National Treasure
Social Security and Trends in Wealth Inequality
Sylvain Catherine, Max Miller & Natasha Sarin
Journal of Finance, June 2025, Pages 1497-1531
Abstract:
Recent influential work finds large increases in inequality in the United States based on measures of wealth concentration that notably exclude the value of social insurance programs. This paper shows that top wealth shares have not changed much over the last three decades when Social Security is properly accounted for. This is because Social Security wealth increased substantially from $7.2 trillion in 1989 to $40.6 trillion in 2019 and now represents nearly 50% of the wealth of the bottom 90% of the wealth distribution. This finding is robust to potential changes to taxes and benefits in response to system financing concerns.
IRS Officials' Stock Holdings and Corporate Tax Outcomes
Michael Mayberry, Eashwar Nagaraj & Scott Rane
University of Florida Working Paper, May 2025
Abstract:
We investigate the information content of personal stock trades by IRS officials. We collect transaction-level data on over five thousand IRS officials' personal investments and document substantial trading activity in individual stocks by officials across IRS departments. We find that IRS officials' trades, predominantly their purchases, generate positive abnormal returns on average, consistent with officials' information being not yet fully impounded into stock price. Next, we examine whether stock trades by these officials are associated with the firm's future tax enforcement outcomes. For a given firm, we find IRS officials' purchases are associated with subsequent decreases in tax reserves and specifically lapses in the statute of limitations. We also find that IRS officials' sales are associated with subsequent unfavorable tax settlements. These findings suggest that IRS officials possess, and trade on, material tax-related information and that these trades are associated with future tax enforcement outcomes for firms.
Policies to Reduce Federal Budget Deficits by Increasing Economic Growth
Douglas Elmendorf, Glenn Hubbard & Zachary Liscow
NBER Working Paper, May 2025
Abstract:
Could policy changes boost economic growth enough and at a low enough cost to meaningfully reduce federal budget deficits? We assess seven areas of economic policy: immigration of high-skilled workers, housing regulation, safety net programs, regulation of electricity transmission, government support for research and development, tax policy related to business investment, and permitting of infrastructure construction. We find that growth-enhancing policies almost certainly cannot stabilize federal debt on their own, but that such policies can reduce the explicit tax hikes, spending cuts, or both that are needed to stabilize debt. We also find a dearth of research on the likely impacts of potential growth-enhancing policies and on ways to design such policies to restrain federal debt, and we offer suggestions for ways to build a larger base of evidence.
News Selection and Household Inflation Expectations
Ryan Chahrour, Adam Hale Shapiro & Daniel Wilson
NBER Working Paper, May 2025
Abstract:
We examine how the media's systematic selection of reporting topics influences household responses to inflation news. In a model where households learn about inflation from news coverage, households account for news selection when forming their expectations. Because media are more likely to report on inflation when it is high, the model implies an asymmetric response to news: high-inflation news changes expectations more than low-inflation news. We test this implication using household panel data, and find that exposure to higher-prices news increases inflation expectations by 0.4 percentage point, while exposure to lower-prices news has no significant effect.
When Do FOMC Voting Rights Affect Monetary Policy?
Vyacheslav Fos & Nancy Xu
NBER Working Paper, May 2025
Abstract:
Using 472 FOMC meetings (1969-2019) and the exogenous rotation of voting rights among Reserve Bank presidents, we identify meetings where local economic conditions in voting districts significantly affect the Federal funds target rate (FFR), while those in non-voting districts show no effect. This voting-group effect persists after controlling for national conditions and Greenbook forecasts, implying that actual FFR decisions plausibly deviated from what average information and expectations would have suggested. Distortions are sizable, persistent, and priced into futures and Treasury markets prior to FOMC meetings. We demonstrate these findings using both components of the Fed's dual mandate: inflation and unemployment rates.
Does Homeownership Matter? The Long-Term Consequences of Losing a House during the Great Recession
Heidi Artigue et al.
