Jeremy Horpedahl

COVID Deaths, Excess Deaths, and the Non-Elderly (Revisited)

May 18, 2022Jeremy Horpedahl8 Comments

While we know that COVID primarily affects the elderly, the mortality and other effects on the non-elderly aren’t trivial. I have explored this in several past posts, such as this November 2021 post on Americans in their 30s and 40s. But now we have more complete (though not fully complete) mortality data for 2021, so it’s worth revisiting the question of COVID and the non-elderly again.

For this post, I will primarily focus on the 12-month period from November 2020 through October 2021. While data is available past October 2021 on mortality for most causes, data classified by “intent” (suicides, homicides, traffic accidents, and importantly drug overdoses) is only fully current in the CDC WONDER data through October 2021. This timeframe also conveniently encompasses both the Winter 2020/21 wave and the Delta wave of COVID (though not yet the Omicron wave, which was quite deadly).

First, let’s look at excess mortality using standard age groups. For this calculation, I use the period November 2018 through October 2019 as the baseline. The chart shows the increase in all-cause deaths in percentage terms. It is also adjusted for population growth, though for most age groups this was +/- 1% (the 65+ group was 3% larger than 2 years prior).

A few things jump out here. First notice the massive increase in mortality for the 35-44 age group (much more on this later). Almost 50% more deaths! To put that in raw numbers, deaths increased from about 82,000 to 122,000 for the 35-44 age group, and population growth was only about 1%. And while that is the largest increase, there were huge increases for every age group that includes adults.

Also notice that the 65+ age group certainly saw an increase, but it is the smallest increase among adults! Of course, in raw numbers the 65+ age group had the most excess deaths: about 450,000 of the 680,000 excess deaths during this time period. But since the elderly die at such high rates in every year, the increase was as large in percentage terms.

One related fact that doesn’t show up in the chart: while there were about 680,000 excess deaths during this time frame in the US in total, there were only about 480,000 deaths where COVID-19 was listed as the underlying cause of death. That means we have about 200,000 additional deaths in this 12-month time period to account for, or a 24% increase (population growth overall was only 0.4%).

That’s a lot of other, non-COVID deaths! What were those deaths? Let’s dig into the data.

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Inflation Has Wiped Out Average Wage Gains During the Pandemic (maybe)

May 11, 2022May 11, 2022Jeremy Horpedahl6 Comments

The latest CPI inflation report didn’t have a huge surprise in the headline number, with 8.3% being very similar to last month. But with the two most recent months of data, we can now see something very unfortunate in the data: cumulative inflation during the pandemic as measured by the CPI-U (11.6%) has now almost matched average wage growth (12.0%), as measured by the average wage for all private workers. I start in January 2020 for the pre-pandemic baseline.

What this means is that inflation-adjusted wages in the US are no greater than they were before the pandemic. They are almost identical to what they were in February 2020 (just 2 cents greater). But as regular readers will know, the CPI-U isn’t the only measure of inflation, and there’s good reason to believe it’s not the best. One alternative is the Personal Consumption Expenditures price index. Cumulative inflation for the PCE is slightly lower during the pandemic (9.0%, though we don’t have April 2022 data yet).

This chart shows average wage growth adjusted with both of these different measures of inflation, expressed as a percent of January 2020 wages. The CPI-U adjusted wages (blue line) have been falling steadily since the beginning of 2021, though the declines have accelerated in 2022. The PCE-adjusted wages (orange line) have also not performed superbly, but at least they are still 2-3% above January 2020. Still, the picture is not rosy: they’ve basically been flat since mid-2020 and have started to drop in early 2022.

Of course, average (mean) numbers can be tricky and sometimes misleading. What if instead we used median wages? Unfortunately, there is no hourly median wage data that is updated every month. The closest data that I usually look at is median weekly earnings, which is available on a quarterly basis. Here’s what that data looks like, expressed as a percent of the first quarter of 2020. I limit the data to full-time workers, since that should give us a roughly comparable number to the hourly data (hours of work may have changed, but using full-time workers should make it roughly constant).

