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“I’m fully prepared not to become president of the United States,” Laurence Kotlikoff told me, more than an hour into a telephone interview Saturday. “That could happen.”
Well, that’s a relief. At least we won’t have two losing presidential candidates challenging the results of the election two weeks from Tuesday. But let’s be honest: You probably weren’t lying awake at night worrying about how Kotlikoff will react if he loses. You probably didn’t even know he was running.
Kotlikoff is a Harvard-trained economist, a Boston University professor and, yes, a candidate for president. He is on the ballot in only two states (Louisiana and Colorado), but he is eligible to win as a write-in candidate in most of the others, meaning that unlike, say, Republican vice presidential nominee Mike Pence, he could theoretically be elected president Nov. 8.1
Emphasis, of course, on “theoretically.” In reality, Kotlikoff has effectively zero chance of winning, not least because he has little name recognition and no serious strategy for changing that. (More about that in a moment.) But long-shot though he may be, Kotlikoff is not a crank. He’s a respected and — within academic circles — well-known economist with legitimate credentials and serious ideas.
The animating principle behind Kotlikoff’s campaign is simple: Today’s Americans are running up a huge bill — both literal and figurative — and leaving the next generation to pay it. On fiscal policy, Kotlikoff thinks that official government budget estimates vastly understate the future cost of Social Security, Medicare and other programs. On foreign relations, Kotlikoff argues that by letting North Korea develop nuclear weapons, the U.S. is leaving a far less secure world for future generations. And on climate change, Kotlikoff believes not only that the U.S. is failing to take the threat seriously, but also that many well-intentioned policies are making the problem worse.
“We’re not disclosing honestly the burdens that we’re leaving for our kids,” Kotlikoff said. “I don’t think we can just leave our kids at risk.”
Kotlikoff is known among economists for what is called “generational accounting,” which is the idea that the government should evaluate policies based on how they will affect spending and revenue far into the future — much further than the 10-year budget window that is standard now. For example, the government has promised to pay Social Security benefits for Americans working today; paying those benefits will fall to the next generation of Americans, yet that obligation doesn’t show up on the government’s balance sheet. Kotlikoff estimates that if we account for the full cost of all the government’s long-term obligations, projected out into the distant future, the true “fiscal gap” between what we owe and what we collect in tax revenue is about $200 trillion, more than 15 times the official national debt.
Kotlikoff’s approach has plenty of critics, who argue that generational accounting is hard to interpret and requires looking much further into the future than is realistically possible. (Economists struggle to predict what will happen next month, let alone 100 years from now.) But the idea also has prominent backers. A 2013 bill requiring the government to provide generational accounting estimates drew the backing of hundreds of economists, including 17 Nobel laureates, and was sponsored by, among others, Sen. Tim Kaine, now Hillary Clinton’s running mate.
Some of Kotlikoff’s other ideas likewise have mainstream backing in economics, if not in politics. He wants to overhaul the tax code to tax spending rather than income, which he argues would make it harder for the rich to avoid taxes while eliminating provisions that can discourage the poor from working more. He wants to institute a tax on carbon to fight climate change.2 And he wants to replace existing tax credits with a lump-sum payment for every American, an idea that, in various forms, has been drawing increased attention from researchers on the left and the right.
Some of Kotlikoff’s other ideas are less mainstream. He wants to limit legal immigration because he believes it is pushing down wages for low-skilled American workers and contributing to a “population explosion” that could lead to overcrowded cities. (He sees illegal immigration as a relatively small problem.) “Boston will turn into Manila,” he said, referring to the Philippines’ capital, which is among the world’s most densely populated cities. His stance on immigration is an odd position for someone worried about the long-term costs of Social Security and other programs; most economists see immigration as a crucial way of supplementing the workforce as U.S. birth rates fall. (Kotlikoff has laid out all of his proposals in a 158-page policy book available on his website.)
Academics of Kotlikoff’s pedigree usually try to influence policy from inside the system, not by running for president.3 Kotlikoff said he has tried the conventional approach, testifying before Congress, serving as a consultant for various agencies and foreign governments, and working at Ronald Reagan’s Council of Economic Advisers early in his career. But he said he has become convinced that politicians will never embrace the kind of policies he believes the U.S. needs. (He may be right — Kotlikoff’s proposals include such political nonstarters as cutting Social Security and eliminating Medicare.)
“I’m talking about radical reform,” Kotlikoff said. “We’re not going to get radical reform unless we have a president of the United States who pushes for radical reform.”
