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In this paper, Jennifer Doleac describes what is known about crime trends in the US and outlines the best evidence to date on the effectiveness of various approaches to reducing crime through prevention, deterrence, and rehabilitation. 

Crime in the US rose during the 1980s and early 1990s before declining steadily until 2020. During the COVID-19 pandemic, homicides, shootings, and motor vehicle thefts spiked, but by late 2023, overall rates of homicides and shootings had returned to their pre-pandemic levels. Because less serious offenses such as carjackings are much more difficult to track with nationwide data systems, we currently have an incomplete picture of how those crimes have trended in recent years across the country. Certain types of crime remain high, however, and Doleac emphasizes that crime continues to disproportionately affect certain urban areas and communities.

Doleac considers the costs of crime on victims and communities through both direct and indirect channels. Direct victim costs encompass medical expenses, cash or property losses, lost earnings, and pain and suffering. In addition to directly affecting victims, crime indirectly affects broader communities through reduced property values, diminished business activity, reduced school attendance, and increased mental health issues like anxiety and depression arising from fear for personal safety and property. 

The costs of crime also come in the form of resources devoted to law enforcement and punishment. The majority of such efforts are conducted by state and local governments, which spent 7.5 percent of their overall budgets on the criminal justice system in 2021, amounting to $274 billion. These funds cover the employment of law enforcement personnel, the costs of the judicial system, and the costs of housing prisoners in correctional facilities. The federal government contributes an additional $58 billion to criminal justice expenses annually, or 1.5 percent of its budget. Combining the direct—tangible and intangible—costs to victims with the costs of law enforcement and punishment, researchers estimate that this aggregate cost of crime in the United States (excluding indirect costs) totals $4.7–5.8 trillion each year.

Given the high cost of crime to victims and affected communities, it is important to allocate crime-prevention efforts to interventions with evidence of effectiveness. Doleac proposes three effective channels to address crime through, and examines the effective strategies in each one. 

1. Preventing someone’s first interaction with the criminal justice system. 

Studies across several cities have found that offering summer jobs for teens, which provides positive career exposure and mentorship, reduces future violent-crime arrests and lowers mortality due to gun violence. Additionally, cognitive behavioral therapy pushes individuals to think more deliberately about the relative costs and benefits of their actions, and has been proven to cause meaningful reductions in violent arrests and recidivism. Over the long term, investments in improving the health of children—such as removing lead from the environment and reducing air pollution—are extremely cost-effective, causing large improvements in educational attainment and reductions in criminal justice involvement.

2. Deterring crime in the community. 

At the community level, Doleac proposes two main strategies for cost-effective crime deterrence. First, putting more police on the streets remains an effective, evidence-based way to reduce crime relatively quickly. Second, employing technology such as cameras, DNA databases, and blood-alcohol content monitors can enhance crime detection at a lower cost than increasing police personnel.

3. Rehabilitating people with past criminal justice involvement. 

To enhance rehabilitation, erring toward leniency for first-time offenders—giving them a second chance to avoid a first criminal record—dramatically reduces recidivism. Doleac also recommends the broader use of electronic monitoring systems as an alternative to prison sentences. Making mental health care affordable and easier to access is also a smart crime-reduction strategy. Finally, bans on public benefits for those with a criminal record should be repealed, as these bans not only increase recidivism rates but also increase future criminal activity for children of parents with criminal records.

Doleac concludes by emphasizing the importance of three approaches in particular as the most likely to have meaningful effects: investing in early life interventions, including reducing young children’s exposure to lead; making better use of police and technology to detect and deter crime; and increasing access to mental health care for high-risk populations. As crime continues to be a challenge for communities across the United States, it is not only important to invest in crime prevention strategies, but to ensure those strategies are effective and well implemented. 

Suggested Citation: Doleac, Jennifer., 2024. “Why Crime Matters, and What to do about it” In Strengthening America’s Economic Dynamism, edited by Melissa S. Kearney and Luke Pardue. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.13975447.

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This paper evaluates the current landscape of global trade and financial flows and proposes a set of reforms to support healthier forms of integration. Brad Setser finds that, despite the growing, bipartisan skepticism about the value of liberal trade, global economic integration remains surprisingly resilient. In fact, Setser argues, the immediate risk facing the global economy is more accurately described as unhealthy integration than fragmentation. Setser identifies two unhealthy forms of globalization that have proven to be resilient – those driven by corporate tax avoidance strategies and persistent trade and payment imbalances with China – and offers three policy reforms to address these risks.