For median weekly earnings, we can see that the picture is even less rosy. Median earnings have been declining consistently since the second quarter of 2020, regardless of which inflation adjustment we use. The decline in the PCE-adjusted measure isn’t quite as steep since early 2021, but both figures are below the pre-pandemic level, and have been for the past two quarters.

One final note: if we look at weekly earnings across the distribution, and not just at the median, we see something very interesting. Earnings at the bottom of the distribution seem to be performing better than those at the top. In fact, the 10th percentile weekly wage is the only category that is still above pre-pandemic levels. I’m only adjusting using the CPI-U here, but the patterns for the PCE-adjusted earnings would be roughly similar.

We should be cautious about interpreting this data too: if workers dropping out of the labor force are primarily at the bottom of the distribution, it will artificially push up the 10th percentile earnings level. It would be good to know how much of that is going on here. Still, I think this is an important result in the current data.

What if You Didn’t Have to File a Tax Return?

May 4, 2022Jeremy Horpedahl4 Comments

Now that we’ve all made it through the 2021 tax filing season, it’s worth thinking about a recurring question in tax policy: is it possible that most of us wouldn’t need to go through this annual ritual? Couldn’t the government just tell us how much we owe (or are due as a refund), or better yet, just deduct the correct amount from our paycheck so we’d have paid the right amount?

We need to imagine such a system: it exists in many developed nations around the world! And it’s true that, at least for many taxpayers, the IRS already has all the information on you it needs to calculate your taxes.

But how many US taxpayers would this be beneficial for? A new working paper which tries to quantify this question. In “Automatic Tax Filing: Simulating a Pre-Populated Form 1040,” the authors use a large sample of tax returns to estimate how many taxpayers a pre-filled return would work for. The results are almost split down the middle: it would work well for maybe half of US taxpayers (41-48% of taxpayers, depending on how we are defining successful). For the other half, it wouldn’t give you an accurate estimate of how much tax you owed.

And the errors can be large. For example, the authors report that “two-thirds of the cases where the lower bound approach is inaccurate, the pre-populated liability is higher than the reported liability, with a median gap of $4,200.” Note: looking at the tables, I think they mean to say “mean,” not “median” here, with the median being $1,400. Still, that’s a lot of errors in a direction that would hurt taxpayers if they didn’t fill it out on their own or pay someone to do it. And it’s not just one thing that’s causing pre-filled returns to be wrong. You might think itemized deductions are a big issue, and they are, but only for about 11% of returns (and in only 4% of returns is this the only issue). They find that 9% of returns didn’t even have the reported wages matching what the IRS showed!

Does this mean that pre-filled returns are doomed in the US? Perhaps not! They seem to work much better for younger, single filers, and as well as filers with very low income, as Figure 1 from the paper shows. Even so, the 60-80% success rate (depending on criteria) for very low income taxpayers isn’t especially encouraging. But one upshot of a pre-filled return is that there are possibly millions of taxpayers (maybe 8 or 12 million?) that don’t file a return because they aren’t legally required to (too low income), but they would benefit if they did because of refundable credits like the EITC and Child Tax Credit.

Maybe there is a compromise position. The IRS could send you a “suggested tax return,” but allow you to modify it. I suspect that, in most cases, those who are currently paying for a person or software to do their taxes would still do it. You can’t know if you are in the one-half of taxpayers where this information is accurate! The IRS could provide a list of “common reasons why you may be in the half of pre-filled tax returns that are wrong,” but we’re still shifting the burden back to the taxpayer.

I would like to suggest, instead, that there are a few changes we could make to our tax system (“simplifications,” if you will) that might make pre-filled returns much more viable.

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Are the COVID Vaccines Effective at Preventing Death?

April 27, 2022Jeremy Horpedahl3 Comments

A recent analysis by the Kaiser Family Foundation of CDC data suggests that about 234,000 COVID deaths in the US could have been prevented if everyone was vaccinated. That’s about 25% of all COVID deaths throughout the pandemic, and about 60% of COVID deaths since June 2021 (roughly the time when most older adults in most states had had a chance to be vaccinated).

The first way to think of that death rate is tragic, given that so many lives could have been saved. Rather than being the high-income nation with the highest COVID death rate, the US could have been more in line with countries like Italy, the UK, and France. The US actually had a lower COVID death rate than Italy and the UK when the vaccine roll-out began, and today we could be at about France’s level with better vaccination rates.

