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New NASA research models are shedding light on how insect populations may respond to severe changes in temperature that are likely climate change. In a study recently published in Nature Climate Change, scientists found that 65% of the insect populations they examined could go extinct over the next century.

Insects perform many important roles in Earth's ecosystems. They assist with the production of fruits, vegetables, and flowers through pollination. They decompose organic matter. They even help control harmful pests. But there are gaps in our understanding of how insects and ecosystems will respond to climate change.

The evidence suggests that inequality aggravates the position of the disadvantaged groups of the society vis-à-vis climate change impact in the following three major ways (Figure 1). a. increase in the exposure to climate hazards, b. increase in the susceptibility to damage caused by climate hazards, and c. decrease in the ability to cope with and recover from the damage. To have a preliminary idea about how these channels work, consider the following example. One of the consequences of climate change is increased flooding. Evidence shows that inequality often compels the disadvantaged groups to live in areas that are more prone to flooding, thus increasing their exposure to flooding caused by climate change. Second, among all living in the flood zone, the disadvantaged groups prove to be more susceptible to the damages caused by flooding. For example, their houses get completely washed away or be damaged seriously, because these are often made of flimsy materials. By contrast, the houses of the more well-to-do suffer less damage because these are generally made of sturdier materials, such as brick and concrete. Finally, the disadvantaged groups have less ability to cope with and recover from the damages caused by floods. For example, the rich may buy insurance and thus get compensated for the damages. By contrast, the disadvantaged groups may not be able to afford such insurance and thus have to absorb the entire loss, leading to greater loss of their asset position.

The paper finally notes that, though the analytical framework presented in it focuses on within-country inequality, it can also be applied to describe and analyse the relationship between climate change and across-country inequality. Greater across-country inequality may indeed increase the exposure of the disadvantaged countries to climate hazards. It may also increase their susceptibility to damage caused by climate hazards. Finally, it may also decrease their capability to cope with and recover from the damages suffered. Thus, climate change may aggravate across-county inequality too. However, to keep its scope manageable, this paper limits its attention to within-country inequality and does not extend it to across-country inequality. The 2030 Agenda for sustainable development has brought the issues of both within- and across-country inequality to the fore and calls for the reduction of both. This paper suggests that an opportunity in the otherwise formidable challenge of climate change may be seen in the expansion of the policy space regarding inequality. This is because emergency situations often make it possible to undertake steps that are not possible in normal situations. The emergency posed by climate change may facilitate reduction of inequality, which is otherwise deemed to be a difficult political issue.

Rates of violent crime are lower in more equal countries (Hsieh and Pugh 1993; Whitworth 2012). This is largely because more equal countries have less poverty, which leads to less people being desperate about their situation, as lower-income individuals have been shown to commit more crime. Relatedly, according to strain theory, more unequal societies place higher social value in achieving economic success, while providing lower means to achieve it (Merton 1938). This generates strain, which may lead more individuals to pursue crime as a means of attaining financial success. At the opposite end of the income spectrum, the wealthy in more equal countries are also less likely to exploit others and commit fraud or exhibit other anti-social behaviour, partly because they feel less of a need to cut corners to get ahead, or to make money (Dorling 2017: 152–153). Homicides also tend to rise with inequality. Daly (2016) reveals that inequality predicts homicide rates better than any other variable and accounts for around half of the variance in murder rates between countries and American states. Roughly 90% of American homicides are committed by men, and since the majority of homicides occur over status, inequality raises the stakes of disputes over status amongst men.

Escalating income inequality has been linked with numerous negative outcomes. On the economic front, negative results transpire beyond the obvious poverty and material deprivation that is often associated with low incomes. Income inequality has also been shown to reduce growth, innovation, and investment. On the social front, Wilkinson and Pickett’s ground-breaking The Spirit Level (2009), found that societies that are more unequal have worse social outcomes on average than more egalitarian societies. They summarised an extensive body of research from the previous 30 years to create an Index of Health and Social Problems, which revealed a host of different health and social problems (measuring life expectancy, infant mortality, obesity, trust, imprisonment, homicide, drug abuse, mental health, social mobility, childhood education, and teenage pregnancy) as being positively correlated with the level of income inequality across rich nations and across states within the US. Figure 3 displays the cross-national findings via a sample of 21 OECD countries.

National conversations about wealth inequality in the United States have led to proposals for a wealth tax. The motivation is to tax concentrated wealth to raise revenues for public programs and redistribution.

Combining insights from macroeconomic models, James Feigenbaum and Austin Brooksby examine the effects of different wealth tax proposals on wealth inequality. The two models of the economy that they consider are infinite-horizon model and the overlapping-generations model. Infinite-horizon models assume that households never leave the economy and exist forever. The overlapping-generations model assumes that households move in and out of the economy in the same way that generations of people do. Generations share time together in the economy as a new generation enters and the older generation begins to die off.

