[Joint House and Senate Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 115-416
 
      EXAMINING THE RISE OF AMERICAN EARNINGS AND LIVING STANDARDS

=======================================================================

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 26, 2018

                               __________

          Printed for the use of the Joint Economic Committee
          
          
          
          
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]          
 
 
 
 
 
 
                  U.S. GOVERNMENT PUBLISHING OFFICE
                   
32-379                      WASHINGTON : 2018       
 


                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Erik Paulsen, Minnesota, Chairman    Mike Lee, Utah, Vice Chairman
David Schweikert, Arizona            Tom Cotton, Arkansas
Barbara Comstock, Virginia           Ben Sasse, Nebraska
Darin LaHood, Illinois               Rob Portman, Ohio
Francis Rooney, Florida              Ted Cruz, Texas
Karen Handel, Georgia                Bill Cassidy, M.D., Louisiana
Carolyn B. Maloney, New York         Martin Heinrich, New Mexico, 
John Delaney, Maryland                   Ranking
Alma S. Adams, Ph.D., North          Amy Klobuchar, Minnesota
    Carolina                         Gary C. Peters, Michigan
Donald S. Beyer, Jr., Virginia       Margaret Wood Hassan, New 
                                         Hampshire

                   Colin Brainard, Executive Director
             Kimberly S. Corbin, Democratic Staff Director
             
                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Erik Paulsen, Chairman, a U.S. Representative from Minnesota     1
Hon. Martin Heinrich, Ranking Member, a U.S. Senator from New 
  Mexico.........................................................     2

                               Witnesses

Dr. Casey Mulligan, Chief Economist, Council of Economic 
  Advisers, Washington, DC.......................................     5
Dr. Russell Roberts, Research Fellow, Hoover Institution, 
  Stanford University, Stanford, CA..............................     7
Mr. Stephen Moore, Distinguished Visiting Fellow, The Heritage 
  Foundation, Washington, DC.....................................     8
Dr. Heather Boushey, Executive Director and Chief Economist, 
  Washington Center for Equitable Growth, Washington, DC.........    10

                       Submissions for the Record

Prepared statement of Hon. Erik Paulsen, Chairman, a U.S. 
  Representative from Minnesota..................................    28
Prepared statement of Hon. Martin Heinrich, Ranking Member, a 
  U.S. Senator from New Mexico...................................    29
Prepared statement of Dr. Casey Mulligan, Chief Economist, 
  Council of Economic Advisers, Washington, DC...................    31
Prepared statement of Dr. Russell Roberts, Research Fellow, 
  Hoover Institution, Stanford University, Stanford, CA..........    35
Prepared statement of Mr. Stephen Moore, Distinguished Visiting 
  Fellow, The Heritage Foundation, Washington, DC................    43
Prepared statement of Dr. Heather Boushey, Executive Director and 
  Chief Economist, Washington Center for Equitable Growth, 
  Washington, DC.................................................    52
Response from Dr. Mulligan to Questions for the Record Submitted 
  by Chairman Paulsen............................................    62
Response from Dr. Mulligan to Questions for the Record Submitted 
  by Representative Karen Handel.................................    63
Response from Dr. Roberts to Questions for the Record Submitted 
  by Representative Karen Handel.................................    64
Response from Mr. Moore to Questions for the Record Submitted by 
  Chairman Paulsen...............................................    65
Response from Mr. Moore to Questions for the Record Submitted by 
  Representative Karen Handel....................................    65
Response from Dr. Boushey to Questions for the Record Submitted 
  by Representative Carolyn B. Maloney...........................    66
Report submitted by Representative Maloney titled 
  ``Disaggregating growth: Who prospers when the economy grows'' 
  by Heather Boushey and Austin Clemens..........................    67


      EXAMINING THE RISE OF AMERICAN EARNINGS AND LIVING STANDARDS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 26, 2018

                    United States Congress,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:47 a.m., in Room 
1100, Longworth House Office Building, the Honorable Erik 
Paulsen, Chairman, presiding.
    Representatives present: Paulsen, Schweikert, Delaney, 
Maloney, and Handel.
    Senators present: Heinrich and Lee.
    Staff present: Ted Boll, Colin Brainard, Kim Corbin, 
Gabrielle Elul, Hannah Falvey, Connie Foster, JP Freire, Ricky 
Gandhi, Colleen Healy, Christina King, Paul Lapointe, Alex 
Schibuola, Ruben Verastigui, Jim Whitney, Scott Winship, and 
Tommy Wolfe.

   OPENING STATEMENT OF HON. ERIK PAULSEN, CHAIRMAN, A U.S. 
                 REPRESENTATIVE FROM MINNESOTA

    Chairman Paulsen. Good morning. We will call this committee 
hearing to order.
    America is a beacon to the world. It is the land of 
opportunity, where everyone has a shot at the American Dream. 
Our Nation isn't perfect, of course, and not everyone gets to 
start from the same position. Many Americans face tremendous 
adversity, and as lawmakers, we must avoid standing in the way 
of Americans being able to enter the workforce or switching to 
jobs that pay more, offer better benefits, or provide greater 
flexibility.
    Since commonsense pro-growth policies have been 
implemented, we have seen a groundswell in opportunity. The so-
called quit rate, as measured by the Bureau of Labor 
Statistics, is at its highest since 2001. Workers are more 
confident to leave their old jobs for new ones. Job 
satisfaction is at its highest since 2005, according to a 
survey by The Conference Board.
    These are positive signs as opportunities expand for 
everyday Americans. And contrary to claims that economic growth 
is only benefiting the wealthy, the unemployment rates among 
those workers who normally face the greatest challenges in the 
job market have fallen drastically since pro-growth policies 
were initiated. Among those without high school diplomas, the 
unemployment rates of Blacks, Hispanics, and Whites have fallen 
8.1, 3.8, and 3.3 percentage points, respectively.
    According to a Washington Post analysis, there has been a 
3.3 percent increase in jobs for blue-collar workers in goods-
producing jobs, the best rate since 1984. A New York Times 
article states that the number of Americans seeking Social 
Security disability benefits is plunging, a startling reversal 
of a decades-old trend. It cites a stronger economy as the 
cause.
    This is how we look at the full picture of our economy, by 
looking at a variety of indicators. While my friends on the 
other side of the aisle look at the downward movements and 
measures of average and medium worker earnings, they fail to 
see that the median worker today is not necessarily the same 
person as last month or last year or a decade ago. It is 
possible for these measures to decline even when wage rates are 
rising.
    Many critics fail to acknowledge that people move in and 
out of different income ranges over their lifetime. Just 
because it is not easy to measure progress across a population 
of over 320 million people, we should not assume people are 
tethered to a given income percentile over their lifetime, 
despite ample evidence to the contrary.
    Millions of people from all over the world continue to 
relocate to the United States, despite tremendous risks and 
numerous challenges and, clearly, it is because America remains 
the land of opportunity. We must take care in reading headline 
statistics; otherwise, we risk creating policies that destroy 
the potential for real progress.
    If we allow people to thrive, they will thrive. If we allow 
American businesses to invest in their employees, they will 
invest in their workers. If we let Americans keep more of their 
money, they will put it to the best uses for their families and 
their own well-being, and our economy will thrive.
    Our future will only be brighter if we allow the path of 
smart economic policy. Our prospects for a brighter future will 
be dimmed if we go back to the old ways. For instance, 
Democrats have threatened to increase taxes to where they were 
prior to the Tax Cuts and Jobs Act. America's tax rate for 
doing business would surge back to the highest in the developed 
world and would undo the growth-enhancing economic incentives 
that have powered increased private domestic investment and 
economic growth in less than 2 years. American workers will not 
have as much of the capital investment to work with that is 
critical to raise productivity, and that would be bad news for 
future wage growth.
    The success of recent economic policy is clear. We are 
again relying on the ability of people to climb up the economic 
ladder to grow and thrive.
    Our star panel of witnesses today will help explain the 
progress made to date and how and why with pro-growth policies 
we can continue to prosper as the great Nation that we know 
America to be.
    Before I introduce our witnesses, though, I now yield to 
Ranking Member Heinrich for his opening statement.
    [The prepared statement of Chairman Paulsen appears in the 
Submissions for the Record on page 28.]

 OPENING STATEMENT OF HON. MARTIN HEINRICH, RANKING MEMBER, A 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Heinrich. Thank you, Mr. Chairman.
    Well, it feels like deja vu all over again. Another hearing 
on the Republican tax law passed 9 months ago. Another attempt 
by Republicans to convince their constituents that they are 
better off because of that law. But there is a problem. Despite 
White House promises, working families aren't better off, and 
another hearing is not going to change that.
    Wages are stuck. The typical worker's hourly wages, after 
adjusting for inflation, were lower in August than they were a 
year ago. What has increased is the cost of this tax giveaway.
    When Republicans passed the bill last December, the 
estimated cost was $1.5 trillion, with a T. Today, it stands at 
$1.9 trillion. It was a massive waste of resources when workers 
could least afford it and when we should have been investing in 
our people and our communities.
    Most working Americans have been treading water, with 
middle-class earnings stalled for years. The typical man 
working full time year-round earned less in 2017, after 
adjusting for inflation, than in 1973. While earnings have been 
stagnant or shrinking, the cost of childcare, of housing, of 
education have climbed higher, with student loan debt exploding 
in the past decade.
    We will hear today that we just need to look at different 
inflation measures or use a different survey and then 
everything looks fine. But telling people across my State, 
don't worry, you are doing better than you realize, won't make 
it easier for them to pay their kids' college tuition. It won't 
help them get health insurance or treatment for addiction.
    Even as those in the middle class work harder and harder to 
make ends meet, those at the top continue to reap large income 
gains. Between 1980 and 2014, the top 1 percent saw their 
pretax incomes grow by 204 percent, while incomes for the 
bottom 50 percent remained virtually flat. And with passage of 
the Republican tax bill, the gap between those at the top and 
everyone else is likely to grow significantly wider.
    Part of the challenge we face is that we need better, more 
timely economic data to help us craft smart, forward-looking 
policies. Knowing in real time who is actually benefiting from 
economic growth and who is not is key to designing new policies 
that generate growth which benefits everyone.
    Along with Leader Schumer and some of my JEC colleagues, I 
have introduced legislation that instructs the Bureau of 
Economic Analysis to start reporting on new Income Growth 
Indicators. These measures would show how incomes are growing 
at different levels of income, painting a clearer picture of 
who the economy is actually working for.
    We also need a sustained effort to lift the working 
standards of working families, to help workers chart a brighter 
course for themselves and their families. We should invest in 
programs that reward work and help Americans prepare for 21st 
century jobs.
    Increasing the value of Pell Grants so that a college 
education is within reach for more students is a good place to 
start. I have a proposal to expand Pell Grants for students 
across the country. In New Mexico, the increased grant would 
cover the full cost of tuition at all of New Mexico's in-State 
colleges and universities.
    Let's expand the Earned Income Tax Credit so that work pays 
better and more families are able to afford the basic 
necessities. We should have done that in the Republican tax 
bill.
    Rather than turning the clock back again, allowing 
insurance companies to deny coverage to those with preexisting 
conditions, as the Trump administration is trying to do, we 
need to build on recent gains to make healthcare more 
accessible and more affordable.
    We also need to be smarter about how we use our Nation's 
fiscal resources. After squandering $1.9 trillion on the tax 
bill, the House is preparing to vote on the Republicans' tax 
plan 2.0. This legislation would add $3.2 trillion to the 
deficits from 2029 to 2038, bringing the total cost of their 
tax policy above $5 trillion. And remember, the majority of 
these costly tax breaks go to the richest among us.
    I don't think we can have a hearing on living standards 
without asking ourselves what will happen to the quality of 
life for tens of millions of Americans who count on Social 
Security, Medicare and Medicaid if Republicans add literally 
trillions to deficits and then turn to these programs as their 
piggybank. The consequences would be disastrous.
    I look forward to the testimony from our witnesses and a 
little healthy debate, Mr. Chairman.
    [The prepared statement of Senator Heinrich appears in the 
Submissions for the Record on page 29.]
    Chairman Paulsen. Thank you, Senator Heinrich.
    And I will now introduce our witnesses.
    Dr. Casey Mulligan is currently on leave as a professor 
with the University of Chicago to serve as chief economist with 
the President's Council of Economic Advisers. Dr. Mulligan was 
also a professor at Harvard University and Clemson University, 
and has authored two well-known books: The Redistribution 
Recession: How Labor Market Distortions Contracted the Economy; 
and Side Effects: The Economic Consequences of Health Reform.
    He is affiliated with a number of research organizations, 
including the National Bureau of Economic Research, the George 
Stigler Center for the Study of the Economy and the State, and 
the Population Research Center. He received his doctorate in 
economics from the University of Chicago and his BA in 
economics from Harvard University.
    And we should note that Dr. Mulligan's parents are with him 
in the audience today.
    Dr. Russell Roberts is also with us. He is a research 
fellow at Stanford University's Hoover Institution. He is also 
the host of EconTalk, which is a podcast discussing a variety 
of topics with economists, authors, and business leaders. Dr. 
Roberts has been a professor at George Mason University; 
Washington University in St. Louis; the University of 
Rochester; Stanford University; and the University of 
California, Los Angeles. He received his doctorate in economics 
from the University of Chicago and his BA in economics from the 
University of North Carolina at Chapel Hill.
    Mr. Stephen Moore is a distinguished visiting fellow at The 
Heritage Foundation and an economic analyst with CNN. Mr. Moore 
was also a senior economics writer for The Wall Street 
Journal's editorial board and the founder of the Club for 
Growth. He has authored and coauthored multiple books on 
economic policy. He received his MA in economics from George 
Mason University and his BA in economics from the University of 
Illinois at Urbana-Champaign.
    Dr. Heather Boushey is the executive director and chief 
economist at the Washington Center for Equitable Growth. She 
writes regularly for The New York Times, The Atlantic, and 
Democracy, in addition to making frequent television 
appearances. Dr. Boushey also served as a senior economist with 
the Joint Economic Committee. She received her doctorate in 
economics from The New School for Social Research and her BA in 
economics from Hampshire College.
    Welcome to all of you, and thank you for joining us today. 
You will each have 5 minutes for your presentations.
    And, Dr. Mulligan, you are recognized for 5 minutes.