But there’s a flipside to the KFF numbers. If 60% of COVID deaths since June 2021 were preventable, that means 40% weren’t preventable. Furthermore, the same data show that about 40% of COVID deaths in January and February 2022 were fully vaccinated or had boosters. That sounds like the vaccines might not work very well! So what does this all mean? Let’s dig into the data from the CDC a little bit.

The first, and most important thing, to recognize is that most American adults are vaccinated (about 78%), so unless vaccines are 100% effective (and they aren’t, despite some public officials overenthusiastic pronouncements early in the vaccine rollout), there are still going to be a lot of COVID deaths among the vaccinated. If 100% of the population was vaccinated, 100% of the deaths would be among the vaccinated. The key question is whether vaccines lower the chance of death.

And they do. Let’s see why.

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How to Get People Vaccinated for 93 Cents

April 20, 2022Jeremy HorpedahlLeave a comment

We’ve talked a lot about vaccines on this blog, including both the benefits of vaccines and how to get people vaccinated. For example, last month I posted about Robert Barro’s estimate on the number of additional vaccines needed to save 1 life. Barro put it at about 250 vaccines. Using some reasonable assumptions, I further suggested that each person vaccinated has a social value of about $20,000. That’s a lot!

But how do we convince people to get vaccinated? Lotteries? Pay them? In addition to just paying them (the economist’s preferred method), another good old capitalist method is advertising (the marketer’s preferred method). And a new working paper tries just that, running pro-vaccine ads on YouTube with a very specific spokesman: Donald Trump.

Running ads on YouTube is pretty cheap. For $100,000, the researchers were able to reach 6 million unique users. And because they randomized who saw the ads across counties, they are able to make a strong claim that any increase in vaccinations was caused by the ads. They argue that this ad campaign led to about 104,000 more people getting vaccinated, or less than $1 per person (the actual budget was $96,000, which is how they get 93 cents per vaccine — other specifications suggest 99 cents or $1.01, but all of their estimates are around a buck).

Considering, again, my rough estimate that each additional vaccinated person is worth $20,000 to society (in terms of lives saved), this is a massive return on investment. Of course, we know that everything runs into diminishing returns at some point (they also targeted areas that lagged in vaccine uptake). Would spending $1,000,000 on YouTube ads featuring Trump lead to 1 million additional people getting vaccinated? Probably not quite. But it might lead to a half million. And a half million more vaccinated people could potentially save 2,000 lives (using Barro’s estimate).

I dare you to find a cheaper way to save 2,000 lives.

Inflation During the Pandemic in the OECD

April 13, 2022Jeremy Horpedahl2 Comments

Inflation is definitely here. The latest CPI release puts the annual inflation rate in the US at 8.5% over the past 12 months, the highest 12-month period since May 1981. That’s bad, especially because wages for many workers aren’t keeping up with the price increases (and that’s true in other countries too).

But what about other countries? Many countries are experiencing record inflation too. The same day the US announced the latest CPI data, Germany announced that they also had the highest annual inflation since 1981.

Using data from the OECD, we can make some comparisons across countries during the pandemic. I’ll use data through February 2022, which excludes the most recent (very high!) months for places like the US and Germany, but most countries haven’t released March 2022 data quite yet.

Let’s compare inflation rates and GDP growth (in real terms, also from the OECD), using the end of 2019 as a baseline. We’ll compare the US, the other G-7 countries, and several broad groups of countries (OECD, OECD European countries, and the Euro area). The chart below uses “core inflation,” which excludes food and energy (below I will use total inflation — the basic picture doesn’t change much).

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Deficits Are Here to Stay

April 6, 2022Jeremy Horpedahl1 Comment

Last week President Biden released his Fiscal Year 2023 budget proposal. The annual release of the budget proposal is always exciting for economists that study public finance. The president’s proposal is the first step in the federal budgeting process, which in some cases leads to the full passage of a federal budget by the start of the fiscal year in October (though perhaps surprisingly, the process rarely works as intended).

This year’s budget is especially interesting to look at because it gives us our first look at what post-pandemic federal budgeting might look like. And while the budget has a lot of detail on the administration’s priorities, I like to go right to the bottom line: does the budget balance? What are total spending and revenue levels?

