Right-of-center advocates of Social Security reform have tended to emphasize the importance of addressing the program’s long-run actuarial imbalance. In a new essay in National Affairs, Andrew Biggs argues that conservatives ought to take a broader approach that would aim to make the program more effective in achieving its core goals as well as more fiscally sustainable. I’ve written enthusiastically about Andrew’s Social Security reform agenda in the past, but “A New Vision for for Social Security” puts his ideas in easily digestible form. His basic idea is to gradually transform the Social Security program into a two-part program, consisting of a flat universal benefit and a universal retirement savings account. And though he calls for a modest increase in the retirement age, he also calls for eliminating the Social Security payroll tax and the Retirement Earnings Test for older workers, measures that will encourage labor force participation. Andrew also calls for Social Security cost-of-living-adjustments that would grow at one percentage point higher than inflation to protect the oldest retirees, a step that could help make his reform model more politically attractive. 

One aspect of Andrew’s Social Security reform proposal will prove particularly attractive to conservatives interested in family-friendly tax reform:

Larger families would significantly benefit Social Security’s finances. But raising a child entails hundreds of thousands of dollars in costs, from birth through college. To compensate parents for their efforts and expenses, a family-friendly payroll-tax cut would reduce the 12.4% Social Security payroll tax by two percentage points for each child under age 18. Such a reform might have the side effect of raising fertility rates and thereby reducing Social Security’s deficits over the long term. For example, an explicitly pro-fertility tax credit introduced in Quebec in 1988 is estimated to have raised birth rates by as much as 25%. A similar increase in the United States would raise the fertility rate from its current 2.0 to around 2.5, such that the tax cut would more than pay for itself.

In modeling the effects of such a reform, I have assumed a far smaller increase, with birth rates rising to 2.15 children per woman. To maintain revenues under such a scenario, the basic payroll-tax rate would need to rise by 1.3 percentage points, split evenly between employers and employees. Individuals would pay higher taxes when they did not have children at home, but lower taxes while raising their kids. If birth rates rose to around 2.25, the payroll-tax increase could be eliminated. Families are helpful to Social Security’s financing, so Social Security should be friendly to families. [Emphasis added]

There are risks associated with Andrew’s approach. Many will object to abandoning the current Social Security benefit formula in favor of a flat universal benefit, and to relying more heavily on universal retirement savings accounts. When all elements of the proposal are taken together, however, the proposal is much more attractive than other credible reform plans, most of which rely more heavily on tax increases.

Labor market outcomes for women are a subject of great across the developed world, and many policy analysts believe that the U.S. has much to learn from European legislative initiatives designed to increase female labor force participation, encourage a more egalitarian distribution of the child-rearing burden, and impose quotas on female representation in legislative bodies and corporate boards, among other things. Kay Hymowitz argues that the U.S. is doing a better job of advancing women’s equality and women’s interests relative to its peers than is commonly understood. 

Eli Dourado makes an admirably forthright case for allowing larger numbers of impoverished foreign workers to settle in the U.S., as doing so would greatly reduce the cost of hiring live-in domestic servants while also alleviating global poverty. I disagree with Eli rather strongly, but he is always worth reading. 

To briefly elaborate on why I disagree with Eli, my sense is that while some inequalities might be tolerable in a democratic nation-state (I’m inclined to think that fairly extreme upper-tail inequality is more or less politically sustainable, and that its benefits might outweigh its costs), others are much less so. The persistence and intergenerational transmission of poverty in the U.S. is, in my view, a real challenge to the legitimacy of U.S. institutions, and allowing for a substantial increase in the number of individuals earning poverty-level wages via more open immigration policy would exacerbate this problem, and introduce a number of other complications. We could devote more public sector resources to investing in the human capital of the children of less-skilled immigrants in order to make it somewhat likely that they will become full participants in American economic and civic life, but this would entail trade-offs that might prove detrimental to the interests of other members of the community in question. If one believes that citizens of a given democratic nation-state should not value the lives of fellow citizens over those of foreigners, such objections are immaterial, and I take this to be Eli’s view (and, implicitly or explicitly, the view of many other advocates of a substantial increase in the less-skilled influx). I reject this view, for reasons I’ve explored elsewhere.

Matthew Weinzierl of Harvard Business School has a new essay in National Affairs on the roots of our disagreements on tax policy. It is really, really good. One of the issues he raises is that if we assume that everyone works to the limit of their earning potential, redistribution starts to look more attractive. But if we instead assume that some people earn less than they otherwise might because they value leisure or more stimulating but less remunerative work, the case gets fuzzier, as it’s not obvious that those who do work to the limit of their earning potential ought to subsidize those who do not. 

If people differ in their tastes and not just in their abilities, then taxing high incomes and redistributing the revenue to others is not an ideal tool for maximizing overall well-being. Hard workers derive a lot of well-being from the last dollar they have earned, more perhaps than do people with lower incomes who have greater preferences for leisure. In that case, redistribution may even reduce overall well-being, especially if it has the side effect of shrinking the overall size of the pie.

The political philosopher Robert Nozick put this point especially vividly in his 1974 book, Anarchy, State, and Utopia: “Why should we treat the man whose happiness requires certain material goods or services differently from the man whose preferences and desires make such goods unnecessary for his happiness? Why should the man who prefers seeing a movie (and who has to earn money for a ticket) be open to the required call to aid the needy, while the person who prefers looking at a sunset (and hence need earn no extra money) is not?” Nozick’s concern was that an income tax — especially one that redistributes from those with high incomes to those with low incomes — assigns to two individuals two different levels of responsibility for providing for their fellow citizens, even if the only way in which the two differ is in how they want to spend their time.

This argument suggests that an awareness of different tastes and priorities among our fellow citizens will lead us to believe that, when a person has a high income, it is the result not merely of talent but of hard work. This, in turn, ought to make us less inclined to redistribute income through taxes.

The available evidence indeed confirms this expectation. The World Values Survey asks representative samples of individuals from a wide range of countries for their opinions on an array of questions pertaining to economics, politics, society, religion, and other topics. One of its questions asks respondents to say where they would place themselves on a work-leisure scale. This scale ranges from 1 to 5, where 1 corresponds to the statement “it’s leisure that makes life worth living, not work” and 5 corresponds to the belief that “work is what makes life worth living, not leisure.”