   STATEMENT OF CASEY MULLIGAN, CHIEF ECONOMIST, COUNCIL OF 
                       ECONOMIC ADVISERS

    Dr. Mulligan. Good morning, Chairman Paulsen and Ranking 
Member Heinrich and members of the Committee. I appreciate the 
opportunity today to comment on wages and labor market 
performance.
    The American economy is growing again, but many in the 
media and policy circles and academia have been puzzled by what 
appears to be stagnating real wages. The hourly amount that 
workers are paid can be an important indicator of economic 
performance and economic policies. But how wages are measured 
turns out to greatly affect estimates of their level and their 
trend over time.
    Several features of the available wage data provide an 
incomplete picture. Most national measures of wages focus on a 
ratio that has cash earnings in the numerator and a denominator 
of either the time worked or the time paid. Wage changes are 
then calculated as the difference between the ratio today and 
the ratio a month ago or a year ago or in the past.
    But because cash earnings do not adequately count the full 
compensation, namely the fringe benefits that are available on 
many jobs, and the usual measures neither net out payroll or 
income taxes owed as a consequence of working, this approach 
misses an important part of the economic value of work for the 
worker and his or her family. Moreover, cash earnings are 
naturally measured in dollars and, thus, affected by changes in 
the value of a dollar over time due to inflation.
    In addition to the difficulty with focusing on cash 
earnings in the numerator, the denominator in the calculation 
poses additional challenges for accurate measurement of wages. 
Although not all the wage data do so, it is important to 
distinguish between hours paid and hours actually worked, 
because a number of employers now are giving their employees 
pay when they are not at work, maybe on vacation, sick leave, 
or parental leave. As the BLS recognizes in its productivity 
statistics, hours worked rather than hours paid is the proper 
denominator for measuring either productivity or what a worker 
received per hour worked.
    All the current data measures begin with a sample of 
individuals who happen to be employed at the time of the 
survey, or maybe they begin with a sample of jobs held by those 
individuals. But the people employed today, as the Chairman 
said, are a different group of people than who were employed 
last year and quite a different group of people who were 
employed a decade ago.
    Movements of people in and out of the workforce 
systematically bias the usual wage growth measures away from 
being reliable indicators of what individuals are experiencing. 
Every year, young, inexperienced people enter the workforce and 
are thereby included for the first time in the national average 
at wages below those of more experienced workers. And every 
year, some of the most experienced and highly paid people 
retire from the workforce and they stop being included in the 
national average. Both these lifecycle events substantially 
reduce the national average wage, especially now that the baby 
boomers are retiring, even though no individual necessarily has 
a wage that is reduced.
    Now, all these issues can be addressed and valid inferences 
can be obtained by properly using the various publicly 
available wage data. The recent BLS fringe benefit data show 
how workers have been receiving bonuses, which contribute to 
the growth of their compensation but are not included in the 
headline wage measures. The data also show how employers have 
been providing more paid time off, which means that earnings 
per hour worked is increasing more than earnings per hour paid. 
Health insurance, on the other hand, has not significantly 
added or subtracted from recent compensation growth rates.
    Holding the composition of the workforce constant, the 
annual growth rate of real compensation over the past year has 
been about one percentage point higher than the usual wage 
measures deflated with the CPI-U. In other words, real wages 
grew 1.0 percent rather than the .1 percent that is usually 
reported from the monthly real earnings release. Moreover, 
taking into account the personal income part of the tax reform, 
after-tax real compensation grew 1.4 percent over the past 
year, again, well above the headline measures.
    I want to be clear that this analysis is not a critique of 
the Federal bureaus that provide us such excellent data. The 
Federal agencies are providing a number of data products that 
address each of the things I mentioned today. The problem is 
that these additional products get too little attention when it 
comes to assessing how the labor market is performing.
    When the average real household income grows at 1.4 percent 
per year, that means more than a thousand dollars every year 
added beyond what is required to keep up with inflation. The 
additional income is even greater when we recognize that the 
average household now, as the Chairman has said, has more 
members with jobs than in the past, and that each worker is 
also accumulating work experience over time that translates 
into yet higher pay. None of this is a surprise, given that 
recent Federal policies have been encouraging business 
formation and removing disincentives to work.
    I look forward to your questions.
    [The prepared statement of Dr. Mulligan appears in the 
Submissions for the Record on page 31.]
    Chairman Paulsen. Thank you, Dr. Mulligan.
    And, Dr. Roberts, you are recognized for 5 minutes.

     STATEMENT OF RUSSELL ROBERTS, RESEARCH FELLOW, HOOVER 
                INSTITUTION, STANFORD UNIVERSITY

    Dr. Roberts. Chairman Paulsen, Ranking Member Heinrich, 
Vice Chairman Lee, distinguished members of the Committee, 
thank you for the opportunity today to testify on the crucial 
issue of American earnings and living standards.
    Adjusted for inflation, the U.S. economy has grown 
dramatically over the last 30 to 40 years. How much of that 
growth has gone to the average person? According to many 
economists, the answer is basically zero.
    In a recent gloomy study of the American economy that 
Ranking Member Heinrich mentioned, economists Piketty, Saez, 
and Zucman find that the bottom half of the American economy 
gained essentially nothing between 1980 and 2014, while incomes 
of the top 1 percent tripled. New York Times columnist David 
Leonhardt concluded that the very affluent and only the very 
affluent have received significant raises in recent decades. 
Noble Laureate Paul Krugman, writing in 2014, said that, quote, 
``Wages for ordinary workers have, in fact, been stagnant since 
the 1970s.''
    But these depressing conclusions and others like them rely 
on studies and data that are incomplete or flawed. They 
understate economic growth for the poor and the middle class 
because they use measures of prices that mis-measure inflation. 
They leave out important components of compensation, such as 
fringe benefits. And many of the most pessimistic studies about 
the fate of the middle class ignore the fall in the marriage 
rate that distorts measurements of progress.
    When Piketty, Saez, and Zucman say that incomes of the top 
1 percent tripled between 1980 and 2014, you might think that 
people who were in the top 1 percent in 1980 earned three times 
more than that by 2014, but that isn't what their numbers 
measure. Their numbers show that the richest 1 percent in 2014 
made three times what the richest 1 percent in 1980 made. It is 
not the same thing.
    The richest people in 2014 aren't the same people. A lot of 
them, people like LeBron James or the founders of Google, Larry 
Page and Sergey Brin, weren't alive in 1980.
    The same is true of the middle class. The change in median 
income between 1980 and 2014 doesn't capture what actually 
happened to the people who were at or near the middle.
    Most of the gloomy studies take a snapshot at a point in 
time and compare it to a snapshot later, ignoring the fact that 
the people in the pictures aren't the same.
    To find out how economic growth affects people at different 
income levels, you have to follow the same people over time. A 
number of studies have done that. I summarize five of them in 
my written testimony. The results are quite cheerful when 
compared to the gloomy studies that take snapshots of the 
American economy.
    Studies that follow the same people over time, using survey 
data, find that since the 1970s, people raised in poor families 
have a much better chance of surpassing the income of their 
parents compared to children from rich families. They find that 
children raised in poor families have gains in income relative 
to their parents that are larger than the gains to children in 
middle-class families which, in turn, are larger than the gains 
to the richest families.
    Studies that use tax data to follow the same people from 
the 1980s find that the poorest people have the biggest gains 
in income over time, followed by the middle class and, in fact, 
the richest people make little or no progress in these studies. 
The economic growth of the past 40 years did, in fact, help the 
poor and the middle class. A rising tide does, in fact, lift 
most of the boats, and it lifts the smallest boats the most. 
The yachts, the income of the rich, pretty much stays where it 
is or even falls a little.
    Now, don't cry for the rich. Even if they stood still over 
the last few decades, they had a very pleasant economic life. 
There is still lots of inequality in America, but measured 
inequality masks the growing prosperity of average and poor 
Americans over time. And those gains are understated, I 
believe, because even the best measures of inflation overstate 
the rise in prices and, therefore, understate the gains in 
income for all Americans.
    This does not mean that everything is fine in the American 
economy. We can do better. There are special privileges 
reserved for the rich that reduce their risk of downward 
mobility. Financial bailouts are the most egregious example, 
and we should stop that. There are too many barriers, like 
occupational licensing and the minimum wage, that handicap the 
disadvantaged desperately trying to get a foothold in the 
workplace. And the American public school system is an utter 
failure for too many children who need to acquire the skills 
necessary for the 21st century. But the glass is at least half 
full.
    All Americans deserve the chance to get ahead, to thrive, 
and to flourish. The focus on the gloomy narrative misleads us 
as to what needs fixing. We should instead focus on getting rid 
of the barriers that block access to prosperity. And let's 
remember that economic growth can and does benefit all 
Americans, especially the poor and the middle class.
    Thank you very much.
    [The prepared statement of Dr. Roberts appears in the 
Submissions for the Record on page 35.]
    Chairman Paulsen. Thank you, Dr. Roberts.
    And, Mr. Moore, you are recognized for 5 minutes.

