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An EconoFact interview of Larry Summers reveals that the former Secretary of the Treasury, Harvard President and eminent economist does not understand how tax statutes of limitations work. Here’s the quote in the context of his contending, which I fully agree with, that the Internal Revenue Service has been underfunded:

I was appalled to discover that over a three-year period late in the last decade there were a hundred people who had incomes of over ten million dollars who didn’t deign to file a tax return, and the government didn’t even manage to notice before the statute of limitations had run.

EconoFact Chats: Today’s Economic Challenges Larry Summers, Harvard University
Published on February 11th, 2024, pp. 5-6.

Tax statutes of limitation only begin to run against the government when a return is filed. So, if you haven’t filed, the statute has not started to run. Here’s the how the American Bar Association describes it (my emphasis):

No Return or Fraudulent Return. What if you never file a return or file a fraudulent one? The IRS has no time limit if you never file a return or if it can prove civil or criminal fraud. If you file a return, can the IRS ever claim that your return didn’t count so that the statute of limitations never starts to run? The answer is “yes.” If you don’t sign your return, the IRS does not consider it a valid tax return. That means the three years can never start to run.

Robert Wood, IRS Can Audit for Three Years, Six, or Forever: Here’s How to Tell

The code section is 6501 and as the IRS says, when you don’t voluntarily file a return:

We can assess tax at any time under the Substitute for Return program (See IRC 6020). If we file a Substitute for Return, the 3-year limit for assessment doesn’t begin. However, if you later decide to file your tax return, it does start the 3-year time limit for assessment.

IRS.gov

I didn’t try to hunt down the source of Summers’ assertion but assume it is likely the letter from the Senate Finance Committee to the IRS that I previously blogged about (in the section on Hunter Biden’s taxes) reporting nonfilers with very high incomes. The actual number for nonfilers with incomes greater than $10 million, contrary to Summers’ characterization of “hundreds,” was 58 according to the letter. The IRS is going after those taxpayers, of course, and has reported collecting some of the unpaid taxes in a subsequent press release.

Those of us who regularly make mistakes and misstatements can take comfort in knowing that we’re in august company. Thanks, Larry. This does not diminish the case for continued full funding of the IRS, but it doesn’t help to misstate the basis for it.

3/1/2024 update

With regard to pursuing millionaire non-filers, the IRS put out a press release on Leap Day updating its efforts. It has mailed out 25,000 CP59 notices to individuals who did not file tax returns since 2017 and reported income of more than $1 million. This press release makes it clear that the IRS has information returns documenting that income:

These are all cases where IRS has received third-party information—such as through Forms W-2 and 1099s—indicating these people received income in these ranges but failed to file a tax return.

IRS launches new effort aimed at high-income non-filers

The Service will also mail out 100,000 more notices to non-filers with incomes > $400,00 and <$1million. The nonsensical $400,000 threshold must be a result of Biden’s idiotic campaign tax pledge not to raise taxes on people with incomes below $400,000. At least that is the best I can figure. (Going after nonfilers is raising taxes? Yikes.) They will get kinder and gentler notices later, according to a WaPo story (Julie Zauzmer Weil, Thousands of millionaires haven’t filed tax returns for years, IRS says):

Eventually, the IRS said, it will send letters to non-filers at all income levels. The letters for people making less than $400,000 will focus on the fact that they might be missing out on a refund.

WaPo

The WaPo story has a telling quote from a former DOJ lawyer:

Failing to file one year can lead to a snowballing effect, a lawyer said. “They forget one year, and then the next year, they say, ‘Well, if I file now, I’ll get in trouble for the year before,’ … Pretty soon, 15 or 20 years later, they’re in a lot worse trouble,” said Rob Kovacev, a former Department of Justice attorney who said that more than 15 years ago, before IRS budget cuts, his docket was full of non-filer cases, some for very rich people.

WaPo [emphasis added.]

All this points out the corrosive effects of the GOP Congress’s starving of the IRS last decade and why there is no need to fabricate facts or embroider the case for preserving the funding, including the cuts that Kevin McCarthy (RIP) extracted as part of his deal to avoid default on the debt.

