the 2016 election policy threesome: inequality, trade...
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The 2016 Election Policy Threesome: Inequality,Trade Shocks, and Monetary Policy
Douglas L. Campbell
Assistant Professor, New Economic School
Democrats Abroad SeminarMarch, 2016
Douglas L. Campbell Inequality, Trade, and Money 1 / 44
(Select) Major Election 2016 Policy Issues
Inequality. Rise of the 1%.Trade. Free trade the enemy?Monetary Policy.Other main election economic policy issues: cleanenergy/Immigration/free college education/single payer/minimumwage/infrastructure investment/Social Security – are either farfrom my specialty, or not so interesting to discuss.
Douglas L. Campbell Inequality, Trade, and Money 2 / 44
(Select) Major Election 2016 Policy Issues
Inequality. Rise of the 1%.Trade. Free trade the enemy?Monetary Policy.Other main election economic policy issues: cleanenergy/Immigration/free college education/single payer/minimumwage/infrastructure investment/Social Security – are either farfrom my specialty, or not so interesting to discuss.
Douglas L. Campbell Inequality, Trade, and Money 2 / 44
(Select) Major Election 2016 Policy Issues
Inequality. Rise of the 1%.Trade. Free trade the enemy?Monetary Policy.Other main election economic policy issues: cleanenergy/Immigration/free college education/single payer/minimumwage/infrastructure investment/Social Security – are either farfrom my specialty, or not so interesting to discuss.
Douglas L. Campbell Inequality, Trade, and Money 2 / 44
(Select) Major Election 2016 Policy Issues
Inequality. Rise of the 1%.Trade. Free trade the enemy?Monetary Policy.Other main election economic policy issues: cleanenergy/Immigration/free college education/single payer/minimumwage/infrastructure investment/Social Security – are either farfrom my specialty, or not so interesting to discuss.
Douglas L. Campbell Inequality, Trade, and Money 2 / 44
The Rise of Inequality, the US
10
15
20
25
0
5top 10 - 5
top 1
*Data from Piketty/Saez World Top Incomes Database
Douglas L. Campbell Inequality, Trade, and Money 3 / 44
Theories on the Rise of Inequality
Skill-Biased Technological Change. Robots.Trade Shocks. Rise of China. NAFTA.Labor Market Institutions – Especially top marginal tax rates, andthe mimimum wageOthers: Education (supply of skilled workers). Increasingrent-seeking/monopolization (Robert Reich)
Douglas L. Campbell Inequality, Trade, and Money 4 / 44
Theories on the Rise of Inequality
Skill-Biased Technological Change. Robots.Trade Shocks. Rise of China. NAFTA.Labor Market Institutions – Especially top marginal tax rates, andthe mimimum wageOthers: Education (supply of skilled workers). Increasingrent-seeking/monopolization (Robert Reich)
Douglas L. Campbell Inequality, Trade, and Money 4 / 44
Theories on the Rise of Inequality
Skill-Biased Technological Change. Robots.Trade Shocks. Rise of China. NAFTA.Labor Market Institutions – Especially top marginal tax rates, andthe mimimum wageOthers: Education (supply of skilled workers). Increasingrent-seeking/monopolization (Robert Reich)
Douglas L. Campbell Inequality, Trade, and Money 4 / 44
Theories on the Rise of Inequality
Skill-Biased Technological Change. Robots.Trade Shocks. Rise of China. NAFTA.Labor Market Institutions – Especially top marginal tax rates, andthe mimimum wageOthers: Education (supply of skilled workers). Increasingrent-seeking/monopolization (Robert Reich)
Douglas L. Campbell Inequality, Trade, and Money 4 / 44
Paul Krugman’s “Chart of the Year” for 2014
From Lakner and Milanovic (2013)
Douglas L. Campbell Inequality, Trade, and Money 5 / 44
US, Trade vs. Inequality
510
1520
Top
1%
Inco
me
Sha
re
0.0
5.1
.15
1900 1925 1950 1975 2000
Imports/GDP Exports/GDPTop 1% Income Share
Douglas L. Campbell Inequality, Trade, and Money 6 / 44
The Rise of Inequality, Anglo Countries
.05
.1.1
5.2
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
USA UKAustralia
*Data from Piketty/Saez World Top Incomes Database
Douglas L. Campbell Inequality, Trade, and Money 7 / 44
Top 1% Share of Income, Other Countries
.05
.1.1
5.2
.25
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
France GermanyJapan
Douglas L. Campbell Inequality, Trade, and Money 8 / 44
France, Trade vs. Inequality
510
1520
Top
1%
Inco
me
Sha
re
.05
.1.1
5.2
.25
1900 1925 1950 1975 2000
Imports/GDP Exports/GDPTop 1% Income Share
Douglas L. Campbell Inequality, Trade, and Money 9 / 44
Skill-Biased Technological Change?