Any period of economic uncertainty can make a major financial decision – like – more stressful. While the housing market on a national scale has seen prices decline since the all-time highs of mid-2022 amid high interest rates, experts are noting that a sudden and abrupt housing market crash is unlikely, based on current market conditions. Housing demand and supply, and unemployment all play roles in how the real estate market fares. Currently they indicate a period of decline in some markets and growth in others, and a decline in transactions compared to recent years overall – but certainly not as significant a decline as seen in the housing market crash of 2008-2009. A recession would put stress on the housing market, and experts predict one in the near future. To avoid rippling impacts in housing, there may be a tightening of mortgage lending practices, but homeowners with existing mortgages are still considered stable, and many of them remain uninterested in leaving their homes in the near future. In economics, a bubble is defined as a period of rapid market value growth of an asset – in this case, homes. Considering the fast pace of the housing market that has lasted roughly the length of the COVID-19 pandemic, rapid market value growth accurately describes the up until about midway through 2022. Home price growth was in the double digits year over year every month from August 2020 thru mid-July 2022, based on home sale price data from Redfin. Signs of a growing housing bubble slowed throughout the rest of 2022 and into the first weeks of 2023, however, as home prices continued to decline month over month during that time. Now, median home prices on the national scale are seeing minor year-over-year declines: The median home price in the U.S. between May 15 and June 11 was $381,000, 2.6% month-over-month increase and a 1% decline compared with the same time period in 2022, according to Redfin. With that in mind, the U.S. housing market is not currently experiencing a rapid increase in home prices indicating a growing housing bubble, but the bubble that has formed in recent years may be seeing some mild correction. If recession comes in the latter half of 2023 as many experts predict, a further drop in demand leading to additional decline in home prices could see prices drop a bit more than they have in the first half of the year. “Could a little air be let out of that bubble? Perhaps,” says Mike Reynolds, vice president of investment strategy at Glenmede, a Philadelphia-based wealth management firm. Reynolds notes that current conditions and shortage of housing availability in general indicates that it’s unlikely, at least at this time, that recession would result in a bubble burst or sudden home price plummet. Home Prices Can Decline Without a Housing Crash While any drop in home prices may feel like the last thing a home seller would want, a slight market correction could help better align prices with what homebuyers – including sellers looking for their next home – can afford. A major challenge to that affordability threshold right now is the increase in mortgage interest rates that began in mid-2022. While are technically independent of the federal funds target rate set by the Federal Reserve, they often increase or decrease as a result of the Fed’s actions. The federal funds target rate has been raised repeatedly in the last year in a marked effort to curb inflation. The Fed most recently opted not to raise the target rate in mid-June, though at least two more rate hikes are expected before the end of the year. The average 30-year, fixed-rate mortgage interest rate reached more than 7% in October and November 2022, but dropped close to 6% in January. The average interest rate has shown some volatility since March, climbing toward 7% again, then dropping back down. The average rate for a 30-year, fixed-rate mortgage as of June 15 is 6.69%, according to Freddie Mac. With many homeowners who purchased or refinanced between 2020 and mid-2022 locked into a mortgage interest rate somewhere around 3%, moving becomes downright unattractive. “Low inventory is going to be a problem for a while, because if homeowners don’t have to sell, the data suggests that they won’t,” says Danielle Hale, chief economist for Realtor.com. The decrease in the number of home sales since interest rates initially rose in 2022 is stark. From May 15 through June 11, there were more than 17% fewer homes sold compared with the same time last year, according to Redfin data. But the ability for homeowners now to wait out economic uncertainty – and climbing interest rates – may be what keeps any from becoming more concerning. As much as 82% of homeowners feel “locked in” to their current mortgage, according to a Realtor.com of 1,200 recent or potential home sellers published in April. Whether a homeowner feels locked into a current mortgage rate appears to be mostly generational. “The baby boomers were less likely to say they feel locked in,” Hale says. “That probably coincides with the fact that they’ve lived in their homes longer.” The easing of mortgage rates in late March and early April encouraged some buyers to come back to the market, and thus far they’ve continued to return heading into the traditional homebuyer season. Orphe Divounguy, senior economist for Zillow, reports that many buyers seem to have adjusted to higher mortgage rates, and the spring homebuying season saw a spike in activity like usual. But home sellers have stayed away. “That means that buyers are absorbing all of the current inventory and inventory remains at an all-time low,” Divounguy says. As a result, the number of homes going under contract is still down compared with the same time in 2022, but it’s getting closer to even. Zillow reports that newly pending listings were down 21% in May compared with May 2022. Additional economic uncertainty could lead more buyers to once again back away from house hunting and sellers to stay put. Year-over-year home prices may continue to decline in that case, but likely on a fairly small scale and without the threat of a crash. Read: What’s Different From the 2008 Housing Market Crash? Homeownership can feel scary during any point of economic uncertainty – especially if you have a vivid memory of the and the housing market crash of 2008 and 2009. “The 2008 housing crash that they think about was due to the overextension of loans to people that were not solid borrowers,” says Kimberly Jay, licensed associate real estate broker for Compass in Manhattan. Predatory lending practices in the first years of the 21st century meant many homeowners faced foreclosure when adjustable interest rates rose, and unemployment further increased the number of properties in foreclosure. Housing demand was artificially propped up by issuing mortgages to people who weren’t in good financial places to buy and maintain homes, and the economic downturn also meant buyer demand plummeted. Home values declined significantly as a result. The current situation is very different compared with the Great Recession, Reynolds explains. “We don’t see a lot in the way of excess this time around,” he says. Another major difference between today’s market and the housing crash is the issue of supply – excessive building leading up to 2008 meant that when demand dropped, there were entire housing developments that sat vacant. Cut to 2023, and housing is still catching up on the low rate of building compared to household formation since the Great Recession. With today’s homeowners, laws and regulations are in place to prevent predatory lending since the Great Recession. Even as high home prices and rising interest rates have increased the total , making homeownership unaffordable for otherwise would-be homebuyers, there are still more qualified buyers searching for homes than there are properties for sale. With all these factors combined, Reynolds says a crash, at this point, is unlikely even with a recession expected in the future. However, he