We present evidence that the high estimated marginal propensities to consume (MPCs) from the leading household studies result in implausible macroeconomic counterfactuals. Using the 2008 tax rebate as a case study, we calibrate a standard macro model with the estimated micro MPCs to construct counterfactual macroeconomic consumption paths in the absence of a rebate. The counterfactual paths imply that consumption expenditures would have plummeted in spring and summer 2008 and mostly recovered in September 2008. We use narratives and forecasts to argue that these paths are implausible. We show that standard two-way fixed effect estimates of the micro MPCs are upward biased. When we correct for the biases, we estimate smaller micro MPCs using the CEX data than the previous literature. We show that realistic modifications of the model result in general equilibrium forces that dampen rather than amplify micro MPCs. The combination of smaller micro MPCs and dampening general equilibrium forces implies general equilibrium consumption multipliers that are below 0.2.

Is government guiding the invisible hand at the top of the labor market? We use new administrative data to measure physicians’ earnings and estimate the influence of health care policies on these earnings, physicians’ labor supply, and the allocation of talent. Combining the administrative registry of U.S. physicians with tax data, Medicare billing records, and survey responses, we find that physicians’ annual earnings average $350,000 and make up 8.6% of national health care spending. Business income makes up one-quarter of earnings and is systematically underreported in survey data. Earnings increase steeply early in the career, and there are major differences across specialties, regions, and firm sizes. The geographic pattern of earnings is unusual compared with other workers. We argue that these patterns reflect policy choices to subsidize demand for physician care, amplified by restrictions on physician entry, especially in certain specialties. Health policy has a major impact on the margin: 25% of physician fee revenue driven by Medicare reimbursements accrues to physicians personally. Physicians earn 8% of public money spent on insurance expansion. These policies in turn affect the type and quantity of medical care physicians supply, retirement timing, and the allocation of talent across specialties.