STATEMENT OF STEPHEN MOORE, DISTINGUISHED VISITING FELLOW, THE 
                      HERITAGE FOUNDATION

    Mr. Moore. Thank you, Mr. Chairman. Thank you, Mr. Vice 
Chairman, for the opportunity to testify this morning. It is a 
privilege to be here.
    I thought I would talk a little bit about--as many of you 
probably know, along with Larry Kudlow, I served as one of the 
senior economic advisers to the Trump campaign and helped 
author one of the early versions of the Trump tax cut. So I 
thought I would relate to you how we came about these policies, 
why we did, and how we think they are working.
    And I would start by simply saying this: The philosophy, I 
believe, of what Donald Trump is trying to do in terms of 
economic policies is all focused on growth. Growth, growth, 
growth. How do you get the economy growing faster?
    Now, that higher growth does not necessarily mean you are 
going to get higher wages, but I can guarantee you this: If you 
don't have growth, you are not going to get higher wages. So 
higher growth is a precondition to getting higher living 
standards and higher wages.
    So I brought a few charts that I would like to show, if I 
may. This is the first on why it is that growth is so 
important. This is what we call the Obama growth gap. And it 
shows that this recovery that we had over the last 8 years, it 
has been--to give Barack Obama his due, it has been a long and 
durable recovery, Mr. Chairman, but it has been a very flat 
recovery. And, in fact, if you look at these numbers, you can 
see that the growth rate of the economy over that 7-year period 
was about 14.9 percent. The light blue line you are looking at 
in the middle is the economic growth rate during an average 
recovery, because we had about eight recessions since World War 
II.
    And then I like to compare the Obama record with the Reagan 
record, because Obama and Reagan used very different approaches 
to dealing with the recession. Of course, you see that we grew 
much, much, much faster under Reagan out of the recovery--in 
the recovery than we did under Obama. I don't think that is by 
accident. I think that is because most of the policies that 
were put in place under Reagan were pro-growth, and many of the 
policies under Obama were antigrowth.
    But the bottom line here is that if we had a recovery under 
Obama that had been as strong as a normal recovery, we would 
have had $2 trillion more GDP by 2016. If we had a Reagan-style 
recovery, we would have had $3 trillion more.
    Now, if you will turn to the next chart, this is 
interesting and it gets to this point about--Mr. Heinrich, you 
were making the point that the cost of the tax cut has 
increased from $1.4 to $1.9 trillion. Let me explain why the 
CBO is saying that. And it turns out that actually it proves 
the success, not the failure, of the tax cut.
    So if you look at this chart, what you are looking at is 
from the time right before we passed the tax cut in December of 
2017--so the picture that the CBO took of the economy before 
that, and then comparing that with the most recent forecast the 
CBO has put out on growth. This is the most amazing story.
    In just 7 months, CBO has revised its 10-year forecast for 
the economic growth of the U.S. economy by $6 trillion. Think 
about that. In 7 months, they have increased their growth rate 
forecast by $6 trillion. That didn't happen by accident, Mr. 
Chairman. It happened because you passed the tax cut.
    And by the way, I wouldn't say it is only the tax cut. It 
is all these other factors, the deregulations, the pro-America 
trade policies. But anyway, so the cost of the tax cut has not 
gone up from $1.4 to $1.9 trillion. We estimate just that extra 
$6 trillion of GDP growth is going to lead to somewhere in the 
neighborhood of $1 trillion more Federal revenues. And if you 
look at it that way, then the tax cut, two-thirds of the tax 
cut has already been paid for just by the economic growth that 
we have gotten over the last 7 months.
    In terms of how Americans feel about the economy, you can 
see that, in the next chart, that 3 out of 10 to 4 out of 10 
Americans rated the economy as good or great during the Obama 
years. Today, according to the latest numbers, 7 out of 10 
Americans rate the economy as good or great. They realize 
something big is happening with the economy.
    If you will look at the next chart, it shows where we are 
creating jobs. This is one of my favorite ones. This is 
manufacturing jobs, it is construction jobs, it is mining jobs. 
These are those middle-class jobs that are good-paying jobs 
that have been leaving. And you can see that we have created 
about a million new manufacturing, construction, and mining 
jobs in just the last 18 months. That reverses the trend. Look 
at mining and logging. Look at, you know, what has happened 
with construction. It is going through the roof.
    And then finally, I would say, what do we need to do to 
keep growth up and to get wages higher? Skip this next chart, 
if you might, and go to the next one. This one, I think this is 
the central problem we have with the economy right now. How do 
we get people into the workforce? Because people can't earn a 
living, they can't have a high wage if they don't have a job. 
And what is so interesting about this is that--this is since 
January of 2000--you are seeing that for older Americans--
obviously, we have an aging population. Older Americans are 
more likely to be working today than they were in 2000. So 
their labor force participation rate has gone up.
    But what is disturbing is look at what has happened to the 
labor force participation rate of younger workers. They have 
been actually dropping out of the workforce. A lot of studies 
show that when people start working at a later age--I mean, 
when they start working at an earlier age, their lifetime 
earnings are higher. We have got to get young people into the 
workforce. It is the best thing we can do for their wages.
    Thank you.
    [The prepared statement of Mr. Moore appears in the 
Submissions for the Record on page 43.]
    Chairman Paulsen. Thank you, Mr. Moore.
    And now, Dr. Boushey, you are recognized for 5 minutes.

