Okay, this is a dense critique of Stephen Miran‘s arguments about teh neutral interest rate and the factors influencing it.here’s a breakdown of the author’s main points, organized for clarity, along with the core arguments being challenged:
Overall Argument:
The author believes Miran’s conclusions about the decline in the neutral interest rate, while numerically precise, are reached through a somewhat disconnected and potentially flawed line of reasoning. They question the consistency of Miran’s arguments and the likelihood of some of his predicted effects actually materializing. the author repeatedly emphasizes the basic principles of supply and demand as a grounding point for their critique.
Key Points of Critique, Organized by Topic:
1.Population & Demand/Supply:
* Miran’s Claim (implied): Declining population leads to a lower neutral interest rate.
* Author’s Critique: A simple population decrease should equally affect both supply and demand, resulting in a neutral effect on inflation and interest rates. The author believes Miran needs to delve into the different supply and demand dynamics of migrants versus native-born citizens to justify his claim. They also question if a stagnant economy (potentially linked to low population growth) wouldn’t naturally lead to low demand for savings, causing a low neutral rate, rather than the other way around.
2. Customs Duties (Tariffs):
* Miran’s Claim: Increased tariff revenue reduces government borrowing, decreasing demand for funds and lowering the neutral interest rate.
* Author’s Critique: The author agrees with the basic supply/demand logic here - less government borrowing with a constant supply of lending capital should lower interest rates. Though, they find it odd that this is presented alongside…
3. Tax Cuts:
* Miran’s Claim: tax cuts stimulate economic growth, increasing national savings and reducing the neutral interest rate.
* Author’s Critique: This is a major point of contention. The author points out the inconsistency of arguing that increased revenue (tariffs) lowers rates while decreased revenue (tax cuts) also lowers rates. They highlight that tax cuts, while potentially boosting the economy, don’t directly increase the supply of savings in the same way tariff revenue does (because Americans pay taxes directly, unlike tariffs).
4. Who Pays Tariffs?
* Miran’s Claim (implied): Tariffs have a predictable impact on prices.
* Author’s Critique: The author questions who ultimately bears the cost of tariffs. While theory suggests exporting countries will lower prices, they doubt this will happen in practice and believe American importers and consumers will likely absorb the cost. They acknowledge Miran’s use of future formulas but remain skeptical.
5. Foreign Capital Inflow:
* Miran’s Claim: Trump’s trade negotiations will lead to a large inflow of foreign capital into the US.
* author’s Critique: The author questions the likelihood of this inflow. They point to existing loan guarantees from East Asian countries with low tariff ceilings and ask if this capital will actually materialize and, if so, when. They reiterate the supply/demand principle – increased supply should lower rates, but they doubt the supply will actually increase.
6. Overall Consistency & Accuracy:
* Author’s Critique: The author repeatedly expresses concern that Miran is reaching very precise numerical estimates based on potentially shaky or disconnected arguments. They feel the analysis lacks a cohesive framework and relies on assumptions that may not hold true.
In essence, the author is challenging Miran’s model by:
* Applying basic economic principles (supply and demand) as a benchmark.
* Highlighting inconsistencies in Miran’s reasoning.
* Questioning the realism of Miran’s predictions.
* Suggesting that the precision of Miran’s estimates doesn’t necessarily equate to accuracy.
Let me know if you’d like me to elaborate on any specific point or aspect of this critique.