- On Capitol Hill
- On Wall Street
- In the Press
- Policy Reform Work
Our projects are designed to empower policy makers to create positive change. With a focus on collaboration and outreach, we provide original, standards-based research on key policy issues.
SCEPA joined with the Economic Policy Institute on Capitol Hill to brief congressional staff and policy experts on tax expenditures, or incentives given through the tax code without scrutiny by Congress.
SCEPA economists are working on the prospects for a more progressive economic order to emerge from the shock of the recession. They have published papers and documents that place current events in a longer-term context as well as policy proposals to deal with short-term concerns. They are also documenting the emerging discussion of how the discipline of economics is reacting to the Great Recession and the questioning of conventional economic analysis.
Lance Taylor, a SCEPA Faculty Fellow, presents an overview of his new book, Maynard’s Revenge, in a Google Tech Talk.
The book, published this November by Harvard University Press, is a timely analysis of mainstream macroeconomics, posing the need for a more useful and realistic economic analysis that can provide a better understanding of the ongoing global financial and economic crisis.
The government spends $143 billion through tax breaks in an effort to expand pension coverage and security. Yet, over half of the American workforce does not have a pension. Retirement insecurity hurts business plans, workers’ lives and retiree well-being. Reform is needed.
SCEPA’s Guaranteeing Retirement Income Project, sponsored by the Rockefeller Foundation and in collaboration with Demos and the Economic Policy Institute, has a plan to guarantee safe and secure retirement income for all Americans.
On November 21, 2015, Institutional Investor published Mark Henricks’ review of SCEPA Director Teresa Ghilarducci’s new book, “How to Retire with Enough Money and How to Know What Enough Is” (available December 15th). He describes the book as a basic guide to retirement security for low- and middle-income earners, containing the standard prescriptions (save early, save often, and delay taking Social Security until you’re 70) while offering much more.
Specifically, Henrick calls Ghilarducci’s guaranteed retirement account (GRA) proposal her “primary intellectual contribution to retirement planning.” GRAs are nationwide mandatory savings plans to which workers and their employers would split a contribution of at least 5% of their income. Funds would be pooled and invested in low-cost index funds, managed by the federal government.
GRAs are the solution to what Henricks identifies as the big takeaway from the book: the failure of the “do-it-yourself” retirement savings experiment of the past 35 years. When people are left to rely on employer-sponsored retirement accounts - to which only half the workforce has access - they don’t save enough. Most Americans over age 50 have less than $30,000 in their retirement accounts. This trajectory leaves half of Americans with a food budget under $5/day in retirement.
Ordinary savers aren’t to blame, given the one-two punch of wage stagnation coupled with the complexity of long-term planning in the 401(k) system. Rather, the lack of retirement savings is a systemic failure with a simple and straightforward policy solution: GRAs.
SCEPA Director Teresa Ghilarducci and Christian Weller from the Center for American Progress (CAP) are working to address the retirement crisis by improving the federal government’s system of retirement savings incentives. On October 30th, they published a paper on The Inefficiencies of Existing Retirement Savings Incentives and hosted an event with academic and political experts to discuss the issue in depth. On November 18th, they released a second paper on Laying the Groundwork For More Efficient Retirement Savings Incentives that contains proposals for reform.
Ghilarducci and Weller’s research concludes that the federal government’s current policy to encourage retirement savings through the tax code is both inequitable and inefficient. The wealthy have higher marginal tax rates and therefore benefit more from tax deductions than the poor and middle class. Furthermore, research has shown that wealthy households would save anyways and tax deductions merely encourage them to shift their savings into retirement accounts to lower their tax bill.
The authors suggests five policy reforms to make the federal government’s retirement savings incentives more fair and effective:
- Make the Saver’s Credit fully available to lower-income households
- Establish and expand progressive savings matches
- Simplify retirement savings incentives by streamlining rules
- Limit the automatic increases of tax deductions
- Create simple, low-cost, and low-risk options for people to save for retirement outside of employer plans
What’s the best way to evaluate international differences in living standards? How can we compare the value of 100 dollars to an American with 100 taka to a Bangladeshi?
In the November 17, 2015 seminar hosted by SCEPA and The New School Economics Department, New School Economics Professor Sanjay Reddy presented his research on the most appropriate choice of price index. According to Reddy, the most commonly used price indices are deeply flawed. However, with careful reasoning, informative and honest indices are achievable.
Reddy is critical of the most widely used methods for constructing price indices. While cynics claim that a perfect index number doesn’t exist, so anything goes, Reddy argues that certain indices are most appropriate for certain circumstances. Just as we use scales to measure weights and rulers to record heights, we should use different indices for different purposes as long as they fit the task at hand and are used consistently. For example, you can’t answer the question “who’s taller?” by measuring one person’s height and another’s weight.
The most widely used approach to constructing price indices is a “representative agent” model, where researchers assume that individuals are rational utility-maximizers, and infer budget constraints and utility functions from observed consumption behavior. According to Reddy, this approach is unconvincing. It may not be an accurate description of how people make decisions, and it fails to satisfy the axioms of the consumer choice theory on which it relies.
Instead, Professor Reddy proposes a set of criteria from which a more reliable price index can be constructed. His own project, The Global Consumption Consumption and Income Project (GCIP), aims to provide a more comprehensive understanding of how a country’s well-being evolves over time and can be compared internationally.