WHAT IT TAKES TO SOLVE THE U.S. GOVERNMENT DEFICIT PROBLEM

This paper uses a structural multi‐country macroeconometric model to estimate the size of the decrease in transfer payments (or tax expenditures) needed to stabilize the U.S. government debt/gross domestic product (GDP) ratio. It takes into account endogenous effects of changes in fiscal policy on the economy and in turn the effect of changes in the economy on the deficit. A base run is first obtained for the 2013:1–2022:4 period in which there are no major changes in U.S. fiscal policy. This results in an ever increasing debt/GDP ratio. Then transfer payments are decreased by an amount sufficient to stabilize the long‐run debt/GDP ratio. The results show that transfer payments need to be decreased by 2% of GDP from the base run, which over the 10 years is $3.2 trillion in 2005 dollars and $4.8 trillion in current dollars. The real output loss is 1.1% of baseline GDP. Monetary policy helps keep the loss down, but it is not powerful enough in the model to eliminate all of the loss. The estimates are robust to a base run with less inflation and to one with less expansion. (JEL E17)     

Social Security and personal saving: 1971 and beyond

Feldstein (1996, 1974) reported that Social Security in the U.S.A. reduced personal saving (“saving”) in 1992 (1971) by $416 ($61) billion. I reestimate his life-cycle consumption specification using data from the latest NIPA revision, correct his calculations, and find that the implied reduction in 1992 (1971) saving is now $280 ($22) billion, 48% (16%) of actual net private saving, with a standard error of $114 ($14) billion. If structural breaks around WWII and the 1972 Social Security amendments (which raised real per capita SSW by 22%) are allowed, and the market value of Treasury debt included in the specification, the reduction in 1971 and 1992 saving attributable to Social Security is at most 0.55 times its standard error, and 12% of net private saving. I then reestimate the preferred specification of Coates and Humphreys (1999), allowing for these structural breaks and relaxing other restrictions. The implied effect of Social Security on saving is again statistically zero. First version received: September 2000/Final version received: September 2001 RID="*" ID="*"  I thank Les Oxley for pointing out that correcting for AR(1) residuals is not a categorical imperative but a cultural relative, in which case common factor restrictions are crucial.     

CUTTING CARBON EMISSIONS AT A PROFIT (PART I): OPPORTUNITIES FOR THE UNITED STATES

This article identifies and corrects shortcomings in recent modeling studies on the economics of reducing greenhouse gas emissions in the United States. The major assessments of the Kyoto Protocol—by the U.S. Energy Information Administration, the Clinton White House Council of Economic Advisers, the U.S. Department of Energy Interlaboratory Working Group, and the Stanford Energy Modeling Forum—are found to be seriously incomplete. Each study omits one or several of four major cost-reducing policy options, resulting in cost estimates that are far too pessimistic.
In the present study, these shortcomings are overcome through the integrated evaluation of all major cost-cutting policy options within a coherent least-cost framework. Three domestic policies—a national carbon cap and permit trading program, productivity-enhancing market reforms and technology programs, and recycling of permit auction revenues into economically advantageous tax cuts—are combined with international emissions allowance trading.
This analysis shows that an integrated least-cost strategy for mitigating U.S. greenhouse gas emissions would produce an annual net output gain of roughly 0.4% of GDP in 2010 and about 0.9% of GDP in 2020. On a cumulative net present value basis, the United States would gain $250 billion by 2010 and $600 billion by 2020. International flexibility mechanisms (including emissions trading) are of only secondary significance in realizing these productivity, output, and welfare gains.     

