Friday, November 21, 2014

New Politico op-ed: "What happened to Warren the watchdog?"

Jason Delisle and I have an op-ed in Politico's magazine that expands on some of the themes we developed in our National Affairs article back in September. This time we contrast Elizabeth Warren’s former role as government watchdog—in which she pointed out that TARP imposed costly market risk on taxpayers—with her current role as evangelist for federal student loans, in which she ignores the cost of market risk. 

Here's a sample:
...[B]efore joining Congress, Elizabeth Warren was a tenacious government watchdog. She charged that the Troubled Asset Relief Program, created in the wake of the 2008 recession, was exposing taxpayers to risky investments and thereby imposing costs that the feds were low-balling. She wrote letters, published reports, testified before Congress and demanded answers from tight-lipped administration officials. It was an admirable performance.

But then she became a politician, herself. In advocating for enhancing the federal student loan program, the now-senator from Massachusetts has taken the other side of her own argument, completely disregarding the cost of market risk. And she’s not alone in her inconsistency. Government accounting has become a political tool with politicians selectively hiding or exposing costs, depending on whether they support the program in question.
Read the whole thing there. I also referenced the op-ed in a recent blog post for National Review.

A couple of days after our op-ed was posted, Jared Bernstein wrote a response piece titled, "Don't pick on Elizabeth Warren." At first he seems to mount a defense of her inconsistency by saying that she was merely following the law, which requires that TARP receive a different accounting treatment than student loans. But then he concedes that this defense really isn't valid, since Warren has been enthusiastic about her advocacy in both cases. His remaining points are standard critiques of fair-value accounting that we addressed in our National Affairs article.

There is room for some agreement, however. Bernstein writes: "Yes, we fight about some weird stuff in D.C." I'll second that one.

Wednesday, November 19, 2014

The value of a college major... in the American Community Survey

Administrators of the enormously useful Integrated Public Use Microdata Series (IPUMS) web site sent an email this week warning of changes to the American Community Survey (ACS), which is a mini-Census conducted each year. Specifically, the Census Bureau is proposing to eliminate ACS questions dealing with marital history and college majors. IPUMs administrators, who streamline the ACS (and other datasets) for easy use by researchers, are concerned about the loss of those questions.

It's not my place to declare what the Bureau should do with its limited budget. I obviously haven't performed the cost-benefit analyses needed to determine which ACS questions should stay and which should go.

But, cost aside, the ACS question about college majors is valuable to researchers. Labor economists in particular are forever looking for a robust measure of human capital. Knowing whether a person graduated from college is useful, but it's even more useful to know the field the person studied. After all, workers with engineering diplomas are likely to possess more valuable skills (in terms of both knowledge and raw ability) than workers who studied, say, nineteenth-century French poetry.

Without a strong measure of human capital, it's difficult to investigate questions about the returns to education. It's also difficult to match workers with similar skills. When Andrew Biggs and I analyzed the wages of public- versus private-sector workers, we did our best to generate an apples-to-apples comparison by controlling for human capital differences. We discovered that controlling for college major -- as opposed to controlling only for college graduation -- made a significant difference in our results.

The table above comes from our analysis of Gov. Scott Walker's public-sector reforms in Wisconsin. It shows the wage premium (a positive value) or wage penalty (a negative value) associated with working for the Wisconsin state government relative to the private sector. The premium/penalty varies depending on the dataset and the skills controlled for. But notice the difference between the last two rows. The premium is 1.0 percent when using the standard controls along with PUMAs (geographic areas). But the premium goes up to 5.6 percent when degree fields are included.

Apparently, Wisconsin state workers tend to hold college degrees in fields that are less valuable than the degrees held by college grads in the private sector, with obvious implications for a pay comparison. That's the kind of result that we would not be able to observe in future years if the ACS changes go through.

Monday, November 17, 2014

The problem with big tents

John Fund has a piece for NRO (where I’m a contributor) titled, “More Non-White Voters for the GOP.” I’m not as optimistic as he is. The improvement in the Asian vote -- 58-40 for Democrats in the 2010 midterm, but 50-49 for Republicans in 2014 – is dubious given the tiny exit poll samples. And if there was any significant change among Hispanic voters, it was away from the GOP: 60-38 for Democrats in 2010, now 62-36 in 2014.

Let’s also remember that the major challenge of coalition building is adding without subtracting. It would be great if Republicans could add more minority voters, ceteris paribus. But as the perennial debate over whether the GOP should emphasize economic or social issues demonstrates, appealing too much to one group can alienate another.

I’m not saying that ethnic voting blocs must necessarily line up against each other, but elections often seem to shake out that way. The Florida governor’s race might be one such example. Fund writes:
Republicans suffered a Florida, where incumbent GOP governor Rick Scott’s share of the Hispanic vote fell from 50 percent in 2010 to 38 percent this year. Scott won the election in both 2010 and 2014 by a single point, which makes demographic comparisons easy — and troubling for Republicans.
Left unstated, perhaps because it’s mathematically obvious, is that Gov. Scott was still able to win in 2014 because he increased his share of the white vote enough to wash out his losses among Hispanics. This is consistent with Sean Trende's observation that demographic change may not doom the GOP as long as working-class whites respond by abandoning the Democrats. Whether this is a sustainable or desirable strategy for Republicans, I don’t know. But the trade-off is evident.