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Yglesias

Inequality and Housing Costs

By Matthew Yglesias on Oct 4, 2008 at 11:02 am

I have a little list in my head of things I wish academics would public serious research on, and this paper from Enrico Moretti was definitely on that list:

A large literature has documented a significant increase in the return to college over the past 30 years. This increase is typically measured using nominal wages. I show that from 1980 to 2000, college graduates have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. This implies that college graduates are increasingly exposed to a high cost of living and that the relative increase in their real wage may be smaller than the relative increase in their nominal wage. To measure the college premium in real terms, I deflate nominal wages using a new CPI that allows for changes in the cost of housing to vary across metropolitan areas and education groups. I find that half of the documented increase in the return to college between 1980 and 2000 disappears when I use real wages. This finding does not appear to be driven by differences in housing quality and is robust to a number of alternative specifications.

Moretti’s takeaway from this is that “the increase in well-being inequality between 1980 and 2000 is smaller than the increase in nominal wage inequality.” I’m a bit more interested in the implications for housing policy, as this seems to suggest that there’s substantial loss of welfare associated with regulatory limits on the creation of new housing supply in high-wage, high-cost metro areas. Allowing central cities and inner suburbs to become denser could substantially reduce the cost of housing in high-cost metros.

Among other things, doing this would allow more non-graduates to be able to afford to live in the high-wage metros that feature large concentrations of college graduates. Certain skillsets that don’t require college degrees are much more valuable if you practice them near where lots of college graduates live. Hairstylists, plumbers, auto mechanics, etc. can all command a higher wage if they have high-wage neighbors since you wind up with clients who can afford to pay top dollar for their services. That works much better, however, if you can afford to move somewhere where there are lots of high earners. And there would be many more such possibilities if we had some denser patterns of living and construction.

Politics

McCain Flack Inadvertently Accuses McCain Of A ’100 Percent Lie’ On Health Care Tax Increase

By ThinkProgress on Oct 4, 2008 at 9:33 am

On Sunday, Sen. John McCain (R-AZ) admitted that his health care plan raises taxes. “[O]nly those with the Cadillac gold-plated health insurance policies today are the ones who might suffer from it,” he claimed. Today, McCain spokesperson Tucker Bounds, however, contradicted McCain, claiming that it is a “100 percent lie” to say that McCain’s health care plan would be a tax increase:

First of all, is John McCain’s health care plan actually effectively would do wonders for the middle class. … Health care would get better. It would be more accessible to middle class families … What is campaign is doing is advertising in complete falsehoods. They’ve said that John McCain wants to tax health care. It is a 100 percent lie.

Watch it:

Bounds claimed that the McCain plan would do “wonders for the middle class.” But, because McCain’s tax credits are indexed to inflation — and not the faster growing cost of health care — his initial $5,000 offering depreciates every year, forcing families to pay more for their health insurance. As a recent CAPAF report states, the largest tax hike falls on the middle class.

For a couple earning $40,000 and paying $13,800 for insurance, “McCain’s new tax credit would cut their taxes by $50 in 2009, but because the credit quickly falls behind rising premiums that are the basis of the current tax break, the family would pay $1,169 more in taxes in 2013…[and] would pay $2,809 more in taxes by 2018”:

graph.jpg

Perhaps this is yet another case of McCain not speaking for the McCain campaign.

Yglesias

Rep. Edwards Blasts McCain on Veterans’ Health

By Matthew Yglesias on Oct 4, 2008 at 9:17 am

During the Presidential debate last week, John McCain made the following puzzling claim about his veterans’ policy:

I know the veterans. I know them well. And I know that they know that I’ll take care of them. And I’ve been proud of their support and their recognition of my service to the veterans. And I love them. And I’ll take care of them. And they know that I’ll take care of them. And that’s going to be my job.

Or, rather, the puzzling thing is that there’s no actual claim about his veterans’ policy here. Just an assertion that he loves veterans and therefore veterans know he’ll take care of them. In fact, veterans groups are deeply concerned about the specific proposals McCain has put forward on veterans health care. Vice President Representative Chet Edwards was in the office last week and talked about this:

Igor Volsky has more.

Climate Progress

Moderate Senate Dems build ‘Gang of 16′ to influence cap-and-trade bill

By Joe Romm on Oct 4, 2008 at 7:54 am

E&E Daily has the story:

Moderate Senate Democrats with close ties to business and organized labor are aiming to take charge of the global warming debate next year.

The “Gang of 16″ represents a critical cross-section of industries and interest groups, including labor, agriculture, coal and manufacturing, setting up an intriguing political dynamic for the next administration and even some of their own party colleagues who typically side with environmental groups. The lawmakers come from the Midwest and Rust Belt and also extend into the Rocky Mountain states…..

Hours after the Senate climate bill was pulled from the floor, 10 of the senators fired off a letter to Boxer and Senate Majority Leader Harry Reid (D-Nev.) outlining their reservations. The group said they would not have supported final passage of the legislation and warned that cap and trade was “perhaps the most significant endeavor undertaken by Congress in over 70 years and must be done with great care.”

Signing the letter were Sens. Debbie Stabenow and Carl Levin of Michigan, John Rockefeller of West Virginia, Blanche Lincoln and Mark Pryor of Arkansas, Jim Webb of Virginia, Evan Bayh of Indiana, Claire McCaskill of Missouri, Sherrod Brown of Ohio and Ben Nelson of Nebraska.

In the four months since the Senate floor debate, staff to another half dozen senators — Jeff Bingaman of New Mexico, Robert Byrd of West Virginia, Kent Conrad and Byron Dorgan of North Dakota, Tim Johnson of South Dakota and Ken Salazar of Colorado — have joined the meetings to get a better grip on global warming policy.

Certainly, this Gang of 16 will be a critical “coalition that must be heard if a cap-and-trade bill can net the 60 votes needed to beat a filibuster.” Some of the demands of this Gang are problematic:

Read more

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