The Dish

Drum translates yesterday’s Fed decision to continue monetary stimulus:

The bottom line is simple: If Republicans really want to see monetary policy get back to normal, they need to stop sabotaging the economy with spending cuts and debt ceiling debacles. If they do that, the recovery will strengthen and the Fed will no longer be forced to sustain loose monetary policy as a way of offsetting stupid fiscal policy.

Soltas weighs in:

Here’s the most important thing anybody can tell you about the taper: It’s not the taper that matters, but the signal the taper sends. By the same logic, the Federal Reserve’s decision today to delay the taper matters little on its own. What counts for everything is the signal: This Fed is committed to restoring vigorous economic growth.

Wolfers argues that the “whole taper debate is one that should never have happened” and that it’s “the result of a failed communication strategy”:

Think back to the June press conference, and you’ll recall Chairman Bernanke signaled that the Fed was thinking about tapering quantitative easing. Taper-talk came to dominate the financial headlines, and a monetary meme was quickly born. The result — as I pointed out at the time–was that markets over-reacted, interpreting the Fed as being less committed to easy monetary policy in the longer run. Long-term interest rates rose, mortgage rates rose, financial conditions tightened. All of this was the result of a needless miscommunication.

Salmon was impressed by the market’s reaction:

If QE does no good, then you might as well not do it. But the lesson we learned on Thursday is that the markets really, really love QE. And insofar as robust markets feed through into a healthier economy, the logical conclusion is that we should retain current policy well into 2014. The downside is limited — and the upside is much bigger than we thought it was.

Barro’s bottom line:

The story of the last five years continues: Fiscal policymakers screw everything up, and the monetary policy authority is the only thing that works. For a guy who’s basically been singlehandedly been keeping the U.S. out of recession, people sure give Ben Bernanke a lot of crap.

Reihan calls Republican Senator Mike Lee’s tax plan “the most promising development in Republican domestic policy in years.” His column explains why he supports the plan:

[T]he heart of the proposal is a new $2,500 per-child tax credit, which can be used to offset payroll taxes as well as income taxes. This is on top of the existing $1,000 child tax credit, which Lee leaves in place, along with a number of other tax benefits for low-income parents. In one stroke, large numbers of middle-income households with children will be removed from the federal income tax rolls altogether.

Lee argues that the current tax code unfairly punishes parents. The solvency of pay-as-you-go entitlement programs like Social Security depends on a steady stream of well-educated new workers. Alas, these new workers do not materialize from thin air. Parents invest considerable time and effort in educating their children and making them workforce-ready. Yet those of us who choose not to raise children are entitled to the same Social Security benefits as those of us who do choose to raise children, and who make enormous sacrifices in the process. Lee’s new per-child tax credit is designed to reduce this bias against parenting, which he describes as an investment in human capital at least as important as the investments savers make in their 401(k)s.

W. Bradford Wilcox also focuses on this feature of the plan:

As sociologist Andrew Cherlin and I wrote in a recent policy brief for the Brookings Institution, a policy move like this is likely to: “increase marriage rates and marital stability among low- and moderate-income families who would benefit from the economic security such a policy would provide to their family finances. It would also signal to them that the nation values the parental investments they are making in the next generation, who—it should be noted—will be helping cover the cost of Social Security and Medicare in the near future.” Indeed, experimental efforts to boost the income of working parents in Minnesota and Wisconsin have been linked to higher marriage rates and lower divorce rates among low-income couples.

Barro praises the plan but takes issue with some of the arguments above:

It seems to me that every generation is, by definition, fiscally neutral: Your kid who will be paying Social Security taxes in 40 years will be attending public school in 10 years and collecting Social Security in 70 years. I don’t really owe you anything, fiscally, for the fact you chose to raise a child.

That said, I favor higher child tax credits for a different and simpler reason: A family of four with an income of $100,000 has a significantly lower standard of living than a family of two with an income of $100,000 and therefore should not be expected to pay as much in tax. I’m with Lee on the policy end even if we don’t agree on the exact rationale.

Drum isn’t a fan of the plan:

[H]is plan leaves the current low capital gains rates and estate tax rates alone (good for the rich) and leaves the current high payroll taxes alone as well (bad for the poor). Put this all together, and the almost certain outcome is that the middle class would pay a little less; the upper middle class would pay somewhat more; and the rich would enjoy a big tax cut. In other words, it’s a pretty standard Republican plan.

Dylan Matthews assesses the plan:

There’s still a lot we don’t know about the plan, like how much revenue it’ll raise (Lee’s aiming for 18-20 percent of GDP but the Joint Committee on Taxation’s score will tell the tale) or its actual distributional outcome (hopefully the Tax Policy Center will run the numbers on that). But since the new child credit would probably increase the number of families not paying any income taxes, it’s an interesting proposal for a Republican to make.

And Yglesias, after discovering the he would get a tax break under Lee’s plan, wants Lee’s numbers to get double-checked:

Now if it’s actually true that you can meet all of Mike Lee’s goals consistent with giving me a small tax cut, then good for him. But I’m suspicious that what we’ve got here is simply a tax plan that doesn’t add up. If Lee wants to collect accolades for this plan, he’s going to need to get it rigorously scored by someone credible.

He really got me on the edit (video after the jump because it’s auto-playing for many readers):

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Google just launched a biotech company, Calico, to combat disease and dramatically extend longevity:

Calico will trying and take a different perspective on medical research by focusing on by using data analysis to solve existing problems. Take cancer, for instance. Cancer kills roughly 7.6 million people per year, according to the Center for Disease Control, and despite millions of dollars poured into research a cure remains elusive. Cancer is a small project in Calico’s greater plan for things. “One of the things I thought was amazing is that if you solve cancer, you’d add about three years to people’s average life expectancy,” Page told Time. “We think of solving cancer as this huge thing that’ll totally change the world. But when you really take a step back and look at it, yeah, there are many, many tragic cases of cancer, and it’s very, very sad, but in the aggregate, it’s not as big an advance as you might think.”

Aubrey de Grey suspects the new company is a turning point:

The “beginning of the beginning” of the war on aging  began in the 1990s. Since then, the battle for hearts and minds as to that quest’s feasibility—especially among the high-profile academics who occupy the pinnacle of opinion-formation—has been proceeding at full tilt. With Google’s decision to direct its astronomical resources to a concerted assault on aging, that battle may have been transcended: once financial limitations are removed, curmudgeons no longer matter.

Sonia Arrison looks at the economic impact of longer and longer lives:

As people work longer and spend money longer, the economy will grow. Health begets wealth, and according to University of Chicago economists Kevin Murphy and Robert Topel, gains in life expectancy over the last decade (30 years) are worth over $1.2 million to the current population. They also found that “from 1970 to 2000, gains in life expectancy added about $3.2 trillion per year to national wealth.” While these numbers are staggering, what might be more important is the issue of longevity gains as a competitive advantage.

In a paper titled “The Health and Wealth of Nations,” Harvard economist David Bloom and Queen’s University economist David Canning explain that, based on the available research, if there are “two countries that are identical in all respects, except that one has a five-year advantage in life expectancy,” then the “real income per capita in the healthier country will grow 0.3–0.5% per year faster than in its less healthy counterpart.” These percentages might look small, but they are actually quite significant, since it is known that between 1965 and 1990 countries experienced an average per capita income growth of 2% per year, and Bloom and Canning’s numbers are based on only a five-year longevity advantage. If a country had a 30 or 50-year advantage then having a longer-lived population could generate enormous differences in economic prosperity.