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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
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.
In two recent articles, the Governing Institute cites work by SCEPA Director Teresa Ghilarducci in bringing attention to the looming pension crisis for workers in the U.S. On June 14, 201 in the article "America's Looming Pension Shock," Governing's Director Mark Funkhouser discusses the effects of decreasing public pensions for workers as they reach retirement. He writes, "but Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School in New York City and author of "When I'm Sixty-Four: the Plot against Pensions and the Plan to Save Them," would tell these government leaders that cuts in government workers' pension benefits are contributing to another impending crisis that they should begin to think about." He continues by bringing attention to Ghilarducci's Guaranteed Retirement Accounts plan as a potential solution.
On June 28, 2012 in "The Very Public Private-Sector Retirement Problem," Governing's Penelope Lemov continues the discussion by writing about the inadequacy of 401(k) plans in providing a secure retirement income in the face of pension shortfalls and potential state-level solutions to address the crisis. She draws attention to recent legislation in California introduced by Senator de Leon that would allow workers without work-based retirement accounts, like a traditional defined benefit pension or a defined contribution 401(k), to automatically be included in a state-run plan. The plan has already been approved by the California State Senate, and if it passes through the State Assembly, SCEPA Director Teresa Ghilarducci predicts, "a handful of states will follow suit quickly." Lemov cites Ghilarducci in noting that New York, Massachusetts and Connecticut are already considering similar plans.
New SCEPA research documents that, despite the growing tax breaks and intensive advertising campaigns for 401(k) and IRA retirement accounts, Americans nearing retirement are more likely than previously expected to experience downward mobility in their golden years. Specifically, people ages 50 to 64 - 59 million in 2011 - will likely not have enough retirement assets to maintain their standard of living when they reach their mid-sixties.
Using data from the U.S. Census Bureau's Survey of Income and Program Participation (SIPP), SCEPA's new Fact Sheet, Near Retirees' Defined Contribution Retirement Account Balances, is the first to provide a breakdown of defined contribution (DC) retirement account balances by income.
Three quarters of near retirees (ages 50 to 64) have annual incomes below $52,536, with an average total retirement account balance of $27,636. When stretched out into an annuity over an average retirement lifetime, this sum does not provide a significant addition to a monthly Social Security benefit (see Table 1.) Further, the median value of retirement account balances for half of near retirees is zero, meaning that over half of this group has no retirement savings.
Individuals with incomes over $52,536 per year have more in their retirement accounts, but their balances are not high. Their average retirement account balance for this income group is $109,752. Because only a few people have very high balances, the median balance is much lower; 50 percent of people ages 50-64 in the top 25 percent of the income distribution have retirement account balances of only $55,000.
The numbers are lower than previous estimates based on the data set. Previous estimates rely on the Survey of Consumer Finances (SCF), which aims to measure the net assets of U.S. families by over-sampling people likely to be wealthy to provide more precise estimates of wealth. This includes assets that only the wealthy own, such as municipal bonds and business assets. In contrast, the SIPP allows researchers to conduct analyses of government programs for the low-income population, over-sampling the low-income population. Since the two data sets focus on different groups of people, SIPP estimates of retirement wealth differ from estimates based on SCF data and more accurately represent the American population.