The Welfare and Resouce Allocation Implications of the U.S.Dairy Quotas

This paper examine the welfare and resource allocation implications of the U.S. dairy quotas. A computable general equilibrium model detailing five dairy sectors and nine aggregate sectors is calibrated to a 1989 benchmark of the U.S economy. The model is used to simulate the removal of the U.S.dairy quotas both the with and without a first-best subsidy to maintain a dairy farm output objective. Welfare, production, trade, and employment results are provided. The welfare cost of the U.S dairy quotas ranges from $0.7 to $1.0 billion. The first-best subsidy ranges from $2.0 to $2.3 billion or approximately $1.4 million per full-time equivalent job maintained in the dairy farm sector [F13, Q17]     

2009财年美国农业部预算概况

2009财年,美国政府农业部预算为970亿美元,比2008财年增长了5．1％。营养援助和农作物保险部分的增长幅度最大,自主支配部分为210亿美元,比上年增长了1．6％;自然资源保护、研究以及农村发展预算有所减少;畜牧业、植物保护和食品安全计划预算南所增加。     

RETURNS TO DEBT AND EQUITY IN FARM PRODUCER ORGANIZATIONS

While the capital structure irrelevance proposition is the point of departure in corporate finance, it is unknown if debt‐or‐equity decisions matter to farm producer organizations. To inform decisions of capital acquisition, a panel study is conducted to estimate the relationships of different types of debt (current, long‐term) and equity (allocated, unallocated) to the financial performance of 707 farm producer organizations in the United States during the 2005–2011 period. Using 3,120 observations, the panel analysis indicates net sales in period t is increased by $1.97, $9.59, and $4.01 with an addition of $1 in current debt, allocated equity, or unallocated equity in period t_‐1. Furthermore, the magnitude of the positive relationship of an additional dollar of allocated (unallocated) equity to net income is estimated at $0.32 ($0.14). We thus reject the notion managers and directors of farm producer organizations should decide to use debt or equity with a coin toss.     

THE BEHAVIOR OF U.S. PUBLIC DEBT AND DEFICITS DURING THE GLOBAL FINANCIAL CRISIS

In this paper we test the sustainability of U.S. public debt for the period 1916–2012 by analyzing how the primary surplus to gross domestic product (GDP) responds to changes in the debt to GDP ratio in a time‐varying parameter model. Further, we determine the stationarity property of the debt/GDP ratio while accommodating possible breaks in the data caused by wars and economic crisis under both the null and alternative hypotheses of an endogenous unit root test. The results show that the U.S. public debt was sustainable until 2005 when the primary surplus to GDP reacted negatively to the debt/income ratio. This is further exacerbated during the global financial crisis when primary surpluses continued to fall with increased debt, thus jeopardizing the sustainability of fiscal policy. While the stationarity test shows that the U.S. fiscal debt/GDP ratio is sustainable, it fails to highlight the risk that its debt policy has been becoming unsustainable in recent years. (JEL H62, E62, C2)     

THE ECONOMIC VALUE OF PROTECTING INVENTORIED ROADLESS AREAS: A SPATIAL HEDONIC PRICE STUDY IN NEW MEXICO

The objective of this paper is to examine the off‐site benefits, as capitalized into housing values, of protecting 1.6 million acres of Inventoried Roadless Areas (IRAs) in the state of New Mexico, United States. In light of petitions filed by various U.S. states to maintain the status of IRAs as roadless lands, spatial hedonic price models are estimated and used to calculate the implicit value of IRAs in New Mexico. Findings show that a two‐stage least squares (2‐SLS), robust spatial‐lag model is the most appropriate econometric representation of the hedonic price function, and that IRA lands are a significant and positive determinant of house value. After controlling for the presence of Wilderness Areas (WAs) and other characteristics, results indicate that, on average, there is a 5.6% gain in the property value of a house from being located in, or adjacent to, a Census tract with IRAs. In the aggregate, this gain represents 3.5% of the value of all owner‐occupied units in New Mexico ($1.9 billion in capitalized value, or an annualized value in perpetuity of $95 million, assuming a 5% interest rate). (JEL R22, H40, Q51, C21)     

The economic burden of kidney disorders in Korea

Aims: To estimate the economic burden of kidney disorders in Korea.