also notes that a recession can also reveal instabilities or assessment errors that weren’t apparent prior to a drop in GDP. As a result, economists and strategists have to be ready for a couple of surprises once recession does occur. “That’s kind of an Unknown unknown that sits out there that could move the needle a little,” Reynolds says. What the Silicon Valley Bank Failure Means for Mortgages and the Housing Market The news cycle following the and First Signature Bank in March, and First Republic Bank in May, has had many people wondering if there will be a larger financial crisis for the American people. Runs on the banks led to their insolvency – should anyone shopping for a home be worried about their savings in a bank? In many cases, no. “For the most part, this banking crisis has been really limited to banks that have had sort of a narrow concentration of who their banking customer is,” says Melissa Cohn, regional vice president of William Raveis Mortgage in New York. Homebuyers currently applying for a mortgage may find that lenders are getting even more thorough in their due diligence than in recent years, “double-dotting their i’s, double-crossing their t’s to make sure that you’re secure in your job,” Cohn says. Other banks may be less interested in lending money altogether right now. “I have seen some banks sort of raise their rates to step to the sidelines for the time being,” Cohn says. If you have a mortgage on your current home and you’re planning to stay put, even if the bank that possesses your mortgage fails, you don’t have to worry as long as you can keep making payments. “There’s zero risk. Once you close on a mortgage no one can come and say, ‘Sorry, you have to give it back,’” Cohn says. “They can’t take your mortgage away from you.” For homebuyers in the act of shopping around for a mortgage, the best advice is to do your research and ask lots of questions. Matt Vernon, head of retail lending for Bank of America, says that the bulk of homebuyers inquiring with the bank are knowledgeable about the process, the current state of mortgage rates and their own financial situation. “Certainly folks are aware of the environment that’s around, but when they come to us … they are very confident in their ability to purchase the home,” Vernon says. Building Permits Are Down – but Housing Demand Isn’t As of April, the U.S. Census Bureau’s Building Permits Survey reports there were 75,100 single-family building permits filed in the U.S. (unadjusted), slightly above the forecast of 72,190 permits predicted for that month in the . Still, it’s well above anything compared to the Great Recession: After the housing bubble burst in 2008, building permits for single-family detached homes cratered to a low of 22,100 in January 2009. In a typical year, the number of building permits for bottoms out in December and January then steadily climbs until peaking in the spring and summer months. The U.S. News Housing Market Index forecasted March as the peak for new building permits this year, declining through the summer and start of fall with a little over 48,000 in September. Compare that to September 2022’s 70,800 permits. With far fewer permits already, expect new home construction to slow. Builder sentiment, while low compared to 2021, has risen slightly in recent months to 55 out of 100 as of June 2023, according to the National Association of Homebuilders and Wells Fargo Housing Market Index. In comparison, builder confidence reached a whopping 84 in December 2021, and was as low as 31 in December 2022. Builder sentiment is based on the number of new single-family homes, predicted single-family homes in the next six months and overall traffic of buyers. “New construction is down from its pandemic era peak, but builders are still working and trying to fill in the gaps that existed,” Hale says. READ: How Does a Recession Typically Impact the Housing Market? At least two consecutive quarters of negative GDP growth make a , and it’s typically accompanied by an increase in unemployment and decrease in consumption by the general public. The financial strain individuals face during a recession leads to a slowdown in the housing market – homebuyers may pause their search if they’re worried about layoffs, and there may be an increase in foreclosure activity while higher unemployment increases the number of people who can’t pay their mortgages. However, once activity on the housing market slows enough, mortgage interest rates drop to a point where buyers reenter the market, interested in getting a good deal. Unlike in the Great Recession, an increase in housing market activity helps bring the economy out of recession. The real GDP increased in the last two quarters – by 2.6% in the fourth quarter of 2022 and 1.3% in the first quarter of 2023, according to the Bureau of Economic Analysis. Unemployment has largely remained low, at 3.7% in May, though it did rise 0.3 percentage points from April, according to the Bureau of Labor Statistics. While these indicators show no recession right now, most experts agree that a recession is likely in 2023, particularly as we see GDP growth slow from quarter to quarter and unemployment tick up slightly. Divounguy expects the economy to cool between now and the end of the year. “If that does happen, mortgage rates will tick down and we should see a pretty strong housing rebound in 2024 – in spring 2024,” he says. The severity of a recession could impact how much the housing market reacts. Reynolds says a more run-of-the-mill recession, neither mild nor severe, may lead to a larger correction of home prices, helping housing become affordable for more people faster. A milder recession, on the other hand, “we may not see prices react all that much to the downside,” Reynolds says. What Conditions Could Lead to a Housing Market Crash or Housing Bubble Burst? While current conditions don’t point to a housing market crash, there’s no crystal ball to guarantee how the economy will fare in the next few months or years. A few factors that could make the housing market more unstable include: Unemployment. A slight increase in unemployment would be OK, but a bottom fallout could be an indication of danger for the housing market. If too many people are without work, then distressed home sales climb and foreclosures become more likely. “There are predictions of an upcoming recession and possible large-scale layoffs. That surely would raise the number of households who fall behind on home loans and send foreclosure numbers upward,” wrote Rob Barber, CEO of market intelligence at real estate data company ATTOM, based in Irvine, California, in an email. Homebuilding. With the slowdown in buyer activity, homebuilders are pulling back and there are . That can prolong the housing shortage and draw out the demand-supply imbalance. Buyer demand. Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market. If buyer demand completely disappears, it would be a sign of a problem. Homeowner equity. If homeowner equity sees a massive drop, either home values are dropping fast or there’s an influx of buyers who are putting little money down. High equity now serves as a cushion for the housing market in case of economic downturn. “Having equity in a home provides a lot of motivation for owners to get caught up on their loans and preserve what they've built up,” Barber says. “Even when they can't, most can still sell, pay off their outstanding debt and come out with at least a small profit if they bought more than a year ago.” Foreclosures. “(I)t's hard to pinpoint a benchmark for (foreclosure) increases that would cause alarm. But if the late 2000s are any guide, quarterly foreclosure caseloads that spike by more than 10% per quarter would be a serious warning bell of danger for the U.S. housing market,” Barber says. “That's what happened in early 2006 before the Great Recession hit and the market started falling in 2007. This is definitely a metric worth watching very closely over the next year.”

