As 2019 comes to a close, it’s a good time to reflect on the state of policy research in the past year. 2019 was a big year for policy research, with impactful studies coming out of diverse institutes such as NBER, the CBO, and the National Academies of Sciences, Engineering, and Medicine. Below are nine studies that particularly stood out in over the past year in informing policy debates.
In December 2015, Congress passed an appropriation measure that included a provision for the National Academies of Sciences, Engineering, and Medicine to research and present policy options for cutting the American child poverty rate in half in the next ten years. Three years later, the panel of 15 leading poverty researchers released a detailed, 600-page study of child poverty in the United States, along with microsimulated policy packages designed to reduce child poverty in the United States.
A conservative, $9 billion plan was proposed by the study committee. The package of tax credit, minimum wage, and job training policies would reduce child poverty about one fifth, making it the most cost-effective package the panel came up with though it still fell short of the 50% child poverty reduction goal. To hit that goal, the committee concluded the federal government would have to spend $90-110 billion, utilizing either a mix of tax credits and housing and food assistance expansions or a package of tax credits, minimum wage increases, and a combination of child allowance, child support assurance, and immigration liberalization measures.
In May of 2019, the Congressional Budget Office released its long-awaited report on single-payer health care. In characteristic CBO fashion, the study rankled partisans on both sides, revealing the complexities of redesigning the U.S. health care system from scratch while declining to project costs of any particular proposal.
This study was particularly important because of the shortage of dispassionate, evenhanded analysis of single-payer proposals in the United States. There is plenty of reading to do on single-payer in the U.S., but opinions are usually marred by rosy predictions of extreme reductions in spending or ideological opposition to state participation in the health care markets. This CBO report lays out how single-payer health care operates in the six countries that currently have a single-payer systems and walks policymakers through twelve questions they will have to answer if interested in designing a single-payer system. This report should be required reading for any advocate or detractor of single-payer health care as well as in undergraduate or graduate level courses on the U.S. health care system.
This study is unique to this list in a couple of ways. First, it is the only study on this list carried out by a firm owned by a publicly-traded corporation. Most corporations like this are less focused on creating non-revenue generating policy relevant research than centers like CBO and NBER. Second, this is the only entry on this list that is a regular study put out on an annual or semiannual basis. Though the methodology of this study is not new, it is rigorous and is particularly relevant as economists debate how close the next recession is and state policymakers debate how big their nest egg should be when this recession hits.
In this October 2019 study, Moody’s Analytics does the hard work that state budget offices usually decline to do, estimating what potential shortfalls in state revenue and shocks to budget needs will look like under different recession scenarios. While this report was covered rather rosily, with many outlets reporting that a majority of states are prepared for a moderate recession, Moody’s still found a number of states that would require belt tightening, especially under conditions of a severe recession. Both fiscal conservatives and advocates for the poor should read this study if they want to understand the tradeoffs between fiscal sustainability and poverty alleviation we make in current budgets and what decisions are kicked down the road to future state budgets.
Studies out of the National Bureau of Economic Research often speak less to headline-grabbing policy problems than those in the CBO or the National Academies. That being said, the beauty of work published in NBER is that it unearths key policy problems that impact lots of people underneath the surface of current policy debates and authors are often encouraged to put forth bold policy proposals to solve these problems.
This November 2019 study is penned by an unlikely pairing of young Penn Law Professor Natasha Sarin and Larry Summers, as big a star as you get in the world of economics. The study addresses a decidedly unsexy topic of uncollected taxes and proposes an equally unsexy policy package of audits, increased reporting requirements, and IT modernization to increase revenue collection by the IRS. What’s sexy are the numbers: Sarin and Summers estimate that these low-cost administrative changes could raise $1 trillion in extra revenue over the next ten years, enough to finance a myriad of new programs or tax rate reduction packages, including being able to finance on its own the most expensive policy packages for reducing child poverty in that National Academies report listed above.
An addendum to economic projections might not seem like a anything worth writing home about, but CBO Economist Daniel Fried’s August 2019 explanation of the impact of the trade war on the U.S. economy was a classic example of the Congressional Budget Office playing the part of the “skunk at the company picnic.” Fried reported that tariffs imposed by the Trump Administration in 2018 reduce the size of the U.S. economy by 0.3%, costing the average U.S. household about $580. Also characteristic to CBO, the explanation includes a couple of paragraphs about the uncertainty of these estimates. Overall, the 90-page economic outlook update mentions the word “tariffs” 124 times, interpreting trade policy as a significant factor in U.S. economic growth in the upcoming years.
This month, leading international poverty economist Martin Ravallion teamed up with former World Bank colleague Michael Lokshin to put forth an ambitious proposal for breaking the stalemate around high-skill work permits in the United States. Lokshin and Ravallion acknowledge that citizenship and residency barriers create a de facto “entitlement” to work in a certain country based on accident of birth. Provocatively, the two economists ask what would happen if citizens interested in pursuing nonmarket pursuits such as caring for children could sell their right to work in the country to immigrants itching for opportunity to use their skills in the United States. Loshkin and Ravallion estimate that a seller of a permit could make $16,000 in the first year of the program and that poverty would be reduced by a third by the infusion of new resources from selling of work permits and tax revenue from new migrants’ earnings. The impacts are projected to fade as immigration markets stabilize over time, but Loshkin and Ravallion still project impacts to be substantial ten years down the road, providing thousands of dollars to sellers of work permits and continuing to substantially reduce poverty.
Timothy Bartik is one of the most prolific and policy-relevant economists in the field of business incentives and in the policy world in general. His work developing cost-benefit models particular to the goal of raising local wages has illuminated the world of business incentives and has been instrumental in understanding the potential of well-designed early childhood programs in promoting local economic development. In his October 2019 book, Bartik pulls together the literature on business incentives for the age of Amazon HQ2.
Like any good policy researcher, Bartik puts his money where is mouth is, laying out a framework for an “ideal” state business incentive program focused on getting the largest local wage impact bang for incentive buck invested. Bartik suggests targeting economically stressed counties with slack employment capacity and high-tech counties likely to generate larger local economic development benefits. He suggests creating a basis of infrastructure and workforce development services, then following up with customized business services, and finally creating limited, state-financed, up-front tax incentives open to all firms in targeted areas.
Once again, the CBO is not afraid to wade into choppy policy waters, this time estimating the employment and income impacts of proposals to raise the federal minimum wage to $10, $12, and $15. Again, the CBO rankles those on the left and right by projecting minimum wage increases would have substantial impacts on employment while also reducing income inequality and boosting average wages for families in and near poverty. Notably, the July 2019 report finds that a $10 minimum wage would have negligible effects on both employment and incomes while a $15 minimum wage would boost average family wages for those in poverty by 5% at the likely cost of over 1 million jobs nationwide. Also notable are the range of employment impacts: CBO projects as little as no employment impact and as much as 4 million jobs lost under a $15 minimum wage scenario.
In this study, which Scioto Analysis has written about before, U.S. economists team up with Innovations for Poverty Action to evaluate how policymakers respond to policy information. In two studies of municipal policymakers in Brazil, researchers find that not only do policymakers apply policy research when they are exposed to it, but they also have a willingness to pay for this research. While Scioto Analysis’s existence is a testament to this fact, it is exciting to see the lesson learned in a large-scale experimental setting. With better evidence comes better policy, and only through partnerships between researchers and policymakers will policy be able to ultimately be improved.
Here’s to a great 2019 in policy research and hope for an even better 2020!
