SCEPA Blog

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Bipartisanship and Retirement Reform

retirement riskThe Bipartisan Policy Center (BPC) today launched its Personal Savings Initiative (PSI). The initiative will examine whether savings rates and available savings vehicles are meeting the retirement goals of Americans and the nation's investment needs.

Co-chaired by former Senate Budget Committee Chairman Kent Conrad, a Democrat, and Jim Lockhart, former Deputy Commissioner of the Social Security Administration under President George W. Bush, the initiative will issue recommendations from a bipartisan commission, which includes SCEPA Director Teresa Ghilarducci

Accoring to Forbes' coverage of the launch announcement, "Lockhart cited a recent Gallup poll that found that not having enough money for retirement is the top financial worry among middle-aged Americans. Then he recapped some sobering retirement statistics to show why the issue is so important and why Congress should take it up."

The initiative will address important financial security issues, including, but not limited to:

  • The impact of federal policies on private savings. 
  • The finances and operation of Social Security Disability Insurance and its interaction with private disability insurance. 
  • Interaction of Social Security with personal savings, especially those in tax-advantaged retirement savings vehicles.
  • The impact of long-term care needs on retirement security. 
  • The role of homeownership and student debt. 

During 2014, the PSI will hold roundtables and issue a series of white papers highlighting challenges related to retirement savings, defined contribution accounts, annuities, Social Security Disability Insurance, and the intersection among housing, higher-education debt, and savings. The commission will develop a set of policy recommendations and model their impact on personal savings, retirement readiness, the macro economy and the federal budget to be presented in a final report in early 2015.

Anwar Shaikh: Named an "Eminent Economist"

Anwar Shaikh'Eminent Economists in the World Today,' the sequel to 'Eminent Economists,' presents the ideas of influential economists of the last 50 years. SCEPA is proud to announce that Anwar Shaikh, economist and professor at The New School for Social Research, is included in this distinguished honor, which recognizes his work on the economic patterns of the developed world.

Shaikh has always held the belief that economics is a moral science and has dedicated his research to understanding inequality. His entry, "Order In and Through Disorder" is a brief autobiography that captures significant moments in his life that influenced his research. 

Modeling the Economic Damage of Climate Change

modelA recent SCEPA working paper, "Economic Damages from Climate Change: A Review of Modeling Approaches," examines how the three integrated assessment models (IAMs) used by the U.S. government translate climatic change into economic impacts.

To present and predict changes in weather, the scientific community relies on Integrated Assessment Models (IAMs), which model and predict the impact of carbon emissions, greenhouse gas concentrations, and temperature increases on climate systems. IAMs also seek to determine the social cost of carbon (SCC) by giving the negative effects of climate change a monetary value. 

The report focuses on the formal mechanisms by which the DICE, FUND and PAGE models convert temperature increases, sea level rises and more intense storms into a dollar figure. These mechanisms are known as damage functions.

Although the IAMs use very different damage functions, they all base the impact of climate change costs on comparative scenarios. The cost of climate change is not just the destruction of structures and objects; it comes from lower food production, low health outcomes, higher indoor cooling costs and lost land to higher sea levels. While big storms and earthquakes capture the media's attention, incremental changes will have by far the greatest cumulative impact on our well-being.

Even among economists, the consensus is that these costs will be profound. This report and an earlier article by SCEPA Faculty Fellows show these leading economic models, if anything, greatly underestimate the costs of climate change.

How Paul Ryan's Budget Fails

CNN logoSCEPA Faculty Fellow Rick McGahey's opinion piece on CNN.com today, "How Paul Ryan's Budget Fails," calls out the House-approved budget for using 'voodoo economics' to pose as 'balanced' while calling for tax cuts for millionaires.

In short, McGahey notes, the math fails, which leaves a budget meant more for political posturing than for the health of the nation's economy. 

"How can Ryan claim that his budget is balanced? By invoking what used to be called "voodoo economics" -- assuming budget cuts and unfair tax cuts will unleash economic growth and generate enough tax revenue.