Materials and methods: The economic burden of kidney disorders was estimated using a prevalence-based approach. Related kidney diseases in patients with kidney disorders (RPWKD) were defined using codes from the tenth International Classification of Disease (E70–E90, F30–F48, F60–F69, F90–F99, K65–K67, N00–N08, N17–N19, and N30–N39). All diseases in patients with kidney disorders (APWKD) were defined as kidney disorders that involved all disease codes. Economic costs were divided into direct costs (medical costs and non-medical costs) and indirect costs (productivity loss because of morbidity and premature mortality).

Results: The prevalence of kidney disorders increased from 0.08% (2008) to 0.11% (2011). The total economic burden of RPWKD also substantially increased from $898.9 million (2008) to $1.43 billion (2011). This ～59.4% increase in the economic burden was equal to 0.12% of the Korean gross domestic product. The economic burden of APWKD also increased during the study period: $1.06 billion (2008), $1.23 billion (2009), $1.44 billion (2010), and $1.46 billion (2011).

Conclusions: The present study provides the first data regarding the economic burden of kidney disorders in Korea. The findings support the need for early intervention services and prevention programs to prevent, identify, and manage kidney disorders.     

THE COST OF THE U.S. SUGAR PROGRAM REVISITED

The article analyzes the welfare cost of the U.S. sugar program using a multimarket model of U.S. sweetener markets. The latter includes raw crops, sugar extraction and refining, and sweetener users (food-processing industries and final consumers). The authors address the industrial organization of food industries using sweeteners and treat the United States as a large importer. With the removal of the program, this article estimates (all figures in 1999 dollars) that in 1998 cane growers, sugar beet growers, and processors would have lost $307, $650, and $89 million, respectively; sweetener users would have gained $1.9 billion. World prices would have increased by 13.2%. The deadweight loss of the program is estimated at $532 million.     

DOUBLING U.S. EXPORTS UNDER THE PRESIDENT'S NATIONAL EXPORT INITIATIVE: IMPLICATIONS OF SUCCESSFUL IMPLEMENTATION

President Obama's National Export Initiative (NEI) is targeted at doubling U.S. exports between 2010 and 2015. We apply USAGE to quantify what the NEI would need to do to foreign import‐demand curves and domestic export‐supply curves to achieve this target. USAGE is a dynamic economy‐wide model of the U.S. incorporating recession‐relevant factor market specifications including excess capacity and wage/labor‐demand elasticities that vary with the level of employment. In our central simulation, export‐promotion policies compatible with the President's target reduce the cost of the current recession from about 70 million 1‐year jobs for the period 2008–2020 to 45 million jobs. (JEL E17, C68, E62, E65, F16)     

CONSERVED ENERGY SUPPLY CURVES FOR U.S. BUILDINGS

Comparison of nine conservation supply curves for electricity shows that fully implementing a series of energy efficiency measures will result in annual saving of 734 billion kWh (BkWh). This is 45 percent of 1989 U.S. building sector electricity use of 1627 BkWh and represents a $29 billion saving. When translated to units of conserved carbon dioxide (CC CO₂), this annual saving is 514 megatonnes, which is 10 percent of the total 1989 U.S. carbon dioxide (CO₂) emissions from all sources. Implementing additional fuel efficiency measures would result in further potential saving of 5·2 quads of fuel (natural gas and oil) per year, or another 300 megatonnes of CO₂, at a net savings of $20 billion. Fuel switching (replacing electric resistance heat with on-site natural gas combustion) would produce annual saving of another 74 megatonnes of CO₂ at a net saving of $6·8 billion. Thus, total CO₂ saving from these combined efficiency measures are 890 megatonnes at a net saving of $56 billion per year.     

The association of pain interference and opioid use with healthcare utilization and costs,and wage loss among adults with osteoarthritis in the United States

Abstract

Aim: To examine associations of opioid use and pain interference with activities (PIA), healthcare resource utilization (HRU) and costs, and wage loss in noninstitutionalized adults with osteoarthritis in the United States (US).