Jomo Kwame Sundaram and Vladimir Popov, "Economic Crisis Can Trigger World War," Inter Press Service, 2-12-2019, http://www.ipsnews.net/2019/02/economic-crisis-can-trigger-world-war/

KUALA LUMPUR and BERLIN, Feb 12 2019 (IPS) - Economic recovery efforts since the 2008-2009 global financial crisis have mainly depended on unconventional monetary policies. As fears rise of yet another international financial crisis, there are growing concerns about the increased possibility of large-scale military conflict.

Responding to climate change, and achieving low carbon growth and development, will be a major challenge for the international community; one which will require significant public and private sector action and cooperation. The private sector has an enormous role to play in this, undertaking the investment and technological innovation that will underpin low carbon growth, providing finance for mitigation and adaptation, adopting lower carbon production processes, and encouraging and facilitating more climate conscious purchasing decisions by consumers. Various reports have looked at the role of the private sector, and how the right incentives can be created to maximise their contribution. For example, the World Business Council for Sustainable Development (WBCSD) study, Towards a Low-carbon Economy, focuses on business experience in technology development and deployment, finance and carbon markets, and makes policy recommendations. Catalysing low-carbon growth in developing economies from UNEP and partners, focuses on the kinds of public finance mechanisms needed to incentivise and scale-up private sector investment for climate solutions. And Charting a New Low-Carbon Route to Development published by UNDP, discusses options to achieve both climate change mitigation and the investments needed to accelerate poverty reduction and development. To maximise the private sector contribution to tackling climate change, clear and appropriate incentives need to be created. This would be achieved most effectively through a global deal establishing binding emission reduction commitments, which would create greater clarity about the future carbon price. The nature of the policy incentives adopted to achieve emission reductions will also determine the scale and nature of private sector involvement. Business is engaging extensively on this agenda, through a range of international initiatives and fora, including the World Economic Forum’s Task force on Low Carbon Economic Prosperity, which is developing proposals to accelerate private sector investment and innovation in the fight against climate change; The Climate Group, a global coalition of governments and businesses working to tackle climate change and speed up the shift to a low carbon global economy; and the WBCSD. At national level too, the establishment of a clear policy framework will be important in creating an environment that is conducive to private sector engagement. If governments can clarify the future direction of policy and the key decisions that will be made, for example on energy sourcing and infrastructure development, this will give business greater confidence to undertake the low carbon investments that are needed, in the knowledge that future policy development will be consistent with a positive return on their investment. Some countries are beginning to do this, although most – especially in the developing world - are still at an early stage. A new ODI study, Policies for low carbon growth, reviews the low carbon and climate resilient growth strategies being developed in a range of countries. The review suggests that consulting and partnering with the private sector in developing these strategies can help increase the feasibility and market-friendliness of policies that are proposed. This can facilitate greater private sector engagement in achieving low carbon growth and improve the sustainability and scale-up of green investments. Help from business in identifying and overcoming the barriers to investment will be particularly important. Many of the barriers to low carbon growth, mitigation financing and technological transfer in developing countries are the same as the existing barriers to investment and business activity (e.g. lack of access to finance, high costs of doing business etc.) and policies to tackle these remain crucial. Most of the low carbon growth plans we have reviewed, particularly those from developing countries, are contingent on large sums of private financing being made available through international carbon markets. Many of the most cost effective mitigation opportunities are in the developing world, and this could allow some developing countries to capitalise on potentially huge new sources of private finance that may be generated through emissions trading schemes or the Clean Development Mechanism. This could represent a real win-win scenario, meeting both environmental and development objectives. However, these carbon markets and international mitigation mechanisms will need to be developed, reformed and scaled up significantly if they are to benefit more developing countries. The role of the private sector in tackling climate change and supporting low carbon growth in developing countries is clear, and business is already actively engaged on this agenda. However, it will be down to policy makers to establish rules of the game that maximise the contribution of the private sector to this objective. There could be more win-win scenarios here, for the environment, development and for businesses themselves, but only if all parties work together and find innovative and effective solutions to this most pressing of problems.