Former Reagan administration economist Bruce Bartlett has criticized this approach as "just another way for Republicans to enact tax cuts and block tax increases. It is not about honest revenue-estimating; it's about using smoke and mirrors to institutionalize Republican ideology into the budget process."

Of course, Paul Ryan isn't stupid, so why the phony budget math and the return of voodoo economics? Because it serves his presidential ambitions."

The Social Cost of Carbon as a Lower Bound for Policy

This week's Worldly Philosopher, Anthony Bonen, writes on economists' contribution to efforts to mitigate against climate change.

tony bonen image 4On Sunday, the IPCC Working Group III, Mitigation of Climate Change, released its latest report, and the news isn’t good. The report says (to no one’s surprise) that governments around the world have failed to act against climate change. The result has been rapid increases in greenhouse gas (GHG) atmospheric concentrations and rising temperatures around the world (see figure). The silver lining (silver sliver?) is that climate change mitigation is eminently affordable if – a big if – governments start to invest now.

It is time for economists to step up and help politicians take this supremely reasonable and moral action to invest. This can be done by improving economic models of climate change and, even more importantly, clearly communicating the limitations of our models.

The Financial Times reports that the costs of “an ambitious fight against climate change will reduce annualised economic growth by somewhere between 0.04 and 0.14 percentage points” versus a scenario of zero mitigation efforts. This compares to a welfare loss of between 0.2% and 2.0% of global GDP if average global temperatures rise by a further 2°C (IPCC, WGII SPM, p. 19). A finance degree is not necessary to decide between these two investment choices.

Yet, these two headline costs, -0.14% (maximum loss if mitigation) versus -0.2% (mininimum loss if no effort), are generated from extremely different data, which leaves the latter open to charges of, at best, uncertainty and, at worst, fantasy. The cost of investing in renewable energy, carbon capture and green transportation are based on real, observable markets and technologies. But the cost of unmitigated climate change? This comes from integrated assessment models’ estimates of the social cost of carbon (SCC).

The SCC metric is the net present value cost of an additional ton of CO2 emissions (tCO2). That is, how much welfare society stands to lose from a marginal increase in carbon emissions, translated into current U.S. dollars. Undoubtedly, there is an enormous degree of uncertainty regarding the nonlinear and variegated impacts of temperature increases on the environment, economy and society.

Although we don’t like to admit it, monetizing the cost of climate change involves a lot of guesswork. We already know that unabated climate change will bring devastating consequences for many peoples and communities around the world. So, are economists adding anything by putting a price tag on these impacts? Put another way: is it worthwhile for economists to compute the social cost of carbon?

Read more: The Social Cost of Carbon as a Lower Bound for Policy

Are Washington Workers Ready for Retirement?

On April 8, 2014, Teresa Ghilarducci, Director of SCEPA and Labor Economist testified before the Washington State Senate in Olympia and presented SCEPA's recently released study, "Are Washington Workers Ready for Retirement." This study finds that employer sponsorship of retirement plans in on the decline from 2000-2012. The availability of employer-sponsored retirement plans in Washington declined by two percentage points, from 62% to 60%. Four out of ten workers in the state do not have access to a retirement plan at work.
Washington State Retirement Data Graph
While this decline is smaller than in some other states, it follows a downward trend across the country. This trend means that, upon retirement, workers without access to a retirement plan during their working years will rely solely on Social Security and Medicare to survive. The support from these federal programs can be supplemented by personal savings, but, as we document below, workers without employer-sponsored retirement plans tend to be less financially secure overall and less able to save sufficiently (if at all) for retirement.

Most workers had less access to retirement plans in 2012 than they did in 2000, but the decline has not been equal across social and economic groups. Particularly stark is the drop in the sponsorship rate for female workers, whose access decreased from 65 percent to 60 percent. Female workers in Washington experienced a decline in sponsorship at more than double the rate of workers' overall sponsorship reduction.

Read more: Are Washington Workers Ready for Retirement?

Are Minnesota Workers Ready for Retirement?