.05
.1.1
5.2
.25
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
France GermanyJapan
Douglas L. Campbell Inequality, Trade, and Money 10 / 44
Skill-Biased Technological Change? Increasing Returns to College Education?
6
8
10
12
0
2
4
1913 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013
Top 1 - .1
Top .1%
Douglas L. Campbell Inequality, Trade, and Money 11 / 44
US
0.2
.4.6
.81
Top
Mar
gina
l Tax
Rat
e
.05
.1.1
5.2
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 14 / 44
UK
0.2
.4.6
.81
Top
Mar
gina
l Tax
Rat
e
.05
.1.1
5.2
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 15 / 44
Australia
0.2
.4.6
.81
Top
Mar
gina
l Tax
Rat
e
.04
.06
.08
.1.1
2.1
4T
op 1
% S
hare
of I
ncom
e
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 16 / 44
Germany
0.2
.4.6
.81
Top
Mar
gina
l Tax
Rat
e
.05
.1.1
5.2
.25
Top
1%
Sha
re o
f Inc
ome
1890 1910 1930 1950 1970 1990 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 17 / 44
France
0.2
.4.6
.81
Top
Mar
gina
l Tax
Rat
e
.05
.1.1
5.2
Top
1%
Sha
re o
f Inc
ome
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 18 / 44
Japan
.2.4
.6.8
1T
op M
argi
nal T
ax R
ate
.05
.1.1
5.2
Top
1%
Sha
re o
f Inc
ome
1910 1930 1950 1970 1990 2010
Top 1% Share of Income Top Marginal Tax Rate
Douglas L. Campbell Inequality, Trade, and Money 19 / 44
Top Marginal Tax Rates and the Top 1% Share of Income: Sweden
0.2
.4.6
.8T
op M
argi
nal T
ax R
ate
.05
.1.1
5.2
.25
.3T
op 1
% S
hare
of I
ncom
e
1910 1930 1950 1970 1990 2010
Top 1% Share of Income Top Marginal Tax Rate
Notes: 1% Share and Top MTR data from the World Top Incomes Database,supplemented with other sources
Douglas L. Campbell Inequality, Trade, and Money 20 / 44
Inequality: Summing Up
Changes in the top marginal tax rate almost certainly droveincreases in the Top 1% share of income(Piketty/Saez/Stantcheva 2013, Campbell/Lusher 2016)
This operates in part via bargaining, which is why changes in thetop MTR affect the trajectory of the top 1% share. Implication:Raise top rates!Caveats – likely small impact on labor supply but possibly largerimpact on avoidance. Implication: Go after loopholes (carriedinterest).We also know that trends in CEO pay largely explained by luck(Bertrand and Mullainathan, 2001)
Douglas L. Campbell Inequality, Trade, and Money 21 / 44
Inequality: Summing Up
Changes in the top marginal tax rate almost certainly droveincreases in the Top 1% share of income(Piketty/Saez/Stantcheva 2013, Campbell/Lusher 2016)
This operates in part via bargaining, which is why changes in thetop MTR affect the trajectory of the top 1% share. Implication:Raise top rates!Caveats – likely small impact on labor supply but possibly largerimpact on avoidance. Implication: Go after loopholes (carriedinterest).We also know that trends in CEO pay largely explained by luck(Bertrand and Mullainathan, 2001)
Douglas L. Campbell Inequality, Trade, and Money 21 / 44
Inequality: Summing Up
Changes in the top marginal tax rate almost certainly droveincreases in the Top 1% share of income(Piketty/Saez/Stantcheva 2013, Campbell/Lusher 2016)
This operates in part via bargaining, which is why changes in thetop MTR affect the trajectory of the top 1% share. Implication:Raise top rates!Caveats – likely small impact on labor supply but possibly largerimpact on avoidance. Implication: Go after loopholes (carriedinterest).We also know that trends in CEO pay largely explained by luck(Bertrand and Mullainathan, 2001)
