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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Today’s Policy Agenda: Ex-Im Can’t be Justified on Economic-Growth Grounds



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The Export-Import Bank can’t be justified on economic growth grounds.

One of the most interesting policy debates of the summer has concerned the reauthorization of the Export-Import bank, the federal government’s credit agency that provides subsidized financing to U.S.-based exporters. Economist Salim Furth from the Heritage Foundation explored the program’s effects on economic growth in a review of the research literature on export subsidies. Furth:

However, ample research by academic economists found that in most cases, export subsidies reduce the total income of the country paying the subsidies. In all cases, export subsidies reduce global income, and benefits accrue only to those who are subsidized—at the expense of other exporters and taxpayers.

While the Ex-Im bank’s subsidy isn’t large – as Tony Fratto has pointed out, on a cash basis it actually returned money to the Treasury in 2013 – a strong case has been made against the program on fairness grounds, that the government shouldn’t be picking winners and losers in the economy instead of letting the market decide. Further, this kind of distortion can have an economic impact when it acts as just one more advantage for incumbent, established firms in fending off upstart competitors.

Maybe it’s worth our while to assist United States companies to gain market share in emerging markets or to use the subsidies to pursue foreign-policy objectives, but congressmen will have to consider that economic research suggests that it doesn’t help our economy as a whole.

Labor-force changes are about more than demographics.

The Economist’s graph of the day looks at the rates of employment growth in the recovery across different age groups.

We’ve discussed before how the scary drop in labor-force participation throughout the recovery can partly be explained by our population getting older and retiring, but that only explains about half of the drop. This graph is what the other half looks like: Prime-age workers, who should be at the peak of their working lives, have seen little job growth coming out of the recession.

Joni Ernst makes sense on the minimum wage.

In an interview for Hot Air, Republican Iowa Senate candidate Joni Ernst discussed what she thinks about the minimum wage:

Hot Air: “Bruce Braley has recently been making the case that you oppose a federally mandated minimum wage. Just to clarify for our readers, what is your position on the minimum wage, either federally or at the state level?”

Joni Ernst: “I grew up working for the minimum wage at Hardee’s and knows firsthand how important the minimum wage is. I support a state based minimum wage so every state can set their own minimum wage based on their cost of living. . What’s right for New York or California, is not necessarily right for Iowa.”

While I’m not particularly sympathetic to the minimum wage in any context, it makes terrific political and policy sense to set minimum wages at the state level. As Jared Bernstein has argued before, state minimum wages would be less problematic than federal floors because of the dramatic differences in price levels between states. According to Bernstein’s calculations, a minimum wage based on half of an area’s median wage adjusted for cost of living would vary from as much as nearly $12 in New York to $8.66 in St. Louis. This disparity can have a severe distortionary impact on the economies with lower price levels if a national wage floor is set, but minimum wages set at the state level could be more responsive both to the policy preferences of the residents and to the economic climate in a given state.

Poverty can’t be solved by one-size fits all solutions.

For the Washington Post’s new narrative/policy journalism outlet the Storyline, Lydia DePillis looks at a homeless shelter/rehabilitation clinic in Colorado that’s having success with the most challenging to treat of the Denver homeless.

“The problem with this population is it’s decades and decades and decades, and it’s all they know. It’s a long way into the woods and it’s a long way out,” says James Ginsburg, the program’s director, who commutes in from Denver. Society thinks “you should go 30 days and you’re done. But we don’t tell that to diabetics.” . . .

In its length of treatment and isolation, Fort Lyon is something of a unicorn. The trend in homeless services over the past decade has been to house people as quickly as possible in the cities where they live, so they can have a stable place to recover while still immersed in the real world. That approach, called “housing first,” doesn’t require people to go substance free immediately in exchange for a shelter. It’s gained traction all over the country and an endorsement from the White House; some federal grants are now tied to whether cities use the model.

Fort Lyon, by contrast, looks like a throwback to the dark days of warehousing the homeless and mentally ill in institutions, where they wouldn’t bother urban dwellers. And yes, it’s convenient for cities that don’t know what to do with their most intractable cases.

But for that subset of the homeless population, it might be the only thing that can help: The place is remote, but also resolutely drug free. . . .

“Like most things, the pendulum swung the opposite direction,” says Ginsburg, who considers himself a strong Housing First proponent. “It’s not all or nothing. This idea that everybody has to be in housing first, everybody has to be treated in vivo, is ridiculous. Housing First is sort of our biggest adversary, because it’s not Housing First. This is housing ready.” By preparing people to re-enter society through vocational education and extended treatment, the logic goes, they’ll be more successful when they finally do get their own place.

While it’s hard to take much in the way of lessons from the experience of the homeless – a distinct subset of the poor that face particular challenges, especially mental illness – and apply them to the broader population relying on the safety net, it does seem that there are implications from DePillis’s powerful reporting to the poverty debate being had after Paul Ryan’s recent federal poverty proposal. First, as Ryan recognizes, different populations have completely different needs. By empowering caseworkers to tailor individualized plans, Ryan’s proposal acknowledges that some individuals could benefit from just simple payments with a work requirement attached, while others need much more comprehensive guidance and support to reach self-sufficiency. James Ginsburg of the shelter in Colorado profiled above is right to argue that one type of treatment or aid will not be sufficient to address every person’s challenges.

Second, Ginsburg notes that the path out of this kind of entrenched poverty is a long one, and therefore, it will be an expensive exercise to employ the case managers and give them the resources they need to help these populations in the way Ryan envisions. Conservatives supporting a comprehensive approach will have to understand they’re going in for a difficult and costly process. 



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