In March, SCEPA Director Teresa Ghilarducci testified before the Minnesota House of Representatives in support of HF 2419, which would study the potential benefits of creating the Minnesota Secure Choice Retirement Plan, a state-administered retirement savings plan for public and private workers without access to retirement plan at work.

Ghilarducci presented SCEPA's report, 'Are Minnesota Workers Ready for Retirement,' which reports a 6% decline in employer-sponsorship of retirement plans in the state. The research supports the implementation of policies that help workers gain access to safe, affordable and efficient retirement savings vehicles to prevent downward mobility among seniors.
Minnesota Retirement Participation Rates
One of the most important aspects of the Minnesota Secure Choice Retirement Plan is that it is safe and cost-effective. The MN Secure Choice plan would facilitate voluntary employee contributions through a simple payroll deduction, rather than complicated private retirement plans that require participants to shoulder the risk and responsibility of finding and paying for the right financial advisor and/or choosing the appropriate investment options. Other advantages include pooled investments, diversified investment portfolio and access to professional money management firms.

Video: Extreme Weather and the Risk from Climate Change

Can We Anticipate, Can We Adapt?

The patterns and probability of extreme weather - and its accompanying risks to society and ecosystems - are being altered by climate change due to the buildup of the greenhouse gases. While our ability to project such changes is improving, it remains inadequate at the local level, where most resilience and adaptation planning occurs. Even more troubling, needed action will likely be deferred by the economic and political obstacles that stand in the way of long-term resilience planning.

In late March, the Intergovernmental Panel on Climate Change (IPCC) issued a report, 'Impacts, Adaptation and Vulnerability,' by its second Working Group as part of the Fifth Assessment Report. On April 7, 2014, Princeton's Michael Oppenheimer, one of the lead authors of the report, joined SCEPA to give a presentation on New York City's climate plan as an example of both the obstacles and possibilities of long-term planning for climate change.

Oppenheimer is the Albert G. Milbank Professor of Geosciences and International Affairs in the Woodrow Wilson School and the Department of Geosciences at Princeton University. He is director of the program in Science, Technology and Environmental Policy (STEP) at the Woodrow Wilson School and Faculty Associate of the Atmospheric and Ocean Sciences Program, Princeton Environmental Institute, and the Princeton Institute for International and Regional Studies.

Oppenheimer serves as a Coordinating Lead Author on the second Working Group report. The first report, "The Physical Science Basis," released in September 2013 by the first Working Group, was the subject of a SCEPA panel held in November 2013 on the Local and Global Impacts of of Climate Change.

SCEPA's Economics of Climate Change Project, led by New School Professor of Economics Willi Semmler, is generously supported by the Fritz Thyssen Foundation and the German Research Foundation (DFG). This event is in coordination with the Environmental Policy and Sustainability Program at the Milano School.

IPCC Issues Report on Impacts, Adaptation & Vulnerability

WGII reportOn March 31, 2014, the Intergovernmental Panel on Climate Change (IPCC) released their second report as part of their Fifth Assessment on climate change. 

One of the lead authors of the report, Princeton's Michael Oppenheimer, will be joining SCEPA on Monday, April 7th at 6:00pm to discuss the report, New York City's climate plan and the difficulties of long-term planning for climate change (RSVP or watch live online). 

The report, Climate Change 2014: Impacts, Adaptation, and Vulnerability, is clear in its conclusion that climate change is having an effect on the world and its oceans. After specifying its impacts to date, impending risks and the possibilities to take action, it concludes that decisions need to be made to mitigate these risks. 

Following are resources on the report's content: 

1. The New York Times reviews the report's major conclusions; 

2. IPCC's summary for policymakers; and

3. A webcast of the IPCC's conference releasing the report. 

In November, SCEPA held an event to discuss the first report on the physical science of climate change with experts from Columbia and Rutgers, who focused on the local and global impacts (watch the video). 