Douglas L. Campbell Inequality, Trade, and Money 21 / 44
Inequality: Summing Up
Changes in the top marginal tax rate almost certainly droveincreases in the Top 1% share of income(Piketty/Saez/Stantcheva 2013, Campbell/Lusher 2016)
This operates in part via bargaining, which is why changes in thetop MTR affect the trajectory of the top 1% share. Implication:Raise top rates!Caveats – likely small impact on labor supply but possibly largerimpact on avoidance. Implication: Go after loopholes (carriedinterest).We also know that trends in CEO pay largely explained by luck(Bertrand and Mullainathan, 2001)
Douglas L. Campbell Inequality, Trade, and Money 21 / 44
Inequality: Summing Up
Changes in the top marginal tax rate almost certainly droveincreases in the Top 1% share of income(Piketty/Saez/Stantcheva 2013, Campbell/Lusher 2016)
This operates in part via bargaining, which is why changes in thetop MTR affect the trajectory of the top 1% share. Implication:Raise top rates!Caveats – likely small impact on labor supply but possibly largerimpact on avoidance. Implication: Go after loopholes (carriedinterest).We also know that trends in CEO pay largely explained by luck(Bertrand and Mullainathan, 2001)
Douglas L. Campbell Inequality, Trade, and Money 21 / 44
Inequality: Summing Up
No Evidence that Trade Liberalization affects the Top 1% Share ofIncome...
Trade Imbalances not correlatedImports/GDP not correlatedTrade with China/Developing Countries not correlated
A caveat: There is some evidence that the Rise of China hadcompositional effects on Workers (Autor/Dorn/Hanson/Song,2014) using Social Security dataCPS MORG data tell a slightly different story – manufacturingworkers with no college but high wages suffered the most(Campbell, 2016)Little Evidence for Skill-Biased Technological Change or Robots.No hard evidence for the Reich thesis
Douglas L. Campbell Inequality, Trade, and Money 22 / 44
Inequality: Summing Up
No Evidence that Trade Liberalization affects the Top 1% Share ofIncome...
Trade Imbalances not correlatedImports/GDP not correlatedTrade with China/Developing Countries not correlated
A caveat: There is some evidence that the Rise of China hadcompositional effects on Workers (Autor/Dorn/Hanson/Song,2014) using Social Security dataCPS MORG data tell a slightly different story – manufacturingworkers with no college but high wages suffered the most(Campbell, 2016)Little Evidence for Skill-Biased Technological Change or Robots.No hard evidence for the Reich thesis
Douglas L. Campbell Inequality, Trade, and Money 22 / 44
Inequality: Summing Up
No Evidence that Trade Liberalization affects the Top 1% Share ofIncome...
Trade Imbalances not correlatedImports/GDP not correlatedTrade with China/Developing Countries not correlated
A caveat: There is some evidence that the Rise of China hadcompositional effects on Workers (Autor/Dorn/Hanson/Song,2014) using Social Security dataCPS MORG data tell a slightly different story – manufacturingworkers with no college but high wages suffered the most(Campbell, 2016)Little Evidence for Skill-Biased Technological Change or Robots.No hard evidence for the Reich thesis
Douglas L. Campbell Inequality, Trade, and Money 22 / 44
Inequality: Summing Up
No Evidence that Trade Liberalization affects the Top 1% Share ofIncome...