I don’t know why stuff like this bothers me, but it does. It’s a typical case of cheery-picking numbers to make something seem more persuasive. Normally I grit my teeth and ignore it when it’s not factually wrong, just a case of overreach. For some reason, I decided to post my thoughts on this one, even though I basically agree that the rate of growth of federal debt is too high.

The STRIB printed an opinion piece, Bruce Yandle, Americans aren’t as rich as they feel (10/26/2023), that makes an accounting point that the recent Federal Reserve Board publication that reported a generous increase in household net worth needs to be discounted by the increase in federal debt for the same period. It reports a 37-percent increase in median net worth and a 23-percent increase in the mean or average net worth.

Yandle casts it as too good to be true because the fed publication fails to account for households’ share of the federal debt and he assumes correctly that a portion of the increase is attributable to the COVID pandemic relief payments the feds made. Put simply, the feds borrowed money and distributed it to households. That money will show up in someone’s net worth and as a federal government liability. But we (or our children) will all have to repay it, so it’s somewhat illusory. His quote:

Let’s avoid that oversight. Consider that between 2019 and 2022, when household wealth was rising by 37%, the federal debt rose from $22.7 trillion to $30.8 trillion — a 35.6% increase. Some might say not to worry. After all, isn’t this debt we owe to ourselves? Well, most of it. Of that amount, $7.2 trillion was owed to foreign sources. (I should add that total federal debt now is $33.6 trillion.)

Bruce Yandle, Americans aren’t as rich as they feel STRIB (10/26/2023)

That seemed too close to be true – household net worth goes up by 37% and federal debt by 36%. Is all of the increase really due to federal COVID payments, financed by Treasury borrowing? The irritation is that he says nothing about what the aggregate numbers are. For an academic (Yandle is a retired business school dean), I assumed that couldn’t be an oversight. So, I checked.

The Federal Reserve publication reports an aggregate increase in household net worth of $28 trillion between 2019 and 2022. (I had to calculate it by multiplying the means by the numbers of households for years. Actually, I had to use the number of families, slightly different than households, because that was all that was in the report.) The Treasury reports a $8.2 trillion increase in outstanding federal debt between fiscal year end 2019 and 2022. So, comparing the two numbers, household net worth increased by a net $20 trillion after deducting the increase in outstanding federal debt. Yandle’s account implies all the increase is COVID pandemic relief. At least, I think that is what a normal reader would assume.

Does he still have a point? Yes. The more nuanced concern is that federal debt is growing at a faster rate. It’s especially concerning if is growing faster than the economy and our implicit ability to repay it. You don’t need to cherry-pick numbers to make the point. That’s my point. For the period, federal debt grew at 36% (as he reported) and aggregate net worth from the Fed’s report grew at 25%. The two aggregate numbers are more apples-to-apples than his comparing total debt’s rate of growth to the growth in median net worth. I’m guessing he used the increase in the median (37%) because of its closeness to the increase in federal debt (36%). Makes the comparison look 1-for-1.

The bigger point to cheer regarding the Federal Reserve’s net worth numbers is that the median increase (37%) is so much larger than the mean (22.5%). That means that an average household’s net worth is increasing faster than that of the top wealth households, which dominate the mean. Table 2 shows that the top decile’s net worth increased by 18%, for example.

This effect likely results from what Yandle is pointing out – the COVID relief payments – which were a mildly progressive income redistribution. Flat grants going to most of the population, excluding those with high incomes, financed mainly by the progressive federal income tax and, of course, debt. They obviously had a much bigger effect in the lower part of the income distribution. But net worth still grew by much more than the COVID payments or the total growth in the federal debt (we were running big deficits even without the COVID payments).

This blog post by Noah Smith, Great news about American wealth (10/27/2023) provides a good case for celebrating the Federal Reserve report’s findings. A fair reading is that it does convey good news. The Yandle piece seems calculated to undercut that and in a way that is quasi-misleading. Why the Strib decided to run it is unclear (auditioning for Debbie Downer, perhaps?).

