. To me, all these pros and cons seem significant. I have yet to see a compelling quantitative analysis of the pros and cons that informs me about how generous the optimal system would be. So when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?
The Hill: "Senate rejects million-dollar tax-cut compromise in Saturday session" – Or more clearly, all Senate Republicans plus one Democrat reject a tax cut for incomes below one million dollars. From The Hill: Republicans had held firm in recent weeks that the tax cuts — designed to benefit the wealthiest Americans — should be permanently extended as a whole. Democrats had argued that only the cuts for the middle class should be extended, also blasting Republicans for failing to propose any spending cuts or revenue increases to pay for all of the cuts.
Very Serious Differences About Social Security – Paul Krugman suspects that cutting Social Security has become a badge of seriousness because Social Security . . .is something that matters enormously to the bottom half of the income distribution, but no so much to people in the 250K-plus club. A 30 percent cut in benefits would represent disaster for tens of millions of Americans, but a barely noticeable inconvenience for [Very Serious People] and everyone they know. So going after Social Security is a way to seem tough and serious — but entirely at the expense of people you don’t know. Certainty, I doubt anyone thinks about it in such crass terms. I take Paul to mean that subconsciously Social Security seems like something of a relic to the “Investor Class” who thinks about their retirement not in terms of pensions and government payments but their 401(k). I would venture a perhaps more, perhaps less cynical view depending on your perspective. I think Very Serious People concentrate on Social Security because they can understand it. The program is relatively simple and the math straightforward. The ultimate driver of most projections – that there will be more retirees than workers – makes sense.