As the logic above would predict, in countries where answers vary more among respondents, standard measures of redistribution are statistically significantly lower. Sweden and the United States offer an illustrative comparison: The variance (a measure of the spread) of answers to the question above about the value of leisure versus work is about twice as large in the United States as it is in Sweden. Consistent with the logic that greater differences ought to lead to less redistribution, the ratio of government transfer payments (a common measure of redistribution) to total national economic output is more than twice as high in Sweden as it is in the United States. And this pattern holds more generally: Countries with less consensus about how to best use one’s time, such as South Korea and Canada, have less redistributive tax policies than those with greater consensus, such as Finland and Germany.

Weinzierl doesn’t end with a particular policy prescription. Rather, he observes that our tax policy debates are heated for the good reason that we are reckoning with challenging moral questions, over which we can expect honest, thoughtful interlocutors to disagree. 

Harry Enten of The Guardian argues that there is no reason to believe that the GOP needs to adjust its policy positions to win elections. This may well be true. As Sean Trende often observes, the two major party coalitions are still very evenly matched, and the larger a given major party coalition becomes, the more difficult it is to keep it together. I can definitely imagine a scenario in which tensions within the Democratic coalition lead to Republican victories in future elections. 

Yet Sean acknowledges that Republicans have “something of a choice to make“:

One option is to go after these downscale whites. As I’ll show in Part 2, it can probably build a fairly strong coalition this way. Doing so would likely mean nominating a candidate who is more Bush-like in personality, and to some degree on policy. This doesn’t mean embracing “big government” economics or redistribution full bore; suspicion of government is a strain in American populism dating back at least to Andrew Jackson. It means abandoning some of its more pro-corporate stances. This GOP would have to be more “America first” on trade, immigration and foreign policy; less pro-Wall Street and big business in its rhetoric; more Main Street/populist on economics.

For now, the GOP seems to be taking a different route, trying to appeal to Hispanics through immigration reform and to upscale whites by relaxing its stance on some social issues. I think this is a tricky road to travel, and the GOP has rarely been successful at the national level with this approach. It certainly has to do more than Mitt Romney did, who at times seemed to think that he could win the election just by corralling the small business vote. That said, with the right candidate it could be doable. It’s certainly the route that most pundits and journalists are encouraging the GOP to travel, although that might tell us more about the socioeconomic standing and background of pundits and journalists than anything else.

Of course, the most successful Republican politicians have been those who can thread a needle between these stances: Richard Nixon, Ronald Reagan and (to a lesser degree) Bush 43 have all been able to talk about conservative economic stances without horrifying downscale voters. These politicians are rarities, however, and the GOP will most likely have to make a choice the next few cycles about which road it wants to travel.

Sean characterizes his first option as an appeal to downscale whites, yet it is worth noting that it is also more likely to appeal to middle-income Latinos and African Americans than the second option, an approach that is more consistent with the status quo in many respects while relying somewhat more heavily on identity politics. 

To get a sense of why Sean’s first option might represent a wiser path than sticking with the status quo, consider Ruy Teixeira’s recent analysis of Georgia’s changing demographic composition:

In the last decade, Georgia had a rapid rate of increase in its minority population, going from 37 to 44 percent minority over the time period. The increase in the minority population accounted for 81 percent of Georgia’s growth over the decade. Unusually, the biggest contributor to minority growth came from blacks, who alone accounted for 39 percent of Georgia’s growth. The next largest contributor was Hispanics, whose numbers increased at a scorching 96 percent pace and accounted for 26 percent of the state’s growth.

By 2020, along with Nevada and Maryland, Georgia is almost certain to join the ranks of majority-minority states. These ongoing shifts should continue to move Georgia in a more competitive direction.

The geographical locus of that change will likely be in the burgeoning Atlanta metropolitan area, whose share of the statewide vote continues to grow (up to 54 percent in the 2012 election).

Ruy goes on to observe that Barack Obama carried metropolitan Atlanta in 2008 and 2012, albeit by relatively narrow margins, and that he expects the minority share of eligible voters in 2012 to increase by 3.5 percentage points by 2016. Barring some radical change in the political allegiance of black, Latino, and Asian voters in Georgia, this will tend to shave the GOP advantage in the state, making it winnable for the right Democratic candidate. It is certainly possible that a more populist Republican candidate could win a larger share of Georgia’s white electorate and increase the white share of Georgia’s electorate by persuading 2012 fence-sitters to come to the polls. Yet a more populist Republican would by definition be a candidate who embraced some brand of reform and modernization. 

The conceptual problem with Enten’s piece, in my view, is that some measure of “adjustment” is inevitable, as the issue mix changes from election cycle to election cycle. Issues that were not salient in 2012 will be salient come 2016, and the process of taking a stand on emerging issues will necessarily entail shifts of emphasis, etc. The central claim made by conservative reformers or reform conservatives (or whatever we’re called this week) is that the party still needs a compelling post-Reagan, post-crisis domestic policy agenda that resonates with middle-income voters. A related claim is that though, as Enten notes, the average voter felt that Mitt Romney was closer to them ideologically than Barack Obama, this didn’t mean that the average voter felt that Romney’s policy agenda was more responsive to her needs and concerns, which is the more salient question. 

Erin O’Donnell profiles David Keith, a leading expert on carbon removal and solar geoengineering technologies, in Harvard Magazine:

The massive scale of the CO2 problem means that carbon removal “will always be relatively slow and expensive,” [Keith] added. It carries some local risks, but has no chance of harming the entire planet. Solar geoengineering, in contrast, could work quickly—and at surprisingly low cost. (By recent estimates, spreading sulfur in the atmosphere to reduce global temperatures could cost a few billion dollars annually, a fraction of the projected cost of reducing greenhouse gas emissions. One 2006 review by the British government estimated that cutting emissions by 25 percent by 2050 would cost about 1 percent of annual global GDP, or about $1 trillion in 2050.) Keith argues that costs for solar geoengineering are so low that “cost will not be a decisive issue.” Instead, he says, scientists and policymakers will have to weigh risks: “the risk of doing it against the risk of not doing it.”

Solar geoengineering, even if it works as intended, won’t solve all of our climate woes. For example, rising CO2 emissions will continue to contribute to the acidification of the oceans, which poses a danger to marine life. But the case for small-scale field tests of solar geoengineering technologies is extremely strong, as they have the potential to greatly reduce the cost of climate damages. 