Methods: Adults with osteoarthritis identified from the Medical Expenditure Panel Survey for 2011/2013/2015 were stratified by no-opioid use with no/mild PIA, no-opioid use with moderate/severe PIA, opioid use with no/mild PIA, and opioid use with moderate/severe PIA. Outcomes included annualized total HRU, direct healthcare costs, and wage loss. Multivariable regression analyses were used for comparisons versus no-opioid use with no/mild PIA (referent). The counterfactual recycled prediction method estimated incremental costs. Results reflect weighted nationally representative data.

Results: Of 4,921 participants (weighted n?=?20,785,007), 46.5% had no-opioid use with no/mild PIA; 23.2% had no-opioid use with moderate/severe PIA; 9.6% had opioid use with no/mild PIA; and 20.7% had opioid use with moderate/severe PIA. Moderate/severe PIA and/or opioid use were associated with significantly higher HRU and associated costs, and wage loss. Relative to adults with no/mild PIA, opioid users with moderate/severe PIA were more likely to have hospitalizations, specialist visits, and emergency room visits (all p?<?.001). Relative to the referent, opioid use with no/mild PIA had higher per-patient incremental annual total healthcare costs ($11,672, 95% confidence interval [CI]?=?$11,435–$11,909) and wage loss ($1,395, 95% CI?=?$1,376–$1,414) as did opioid use with moderate/severe PIA ($13,595, 95% CI?=?$13,319–$13,871; and $2,331, 95% CI?=?$2,298–$2,363) (all p?<?.001). Compared with the referent, estimated excess national total healthcare costs/lost wages were $23.3 billion/$1.3 billion for opioid use with no/mild PIA, and $58.5 billion/$2.2 billion for opioid use with moderate/severe PIA.

Limitations: Unobservable/unmeasured factors that could not be accounted for.

Conclusions: Opioid use with moderate/severe PIA had significantly higher HRU, costs, and wage loss; opioid use was more relevant than PIA to the economic burden. These results suggest unmet needs for alternative pain management strategies.     

Economic impact of ocean fish populations in the global fishery

Our goal in this paper is to estimate the total output in an economy that is currently dependent (at least partially) on current fisheries output. We therefore applied the Leontief technological coefficients at current production and then estimate total output supported throughout the economy at the current level of production. Estimates of gross revenue from capture fisheries suggest that the direct value of output for this sector is US $80–85 billion annually (Sumaila et al., Journal of Bioeconomics 9(1):39–51, 2007; Willmann et al., The Sunken Billions, World Bank, FAO, Washington DC, Rome, 2009). However, as a primary or a potential economic base industry, there are a vast number of secondary economic activities—from boat building to international transport—that are supported by world fisheries, yet these related activities are rarely considered when evaluating the economic impact of fisheries. This study applies an input–output methodology to estimate the total direct, indirect, and induced impact of marine capture fisheries on the world economy. While results suggest that there is a great deal of variation in fishing output multipliers between regions and countries, when we apply the output multipliers to the capture fisheries sector at the global level, we find that significant indirect and induced effects place the impact of this sector to world output nearly three times larger than the value of landings at first sale, at between US $80–85 billion annually (Sumaila et al., Journal of Bioeconomics 9(1):39–51, 2007; Willmann et al., The Sunken Billions, World Bank, FAO, Washington DC, Rome, 2009). However, as a primary or a potential economic base industry, there are a vast number of secondary economic activities—from boat building to international transport—that are supported by world fisheries, yet these related activities are rarely considered when evaluating the economic impact of fisheries. This study applies an input–output methodology to estimate the total direct, indirect, and induced impact of marine capture fisheries on the world economy. While results suggest that there is a great deal of variation in fishing output multipliers between regions and countries, when we apply the output multipliers to the capture fisheries sector at the global level, we find that significant indirect and induced effects place the impact of this sector to world output nearly three times larger than the value of landings at first sale, at between US 225 and 240 billion per year.     