  STATEMENT OF HEATHER BOUSHEY, EXECUTIVE DIRECTOR AND CHIEF 
       ECONOMIST, WASHINGTON CENTER FOR EQUITABLE GROWTH

    Dr. Boushey. Thank you, Chairman Paulsen, Vice Chairman 
Lee, and Ranking Member Heinrich, for extending an invitation 
to speak here today. I am honored to be here.
    My name is Heather Boushey, and I am executive director and 
chief economist at the Washington Center for Equitable Growth. 
We seek to advance evidence-backed ideas and policies that 
promote strong, stable, and broad-based economic growth. I am 
here today to talk about how the economy is working and not 
working for most American workers.
    My fellow witnesses have talked about how Americans are 
doing well, but the reality is, for many American workers, this 
is just not the case. I think I am the gloomy economist up here 
today.
    Over the past few decades, incomes and wealth have surged 
for those at the top, while earnings for low- and middle-income 
Americans have stagnated. And the reports and top-line 
statistics that we currently rely on to inform us about the 
economy often mask the economic situations our friends and 
neighbors across the country and in your districts are facing.
    As the Joint Economic Committee considers the needs of 
Americans up and down the income spectrum, you should consider 
supporting the Measuring Real Income Growth Act of 2018, which 
was introduced by Senator Schumer and Ranking Member Heinrich 
in the Senate and by Representative Maloney in the House. This 
bill directs the Bureau of Economic Analysis to provide the 
American public with measures of how economic growth is 
impacting Americans of different income levels.
    GDP growth is one of our most well-known economic metrics, 
but it does not reflect how the economy is performing for 
everyday Americans. Academic economists have constructed a 
dataset like the one the Ranking Member's bill would direct the 
Bureau of Economic Analysis to build. It gives us a complete 
picture of how economic growth over the past 60 years has been 
shared by American workers.
    In 2014, for example, the data tell us that total national 
income growth was 2.1 percent, but for the remaining--for the 
lowest earning 50 percent of all Americans, incomes grew by 
just 0.4 percent, while the growth for the richest 1 percent of 
Americans was 5.1 percent, more than five times as large. This 
group at the top enjoyed more than 13 times greater growth than 
that experienced by most Americans.
    Looking at aggregate GDP growth alone leads to misleading 
conclusions about how well the economy is serving its citizens. 
Unequally shared growth has detrimental effects on our economy.
    One particularly stark example is provided by economist Raj 
Chetty, who found that the likelihood of children earning more 
than their parents in the United States has declined between 
the mid 20th century and today. He and his colleagues find that 
children born in 1940, just before the baby boomers made their 
way into the world, had a 90 percent chance of earning more 
than their parents. But for Gen Xers, those born in 1980, it is 
a coin flip, a 50/50 chance that they would earn more than 
their parents.
    This is not a good outcome in a growing economy. According 
to Professor Chetty, two-thirds, two-thirds of the gap in 
mobility between children born in 1940 and those born in 1980 
is explained by faster income growth at the very top and 
stagnating incomes at the middle and bottom.
    Policies like the recent Republican tax cuts are likely to 
further increase economic inequality in the United States. The 
nonpartisan Tax Policy Center estimates that the Tax Cuts and 
Jobs Act will cause inequality to increase sharply, with high-
income families enjoying larger income gains in both the short 
and long term than low- and middle-income families. Meanwhile, 
we have lowered our ability to finance the much needed 
investments that have kept children and families out of poverty 
and grow our middle class.
    The purpose of the tax system, as with public policy in 
general, is to support the living standards of American 
families. With legislation like the Tax Cuts and Jobs Act, and 
the additional tax giveaways that Congress is currently 
considering, we limit our ability to invest in infrastructure, 
social insurance, and medical research, all of which support 
the well-being of American families.
    As this Committee considers the ways to make a difference 
in the lives of Americans up and down the income spectrum, I 
urge you to consider more than just the headline numbers. Our 
economy is growing, but that growth is distributed unequally, 
and many Americans are being left out. And that inequality is 
itself hampering upward mobility for a large share of American 
people. I would urge the Committee to think about how we can 
deliver economic growth that is beneficial for all Americans.
    Thank you for allowing me to speak today, and I look 
forward to answering any questions.
    [The prepared statement of Dr. Boushey appears in the 
Submissions for the Record on page 52.]
    Chairman Paulsen. Thank you, Dr. Boushey.
    And during our question-and-answer period, I would just ask 
members to keep their questions and comments to 5 minutes. And 
I will begin.
    Let me start, Dr. Mulligan, with you first. I think we all 
know the economy is performing remarkably well in the last 2 
years since economic policy has changed. I think there have 
been only 8 months in the last 49 years where unemployment has 
been below 4 percent, and three of those months have been this 
year.
    Indeed, economic growth has clearly exceeded the so-called 
new normal rate we were told to expect, never getting above 2 
percent. We could never get above that any longer as a country. 
We were told to expect that, which is far below the post-war 
trend. Consumer confidence is now at, essentially, record 
highs. And, indeed, the data for business investment, 
production, and employment are positive without unsettling 
inflation. And the Federal Reserve Chairman, Jay Powell, has 
also said the economy is doing very well.
    After implementation of tax reform at the beginning of this 
year, many employers started paying their workers special 
bonuses, better compensation, better benefits. Worker job 
satisfaction is up, as their willingness now to change jobs is 
now a sign of rising confidence.
    Dr. Mulligan, maybe you can elaborate a little bit on what 
prompted the Council of Economic Advisers to prepare the primer 
on proper wage measurement that you are speaking about today.
    Dr. Mulligan. Yes. As you mentioned in the introduction, 
most of my career has been as a professor at the University of 
Chicago in the social sciences. And there, we literally have it 
etched on the wall: When you cannot measure, your knowledge is 
meager and unsatisfactory.
    And the CEA--that is why I was so glad to join the CEA. 
That is their mission. We are the geeks. We are supposed to 
measure things and give the information to you guys to make the 
tradeoffs for the people.
    And in my own career, I started from the beginning 
measuring the labor market, measuring human capital. I 
testified in this Committee before on measuring after-tax wages 
and pretax wages. In our field, we know how to do these things. 
When we have the data, we know how to do it.
    And we just, at the CEA, we just apply the same old methods 
that have been used and tried and tested on how to measure 
labor market performance. And you want to look at the whole 
package of what people get. Sick pay, they value that. Paternal 
leave, they value that. Health insurance, they value those 
things.
    And then you want to turn around and understand, what are 
they able to buy? How much are they having to give off in 
taxes? How expensive are the things that they want to purchase? 
And that was the motivation for the CEA report.
    Chairman Paulsen. Now I will go to Mr. Moore. And, Dr. 
Roberts and Dr. Boushey, you can comment last. But can you give 
me a perspective a little bit perhaps on just the economy and 
how are workers doing? How are consumers and businesses doing? 
And do you believe that economic improvements are, in fact, 
being widely shared?
    Mr. Moore.
    Mr. Moore. Well, look, if you look at the data on wages, I 
think, you know, Mr. Heinrich has a point that, you know, we 
have been stuck, you know, for 20 years in flat wages. And, in 
fact, I would make the case this is one of the reasons Donald 
Trump won the election. The middle class hadn't seen gains in 
20 years.
    And I will tell you this. You know, there is a perception 
out there that this tax cut that you all passed last December 
was for the rich. And I guarantee you, every conversation I 
ever had with then-candidate Trump was how do we get middle-
class wages up. And there are two things in this bill, I think, 
that have really helped--look, it is early in the game in terms 
of wages, so we don't have a lot of great data. We do know that 
the Heritage study shows that just in terms of tax cuts to 
middle-class families, the average family is saving $2,000 a 
year. So that ain't nothing, right? I mean, that is a nice 
bonus to their paycheck.
    But we thought that two things could happen that would 
raise wages over time. Number one, we want businesses to invest 
more, right? The only way you can over time--and we have got 
three--another economist on this platform, so tell me if you 
think I am wrong, but you need businesses to invest more in 
capital, and that plays out in higher wages.
    The capital-labor ratio and the wage rate are like 95 
percent correlated over time. And so we want businesses to 
invest more, and so far so good on that. We are seeing some 
really healthy increases in business investment. I go around 
the country, by the way. I have been everywhere from Portland, 
Oregon, to Portland, Maine. Every city you go in, all you see 
is cranes, building, apartment buildings, condos, factories, 
warehouses. Those are workers that are getting those jobs.
    The second thing we wanted to do was to create a tighter 
labor market. Boy, do we have a tight labor market right now. 
According to the latest CB--I mean the Bureau of Labor 
Statistics monthly jobs report, there are 6-1/2 million more 
jobs than people to fill them.
    That is creating a lot of opportunities for workers to, you 
know, bargain higher wages with their employers. If they don't 
like their job now, they can go to--you know, if they don't 
like what Joe is paying them, they can go to Sally and get a 
pay raise. So those kinds of factors, I think, will lead to the 
kind of higher wages that we all would like to see.
    Chairman Paulsen. I know that upward mobility is key, as 
you talked about a tight labor market. So of all 435 
congressional districts, the district I represent has the 
lowest unemployment in the country at 1.9 percent.
    Senator Heinrich, you are recognized for 5 minutes. Senator 
Heinrich.
    Senator Heinrich. Mr. Chairman, I am an engineer by 
training, so I am a fan of data and I don't think we should 
ever shy away from the data. But let me suggest that maybe what 
we should have done here is to actually have a hearing with 
hourly workers to ask them how they are faring, rather than 
asking economists how workers are faring. And I think this 
hearing is an example of exactly why D.C. so often looks out of 
touch.
    Mr. Moore, you stated that CBO estimates show that the tax 
cuts are paying for themselves, but this is precisely the 
opposite of what CBO is saying. They have directly stated that 
the tax cuts will cost $1.9 trillion even after factoring in 
additional growth.
    Why misrepresent CBO's findings? Why not just say, I 
disagree with CBO's findings?
    Mr. Moore. Well, look, Mr. Chairman--I mean, Mr. Ranking 
Member, it is simply a fact that they have increased their 
economic growth estimate from before the tax cut to today by--
--
    Senator Heinrich. Agree, they did increase their estimate 
for growth, but then they said that $1.9 trillion in costs 
would occur even with the additional----
    Mr. Moore. So let me explain why that is. So what they are 
saying--I mean, this is static analysis on steroids. So what 
they are saying is that none of the increase in economic growth 
is attributable to the tax cut, but the reason we did the tax 
cut was to get the economic growth rate up. So----
    Senator Heinrich. Well, let's take the tax cut aside. The 
cost is the cost.
    Mr. Moore. The cost of the tax bill is higher, according 
to--in other words, what they are saying is incomes are higher 
and you are getting a bigger economy and, therefore, you have 
lower tax rates, so you are going to generate less revenue. But 
that is--the reason we have the $6 trillion higher growth----
    Senator Heinrich. Clearly, you and the CBO disagree on how 
to model this. So let's move on to GDP.
    I think GDP is useful. It is certainly the most commonly 
used indicator to measure the growth of the economy, but it 
certainly also doesn't tell the whole truth, and it certainly 
doesn't tell the truth about how costs and growth are shared 
across the economy.
    So, as I mentioned in my previous statement, I would like 
to see the government measure how economic growth is 
distributed across households at different levels in the 
economy. And I would be curious from all of you, actually, and 
we will just start with Dr. Boushey and go across the panel. A 
simple yes-or-no question: Do you agree that having more 
detailed data on who is benefiting from growth would allow us 
to better evaluate the long-term impacts of something like the 
tax cuts?
    Dr. Boushey. My simple answer to that is yes. And I think 
my question to those who don't agree that the answer is yes is 
why you wouldn't want to know where GDP growth goes. It is a 
really fundamental question for our economy, our society, our 
democracy. Where does that growth grow and why? What are the 
reasons that we should not do this? And I think the bar should 
be very high.
    Senator Heinrich. Mr. Moore.
    Mr. Moore. I don't know the specifics about your bill, but 
certainly when we measure economic policy, economic growth is 
not everything, right? And we do want to measure how these 
policies are affecting the middle class and the least among us. 
So, you know, I would like to see the particulars of your bill, 
but absolutely, we should look at how the middle class and low-
income people are being affected.
    Senator Heinrich. Thank you.
    Dr. Roberts.
    Dr. Roberts. I totally agree with you. I think GDP is 
useful, but it, of course, hides what is going on underneath, 
and we care deeply about how it is distributed. The studies 
that I mentioned are studies that actually do see how growth 
has affected people at different parts of the income 
distribution, and they all contradict the narrative that is 
based on a different kind of data, which I think is the wrong 
kind of data.
    The studies that follow people over time at different parts 
of the income distribution find that the largest gains go to 
the poor, the middle class does very well, and the rich gain 
nothing or lose money, lose ground.
    Senator Heinrich. I am still looking for those poor who 
feel like they have really done great in the last 20 years, but 
I do appreciate your point.
    Dr. Mulligan.
    Dr. Mulligan. As I quoted, when you cannot measure, your 
knowledge is meager and unsatisfactory. So, please, let's have 
the data. I would also say, please, let's not do the misguided 
economic theory that the economy is a zero-sum game. It is not 
a zero-sum game. Everybody can benefit at the same time. So 
more income at the top doesn't mean less income at the bottom. 
But sure, please, let's measure.
    Senator Heinrich. In your statement, Dr. Mulligan, you 
highlighted that if we include benefits, then wage growth is 
higher. And that is true. Not much, but a little bit higher, 
certainly. But there are tens of millions of Americans that 
receive very few benefits from their employers. There are a lot 
of workers who receive none. Low-wage workers are the least 
likely to receive benefits. Is there some substantial value in 
looking at wage growth, in and of itself, without fringe 
benefits?
    Dr. Mulligan. Again, when I put it in a market context, 
Adam Smith talked about this is compensating difference. So, 
yes, there are jobs that don't offer benefits, health insurance 
benefits, let's say, or sick leave. But they would tend to 
offer other things; maybe a nice schedule or a good location or 
what have you. And I would want to look at the full picture.
    In the CEA's analysis, we included all the Americans, to 
the extent that the Census Bureau measures them, with our 
sample of hundreds of thousands of people. So all kinds of 
people were included in there, including the ones that you 
mentioned.
    Chairman Paulsen. Thank you.
    Representative Schweikert, you are recognized for 5 
minutes.
    Representative Schweikert. Thank you, Mr. Chairman.
    And, look, this is one of those hearings you sort of look 
to, but I am hoping we can sort of geek out for a moment. And 
just quick comments on some of the other testimony we have had.
    Our baseline before the tax reform was what in the next 
decade or two decades, about what, 1.8, 2 percent was the 
baseline GDP growth. The baseline math I think that came out of 
joint tax was if over the next 10 years we could have a .4 
percent growth additional on top of that 1.8, the tax reform 
paid for itself.
    Well, GDP now, right now--now, I know it is just a 
snapshot--has us at 4.4. So I am sort of heartbroken. There 
does seem to be this left-right divide on wanting to sort of 
talk down what should be sort of a joyous opportunity for, 
particularly, when we actually start to look at what is 
happening with blue-collar, those without a high school 
education. And we are only, what, 9 months or 8 months into 
actually datasets of post-tax reform and a lot of other things 
going on.
    I think I have a more elegant question to go across. If 
what I am seeing in Arizona right now with my unemployment 
statistics, with people actually recruiting workers from the 
homeless campus because they are so desperate for labor, what 
do we as policymakers, whether you be on the left or the right, 
what do we do to continue it? As you know, Arizona I think in 
the first quarter had some of the fastest growing wage growth. 
What do we do policy-wise to continue that?
    Doctor, for you, when we see the benefits that have 
happened so far this year, how do we create this sort of growth 
stability? Because we are out of the growth recession. How do 
we maximize this curve for as long as possible?
    Dr. Mulligan. I should preface by saying the CEA, we are 
the geeks, we run the numbers. We do not make the policy. We 
are aware of the President's agenda and we are studying that.
    So one of the things that I think people haven't 
appreciated yet, and we are going to roll some measures out, is 
about regulation and deregulation. Regulation is a big problem 
for business and for the labor market, and steps toward 
streamlining how businesses run would be very helpful for 
productivity and wages.
    Representative Schweikert. Dr. Roberts.
    Dr. Roberts. There is an infinite number of things you 
could do to make the economy more effective. Many of them are 
not under your direct authority. Many of them are State and 
local regulations that I think make life very difficult for the 
poorest among us. I mentioned occupational licensing, State 
minimum wages--or local minimum wages that I think keep people 
from getting into the labor market, and particularly real 
estate housing and land use regulations and restrictions that 
help rich Americans and make it much harder for poor Americans 
to come to the cities where the best opportunities are.
    And I think, Ranking Member Heinrich, I think that is an 
area that I think to the extent that you can do something about 
that. The ability to move to where the jobs are is, I think, 
greatly restricted by the current real estate market and the 
rental market for especially young people, and it is a tragedy.
    Representative Schweikert. Mr. Moore. Could you do your 
mike button?
    Mr. Moore. There was an article in--I think it was in The 
Wall Street Journal a week or two ago about that truckers in 
Texas are now getting $25,000 and $50,000 signing bonuses, you 
know, like they are Derek Jeter or something like that, I mean.
    So, I mean, employers are really hungry to get workers. And 
I do anticipate that they are going to--if we continue to see 
this strong demand for workers, you are going to see increases 
in wages, which is exactly what we want.
    The one thing I would just add to this, I think one of the 
biggest problems, in terms of when you just look at wages why 
they aren't growing, is the healthcare costs. And I think this 
is something we kind of all would agree on. We may have very 
different prescriptions about what to do about the healthcare 
cost.
    Representative Schweikert. Was that a pun?
    Mr. Moore. Sorry?
    Representative Schweikert. Never mind.
    Mr. Moore. No, I am just saying, you know, that that--as 
Casey Mulligan was just saying, that, you know, when you have 
employers that face higher and higher healthcare costs, that 
comes out of the wages of the workers. If we can do something 
to lower health insurance costs for employers--ObamaCare was 
supposed to do it, it obviously didn't work--you will help 
drive up wages.
    Representative Schweikert. Dr. Boushey.
    Dr. Boushey. So growth happens when you see increases in 
productivity and increases in people participating in the labor 
force. Keeping this recovery going, I think one of the things 
that we should be focusing on--a number of my colleagues have 
talked about labor force participation. There are a number of 
policies that could pull those folks who are still not back in 
the labor force back in if the employment rate continues to be 
lower than it was. So things like addressing the challenges 
that families face between work and care, policies like 
universal childcare, paid family leave, paid sick days and the 
like could go a long way.
    Representative Schweikert. I think you are brilliant on 
labor force participation, because whether it be those things, 
the ability to access work, but also our incentives not to work 
that are often built into our social entitlement systems.
    Look, we never really get around to the honest conversation 
of velocity of our brothers and sisters being able to move from 
poverty statistics and up. We know we just spent a couple 
decades where velocity had seemed to shrink. I am desperately 
hoping we are back to a time where there is opportunity, 
because that is the most honest, fair thing for all of us. And, 
hopefully, it is all of our goal.
    And with that, I yield back, Mr. Chairman.
    Chairman Paulsen. Representative Delaney, you are 
recognized for 5 minutes.
    Representative Delaney. Thank you, Mr. Chairman.
    Mr. Moore, I just wanted to follow up on the Senator's 
question about your view of the tax cuts. You had said that the 
economic growth projections were updated by $6 trillion, based 
on the stimulative effect of the tax cuts, which I agree they 
have been stimulative and they have driven the economy to 
higher levels. And then you said that will likely produce a 
trillion dollars of additional revenues, which already pays for 
two-thirds of the tax cut.
    But isn't ``already'' not the right word there? Because if 
they actually take the stimulative effect and they projected it 
out for 10 years, isn't really the thing to say that that is 
the most it can ever do is pay for two-thirds, unless the rate 
of growth were, in fact, to accelerate above what the rate of 
growth is now?
    So isn't that the right way to think about it? It has 
already been modeled for 10 years, based on what you said. 
Unless economic growth rates continue to accelerate at an 
increasingly faster rate, the tax cuts will never pay for 
themselves.
    Mr. Moore. What they have basically done is they have 
looked at the economic growth that has happened just in the 
last 6 to 9 months.
    Representative Delaney. Yes.
    Mr. Moore. And they are saying, wow, this is a lot higher 
than we thought it would be. And when you get----
    Representative Delaney. And they projected it out 10 years.
    Mr. Moore. Right. Yes.
    Representative Delaney. And you are saying that is another 
trillion dollars.
    Mr. Moore. Right.
    Representative Delaney. So that is all we will ever get is 