SCEPA Faculty Fellow Willi Semmler, head of the Economics of Climate Change project, published a paper with co-authors Stephan Klasen and Anthony Bonen that reviews how the economic damages of climate change are modeled and measured. Bonen joins the Worldly Philosopher blog to debate how economists and climate scientists assess these costs.

Is the 'Better Off Budget' an End to Austerity as We Know It?

This week's Worldly Philosopher, Katherine Moos, writes on austerity and the social safety net.

In the wake of the financial crisis, we have witnessed a number of policy measures that have increased the financial fragility of workers by cutting benefits and social safety net programs. In the United States, there have been repeated calls to cut Social Security – by raising the retirement age or by adjusting benefits to the Chained CPI – legalese for cuts in entitlements that would have disastrous effects, especially for the poor.

However, at the most unlikely time, there have also been calls to expand Social Security benefits. Last year, Senator Harkin (D-IA) introduced legislation that would link benefits to the consumer price index for elderly consumers, CPI-E, that factors in additional costs faced by retirees such as higher healthcare expenses. The bill garnered the support of Senators Brown (D-OH), Begich (D-AK), Schaltz (D-HI), and Warren (D-MA). Congress Member Sanchez introduced the House version of the bill in September, which has since obtained 55 co-sponsors. While neither version has moved in Congress, this legislation seems to have emboldened other members to push for progressive reforms.

More recently, the Congressional Progressive Caucus (CPC) introduced its "Better Off Budget" for fiscal year 2015. It includes a number of fiscal policy measures that signal support for expanding Social Security. CPC Co-Chairs, Representatives Raúl M. Grijalva (D-AZ) and Keith Ellison (D-MN), issued a statement that the Better of Budget "reverses the damage [that the] austerity agenda has inflicted on hard-working families." The budget would create 8.8 million jobs, repeal the sequestration cuts, change the tax code to create tax relief for low and middle-income working families, and expand retirement and health benefits. The budget is also estimated to reduce the federal deficit by more than $4 trillion in 10 years.

Read more: Is the 'Better Off Budget' an End to Austerity as We Know It?

Income Inequality and Demand Side Limitations: The American Case

This week's Worldly Philosopher, Rishabh Kumar, writes on the wealth inequality debate.
Figure 1: Shares of different household groups in Total Household Income. Source: Upcoming in Taylor, Rezai, Kumar and Barbosa (2014)
The wealth inequality debate has taken center stage since the publication of Tom Piketty's new book, "Capital in the Twenty-First Century." Piketty drives home the point that wealth owners are better off than income earners because the rate of return on capital is higher than the return on income. Since wealth holders increase as we move up the class distribution, this implies an increasing income gap between the poorest and richest households.

In recent (and upcoming) research, my co-authors and I are examining the income distribution for the United States between 1986-2009. Using data from the Congressional Budget Office (CBO) and Bureau of Labor Statistics (BLS), we observe the gap between the super rich (the top 1 perce) and the bottom groups is indeed increasing (Figure 1: Shares of Different Household Groups in Total Household Income. Source: Upcoming in Taylor, Rezai, Kumar and Barbosa, 2014). But unlike Piketty, we did not count capital gains, and we discovered that the super rich are also increasing their share of income. Therefore, the rapidly increasing inequality that favors a few does not solely depend on capital and wealth, as Piketty's analysis implies.

Thus, even without wealth gains, the top 1 percent was able to increase its share of "non-wealth" income (the black line in Figure 1) from just under 9 percent in 1986 to around 18 percent by 2009. This happened while the income shares of the other groups remained relatively stagnant, if not decreasing. Piketty ascribes inequality to the concentration of wealth in the hands of the few. Our findings complement the story – the richest class in the United States has also benefited from higher (real) labor compensation and transfers (interest, dividends etc). In a broad sense, the total growth in income in the United States over the last two decades is heavily skewed in favor of the super rich.

Read more: Income Inequality and Demand Side Limitations: The American Case

April 22: Has Capitalism Seen Its Day?