In 2005, Thomas J. Espenshade and Chang Y. Chung published an article in Social Science Quarterly on “The Opportunity Cost of Admission Preferences at Elite Universities” that has gained renewed relevance in light of recent conversations concerning the future of racial preferences in college admissions. The findings are dated, not just because the article was published eight years ago but because its simulations were based on data from the late 1990s. Moreover, they apply to a very small number of elite private research universities, as opposed to one of the selective state universities that enroll very different student populations. But the results are interesting all the same:

The result of eliminating admission bonuses for African-American and Hispanic applicants would be dramatic. Acceptance rates for African-American candidates would fall from 33.7 percent to 12.2 percent, a decline of almost two-thirds, and the proportion of African-American students in the admitted class would drop from 9.0 to 3.3 percent. The acceptance rate for Hispanic applicants would be cut in half—from 26.8 percent to 12.9 percent, and Hispanics would comprise just 3.8 of all admitted students versus an actual proportion of 7.9 percent. If admitting such small numbers of qualified African-American and Hispanic students reduced applications and the yield from minority candidates in subsequent years, the effect of eliminating affirmative action at elite universities on the racial and ethnic composition of enrolled students would be magnified beyond the results presented here.

White plaintiffs in Gratz v. Bollinger (2003) and Grutter v. Bollinger (2003) argued that they were unfairly denied admission while some less qualified minority students were accepted. Our results show that removing consideration of race would have a minimal effect on white applicants to elite universities. The number of accepted white students would increase by 2.4 percent, and the white acceptance rate would rise by just 0.5 percentage points—from 23.8 to 24.3 percent. Many rejected white applicants may feel they would have been accepted had it not been for affirmative action, but such perceptions probably exaggerate the reality. It would be difficult to tell from the share of white students on campus whether or not the admission office was engaged in affirmative action.

Asian applicants are the biggest winners if race is no longer considered in admissions. Nearly four out of every five places in the admitted class not taken by African-American and Hispanic students would be filled by Asians. We noted earlier that Asian candidates are at a disadvantage in admission compared to their white, African-American, and Hispanic counterparts. Removing this disadvantage at the same time preferences for African Americans and Hispanics are eliminated results in a significant gain in the acceptance rate for Asian students—from 17.6 percent to 23.4 percent. Asians, who comprised 29.5 percent of total applicants in 1997, would make up 31.5 percent of accepted students in the simulation, compared with an actual proportion of 23.7 percent. Other aspects of admitted students, including the distribution of SAT scores and, especially, the proportions of students who are athletes or legacies, are hardly affected by affirmative action.

Espenshade and Chung characterize Asian applicants as “the biggest winners,” yet if one embraces the mismatch hypothesis, one could argue that African American and Hispanic students admitted without preferences would also be winners, as there is some reason to believe that they would be more likely to graduate and they would no longer be forced to labor under the impression that they benefited from admission preferences. Another view, however, is that because we are talking about a small number of elite private research universities, graduation rates are less of a concern, as mismatch operates at the level of the major, i.e., “mismatched” students who intend to complete a degree in the hard sciences will switch their major to a less demanding discipline, and graduation rates will remain fairly high, thanks to a combination of resources and peer effects.

My take is that the problem is not with racial preferences for members of underrepresented groups per se, but rather with large racial preferences, as large racial preferences raise the risks associated with mismatch. Yet rather than simply defer to selective colleges and universities, I would embrace the policy recommendations of Richard Sander and Stuart Taylor Jr.: (1) make sure that preferences are transparent, so that students who benefit from them are aware that they are being given a boost; (2) provide students with data concerning educational outcomes for students admitted with similar academic track records, so that they can make an informed decision; (3) require that racial preferences be no larger than preferences based on household income or some other indicator of economic deprivation.

One crucial aspect about the CBO’s assessment of the Senate immigration bill keeps coming back to me:

In CBO’s view, enactment of S. 744 would lead to slightly higher productivity of both labor and capital because the increase in immigration— particularly of highly skilled immigrants—would tend to generate additional technological advancements, such as new inventions and improvements in production processes. CBO estimates that total factor productivity (TFP, the average real output per unit of combined labor and capital services) would be higher by roughly 0.7 percent in 2023 and by roughly 1.0 percent in 2033, compared with what would occur under current law. The increase in TFP would make workers and capital alike more productive, leading to higher GDP, higher wages, and higher interest rates.

Where exactly does this increase in TFP come from? It seems intuitively plausible that a dramatic increase in skilled immigration might lead to some increase in useful inventions and improvements in production processes, though of course inventions and improvements in production processes generated overseas would also benefit the U.S., as high-level innovations travel reasonably well across borders. Having a more skilled workforce might increase the “absorptive capacity” of U.S. firms, i.e., the capacity of U.S. firms to deploy new innovations, whether developed in the U.S. or elsewhere. 

But as the CBO acknowledges, the bulk of the immigrant influx under the Senate immigration bill will consist of less-skilled immigrants, and I am not aware of work which suggests that a dramatic increase in less-skilled immigration, and a concomitant decrease in the average skill level of the working-age population, will tend to boost TFP. I can imagine some channels via which this could happen, e.g., lowering the cost of outsourcing household production might allow innovators to do more innovating, or perhaps a larger population, regardless of skill level, is necessarily more innovative. This is contradicted by the fact that TFP growth in the U.S. has remained fairly consistent even as the U.S. population has increased.

Robert Shackleton of the CBO released a paper on U.S. TFP growth in historical perspective in March of this year. Here is one passage that relates to population size:

Although forecasters generally project relatively strong continued growth in TFP over the next decade or so, some researchers express concern about several trends that could constrain productivity improvements over the longer term. They worry that it will become increasingly difficult to increase the educational attainment of a labor force when the great majority of workers already have at least a high-school degree and a large portion have attended college.

They also worry that the recent concentration of TFP growth in information and communication technology indicatesthat widespread improvement in many different areas of technology, as in the past century, may have been a one-time event that cannot be replicated. They are concerned that manufacturing’s contribution to overall TFP growth will decline as the sector’s nominal share of output continues to shrink, while rising demand for services with little measured TFP growth, such as health care, will exert an additional drag on aggregate TFP. Some observers express further concern that resource constraints (such as rising costs of fossil fuel extraction and changes in climate resulting from the burning of fossil fuels) will require continual innovations and continual increases in expenditures simply to maintain current productivity levels.