This is another in my series of bad high school book reports on nonfiction books that I have read recently. I write them to memorialize my thoughts in the vain hope that I will remember a bit more of what I read.

Author and book

Brad DeLong, Slouching Toward Utopia An Economic History of the 20^th Century (Basic Books 2022).

DeLong is a left-leaning econ professor at UC Berkley and a former treasury official during the Clinton Administration. He has a substack blog that I occasionally read for its acerbic commentary on economic, political, and social issues.

Why I read it

I’m particularly interested in economic history and DeLong generally has interesting insights and takes (unless your priors align with Milton Friedman and cause you to outright reject his viewpoint). He’s a colorful writer; the book reads more like a series of long commentary pieces, rather than an academic history. That’s a virtue and drawback. But it makes easy reading for a non-economist.

The book is in the tradition of old-fashioned political economy and attempts to put the sweep of economic history in the context of governmental, political, and cultural (broadly considered) actions. It focuses on what DeLong defines as the long 20^th century – 1870 to 2010. He rightly considers 1870 a hinge point when economic growth, fueled by some combination of technological and socio-political developments, accelerated to yield rapid increases in per capita income, especially in the Global North. For human history before 1870, economic growth varied between nonexistent or glacial, struggling to keep pace with or to slightly exceed population growth. That changed dramatically in 1870.

The book focuses on how that occurred and why previously unthinkable increases in economic well-being did not usher in anything like a social utopia. Getting a lot richer did not reduce conflict, social strife, and other ills. Money can’t buy you love, so to speak, especially when some others seem to randomly end up with a lot more of it. Conversely, the fact that there are a lot more riches to go around may simply intensify the human tendency (reflecting Augustinian original sin) to covet what your neighbor has or worse to try and take it, one way or another.

The story in DeLong’s telling is a matter of social-political institutions (the market, government, etc.) delivering economic growth but not distributional and other social outcomes that satisfy the populace. That wars, depressions, recessions, social strife, and inordinate concentrations of wealth and income characterized most of the period is obvious. Far from the improvement in human happiness (if not utopia) that someone in 1870 might have imagined if she presciently foresaw the economic growth that would occur.

DeLong’s book caused me to contemplate rereading Robert Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton U Press 2016), which I read when it came out. It could be considered a companion to Sloughing Toward Utopia. Gordon’s book an account of the nuts and bolts of the rapid economic growth in the second half of the 19^th century and the first half or so of the 20^th. It provides more specifics and is a great read, even if you’re not interested in economics. It details many of the advances the developed world made via technological improvements (e.g., electricity, telecommunications, cars, household appliances, and indoor plumbing and heating), along with public health improvements such as clean water and waste control, to name only a few. It reminds one of just how far we have come. Gordon expects such rapid growth cannot continue because of the inability to keep making such transformative advances. They slowed down after 1950 and the effects of the more recent IT revolution pale by contrast. At least, that is how I remember the book without rereading it.

These same developments are grist for DeLong’s narrative mill with its broader political and macroeconomic management scope. His concerns about lagging growth result more from flubbed social-political management than an inherent limit on human technological advancement, although they’re interrelated.

What I found interesting

The book was a fascinating read. I can imagine rereading it a couple of years – ideally if he updates and revises it.

It is full of interesting details (e.g., about people like Tesla, Hoover, and Trotsky and more minor events like the Boer War). The book is essentially DeLong’s take on what caused the successes and missteps in the socio-political management of the world’s economic order over the last century and a half. In his telling, it is an aggregate growth success and distributional and allocative failure. There was an interlude where the political and economic stars aligned – 30 Glorious Years of Social Democracy (1948-1973) DeLong titles it – but otherwise largely missed opportunities. We’re talking about the world economy, so governmental management is fragmented and subject to foreign relations vagaries with all the resulting complexity. The story finds residents of the Global North a lot richer but far short of utopia. But he’s still relatively optimistic.

The book goes mostly in chronological order with DeLong providing his analysis of events and trends from the Gilded Age, WWI, post-war era, Great Depression through the Great Recession. He uses the insights of economic analysis to explain a broad range of developments from colonialism, nationalism, the world wars to more obvious economic matters, like the recessions and lack of development in the Global South etc. Most of it seems credible to a rank amateur like me and almost all is interesting.