SCEPA and The New School Economics Department's Spring 2014 Seminar Series Hosts

Wolfgang Streeck, Max Planck Institute for the Study of Societies, Köln
"Has Capitalism Seen Its Day?"

April 22, 2014
4:00pm to 6:00pm
The New School
6 East 16th Street, Room 1009

The Cost of Climate Change - More Than Disasters

This week's Worldly Philosopher, Anthony Bonen, writes on the economic and social costs of unmitgated climate change.

A heated debate was sparked last week after Robert Pielke, Jr. wrote an article for Nate Silver's fivethirtyeight.com arguing that the rising costs of natural disasters are driven not by climate change, but by the world's increasing wealth. Pielke's spurious assertions have already been picked apart by ThinkProgress and Salon. But what strikes me is the bizarre narrowness of his argument.

For example, in a misleading statement on the IPCC's recent findings Pielke says: "There have been more heat waves and intense precipitation, but these phenomena are not significant drivers of disaster costs." Well sure, heat waves and intense precipitation are only minor aspects of disaster costs. But the economic costs of unmitigated climate change are far more wide-ranging than disasters alone.

In a recently released SCEPA report, my co-authors and I examine how the three integrated assessment models (IAMs) used by the US government translate climatic change into economic impacts. The report focuses on the formal mechanisms by which the DICE, FUND and PAGE models convert temperature increases, sea level rises and more intense storms into a dollar figure. These mechanisms are known as damage functions.

Although the IAMs use very different damage functions, they all base the impact of climate change costs on comparative scenarios. This only makes sense. The cost of climate change is not just the destruction of structures and objects; it comes from lower food production, worse health outcomes, higher indoor cooling costs and lost land to higher sea levels. While big storms and earthquakes capture the media's attention, incremental changes will have by far the greatest cumulative impact on our wellbeing.

Even among economists the consensus is that these costs will be profound. In fact, our report and an earlier article by our colleagues show these leading economic models, if anything, greatly underestimate the costs of climate change.

So don't be bamboozled by pseudo-climate skeptics like Pielke. Economists and climate scientists don't just add up the value of capital lost in storms like insurance agents. We are looking ahead and mapping out alternative options we, as a society, can take. That is how one assesses economic costs. 

Rising Wealth Inequality-- New Facts

This week's Worldly Philosopher, Raphaele Chappe, writes on the increasing inequality in free-market dynamics.

working paper graphInequality is rising in most developed economies. At the peak of the housing bubble in 2007, the richest 1% held 34.6% of wealth in the U.S.1 The drop in household wealth following the crisis affected the median household more than the top 1%2 so that the wealth distribution is now even more unequal. Robert Reich points out that since the start of the recession, the share of total U.S. national income going to labor has plunged (while profits in the U.S. corporate sector are now at a 45-year high), and that 2013 has been the year of "the great redistribution."3 In 2012, the top 10 percent of U.S. earners took more than half of total income – the highest level recorded in a century.4

Thomas Piketty's new book, "Capital in the Twenty-First Century" (Piketty, 2013)5 suggests that these trends are the natural result of free-market dynamics – with the prosperous decades that followed the Great Depression and World War II are an exception to the rule and are unlikely to be repeated. In the tradition of the worldly philosophers, this ambitious work is nothing short of an attempt to characterize the laws of motion for the process of capital accumulation and income distribution for advanced capitalist economies.

Piketty's hypothesis is that the main driver of inequality is the tendency of returns on capital6 to exceed the rate of economic growth (this is Piketty's key inequality relationship r>g), producing high capital/income ratios (β).7 If r is to remain at its historical rate of 4-5% p.a., while advanced economies continue to experience low growth rates8, we are headed back to the 19th Century in terms of inequality -- a time where inheritance was so important that it arguably made more sense for the ambitious and talented to marry well than to work hard.9

Read more: Rising Wealth Inequality-- New Facts

Economic Shocks on the Financial Sector

A recent study by SCEPA Faculty Fellow Willi Semmler and the Centre for European Economic Research's Frauke Schleer analyzes dynamics between economic downturns and financial stress for several euro-area countries.

graph

Using a newly constructed financial condition index that includes banking variables, the authors examine leadership changes in countries that have high and low levels of financial stability and the ripple effects on the economy. They found that strong rippling effects appear to be related to large, but rare events, such as the financial crisis, and to a short business cycle. Prior to the financial crisis, economic shocks could be self-adjusting, even if the financial sector shock took place during a time of instability. 

