Does Disability Insurance Receipt Discourage Work?

Click here for more info on this paper

Maestas, Nicole, Kathleen J. Mullen, and Alexander Strand. 2013. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt." American Economic Review, 103(5): 1797-1829.

Here is the abstract:

"We present the first causal estimates of the effect of Social Security Disability Insurance benefit receipt on labor supply using all program applicants. We use administrative data to match applications to disability examiners and exploit variation in examiners' allowance rates as an instrument for benefit receipt. We find that among the estimated 23 percent of applicants on the margin of program entry, employment would have been 28 percentage points higher had they not received benefits. The effect is heterogeneous, ranging from no effect for those with more severe impairments to 50 percentage points for entrants with relatively less severe impairments."

Venezuela went from being a net exporter of rice to a net importer of rice

See Who’d a-thunk it? by Mark J. Perry of "Carpe Diem."

"About two weeks ago, Don Boudreaux started a great new series of posts on the Cafe Hayek blog with the theme “Who’d a-Thunk It?”, here’s a link to the inaugural post in that series. Don has graciously agreed to allow me to post items on CD under that same theme, so here’s my first one: Under Venezuela’s late president and vocal critic of the market economy, Hugo Chavez’s socialist economic policies, which included nationalizing private farm land, redistribution of land, and government price controls on agricultural products, Venezuela went from being a net exporter of rice to a net importer of rice — with many of its imports coming from… the “imperialist USA,” a term Chavez frequently used to describe America."

Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?

Click here to read this NBER paper by David Neumark, J.M. Ian Salas, and William Wascher.Here is the abstract:

"We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the “new minimum wage research” is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. Moreover, new evidence based on methods that let the data identify the appropriate control groups leads to stronger evidence of disemployment effects, with teen employment elasticities near −0.3. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage."

The Clinton-Era Roots of the Financial Crisis

See The Clinton-Era Roots of the Financial Crisis: Affordable-housing goals established in the 1990s led to a massive increase in risky, subprime mortgages. by PHIL GRAMM AND MIKE SOLON, WSJ, 8-13-13. Excerpts:

 "Simply put, the financial crisis of 2008 was caused by a lot of banks making a lot of loans to a lot of people who either could not or would not pay the money back. But this explanation raises two key questions. Why did private lenders, whose job it was to assess credit risk, make those loans? And why did the army of financial regulators, with massive enforcement powers, allow 28 million high-risk loans to be made?"

"...be traced to Sept. 12, 1992. On that day presidential candidate Bill Clinton proposed, in his campaign book "Putting People First," using private pension funds to "invest" in government priorities, such as affordable housing, to "generate long-term, broad based economic benefits.""

"Six pension funds ultimately agreed to invest in public housing that was backed by $100 million in federal grants and guarantees, but the program never took off. In the end, even unions and their pension funds rejected the effort to direct any part of their retirement savings toward someone else's welfare."

"...drafting Fannie Mae, Freddie Mac and the commercial banking system into the affordable-housing effort. It did so by exploiting a minor provision in a 1977 housing bill, the Community Reinvestment Act, that simply required banks to meet local credit needs.

Bank regulators began to pressure banks to make subprime loans. Guidelines became mandates as each bank was assigned a letter grade on CRA loans. Banks could not even open ATMs or branches, much less acquire another bank, without a passing grade—and getting a passing grade was no longer about meeting local credit needs. As then-Federal Reserve Chairman Alan Greenspan testified to Congress in 2008, "the early stages of the subprime [mortgage] market . . . essentially emerged out of the CRA."

"Effective in January 1993, the 1992 housing bill required Fannie and Freddie to make 30% of their mortgage purchases affordable-housing loans. The quota was raised to 40% in 1996, 42% in 1997, and in 2000 the Department of Housing and Urban Development ordered the quota raised to 50%."

"By 2008, when both government-sponsored enterprises collapsed, the quota had reached 56%."

"...by 2002 Fannie officials knew perfectly well that these quotas were promoting irresponsible policy..."

