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.
- Published on Wednesday, March 19, 2014
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.
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.
- Published on Tuesday, March 11, 2014
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.
- Published on Monday, March 10, 2014
by 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.