Kotlikoff swears he is not running merely to spread his ideas — he wants to win. But if that’s true, he isn’t doing much to make it happen. He has essentially no paid staff,4 has run no television ads and doesn’t hold campaign rallies. His campaign appears to consist mostly of emailing journalists and complaining that they are ignoring him — which, apart from a few stories when he first declared his candidacy, we mostly have. “I expected a whole lot more press,” Kotlikoff told me.
Still, Kotlikoff remains convinced that there is still time for his campaign to “go viral.” He said he hoped people would read this story, visit his website, then pass his message on. That, in the end, may be Kotlikoff’s most radical belief: that in an election year dominated by personal attacks and campaign theatrics — not to mention deep mistrust of experts and elites — policy proposals will carry the day.
Trump and the markets
Last week, I argued that economists should stop saying that a Donald Trump victory would cause a meltdown in financial markets. Markets are inherently unpredictable, and economists risk undermining their (already shaky) public reputation if they make dire predictions that turn out to be wrong.
But in a new paper, economists at the Brookings Institution argue that investors are sending a clear signal that they are rooting against a Trump presidency. Economists Justin Wolfers and Eric Zitzewitz looked at how markets moved during the first presidential debate, which pretty much everyone scored as a decisive win for Clinton. They found that stock prices rose and volatility fell, both signs that markets were comforted by the improved prospects of a Clinton victory.5 They observed a similar pattern over the early October weekend that followed the release of the now-infamous “hot mic” videotape that was widely seen as hurting Trump’s chances.
Wolfers and Zitzewitz’s work still doesn’t necessarily mean markets will tumble if Trump wins, or, if they do, that the losses will last long. (Markets fell sharply after the surprise “Brexit” decision but have since rebounded.) But their findings do represent a break from history: In most elections dating back more than a century, markets have appeared to prefer the Republican candidate.
Swing-state unemployment
We will get one last pre-election jobs report on Nov. 4, four days before voters go to the polls. But last week, the Bureau of Labor Statistics released its final look at state-by-state jobs numbers before Election Day. The report showed the job market improving in many key battleground states.
Florida — the most likely “tipping-point” state according to FiveThirtyEight’s election model — saw its unemployment rate drop to 4.7 percent in September from 5.1 percent a year ago and from more than 11 percent in the aftermath of the recession. North Carolina, another key swing state, saw the biggest year-over-year improvement in its unemployment rate of any competitive state, to 4.7 percent from 5.7 percent. Michigan, Nevada and Arizona — three of the states hit hardest by the recession and all states that could be important on Election Day — have all seen big declines in their unemployment rates. (One key state, Pennsylvania, isn’t so lucky: Unemployment there fell below 5 percent in 2015 but has since risen sharply.)
Interestingly, Trump doesn’t seem to be outperforming Clinton in states with higher unemployment rates, or in those where the economy has recovered more slowly. If anything, Clinton is doing slightly better than expected in states where the unemployment rate has improved more slowly.
The week ahead
On Friday, the government will release its preliminary estimate for economic growth in the third quarter of the year, which ended in September. Economists expect it to show that gross domestic product — the broadest measure of goods and services produced in the economy — rose at a rate of about 2.5 percent. That would represent a marked improvement from the first and second quarters of the year, when GDP grew at rates of 0.8 percent and 1.4 percent, respectively. But it would still leave 2016 on track to be yet another disappointment in a recovery that has been full of them.
No matter what Friday’s report says, however, don’t read too much into it. The government’s initial estimate of GDP is based on preliminary data and is notoriously unreliable. Better to wait a month or two for the more trustworthy revised data.
Last week at FiveThirtyEight
The third and final presidential debate finally put policy front and center, with a particular emphasis on economic issues. See our wrap-up of the policy discussion or check out our full live blog. Or see our pre-debate briefing book for analysis of some of the key issues.
Ikea’s Poäng chair is ubiquitous. It is also, remarkably, getting cheaper. Oliver Roeder took a look at the weird economics of the Swedish furniture giant.
Elsewhere
For all the talk of the death of American manufacturing, actual U.S. factory output is near record highs. But in an interview with Jared Bernstein in The Washington Post, economist Susan Houseman argues that those figures are misleading.
The rapid rise in student debt has hit blacks much harder than whites, Josh Mitchell reports in The Wall Street Journal. According to new research from the Brookings Institution, African-Americans owe nearly twice as much four years after graduation as their white counterparts.
Worried by a new survey showing that a large share of Americans don’t trust government data, economist Claudia Sahm considers possible causes of that mistrust.
Americans are starting fewer companies. That’s bad news for the U.S. economy’s productivity, writes Jeffrey Sparshott in The Wall Street Journal.