my point.
    Mr. Moore. What they are saying is we have had this bump up 
in growth, right?
    Representative Delaney. Yes.
    Mr. Moore. And that even if we revert back to the low 
growth rate we have had over the last decade of like 1.8 
percent, so you get like the 4 percent bump up and so 
everything in the future is higher, right? And so they are 
assuming that you revert back to the low growth rate.
    Now, look, I think you are going to have--we can all 
disagree about what growth will be in the future, but the point 
is, just based on what has already happened, they say you are 
going to get this extra $6 trillion.
    Representative Delaney. Let me just switch for a second. 
Dr. Roberts, I just have a question about kind of averages and 
what has happened. I mean, just to frame the question, like if 
you, me, and my favorite recording artist, Bruce Springsteen, 
were to go to lunch, someone would accurately say that that 
table, on average, has 17 Grammies. Well, in reality, he would 
have 50, and I don't know, you may have a Grammy, I don't. 
Neither of us.
    So are you familiar with the work of Ray Dalio, who is a 
very successful investor? He recently deconstructed all the 
economic data since 1980 and basically broke the country down 
into the top 40 percent and the bottom 60 percent. And he said 
the top 40 percent used to make two and a half times more than 
the bottom 60; now they make four times more. They used to have 
six times the wealth; now they have ten times the wealth. They 
used to spend twice on their education of their kids; now they 
spend four times.
    And his point is, there is really no average American 
anymore, that there is the average of the top 40 and the bottom 
60, and those groups are kind of stunningly disconnecting, 
which, in my judgment, is because the world has changed 
profoundly, because of globalization and technological 
innovation. And we haven't done the basic things we should have 
done to update the social compact, if you will, to prepare our 
workers for this change. So they have been left behind.
    Do you dispute that that is actually happening?
    Dr. Roberts. Well, I haven't seen--you asked me if I was 
familiar with his work. I have seen many things he has written. 
I haven't seen that particular analysis. Many of those analyses 
rely on household income. And, of course, there has been an 
extraordinary transformation of household structure in the 
United States since 1980, since late 1970s.
    There has been a huge increase in divorce, a reduction in 
the proportion that is married, and a large increase in the 
number of households that are headed by a single person. The 
delay in marriage rate, the increase in divorce, and then the 
reduction in remarriage has caused there to be a lot more 
people living on their own. Now----
    Representative Delaney. But wouldn't, in fact, what has 
happened actually cause that? So I would agree that that has 
been an accelerant of the change.
    Dr. Roberts. It could.
    Representative Delaney. But that phenomena that you are 
talking about, the rate--because in the instance of marriage, 
for example, it has never been healthier in the top third of 
this country and it has never been worse in the bottom two-
thirds. So those are accelerants, but isn't the disconnection 
the underlying cause of those accelerants?
    Dr. Roberts. Well, they could be a factor, and the 
causation could run in both directions. What is certainly true, 
though, is that when we try to measure what has happened to the 
groups of people in a different part of the income 
distribution--which is a good idea because the average is not 
representative. So we go to median, then we go to the middle 
quintile, we go to the bottom quintile. What we do is, if we 
don't correct for those changes in structure, we get a 
distorted measure of how those people are doing.
    One way to solve that is to follow the same people over 
time. And when you do that----
    Representative Delaney. Do you think those changes account 
for those dramatic differences, actually, though?
    Dr. Roberts. Well, when you look at the same people over 
time, you see that the story is reversed from the one we 
usually hear. The poorest and the middle class get more of the 
gains than the rich, and that the income distribution is 
actually shifting toward--the reason that the bottom is not 
doing so well is that people are doing better moving into the 
middle and the upper class.
    Representative Delaney. This reminds me of the--and I don't 
mean this disrespectfully at all--the Mark Twain expression, 
``lies, damned lies, and statistics,'' right? And that is kind 
of part of our problem----
    Dr. Roberts. Oh, yeah.
    Representative Delaney [continuing]. Which is really trying 
to agree on the facts here.
    So, anyway, I yield back, Mr. Chairman.
    Chairman Paulsen. Representative Maloney, you are 
recognized for five minutes.
    Representative Maloney. Thank you, Mr. Chairman and Ranking 
Member. And I thank all of the panelists.
    And I would particularly like to thank Dr. Boushey for your 
kind words about the legislation that the Ranking Member and I 
put forward. And I want to give you credit for the research 
that you did that provided the intellectual foundation for the 
bill.
    And I really urge my colleagues here to read her report on 
disaggregating growth and measuring who prospers when the 
economy grows, and ask unanimous consent to put it in the 
record.
    [The report titled ``Disaggregating growth: Who prospers 
when the economy grows'' appears in the Submissions for the 
Record on page 67.]
    Representative Maloney. So I would like to ask you, Dr. 
Boushey, why is wage and jobs data alone not sufficient to 
understand the economic status of most Americans? And how does 
a single estimate of GDP fail to represent the economic health 
of our families and our Nation?
    Dr. Boushey. Thank you. Thank you, Congresswoman Maloney, 
and thank you for your support of this idea. We think it is an 
important one for the American people.
    And one of the things that we see and we kind of--we see in 
this conversation today, we often have this conversation about 
what is happening in terms of growth separate from how that is 
actually benefiting the American people. And it is time that we 
actually merge those conversations together. So when we talk 
about economic performance, we are actually talking about who 
benefits up and down the income spectrum, not this abstract 
notion of growth being one thing and what is happening to 
American families being a separate issue, with data delivered 
on different months and days. So we are not having that 
conversation together. I think it is imperative that we start 
talking about them together.
    And I think that once you do, you see this different trend 
emerge, which is that the economy can grow, but only the people 
at the top benefit. And I take very seriously many of the 
comments of my colleagues up here that, you know, that we need 
good data, that we need to look at what happens to people over 
time and look at mobility. But one thing that we need to make 
sure of and that this data would allow us to do is to look at 
what younger people are experiencing in the economy, cohorts of 
people over time, different demographic groups.
    And one of the things that we know is that people who have 
come up since the 1980s are actually seeing worse outcomes than 
their parents at similar ages. That is probably one of the most 
important metrics for American economic success.
    So it is not enough to just follow people over time or to 
look at the aggregates, but to look at how cohorts have been 
faring over time and to see that actually younger and younger 
cohorts are not seeing the benefit of the American Dream, the 
benefit of economic growth, and that that underpins, I think, a 
lot of the frustration that American families are feeling.
    Representative Maloney. Well, can you give us an 
explanation of why wage growth is slow despite what is 
otherwise a strong economy?
    Dr. Boushey. Well, there has been a lot of debate among 
economists on these issues. And, you know, some argue that it 
is continued ongoing slack in the labor market; that although 
we are at full employment measured by the unemployment rate, 
the share of Americans with a job remains lower than it had 
been in other recoveries. That may be playing a factor. But I 
think there is more consensus on the fact that it is because of 
the slow productivity growth, that that has been--that the pace 
of that has slowed and so you are not seeing the foundation for 
wage growth.
    However, the big issue does appear to be that even when we 
see productivity growth, even when we see those gains, even 
when we are at full employment, workers aren't benefiting. So 
that comes down to their bargaining power, the declining 
unions. And increasingly, economists are showing evidence that 
the rise in the concentration of capital, that the rise in what 
economists call monopsony power, which is a mouthful, but it 
basically means that in a lot of communities workers have few 
or maybe only one potential employer. Certainly, you know, 
healthcare is a perfect example. If you are a nurse and you 
work at a hospital, almost any hospital you work at is owned by 
the same person. These all drag down wages.
    Representative Maloney. My time is almost up, but I would 
like to mention, as you know, the tax cuts were sold to the 
American people on the basis of three primary claims: that they 
would be fair, not tilted towards the wealthy; that they would 
create jobs; and that they would increase wages.
    In the interest of time, I just want to flip to the third 
point: wages. I would like to really go to a chart that was 
produced by your organization. And this graph shows various 
projections of the impact of the first round of the tax cuts on 
wages. And can you help us understand this slide? Why is there 
such a large disparity between various estimates of wages 
growth? I mean, it is probably----
    Dr. Boushey. Well, and I think in many ways, unfortunately, 
the CEA report that was talked about today actually sort of 
demonstrates the case that we actually haven't seen the kind of 
wage growth that we would expect after these tax cuts, based on 
the arguments that were presented in advance and the estimates.
    That if that tax cut was successful, we should have seen 
sharply rising wages and, instead, we have seen wages that 
have--they have been increasing sort of on par with what they 
were doing before. They should have increased sharply relative 
to trend. That is not what we have seen. That is what was 
predicted. The American people were lied to or we didn't get 
what we deserved.
    And then second, you know, what we have seen is most of the 
money has been going to stock buybacks. We are now back to 
where we were at the record-breaking level in 2007. What 
happened in 2008, right? This was not a good economic 
indicator. So the tax cuts have created growth. They should 
have. It was a lot of money pumped into the U.S. economy. It 
would have been ridiculous if growth hadn't gone up. But it has 
not delivered the wage gains that they said it would. Wages 
should have increased sharply, they should have spiked. They 
didn't. And instead, that has all gone disproportionately to 
share buybacks, benefiting the richest Americans, and not 
leading to the productivity gains that we need to see to grow 
our economy over the long term.
    Representative Maloney. Thank you. My time is up.
    Chairman Paulsen. Thank you, Dr. Boushey. I think our other 
witnesses may disagree with that.
    But, Senator Lee, you are recognized for 5 minutes.
    Senator Lee. Thank you, Mr. Chairman. Thanks to all of you 
for being here. It is good to see you.
    Dr. Roberts, I would like to start with you. Could you 
explain something to us, just in a minute or so, called 
Simpson's paradox?
    Dr. Roberts. Only a minute? Could I----
    Senator Lee. You have a great vendor online that does it in 
a couple minutes.
    Dr. Roberts. Simpson's paradox is the phenomenon that 
composition changes can affect how people in trends are 
measured over time. To take an example, there is a study done 
of poverty rates from 1967 to 2003 by Hilary Hoynes, Marianne 
Page and Ann Huff Stevens in the Journal of Economic 
Perspectives. Every type of family had a dramatic drop of at 
least 20 percent in the poverty rate, except for one group 
which was 10 percent. That group was very small. That was, I 
think, single men without children. But women with children, 
their poverty rate fell by more than 20 percent. Married 
couples, their poverty rate fell by more than 20 percent.
    So when you look across all six groups, you would think 
that the average poverty rate should have dropped by about 20-
something percent. One group had a 29 percent drop. A huge 
decrease, wonderfully, in the poverty rate among single women 
with children.
    But the poverty rate barely budged. How could that be? 
Shouldn't it be a weighted average of the different groups? And 
the answer is it is not because the proportions of the groups 
change. And over that time period, we got an enormous increase, 
almost a doubling, in the group with the highest poverty rate, 
which was single women with children. So as a result, the 
measured poverty rate didn't change.
    The question is, when you are looking at how growth affects 
poverty, you probably want to take into account the fact that, 
at the same time, demography, the demographic structure of the 
United States was changing, and you wouldn't want to say that 
the economic growth over that time period had no effect on 
poverty if at the same time there was something else going on.
    How did I do?
    Senator Lee. So they don't all weigh the same and they 
shake down differently.
    Dr. Roberts. And the weights change over time.
    Senator Lee. I have got a graph in front of you that I 
think tends to show some of this. So----
    Dr. Roberts. Simpson's paradox.
    Senator Lee. Yes, exactly. So between 1969 and 2016, as 
this chart indicates, median household income rose by 37 
percent, but the increase would have been much larger if there 
had not been significant changes in family formation, family 
structure, and family dissolution. And among households that 
are headed by married parents, median income nearly doubled. 
And among households headed by single mothers, it rose by more 
than 60 percent. And yet, you see that the median household 
income rose by 37 percent, which is significantly lower than 
this lowest performing cohort that I described.
    So would you say this is an example of Simpson's paradox 
being played out?
    Dr. Roberts. It is. And it is an example of how challenging 
it is to assess the effect of the economy on different groups 
when other things are happening in the background. It is really 
a lesson in the complexity of economics and how often Mark 
Twain was right, because sometimes it is very hard to know what 
statistics are actually measuring.
    Senator Lee. As the studies done by my Social Capital 
Project have shown, families today are twice as likely to be 
headed by a single parent as they were at the end of the 
sixties.
    So I would like to ask you, is there anything that we can 
look to in terms of Federal policy that might either be pushing 
this trend or that could alleviate it, could improve it? In 
other words, people tend to perform better if they have two-
parent households. What Federal policies, if any, can you think 
of that might help that?
    Dr. Roberts. Well, I will leave my other panelists to 
respond more to that, but I would simply say that I don't think 
we fully understand the causal relationship between family 
structure and income.
    I don't think the Federal Government should be necessarily 
in the business of particularly trying to design the American 
family, but they should get rid of any barriers that make it 
expensive to be married. I would certainly agree with that.
    Senator Lee. Sure. And I agree with you on both points. It 
is not the Federal Government's business to coerce, cajole, or 
lead people into any particular family structure. If, on the 
other hand, it is doing something to actively discourage people 
from getting married, if it is punishing them for doing so, 
that could be a problem and it could be a problem that leads to 
less favorable economic outcomes.
    Mr. Moore, in the time I have left, would you have anything 
to add in terms of Federal policy that might be affecting this?
    Mr. Moore. You mean with respect to----
    Senator Lee. Family formation, dissolution.
    Mr. Moore. Welfare policy. I mean, you really have to look 
at whether our welfare policies are encouraging out-of-wedlock 
births and whether it is leading to higher divorce rates. And 
there is some evidence that it is. So we ought to have policies 
on welfare that encourage work and discourage nonmarriage.
    Mr. Moore. Thank you very much. I see my time has expired, 
Mr. Chairman.
    Chairman Paulsen. Thank you.
    Senator Heinrich has another question.
    Senator Heinrich. Dr. Roberts, I wanted to follow up on 
something you said and would even be curious to hear my 
colleagues' opinion on this. I don't want to misquote you, but 
I think you said one of the things we need to do is make sure 
that people can move to where the jobs are.
    And I often hear this with regard to rural versus urban 
demographics, that people should just move to where the jobs 
are. We used to take the approach that we need to connect our 
economy and invest in rural areas as opposed to just say to 
rural people they should move to the cities.
    What exactly do you mean? Because my approach would be to 
say, we need to connect those economies. We need to have 
broadband in rural communities, for example, so that they can 
access that economy. But I think to suggest to rural 
communities that their solution is just to pick up and move to 
the cities seems to be a little myopic.
    Dr. Roberts. Well, that has been the trend of world history 
for the last, I don't know, few hundred years. It is true in 
China. It is true in the United States. People have chosen to 
move to urban areas.
    I didn't mean to suggest that we ought to encourage them to 
move. I was suggesting that the barriers to that natural 
movement, which is where the most dynamic parts of the economy 
are right now, the barriers that are there because of the high 
cost of housing and the high cost of real estate, those 
barriers are artificially high due to restrictions on zoning 
and other regulations.
    As to connecting the rural to the urban, I think it would 
be great if rural areas were thriving. I care more about the 
people than the areas. I don't see any reason to invest 
specifically in rural areas, per se. They should certainly have 
the benefits that all Americans have that the Federal 
Government's activity leads to. But I don't think we should 
focus on the fact that those areas are struggling. I am worried 
about the people that are there. We certainly should help them 
invest in the skills they need. And if they want to stay in 
those rural areas, which many people do, because it is a 
different lifestyle and pleasant for a thousand other reasons 
than high wages. I would never want to suggest that money is 
the only thing that matters.
    Chairman Paulsen. Thank you. Dr. Roberts, let me follow up 
with one additional question before we close out. There are 
increasing numbers in our population now that are retired or 
going to be retiring soon. And that means you are going to have 
fewer people with measurable income, though a lot of those 
folks now will be drawing down their savings that they have had 
accumulated over a lifetime.
    So is income equality a very useful metric to measure 
welfare or will this sort of demographic--it is a combination--
will this sort of demographic change affect our median 
household income statistics?
    Dr. Roberts. Well, it is incredibly complicated. Obviously, 
we care. We have talked I think exclusively today about wages 
and nonmonetary forms of compensation. Wealth, of course, also 
matters. It points out to how complicated it is to assess well-
being. Some of the richest people today are very poor right 
now. They are students. They are going to have successful 
lives. We capture them in our data as poor, most of them, and, 
of course, many of them will go on to be extremely successful 
financially.
    In terms of measurement, retirement and the increasing 
numbers of people who are retired have distorted a number of 
studies that have been done of well-being and the median and 
trying to assess how people have done over time, because we 
have, my generation--I am 64. I was born in 1954. I don't plan 
to retire soon. I hope that is okay. I like working a lot. I 
love my job.
    But as that bulge of baby boomers goes out into the--went 
out into the economy and now is leaving the economy, that is 
causing all kinds of measurement changes.
    Chairman Paulsen. Is there some other metrics that might be 
better to help gauge----
    Dr. Roberts. Say again.
    Chairman Paulsen. Is there another metric we might use to 
measure overall well-being?
    Dr. Roberts. Well, I certainly would never want to use--as 
I mentioned earlier, I would never want to use just money, but 
we do want to at least see how people are doing financially.
    And I am very--I like the idea of trying to measure how 
people have done over time. I think it will show that the 
American economy benefits a lot of people more than people tend 
to think, because it is very dynamic. And its dynamism is 
hidden by the fact that these underlying demographic changes--
we haven't talked about immigration, the large number of 
people--you alluded to it earlier.
    Poor people are desperate to come here for the opportunity 
to be poor. They don't come here for welfare payments. They 
come here for the opportunity to work. And they thrive. They do 
much better than they did where they came from in their home 
countries. But they really come here to improve the lives of 
their children.
    And, again, I think if we take a longer perspective, which 
I think we should do with almost all economic policies, and 
look across generations when we can, we should take account of 
the fact that the longer run impact is tremendously larger than 
the short run impact.
    Chairman Paulsen. Dr. Mulligan, Representative Maloney had 
put up the chart earlier about the CEA estimates earlier I 
think on wage levels being higher. Any comments you may have to 
refute that? I mean, you offered some of that in your 
testimony. But, obviously, whether it is stock buybacks, that 
is just not a dollar that disappears in the economy, that goes 
somewhere else. But any other thoughts, in terms of your 
analysis?
    Dr. Mulligan. Yes. Thank you. I appreciate having the 
opportunity. It was asserted that the CEA forecast for the year 
2027 was, number one, out of bounds from the experts; and, 
number two, that it was proven incorrect, okay?
    Number one, it is not out of bounds from the experts. Two 
experts wrote a paper together for Brookings. Professor Barro, 
who was one of my teachers, and Jason Furman, who was one of 
the main advisers in the Obama Administration, together they 
wrote a paper, came up with a very similar estimate that CEA 
did. That wasn't shown on that chart. Professor Kotlikoff did 
an analysis, similar estimate. It wasn't shown on the chart. So 
that was a cherry-picked chart in terms of CEA being out of 
bounds.
    The second thing is no decent statistician would use 5 
months of data into the policy to refute a 120-month forecast. 
And that is what was done here today, and that is absolutely 
wrong. No econometrician or no statistician would advise doing 
that, and I don't advise doing that. We have been 5 months 
through. But if you want to play that game, then you should 
take 1/24th of what was promised, because we are 1/24th of the 
way there. And CEA's wage report clearly shows that people have 
gotten way more than 1/24th of the way to the 10-year goal.
    Thank you.
    Chairman Paulsen. Well, I would like to thank again all of 
you for being with us today and taking the time to provide your 
testimony before the Committee.
    And I remind members, should they wish to submit questions 
for the record as well, the hearing will remain open for 3 
business days.
    And, with that, our hearing is adjourned.
    [Whereupon, at 12:00 p.m., the committee was adjourned.]