Trade Imbalances not correlatedImports/GDP not correlatedTrade with China/Developing Countries not correlated
A caveat: There is some evidence that the Rise of China hadcompositional effects on Workers (Autor/Dorn/Hanson/Song,2014) using Social Security dataCPS MORG data tell a slightly different story – manufacturingworkers with no college but high wages suffered the most(Campbell, 2016)Little Evidence for Skill-Biased Technological Change or Robots.No hard evidence for the Reich thesis
Douglas L. Campbell Inequality, Trade, and Money 22 / 44
Inequality: Summing Up
No Evidence that Trade Liberalization affects the Top 1% Share ofIncome...
Trade Imbalances not correlatedImports/GDP not correlatedTrade with China/Developing Countries not correlated
A caveat: There is some evidence that the Rise of China hadcompositional effects on Workers (Autor/Dorn/Hanson/Song,2014) using Social Security dataCPS MORG data tell a slightly different story – manufacturingworkers with no college but high wages suffered the most(Campbell, 2016)Little Evidence for Skill-Biased Technological Change or Robots.No hard evidence for the Reich thesis
Douglas L. Campbell Inequality, Trade, and Money 22 / 44
How About Trade?
Progressives’ skepticism of FTAs often portrayed as idiocy orpandering to labor unions. Don’t you understand comparativeadvantage?
Anti-free trade Trump: Just zenophobic?
Bashing trade is now quite popular on the campaign trail...
In Michigan, only 30% of Democratic primary voters believe tradecreates US jobs (Clinton won these, 54-44), while 57% believe ittakes away jobs (Sanders won these 56-41).
Douglas L. Campbell Inequality, Trade, and Money 23 / 44
How About Trade?
Progressives’ skepticism of FTAs often portrayed as idiocy orpandering to labor unions. Don’t you understand comparativeadvantage?
Anti-free trade Trump: Just zenophobic?
Bashing trade is now quite popular on the campaign trail...
In Michigan, only 30% of Democratic primary voters believe tradecreates US jobs (Clinton won these, 54-44), while 57% believe ittakes away jobs (Sanders won these 56-41).
Douglas L. Campbell Inequality, Trade, and Money 23 / 44
How About Trade?
Progressives’ skepticism of FTAs often portrayed as idiocy orpandering to labor unions. Don’t you understand comparativeadvantage?
Anti-free trade Trump: Just zenophobic?
Bashing trade is now quite popular on the campaign trail...
In Michigan, only 30% of Democratic primary voters believe tradecreates US jobs (Clinton won these, 54-44), while 57% believe ittakes away jobs (Sanders won these 56-41).
Douglas L. Campbell Inequality, Trade, and Money 23 / 44
How About Trade?
Progressives’ skepticism of FTAs often portrayed as idiocy orpandering to labor unions. Don’t you understand comparativeadvantage?
Anti-free trade Trump: Just zenophobic?
Bashing trade is now quite popular on the campaign trail...
In Michigan, only 30% of Democratic primary voters believe tradecreates US jobs (Clinton won these, 54-44), while 57% believe ittakes away jobs (Sanders won these 56-41).
Douglas L. Campbell Inequality, Trade, and Money 23 / 44
How About Trade?
Is there any truth to the view of voters that free trade has beenbad for them?
Yes. It may be even worse than Bernie/Trump says...
And, if so, does this mean that we should try to reverse NAFTAand pNTR with China?
No. Though I would try to “make a better deal” with China. I wouldnot touch NAFTA though. Let me explain...
Douglas L. Campbell Inequality, Trade, and Money 24 / 44
How About Trade?
Is there any truth to the view of voters that free trade has beenbad for them?
Yes. It may be even worse than Bernie/Trump says...
And, if so, does this mean that we should try to reverse NAFTAand pNTR with China?
No. Though I would try to “make a better deal” with China. I wouldnot touch NAFTA though. Let me explain...
Douglas L. Campbell Inequality, Trade, and Money 24 / 44
How About Trade?
Is there any truth to the view of voters that free trade has beenbad for them?
Yes. It may be even worse than Bernie/Trump says...
And, if so, does this mean that we should try to reverse NAFTAand pNTR with China?
