La última carta de Obama

La semana pasada Barack Obama presentó un paquete de medidas para reactivar la demanda de trabajo en los EEUU. Esta probablemente sea su última jugada en el plano económico con miras a la reelección en noviembre del año próximo. Greg Ip resume las medidas en uno de los blogs de The Economist.


Si la reacción de Wall Street luego del anuncio de estas medidas fue negativa se debe a que Obama tuvo la mala suerte de coincidir en su anuncio con la renuncia de Jürgen Stark como economista jefe del Banco Central Europeo. Los mercados interpretaron que esta renuncia presagia más ortodoxia por parte del BCE (Stark era un confeso crítico de las compras recientes de bonos italianos y españoles). Al respecto, hoy Paul Krugman en su columna diaria en el NY Times analiza el rol del BCE en la no resolución de la crisis del euro.

Volviendo al paquete de medidas de Obama, la más esperada y menos controversial (y que por ende tendría asegurada su aprobación en el Congreso), es la extensión y expansión de una reducción de impuestos de seguridad social. Esta medida, que nosotros conocemos bien pues una política similar fue implementada por Domingo Cavallo en 2001 para los aportantes a las AFJP, tiene el objetivo de aumentar el ingreso disponible de los trabajadores y de esta forma incentivar su demanda de consumo.

Decimos extensión pues la rebaja de los impuestos de seguridad social se aprobó en diciembre del año pasado y tenía validez por un año. En marzo de 2009 escribí una nota que envié a Economist’s Voice donde proponía una reducción de estos impuestos que fuese optativa, y compensada intertemporalmente (de forma de no incrementar el total de la deuda pública, explícita e implícita en el sistema de seguridad social). Copio la nota, y la respuesta de Aaron Edlin (que no comprendió que la compensación sería en el futuro, pues de otra forma no se estimularía la demanda agregada). 

Stimulating Consumption through Social Security

After realizing it is in the middle of a “global recession” the world is in panic, or at least suffering from post-traumatic stress disorder. Uncertainty has led to a significant decrease in aggregate demand. At the same time, a deterioration of financial intermediaries’ balance-sheets, and a flight to quality in financial portfolios, produced a severe credit crunch in advanced economies. If a fraction of consumers and firms see their (reduced) demand affected by this increase in credit constraints, this further feeds on aggregate demand.

I propose a simple policy that would have a positive effect on aggregate demand in developed economies where credit constraints are operative. For simplicity I describe it as if it were to be applied in the U.S. The policy consists in giving workers the option of reducing to zero their social security contributions (currently at 6.2 percent of their gross wages) for two years. Employers would continue to contribute, thus this would amount to a one year reduction in total contributions for those that choose the option. They would then either have the option of an actuarially fair reduction in future benefits, or delaying their retirement one year. Near the end of the second year of the program contributions should increase gradually, to smooth the negative impact on demand.

Policy characteristics

This policy achieves three goals. First, it puts money in the pockets of those that want to spend it, since only workers that want to increase their consumption would self-select into the program. Thus it is clear why we need the presence of credit constraints. Otherwise Ricardian equivalence would mean that the reduction in benefits is neutral. Second, because either future benefits are reduced, or contributions are made later in the life-cycle, the policy does not increase aggregate public debt, i.e. including promised benefits. And either the Trust Fund can be used to buffer the temporary decrease in contributions, or public debt can be issued to meet the shortfall in resources.

Finally this policy has a benefit for policymakers. In the middle of widespread uncertainty, existing empirical models of consumer behavior are less helpful to predict the usefulness of stimulus policies. That is probably one of the reasons why some economists predict that a tax cut would not stimulate demand, expecting that the extra funds would be saved instead of being consumed. Others advocate decisive action, e.g. Olivier Blanchard, the current Chief Economist at the IMF, in a recent contribution in The Economist advices governments to “do too much, rather than too little”. The policy I propose makes it very simple to monitor who, and where, is making use of the option, and thus can lead policymakers to better design future policies in case they are needed to further boost the economy.

Design and implementation

How this policy is designed and implemented will affect its final impact on aggregate demand. Even if the project is voted into law by Congress, advertisement of it made in the media, and finally a prospectus received by every worker with their wages, enrolment might still be low due to lack of information, or confusion about the workings of the option proposed. Thus it would be crucial to use the available insights from behavioral economics in the design and implementation of such a policy.

A possibility would be to have the government paying the social security contributions of every worker for one month, then giving the workers the option of keeping contributions at zero for two years. The increase in available income will be noticed by almost everybody raising the awareness on the workings of the program. Furthermore if the choice architecture is designed in such a way that the default option is for benefits to be kept at zero, and opting out thus a conscious choice, the level of enrolment would be higher, and with it the impact of the policy on aggregate demand.

Summary

If in advanced economies aggregate demand is perceived to be depressed, at least in part, by some consumers facing credit constraints, then a policy that increases available income of these consumers will boost aggregate demand. A simple way of achieving this is to give workers the option of a temporary reduction in their contributions to social security. Those that have a high propensity to consume, and are constrained, will choose to use this option and spend the windfall. Since the reduction in current benefits would be matched by either reduced future benefits or increased future contributions, the policy does not increase aggregate public debt, a sensitive issue given the size of the projected budget deficit in the U.S. And by providing policymakers with information on those exercising the option (e.g. socio-economic and demographic characteristics of individuals, geographic concentration of those credit constrained), uncertainty is reduced, allowing a better design of future policies.

References and further reading

Blanchard, Olivier (2009) “(Nearly) nothing to fear but fear itself”, The Economist, January 29th

Acknowledgements

I want to thank Olivier Blanchard, Enrique Kawamura, and Dirk Niepelt for helpful comments.

This is a smart piece, and not far from our bar, but I think in the end, I can’t take it.  Others have proposed eliminating social security contributions for a while, which I think would have been sensible and powerful stimulus.  In my own view the added complications you have of making it optional and trying to balance out the social security expenditure now, rather than forwarding the date of its insolvency seem to reduce the power of the program and complicate the discussion.

2 respuestas a La última carta de Obama

  1. Leandro dice:

    Me impresionó el agradecimiento a Olivier Blanchard. ¿Le escribiste y te contestó así nomás? Aparte ¿porqué decís que esta es la última carta de Obama? Tengo entendido que la Reseva Federal estaría considerando hacer una ampliación del programa de expansión cuantitativa. Saludos.

    • mgeiras dice:

      Leandro, Blanchard fue el supervisor de mi tesis de doctorado en MIT. Es cierto que la Fed podría ayudar con una ronda más de expansión monetaria, pero en principio la Fed es independiente de la administración de Obama. Además me parece que hay poco margen para que el Congreso, con una cámara dominada por los republicanos, apruebe un paquete de estímulo fiscal en un año electoral. Por eso digo que esta es “la última carta” de Obama, que además hay que ver si es aprobada (o mejor dicho que partes del proyecto son aprobadas). Saludos.

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