                       SUBMISSIONS FOR THE RECORD
                       
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    I call this hearing to order.
    America is a beacon to the world. It is the land of opportunity, 
where everyone has a shot at the American dream.
    Our Nation isn't perfect, of course, and not everyone gets to start 
from the same position. Many Americans face tremendous adversity.
    As lawmakers, we must avoid standing in the way of Americans being 
able to enter the workforce, or switching to jobs that pay more, offer 
better benefits, or provide greater flexibility.
    Since commonsense pro-growth policies have been implemented, we 
have seen a groundswell in opportunity. The so-called ``quit rate'' as 
measured by the Bureau of Labor Statistics is at its highest since 
2001. Workers are more confident to leave their old jobs for new ones.
    The Atlanta Federal Reserve Bank's monthly Wage Growth Tracker, 
which is derived from Census Bureau data, reports that wage growth 
among job switchers was 3.3 percent higher than one year ago. Job 
satisfaction is its highest since 2005 according to a survey by the 
Conference Board.
    These are positive signs as opportunities expand for everyday 
Americans.
    And contrary to claims that economic growth is only benefiting the 
wealthy, the unemployment rates among those workers who normally face 
the greatest challenges in the job market have fallen drastically since 
pro-growth policies were initiated:
    Among those without high school diplomas, the unemployment rates of 
blacks, Hispanics, and whites have fallen 8.1, 3.8, and 3.3 percentage 
points, respectively.
    According to a Washington Post analysis, there's been a 3.3 percent 
increase in jobs for blue-collar workers in goods-producing jobs, the 
best rate since 1984.
    A New York Times article states that ``The number of Americans 
seeking Social Security disability benefits is plunging, a startling 
reversal of a decades-old trend.'' It cites a stronger economy as the 
cause.
    This is how we look at the full picture of our economy: By looking 
at a variety of indicators.
    While my friends on the other side of the aisle look at downward 
movements in measures of average and median worker earnings, they fail 
to see that the median worker today is not necessarily the same person 
as last month, or last year, or a decade ago. It is possible for these 
measures to decline, even when wage rates are rising!
    Many critics fail to acknowledge that people move in and out of 
different income ranges over their lifetime.
    Just because it is not easy to measure progress across a population 
of over 320 million people, we should not assume people are tethered to 
a given income percentile over their lifetime despite ample evidence to 
the contrary.
    Millions of people from all over the world continue to relocate to 
the United States despite tremendous risks and numerous challenges. 
Clearly it is because America remains the land of opportunity.
    We must take care in reading headline statistics otherwise we risk 
creating policies that destroy the potential for real progress.
    If we allow people to thrive, they will thrive. If we allow 
American businesses to invest in their workers, they will invest in 
their workers. If we let Americans keep more of their money, they will 
put it to the best uses for their families and their own well-being, 
and our economy will thrive.
    Our future will only be brighter if we follow the path of smart 
economic policy. Our prospects for a brighter future will be dimmed if 
we go back to the old ways. For instance, Democrats are threatening to 
increase taxes to where they were prior to the Tax Cuts and Jobs Act.
    America's tax rate for doing business would surge back to the 
highest in the developed world, and would undo the growth-enhancing 
economic incentives that have powered increased private domestic 
investment and economic growth in less than two years. American workers 
will not have as much of the capital investment to work with that is 
critical to raise productivity, and that would be bad news for future 
wage growth.
    The success of recent economic policy is clear. We are again 
relying on the ability of people to climb up the economic ladder, to 
grow, and thrive.
    Our star panel of witnesses will help explain the progress made to 
date and how and why, with pro-growth policies, we can continue to 
prosper as the great Nation we know America to be.
    Before I introduce our witnesses, I now yield to Ranking Member 
Heinrich for his opening statement.
                               __________
   Prepared Statement of Hon. Martin Heinrich, Ranking Member, Joint 
                           Economic Committee
    Thank you Mr. Chairman.
    I have a sense of deja vu--another hearing on the Republican tax 
law that passed nine months ago. Another attempt by Republicans to 
convince their constituents that they are better off because of that 
law.
    But there's a problem. Despite White House promises, working 
families aren't better off, and another hearing won't change that.
    Wages are stuck. The typical worker's hourly wages, after adjusting 
for inflation, were lower in August than a year ago.
    What has increased is the cost of this tax giveaway. When 
Republicans passed the bill last December, the estimated cost was $1.5 
trillion. Today, it stands at $1.9 trillion.
    It was a massive waste of resources when workers could least afford 
it and when we should have been investing in our people and 
communities.
    Most working Americans have been treading water, with middle-class 
earnings stalled for years. The typical man working full time year 
round earned less in 2017, after adjusting for inflation, than in 1973.
    While earnings have been stagnant or shrinking, the costs of child 
care, housing and education have climbed higher, with student loan debt 
exploding in the past decade.
    We'll hear today that we just need to look at a different inflation 
measure or use a different survey, and then everything looks great.
    But telling people across New Mexico, don't worry, you are doing 
better than you realize won't make it easier for them to pay for their 
kids' college. It won't help them get health insurance or treatment for 
addiction.
    Even as those in the middle work harder and harder to make ends 
meet, those at the top continue to reap large income gains.
    Between 1980 and 2014, the top 1 percent saw their pre-tax incomes 
grow by 204 percent while incomes for the bottom 50 percent remained 
virtually flat.
    And, with passage of the Republican tax bill, the gap between those 
at the top and everyone else is likely to grow significantly wider.
    Part of the challenge we face is that we need better, more timely 
economic data to help us craft smart, forward-looking policies.
    Knowing in real time who is benefiting from economic growth--and 
who is not--is key to designing new policies that generate growth which 
benefits everyone.
    Along with Leader Schumer and some of my JEC colleagues, I have 
introduced legislation that instructs the Bureau of Economic Analysis 
to start reporting on new Income Growth Indicators.
    These measures would show how incomes are growing at different 
levels of income--painting a clear picture of who the economy is 
working for.
    We also need a sustained effort to lift the living standards of 
working families and to help workers chart a brighter course for 
themselves and their families.
    We should invest in programs that reward work and help Americans 
prepare for 21st century jobs.
    Increasing the value of Pell Grants so that a college education is 
within reach for more students is a good place to start.
    I have a proposal to expand Pell Grants for students across the 
country--in New Mexico, the increased Grant would cover the full cost 
of tuition at all of New Mexico's in-state colleges and universities.
    Let's expand the Earned Income Tax Credit so that work pays better 
and more families are able to afford the basic necessities. We should 
have done that in the Republican tax bill.
    Rather than turning the clock back and again allowing insurance 
companies to deny coverage to those with pre-existing conditions, as 
the Trump administration is trying to do, we need to build on recent 
gains to make health care more accessible and affordable.
    We also need to be smarter about how we use our Nation's fiscal 
resources.
    After squandering $1.9 trillion on the tax bill, the House is 
preparing to vote on the Republicans' Tax Plan 2.0. This legislation 
would add $3.2 trillion to deficits from 2029 to 2038, bringing the 
total cost of their tax bills above $5 trillion.
    And remember, the majority of these costly tax breaks go to the 
richest among us.
    I don't think we can have a hearing on living standards without 
asking ourselves--what will happen to the quality of life for tens of 
millions of Americans who count on Social Security, Medicare and 
Medicaid if Republicans add literally trillions to deficits and then 
turn to these programs as their piggy bank.
    The consequences would be disastrous.
    I look forward to our witnesses' testimony.
    
