Yellen Davos backs Biden for ‘modern supply-side’ expansion
Author: Zhou Erin
[ 耶伦认为，在基础设施方面的长期投资，如宽带、港口、公路和铁路，应该使美国家庭、工人和企业都受益。“我们正在投资新能源基础设施，并支持研发，以激励可再生能源技术的创新。这些投资应通过应对气候变化和缓解极端天气事件来促进可持续增长，而极端天气事件也对穷人产生了不成比例的影响。” ]
On January 21, Janet Yellen, the US Secretary of the Treasury and former Chairman of the Federal Reserve, attended the World Economic Forum (also known as the “Davos Forum”) and made the finale on the last day. In her speech, she championed U.S. President Joe Biden’s economic agenda, calling it “modern supply side economics” and contrasting it with Keynesianism and traditional supply-side approaches.
What needs to be compared, Yellen said, is how the new approach differs from traditional “supply-side economics,” which also seeks to expand the economy’s potential output, but through deregulation and tax cuts to boost private capital investment. “But these measures are not enough and often go too far. By contrast, ‘modern supply-side economics’ prioritizes investment in labour supply, human capital, public infrastructure, research and development and a sustainable environment. These areas of focus are all Designed to boost economic growth and address long-term structural problems, especially inequality A modern supply-side approach,” she said.
At the end of last year, Biden’s proposed $1.75 trillion “Building a Better Future” bill was blocked. The bill includes a $550 billion investment in clean energy and climate change, a substantial increase in the tax credit for new energy vehicles, and a subsidy of up to $12,500 per electric vehicle; the bill also aims to make it easier for working-age parents to enter labor market to expand labor supply, etc.
At the time, U.S. Democratic Senator Joe Manchin suddenly defected, citing inflation concerns, saying he “couldn’t vote for the continuation of the legislation,” which meant the bill would have to “fight again next year.” Nobel laureate in economics Krugman (Paul Krugman) immediately published an op-ed in the “New York Times” criticizing Manchin’s defections. He said the spending proposed in the bill would be spread out over many years, so it would not significantly boost aggregate demand in the short term, with only a 0.6 percent increase in the deficit as a percentage of GDP in the first year. None of this is enough to make a significant change in inflation in the model. In addition, the Fed has recently made it clear that it is prepared to raise rates if inflation does not subside, so government spending should be less important to inflation.”
Yellen’s support for Biden this time is obviously in solidarity with the “Building a Better Future” bill on the international stage. “Our new approach is far more promising than the old supply-side economics, which I think is a failed growth strategy,” she said. “The big tax cuts on capital have not delivered the gains they promised. Deregulation has an equally poor track record as environmental policy in general, especially in limiting carbon dioxide emissions. And, by shifting the tax burden from capital to labor, it deepens income and wealth disparities in the United States.”
Yellen’s remarks also appeared to be aimed at criticizing former President Trump’s decision to cut taxes, deregulate and withdraw from the Paris climate agreement. In 2018, Yellen was not re-elected as the chairman of the Federal Reserve. At that time, there were views that she was “incompatible” with Trump.
Yellen believes that a country’s long-term growth potential depends on the size of its workforce, the productivity of its workforce, the reproducibility of its resources, and the stability of its political system. Modern supply-side economics seeks to stimulate economic growth by increasing the supply of labor and increasing productivity, while reducing inequality and environmental damage.
The current economic situation is also well suited for this modern supply-side expansion. In Yellen’s view, potential U.S. GDP growth is constrained by a declining labor force. Productivity growth has been slow since the late 1970s. “We underinvest in public infrastructure, in the education and training of children and those without a four-year college degree. This underinvestment widens the income gap between highly skilled workers and those without a college degree. This disparity Expanding since the late 1970s.”
In Yellen’s view, Biden’s economic agenda embodies modern supply-side methodology in three ways. The first concerns labor supply and is reflected in the Building a Better Future Act.
Labor supply was already a prominent problem in the U.S. even before the pandemic, in part because of an aging population and in part because of a downward trend in labor force participation over the past 20 years. Now, the pandemic and reduced immigration have further reduced labor force participation. The lagging labor force participation rate is largely driven by a combination of factors that dampen work motivation, such as insufficient paid time off and high childcare costs. At the heart of the Building a Better Future Act is addressing these trends by making it easier for working-age parents to enter the workforce. It proposes universal access to early childhood education for another two years while expanding elderly care. It seeks to limit childcare spending to 7% of their income for most households. Expanding the earned income tax credit is intended to provide greater financial security for families while incentivizing low-income workers to look for work. These plans should help reverse the continued decline in the U.S. labor force participation rate relative to other developed nations and boost potential GDP growth.
The second focus of Biden’s agenda is increasing productivity. Over the past decade, labor productivity growth in the U.S. has averaged just 1.1 percent, about half the rate of the previous 50 years. This has led to sluggish wage and compensation growth, especially historically slow growth for workers at the bottom of the wage distribution. A Biden administration aims to boost labor productivity to help address the gap in wage growth. The focus is on upskilling workers, especially those on low incomes, so they can take advantage of new technologies. “To that end, we propose a broad investment in human capital, from early childhood education to community colleges, apprenticeship training and worker training,” Yellen said.
In addition, Yellen believes that long-term investments in infrastructure, such as broadband, ports, roads and railroads, should benefit American families, workers and businesses alike. “We are investing in new energy infrastructure and supporting research and development to incentivize innovation in renewable energy technologies. These investments should foster sustainable growth by addressing climate change and mitigating extreme weather events, which also disproportionately impact the poor. proportions.”
The third area has to do with taxation. Yellen said the current multinational tax system has weakened the financial resources that could fund supply expansion. Over the past few decades, the U.S. and global tax burden has shifted from corporations to the middle class. “An important reason for this shift is the tax competition between countries. This competition has led to a race to minimize corporate tax rates on free-flowing capital. In this competition, no country is the winner, and the world’s working class and the middle class are losers. Large multinational corporations are incentivized to hide their profits in their low-tax subsidiaries around the world, with tax-driven and inefficient transactions. So this ‘race to the bottom’ drains The resources the government needs to address complex challenges. From a U.S. perspective, perverse corporate tax incentives have led some companies to shift real economic activity outside the U.S., further shrinking supply and reducing U.S. production capacity.”
Last year, more than 130 countries agreed to create new rules for collecting corporate taxes, adopting a rate of at least 15 percent, and ditching the national digital services tax in favor of new taxing powers. Yellen noted that the agreement is backed by 134 countries representing more than 90 percent of the world‘s GDP, and said the new international tax system will help governments invest in workers and the economy while leveling the playing field for U.S. companies, “which is A remarkable testament to the strength of American leadership and multilateralism.”
Massive information, accurate interpretation, all in Sina Finance APP
Responsible editor: Chen Cheng