The Boston Globe - 07.08.2019

A10 Editorial The Boston Globe WEDNESDAY, AUGUST 7, 2019

I

t has never been more popular to work fromhome.

It used to be nothing morethan a nice job perk —

like free coffee or being allowed to bring your dog to

the office. But the state government has now

identified telecommuting as a policy tool with

potential to ease our record-high levels of congestion.

As part of a broader $18 billion transportation investment

bill unveiledlast week, Governor Charlie Baker is proposinga

new tax credit to encourage companies to let employees work

from home. Fewer cars on the road during the workweek

equals less traffic for everybody. What’s not to like?

Unfortunately, the value is not quitethat straightforward.

Baker’s telework subsidy is worth pursuing — but only if it’s

part of a broader plan to tackle congestion that includes

stronger investments in bus and rail transit, and more

targeted traffic-reduction policies such as congestion pricing.

First, the details. Baker is proposing a $2,000 tax break,

which would go to the employer, per each worker who begins

telecommutingon or after Jan. 1, 2020. In other words,

companies that have employees working fromhome right

now wouldn’t be able to claimthe tax credit — these have to

be new telecommuters. The total subsidies would be capped

at $50 million a year.

Nationally, telecommuting is on the rise. According to a

Globe story last week, roughly half the US labor force works

from home at least once a month, and the number of non-

self-employed workers who telecommute at least half the

time increased159 percent between 2005 and 2017. In

Massachusetts, only 4.7 percent of the workforce

telecommutes full time, lower than in 19 other states.

Moreover, according to Baker’s remarks whenhe

introducedthe proposal,“Nearly 70 percentof

Massachusetts’ workers report driving to workalone in a

vehicle.” Lest we forget, Boston had the worst rush-hour

traffic last year, according to one report. On average, Boston

drivers lost 164 hours in peak traffic periods.

So what’s the harm of enacting a policy that has the

potential to encourage less driving? It has to do with who the

tax subsidy benefits most, and whether it is

focused and cost-effective.

Most beneficiaries of the program will

likely be white-collar workers, argued Chris

Dempsey,directoroftheadvocacygroup

Transportation for Massachusetts. Workers

in managerial positions are more likely to

have the ability and flexibility to work from

home, as opposed to restaurant or

construction workers. (Of course, the

argumentgoes, blue-collar workers will

benefitindirectlybyencounteringless

clogged roads.)

Dempsey also points out that the telecommuting subsidy,

unlike state spending on mass transit, won’t benefit from

scale — it’ll always cost $2,000 per telecommuter per year.

“Transit is different. The state’s contribution is flat, not per-

rider, so as ridershipgrows the state contribution per trip

actually goes down. That’s why state policies that increase

transit usage — like dedicated bus lanes and congestion

pricing — are such great public policies.”

It’s also a potentiallyscattershot approach: As written, the

bill would not necessarilyensure that the workers who start

telecommutingwere previously driving on heavily congested

roads or during peak hours.

Of course, the politics of transportation reformcannot be

ignored. Baker seems to be contradicting himself with the

telework proposal. Last year, he vetoed a widely supported

pilot program to test congestion pricing, or smarter tolling, on

the grounds that it needed to be studied

first. And yet, the benefits of a telework tax

credit on traffic have gone largely unproven.

Congestion pricing is far more targeted, and

only applies to drivers on the roads and at

the times where traffic is worst.

This is not to downplay telecommuting’s

potentialimpact on traffic. It’s a concept

that resonates with people because of its

simplicity. But that’s exactly why flexible

work arrangements should be deployedas

modest, narrow measures to see a dent in

congestion. (For instance, officialsin Tokyo

are implementing a “work fromhome” two-week program to

manage the massive crowdsthat will burden the city’s

subway system during the 2020 Olympics next summer.)

As one tool among many, a targeted state policy to

encourage teleworking makes sense. Alone,it’s inequitable

and won’t help address the needsof thousandsof the state’s

commuters.

Baker’s telework credit isn’t enough, but it’s a start

Opinion

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T

here was a time, in the aftermath of the

financial crisis, when central bankers

were“the only game in town.” In a book

with that title, published in January 2016,

economist MohamedEl-Erian warned

that, with theirexotic crisis-fighting

measures —zero interest rates,

quantitative easing, forward guidance — the central bankers

risked overreaching.

This was prescient. Three years on, the men and women

who make monetary policy are very far from the only game

in town. Now they’re the ones being gamed.