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  Response from Dr. Mulligan to Questions for the Record Submitted by 
                            Chairman Paulsen
    A frequently cited San Francisco Federal Reserve Bank paper 
suggests that the Tax Cuts and Jobs Act may have little effect on 
economic growth, but seems to equate the Tax Cuts and Jobs Act with a 
Keynesian-style stimulus package.
    Could you comment on the report's validity?
    Does this study's results hold if the Tax Cuts and Jobs Act raises 
the economy's potential as the Congressional Budget Office is 
projecting?
    The paper can be found at this link: https://www.frbsf.org/
economic-research/publications/economic-letter/2018/july/procyclical-
fiscal-policy-tax-cuts-jobs-act/
    The San Francisco Fed report is concerned with empirical estimates 
of government purchases multipliers, which is an entirely different 
question from the GDP effects of cutting marginal tax rates on capital 
and labor income, as TCJA did.\1\ Moreover, in practice many of the 
changes in government purchases are lasting only a few years, whereas 
the cut in the statutory corporate tax rate is permanent and expected 
to permanently increase the Nation's capital stock and the productivity 
of its workers.
---------------------------------------------------------------------------
    \1\ The report refers to ``government spending,'' which is the sum 
of transfers, government purchases, and interest, but it is actually 
referring to studies of government purchases such as military and 
highway spending. The distinction is important because transfers can 
reduce employment and GDP even while purchases increase them (e.g., my 
2012 book on The Redistribution Recession). If nothing else, we must 
recognize that government purchases are part of GDP whereas transfers 
are not.
---------------------------------------------------------------------------
    The best approach for assessing the long-run GDP effects of a 
permanent change in the business tax rate is to look at the effect of 
the rate change on the cost of capital, and the responsiveness of 
demand for capital services to a change in the cost of capital. TCJA 
permanently reduced the cost of capital. A higher equilibrium capital-
labor ratio implies higher productivity, and thus higher output. In 
other words, this approach shows how the business tax cuts permanently 
increase the economy's potential.
    An analogous approach could be used for the temporary individual-
income tax cuts. Alternatively, the large and growing time series 
literature on the effects of exogenous tax shocks can be used because 
these studies at least distinguish taxes from government purchases even 
if they do little to distinguish temporary from permanent.
    As noted in the 2018 Economic Report of the President, the 
fundamental challenge to estimating the effects of changes in tax rates 
on economic growth is that the timing of tax changes are generally not 
random--historically, legislators tend to raise rates during periods of 
expansion and lower them during periods of contraction. This can 
negatively bias estimates of the effect of tax cuts on investment and 
output.
    As noted in the Economic Report of the President, there have been a 
battery of peer-reviewed articles on this in top-5 economics journals 
over the past two decades:

        One is the approach called structural vector autoregression, 
        following Blanchard and Perotti (2002), in which the 
        identification of causal effects relies on institutional 
        information about tax and transfer systems and the timing of 
        tax collections to construct automatic fiscal policy responses 
        to economic activity. In their original study, Blanchard and 
        Perotti (2002) find an initial tax multiplier of 0.7 on impact, 
        with a peak impact of 1.33 after seven quarters. In contrast, 
        using sign restrictions to identify tax shocks, Mountford and 
        Uhlig (2009) find a peak-to-impact multiplier that is 
        substantially larger.
        A second technique, originating with Romer and Romer (2010), 
        uses narrative history from Presidential speeches and 
        Congressional reports to identify exogenous tax changes with 
        political or philosophical, as opposed to economic, 
        motivations. These changes are unlikely to be correlated with 
        other factors affecting output. Tax changes unrelated to the 
        business cycle can be used as a quasi-natural experiment to 
        estimate the effect on economic output; this matters because if 
        tax cuts are a response to deteriorating economic conditions, 
        the data will show a spurious negative correlation between 
        taxes and growth. Romer and Romer estimate that a 1-percentage-
        point increase in the total tax share of GDP decreases GDP by 1 
        percent in the first year and up to 3 percent by the third 
        year. They further find that a 1-percentage-point increase in 
        the total tax share of GDP decreases investment by 1.5 percent 
        in the first year and up to 11.2 percent by the third year.
        Using Romer and Romer's (2010) series as an external instrument 
        for changes in average individual marginal tax rates, Barro and 
        Redlick (2011) similarly find that a permanent 1-percentage-
        point reduction in the average marginal tax rate raises real 
        GDP per capita by 0.5 percent in the subsequent year, 
        corresponding to a conventional tax multiplier of 1.1. Applying 
        the narrative approach to U.K. data, Cloyne (2013) finds that a 
        1-percentage-point reduction in the total tax share of GDP 
        increases GDP by 0.6 percent on impact and by 2.5 percent over 
        three years, and raises investment by 1.2 percent immediately 
        and by 4.6 percent by the third year. Hayo and Uhl (2014), 
        using German output data, estimate a maximum response to a 1-
        percentage-point drop in total tax liability (as a percentage 
        of GDP) of 2.4 percent. Applying a similar approach to fiscal 
        consolidations (tax revenue increases) across the OECD 
        countries, Leigh, Pescatori, and Guajardo (2011) find that a 
        tax-based fiscal consolidation of 1 percentage point of GDP 
        reduces GDP by 1.29 percent.
        Mertens and Ravn (2013) develop a hybrid approach that combines 
        both methods. Because narratively identified shocks may be 
        prone to measurement error, and identification in a structural 
        vector autoregression framework can require questionable 
        parameter restrictions, Mertens and Ravn develop an estimation 
        strategy that utilizes Romer and Romer's (2010) narrative tax 
        shock series as an external instrument to identify structural 
        tax shocks, avoiding the need to impose parameter restrictions. 
        Utilizing this hybrid approach to analyze U.S. data, they 
        estimate that a 1-percentage-point cut in the average corporate 
        income tax rate raises real GDP per capita by 0.4 percent in 
        the first quarter and by 0.6 percent after a full year, with 
        the effect persisting through 20 quarters. Mertens and Ravn 
        additionally estimate that a 1-percentage-point cut in the 
        average corporate income tax rate generates an increase in 
        nonresidential investment of 0.5 percent on impact, with a peak 
        increase of 2.3 percent after six quarters. Also employing a 
        hybrid approach, Mertens and Montiel-Olea (2017) find that in 
        the first two years following a tax decrease of 1 percentage 
        point, real GDP is expected to be higher by about 1 percentage 
        point.
        On the individual side, meanwhile, Mertens and Ravn estimate 
        that a 1-percentage-point cut in the average personal income 
        tax rate raises real GDP per capita by 1.4 percent on impact 
        and by a peak of 1.8 percent after three quarters. Though they 
        find that a 1-percentage-point reduction in the average 
        personal income tax rate has a negligible impact on inflation, 
        short-term nominal interest rates, and government debt, they do 
        find significant positive effects on employment, hours worked, 
        consumption, and durable goods purchases and nonresidential 
        fixed investment. In particular, they observe that a 1-
        percentage-point decrease in the average personal income tax 
        rate results in a peak employment response of 0.8 percent after 
        5 quarters, and peak durable goods and nonresidential 
        investment effects of 5 and 4 percent, respectively, beyond one 
        year.
                               __________
  Response from Dr. Mulligan to Questions for the Record Submitted by 
                      Representative Karen Handel
    Wage stagnation among men with no college degree receives more 
attention than the tens of millions of women who have gained jobs and 
advanced from entry-level wages over time.

      Can you comment on female wage growth? (U.S. Census 
Bureau data show that the 2017 inflation-adjusted median income for 
women was 82.4 percent higher than in 1980 versus 13.5 percent for 
men.)

    Prime-age labor force participation has recently risen slightly, 
but remains well below the pre-recession level.

      Why is it so low?
      What can draw those who are able bodied back to work?

    From Q1 2017 through Q2 2018, the nominal median weekly wage among 
women working full-time as wage and salary workers has increased by 2.6 
percent. This slightly outpaces the 2.3 percent increase among men 
working full-time as wage and salary workers. Similarly, among women 
working part-time, nominal median weekly wages increased by 5 percent 
since the start of 2017, compared to an increase of 3.6 percent among 
similarly employed men during this period.\1\
---------------------------------------------------------------------------
    \1\ These data are from Bureau of Labor Statistics calculations 
using Current Population Survey data. The part-time results are not 
seasonally adjusted.
---------------------------------------------------------------------------
    For historical context, the wage growth of female full-time workers 
has substantially outpaced that of men over the past 38 years since 
1980. From Q1 1980 through Q2 2018 the average weekly wages of women 
has increased by 27.5 percent in real terms, while the average weekly 
wages of men has been roughly flat (as reported by BLS using the CPI-U 
as an inflation measure; each of these would exhibit faster growth 
using the PCE inflation measure).
    The faster growth in wages among women from these official 
statistics does not tell the whole story though, as more women are now 
working and more women are now working full-time than was the case in 
early 2017. There were 2.1 million more women working full-time in 
August 2018 than in January 2017, and 300 thousand fewer women working 
part-time.\2\ As women are moving from part-time to full-time work, 
this will also result in further increases in wages that are not 
reflected in the BLS computations described above.
---------------------------------------------------------------------------
    \2\ There also has been a long-run increase in full-time work among 
employed women. In January 1980, 73.1 percent of working women worked 
full-time. By August 2018, this share had increased to 76.1 percent.
---------------------------------------------------------------------------
    In the Council of Economic Advisers' September report on wage 
growth we outlined several adjustments to traditional wage statistics 
reported by the Bureau of Labor Statistics which result in those 
figures understating the actual growth in compensation that workers are 
experiencing. These include an increase in the share of compensation 
coming in the form of benefits, shifts in the composition of the 
workforce as workers who were on the sidelines join or rejoin the labor 
force, and counting after-tax compensation to include the direct 
benefits of the Tax Cuts and Jobs Act. While we do not have a specific 
break-out of these effects by gender, these effects are relevant for 
considering women's wage growth in addition to being relevant for wage 
growth among the entire population.\3\
---------------------------------------------------------------------------
    \3\ Mulligan and Rubinstein. ``Selection, Investment, and Women's 
Relative Wages over Time.'' Quarterly Journal of Eocnomics. August 
2008.
---------------------------------------------------------------------------
    Regarding your second question on prime-age labor force 
participation rates, you are correct that prime-age labor force 
participation remains below the pre-recession level (although the 
prime-age labor force participation rate of has now recovered to its 
2010 level and the 79.5 percent prime-age employment to population 
ratio in July 2018 was the highest it has been since May 2008). It 
remains low, in part, because there are workers who left the labor 
force during the recession and its aftermath. These workers could be 
incentivized to rejoin the labor market--potentially after years of not 
working. In July, the Council of Economic Advisers released a report on 
expanding work requirements in non-cash welfare programs, which 
discusses policies to increase the incentives for able bodied prime-age 
workers to reenter the labor market. These include expanding work 
requirements, similar to those in place in TANF, to Medicaid, SNAP, and 
housing assistance. As we note in that report, ``expanded work 
requirements would increase the incentive for individuals to work 
without exacerbating the high marginal tax rates faced by some current 
low-wage, part-time workers'' adding that ``the evidence on welfare 
programs suggests that work-conditioned programs are uniquely able to 
both increase adult employment and improve child outcomes.''
    The Affordable Care Act's employer mandate and premium tax credit 
rules also penalize both earnings and full-time employment.\4\ A repeal 
of the law would remove those disincentives and thereby increase full-
time-equivalent employment. Even with the law in place, allowing 
families to pursue unsubsidized coverage options would increase 
incentives to work and earn. The Trump administration has taken some of 
these steps, such as expanding the range of (unsubsidized) short-term 
limited-duration insurance plans that are permitted on the market (83 
FR 38212).
---------------------------------------------------------------------------
    \4\ See my 2015 Side Effects and Complications, or my June 2015 
Testimony to the Joint Economic Committee on this subject.
---------------------------------------------------------------------------
                               __________
  Response from Dr. Roberts to Questions for the Record Submitted by 
                      Representative Karen Handel
    Wage stagnation among men with no college degree receives more 
attention than the tens of millions of women who have gained jobs and 
advanced from entry-level wages over time.

      Can you comment on female wage growth? (U.S. Census 
Bureau data show that the 2017 inflation-adjusted median income for 
women was 82.4 percent higher than in 1980 versus 13.5 percent for 
men.)

    Female wage growth has indeed been very impressive. And since I 
believe that inflation since 1980 has been overstated, I think the 
growth of female wages in real terms is even higher than the numbers 
suggest. Equally important is that millions of women joined the labor 
market over this time period. In 1980, there were a little over 20 
million women who worked full-time and year-round. By 2015, that number 
had more than doubled to 47 million. So the economy has created jobs 
for millions of women at much higher pay than in the past.
    Prime-age labor force participation has recently risen slightly, 
but remains well below the pre-recession level.