No. Though I would try to “make a better deal” with China. I wouldnot touch NAFTA though. Let me explain...
Douglas L. Campbell Inequality, Trade, and Money 24 / 44
How About Trade?
Is there any truth to the view of voters that free trade has beenbad for them?
Yes. It may be even worse than Bernie/Trump says...
And, if so, does this mean that we should try to reverse NAFTAand pNTR with China?
No. Though I would try to “make a better deal” with China. I wouldnot touch NAFTA though. Let me explain...
Douglas L. Campbell Inequality, Trade, and Money 24 / 44
The Collapse in Manufacturing Employment
2%
4%
6%
8%
10%
12%
10
12
14
16
18
20
22
1960 1970 1980 1990 2000 2010
Millions Share
American Manufacturing Employment
employment
(left axis)
share of population
(right axis)
1960 1970 1980 1990 2000 2010
Autor, Dorn, Hanson (2013) and Campbell (2013, 2016) suggest collapse due to trade
Douglas L. Campbell Inequality, Trade, and Money 25 / 44
Real Exchange Rates and Trade
.81
1.2
1.4
RE
R In
dice
s
−.0
4−
.02
0.0
2G
oods
Tra
de B
alan
ce e
x−O
il, S
hare
of G
DP
1950 1960 1970 1980 1990 2000 2010
Goods Trade Balance ex−Oil, Share of GDP WARPDivisia (CPI)
Note: WARP is a measure of the trade-weighted Real Exchange Rate for the US
Douglas L. Campbell Inequality, Trade, and Money 26 / 44
The Rise of China (which has lifted millions of people out of poverty)
Douglas L. Campbell Inequality, Trade, and Money 27 / 44
Adverse Trade Shocks: RER Movements
11.
11.
21.
31.
41.
5W
eigh
ted
Ave
rage
Rel
ativ
e U
nit L
abor
Cos
ts
11.
52
Impo
rt P
enet
ratio
n/E
xpor
t Sha
re
1975 1980 1985 1990 1995 2000 2005 2010
Import Pen./Export Share WARULC
Notes: WARULC = Weighted Average Relative Unit Labor Costs (from Campbell, 2015), ImportPenetration = Imports/(Shipments + Imports - Exports); Export Share = Exports/Shipments
Douglas L. Campbell Inequality, Trade, and Money 29 / 44
Adverse Trade Shocks: RER Movements, Impact on Employment
11.
11.
21.
31.
41.
5W
AR
ULC
8590
9510
010
511
0
1972 1976 1980 1984 1988 1992 1996
Most Open: Top 25% Least Open: Bottom 50%2 s.d. Error Bounds Rel. ULC Index
Notes: WARULC = Weighted Average Relative Unit Labor Costs, Import Penetration =Imports/(Shipments + Imports - Exports); Export Share = Exports/Shipments
Douglas L. Campbell Inequality, Trade, and Money 30 / 44
Adverse Trade Shocks: RER Movements, Impact on Employment
11.
11.
21.
31.
