- On Capitol Hill
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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.
The retirement crisis is forging unlikely alliances. The New York Times’ Mark Miller writes about how SCEPA director Teresa Ghilarducci and Blackstone President Tony James have joined forces to advocate for replacing 401(k)s with a mandatory retirement savings program on top of Social Security.
Since Dr. Ghilarducci first proposed Guaranteed Retirement Accounts (GRA) in 2009, the effort for reform has gained steam as policymakers recognize the chasm between what experts recommend people save and what they actually do. Most Americans, even in the upper-middle class, have saved nowhere near enough for retirement.
The will for reform is present abroad and at home. Britain, Australia, and New Zealand implemented mandatory retirement programs within the last generation - to great success. In Britain, workers can expect to receive 71% of their salary in retirement. Three U.S. states have enacted universal pension plans since 2012, and another 23 are considering a variety of proposals. According to Ghilarducci, state action is a response to federal inaction, and state policymakers would prefer federal reform.
Last month, the U.S. Treasury debuted its myRA program, which makes government-sponsored starter IRA’s widely available. However, because myRAs are voluntary and small, their impact will be limited. Nonetheless, the program reflects a broad recognition of the need for reform. The Ghilarducci-James alliance is another indicator that a comprehensive federal plan is both necessary and possible.
Today’s unemployment report - while good news for the overall economy - reveals that the number of older people in the labor market continues to outpace population growth. While we all know the number of older people is increasing as the Baby Boomers hit retirement age, this isn’t a story about demographics. It’s about a larger percentage of older workers relying on the labor market.
You can see this trend in both the shrinking unemployment rate for older workers and the increase in their labor force participation rate. In November, the unemployment rate for older workers was 3.7%, one of the lowest since the beginning of the recovery in 2010. More people are working or looking for work.
The labor force participation rate, like the unemployment rate, includes both those looking for work as well as those who have jobs. In November, the participation rate for workers 55+ was about 40.2%, close to its peak of 40% in 2012. In 1995, only about 30% of workers over 55 participated in the labor force, an increase of 124% over the past 20 years. As a result, the labor market is flooded with 35 million older workers. In contrast, the number of prime-age workers (those between 25 and 54 years old) has not grown as fast as the prime-age population. The labor force participation rate of prime-age workers fell to about 80.7% from 80.8% in 1995.
Why are more older workers in the labor market? Given the crisis in retirement savings, some are unable to leave due to inadequate savings, the increase in 401(k)-type plans, and the lack of affordable health insurance.
Cutting Social Security benefits through raising the retirement age leaves work as the primary solution to the shortfall in retirement wealth. While it may look good to see an increasing demand for jobs among older people in an expanding economy, this rosy scenario doesn’t account for bargaining power. If the surge in older workers continues, the job market for all workers takes a hit in lower wages and increased competition between old and young.
The solution is to ensure retirement income through Guaranteed Retirement Accounts. This benefits both old and young. Older workers would have the choice to retire at their current standard of living and younger workers will see an increase in the supply of jobs.
by Arkady Gevorkyan and Willi Semmler
A cheap alternative to imported fossil fuels, shale energy was considered revolutionary when it hit the market in the late 20th century. As a result, the shale industry thrived in the early 2000s, playing a major role in the energy sector. But early in mid2014, the industry began to falter due to market forces and high debt levels, leaving it to face an uncertain future. However, the bust of the shale industry opens the door to the next revolutionary player in the energy sector: renewables.
The shale industry’s poor market position is due to both external market forces and questionable business practices, as documented in a recent SCEPA paper and published in Economic Modeling. First, an EIA report documents how shale companies engaged in excessive borrowing, incurring an unprecedented level of debt from 2010 to 2014. Second, 2014 ushered in an unexpected drop in crude oil prices that undercut shale’s competitive price in the market. Third, many of the larger energy companies that had been investing in small and midsize shale oil companies substantially increased their borrowing after the 2014 price plunge.
Unfortunately, experts predict that crude oil prices will remain low, extending shale’s “bust” cycle and offering the industry little chance at redemption. Instead, smaller shale companies that overleveraged during the “boom” years will likely have to downsize production and liquidate capital to repay debt. Rather than inspiring confidence in potential and necessary investors, this could reinforce shale companies’ reputation within the energy industry for making misguided investments and lead to a sector shakeout that forces some companies to restructure and some to fold.
Should shale collapse, what comes next? While some argue that low crude oil prices will simply revert the market back to a high demand for fossil fuels, others believe this “bust” among traditional market players is an opportunity for the emerging renewable sector. In fact, renewable energy companies could find U.S. consumers more open to green energy as a viable alternative to fossil fuels, just as they once learned to embrace shale energy.