      Why is it so low?
      What can draw those who are able bodied back to work?

    I don't think we understand this phenomenon fully. There has been a 
lot of interesting speculation about both cultural causes as well as 
changes in disability law and other regulations. But I don't think a 
clear consensus has emerged that is convincing.
                               __________
   Response from Mr. Moore to Questions for the Record Submitted by 
                            Chairman Paulsen
    A frequently cited San Francisco Federal Reserve Bank paper 
suggests that the Tax Cuts and Jobs Act may have little effect on 
economic growth, but seems to equate the Tax Cuts and Jobs Act with a 
Keynesian-style stimulus package.
    Could you comment on the report's validity?
    Does this study's results hold if the Tax Cuts and Jobs Act raises 
the economy's potential as the Congressional Budget Office is 
projecting?
    The paper can be found at this link: https://www.frbsf.org/
economic-research/publications/economic-letter/2018/july/procyclical-
fiscal-policy-tax-cuts-jobs-act/
    The San Francisco Federal Reserve Bank study is a purely Keynesian 
analysis of fiscal policy. It concludes that ``thanks in large part to 
recently enacted tax cuts, U.S. fiscal policy has taken a decidedly 
procyclical turn--providing stimulus when the economy is growing. In 
fact, the projected increase in the Federal deficit over the next few 
years would represent the most procyclical fiscal policy stance since 
the Vietnam War.''
    If there is any lesson to be learned from the last two presidencies 
and the economic performance it is that standard demand-side economic 
policies as tried by President Obama were failures. Government spending 
does not create jobs, it reduces private sector growth and employment. 
This is why the Obama Administration's own numbers found that the 
economy would have recovered from the Bush recession more quickly and 
more powerfully if the government had NOT spent and borrowed the $830 
billion on the ``fiscal stimulus'' plan. The Keynesian playbook gave 
America the worst recovery from a recession since the Great Depression.
    The Trump tax cuts are SUPPLY SIDE policy moves. They shift the 
supply curve out by increasing incentives for businesses to invest, 
hire and innovate. Already they have expanded the 10 year window for 
the economy 2018-27 by just over $6 trillion. It is hard to conceive of 
a more positive result--so far. This means that about two-thirds of the 
debt impact of the Trump tax cuts has already been erased thanks to the 
phenomenal 3 to 4% growth path of the economy over the past twelve 
months.
                               __________
   Response from Mr. Moore to Questions for the Record Submitted by 
                      Representative Karen Handel
    Wage stagnation among men with no college degree receives more 
attention than the tens of millions of women who have gained jobs and 
advanced from entry-level wages over time.

      Can you comment on female wage growth? (U.S. Census 
Bureau data show that the 2017 inflation-adjusted median income for 
women was 82.4 percent higher than in 1980 versus 13.5 percent for 
men.)

    Wage growth over the last 30 years has been significantly higher 
for women than men. And the demographic group with the most economic 
progress has been black women.
    The very good news on the economy and wages is that since the Trump 
tax cut, the largest wage gains went to low-income households and 
households headed by workers without a college degree. The bottom 10% 
in income saw wage gains of 5%. The top 10% of wage earners saw wage 
growth of just over 3%. This would seem to validate the Trump claim 
that the tax cuts were designed to help working class Americans. Retail 
sector pay rose by nearly 4% while professional business workers saw 
wage hikes of closer to 3%. This does not include bonuses. We have seen 
three major retailers, Amazon, Disney, and Walmart raise starting wages 
in the last year.
    This is happening in part because we are seeing more capital 
investment by businesses--as a result of the lower business tax rate 
and expensing--which leads to greater worker productivity. It is also 
occurring because the tight labor market has created more job options 
for blue collar and lower skilled American workers. What is unique 
about this Trump boom is that the rising tide is lifting all boats. 
This was a tax cut for everyone--not just the rich.
    Prime-age labor force participation has recently risen slightly, 
but remains well below the pre-recession level.

      Why is it so low?
      What can draw those who are able bodied back to work?

    Low labor force participation can be combatted through work for 
welfare reforms, apprenticeship programs and higher wage rates to 
entice more Americans to tilt toward work over leisure. We also need a 
more robust work-based immigration system to get the best workers from 
around the world here in the United States.
                               __________
  Response from Dr. Boushey to Questions for the Record Submitted by 
                   Representative Carolyn B. Maloney
    1) The Measuring Real Income Growth Act (H.R. 6874) instructs the 
Bureau of Economic Analysis of the Department of Commerce to produce, 
as part of its quarterly analyses of Gross Domestic Product, estimates 
of economic growth by income level. How would such additional analyses 
improve our ability to shape public policy so that it better serves all 
Americans? For example, how would it improve our understanding of the 
economic status and the needs of Americans living in different cities, 
states and Congressional districts?
    The Measuring Real Income Growth Act would immediately require the 
Bureau of Economic Analysis of the Department of Commerce to 
disaggregate growth by income so Americans can see how income is 
growing, or not, for those at the top, bottom, and middle of the income 
distribution. These new measures will help policymakers track and 
respond to increases in income inequality that reduce economic mobility 
in the United States, and could help policymakers to trace the causes 
of inequality to a number of social ills. They will also provide 
information that can help us predict and plan for recessions. For 
example, if the Bureau of Economic Analysis additionally disaggregates 
consumption (as they have conducted preliminary research on), the 
results could help us understand the uneven distribution of savings and 
identify when consumption is being driven by debt, rather than income 
gains.
    This legislation also lays the groundwork for the possibility of a 
more extensive effort to disaggregate growth in the future. The same 
techniques could also give us growth disaggregated by geographic area. 
More detailed economic data by State, county, or other geographic 
region would help policymakers target place-based policies to address 
areas that have been left behind by the modern economy.
    2) Why is legislation like the Measuring Real Income Growth Act 
(H.R. 6874) necessary when some prominent economists have been able to 
independently produce analyses of GDP growth by income? Is there 
support in the field of economics for disaggregating economic growth?
    Federal collection of these data is important for several reasons. 
First, federally produced distributional national accounts would be 
consistent and reliable over time. Academic economists have made great 
strides in pioneering these measures, but the production of important 
national economic statistics should not be left solely up to non-
governmental sources. Academics' research priorities and available 
funding will change over time, but policymakers and the public should 
not be deprived of this data in the event that academics are unable to 
continue producing it.
    Second, having the Bureau of Economic Analysis produce 
distributional national accounts would ensure this data is as current, 
prominent and widely accessible as possible. It will also complement 
for other Bureau products, such as on GDP, providing important context 
for news outlets and other consumers of those reports.
    Finally, Federal statistics are seen as unbiased, credible, and 
valuable by most economic observers. The construction of economic 
statistics is transparently documented by the agency that produces 
them, allowing researchers to scrutinize the methodology themselves and 
ensure that they are error free and that the statistical methodology is 
sound.
    There is significant support in the economics field for producing 
such a measure federally. The principal authors of the current 
estimates support the Federal production of these data. Two economists 
who have won the Nobel Memorial Prize in Economics have stated that 
they favor adding these measures to the national accounts: Robert 
Solow, in a column written for the Washington Center for Equitable 
Growth (``Improving the measurement and understanding of economic 
inequality in the United States'' 07/12/2017), and Paul Krugman, in an 
opinion piece in the New York Times (``For Whom the Economy Tolls'' 08/
30/2018).
                               __________
                 Washington Center for Equitable Growth
       Disaggregating growth: Who prospers when the economy grows
Heather Boushey and Austin Clemens
March 2018
                             key takeaways
    1. The measurement of Gross Domestic Product has fostered a 
national fixation on ``growing the pie'' that ignores how growth is 
distributed. That conventional wisdom has become antiquated, as more 
and more of the Nation's growth has benefited the top 1 percent.
    2. Policymakers interested in combatting rising income inequality 
cannot evaluate the effectiveness of their policies without a 
consistent, high-quality measure of how economic growth is distributed.
    3. Existing statistics on inequality and the distribution of 
economic gains produced by the Federal Government do not account for 
all income, vastly underestimate the income of top earners, or are not 
given the level of attention received by other major economic 
statistical products.
    4. A distributional component could be added to the National Income 
and Product Accounts now, at least in part. The United States could 
include many of the most desirable features of such a system, although 
some others may require investments in new statistical infrastructure.
    5. To create an accurate system of distributional accounts requires 
the Bureau of Economic Analysis to have expanded access to tax data 
held by the Statistics of Income division of the Internal Revenue 
Service.
                                overview
    The National Income and Product Accounts, or NIPA (also referred to 
as System of National Accounts, or SNA, outside of the United States), 
were a radical advance in economic measurement when they were 
instituted in the early 20th century. These accounts track aggregate 
output and income for the national economy. Most notably, they measure 
Gross Domestic Product and the quarterly fluctuations in GDP that tell 
us if the economy is growing or contracting. Before their advent, 
ascertaining the health of the economy was an inexact and patchwork 
procedure.
    Great achievement though it was, even the creators of NIPA knew it 
had limitations. One of these is the lack of data on how income is 
distributed. In a section titled ``Uses and Abuses of National Income 
Measurements,'' the 1934 report to Congress that is the first official 
measurement of national income noted that ``The welfare of a nation 
can, therefore, scarcely be inferred from a measurement of national 
income.'' \1\ The author, future Nobel Laureate Simon Kuznets, was 
careful to differentiate between the idea of aggregate economic output 
and ``economic welfare.''
---------------------------------------------------------------------------
    \1\ Simon Kuznets, ``National Income, 1929-32'' (Washington: U.S. 
Government Printing Office, 1934).
---------------------------------------------------------------------------
    The lack of data on how income is distributed is especially glaring 
now in the face of rapidly increasing economic inequality. Through much 
of the mid-20th century, economic growth was shared relatively equally 
by all income groups. Starting around the 1980s, however, larger shares 
of economic growth flowed to the top of the income distribution, with 
the top 1 percent experiencing especially large gains. According to the 
economists Thomas Piketty at the Paris School of Economics and Emmanuel 
Saez and Gabriel Zucman at the University of California, Berkeley, 
pretax income growth for the top 1 percent of all earners between 1980 
and 2014 was 204 percent in the United States, far above the national 
average of 61 percent.\2\
---------------------------------------------------------------------------
    \2\ Piketty, Thomas, Emmanuel Saez, and Gabriel Zucman, 
``Distributional National Accounts: Methods and Estimates for the 
United States.'' Quarterly Journal of Economics (2018, forthcoming).
---------------------------------------------------------------------------
    NIPA needs some renovations to update it for the 21st century. 
Other researchers have suggested a broad range of possible 
improvements. Most notably, former French President Nicolas Sarkozy 
commissioned Nobel Laureates Joseph Stiglitz and Amartya Sen of Harvard 
University and economist Jean-Paul Fitoussi at the Institut d'Etudes 
Politiques de Paris to suggest how GDP could be rethought to more 
accurately measure economic and social progress. The resulting report 
contains a long list of suggested improvements, with suggestions that 
address inequality as well as thoughts on how environmental quality and 
life satisfaction could be better accounted for in national economic 
statistics.
    This report sets a more modest but equally important goal: Instead 
of revolutionizing GDP, U.S. policymakers should evolutionize it. The 
pages that follow explain why the United States needs to add an 
explicitly distributional component to GDP and discuss how that goal 
can be accomplished. Adding a measure of how income is distributed 
would allow us to quantify inequality in our economy, and, in its most 
advanced format, would let U.S. statistical agencies disaggregate 
economic growth to see how the economy is performing for subgroups of 
people according to their income, geographical location, gender, and 
more. Being able to do so would enable policymakers at Federal, State, 
and local levels to better understand the consequences of rising 
economic inequality and design policies that encourage more equitable 
and sustainable economic growth.
    The time to make these improvements to NIPA is now. On a purely 
pragmatic level, methodological advances and increased availability of 
computational power make it practical to produce a more sophisticated 
NIPA. But even in the 1930s, economists understood that NIPA should 
eventually incorporate distributional data. Doing so responds to an 
emerging economic challenge: In recent years, the share of income that 
accrues to the top 1 percent has reached pre-Great Depression heights, 
creating a new class of super-rich individuals who enjoy much faster 
income growth than the ``merely'' rich and everyone else in society 
today.
    This report proceeds in three parts. The first section describes 
the historical development of NIPA and recent efforts to update NIPA to 
reflect new economic realities. The second section explains why 
distributing national income is important. And the final section 
enumerates the desirable features that a distributional system of 
national accounts should have and discusses implementation of these 
features in the United States.
    https://equitablegrowth.org/research-paper/disaggregating-growth/
?longform=true