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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.
- Published on Wednesday, January 19, 2011
The federal government is not considering plans to confiscate anyone's 401(k) account, despite public assertions to the contrary. This myth originated in a story published in the Carolina Journal Online, a publication of the (self-described) conservative John Locke Foundation in North Carolina. In a 2008 article titled "Dems Target Private Retirement Accounts," the author reported – incorrectly - that leaders in Congress were discussing the confiscation of 401(k) accounts. Later reports recycled this misinformation, leading to a pyramid effect where one undocumented, unsubstantiated claim is used as the source for subsequent claims.
This myth has been dispelled by reputable, non-partisan sources. For example:
1. FactCheck.org is a non-partisan media advocacy project based in the University of Pennsylvania. Referring to the Carolina Journal article, their comprehensive report stated simply, "The report is wrong. There's been no such discussion."
2. The Ric Edelman Show is a nationally-syndicated radio show hosted by the independent financial advisor. Concerned about his listeners panic after hearing these dangerous rumors, his used his November 6, 2010 show to address the rampant misinformation about pension reform proposals and 401(k)s. He also stated clearly, two years after the initial report, that there is no proposal to seize current 401(k) or IRA assets.
The real conversation on Capitol Hill is about the effectiveness of the tax credit for 401(k)s and similar accounts. Currently, taxpayer-funded tax credits for 401(k) and Individual Retirement Accounts (IRA) disproportionally help those who are already wealthy. As a matter of fact, 3% of taxpayers with incomes over $200,000 receive 20% of all the tax credits.
This is not a veiled critique of those who earn more. Indeed, many Americans work hard to gain a higher standard of living. But we need to remember that 401(k) programs we designed to make individual workers save more, and that so far this has not been the case. So in this Age of Austerity, why should we continue giving money to a program that has not accomplished its objective?
- Published on Wednesday, January 19, 2011
by Eloy Fisher, SCEPA Research Assistant
Foreign Policy magazine's special report, "Unconventional Wisdom," features commentary challenging the world's most dangerous thinking. It includes an article by James Galbraith, an economist and University of Texas professor, who makes an unconventional argument supporting lowering - rather than raising - the retirement age.
The strength of Galbraith's argument is that retirement reform can indeed be an effective policy tool against the financial crisis. If the right policy prescriptions address all three prongs of the issue - an appropriate determination of the retirement age, strengthening pension income, and providing medical care for the elderly - this could serve to unclog the labor market, lower unemployment, and increase productivity and entrepreneurship.
A critique of his article is that he does not address pension income and medical care, and how to fund and arrange both. Lowering the retirement age will increase the amount of people eligible to receive benefits, and, therefore, increase costs in the current hybrid PAYGO system. Unfortunately, I cannot fully agree with Galbraith's argument for two reasons. First, cheap imports are likely to become a thing of the past (with inflation increasing in China, news reports warn the age of cheap clothing will soon be over). Second, productivity gains are far from certain. These gains depend on current innovation, which is rapidly moving elsewhere, allowing others to reap its rewards.
This uncertainty is an opportunity. Social insurance programs were created during the New Deal to address the problem of how to achieve income stability and prevent old age poverty. Pension income, however, needs to be supplemented (and financed) somehow. For this reason, one could argue that people need to save more. A sensible solution would be making Guaranteed Retirement Accounts mandatory, a revenue-neutral plan to supplement basic Social Security to achieve the objective of preventing downward vertical mobility for working Americans.
- Published on Friday, January 14, 2011
Reporter James Pilcher reports on the state of retirement in Cincinnati and the massive losses 401k retirement accounts sustained as a result of the recession. He questions what the new normalcy of retirement will be now that traditional retirement accounts are on the decline and 401k accounts do not seem to be enough.
Teresa Ghilarducci's response to the article shows that there is a way to ensure that every American have a secure retirement.