Other researchers note factors that could work in the opposite direction, helping to maintain or even increase TFP growth rates. They suggest that, much as the key innovations of the late 19th century were not fully exploited until the big wave of TFP growth occurred several decades later, recent innovations in information technology, communications, medicine, and elsewhere may yield substantial growth well into the future. They also note that, over the long term, TFP growth is limited only by the ability of innovators to develop new technologies, and that a larger population—especially a larger global population—makes possible a larger pool of talent to be devoted to research, and thus opens up more potential for innovation. [Emphasis added]

Shackleton’s assessment of future TFP growth is appropriately tentative, and it only includes one brief reference to immigration, in a footnote to the following passage:

After averaging somewhat more than 1 percent annually from 1900 to 1920, measured TFP growth accelerated to nearly 2 percent on average during the 1920s and around 3 percent during the 1930s. Researchers attribute that “big wave” primarily to four clusters of critical innovations—electricity generation, internal-combustion engines, chemicals, and telecommunications—with nearly all of the important innovations in those clusters already in place well before World War II. Although the capital equipment associated with those innovations was produced in the manufacturing sector, much of the productivity growth occurred elsewhere, particularly during the 1930s.

The footnote reads as follows:

A complementary hypothesis proposes that the dramatic reduction in immigration from the 1920s through the 1970s tended to raise domestic real wages and encourage greater investment and more labor-saving innovation than would have been the case otherwise.

Let’s think about this for a moment. The Senate immigration bill greatly increases temporary less-skilled immigration through W visas, many of which are expected to be used in labor-intensive agriculture. Is it at least possible that reliance on a continuing influx of less-skilled immigration will tend to discourage investment in labor-saving innovation in sector like agriculture and tourism, and might this have wider implications for TFP?

Eric Rasmusen offers a number of intriguing questions and thoughts — for example, what might the CBO analysis look like without the boost to TFP? 

Rather fortuitously, I am attending a conference on energy innovation and climate policy in northern California. For now, I recommend Juliet Eilperin on President Obama’s “war on coal.” More to come later today.

Matt Yglesias argues that increased spending on border enforcement will do very little to reduce unauthorized immigration, as the crux of the problem will be temporary immigrants who enter the country legally, yet who choose to overstay their visas. The guest worker provisions of the Senate immigration bill will allow large numbers of less-skilled workers to temporarily settle in the U.S., with spouses and children in tow. But the number of W visas won’t necessarily be in line with demand for less-skilled immigrant labor, and not all W visa workers will be keen to return home once their visas expire:

Visa overstayers are already a large share of the unauthorized population, and creating a guest-worker program is going to increase the possibility of visa overstaying. You could build the Berlin Wall all across the U.S.–Mexico border and you’re not going to solve anything. What you need to do is either increase the number of W Visas (my preference) or increase behind-the-border security or some combination of the two. Personally, I don’t really care that a border surge is going to be ineffective. But it can get corrosive in the long term if you promise the voters something your legislation can’t deliver. If this bill passes, the immigration-enforcement problem won’t be at the border. [Emphasis added]

Not surprisingly, my preference would be for much more stringent behind-the-border security and for the elimination of the guest-worker program, but my preferred policy option has many serious downsides, e.g., the enforcement measurements it would likely require would be expensive, draconian, and potentially intrusive. Canada, for example, imposes a one-year mandatory prison sentence on unauthorized immigrants, which seems impracticable in the U.S. context. Ron Unz of The American Conservative has proposed increasing the minimum wage as a strategy to reduce less-skilled immigration:

One of the few sectors likely to be devastated by a much higher minimum wage would be the sweatshops and other very low wage or marginal businesses which tend to disproportionably employ new immigrants, especially illegal ones. Sweatshops and similar industries have no legitimate place in a developed economy, and their elimination would reduce the sort of lowest-rung job openings continually drawing impoverished new immigrants. Meanwhile, those immigrants who have already been here some time, learned English, and established a solid employment record would be kept on at higher wages, reaping the same major benefits as non-immigrant Americans within the ranks of the working-poor.

Though I don’t support Unz’s proposal, it does represent a “behind-the-border” measure that would have a number of enforcement advantages over E-verify. Employers who hire unauthorized employees might be easier to stigmatize if they are also violating minimum wage laws, which enjoy broad public support. Of course, a sharp increase in the minimum wage would also impact a non-trivial number less-skilled native-born workers and lawful permanent residents. 

I’ve often argued that advocates of an increase in less-skilled immigration need to be more forthright about acknowledging the trade-offs their favored policies entail. Those of us who opposed increasing less-skilled immigration ought to do the same, including the fact the the persistence of demand for less-skilled labor at very low wages is a powerful force. 

The New York Observer’s Stephen Smith describes New York city’s efforts to subsidize housing for middle-income households before turning to the root cause of the affordability problem:

The city has cemented neighborhoods as they were in 1961, when the modern zoning code was adopted, with only pockets of growth allowed—in Downtown Brooklyn, Long Island City and the Far West Side today, for example.

“New York has made it so difficult to build that you forget what free and easy supply really does,” said Harvard economics professor Ed Glaeser, who co-authored a study a decade ago that found that half of the cost of housing in Manhattan could be blamed on artificial supply constraints. “Chicago remains a vastly more affordable city because Mayor Daley unleashed the cranes on Lake Michigan”—a reference to the Windy City’s far more lenient land-use regulations and commensurate low rents.

When it comes to New York City housing policy, said Mr. Glaeser, “there’s been a funny combination, from an economic point of view, of on one level making it difficult to build housing supply, and then trying to make up for it on a smaller scale by giving a privileged few access to housing.” In other words, those lucky enough to win the housing lottery like the couple at Elliott-Chelsea, who said they’d been applying for 15 years before they won a spot.

One barrier to reform is that the city’s real estate incumbents profit from building restrictions that limit the ability of new entrants to develop new housing units, and so they have relatively weak incentives to fight them. Voters with an intense desire to limit development, meanwhile, outgun voters who are either indifferent or who have a weak preference for development that might foster job creation and reduce housing costs. David Schleicher has written extensively on institutional reforms that might mitigate this anti-development bias, and Matt Yglesias argues that New York city could stand to learn a thing or two from Texas.

Yesterday I did a quick back-of-the-envelope calculation to get a sense of the extent to which the CBO believes international migration will increase the U.S. population. Brad Plumer of Wonkblog has a helpful post on the same subject, and I’m pleased to report that we’re in the same ballpark. My guess was that the CBO anticipated that 20 million immigrants would settle in the U.S. over the next decade, and Brad’s guess is that the CBO anticipates that 36 million will arrive over the next two decades. Brad observes that 36 million is roughly the number of people currently residing in Canada. (One frustration that Brad and I both had to deal with is that, as he notes in his post, “the CBO doesn’t publish a detailed forecast of what it expects immigration to look like under current law,” and so we were forced to make educated guesses.)

