Weekly Economic Snapshot 3/6 - 3/10

Economic Facts for this Week

• Seventy percent of the benefits from President Trump’s childcare proposals would go to families earning at least $100,000, and 25 percent of benefits would go to families earning at least $200,000, according to new analysis from the Urban Institute.
• President Trump said he would pay for his proposed $54 billion increase in defense spending by cutting non-defense discretionary (NDD) spending, already near historic lows. NDD is below its average level from 1962 to 2015 as a percentage of gross domestic product, has fallen steadily since 2010, and is projected to hit a record low in 2018.
• According to the conservative Tax Foundation, President Trump’s tax plan would reduce federal revenue by at least $2.6 trillion over the next decade largely by giving breaks to the top 1 percent. The top 1 percent would see an increase in after-tax income of at least 12.2 percent. These estimates assume his actions stimulate the economy (“dynamic scoring”) and show that even Republican promises of economic growth won’t be enough to overcome the fiscal hole it creates.
• Cuts in programs because of sequestration are already beginning to hurt Americans: for instance, federal funding for preschool and K-12 programs shrunk by 13 percent from 2010 to 2015 (adjusted for inflation).

Chart of the Week:

 

President Trump’s proposal to cut domestic non-defense discretionary (NDD) spending by $54 billion would result in a face value cut of about 10 percent to programs. Accounting for inflation and enacted increases in Veterans Affairs health funding and flat funding to the Department of Homeland Security results in an even higher cut of 25 percent to other NDD programs.  These programs fund important initiatives like cancer research, air traffic control, the Coast Guard, the National Highway System, Head Start, WIC (funding for food for women, infants, and children), NASA’s space exploration, and the FBI, among others. As Representative Tom Cole, chair of the House appropriations subcommittee for education, labor and health programs, said, reflecting on the $18 to $20 billion in cuts likely for those programs, “There’s no part of this budget that can escape unscathed if we have $18 to $20 billion in reductions.”

ICYMI

• Local economic conditions affect the likelihood of opioid abuse: new research finds that for every 1 percentage point increase in the unemployment rate, the opioid death rate rises by 3.6 percent and the rate of emergency department visits for opioid overdoses rises by 7.0 percent.
• New research shows that allowing the economy to “run hot” (i.e. not raising rates in response to the unemployment rate falling below its natural point) can help workers weather recessions. The paper says that “the hotter the state's prerecession economy, the lower the impact of the recession on workers' probability of unemployment.” This research has implications for the Federal Reserve’s decision on when to raise rates.
• High levels of financial concentration (i.e. fewer, larger banks) can make an economy susceptible to large fluctuations: new research finds that between 1990 and 2010, 30 to 40 percent of the investment rate in Japan (where the banking sector is highly concentrated) can be explained by idiosyncratic bank shocks. The American financial sector is currently highly concentrated: eight global systemically important American banks control nearly three-quarters of U.S. banking system assets.

Coming This Week

• Tuesday 8:30am: U.S. International Trade in Goods and Service for January - https://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm
• Friday 8:30am: Employment Situation for February (Jobs Numbers) - https://www.bls.gov/news.release/empsit.nr0.htm