US Economic Policy in the 21st Century (Professional Practice in Governance and Public Organizations)

This book addresses major economic problems affecting the United States and proposes policy reforms to target them. The authors use a broad survey of economic research to conduct an evidence-based assessment of four economic issues affecting the US and other developed nations: slowing economic growth, unsustainable public debt increases, widening wage inequality, and climate change. Finding that the problems are interconnected and should be dealt with in a comprehensive manner, the authors explain how current policies have contributed to the issues and make recommendations on policy reforms. All four issues are examined in one place and the resulting policy recommendations form a consistent plan to mediate the problems simultaneously. Providing a comprehensive approach to some of economic policy’s most difficult problems, this book will be an excellent resource for students and researchers interested in macroeconomic theory, public sector economics, international economics, labor economics, and environmental economics. Contents Chapter 1: Twenty-First Century Economics The Fiscal Crisis Slowing Economic Growth Diminishing Returns Slowdown in the Rate of Capital Investment Technological Progress to the Rescue? Increasing Income Inequality Geopolitical Tensions and Globalization Climate Change Connections Failed Education Policy Causes Slow Growth, Rising Wage Inequality, Economic Frustration, and the Rise of Populism Economic Frustration Creates Popular Resistance to Needed Reforms of Fiscal, Climate Change, and International Policies Current Fiscal Policies Crowd Out Private and Public Investment, Reduce Economic Growth, and Are the Primary Source of the Fis... Needed Policy Reforms Face Major Political Obstacles Political Advantage to Comprehensive Reforms Summary References Chapter 2: Fiscal Policy The Unsustainable US Fiscal Path The Government Intertemporal Budget Constraint Sustainable Fiscal Policies Economic Effects of Sustainable Intergenerational Redistribution The Government Investment Gap Money Financing and the COVID-19 Recession Long-Run Economic Effects New Generational Tensions Public Health Policy The Crucial Role of Interest Rates Why Are Interest Rates Low? Will Interest Rates Remain Low? If Interest Rates Do Remain Low, Does the Fiscal Crisis Disappear? If Interest Rates Do Remain Low, What Should the Government Do to Exploit the Opportunity? Waiting for Fiscal Reforms Fiscal Reform Suggestions Aging and Healthcare Costs Improving Tax Compliance Removal of Tax Expenditures Tax Rates and Tax Revenue Efficiency-Promoting Taxation Consumption Taxes Short-Run Effects of Fiscal Consolidation Summary of Policy Reforms Appendices Appendix 1 Appendix 2 References Chapter 3: Human Capital Policy The Good The Bad The Ugly Making of the Public University Corporation Education and Wage Inequality Other Candidates for Rising Wage Inequality Education and the Fiscal Gap Technological Progress and Wage Inequality Education Deniers Education and Labor Force Participation Human Capital Policy Reforms Pre-school Investments Vocational Training Less Funding and Higher Standards in Public Universities Student Loan Forgiveness? Summary of Reforms to Human Capital Policy References Chapter 4: International Economic Policy The Trade of Goods and Services Effects of Trade on the Average Household Total Economic Effects from US Trade Marginal Effects from Changes in Trade Policy The Welfare Effects of US Trade: Summary Distributional Effects from Trade Standard Argument for a Link Between Trade and Inequality Other Ways Trade May Raise Inequality Distributional Effects of Trade: Summary International Trade of Assets 1800-1880 The US Industrial Revolution 1980-Present Problematic Persistent Trade Deficits? Offshoring Immigration Economic Effects of Immigration Physical Capital Adjustment Heterogeneous Labor and Complementarity of Inputs Externalities and Technological Progress Empirical Evidence Summary Border Crises Policy Suggestions to Benefit More from International Activity Foreign Aid Unconditional Aid Is Not Growth-Promoting Domestic Conflict over Growth Policies Prohibitive Aid Cost Humanitarian Aid Reforming Foreign Aid Needed: Accountants Without Borders Alternative Pre-conditions for Aid Multilateral Aid A Knowledge Bank of Development Projects Deal with Corruption First Appendix Basic Model Production with Heterogeneous Labor What Has Caused the Rise in Inequality? References Chapter 5: Climate Policy The Climate Change Target Economic Effects of Climate Change The Marginal Social Cost of Carbon Emissions The Marginal Abatement Cost of Limiting Climate Change The Optimal Level of Carbon Emissions Climate Policy in Theory Issues in Setting Climate Policy Rising Carbon Tax Carbon Pricing: Carbon Tax vs. Cap and Trade Costs of Taxation International Dimension Carbon Border Tax Uncertainties and Optimal Climate Policy Climate R&D Climate Policy in Practice The Climate Crisis and the Fiscal Crisis What Should (Can) the USA Do? References Chapter 6: Policy Reforms Summary Is Government Failure Inevitable? Economic Challenges Slowing Long-Run Economic Growth Rising Income Inequality Looming Fiscal and Financial Crises Geopolitical Tensions Climate Change Policy Reforms Step 1: Human Capital Reforms Step 2: Resist De-Globalization Step 3: Fiscal Consolidation and Climate Policy Emergency Actions Changes in Tax Policy Raising the Tax Base Cutting Government Spending References Index