New School Economists and Policy Debates: Balancing Theory and Practice

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow
March 11, 2014

Today I attended a meeting at Georgetown University, on "Making A Living on a Living Planet: Toward a More Just and Sustainable Economy." This important session brought together representatives from two progressive movements who don't often cooperate or communicate effectively—the labor and environmental movements. (For more on the organizers, see this link www.labor4sustainability.org, I'll blog about the meeting in a separate post.) There were about 40 people in the room—activists from both the labor and environmental movements, policy advocates, and progressive economists. And, in a tribute to The New School's economics program, five of those economists studied graduate economics at The New School.

They included: Ron Blackwell, former Chief Economist at the AFL-CIO, one of the principal organizers of the meeting; Bob Pollin of U-Mass Amherst, who co-authored the key paper outlining an economic program for jobs and sustainability (he recently presented this work as part of SCEPA's Robert Heilbroner lecture); Mark Levinson, Chief Economist for the Service Employees International Union; Ken Peres, Chief Economist for the Communications Workers of America; and yours truly.

All of us were in the program some time ago, and it was gratifying to see how everyone remained focused on linking economic analysis with the critical progressive policy issues of our time. But what accounts for the remarkable concentration of New School economists at this event?

I believe it's The New School's combination of heterodox theory and critical economics, coupled with a desire to engage with and support policy and social movements, something we were able to learn and do in our graduate education at NSSR. Although there sometimes can be a tension between theoretical and applied policy work, when it is done right—as I believe it was during our time at The New School—the two domains reinforce each other. The theorists keep the policy analysts honest and self-critical, focused on the big picture, while the policy work grounds the theory and keeps it from becoming sterile and academic.

Today reminded me of the recent, excellent session organized by current graduate economics students, "The State of Wordly Philosophy at NSSR." That event continued the department's long and honorable history combining theory and practice, and the program's health and vitality depend on keeping those two elements in balance.

Today's event was just one example—others include the prominence of New School graduates in international policy debates (such as Nelson Barbosa's tenure as Brasil's Deputy Finance Minister), the appointment of Heather Boushey to lead the new Washington Center on Equitable Growth, David Howell's major study on inequality and growth in the United States, and the recent edition of Social Research on austerity economics and policy featuring several faculty and alumni of the economics program.

By keeping theory and policy in creative tension and balance, The New School can continue to produce critical and useful economic thought and analysis for decades to come. As the economics profession offers fewer and fewer heterodox opportunities for graduate education, The New School's role in both theory and policy becomes even more important.

The Role of Financial Stress in Debt and Recovery

As countries continue to struggle with the consequences of the 2007-2008 recession, the debate surrounding national debt is at the forefront of economic and foreign policy discussions. What is too much debt? Does debt inhibit a state's ability to recover from the recession?

In a recent SCEPA Policy Note on the impact of national debt on economic growth, Economists Christian Proaño, Willi Semmler and Christian Schoder discovered that at low levels of financial stress, when investments in banks and stocks carry low risk and the financial market is stable, national debt does not impact economic growth. Rather, they found that debt impacts economic growth when there are high levels of risk and uncertainty in the financial sector. Therefore, economic growth depends first on financial market stability, and is only affected by debt if financial markets are unstable. These findings contradict the highly cited 2010 Reinhart and Rogoff study - now identified as having coding errors - which posited that despite all other factors, economic growth will decline if debt is 90% of a state's GDP.