Brad teases out another important aspect of the CBO report:

Legal immigration will continue to expand in the future — with high-skilled immigrants making up a small fraction of the total.

Again, we’re assuming the Senate bill passes. The number of additional legal residents in the country goes up an extra 12.7 million in 2018, then to 18.5 million in 2023, and then to 24.1 million in 2033. (Again, this is over and above the legal immigration that was already expected.)

A few things are happening here as time goes by. Many amnestied immigrants who received provisional status become permanent residents. The number of legal immigrants who come through employers rises — to an extra 5.1 million in 2033. And the two “merit-based programs” to cut the backlog expand significantly, bringing in family members of existing residents, people who speak in English, people with education, and people from countries that have had little that have had little immigration to the United States.

Note that the number of high-skilled immigrants and temporary workers also rises, though not quite as quickly as the number of low-skilled workers. The H1-B program, for instance, doesn’t expand as quickly as programs like the W-visa for farm workers and low-wage workers. 

Advocates of the Senate bill focus on the fact that the CBO has found that it is deficit-improving. It seems clear, however, that it would be more deficit-improving if the amount of high-skilled immigration were substantially increased while the amount of less-skilled immigration were substantially decreased, as high-skilled immigrants tend to earn higher incomes than less-skilled immigrants and that are less likely to rely on means-tested transfers. Some might find the idea of annexing Canada rather attractive, in light of its natural resources and its highly educated population. But imagine if we instead annexed a country in which the share of the population that has attained at least upper secondary education were much lower than it is in Canada, where 93 percent of adult women and 91 percent of adult men have at least a high school diploma in the 25-34 cohort – levels higher than the U.S., where the share is 90 percent for women and 87 percent for men. (The upper secondary school completion numbers for Canada and the U.S. are lower for adults in the 45-54 cohort, but not dramatically so.) 

In 2009, the Pew Hispanic Center published a demographic profile of the unauthorized immigrant population which included the following data on its level of educational attainment:

The education profile of adults who are unauthorized immigrants differs markedly from that of U.S.-born adults and from that of other immigrants because unauthorized immigrant adults ages 25-64 are disproportionately likely to have very low education levels.

Nearly three-in-ten (29%) have less than a ninth-grade education; an additional 18% have some high school education but have not completed high school. The proportion of unauthorized immigrants with either less than a ninth-grade education or less than a high school education is roughly double the share of legal foreign-born residents with those educational levels. It is far greater than the share of U.S.-born adults—only 2% of those ages 25-64 have less than a ninth-grade education, and only 6% have additional years in high school, but no diploma.

Unauthorized immigrants are considerably less likely than both other immigrants and U.S.-born residents to have achieved at least a high school diploma. Among adults ages 25-64 who are unauthorized immigrants, 27% have finished high school and gone no further. The corresponding figure for legal immigrants is slightly lower at 24%; the U.S. born are slightly higher at 31%. But there are very large differences among the groups in the share that go beyond high school. Most U.S.-born adults ages 25-64 (61%) and legal immigrants (54%) have attended college or graduated from college, compared with only one-in-four unauthorized immigrants.

Another way to look at the education distribution is that 22% of U.S. residents ages 25-64 with less than a high school education are unauthorized immigrants— a rate that is five times the proportion of unauthorized immigrants in the adult population. The share of unauthorized immigrants is even higher—35%—among those with less than a ninth-grade education. [Emphasis added]

This is not an apples-to-apples comparison, but because the difference between the 25-34 and 45-54 cohorts is not great in either the U.S. or Canada (a somewhat discouraging fact in itself, as one would hope that upper secondary completion numbers would have gone up more) is small, the contrast remains at least somewhat useful. And so even if we bar all future migrants with less than a high school diploma, we are set to absorb a large number of individuals with less than a high school diploma into our networks of mutual civic obligation under a path to legalization. If we accept the premise that workers with less than a high school diploma are more likely to depend on means-tested transfers once they are eligible for them and that it is important to legalize much of the current unauthorized population, it is worth asking whether inviting still more less-skilled workers to settle in the U.S. means biting off more than we can chew. I continue to be by the fact that many liberals and moderates who believe that we as a society aren’t doing enough to meet the needs of our poorest and most vulnerable citizens and lawful permanent residents, many of whom are also among our least educated citizens and lawful permanent residents, believe that increasing the share of the adult population with less than a high school diploma is a wise course of action. The argument from global poverty alleviation is not an unreasonable one. But given the limitations of U.S. institutions that serve the very poor, my sense is that it would be prudent to sharply reduce less-skilled immigration. 

Having recently discussed why I think we should allow compensation of some kind for organ donations, I’ve had a number of conversations about alternative strategies, including shifting to presumed consent. Alexander Berger makes an informed guess that merely getting people to sign up as organ donors is unlikely to make much of a dent in the organ shortage. 

My vague impression is that the organ donation community spends a huge amount of its time, money, and effort trying to get more people to sign up as organ donors. My analysis here has been tentative and exploratory, but I think the lack of stronger empirical evidence for an actual impact of those registries is startling, and that it would be worth a fuller exploration by people with more subject-matter expertise than I have. Given that there are a lot of other strategies for improving organ donation, continuing to focus on donor registration outreach seems like it may be leaving a lot on the table.

I think Berger makes a convincing case.

UPDATE: Berger later wrote a follow-up post in which he suggested that while donor registration outreach was likely to have a modest impact, the resources devoted to it are also quite modest. And earlier still, in December of 2011, he wrote a New York Times op-ed in which he described his decision to donate a kidney and why he believed that compensation for organ donations was appropriate. I found this passage particularly illuminating:

It has been illegal to compensate kidney donors in any way since 1984. The fear behind the law — that a rich tycoon could take advantage of someone desperately poor and persuade that person to sell an organ for a pittance — is understandable. But the truth is that the victims of the current ban are disproportionately African-American and poor. When wealthy white people find their way onto the kidney waiting list, they are much more likely to get off it early by finding a donor among their friends and family (or, as Steve Jobs did for a liver transplant in 2009, by traveling to a region with a shorter list). Worst of all, the ban encourages an international black market, where desperate people do end up selling their organs, without protection, fair compensation or proper medical care.

The case against the ban on compensation ban seems impressively weak. Back in 1984, one could make the case that we ought to give altruism a try and see if it yielded a sufficiently large supply of kidneys and other organs. The intervening decades have demonstrated that this experiment has been a failure.