4W
AR
ULC
8090
100
110
120
1989 1992 1995 1998 2001 2004 2007 2010
Most Open: Top 25% Least Open: Bottom 50%2 s.d. Error Bounds Rel. ULC Index
Notes: WARULC = Weighted Average Relative Unit Labor Costs, Import Penetration =Imports/(Shipments + Imports - Exports); Export Share = Exports/Shipments
Douglas L. Campbell Inequality, Trade, and Money 31 / 44
Exposure to Import Competition and Employment Growth, by Sector
−2
−1
01
−.2 0 .2 .4 .6Change in Import Penetration, 1995−2005
Log 10 year change, Employment Fitted values
Notes: Import Penetration = Imports/Shipments + Imports - Exports
Douglas L. Campbell Inequality, Trade, and Money 32 / 44
Manufacturing Jobs Exposed to Import Competition, 1979
These areas suffered declines in wages, employment, population,and increases in disability benefitsThe evidence suggests that areas worst hit by import competitionnever recover
Douglas L. Campbell Inequality, Trade, and Money 33 / 44
Manufacturing Jobs Exposed to Import Competition, 1979
These areas suffered declines in wages, employment, population,and increases in disability benefitsThe evidence suggests that areas worst hit by import competitionnever recover
Douglas L. Campbell Inequality, Trade, and Money 33 / 44
Manufacturing Jobs Exposed to Import Competition, 1979
These areas suffered declines in wages, employment, population,and increases in disability benefitsThe evidence suggests that areas worst hit by import competitionnever recover
Douglas L. Campbell Inequality, Trade, and Money 33 / 44
Estimates of the Total Jobs Lost
China,
Direct
China, Add
IO Linkages
All Shocks,
Direct
All Shocks, Add
IO Linkages
All Shocks,
Add Local
Impact
Acemoglu/Autor/Dorn/Hanson, 2015 0.85 1.4 3.0
Campbell, 2016 1.6 2.7* 2.9 4.8* 10.3*
Bernie Sanders, Campaign Literature 3.0
Estimates of Total Jobs Lost Due to Trade Competition
Estimates (Millions) of Total Job Losses due to:
*Indicates that the Campbell direct estimates are combined with the AADH multipliers
Notes: Acemoglu et al. used an extremely conservative methodology tocalculate the total jobs lost.Campbell’s estimates include exchange rate movements, end of MFAquotas, and China’s accession to the WTO
Douglas L. Campbell Inequality, Trade, and Money 34 / 44
Estimates of the Total Jobs Lost
China,
Direct
China, Add
IO Linkages
All Shocks,
Direct
All Shocks, Add
IO Linkages
All Shocks,
Add Local
Impact
Acemoglu/Autor/Dorn/Hanson, 2015 0.85 1.4 3.0
Campbell, 2016 1.6 2.7* 2.9 4.8* 10.3*
Bernie Sanders, Campaign Literature 3.0
Estimates of Total Jobs Lost Due to Trade Competition
Estimates (Millions) of Total Job Losses due to:
*Indicates that the Campbell direct estimates are combined with the AADH multipliers
Notes: Acemoglu et al. used an extremely conservative methodology tocalculate the total jobs lost.Campbell’s estimates include exchange rate movements, end of MFAquotas, and China’s accession to the WTO
Douglas L. Campbell Inequality, Trade, and Money 34 / 44
Estimates of the Total Jobs Lost
China,
Direct
China, Add
IO Linkages
All Shocks,
Direct
All Shocks, Add
IO Linkages
All Shocks,
Add Local
Impact
Acemoglu/Autor/Dorn/Hanson, 2015 0.85 1.4 3.0
Campbell, 2016 1.6 2.7* 2.9 4.8* 10.3*
Bernie Sanders, Campaign Literature 3.0
Estimates of Total Jobs Lost Due to Trade Competition
Estimates (Millions) of Total Job Losses due to:
*Indicates that the Campbell direct estimates are combined with the AADH multipliers
Notes: Acemoglu et al. used an extremely conservative methodology tocalculate the total jobs lost.Campbell’s estimates include exchange rate movements, end of MFAquotas, and China’s accession to the WTO
Douglas L. Campbell Inequality, Trade, and Money 34 / 44
But, wait. It gets worse...
1 Small trade shocks probably have no aggregate jobs impact. The Feddecides aggregate employment.
2 But, rise of China, RER movements, and the Great Reserve Accumulationled to...
3 The Collapse in Manufacturing and low interest rates. Fueled the housingbubble.
4 Thanks to poor regulation, when the bubble burst, this led to the worldfinancial crisis, the Great Recession, a liquidity trap, and a slow-growthtrajectory
5 The Federal Reserve (and other central banks), have not been veryaggressive about getting the US economy back on its long-run growthpath.
Douglas L. Campbell Inequality, Trade, and Money 37 / 44
But, wait. It gets worse...
1 Small trade shocks probably have no aggregate jobs impact. The Feddecides aggregate employment.
2 But, rise of China, RER movements, and the Great Reserve Accumulationled to...
3 The Collapse in Manufacturing and low interest rates. Fueled the housingbubble.
4 Thanks to poor regulation, when the bubble burst, this led to the worldfinancial crisis, the Great Recession, a liquidity trap, and a slow-growthtrajectory
5 The Federal Reserve (and other central banks), have not been veryaggressive about getting the US economy back on its long-run growthpath.