Tax avoidance tactics, such as the “Double Irish” strategy, have allowed major companies to route profits through offshore subsidiaries to minimize tax liabilities. The OECD’s 2015 base erosion and profit shifting (BEPS) reforms, aimed to curtail such practices by eliminating stateless income and zero-tax jurisdictions. The 2017 Tax Cuts and Jobs Act (TCJA) subsequently further addressed the issue of international tax avoidance by reducing the corporate tax rate, ending deferral, and introducing two new special tax rates for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Tax Income (GILTI).

Despite these reforms, tax avoidance and offshoring are still considerable issues in the US tax system. The pharmaceutical industry serves as a prime example: US imports of pharmaceuticals have more than doubled since the TCJA, with imports primarily originating from tax havens such as Ireland, Singapore, and Switzerland. In 2023, seven of America’s largest pharmaceutical companies reported losing a combined $14 billion on their US operations while earning $60 billion abroad. The absence of reported profits in the US translates directly into a loss of federal tax revenues. Similar issues are present in other crucial sectors, leading to reduced domestic tax revenues and unhealthy global economic integration. 

China’s domestic economic issues pose a further challenge to global economic integration. Recent data shows China’s economy is re-globalizing and exports have recently grown much faster than China’s own economy. However, this form of globalization is the result of high household savings rates and faltering domestic demand in China, which has led the country to rely again on exports to support its economic growth. 

This export-led growth model is driven by extensive government support to favored sectors, mostly through the provision of cheap equity and cheap debt financing. Furthermore, the high level of savings creates internal imbalances in the United States, the eurozone, and in China, fueling bubbles and bad debts. The Chinese property sector has long absorbed the excess savings, but property construction is expected to normalize, creating greater pressure on exports to drive growth in China.

Setser offers three concrete steps which would start to define a path toward a healthier form of globalization.

1. Reform the US corporate tax code. Limiting offshoring, increasing the GILTI rate from 10.5 percent to 15 percent, limiting US firm’s ability to deduct R&D expenses of intellectual property in offshore subsidiaries, and making the sale of a firm’s intellectual property from one international subsidiary to another a taxable event would reduce profit shifting while raising US tax revenue.

2. Create subsidy sharing agreements among allies in key sectors. In industries such as electric vehicles and steel, subsidies sharing agreements and increased policy coordination between the US and EU would expand the market size for American and European firms and lower costs. 

3. Address China’s internal imbalances. US policymakers and international institutions such as the IMF should pressure China to change its export-led growth model and address its internal economic imbalances.

Suggested Citation: Setser, Brad. 2024. “The Surprising Resilience of Globalization: An Examination of Claims of Economic Fragmentation” In Strengthening America’s Economic Dynamism, edited by Melissa S. Kearney and Luke Pardue. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.13973914.

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Global tensions and domestic discontent are driving a new era of economic policymaking. Leaders in both parties are turning away from free-market principles and endorsing an increase in protectionist trade policies and more active government-directed industrial policy. Further, these disruptions come when the country’s economic and political landscapes face systemic difficulties including limited state capacity and mounting federal debt. At the same time, rapid advances in generative AI have the potential to dramatically change the nature of work and the workforce as well as other fundamental aspects of society. This 2024 Aspen Economic Strategy Group (AESG) policy volume considers these topics and others, with a focus on strengthening America’s economic dynamism.

With the uncertain outcome of the November 2024 US presidential election ahead of us, there are a lot of unknowns about the specifics of how US economic policymaking will unfold over the coming years. However, given recent trends and current rhetoric, one thing that seems likely is that, whichever candidate wins the US presidency, the US will continue moving toward protectionist and nationalist economic policies. This movement has the potential to hinder economic growth and dynamism if not pursued wisely and cautiously.

DAVID DEMING, CHRISTOPHER ONG, LAWRENCE H. SUMMERS

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This paper explores past episodes of technological disruption in the US labor market, with the goal of learning lessons about the likely future impact of artificial intelligence (AI). The authors measure changes in the structure of the US labor market going back over a century in two ways. First, they examine the relative frequencies of occupations from 1880-2020. Over that period, the structure of the US labor market underwent two large shifts: 

1. From 1880 to 1960, workers moved out of agriculture jobs. In 1880, 41 percent of all workers in the US economy were employed as farmers or farm laborers. This share fell consistently by 4 percentage points per decade, and by 1960 only 6 percent of US employment was in agriculture. 
2. From 1960 to 1980, jobs moved from the factory to the office. The share of workers employed in blue-collar jobs like manual labor, construction, production and manufacturing, transportation, and maintenance and repair remained relatively constant at 40 percent from 1880 to 1960, then fell ten percentage points by 1980. It has experienced a slower decline since, reaching 20 percent by 2010.

They also find that the pace of change, as measured by occupational churn, has slowed over time: the years spanning 1990 to 2017 were less disruptive than any prior period we measure, going back to 1880. This comparative decline is not because the job market is stable today but rather because past changes were so profound. 