Inflation,nominal portfolios,and wealth redistribution in Canada

Abstract This paper quantifies the redistributional effects of inflation in Canada that arise through the revaluation of nominal assets and liabilities. We find that the effects are non‐trivial even for low inflation episodes. The main winners are young, middle‐class households with mortgage debt. The government receives a windfall gain from its long‐term debt. The old, the rich or the middle‐aged, middle‐class lose, largely owing to their holdings of bonds and non‐indexed defined benefit pension assets. Finally, our Canada‐U.S. comparison reveals that the extent of redistributions can be quite different even between countries of similar economic and legal environments.     

Estimates of the direct and indirect cost savings associated with heart disease that could be avoided through dietary change in the United States

Aims: Diets high in saturated fat are associated with elevated risk of heart disease. This study estimates the savings in direct (medical care) costs and indirect (job absenteeism) costs in the US from reductions in heart disease associated with substituting monounsaturated fats (MUFA) for saturated fats.

Materials and methods: A four-part model of the medical care cost savings from avoided heart disease was estimated using data on 247,700 adults from the 2000–2010 Medical Expenditure Panel Survey (MEPS). The savings from reduced job absenteeism due to avoided heart disease was estimated using a zero-inflated negative binomial model of the number of annual work loss days applied to data on 164,577 adults from the MEPS.

Results: Estimated annual savings in medical care expenditures resulting from a switch from a diet high in saturated fat to a high-MUFA diet totaled ～ $25.7 billion (95% CI = $6.0–$45.4 billion) in 2010, with private insurance plans saving $7.9 billion (95% CI?=?$1.8–$14.0 billion), Medicare saving $9.4 billion (95% CI?=?$2.1–$16.7 billion), Medicaid saving $1.4 billion (95% CI?=?Aims: Diets high in saturated fat are associated with elevated risk of heart disease. This study estimates the savings in direct (medical care) costs and indirect (job absenteeism) costs in the US from reductions in heart disease associated with substituting monounsaturated fats (MUFA) for saturated fats.

Materials and methods: A four-part model of the medical care cost savings from avoided heart disease was estimated using data on 247,700 adults from the 2000–2010 Medical Expenditure Panel Survey (MEPS). The savings from reduced job absenteeism due to avoided heart disease was estimated using a zero-inflated negative binomial model of the number of annual work loss days applied to data on 164,577 adults from the MEPS.

Results: Estimated annual savings in medical care expenditures resulting from a switch from a diet high in saturated fat to a high-MUFA diet totaled ～ $25.7 billion (95% CI = $6.0–$45.4 billion) in 2010, with private insurance plans saving $7.9 billion (95% CI?=?$1.8–$14.0 billion), Medicare saving $9.4 billion (95% CI?=?$2.1–$16.7 billion), Medicaid saving $1.4 billion (95% CI?=?$0.2–$2.5 billion), and patients saving $2.2 billion (95% CI?=?$0.5–$3.8 billion). The annual savings in terms of reduced job absenteeism ranges from a lower bound of $600 million (95% CI?=?$100 million to $1.0 billion) to an upper bound of $1.2 billion (95% CI?=?$0.2–$2.1 billion) for 2010.

Limitations: The data cover only the non-institutionalized population. Decreased costs due to any decreases in the severity of heart disease are not included. Cost savings do not include any reduction in informal care at home.

Conclusions: Diets high in saturated fat impose substantial medical care costs and job absenteeism costs, and substantial savings could be achieved by substituting MUFA for saturated fat.     

Economic burden of hypoglycemia: Utilization of emergency department and outpatient services in the United States (2005–2009)

Objective: To estimate the economic burden of hypoglycemia on the healthcare system at the national level in the US between the years of 2005–2009.