Increasing wages for those earning the least is fundamental to ensuring an equitable economy that leaves no one behind. Wage increases among those who earn the least helps Black, brown, Latinx, and gender and sexual minorities most, as these communities are disproportionately represented in low-wage populations. For example, approximately 60 percent of low-wage earners are women, and wage increases at the bottom of the income distribution are likely to benefit nearly one-third of Black Americans and a quarter of Latinx Americans.

Moreover, beyond the equity-related benefits of higher wages, increasing wages for low-income workers in particular also provides benefits for the economy as a whole. It can be difficult to isolate the empirical effects of wage gains via market forces on living standards given the various moving parts, such as nonwage gains, fiscal stimulus, and price volatility. However, by drawing parallels to a policy-induced phenomenon like minimum wage increase, which by construction raises the incomes of low-wage workers, we can identify the potential impact of real wage gains for those who earn the least.

Investment influences the rate of economic growth because it is a component of aggregate demand (AD) and more importantly influences the productive capacity of the economy. (LRAS)

An increase in investment should be a boost to economic growth.

Presidential candidate Joe Biden has made it clear he would increase taxes as president. His tax plan calls for increasing the top corporate tax rate and the top personal tax rate, removing the cap max for social security, and ending the preferred tax rate for capital gains for wealthy Americans.

The Tax Foundation and the Tax Policy Center project that his tax plan would generate somewhere between $3.2 to $4 trillion over the next ten years.

Ironically, the rosy revenue projections that wealth-tax supporters such as Emmanuel Saez and Gabriel Zucman made in 2021 for its revenue potential—starting in 2023—are now hopelessly out of date. Two years ago, at the height of the pandemic, billionaires accumulated capital at near-record rates. Now, potential gains from a wealth tax have fallen because of the enormous declines in wealth (toward greater income equality!) experienced by virtually all newly minted tech moguls. Elon Musk leads the pack, with capital losses of $115 billion in 2022 alone. He has good company in Jeff Bezos ($80 billion); Mark Zuckerberg ($78 billion); and Larry Page ($40 billion). In sum, the American billionaires lost $660 billion this past year, about one-third of the $2 trillion in losses worldwide. Nothing guarantees that they will recover those losses any time soon, if ever. Considering a hypothetical 3 percent wealth tax rate, close to $20 billion in domestic wealth-tax revenue disappeared in 2022; this number would be far higher if the wealth tax also reached foreigners.

Pass the tax and those losses will only get larger. Killing the goose that lays a golden egg is to be expected in any system that stresses redistribution first and growth second.