As he points out, the secret weapon of the economist is the ability to count. He uses that advantage to provide useful insights. A telling example is this quote that succinctly sums up a, if not the, crucial dynamic of WWII, the allies’ overwhelming economic advantage:

Set war production of the U.S. in 1944 equal to 100. By this metric, in 1940 Britain’s production was 7 and Nazi Germany’s and Japan’s were 11. In 1942, all the Allies together were producing 92 and Germany and Japan were producing 16. And by 1944, it was 150 to 24.

Sloughing Toward Utopia, p. 307.

It’s important to keep in mind that changing a few events – political or military – could have altered the course of the war and resulted in a Nazi German hegemony in Europe, as inevitable as the numbers make the Allied victory seem. I think the numbers also provide insight into the Ukrainian War, which increasingly looks like a war of attrition with its resolution crucially depending upon the political will of NATO countries, especially the USA, to provide continuing economic backing of Ukraine.

The remainder of this section describes a couple themes and concludes with a list of items that interested me even if a minor part of DeLong’s narrative. None of this does justice to the book’s sweep and its addressing myriad eras, developments, and problems. My goal was to keep this under 2,000 words. Spoiler alert: I failed.

Sources of growth

DeLong attributes the breath-taking growth over the long 20^th century to three factors. Human advancement is inherently a social endeavor, requiring collaboration and cooperation. Success or failure depends upon social organizations to harness and aggregate individual human capacity:

• Globalization – essentially the revolution in transporting goods and people (railroads, steel-hulled ships, internal combustion engines, etc.) and communication (telegraph, telephone, radio, television, etc.).
• The industrial research laboratory – collaboration and standing on the shoulders of others is essential to the incremental and development of transformative technology essential to rapid growth.
• Development of the bureaucratic corporation – this enabled marshalling the resources (financing) and implementing the technological improvements to fund and sustain the industrial research laboratory.

Hayak v. Polanyi dialectic

The tension over how much to rely on laissez-faire market forces (the Hayak or libertarian pole) versus governmental intervention (the pole that seeks to satisfy social expectations of fair distributional outcomes, Polanyi rights in DeLong’s terminology) is an, if not the, overarching theme of the book’s narrative. The Hayakian extreme elevates the market to be the primary principle of social organization. DeLong’s oft-repeated chant to characterize the libertarian tendency to glorify the market almost as an end, rather than a means, is: “The market giveth. The market taketh. God bless the market.”

As a neoclassical-trained economist, DeLong recognizes the virtues of the market to maximize production and consumption by harnessing incentives and human nature. Societies ignore that reality at their peril (see chapter 8, “Really Existing Socialism,” on the USSR repeated failures as result of ignoring that reality); growth withers. I was unfamiliar with and have not read Polanyi. DeLong uses him as the intellectual underpinning for social democracy, i.e., sanding the rough edges off market allocations to meet social expectations of a just and ordered society (even putting aside market imperfections and failures that Hayakians presumably would abide the government correcting) so work and notions of merit realize their rewards. There’s a strong element of earned merit. Here’s one of DeLong’s characterizations of Polanyi rights, crucially differentiating them from rote redistribution to achieve equal outcomes:

People seek to earn, or to feel they have earned, what they receive – not to be given it out of somebody’s grace, for that is not respectful. Moreover, many people don’t want those who are ranked lower than them to be treated as equals, and may even see this as the greatest violation of their Polanyi rights.

Sloughing Toward Utopia, p. 429 (emphasis in original).