NBER Working Paper, April 2025
Abstract:
This paper examines the long-term impact of keeping versus losing one's home following a mortgage delinquency in the aftermath of the Great Recession, studying the trajectory of homeownership, consumption, and financial well-being over the subsequent decade. Our research design leverages the substantial number of households that experienced temporary income shocks and the turbulence of the foreclosure crisis -- we focus on individuals who were seriously delinquent on their mortgages and compare outcomes between those who received a mortgage modification and those who did not. These two groups exhibit highly similar pre-trends in financial outcomes prior and during the Great Recession but diverge by 36 percentage points in their short-term likelihood of retaining homeownership. More than half of this disparity persists nearly a decade later, translating into an average capital gain of $83,000 in the housing market. Despite these significant differences in homeownership and wealth accumulation, keeping a home does not appear to influence the path of creditworthiness, proxies for consumption, and the income rank of one's residential neighborhood.
Tax Subsidy Disclosure and Local Economic Effects
Lisa De Simone, Rebecca Lester & Aneesh Raghunandan
Journal of Accounting Research, May 2025, Pages 547-598
Abstract:
We examine if the effectiveness of business tax subsidies varies based on state disclosure laws. The prior accounting literature on government disclosure documents substantial variation in the quality of such disclosures, raising questions about their effectiveness for monitoring. State and local business subsidies for investment and employment have tripled in size over the past 30 years, but transparency problems inhibit clear assessments of whether subsidies achieve their intended outcomes. We examine both internal disclosure laws, which mandate subsidy reporting by the granting state agency to other state oversight agencies, and external disclosure laws, which mandate reporting to the public. We find positive effects of subsidies on local employment when subsidies are subject to internal disclosure laws; by implementing such regimes, governments could forego 1.2-1.7 subsequent subsidies per county, saving $419.0-$593.5 million in aggregate. In contrast, we observe little effect of external disclosure, which we show is due to governments either substituting to other types of incentives or posting stale information that impedes public monitoring. We contribute to the government disclosure literature by demonstrating the real employment effects of internal government disclosures, and we provide policy-relevant evidence about the conditions under which external disclosure regimes facilitate public monitoring.
Home Mortgage Lending and Neighborhood Mental Health: A Spatial Econometric Analysis of 18 U.S. Metropolitan Statistical Areas
Liang Chen et al.
Journal of Urban Health, February 2025, Pages 35-48
Abstract:
This study investigates the relationship between home mortgages and neighborhood mental health across the 18 largest metropolitan statistical areas (MSAs) in the United States. Home mortgages, a primary avenue to homeownership, contribute to housing security and stability. Moreover, their issuance reflects local investment and potential improvements in the built environment, hypothesized to positively influence community mental well-being. Using census tract-level data from multiple sources, we employed a spatial econometric approach, specifically spatial error modeling, to account for spatial dependency and estimate the association between home mortgage lending (2011 to 2020) and the prevalence of self-reported poor mental health in 2020. Our findings indicate a statistically significant negative association between mortgage issuance and self-reported poor mental health across all 18 MSAs, suggesting that increased mortgage lending is associated with improved neighborhood mental health. Comparisons between standard linear models and spatial error models highlight the influence of unmeasured, spatially correlated factors on neighborhood mental health outcomes. This study underscores mortgage lending as a crucial factor in community well-being and emphasizes the necessity of addressing spatial dependency in neighborhood health studies for accurate estimations. The findings offer valuable insights for researchers and policymakers aiming to enhance community mental health and address health disparities through informed housing policies.
MPCs of ABCs: The housing wealth effect for affluent boomers with credit
Niloy Bose & Antu Panini Murshid
Economic Inquiry, forthcoming
Abstract:
This paper combines exogenous variation in house prices with anonymized individual-level expenditures data to identify a causal channel from housing wealth to consumption. We show that the Sandy Hook school shooting provided a large negative exogenous shock to local housing which lowered credit card spending by about 4.2 cents for each $1 fall in house prices: rescaled this translates to an annual marginal propensity to consume (MPC) of about 9 cents on the dollar. These consumption sensitivities are driven entirely by creditworthy middle-aged consumers, with those closest to the retirement threshold reacting the strongest.