These changes were caused by general-purpose technologies (GPTs), like steam power and electricity, which dramatically disrupted the twentieth-century labor market over the course of several decades. The authors argue that AI could be a GPT on the scale of prior disruptive innovations and suggest that there are two patterns in the data that might indicate that AI is leading to labor market disruptions along the lines of past GPTs. First, increased investment in new technologies and a J-curve pattern of productivity growth in AI-exposed sectors. Second, large but steady declines in employment share for AI-exposed jobs, especially jobs in sectors where consumers don’t increase consumption with rising income. They present early evidence of such signs in four stylized facts:

1. The labor market is no longer polarizing— employment in low- and middle-paid occupations has declined, while highly paid employment has grown. 
2. Employment growth has stalled in low-paid service jobs. 
3. The share of employment in STEM jobs has increased by more than 50 percent since 2010, fueled by growth in software and computer-related occupations. 
4. Retail sales employment has declined by 25 percent in the last decade, likely because of technological improvements in online retail. 

The authors conclude that, with respect to white collar-jobs, AI will contribute to the ongoing decline in back-office administrative jobs and rise in management and business operations occupations. As AI technology improves, innovations like pricing algorithms and automated scheduling may lead to declining employment in sales and administrative-support occupations. On the other hand, while AI helps with certain tasks of professional and managerial workers, the demand for good ideas and cogent analysis of complex counterfactual thought experiments may be nearly unlimited. In this way, at least in the near term, AI is more likely to ratchet up firms’ expectations of knowledge workers than it is to replace them.

Suggested Citation: Deming, David, Christopher Ong, and Lawrence H. Summers. 2024. “Technological Disruption in the US Labor Market” In Strengthening America’s Economic Dynamism, edited by Melissa S. Kearney and Luke Pardue. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.13973975.

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This paper evaluates the shift towards increasingly protectionist and nationalist policies carried out by the past two presidential administrations. In this paper, Michael Strain argues that the turn to such economic policies has not only been ineffective by its own standards, failing to raise employment and reduce America’s reliance on China, but also is more fundamentally misguided. Strain makes three central arguments about the efficacy of these increasingly insular economic policies. 

1. Protectionism Has Not Met Its Own Goals

The 2018-2019 tariffs likely reduced manufacturing employment. Increased prices of intermediary goods and retaliatory tariffs outweighed the protection from import competition, leading to net reductions in manufacturing employment. Research shows that industries more exposed to tariff increases experienced greater declines in employment. Beyond the manufacturing sector, counties with higher exposure to tariffs experienced higher unemployment rates.

Post-2017 protectionism failed to reduce the US trade deficit, despite it being a primary goal of the Trump administration. The current account deficit rose from $85.5 billion when President Trump took office to $180 billion at the end of his term. Furthermore, many Chinese manufacturers rerouted goods through other nations, such as Mexico and Vietnam, to evade US tariffs. Thus, China’s “value-added” to US domestic final demand rose over the period, making the policy unsuccessful in reducing US reliance on Chinese imports. 

2. Protectionism is Wrongheaded

Strain argues that the goal of significantly increasing manufacturing employment is inherently misguided, as the decline in US manufacturing jobs largely reflects a productivity increase. Although these productivity gains have been accompanied by disruptions, they also have created new opportunities. Policymakers should focus on doing more to help affected workers access these new opportunities rather than trying to turn back the clock. 

Strain notes that trade creates both winners and losers by affecting the composition of jobs in the labor market, but should not affect the aggregate level of employment. Trade between nations allows a given country to specialize in the production of those goods and services for which that nation has a comparative advantage, and to trade to receive and consume other goods and services. However, trade is not about jobs, per se. Rather, trade is about productivity, wages, and consumption.

3. Industrial Policy is (almost) Always Bad Policy

Strain makes a case against the recent turn to policies that favor specific domestic industries, as most of these policy efforts have multiple, competing objectives and are unlikely to yield public benefits that exceed the public costs. Instead, to advance American innovation, the government should invest public funds in basic research and infrastructure. The goal of this investment should not be to create manufacturing jobs and should not target specific products or sectors, but should instead be focused on increasing innovation and dynamism more broadly, which will in turn increase productivity and wage growth. 

Suggested Citation: Strain, Michael R., 2024. “Protectionism is Failing and Wrongheaded: An Evaluation of the Post-2017 Shift toward Trade Wars and Industrial Policy” In Strengthening America’s Economic Dynamism, edited by Melissa S. Kearney and Luke Pardue. Washington, DC: Aspen Institute. https://doi.org/10.5281/zenodo.13974079.