DeLong evaluates the long 20^th century under this dichotomy. Here’s my simplistic pigeonholing of the eras for Global North economies based on his dichotomy as I think he sees it:

Era	Economic regime
Gilded Age (1870 – 1914)	Hayakian laissez-faire
WWI	Planned economy – German war economy misled Lenin and Stalin as to its workability
Roaring 20’s and Great Depression	Laissez-faire, but advent of fascist and communist control
WWII	Planned economy (rationing, price controls, etc.)
Glorious years of social democracy (DeLong’s title for 1948 – 73)	Closest to Polanyi rights ideal
1975 onward	Neoliberalism – laissez-faire light

At one level, this dialectic frame allows DeLong to apply his ongoing case against neoliberal economic policies, which anyone who casually reads his commentaries and blog will be familiar with, to early and mid-20^th century history. That naturally adds credibility to his political and economic views on current affairs. Put another way, current shortcomings of neoliberal orthodoxy were presaged by the failures and successes of late 19^th and early 20^th century, when they are properly understood. He casts it the other way, of course, and professes to exercise more reticence in his analysis of the late 20^th century to ensure objectivity because of his active participation in an ongoing debate, lacking the detachment expected of a historian. A cynic would assume he’s just trying to buttress his advocacy of a social democratic order.

I’m generally sympathetic to his policy views, for what it is worth. The case for even libertarian-light policies in anything resembling a democratic order are nonstarters. The fact that so many right-wing elites (see Club for Growth, Americans for Prosperity, WSJ editorial page, and many more of similar ilk who are the core donors of the GOP) is a testament to denial of practical reality and belief in the ability modern PR and political advocacy technics to fool a large share of the public almost all the time. The populist takeover of America’s dominant conservative party punctuates the practical unreality of libertarianism.

Misc items that interested me

A few items in the book that I found interesting or were new to me:

• Until I read the book, I had not thought much about the ambiguous economic motivations for and benefits of colonialism and the apparent ongoing debate on that (DeLong doesn’t take or have a clear position). My guess is the motivation is more psychological (machismo and urge to explore and dominate, say) than rationally pursuing economic advantage.
• Throwing nationalism into the mix is further confounding. The Boer War provides an example of economic irrationalism of colonialism and nationalism – its costs in money and human life vastly outweighed any plausible benefits but the war was very popular in Britain. The current resurgence of nationalism, evidenced by the War in Ukraine, e.g., raises the specter that we’re returning to something like the world before WWII.
• Herbert Hoover as a sort of Forest Gump in the first half of DeLong’s century. He’s in colonial China (that’s where he made his fortune), post-WWI food relief czar, directing relief in the 1927 Great Mississippi Flood, president during the Great Crash and Depression, remaking the administrative state after WWII, etc.
• All the horrors of WWII and fears of totalitarian communism scared the U.S. into an uncharacteristic bipartisan shouldering of the burden of a responsible hegemon, in the form of the Marshall Plan, containment, etc. These fears overcame the Republican tendency to isolationism, Democratic opposition to defense spending, and almost universal opposition to foreign aid. This is maybe half the political explanation for DeLong’s Glorious Years of Social Democracy.
• I was unaware of Botswana as a success story of the Global South.
• DeLong’s typology of recessions and depressions (monetarist, Keynesian, and Minskyite). I’m not competent to judge its validity but found it interesting. (Disclosure: I avoided taking macro, assuming it had no practical application for someone on my career path. It wouldn’t have had, but management of the national economy through fiscal and monetary policy is an important and interesting issue.)

There are many more, but I won’t go on because I’m already over my 2000-word budget. Reading the book stimulated lots of speculation about various plausible counterfactuals that could have changed the trajectory of history for good or ill, a fun waste of my time.

What disappointed me

The breezy and confident style of much of the book (DeLong does frequently admit that he doesn’t have the “answer” or economic explanation for a variety of observed phenomena) made the book readable and entertaining. But it also created some nagging doubts in my mind.

Along those lines, some bits left me hanging or wondering if they were more appropriate to a blog post or column than a carefully written and edited book on economic history. For example, in making the case against the The Bell Curve’s pop science hypothesis of a genetic link between race and intelligence, DeLong observes (p. 377) that all of humanity has less genetic variation than a baboon troupe. I haven’t paid attention to The Bell Curve, assuming it is just a latter-day effort to cloak race prejudice in pseudo-scientific and statistical clothing. That practice has a long and sordid history, including spawning eugenics policies based on it in the early 20^th century U.S.

