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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.
In “What Happens When Low-Wage Workers are Given a Stake in Their Own Company,” SCEPA Director Teresa Ghilarducci writes about Texas grocery chain HEB’s recent announcement that it will give 15% of the company to its 55,000 employees.
HEB workers who meet a certain tenure threshold will get an equity stake valued at 3% of their salary and an additional $100 in stock per year going forward.
HEB’s move is not without support. Economists on both the left and right advance the idea of efficiency wage theory, or employers offering compensation above market rate to attract talent and reduce turnover. Social theorists have long discussed how worker ownership gives workers a stake in the success of their company. John Stuart Mill advocated industrial cooperatives, and Robert Owen experimented with utopian communities during the industrial revolution. More recently, Democratic presidential candidate Hillary Clinton has proposed a tax break that would encourage companies to share profits with their workers.
But HEB’s decision is best viewed in the context of recent developments in the labor market. The unemployment rate is finally approaching its pre-crisis level, and activists are becoming increasingly vocal about low pay and poor working conditions. If this is what workers get when the unemployment rate is 5%, what might happen if it falls even further?
In “How to Help the Middle Class Retire Comfortably at No Extra Cost,” SCEPA Director Teresa Ghilarducci discusses the federal government’s main tool for encouraging retirement savings: tax expenditures. At $120 billion per year, tax breaks for retirement savings represent the second largest federal tax expenditure, just below health insurance and above mortgage interest and charitable giving.
Unfortunately, this money is not spent equitably or effectively. The majority of it accrues to the top 20% of earners, who are more likely to have employer-sponsored retirement savings accounts and have higher taxes to avoid. Recent research shows these tax breaks aren’t having their intended effect. High-earners who benefit from them would be saving anyway, and just shift their money to retirement accounts to lower their tax rates.
This money could be better spent. Instead of giving most of the $120 billion to wealthy households to encourage saving they would have done anyway, we should divvy it up equally to support everyone’s need to save for retirement. This would amount to about $800 per worker per year, which would give workers around $100,000 in savings by the time they retire.
While we still need a comprehensive solution to the retirement crisis in the form of Guaranteed Retirement Accounts, reforming inefficient and ineffective tax breaks for retirement savings is a good start. It represents a huge increase for the roughly half of American households who have no retirement savings whatsoever.
Economics Professors Mark Setterfield of The New School and Eduardo Bastian of the Federal University of Rio de Janeiro have a message for post-Keynesian economists: take inflation seriously.
Setterfield and Bastian presented their research, “A Simple Analytical Model of the Adverse Effects of Inflation,” at the November 3rd weekly seminar series hosted by SCEPA and The New School Economics Department.
To “poke post-Keynesians in the ribs” so they consider the downsides of higher inflation, Setterfield and Bastian developed a framework to show the negative effects of rapidly rising prices on economic growth. Drawing from conflicting-claims inflation theory and Kaleckian growth theory, their work shows how different “inflation regimes” arise, ranging from low and stable price increases to out of control hyperinflation. The conclusion was clear: if inflation takes off, it can be hard to control and have adverse effects for economic growth.