The bottom line in the Biden budget this year is that permanently large deficits are here to stay. Keep in mind that a budget proposal is just a proposal, but it’s reasonable to interpret it as what the president wants to see happen with the budget over the next 10 years (even if Congress might want something different). Over the next 10 years, Biden has proposed that budget deficits remain consistently right around 4.5% of GDP, with no plan to balance the budget in the near future.

How does this compare to past budget proposals? For comparison, I looked at the final budget proposals of Biden plus his two predecessors. I start Obama’s in 2021 to match Trump’s first year, and all three overlap for 2023-2026. I put these as a percent of GDP so we don’t have to worry about inflation adjustments (though we might worry about optimistic GDP forecasts, see below).

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$5,000 Worth of Vaccines Saves One Life

March 30, 2022Jeremy Horpedahl1 Comment

I’ve written about the social benefits (in terms of the value of lives saved) of COVID mitigation measures, such as wearing face masks, before. But at this juncture in the pandemic (and really for the past 12 months), the key mitigation measure has been vaccines. How much does it cost to save one life through increased vaccination?

Robert Barro has a new rough estimate: about $5,000. In other words, he finds that it takes about 250 additionally vaccinated people in a state to save one life, and the vaccines cost about $20 to produce (marginal cost). So, about $5,000.

Barro gets this number (specifically, that 250 new vaccinated people saves one life) by using cross-state regressions on COVID vaccination rates and COVID death rates. Of course, there are plenty of potential issues with cross-state regressions. It’s not a randomized control trial! But Barro does a reasonable job of trying to control for most of these problems.

Another way to restate these numbers: if we assume that the VSL of an elderly life is somewhere around $5 million, then the social benefit from each person getting vaccinated is around $20,000. In other words from a public policy perspective, it would have made sense to pay each person up to $20,000 to get vaccinated!

Or thought of one more way: each $20 vaccine is worth about $20,000 to society. That’s an astonishing rate of return. And we’re not even including the value of opening up the economy earlier (from both a political and behavioral perspective) than an alternative world without the vaccines.

The Transition to a Market Economy: Did Former Soviet Republics Fail?

March 16, 2022April 27, 2024Jeremy Horpedahl1 Comment

This semester I am participating in a reading group with undergraduate students that focuses on the history and prospects for capitalism and socialism. Lately we have been reading Joseph Stiglitz, who has long argued that China’s transition to a market economy has gone much better than the former Soviet Union. Gradual transition is superior to “shock therapy,” according to Stiglitz.

There’s an extent to which this is true. If we just look at economic growth rates since, say, 1995, China has clearly outpaced Russia.

It’s hard to know exactly what year to start, since GDP figures for former planned economies immediately after transition aren’t reliable, but the start date is mostly irrelevant for everything I’ll say here (please play around with the start year in the charts to see if I’m cherry-picking years). 1995 seems a reasonable enough year to start for reliable post-transition starting point.

As we see above, while Russia has had a rough doubling of GDP per capita since 1995 (respectable, and yes, it’s all adjusted for inflation!), China has soared almost 600%. Wow! But this is something of a cheat. Despite all that growth, average income in China is still lower than Russia: only about 60% of Russia in 2020. China started from a much lower level, meaning that faster growth, while not guaranteed, is at least easier to achieve. In fact, if we go back to 1978, when China’s first reforms began, GDP per capita in the Former USSR was about 6 times as high as China (that’s according to the latest Maddison Project estimates, which will always be speculative for non-market economies, but are the best we have).

Furthermore, Russia hasn’t really transitioned to a democracy either. China clearly hasn’t, but no one doubts that. But despite having the outward symbols of democracy (elections, a legislature, etc.), Russia still scores low on most indexes of democracy and civil liberties. For example, Freedom House scores them at 19/100, a little better than China (9/100), but nothing like Western Europe.

So, did the quick transition to market economies fail? Not so fast. While it did fail in Russia, in most of Eastern Europe and the eastern part of the former USSR seems to have been a major success. Take a look at this chart, which shows the former Soviet Republics in and near Europe (I exclude Central Asian FSRs).