DeLong’s observation caught my attention as perhaps a telling criticism that I hadn’t heard. I checked and he is correct about the difference in the amount of genetic variation between apes and humans (see, e.g., here). But he did not expand on it and to my amateur mind (after some but not rigorous thought), it was not clear why it matters. I suppose more variation in traits could increase the probability that two traits (intelligence and race) are linked, but that’s not obvious to me and DeLong doesn’t go into it. Why would more variance in the number of traits in a population increase the probability that two specific traits (not any two traits, mind you) are linked? (I have assumed that intelligence is due to many genes and is very difficult to measure because it varies a lot and that the invalidity of the idea or intelligence as an objective thing or the ability to measure with an IQ score/test is the core of the problem but have not read or thought about it.) Not a big deal but including stuff that doesn’t seem thoroughly thought through mildly irritated me.

DeLong admits he doesn’t fully understand or have an explanation for the varying or lack of growth in Global South, although he does provide a lot of interesting insights and observations in that regard. He briefly discusses (in a couple of contexts) Argentina’s interesting case and his explanation for its stalled growth (worse actually). I was familiar with that story and think his explanation makes sense. I was disappointed, though, that he did not spend more time on Chile, the arch type Hayakian example of how to develop the Global South (beyond glancingly castigating its authoritarian abrogation of democratic principles to implement its libertarian goals).

SALT connection

NA

Addendum

There was a symposium on DeLong’s book that makes many interesting points. He has a response here summarizes the criticisms, accepts some and explains why he decided not to cover points/criticisms that he should have spent time on some issues or developments.

The five basic criticisms, all errors of omission, are:

• Technological progress underemphasized
• Demographic changes overlooked
• Failure to cover global warming, fossil fuels use and other environmental issues
• More coverage of capital-labor struggles
• Scandinavian countries’ remarkable success in balancing economic growth with social equity certainly deserved more focus.

We just got Florida’s equivalent of Minnesota’s Truth-in-Taxation statement (i.e., how much next year’s tax will be under the taxing jurisdictions’ proposed levies) for the condo my wife inherited on her mother’s death last year.

The notice contained a surprising revelation. Florida provides a special property tax exemption for widows and widowers, which of course we will be losing. Back when I was working, I spent time thinking and writing about income tax marriage penalties and bonuses. But one built into the property tax and limited to surviving spouses was a new to me. Or maybe this is a special form of a single bonus? (The income tax does have a one-year surviving spouse status that confers bonuses on widows and widowers.) The exemption amount is a trivial but was just increased by the Florida legislature. I guess widows have a lobby in Florida.

A much more generous homestead exemption is provided to resident homeowners, which I knew about and knew we would be losing. That’s no surprise and is common in many states. Minnesota has a more generous one, albeit (of course for Minnesota) value limited. Florida’s predictably is a flat amount ($50,000 of value) for any home, regardless of its total value. Mar Largo probably qualifies if part of it is deemed a home. We’re in some of the same taxing districts.

The nastier surprise the notice contained was the fallout from Florida’s version of limited market value, which caps the annual value increase at 3% for homesteads and 10% for non-homestead property. A transfer allows an increase to full value. In our case, that meant a near 4X increase in value with an equivalent effect on tax. Welcome stranger.

That underlines the fundamental unfairness and distortions caused by provisions like Minnesota’s old limited market value law and the current version in Florida, as well as California’s Proposition 13. For years many other property owners were unnecessarily subsidizing my mother-in-law. Now, we’re on the other side of the equation. Over long periods of time, the distortions keep multiplying. Prop 13’s distortions are mindboggling. Value caps are very popular politically, of course, and extraordinarily difficult to undo.

This post is not SALT related. I have slid into occasionally blogging about the opioid epidemic via book reports on Deaths of Despair and Empire of Pain. As a result, I now tend to take more notice of items related to the epidemic, which appears to be increasingly infecting Minnesota. This post reports on two items that caught my attention.

Supreme Court review of the Sacklers’ personal liability?

