- 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.
A recent article in Institutional Investor by Fran Hawthorne, "Claims that 401(k)s Beat Defined Benefit Plans Stirs Controversy," analyzes the findings of an Employee Benefit Research Institute (EBRI) Issue Brief that claims that defined contribution (DC) plans do better than defined denefit (DB) plans for all income levels.
Hawthorne's critique points out the weaknesses of the EBRI study. These include the fact that the study includes only data on voluntary 401(k) plans, which have higher contribution rates than the more prevalent automatic enrollment plans, that it uses unrealistically high rates of return on stocks, and that it ignores the fact that employers contribute 'free money' toward DB plans, but do not need to contribute to DC plans.
Hawthorne is thorough. However, she overlooks two significant problems. First, EBRI overstates the retirement plan coverage and participation rates for workers, especially following an unemployment spell; this is especially important in the aftermath of the Great Recession. Second, the study uses an implausibly high growth rate of average hourly earnings. EBRI's findings are partly a result of these skewed assumptions.
These concerns are spelled out in a Huffington Post Business blog, by SCEPA Director Teresa Ghilarducci and SCEPA Research Economist Joelle Saad-Lessler.
On July 9, 2013, The New York Times reported that U.S. Senator Orrin Hatch (R-UT) announced a new proposal to allow the life insurance industry to manage public pensions.
Senator Hatch's high hopes that insurance companies are better insurers of public pensions than municipalities and states is based on three false beliefs.
- States regulate insurance companies better than their pension funds.
- Insurance companies will insure pension funds cheaper and more efficiently than state and local pension funds.
- Insurance companies are more secure than state and local governments.
Each of these assumptions is wrong.
Governments have promised their employees these benefits, so they can't simply "get the obligation off their books" by privatizing the management of the funds. Further, insurance companies are for-profit institutions – shareholders come first – so they charge more than state and local pension funds. Also, as we have seen, insurance companies can fail, requiring huge government bailouts. Examples abound, with AIG foremost in memory. At the state level, Executive Life took over California's pension funds in the 1970s and then went belly up. Pension beneficiaries lost everything.
Senator Hatch argues he is earnest. He wants to help state and local governments, not insurance companies. His theory is that pensions would come off municipal books and benefit from more reliable contributions.
But state and local governments could pay their pension obligations with a simple administrative and actuarial fix - by looking at their assets and liabilities and figuring how much they have to pay each month. This is called 'easy math,' a concept familiar to anyone with a mortgage.
The problems faced by some state and local governments are not structural. Rather, a minority of governors and mayors took pension holidays. They liked paying nothing, diverting funds from their pension obligations to other budget lines. Rather than creating a new structure for public pensions, Senator Hatch, the ranking Republican on the Senate Finance Committee, could hold hearings highlighting this political failure and calling for these localities to pay what they owe.
Contrary to Senator Hatch's intention, this proposal would expose public pensions to more insecurity, not less - while boosting industry profits.
by Rick McGahey, SCEPA Faculty Fellow
Today’s report on unemployment in June recalls the old saying, “slow progress is still progress.” The unemployment rate stayed level at 7.6%, but total job creation rose by 195,000.
The good news? That means the economy’s created 202,000 jobs per month in the first six months of this year.
The bad news? At that rate of job creation, according to the Atlanta Fed’s jobs calculator, it will take us another 36 months—3 full years--to achieve 5.5% unemployment, a rate that the Congressional Budget Office defines as full employment.
Job gains showed up in most sectors, although federal government employment continued to fall as budget cuts from the sequester take hold. Some analysts worry that the ripple effects of those cuts are now beginning to hit companies that depend on federal spending.
Examine the report more closely and other signs of labor market weakness show up. The number of long-term unemployed—those out of work for 27 weeks or more—didn’t change, and those workers account for 36.7% of total unemployment. People employed part-time for economic reasons—those who want a full time job but can’t get one—rose slightly. And the number of discouraged workers—those who want a job but have given up looking—has risen by 26% in the past year.
This weekend is the 150th anniversary of the Battle of Gettysburg, the turning point of the Civil War, so we will give the last word to Abraham Lincoln. In 1864, when criticized on the war’s progress, he said, “I am a slow walker, but I never walk backwards.” Like Lincoln, we should persevere against unemployment, but we need to pick up our pace.