Last Wednesday, Federal Reserve Chair Jerome “Jay”

Powell explained at a press conference why he and his

colleagues had decided to cut interest rates by a quarter of 1

percent. Giventhat the economy is still growingat a

reasonable 2.1 percent and has the lowest unemployment

rate since December1969,the decision took a bit of

explaining. Powell’s best argument, aside from persistently

low inflation? “Trade policy uncertainty,” which he referred

to at least two dozen times, twice as often as the other

excuse (“weak global growth”).

Overthe past year, President Trump has repeatedly

criticized the Fed for wanting to hike rates and then for not

cutting rates enough. His response

to the Fed’s quarter-point cut was

swift. The very next day he tweeted

his intention to “start, on

September 1st, putting a small

additional Tariff of 10% on the

remaining 300 Billion Dollars of

goods and products coming from

China into our Country.”

New York and Washington,

D.C., are full of commentators who

wentto Harvard, Yale, and Princeton (which Powell

attended) and considerthemselves muchsmarter than

Donald Trump.They snigger when he calls himself a “stable

genius.” But this president is crazy like a fox. His behavior

may seem nuts or just plain dumb,but it is in fact calculated

to outsmart the Ivy League types.

The Fed says it’s cutting rates because of trade

uncertainty that Trump himselfhas almost single-handedly

caused. But it’s only doing a lousyquarter-percent. The

crazy-fox response is to threaten yet more tariffs on Chinese

goods on Sept. 1, two weeks before the next meeting of the

Federal OpenMarkets Committee, which sets the Fed’s

interest rate.

Now tell me who is the only game in town.

Officially, the readiness of central bankers to cut rates

preemptively to avert recession, or at least to scrap rate

hikes and further “quantitative tightening,” reflects a

fundamental shift in economic thinking. The post-2008-

assumption was that the goal was to fight the crisis and then

“normalize,” i.e., to get rates back up to pre-crisis levels. But

the counter-argument — that we face a problem of secular

stagnation, not just a cyclical hangover — appearsto have

won the day. No one now believes that interest rates can

return to where they were before 2008.

At the same time, there has beena widespread

abandonmentof the old principles of fiscal policy. Now even

Olivier Blanchard, formerly chief economist at the

International Monetary Fund, says that rising public debts

are less of a problem than used to be thought. This is not

something I ever expected to hear from a senior fellow of the

PetersonInstitute for International Affairs, but then Pete

Peterson— the lifelong fiscal conservative whose namethe

institute bears— died last year.

These shifts in monetary and fiscal theory are a huge

stroke of luck for populists in power. (I refuse to

countenance the disgraceful idea that they are in fact a

rationalization of the central bankers’ rapidly dwindling

political independence.) For whatever reason, the Federal

Open Markets Committee has becomethe Committee to

Reelect Trump. This isn’t because Trump has successfully

brow-beaten the Fed staff with his tweets, or so they insist.

It’s because their estimates of the “natural rate of interest”

are just really, really low.

And it’s a similar story in Britain, Europe, and Brazil.

Give the populists theirdue. They intuitively knew that

therewas something crazy (in the non-fox-like sense) about

raising interest rates and trying to balance budgets in the

post-crisis world, just as they understood that votershad

tired of ever freertrade and rising immigration rates. It was

the eggheads (myself among them, I admit) who wanted

sound money and austerity.

Could anything breakthis trend, whereby falling interest

rates and painless deficits help populists stay in power? One

answer I can think of is a majorwar, which has tended to be

the thing, historically, that drives inflation expectationsand

interest rates upward. But that, too, is something the

populists have pretty muchruledout. They saw what

became of another set of eggheads — the neoconservatives

— when they decided to revive war as an instrument of

policy after 9/11.

But another game-changer would be an election surprise.

Markets seem to love a right-wing government

unconstrained by monetary and fiscal rules. They may feel

differently if a left-wing governmentinherits this lack of

constraint. The difference between technocracy and

democracy is that there’s always more than one gamein

town.And not all crazy foxes are on the right.

Niall Ferguson is a senior fellow at the Hoover Institution at

Stanford University.

NIALLFERGUSON

Trump’s crazy tariffs have outfoxed the Fed

The presidenthas

turnedthetables

ononce-mighty

central bankers.

Fewercarsonthe

roadduringthe

workweekequals

lesstraffic for

everybody. What’s

notto like?

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