When I wrote my report on Empire of Pain, I assumed that the Second Circuit decision, In re Purdue Pharma, LP, 22-110(bk) (2^nd Cir. May 30, 2023), upholding the bankruptcy court’s release of the Sacklers from personal liability beyond their $6 billion contribution would be the final word.  Supreme Court review seemed unlikely, even though there is a split in the circuits as to whether the bankruptcy code allows it.

The Solicitor General has, however, filed a request for a stay with the Supreme Court in order to file a petition for cert on behalf of the US Trustee. I assume that materially increases the chances for Supreme Court review. Traditionally that is the case when the Solicitor General weighs in on a case. After I wrote this, but before posting, SCOTUS granted the stay. The Court’s order treats the stay as a grant of cert.

I know nothing about the merits, although I did read this piece by two Alabama bankruptcy judges summarizing the issues. It suggests there is more authority supporting the release than Empire of Pain suggested, at least as I recall. (Aside: Based on that piece, John Oliver did a show on the issue. I missed that since my television watching is limited to NBA and MLB games and PBS. It must reflect that the legal issue has become modestly high-profile in some circles, at least for something that esoteric legally.)

If the Court grants review, it will be a case worth watching. The text of the Code does not explicitly authorize it, so authority is derived from the general grant of authority (the statute’s “necessary or appropriate” clause). One might assume that will cause soul searching by textualists and/or justices who don’t want to imply powers from broad general grants when major questions are involved. Perhaps that will not be an issue, because here it requires implying powers to be exercised by the bankruptcy court, not an administrative agency. Strictly speaking (IMO) it should not matter whether the grant is to an administrative agency (i.e., Chevron deference to an expert administrative agency) or a judicial entity (bankruptcy court). But I doubt conservative justices worry much about the courts (themselves) usurping Congress’s responsibility.

Epidemic benefits the GOP?

The jarring – at least to me – findings of a draft research piece caught my eye in a Thomas Edsall NY Times column. Carolina Arteaga and Victoria Barone, Democracy and the Opioid Epidemic (July 24, 2023). The authors assert that “the opioid epidemic substantially increased the Republican vote share [in congressional and presidential elections].”  Page 3. The basis for such a seemingly outlandish assertion by academic economists (at the University of Toronto and Norte Dame) intrigued me so much that I had to read the piece.

As a preliminary matter, I’m skeptical when economists apply their methods outside traditional areas for economic analysis (here political science). In my view, behavioral economics has called some of those efforts into question, such as some of Gary Becker’s work, despite his Nobel Prize. For example, it seems questionable whether decisions to commit crimes or to consume highly addictive drugs, as a general matter, are driven by homo economicus type calculations. (Disclosure: In another life, I fell into the thrall of Becker’s approach in writing a senior seminar paper on crime.)

Here the authors are using econometrics (i.e., statistical techniques) to measure whether the geographic areas that were more affected by the opioid epidemic showed changes in their partisan voting behavior. Analyzing such a question requires creativity in using data, similar to examples in the popular book, Freakonomics. The authors rely on Purdue Pharma’s strategy of initially marketing OxyContin to the cancer pain market and, then, to prescribers treating chronic, rather than mortal, pain in those same geographic areas. That strategy concentrated initial use and abuse of the drug in geographic areas with high cancer mortality. Other research has shown that those areas are strongly correlated with opioid prescription levels and overdose mortality. Thus, cancer mortality by geographic areas provides a way to identify geographic areas in the before times (pre-OxyContin) to test the effects of the epidemic on voting behavior. Clever idea.

The authors find a big effect on voting behavior – increasing the Republican vote in presidential and House races – after a lag. Figure 3(a) from their paper (copied below) shows the quite dramatic correlation. CZ in the title refers to commuting zones, the term for the authors’ constructed geographic areas where they measured cancer mortality, opioid prescriptions, drug overdose mortality, and voting behavior. OxyContin was introduced in 1996 and the effect starts being statistically significant in 2002 but becomes most dramatic in 2010, which was a Republican wave election, and persisting thereafter.

The relationship’s ability to predict the probability of Republican wins, per the authors’ statistical analysis, only starts in 2012. According to them, that may be because the affected areas were not in the baseline “swing” political areas, requiring more vote changing to yield wins in many cases.

