What do you currently work on? Please state the research question and what you expect to learn from your research.
My research mainly focuses on how households respond to fiscal and monetary policies.
My studies examine macroeconomic effects of their behavioral responses, as well as how responses differ across group of people. Examples of this research are the direct payments (rebates) to people and temporary tax cuts in a recession. With Matthew Shapiro and Joel Slemrod at the University of Michigan I have researched these fiscal policies since 2008. We are currently studying the effects of the 2020 recovery rebates. Our main research question now is whether the Covid-19 public health and economic crisis is altering behaviors relative to the Great Recession. Preliminary results suggest that may be the case. We also document the financial fragility that the severe economic crisis has caused.
In addition, my recent solo-authored work has contributed to rule-based fiscal policy and ways to automatically fight recessions and provide support in the recoveries. I developed a new recession indicator, the so-called Sahm rule, that uses changes in the unemployment rate to automatically trigger for fiscal stabilization policy.
ECONtribute’s goal is to advance a new paradigm for the analysis of markets & public policy. In your mind, what are the key societal challenges? And how can economists answer to these?
In the United States, the social safety net is insufficient, in good economic times and bad. The deficiencies affect some groups of people and communities more than others. As a result, they reinforce inequities in the economy. Many Americans also lack financial buffers, so they are unable to handle abrupt changes in their income. A reduction in hours or an illness can put many families under extreme distress.
New public policies and private initiatives are needed to address the economic challenges that household face, including policies to improve the safety net; support low-wage workers; expand access to affordable health care; and provide quality education universally. Economists and other social scientists need to contribute high-quality research and policy advice.
My role as Director of Macroeconomic Policy at the Washington Center for Equitable Growth focuses on connecting academics with policy makers. One goal of mine is to make heterogenous agent models accessible to fiscal policy makers. Rising income and wealth inequalities, among other structural problems, in the United States make evidence-based policies urgent.
What are the implications of your own research for policymaking and/or for our understanding of society and the economy?
In the past year, I have worked with members and staff in Congress, as well as policy analysts at various think tanks to promote automatic stabilizers. My proposals of direct payments to people early in a recession are based on my research from the Great Recession. In addition, I draw on studies from a wide range of academic.
In the current crisis, I have shown how to use automatic triggers to turn on and off fiscal policies. The principle of automatic stabilizers can be applied to many programs. Key examples are enhanced jobless benefits; higher food stamps payments; and aid to state governments.
I am also beginning work on what longer-term policies Congress could enact to support the recovery and at the same time address structural problems.