Methods: This study analyzed the National Hospital Ambulatory Medical Care Survey (NHAMCS), including emergency department (ED) and outpatient department (OPD) components, and the National Ambulatory Medical Care Survey (NAMCS). The annual rates of ED and OPD visits associated with hypoglycemia were reported. Subsequent medical services after disposition were studied. The unit cost of specific medical service was estimated from the Medical Expenditure Panel Survey (MEPS). All annualized costs were adjusted to US 2009 dollars. We also estimated the rates of injury and ambulance use incurring within a visit for hypoglycemia.

Results: The total direct medical cost of hypoglycemia was estimated as $3.49 billion in 2005 and decreased gradually to $1.84 billion in 2009. The declining trend was correlated with hospital admissions from ED, which decreased from 170 665 in 2005 to 71,751 in 2009. Consequently, the estimated annual expenditure of hospitalization for hypoglycemia from ED declined over time by more than half ($2.90 billion in 2005, $1.25 billion in 2009). Injury was reported among 9.5% of the ED visits for hypoglycemia. Ambulances were used among 58% of the ED visits for hypoglycemia.

Conclusion: Hypoglycemia poses a significant burden on the healthcare system; however, annual direct medical cost of severe hypoglycemia in the US decreased over the 5 years studied, which is attributable to tremendous decrease in need of hospitalization following an ED visit.     

UNPREPARED FOR FINANCIAL SHOCKS: EMERGENCY SAVINGS AND CREDIT CARD DEBT

We measure readiness to face emergency expenses using data from a representative survey of U.S. consumers. Our main findings are as follows: (1) there is substantial heterogeneity in financial readiness, with lowest‐income, least‐educated, unemployed, and Black consumers most likely to have $0 saved for emergency expenses; (2) the amount of emergency savings is correlated with payment choice: Less financially prepared individuals use cash more and credit cards less, compared to those with higher emergency savings; (3) while people with low emergency savings rely more on cash than credit cards, they revolve more debt, and so a financial shock is costlier for them; (4) changes in income from one year to the next do not appear to affect the likelihood of revolving on credit cards or increase the amount borrowed, although the data were collected before the COVID‐19 pandemic. For those with little or no savings and already financially vulnerable, even a temporary financial shock—an unexpected negative income shock (such as a layoff or a short‐term government shutdown) or an unexpected expenditure (such as a medical expense or a car repair)—could have severe financial consequences, exacerbated by the high cost of borrowing on credit cards. (JEL D12, D14, D15, E21)     

Tariff evasion and rules of origin violations under the Canada‐U.S. Free Trade Agreement

Abstract Using product‐level data on trade between Canada and the U.S., this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the Canada‐U.S. Free Trade Agreement (CUSFTA). It shows that more imports go unreported at the destination country when tariffs are higher. Consistent with the tariff evasion hypothesis, this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting. Further, this paper shows that the larger Canadian tariff preference margin for the U.S. is associated with more goods originating in third countries being transshipped through the U.S. territory for re‐export. The preference margin is also positively correlated with the value of excess imports from the U.S., which qualify for preferential treatment. Both results suggest the presence of persistent violations of CUSFTA’s rules of origin.     

VALUING HEALTH EFFECTS: THE CASE OF OZONE AND FINE PARTICLES IN SOUTHERN CALIFORNIA

This study presents a conservative estimate of the health benefits that would result from attainment of the federal ozone and fine particle (PM_2.5) standards in the South Coast Air Basin of southern California. A three‐stage approach is used that links pollution exposures to adverse health outcomes to economic values. The annual value of the aggregate health benefits approaches $500 million (with a range of $295–$646 million) for ozone and exceeds $21 billion (with a range of $12.85–$34.22 billion) for fine particles. Such results are useful to regulatory agencies and other policy makers when evaluating the merits of various air pollution reduction strategies. (JEL Q51, Q53)