Emmanuel Saez and Gabriel Zucman make two quite different claims about a progressive wealth tax. It is necessary, they say, not just to raise government revenue, but also to curb the injustice of our current system and to protect democracy from the ruinous effects of inequality. While they make a convincing case against concentrated power, they fail to show why a wealth tax, and only a wealth tax, would effectively combat the ills they intend to address. Their central contentions—that such a policy would diminish the power to influence government policy, stifle competition, and shape ideology—are simply taken for granted. They devote hardly any space to their most import assertion, that the income of today’s superrich is earned at the expense of everyone else—and thus that everyone else’s well being will be improved if a wealth tax were implemented. If we implement a wealth tax, the overall U.S. economy will be weaker, the country as a whole will be poorer, and Americans will have less access to innovative companies and high-paying jobs. In fact, by their own estimates, the radical wealth tax they endorse would bring in less and less revenue over time, since it would erode very large fortunes and prevent new ones from being created. For the same reason, it would also reduce revenues raised by the capital gains tax, the income tax, and the estate tax. A radical wealth tax could thus leave the less well off worse than they are today. For their argument to work, the decline in wealth over time must produce meaningful gains for the average American. But there are a number of problems with this presumption. First, a wealth tax would encourage existing wealth to be transferred overseas. The most straightforward way this can happen is for wealthy people to renounce their U.S. citizenship and move abroad. To discourage such defection, both the Warren and Sanders plans call for an exit tax on 40 percent of all wealth. That may seem like a hefty disincentive. But if the alternative is exposure to a wealth tax designed to erode fortunes to a very large extent over time, it may not be much of a disincentive after all. Moreover, there would be an enormous incentive for the wealthy to attempt to avoid the exit tax by lowering the assessed value of their assets for the single year in which they leave. The economists Larry Summers and Natasha Sarin estimate the avoidance rate for the estate tax, a similar one-time levy, to be around 60 percent. An exit tax, which could be planned for far more effectively than one’s death, should see avoidance rates at least as high. That means the exit tax would amount to an effective rate of only 24 percent. For many of the very wealthy, that option would likely be far preferable to having their wealth eroded to a much greater degree over time. So much for existing fortunes. But a wealth tax would also encourage entrepreneurs to leave the United States even before their fortunes are made. According to the Forbes 400, over half of the fifteen richest people in the United States made their fortunes within their lifetime. A wealth tax would incentivize them to have done so from Toronto or Vancouver rather than New York City or Silicon Valley. It is not clear how any of the issues that Zucman and Saez want to address would be improved by having by shifting the distribution of North American billionaires to Canada. It is more likely that, over time, the U.S. advantage in economic innovation would be eroded as a growing concentration of successful entrepreneurs abroad—in Canada, Singapore, or other potential wealth tax havens—lures venture capitalists and startups out of the United States. Second, reducing wealth does not necessarily reduce power. Jeff Bezos is the wealthiest person in the United States, but a great deal of his power comes from his position as CEO of Amazon, of which he owns roughly 12 percent. If a wealth tax jeopardizes executives’ ability to hold on to their positions at the top of the companies they run, there would be even stronger incentive for them to leave the country. When I challenged Saez and Zucman on this point last fall, they responded that effective CEOs would not have to worry because they could still maintain the support of their board; the wealth tax would only make it easier for ineffective executives to be removed. Yet, to the extent that effectiveness is measured in increasing Amazon’s profits, Bezos retains every incentive, if not more incentive, to use Amazon’s size to influence government policy and stifle competition. Third, a wealth tax will face enormous opposition from those who feel threatened by it. The super-wealthy are ideologically diverse. Some, including Bill Gates, are supporters of progressive causes, including some types of wealth tax. Others, such as the Koch brothers, are strong supporters of free market policy. By far, however, most donations by the super-wealthy are to non-political causes. By politicizing wealth itself, a wealth tax would encourage billionaires to enter the political process against it. Michael Bloomberg reportedly committed upwards of $2 billion toward a political campaign that was at least in part designed to prevent Bernie Sanders from getting the Democratic nomination. There may be other ways to decrease economy inequality, encourage competition, and reduce the impact of money on politics, but a wealth tax isn’t it. Far from pushing the wealthy out of politics, then, the threat of policies such as a wealth tax appears to be drawing them in. Passing a wealth tax would do little to discourage this in the short term. Each year both the existing super-rich and the newly super-rich would face the prospect of donating to efforts to repeal the wealth tax or simply seeing their wealth eroded away. Over time, pressure to repeal the wealth tax would decline only if wealth creation were moved largely outside the United States. All these factors suggest that a wealth tax would drive the already existing super-rich and those looking to become super rich outside of the United States. Once the center of wealth creation relocates, stable equilibrium might re-emerge. But control over large multinational corporations operating inside of the United States would remain with the same small set of founders and CEOs that run them today. In that case, what has the average American citizen gained? The overall U.S. economy will be weaker, and Americans will have less access to innovative companies and high-paying jobs. The country as a whole will be poorer, and the tax system would have less revenue.

There may be other ways to decrease economy inequality, encourage competition, and reduce the impact of money on politics, but a wealth tax isn’t it.

