- On Capitol Hill
- On Wall Street
- In the Press
- 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 “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 on “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.
SCEPA co-hosted a conference with the Center for American Progress on How Tax Reform Can Address the Incoming Retirement Crisis. We discussed the erosion of American's retirement security and how the tax code can be used to encourage retirement savings.
Retirement tax expenditures are the second largest federal tax expenditure, costing roughly $100 billion per year and growing. They are ineffective and regressive. Rather than encourage savings, they incentivize the well-off to shift their savings to tax-exempt accounts. The top 20% of earners reap 60% of the benefits of these expenditures, while the bottom 40% of earners see only 3%.
In light of the crisis in retirement savings--one quarter of workers aged 50-64 have no retirement savings whatsoever--we believe this money could be put to better use. If it were converted to a credit and divided evenly among the population, it could provide over $600 per year to Guaranteed Retirement Accounts. Add to that state retirement tax expenditures, and you can make an impact in the retirement security of low-income and middle-class Americans.