Douglas L. Campbell Inequality, Trade, and Money 37 / 44
But, wait. It gets worse...
1 Small trade shocks probably have no aggregate jobs impact. The Feddecides aggregate employment.
2 But, rise of China, RER movements, and the Great Reserve Accumulationled to...
3 The Collapse in Manufacturing and low interest rates. Fueled the housingbubble.
4 Thanks to poor regulation, when the bubble burst, this led to the worldfinancial crisis, the Great Recession, a liquidity trap, and a slow-growthtrajectory
5 The Federal Reserve (and other central banks), have not been veryaggressive about getting the US economy back on its long-run growthpath.
Douglas L. Campbell Inequality, Trade, and Money 37 / 44
But, wait. It gets worse...
1 Small trade shocks probably have no aggregate jobs impact. The Feddecides aggregate employment.
2 But, rise of China, RER movements, and the Great Reserve Accumulationled to...
3 The Collapse in Manufacturing and low interest rates. Fueled the housingbubble.
4 Thanks to poor regulation, when the bubble burst, this led to the worldfinancial crisis, the Great Recession, a liquidity trap, and a slow-growthtrajectory
5 The Federal Reserve (and other central banks), have not been veryaggressive about getting the US economy back on its long-run growthpath.
Douglas L. Campbell Inequality, Trade, and Money 37 / 44
But, wait. It gets worse...
1 Small trade shocks probably have no aggregate jobs impact. The Feddecides aggregate employment.
2 But, rise of China, RER movements, and the Great Reserve Accumulationled to...
3 The Collapse in Manufacturing and low interest rates. Fueled the housingbubble.
4 Thanks to poor regulation, when the bubble burst, this led to the worldfinancial crisis, the Great Recession, a liquidity trap, and a slow-growthtrajectory
5 The Federal Reserve (and other central banks), have not been veryaggressive about getting the US economy back on its long-run growthpath.
Douglas L. Campbell Inequality, Trade, and Money 37 / 44
In part because of ZLB, Fed has done little. Tightening without inflation
Douglas L. Campbell Inequality, Trade, and Money 40 / 44
Fed Total Assets. Two years in between MP changes...
Douglas L. Campbell Inequality, Trade, and Money 41 / 44
The Fed has decided the economy is sick...
2.5
3
3.5
4
4.5
Actual RGDP Growth vs. Fed's Forecasts
Actual GDP Growth
April, 2009
Forecast
April, 2010 Forecast
April, 2013
April, 2012 Forecast
April, 2011 Forecast
March, 2014
Forecast
March, 2015
1
1.5
2
2010 2011 2012 2013 2014 2015 2016 2017 2018
Actual GDP Growth
Dec., 2015
Douglas L. Campbell Inequality, Trade, and Money 42 / 44
The recent tightening has led to another dollar appreciation...
Douglas L. Campbell Inequality, Trade, and Money 43 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
Conclusions for Policy
1 There was massive harm from trade. But with better regulation/MP,perhaps no aggregate job losses...
2 Presidents need to intervene at times to ensure countries don’t have atrade advantage. Now the Fed is the culprit...
3 Military impact of cutting off trade with China? (Good or bad?)
4 Democratic activists need to focus on monetary policy.Need better appointees (recent choices, e.g., Lael Brainard, much betterthan early Obama-admin appointees – Dan Tarullo/Jeremy Stein/JeromePowell were disasters. How many vacant seats now?)
5 Circa 1998-2007, we should have pressured China hard to devalue. Now,China is actually propping up its own currency.
There are still plenty of issues to push China on. Mostly, these are pushingthe interests of US corporations in China – pirating, facebook in China, etc.
6 Need better trade assistance to regions which have been wrecked by tradeshocks. Create tax havens? Outmigration doesn’t “help” these areas.
Douglas L. Campbell Inequality, Trade, and Money 44 / 44
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