A Wealth Tax Would Not Raise Much Revenue but Would Create Distortion. The U.S. faces historic deficits, and the federal government’s debt-to-GDP ratio is predicted to exceed 100% next year. This most likely means that, eventually, taxes must increase to pay some of the debt, especially if interest rates increase. Wealth taxes, however, are not a good way to raise revenue. All taxes alter people’s behavior, and the distortions they create can be harmful. Capital does not go toward its more productive uses; and distorting the returns from risk often yields unintended consequences. Income- and consumption-tax rates have to be quite high in order to discourage work or spending because it is hard to avoid these taxes.[12] Wealth taxes, however, are considered to introduce more distortions than any others. Even at low rates, they discourage saving and investment because they lower the return on these activities.[13] A 2% wealth tax may sound small. Senator Warren points out that it is only 2 cents on every dollar of wealth.[14] But it will be levied each year, so it is more instructive to think of it as a tax on capital income. And when you put the tax in income terms, 2% can be enormous. For example, if your assets return 4%, a 2% wealth tax is equivalent to a 50% tax on capital income! Thus, it is not surprising that wealth taxes increase the incentive to move assets abroad, as European nations have experienced. Unlike income, wealth is relatively easy to move and its value is relatively easy to manipulate. We already see significant distortions that exist in the taxation of estates. Quirks in the tax code that determine how tax liabilities are valued on estates lead to delays in when people sell assets, changes in how they value assets, and even changes to when people die. One paper[15] estimates that death rates changed slightly around the time when there were changes in the tax code that would affect tax liability, though some of the effects may come from when deaths are reported. Another, more common, distortion, is the stepped-up basis. It means that tax liability is based on capital appreciation from when the assets were bequeathed to when they were sold. Normally, capital-gains taxes are based on the growth in value from when an asset was originally purchased. Estate-tax rules encourage some to hold assets until their death that they would otherwise have sold earlier. Holding these assets will reduce the intergenerational tax burden.[16] This distorts asset markets, and the estate tax is only a one-time tax levied after death. An annual tax would create more distortions that could even worsen inequality. A wealth tax creates an incentive to keep companies private and not sell shares on the stock market, because that makes wealth easier to underreport, which lowers the tax burden. There are numerous examples of private wealth being unreliable and difficult to value. Take the Forbes list of richest Americans,[17] which, according to one study, is completely out of step with estate-tax data.[18] One example was the great fanfare around the report that Kylie Jenner, a reality-show and makeup mogul, was a billionaire and appeared on the Forbes list. Later it was revealed that she was indeed very wealthy but not a billionaire.[19] Her case demonstrates how easy it is to misstate wealth when a company’s shares are not sold on the open market. A wealth tax creates an incentive for entrepreneurs not to take their companies public—which means that the American public cannot share in the growth of the most productive firms. This reduces wealth creation within the broader economy.

Of all the possible types of ways to collect revenue, wealth taxes are the least desirable. Wealth taxes are inefficient and ineffective because wealth is inherently more difficult to measure. Privately held companies, for example, are not traded in public markets, which means that there are no stock prices by which one can objectively gauge their value. Also, financial assets can be hidden or moved abroad with the click of a mouse or converted into other assets that are hard to value. A dozen European countries had a wealth tax in 1990, but most abandoned them because they were ineffective and expensive to administer. In part, the taxes failed to raise much revenue because wealthy individuals easily moved their assets across borders to avoid taxation. Today, only Switzerland, Norway, Belgium, and Spain still have wealth taxes, but the rates—0.3%–1%, 0.85%, 0.15%, and 0.2%–2.5%, respectively—are much lower than the 2%–6% proposed by advocates such as Senator Elizabeth Warren for the United States. With a small enough rate, there is much less incentive to evade the tax, but far less revenue is raised. Switzerland collects the most from its wealth tax; and it only brings in about 3% of its tax revenue.[5] Wealth taxes distort behavior in a way that is harmful to economic growth and national prosperity. By taking a fraction of people’s wealth each year, the tax reduces the return to investing and discourages saving. This can reduce growth because investing and capital accumulation are critical to innovation.