Julian Sanchez clears up a number of misconceptions regarding the NSA’s metadata program — including several I was laboring under until I read his post.

Paul Romer asks why rapid urbanization proved so successful in South Korea while proving so much less so in Brazil:

A recent analysis of by Rick Hanushek and Ludger Woessman points to the obvious factor that we should consider in any analysis of modern economic growth: education. The disappointing rate of growth in Brazil (and most other countries in Latin America) used to be a puzzle. When we used measures like years of school attainment, there didn’t seem to be any problem with the school systems in the region. But when Hanushek and Woessman looked at measures of what students actually learned instead of measures of seat-time like years of educational attainment, they found that schools in the region dramatically underperformed those in the rest of the world. The skills gap was so large that it could easily account for the region’s chronically poor growth performance.

The connection between education and urban opportunity is dramatically reinforced by the basic result that emerges from The Chosen Few, a wonderful recent history by Maristella Botticini and Zvi Eckstein. They show that urbanization and literacy reinforce each other. Literacy and numeracy became much more valuable when independent political and military developments lead to rapid urbanization. In the other direction, the demand for literacy and numeracy goes back down when a region de-urbanizes, again because of independent political and military developments.

In the jargon of economics, urbanization and education are complements. This suggests that countries will do fine if they follow S. Korea by investing both in skills and the urban infrastructure that lets those skills be used to their full potential. Countries could face trouble if, like Brazil, they fall short on providing for effective universal education and fail to adequately plan for the provision of the basic services — water, transport, security — required for successful urban development.

Romer’s basic recommendation — that we ought to invest in skills and urban infrastructure to improve the opportunity set of the next generation — is sound. And though I’m confident that Romer would disagree with me, this gives us another lens through which to view the U.S. immigration debate. The U.S. is a highly urbanized society, yet we are on the cusp of embracing a substantial increase in less-skilled immigration. In effect, we are seeing to it that a larger share of our workforce consists of individuals who, like Brazil’s urban migrants, did not benefit from effective universal education rather than individuals who, South Korea’s urban migrants, did benefit from high-quality school systems. 

Romer has another excellent post gently debunking a recent New York Times account of Chinese urbanization.

One of the more frustrating aspects of the CBO analysis of the Senate immigration bill is that while it provides an estimate of the bill’s impact on the size of the U.S. population, it doesn’t provide much detail regarding the baseline on which it builds:

CBO estimates that, by 2023, enacting S. 744 would lead to a net increase of 10.4 million in the number of people residing in the United States, compared with the number of people projected under current law. That net increase comprises an increase of about 10.4 million permanent residents; an increase of about 1.6 million temporary workers and their dependents; and a decrease of about 1.6 million unauthorized residents. (CBO estimates that about 8 million unauthorized residents would initially gain legal status under the bill, but that change in status would not affect the size of the U.S. population.)

I assume that the net increase of 10.4 million can be attributed entirely to immigration, unless the CBO is also taking into account larger immigrant family sizes. For the sake of argument, let’s say the CBO envisions that the Senate bill will lead to a net increase in the number of immigrants. This is in addition to the immigration level the CBO already anticipates in the absence of the legislation. I don’t have access to the baseline number of immigrants the CBO assumes will settle in the U.S. between now and 2023, but Yuval Levin kindly provided me with a March 2011 CBO report detailing the assumptions behind the CBO’s labor force projections, including its assumptions regarding immigration levels (and I’m more generally grateful to Yuval for pointing me to the volume of immigration the CBO assumes will follow from the Senate immigration bill):

The Congressional Budget Office (CBO) relies on its own projections of net immigration, in which total net flows rise from about 440,000 in 2010 to more than 2.3 million in 2015, then fall to about 1.3 million by 2020. CBO’s estimate for 2010 is much lower, and its projection for 2015 much higher, than are predictions from the Social Security Administration (SSA), the Census Bureau, or the Social Security Advisory Board’s Technical Panel on Assumptions and Methods; the differences arise largely because CBO’s projections explicitly take into account the impact of the recession and subsequent recovery, whereas the other forecasters do not. By 2020, CBO shows somewhat larger net inflows than SSA but somewhat smaller net inflows than the Census Bureau and the Technical Panel.

More details follow, but my rough guess would that the CBO is assuming that net immigration over the coming decade will be in the neighborhood of 10 million under current law. And so a net increase of 10.4 milion as a result of the immigration bill as compared to current law would mean that the U.S. immigration from 2013 to 2023 will be in excess of 20 million. I should stress that I’m not sure if my interpretation of the CBO analysis is correct. It is possible that my numbers are way off, and fortunately a number of crack reporters, including Brad Plumer of Wonkblog, are also trying to get to the bottom of this, so consider my take on this subject provisional. 

The Census projects that the U.S. population in 2023 will be roughly 341 million. Let’s say the CBO is assuming that the population will instead be 351 million, of which 20 million reflects post-2013 immigration. This means that 5.7 percent of the U.S. population will consist of post-2013 immigrants as of 2023. By way of comparison, Matt Yglesias of Slate recently wrote on the historical data concerning how the foreign-born share of the U.S. population has changed over time. The foreign-born share peaked in 1890 at 14.8 percent and it was at its nadir in 1970, when it hit 4.7 percent. It has been increasing dramatically in the decades since, and it reached 12.9 percent as of 2010. The CBO anticipates that immigrants who will have arrived since 2013 will represent a larger share of the U.S. population in 2023 than all immigrants in 1970 or 1960 (5.4 percent), and only a slightly smaller share than the 1980 number (6.2 percent). 

It would be foolish to simply add this 5.7 percent to the 12.9 percent 2010 share. But it seems reasonable to guess that we are looking at a foreign-born share of the U.S. population in the neighborhood of 16 to 18 percent, a level higher than the previous 1890 peak. The foreign-born share of the U.S. population remained quite high during the first decades of the twentieth century before drifting down by midcentury (14.7 percent in 1910, 13.2 percent in 1920, 11.6 percent in 1930, 8.8 percent in 1940, 6.9 percent in 1950). What is striking is that, as Matt acknowledges, the most egalitarian era of modern U.S. history coincided with a very low foreign-born share of the population. Matt argues, not unreasonably, that the failure to take into account the poverty-reducing effects of international migration is myopic. I’ve addressed how I balance the competing concerns of global poverty alleviation and facilitating the assimilation of current immigrants and combating entrenched poverty among the native-born elsewhere, and of course Matt and I disagree about the virtues of less-skilled labor in an economy like ours more broadly. 

