- 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 July 21, 2012, SCEPA Director Teresa Ghilarducci wrote an opinion piece in the New York Times Sunday Review on "Our Ridiculous Approach to Retirement." She describes how the current 'do-it-yourself' retirement planning both defies human behavior by requiring each individual to perform like a professional investor, while relying on the very natural human response to believe that you can work forever without sickness or forced unemployment.
"Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system? Consider what would have to happen for it to work for you. First, figure out when you and your spouse will be laid off or be too sick to work. Second, figure out when you will die. Third, understand that you need to save 7 percent of every dollar you earn. (Didn’t start doing that when you were 25 and you are 55 now? Just save 30 percent of every dollar.) Fourth, earn at least 3 percent above inflation on your investments, every year. (Easy. Just find the best funds for the lowest price and have them optimally allocated.) Fifth, do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house or send a kid to college. Sixth, time your retirement account withdrawals so the last cent is spent the day you die."
Ghilarducci ends with a call for a shared solution to ensure retirement security through practical policies based on actual, rather than idealized, behavior. "I hope that fear can make us all get real. The coming retirement income security crisis is a shared problem; it is not caused by a set of isolated individual behaviors. My plan calls for a way out that would create guaranteed retirement accounts on top of Social Security. These accounts would be required, professionally managed, come with a guaranteed rate of return and pay out annuities. This is a sensible way to get people to prepare for the future."
On July 23, 2012, Carole Fleck echoed the New York Times column on the AARP Blog. In her post, "Our 'Ridiculous' Retirement System is Crumbling, Expert Says," Fleck cites Ghilarducci, "She says it’s irresponsible for Congress to deny that the retirement system, despite its tax breaks, defies human behavior. Basing a system on people’s voluntarily saving for 40 years and evaluating the relevant information for sound investment choices is like asking the family pet to dance on two legs."
On July 24, 2012, Business Insider and the Huffington Post both covered Director Ghilarducci's opinion piece. Jill Krasny's article in Business Insider, "ECONOMIST: The Do-It-Yourself Pension System Has Failed," she writes, "Ghilarducci calls this is a "shared problem," and it most certainly is. But whether the government is ready to create retirement accounts on top of Social Security remains to be seen. It may be as tall an order as asking us to calculate what we'll be living on forty years from now." Robert Teitelman, Editor-in-Chief of The Deal, discusses Ghilarducci's NYTimes piece in the Huffington Post in his article "The Looming Retirement Crisis and What To Do About It." He agrees that the define contribution system doesn't work in an economy with macroeconomic volatility such as what the U.S. economy has experienced in the past ten years. He writes, "in the end, Ghilarducci pumps for a kind of mandated retirement program for everyone that would sit atop Social Security. She may be right, though the politics of this are very difficult." And he concludes by saying, "if the experiment in defined-contribution plans taught us anything, we don't share nicely. It'll take a very large crisis to change that."
On July 16, 2012, The Hindu publshed an opinion piece by SCEPA Faculty Fellow Sanjay Reddy, "Europe Should Not be Crucified on Euro's Cross," describing the motivation for the euro as a drive to create a global reserve currency. He describes the Triffin dilemma, which is when the surplus currency demanded on a global scale that would be required for a reserve currency will lead to the undermining of the currency because of the creation of a current account deficit in the economy of the reserve currency. Europe's current measures to curb the euro crisis have an ambiguous effect on current account balances, but austerity measures also risk an economic contraction. Reddy writes, "the lesson is to focus first on what really matters to the people of Europe and not on grandiose illusions. Ironically, doing so is what can also best revive the euro, whatever its future as a reserve currency. Europe should jettison the strong euro, which in the absence of sizeable current account surpluses, has been underpinned by an inflation averse central bank and the demand for fiscal austerity. Instead, it should promote viable European economies."
by Rick McGahey, SCEPA Faculty Fellow
Bob Dylan once sang "you ain't goin' nowhere," and that's the theme song for today's June employment report. We are badly stuck, with no obvious relief from either the Fed, or from fiscal policy. The political costs to Obama may be severe in November, while the long-term damage to the economy and to the unemployed will ripple through the economy for years to come.
The unemployment rate remains stuck at 8.2 percent, with another worse-than-expected job creation number of 80,000, well below forecasts that predicted job growth over 150,000. After a relatively strong first quarter, where job growth averaged 226,000 per month, the second quarter of 2012 has limped along with an average monthly job growth of 75,000.
This stagnant job market is, of course, bad news for Obama. To get the unemployment rate to even 8 percent by the November election, the economy needs to be creating around 144,000 jobs per month. To get unemployment down by a full percentage point—to 7.2 percent—in one year, we need about 211,000 jobs per month. (You can run scenarios for yourself with the Atlanta Fed's useful jobs calculator) We are nowhere close to either number, and with fiscal drag continuing from all levels of government, slowing economies in the developing world, and the ongoing crisis in the Euro zone, there isn't any likely candidate to stimulate growth.
The most maddening thing about the nation's policy deadlock is that we know what to do: increase government stimulus to create jobs. Economists are tearing their hair out at our inability to undertake sensible fiscal or monetary policies. Laura Tyson, head of the Council of Economic Advisers under President Clinton, compares Obama's modest proposals to Mitt Romney's ideas, finding that Obama's policies would help job creation, while "Romney's proposals would have little or no effect – and some could even make matters worse." Brad DeLong and Larry Summers have put out a powerful argument in favor of stimulus, now coupled with longer-term deficit reduction. And Paul Krugman pulls no punches, entitling his new book, End This Depression Now.