"According to the nonprofit National Community Reinvestment Coalition, total CRA lending rose to $4.5 trillion in 2007 from $8 billion in 1991. The American Enterprise Institute's Ed Pinto found that in 1990 80% of the residential mortgage loans acquired by Fannie and Freddie were solid prime loans with healthy down payments and a well-documented capacity by borrowers to make mortgage payments. By 1999 only 45% of their acquisitions met this standard. That number fell to 15% by 2007. By 2008, roughly half of all outstanding mortgages in America were high-risk loans. In 1990, very few subprime loans were securitized. By 2007 almost all of them were."

"It is stunning that, to this day, no one has explained how 28 million high-risk loans (the number calculated by the American Enterprise Institute's Peter Wallison) got around the "safety and soundness" rules that dominate federal and state banking laws. What happened to the enforcement army, with its laws and regulations, its power to investigate and mandate corrective action, and its ability to fine and imprison violators?"

"...a review of the banking laws adopted since 1980 reveals that not one single safety and soundness measure was repealed."

Mr. Gramm, a former Republican chairman of the Senate Banking Committee, is senior partner of US Policy Metrics and a visiting scholar at the American Enterprise Institute. Mr. Solon, a former economic policy adviser to Senate Republican leader Mitch McConnell, is a partner at US Policy Metrics.

Barney Frank: "It was a mistake to push lower-income people into housing they couldn't afford"

See Competing Visions for the Future of Housing Finance by PETER J. WALLISON, WSJ, 8-11-13. Excerpt:

"The government's record in housing is not enviable. The 2008 financial crisis was triggered by an unprecedented 30% loss in home values when an enormous housing-bubble collapsed. Before the crisis began, at least half of all mortgages in the U.S.—28 million loans—were subprime or otherwise risky, and their failure in substantial numbers is what drove prices down. Of the 28 million risky loans, 74% were on the books of government agencies, principally Fannie and Freddie. This shows that the demand for those mortgages originated with the government's housing policies.

The terrible events of 2008 are only the most recent government fiasco in housing. There was the collapse of the government-insured savings and loans in the 1980s (costing taxpayers at least $150 billion in bailouts), the insolvency of Fannie and Freddie (more than $180 billion in bailouts) and, coming soon, a bailout of the Federal Housing Administration. With this record, it's amazing that anyone is seriously thinking about giving the government another chance."

Even After "Welfare Reform," In Many States, the Dole Pays Better Than Honest Work

Great post by J.D. Tuccille of Reason. Click here to read it. Here is the intro

"Weren't we all told that welfare had been abolished back in the 1990s, and that now we live in a brand new world of personal responsibility? I could have sworn I heard something about that. As it turns out, though, the dole was rebranded, repackaged, and at least in some states, made more generous. A new report from the Cato Institute's Michael D. Tanner and Charles Hughes says that welfare benefits remain more generous than minimum-wage jobs in 35 states."

McDonald's, Unions And The Minimum Wage

See Unions Cast Ronald McDonald as Simon Legree: The SEIU is leading protests to 'supersize my wage,' but a minimum-wage hike would mean fewer jobs By STEPHEN MOORE of the WSJ, 8-17/18-13.

"Most of the evidence shows that super-minimum wage laws force businesses to reduce hiring and are counterproductive in reducing poverty."

"An exhaustive study this year by the National Bureau of Economic Research found that "minimum wages pose a tradeoff of higher wages for some against job losses for others," with unemployment rising most for teenagers. "

"...the activists rarely mention the federal Earned Income Tax Credit that supplements the full-time, minimum-wage salaries by up to $6,800 a year."

"President Obama put most of his chips on green jobs, promising five million of them for the middle class. Only a small fraction of those jobs have materialized. And ObamaCare's mandated health benefits have already begun to push more employees into part-time jobs."

"There's at least one place where you're unlikely to find the SEIU besieging fast-food restaurants with protesters: North Dakota. The state has thousands of unfilled jobs thanks to the oil boom, and fast-food workers really do earn as much as $15 an hour and even get $500 signing bonuses. There's nothing better for workers at every level of employment than a flourishing economy."