But for now I’ll just say that if you believe that culture has important political and cultural implications, the prospect of such a rapid increase in the foreign-born share of the population ought to be cause for concern. It is worth noting that the foreign-born share varies across U.S. states. California (27 percent), New York (22 percent), and New Jersey (21) already have much higher foreign-born shares than the U.S. will have under the scenario outlined above. What is interesting is how the texture of civic life might change in other communities, where the foreign-born share is currently relatively low. Leaving geography aside, one wonders how U.S. politics might evolve as the foreign-born share of the working-age population grows relative to the retired population. Rising public expenditures associated with Social Security, Medicare, and other programs devoted to the old might engender resentment among the young, particularly when cultural cleavages line up with generational cleavages. 

And then there is the matter of the skill distribution. The following is drawn from the CBO report on the economic impact of the Senate immigration bill:

S. 744 would allow significantly more workers with low skills and with high skills to enter the United States—through, for example, new programs for temporary workers and an increase in the number of workers eligible for H-1B visas—and would allow somewhat greater numbers of workers with skills in the middle of the distribution to enter as well. JCT expect that a greater number of immigrants with lower skills than with higher skills would be added to the workforce, slightly pushing down the average wage for the labor force as a whole, other things being equal. Taking into account all of those flows of new immigrants, CBO and JCT expect that a greater number of immigrants with lower skills than with higher skills would be added to the workforce, slightly pushing down the average wage for the labor force as a whole, other things being equal. [Emphasis added]

It is widely believed that as the the size of the retired population increases, and as the cost of medical care increases, that the resources devoted to old-age social insurance programs will have to increase, and that this will necessitate increases in the lifetime net tax rates of younger workers. If a disproportionately large share of the workforce consists of younger workers with modest levels of educational attainment, a substantial tax burden might prove very problematic. A short while ago, a friend pointed me to Robert Dahl’s brief discussion of Argentina during the first half of the twentieth century. I wouldn’t rely too heavily on Argentina’s experience to guide us as we go forward, but it is a reminder that dramatic changes in the composition of a population can have dramatic cultural and social consequences.

Conn Carroll highlights one of the more peculiar aspects of the Senate immigration bill. Though its Republican sponsors often reference its tough enforcement measures, the CBO estimate that it will only reduce the net flow of unauthorized immigration by 25 percent. And so the CBO projects that the unauthorized immigration population in 2023 will be 8.3 million, which includes the 3.5 million who will not be granted legal status under the bill and 4.8 million unauthorized immigrants who will settle in the U.S. over the intervening period.

Michael Clemens, a close observer of the immigration debate and a staunch advocate of a dramatic increase in less-skilled immigration to the U.S. on the grounds that it will help reduce global poverty levels, observes that “no one involved has been serious about tackling unauthorized immigration.” Clemens, of course, believes that the only way to tackle unauthorized immigration is to further liberalize U.S. immigration laws.

There are, however, other strategies the U.S. might pursue. One premise of the immigration bill has been that it imposes tough enforcement measures in exchange for granting legal status to the vast majority of unauthorized immigrants currently residing in the U.S. But reducing the influx of unauthorized immigrants by 25 percent seems like a relatively modest victory. Congress might instead embrace something like Canada’s approach, as described by Stephen Marche in Bloomberg View last year:

The Canadian obsession with order can make for strange politics, at least in an American context. For example, of all the world’s societies, Canada’s is one of the most open to immigrants, as anyone who has been to Toronto or Vancouver will have seen. Yet Canada also imposes a mandatory one-year prison sentence on illegal immigrants, and the majority of Canadians favor deportation. Canadians insist that their compassion be orderly, too.

This immigration policy is neither “liberal” nor “conservative” in the American political sense. It just works.

Artur Davis has also raised this possibility:

I would rather see an immigration approach that got tougher in tangible ways, like making illegal entry a felony and making an illegal immigrant’s failure to declare and register a deportable offense, but still provided some form of legal gateway for the undocumented, to either the overly complex bill working its way through the Senate or to an enforcement only approach.

Suffice it to say, a mandatory one-year prison sentence might be practicable for Canada, which has the U.S. to serve as an immigration buffer, but it would be an enormously expensive and labor-intensive undertaking for the U.S., and it would almost certainly meet with fierce political resistance. I wouldn’t recommend that we take this step likely. It is strange, however, that conservative backers of the Senate bill haven’t demanded more in the way of measures designed to stem future unauthorized immigration, or to guarantee that unauthorized immigrants currently residing in the U.S. go through the process of determining whether or not they are eligible for legal status.

My Reuters Opinion column this week will be on the comprehensive immigration reform bill, so I’ll have more on the subject soon. But first I want to address the following from Ezra Klein and Evan Soltas in this morning’s edition of Wonkbook:

Ultimately, the CBO report rips a layer of artifice from the immigration debate. Few critics of immigration reform really base their opposition on concerns about the deficit or the economy. Their real concern with immigration is cultural and sociological. But that’s dangerous political ground. It’s easier to frame opposition using the bloodless language of the budget than the combustible language of national character and composition.

That’s the real damage the CBO did to the anti-immigration caucus. It took the bloodless language of the budget away from them. It left them only with their real concerns — the ones they’d prefer not to emphasize. That will perhaps lead to a slightly more truthful debate about immigration reform, but one that is much more dangerous for the anti-reform side, and for the Republican Party.

I can’t speak for all critics of immigration reform, or rather all critics of this particular legislative proposal (blurring the distinction is, for obvious reasons, useful to proponents of the Senate bill, but also highly misleading). But my view, as a conservative who is for the record less exercised about near-term deficits than most, is that the economic, the cultural, the sociological, and the political are interrelated. Ezra and Evan really mean to suggest, as far as I can tell, that opponents of this immigration reform bill are uncomfortable about the prospect of a U.S. population that is more Latin, Asian, and African. That may well be true. I tend to think that opponents of the bill really are concerned about the wisdom of allowing a large increase in less-skilled immigration, regardless of its source. 

