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- 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.
by Rick McGahey, SCEPA Faculty Fellow
President Obama's team may think they are winning the public relations battle on the sequester, but in the process, they are losing the war over the best way to cut the debt and deficit.
The employment report for February came out this morning, and it is (finally) a strong report. The unemployment rate declined to 7.7 percent, the lowest rate since December 2008. But more importantly, job growth showed 236,000 new jobs being added to the economy, the first time in two years that monthly job growth has exceeded 200,000. If we hit that mark every month, it is estimated we will reach 6 percent unemployment in 19 months.
However—and it is a big however—federal fiscal policy is working against a strong economic recovery, and Washington policy makers seem hell-bent on slowing or stopping the recovery. And Republicans are actually winning the overall war over spending reductions, while the Obama Administration indulges in short-term public relations battles, missing the bigger picture.
In January, we restored some tax revenues paid by the wealthy as part of avoiding the so-called "fiscal cliff." Bush-era tax cuts were allowed to expire for those making over $400,000 a year, instead of the $250,000 threshold that President Obama fought for during last year's presidential election. These revenues probably don't hurt economic growth, as taxing the wealthy is less harmful than other tax increases. (Social Security payroll taxes reverted to their usual level for workers, which is more economically harmful.)
But the bigger hit on the economy began on March 1--the automatic spending cuts passed by Congress in 2011, the "sequester," originally enacted in the 2011 debt ceiling deal. In 2011, Republicans in Congress would not agree on new revenues, and the sequester—an across-the-board cut to all discretionary spending, including the military—was put into place.
At the time, no inside-the-Beltway expert believed the specific sequester cuts would actually happen. Although Republicans now want to blame it on the president, at the time they enthusiastically embraced the idea. Here's Paul Ryan (R-WI) in 2011, asked by Fox News commentator Sean Hannity why the sequester was a good idea: "Because we're cutting spending...What conservatives like me have been fighting for, for years are statutory caps on spending... We got that in law."
The sequester was supposed to hit on January 1, but as part of the deal on the Bush tax cuts, it was put off until March 1, with many commentators assuming it wouldn't happen, and that Congress would negotiate a more sensible package. But the president insisted on more revenues as part of any deal, and since about the only thing that unites Republicans any more is resisting any revenue increases, they refused, and the sequester cuts have gone into place.
The Obama Administration thinks it is winning a public relations battle blaming the cuts on Republicans, but the truth is that Republicans are winning the overall budget battle. We are making large cuts in the federal debt, heavily tilted towards spending cuts. A combination of spending cuts and new revenues of almost $4 trillion already has been enacted, close to the amount needed to stabilize the debt-to-GDP ratio. But guess what? That $4 trillion is made up of around $4 in spending cuts for every $1 in new revenue. Even the Bowles-Simpson plan, much criticized by progressives and liberals for excessive proposed spending cuts, only called for $2 to $3 in spending cuts for each $1 of new revenue.
So spending cuts are carrying the day. But do we hear any calls from Washington, including the president, to stop these harmful reductions? On the contrary—all we hear are more calls for cutting spending, "grand bargains" to reduce Social Security and Medicare benefits, and little prospect of any real balance between spending cuts and tax increases.
California has set a precedent for providing needed retirement reform at the state level, and other states have begun to follow in its footsteps. Within one week, both Connecticut and Maryland's legislatures are considering similar legislation to create individual retirement accounts for low-income private employees who do not have access to such plans at work.
On Tuesday, February 26, 2013, the Connecticut General Assembly held two hearings on the legislation, discussed in detail below. One week later, on March 5, 2013, Maryland's House of Delegates' Economic Matters Committee considered legislation introduced by Delegate Tom Hucker. SCEPA tesified at both, sharing our research on the impending retirement crisis.
The Connecticut Assembly's Labor and Public Employees Committee held a hearing on Bill 54: An Act Establishing a Retirement Savings Plan for Low Income Private Sector Workers, and the Aging Committee discussed Bill 885: An Act Establishing a Task Force to Evaluate the Utility of Creating a Public Retirement Plan. SCEPA Research Economist Joelle Saad-Lessler, Ph.D. Columbia University, provided testimony for both pieces of legislation. She stated:
"Middle income workers in Connecticut will fare worse than today’s retirees. Between 2000 and 2010 employer sponsorship of retirement plans dropped from 65% to 58%. As a result, over 686 thousand workers in Connecticut between the ages of 25 and 64 did not have access to a retirement plan through their employer in 2010. When people do save for retirement, their savings are vulnerable to high fees and low returns. Growing numbers of Connecticut residents will find themselves NOT READY for retirement, and will turn to the state for help. This is a crisis that needs to be addressed now.
We propose that the Connecticut legislature increase access to retirement savings by giving workers the option of opening up an individual, Guaranteed Retirement Account (GRA) through the existing Connecticut Retirement Plans and Trust Funds (CRPTF).
The Guaranteed Retirement Account, or “G.R.A.”, takes advantage of existing financial infrastructure in the state to give private sector workers access to the best financial managers and the lowest fees. The accounts would be separate from public sector retirement funds and come at no cost to taxpayers -- workers would pay administrative fees. Since these are individual retirement savings accounts, there is no liability to the state. Workers take out what they and their employer put in, plus the returns they earn. Private capital markets offer expensive retirement accounts with high fees to lower income workers because the sums invested are low. By pooling the money from many private sector workers, the Connecticut Retirement Plans and Trust Funds can invest in longer term opportunities with higher rates of return and charge lower fees. This is a win for workers."