The Unemployment Report: Moving Faster, But Too Slow For Takeoff

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow

After two months of very weak employment data, today’s report for February is a little more encouraging, or at least doesn’t continue the negative trend. The economy added 175,000 jobs, better than the consensus forecast of 149,000, and the unemployment rate bumped up slightly to 6.7 percent. The January jobs number also was revised upward, so the rolling average of the past three months now stands at 126,000 additional jobs per month.

But just to put these numbers in perspective, even we get 175,000 new jobs every month, it will take slightly over two years to reach a relatively full employment rate of 5.5 percent unemployment. And those 175,000 jobs in a month is lower than the average monthly figure for all of 2013, so it isn’t a number that should satisfy policy makers.

So this is not a strong employment report, especially at this stage of the business cycle. The bottom of the Great Recession was reached in June 2009, and we are now over four and a half years into a very weak and slow recovery.

One persistent factor that is holding growth back, and will continue to hold it back, is contracting government spending. The original federal stimulus in response to the Great Recession was never large enough to address the problem; at the time, several economists, including analysts at Goldman Sachs and elsewhere, were calling for a stimulus two to three times higher than we actually got. And even that federal spending was partly offset by state and local government budget cuts.

Throughout this anemic recover, the debate in Washington has been driven by the right-wing Tea Party faction of the Republicans, who insist on continuing budget cuts rather than stimulus and expansion. And they have been winning.

President Obama’s just-released budget for fiscal year 2015 starting in October noted that the budget deficit is coming down, to a projected 3.7 percent of GDP, the lowest figure in five years. But that deficit reduction is part of our economic problem, especially because it has been achieved mostly by cutting spending, which slows the economy.

Since 2009, federal spending has shrunk by 4.1 percent, while tax revenues increased by 2.2 percent from economic growth and some recapture of the Bush tax cuts for the wealthy. As the Washington Post points out, “To put it another way, there have been nearly $2 in spending cuts for every $1 in revenue increases. On the surface, it would appear that the Republicans won the budget wars.”

The Tea Party’s grip on policy isn’t just budgetary. Although Obama is now arguing strongly for federal policies to attack inequality, there is no prospect that he will get legislative support for those, whether it is significantly higher infrastructure spending, a long-overdue increase in the minimum wage, expanding the earned income tax credit for low-income people, or increase education aid from preschool to college. Paul Ryan, one of several potential Republican candidates for President, dismissed Obama’s budget as “a campaign brochure,” signaling another round of seemingly endless Washington budget battles.

While the Tea Party holds sway in Washington, the budget fight will continue to be about further reductions, not stimulus or investment. That means little or no federal stimulus for our anemic economy. And that very likely means slower economic growth, lost output, higher unemployment, slower wage growth, and unnecessary hardship for millions of Americans.

SCEPA Paper on Older Unemployed Workers Makes SSRN's Top 10 List

SCEPA is excited to announce that "New Policies for an Older Unemployed Population," a SCEPA Working Paper by Director Teresa Ghilarducci and Economist Joelle Saad-Lessler, has made the top ten download list for the Social Science Research Network, (SSRN) for three different sub categories; Food Stamps and Food Assistance, Medicaid and Rates of Coverage. The paper outlines issues facing older unemployed workers, such as living with low incomes and without health insurance for longer periods of time due to increases in the duration of unemployment. The authors recommend expanding and reforming retraining programs to better accommodate the needs of older workers and the creation of tax incentives to encourage employers to hire older workers.

Bargaining Power and Employer-Sponsored Retirement Plans

Teresa Ghilarducci and Joelle Saad-Lessler released a new working paper examining the decline in employers offering retirement plans. Workplace retirement plans - defined contribution (DC) and defined benefit (DB) - help workers save for retirement conveniently, consistently, and automatically. However, offer rates are steadily declining: between 2001 and 2012, the retirement plan offer rate dropped from 60% to 50%. The drop is driven by a decline in DC plans. Bargaining power matters, since both the length of time spent unemployed and union status significantly impact the likelihood of losing or retaining employer retirement plan offer rates. Therefore, efforts to increase retirement account offer rates must address the decline in workers' bargaining power and the changes in norms relating to benefits provision.