For example, I consider it highly unlikely that given the extremely high poverty levels of the unauthorized immigrant population, and the fiscal burdens facing state and local governments, Congress won’t take steps to expand eligibility for programs like SNAP, TANF, Medicaid, and the subsidies for the purchase of medical insurance established under the Affordable Care Act to include legalized immigrants. The U.S. contains many mixed-status households, and most legalized immigrants are not so socially and culturally isolated that the larger public will be indifferent to reports of hunger, a lack of access to medical insurance, and other maladies that means-tested transfers might help address. This reflects the cultural and political reality that while Americans are ideologically conservative, they are operationally liberal. That is, U.S. voters oppose “big government” in the abstract, but in practice they’re often moved by compelling stories of hardship to back expansions of means-tested transfers. It could be that the fact that most of the legalized immigrant population will be drawn from minority groups will lead the median voter to oppose the expansion of programs aimed at hunger alleviation and subsidizing medical coverage. But determining the answer to this question requires that we draw on cultural, political, and sociological insights. 

So we find ourselves in this funny position: advocates of the comprehensive immigration reform bill, including many who like Hawaii Sen. Mazie Hirono believe that “the restrictions on federal safety-net programs make the pathway even more treacherous” for legalized immigrants, are delighted by the CBO’s determination that it is deficit-improving, despite the fact that it may well be substantially less so if the restrictions on federal safety-net programs were removed.

My view is very basic: I both believe that we ought to be more selective about immigrants we allow to settle in the U.S. — I’d suggest that we admit immigrants likely to pay very high lifetime net tax rates – yet that we ought to be relatively generous to those who join our political community. The contrasting view, that we ought to be much less selective while also strictly limiting access to safety net programs, is embraced by libertarians, but my guess is that it is not terribly popular among liberals or conservatives or moderates, either because they favor a smaller immigrant influx or because they find the idea of a sharp increase in domestic poverty levels and self-reported hunger very unattractive. 

Moreover, it is worth recalling that the CBO’s analysis looks to this decade and the next. A focus on lifetime net tax rates, in contrast, looks both to the taxes paid over a working life and public expenditures on retirement and health security programs and human capital investment, among other things. I don’t fault the CBO for doing its job as well as it can given its limitations, including its statutory limitations. It is not clear to me, however, that the CBO’s analysis has settled much of anything.

Beth Reinhard reports on what I’ve been hearing from various politically-connected friends: Scott Walker, the combative Republican governor of Wisconsin who emerged as a hero on the right after curbing the collective bargaining rights of public employees and beating back a labor-backed recall effort, is emerging as a serious contender for the 2016 GOP presidential nomination. As of last month, a Marquette University survey found that Walker had a 51 percent approval rating, which is respectable given Wisconsin’s political coloration. But as Walker’s prospects improve, Louisiana Gov. Bobby Jindal’s prospects appear to be doing the opposite. Mired in controversy, Jindal, who unliked Walker has already secured reelection, is laboring under a 38 percent approval rating, and his national profile is oscillating wildly. Keen to criticize the congressional GOP and to call for reform and renewal immediately after Mitt Romney’s defeat, albeit it in blandly unspecific terms, Jindal has just published a Politico op-ed that is truculent in its insistence that rather than rethink their policy commitments in light of the challenges facing middle-income households, Republicans ought to “hold fast, get smarter, get disciplined, get on offense, and put on your big boy pants.” Walker is no less conservative than Jindal. During the 2012 presidential campaign, for example, he recommended that the Romney campaign promise much deeper tax cuts. Yet he also comes across as more consistent and less eager to please than Jindal, who seems to be masking his greatest asset, which is his rare intellect. 

The Republican 2016 contest already has a rough shape: several would-be candidates are crowding the rightward end of the spectrum (let’s say Ted Cruz, Bobby Jindal, Rick Santorum, Scott Walker), one or two are presenting themselves as problem-solving pragmatists with establishment support (Chris Christie and possibly Jeb Bush), and one or two are hovering in-between (this is where I suspect Marco Rubio and Paul Ryan would wind up, though I suspect Ryan is too wise to run). My gut sense is that Walker and Christie are the ones to watch. 

Donald Marron and Hillel Kipnis observe that the dramatic post-crisis expansion of the U.S. federal government’s investment porfolios has yet to reverse itself:

Since October 2007, the public debt has increased by $6.9 trillion. Most went to finance deficits, but about $650 billion went to expand the government’s investment portfolio, including a big jump in student loans. Before the financial crisis, Uncle Sam held less than $500 billion in cash, bonds, mortgages, and other financial instruments. Today, that portfolio has more than doubled, exceeding $1.1 trillion.

The U.S. Treasury has sold off many of its financial assets over the intervening years, yet it has greatly increased its holdings of student loan debt.

The federal government used to subsidize student borrowing not only by providing loans directly to students, but also by guaranteeing many private loans. In 2009, however, Congress eliminated private guarantees and dramatically expanded direct federal lending. The government’s portfolio of student loans has since increased from about $90 billion at the start of fiscal 2008 to more than $560 billion today.

As a result, the government’s financial investments now total about $1.1 trillion, essentially all of which was financed by borrowing. The debt supporting Uncle Sam’s investment portfolio thus accounts for almost 10 percent of the $11.9 trillion in public debt.

If you told me that Congress was planning to borrow heavily to finance a variety of large-scale public investments, I wouldn’t necessarily balk. But I would want the country to have a proper conversation about the kind of investments we ought to make. That hasn’t really happened. Back in 2011, Christopher Papagianis and Arpit Gupta argued that “private sector is fighting the government for control of capital markets, and the government is winning”:

At first, government dominance of credit allocation is presented as a good thing, or as a choice between equally unpleasant outcomes. In the case of residential mortgages, government involvement is generally rationalized as a choice between government mortgages or no mortgages at all. Yet, the refusal to allow the market to find a price at which lenders are willing to assume the risks of consumer lending creates the real potential for much worse long-run outcomes.

While it’s already starting to happen, increasingly the levers that control the provision of credit for consumers will be set in accordance with the needs and wants of politicians and bureaucrats. As the risk of a Japan-like period of stagnation grows for the U.S., it’s worth bearing in mind the lessons of Anil Kashyap from the Chicago Booth School of Business, who has warned that politically-driven investment and capital decisions played a large role in the long Japanese recession.

We are now at a point where it is almost impossible to imagine a functioning capital market without an oversize role for government. The longer the government maintains a dominant role, the more the private sector’s capacity to fill in or take control atrophies. This dynamic needs to shift back in the direction of the private sector. In many ways, the most important battle the U.S. faces over the next few years is wrestling back control of its own capital markets. [Emphasis added]

On a related note, Jason Delisle of the New America Foundation has written extensively on the transformation of the student loan market and its implications, most recently in engaging with Sen. Elizabeth Warren (D-MA).