The U.S. economy is hurting—GDP is estimated to have fallen by nearly 10% in the second quarter. This decline isn’t surprising since large portions of states’ economies have been shut down for months due to the pandemic, but it has worsened the country’s and states’ already bleak fiscal situations. Understanding the damage is important, but what’s more important is a plan for strong economic growth that will help repair our damaged finances. Raising taxes is a tempting solution, especially taxes on high earners, but doing so could stifle the recovery we need. Right now, governments at all levels are focused on spending money to help people cope with the economic fallout from Covid-19. But we can’t spend trillions of dollars indefinitely. To get government budgets under control spending needs to be cut, taxes increased, or both. The primary purpose of taxes is to pay for public goods and services that the private sector struggles to provide, such as national defense, some infrastructure projects like highways, and a legal system to maintain law and order. In more recent decades governments have also contributed to a basic social safety net people can use during hard times, such as the current pandemic. Even though some taxes are necessary, we must be mindful of the effects taxes have on the economy. A new paper from economists Ufuk Akcigit and Stefanie Stantcheva discusses how taxes impede innovation. Both the quantity and quality of innovation—measured by patents and citations, respectively—decrease as personal income taxes rise. A 10% increase in personal income taxes reduces the quantity and quality of patents by about 6% and 8%, respectively. The authors also note that inventors often move in response to higher state and federal taxes. Among U.S. inventors living in a state they are not from, a 10% decrease in the net-of-tax rate (the percentage of a dollar kept after taxes and equal to one minus the tax rate) results in a 12% decline in the number of inventors. So, when taxes go up, some inventors move to states with lower taxes or do other things with their time. At the national level, superstar inventors—those in the top 1% of inventors based on quality—respond to top marginal tax rates, especially foreign superstar inventors living in America. A 10% decrease in the net-of-tax rate causes a 10% decrease in the number of foreign superstar inventors. Taxes also affect domestic superstar inventors, but the impact is smaller since domestic inventors have more non-financial reasons to remain in the country. A 10% decrease in the net-of-tax rate causes a 0.3% decline in the number of domestic inventors. In both cases, taxes reduce innovation by diminishing the financial incentive people have to create new products and services. Less innovation hurts the broader economy. Business dynamism has declined since the early 2000s, and even the long recovery after the Great Recession wasn’t enough to fully restore it. One measure of the economy’s overall dynamism is “churn”, measured as the sum of the rates of establishment births and deaths. The figure below shows the churn of U.S. businesses over time. It was highest in the early 2000s and then trended downward. Churn increased more recently but was still below the peak. Figure showing annual business churn from 1994 to 2015. Annual Business Churn 1994 - 2015COOKSEY ET AL. “ASSESSING THE STRENGTH OF ENTREPRENEURSHIP IN AMERICA WITH THE BLS BUSINESS EMPLOYMENT DYNAMICS” U.S. BUREAU OF LABOR STATISTICS Taxes are one factor that can deter new businesses and decrease dynamism. According to a recent study, corporate tax increases accounted for about 10% of the decline in America’s business dynamism from 1980 to 2010. The country’s fiscal situation is a mess and the coronavirus and accompanying shutdowns have only made it worse. The figure below from the Committee for a Responsible Federal Budget (CRFB) shows America’s debt is projected to be around 120% of GDP by 2030, up from around 95% prior to the pandemic. The Medicare and Social Security Trust Funds are also projected to be insolvent by 2024 and 2031, respectively. Figure showing U.S. debt from 2008 to 2030. Projected U.S. debt.COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET Both Republicans and Democrats claim to care about the nation’s debt, but neither party has any plan to get it under control. President Trump refuses to control spending while presidential candidate Joe Biden mistakenly thinks more revenue can solve the problem. Biden’s plan is to raise taxes by around $3.5 trillion dollars over the next decade by increasing the corporate tax rate, the top marginal tax rate for personal income, and other taxes. These tax increases are unlikely to shrink the debt, though, since Biden also wants to increase spending by as much as $6 trillion, including $1.3 trillion on infrastructure, $1.5 trillion on education, and $750 billion on health care. Worse, as just mentioned, higher taxes reduce the incentive to innovate and invest which decreases GDP and employment over time. According to a recent report from CRFB, estimates show Biden’s tax plan would reduce long-run GDP between 0.2% and 1.5% and likely shrink the labor force. These negative long-term effects are bad enough, but since higher taxes reduce innovation any near-term increases are likely to stifle new business formations just when we need them most. Government shutdowns and consumer fears caused by Covid-19 have forced thousands of businesses to close, many of them permanently. A strong recovery hinges on new entrepreneurs and innovators replacing the businesses that are no longer viable in a post-pandemic world, while in the process creating jobs for the millions of people who are currently unemployed. States that fail to account for how taxes reduce innovation will push inventors and entrepreneurs away, delaying their recoveries. Similarly, federal tax increases deter foreign inventors from creating their new products and businesses in America. Governments and voters that ignore these effects do so at their own peril

This century has known a stunning , bringing it down to levels not seen in well over a century. That's the conclusion that Branko Milanovic, one of the world's foremost inequality researchers, comes to in an important  for Foreign Affairs.

Why it matters: The U.S. has only about 4% of the world's population. Increasing equality is good for the planet as a whole, but it foreshadows an end to U.S. hegemony.

Today, wherever people live, they don’t have to look far to confront inequalities. Inequality in its various forms is an issue that will define our time. Confronting inequalities has moved to the forefront of many global policy debates as a consensus has emerged that all should enjoy equal access to opportunity. ‘Leave no one behind’ serves as the rallying cry of the 2030 Agenda for Sustainable Development.

Overall, since the 1990s total global inequality (inequality across all individuals in the world) declined for the first time since the 1820s. Reinforcing this trend, we have mostly seen income inequality between countries decline. Yet income inequality within countries has risen, this is the form of inequality people feel on a daily basis.

When it comes to investing, we have to remember that everything is relative. While the US faces a host of challenges right now, many of those same issues are global too. These include inflation, an aggressive central bank, a continued tight labor market, and geopolitical risks with other world powers. Therefore, what may make the US seem uninvestable to some may actually make the entire developed world uninvestable! That just isn't realistic, so we need to put things in perspective.

Case in point is economic growth. A lot of concern has been made over generally weak US economic growth and the potential for a recession. We have been hearing this for a long time now, and America keeps chugging along. Perhaps the reason is that US growth is actually stronger over time than most of its closest competitors.