Cecilia Rouse on Biden Economic Policy, Part I

Last Thursday, Cecilia Rouse, chair of President Biden’s Council of Economic Advisers, gave a Zoom talk to the Stanford Institute for Economic Policy Research (SIEPR). I “attended” for the first 20 minutes, but then signed off to “attend” another Zoom talk out of Stanford presented by Scott Atlas.

But I circled back, as Jen Psaki would say, to watch the rest of the talk, which you can find here. I wondered particularly whether and how Rouse would deal with the graph on declines in black and Hispanic poverty that I highlighted and discussed here, which, incidentally, the Wall Street Journal used as a “Notable and Quotable” in their April 28, 2022 print issue (April 27 on line.)

Here’s the relevant part, at the 24:50 point:

Rouse shows the graph that I commented on. Notice the little gray bar at the end. There are two things interesting here. First, she introduces the issue by talking about inequality. But then she talks about the decline in poverty. That’s what she should talk about. I don’t care, and I bet most poor people don’t care, if inequality is increasing if the worst off are becoming substantially better off, as the graph shows. Notice the speed up in the drop in poverty for black and Hispanic people from 2017 to 2020. Rouse seems to care about black and Hispanic people. But what does she focus on? The little gray part at the end: the drop in poverty from 2019 to 2020, which occurred, as she stated correctly, because of the huge child care tax credit in the CARES Act of March 2020. Is she so uncurious not to wonder why poverty among black and Hispanic households plummeted from 2017 to 2019, without the increased child care tax credit? If someone cares about reducing poverty, isn’t it important to look into why those reductions happened before the increased child tax credit.

This, to me, was the most disappointing part of her talk. The gatekeeper for questions was the host, economist Mark Duggan. I don’t know if anyone submitted a question on this. If so, Duggan didn’t ask them.

Much later, at about 46:08, when she discusses the 2017 tax bill, she focuses on some tax breaks it created for the very wealthy, without mentioning what they are. She has to be aware of the tax break for the wealthy that the bill reduced substantially, namely the restriction of the deductions for state and local taxes for those who itemize.

Rouse says it’s “not obvious at all” that the tax cut had good effects. We haven’t seen big good effects of the tax bill. Really? One of her predecessors, Trump’s CEA chair Kevin Hassett had some pretty careful analysis of the the effects on growth of the tax cut. His analysis helps us understand how the tax cut could indeed be behind the large drop in poverty. It’s much more careful than anything that Rouse and her colleagues did on the same issue in their 2022 Report. Is this just bad propaganda or does she know something we don’t?

In Part II, I’ll highlight some other parts of her talk, including some parts I liked, particularly on immigration and on the FDA.