The effect is quite strong, as the graph visually suggests. As they state:

We estimate that an increase of one standard deviation in cancer mortality in the baseline period [1982-1996] increased the share of votes for a Republican candidate in a presidential election by 12 percentage points.

Carolina Arteaga and Victoria Barone, Democracy and the Opioid Epidemic, p. 10 (July 24, 2023).

The obvious concern with efforts like these is to make sure that correlations are not spurious or random. While that doesn’t ensure the relationship is causative, it increases the chances. Two strategies are to (1) make sure that there is a solid theoretical reason to posit a causal relationship and (2) use various statistical methods and tests that decrease the chance you’re measuring spurious correlation or using bad data. Both are necessary and neither is foolproof, of course.

Theoretical basis for a relationship

The rationale for requiring a social science based or logical rationale for causation is obvious. The world is full of random correlations. Consider the long running trope about the relationship between Super Bowl winners and stock market performance that the media regularly reports on. Obviously random but still a correlation.

One easily can assume logically that the adverse social effects of the opioid epidemic had political repercussions. It has and is causing a lot of deaths (700,000 nationally according to the CDC) in addition to adverse health, economic, and social effects on families and communities. It seems reasonable that could affect political behavior. I suppose, it’s a small step to conclude that may take the form of a reactionary turn to the right and, thus, Republican support. The authors cite to a small literature (3 studies) finding such effects: two showing that the severity the 1918-19 flu pandemic in German and Italian areas correlated with increased support for Fascists and the other that areas with more incidence of the Black Death in the Middle Ages had increased antisemitism.

Statistical tests

Caveat: I’m not a statistician, so the following observations are just amateur guesses. The authors appear to me to do their best to apply statistical tests of reliability but face some challenges. Two key assumptions underpin their analysis (p. 9): (1) that cancer mortality rates are a good predictor of higher opioid abuse because of Purdue Pharma’s marketing and (2) absent that marketing and abuse, voting behavior in the impacted areas would have been about the same, on average, is in unimpacted areas.

The first of these isn’t very difficult for me to accept. The causative relationship seems pretty clear. The Sackler’s marketing was effective, and abuse and death rates followed by most accounts. You can see this in their Figure 2 (p. 20, not copied) and it is detailed in Empire of Pain.

The second, the link to political/voting behavior, is where there is more uncertainty in my view. The authors strain to find an appropriate placebo check, using diabetes and flu, which is not too convincing to me for rejecting that cancer incidence is not a proxy for a vector of demographic and economic variables that are the real explanation (more of my thoughts below). They test and statistically reject two common explanations for the increasing Republican vote share – the Fox effect and areas particularly hit by the last decades’ growth in Chinese imports. Yes, there is research that shows that relatively more exposure to Fox News increases Republican vote shares. That was another instance of clever use of data (channel numbers used by the local cable carriers).

My take

I have long been puzzled about the cause of or explanation for the increased dominance of Republicans in rural areas, both in Minnesota and nationally. That is partially what generated my interest in the paper and its potential piece to resolving that puzzle. But I wish the authors had tested whether average education levels in their commuting zone (geo areas) explain some of the increased Republican vote share.

Pollsters and political scientists have pointed out the correlation (at least in the last few elections) between educational attainment and the Republican vote. More specifically, white college educated voters are trending away from voting Republican, while white voters with only high school educations, especially males, are trending Republican. Second, Case and Deaton, Deaths of Despair, points out that a prime antidote to deaths of despair (suicides, drug overdoses, and alcoholic cirrhosis) is a college education. That raises in my mind whether that is some or much of what the authors are picking up in their analysis. It would be nice to see how many of their affected areas have variations in those measures (prevalence of college degrees and being targeted by the Purdue Pharma marketing), which may allow sussing out the differential effects. More generally if the epidemic is hitting white rural areas heavily (it is) and those areas are trending Republican for an array of reasons, the incidence of the epidemic just be a convenient proxy. That’s my nagging concern, anyway.

My bottom line is that the study is intriguing and, at a bare minimum, plausible but I remain less than convinced.