Category Archives: Economy

Faces of Austerity: How Budget Cuts Make Us Sicker, Poorer, and Less Secure

Source: NDD United, November 2013

Thus far, the true impact of austerity has been masked behind the numbers. You have to talk to Americans, face-to-face, if you really want to understand the effects of budget cuts. Faces of Austerity: How Budget Cuts Have Made Us Sicker, Poorer and Less Secure tells the stories of those who’ve been impacted most by Washington’s failure to preserve the programs that keep us all healthy, safe, and educated. It is the product of months of work on behalf of hundreds of organizations representing millions of Americans nationwide.

The report provides the first ever comprehensive snapshot of austerity’s impact across sectors—education, job training, public health, safety and security, housing, science, natural resources, infrastructure, and international affairs. It features more than 40 distinct stories of individuals living with federal budget cuts in 22 states, nationwide, and even overseas.

While each individual’s story is unique, there are three key lessons that emerge:
• The cuts are deeper than you think.
When it comes to sequestration, we’ve all heard politicians and pundits say, “Who can’t absorb a five percent cut?” As the stories in our report show, sequestration cuts much deeper—25, 50 and in some cases, even 100 percent—once the cuts ripple out into the community. This report will provide much needed context for ongoing budget discussions. We hope Congress and the White House will remember the faces from this report— and the faces of millions of Americans not featured here—as they work together to balance the federal budget in a more balanced and responsible way.

•The cuts are unsustainable.
Those featured in our report say they’ve been able to hold it together so far, but if the cutting continues—as is scheduled to happen if lawmakers don’t intervene—there will be real and lasting damage, including complete elimination of programs, projects, and services.

•The cuts lead to lost opportunities.
There are real opportunity costs of federal budget cuts. The eroding disease surveillance infrastructure. The antiquated weather satellites. The student turned away from a career in science. The insolvent highway trust fund, and crumbling roads and bridges. The baby who wasn’t screened for SCID because the state can’t afford it….

Raising the Minimum Wage Would Help, Not Hurt, Our Economy

Source: T. William Lester, David Madland, and Jackie Odum, Center for American Progress, December 3, 2013

…A significant body of academic research finds that raising the minimum wage does not result in job losses, even during periods when the unemployment rate is high. Furthermore, our analysis of more than two decades’ worth of minimum-wage increases in U.S. states clearly shows that the minimum wage has no impact on job creation during periods of high unemployment.

Our analysis includes every state that saw its effective minimum wage increase from 1987 through 2012, when the state’s unemployment rate was at or above 7 percent. We then studied changes in employment in these states over the next year.* We include minimum-wage increases that occur because of either state or federal action, though we disaggregate results later.

According to our analysis, the majority of states that raised the minimum wage saw a decrease in their unemployment rate over the next year. There were a total of 91 cases where a state minimum-wage increase occurred during a period of high unemployment over the past two and a half decades. In 47 of these cases, the unemployment rate decreased over the next 12 months, and in 4 other cases the unemployment rate remained unchanged. In contrast, there were only 40 occurrences where the unemployment rate increased. That means when a minimum-wage increase occurred during a period of high unemployment, unemployment rates actually declined 52 percent of the time. …

Mobility and the Metropolis

Source: Patrick Sharkey, Bryan Graham, Pew Charitable Trusts, Economic Mobility Project, December 2013

From the summary:
This report shows that neighborhoods play an important role in determining a family’s prospects of moving up the economic ladder. Metropolitan areas where the wealthy and poor live apart have lower mobility than areas where residents are more economically integrated.
See also:
Overview
Press Release

An Analysis of State and Local Tax Incentives in Indiana

Source: Dagney Faulk, Michael J. Hicks, Ball State University, Center for Business and Economic Research, November 2013

This study provides an evaluation of economic development incentives offered by state and local governments in Indiana. The goal is to clarify the type, scale, and effectiveness of state and local tax incentives in Indiana, and to provide recommendations for policy or administrative adjustments as warranted. We conduct this analysis in two parts. The first is a descriptive analysis of state and local tax incentives in Indiana and a brief outline of selected states with which Indiana may compete for new business investment. Here we describe the tax incentives and compare and contrast the various aspects of individual systems and incentives as a whole. In the second section, we conduct a far more detailed study of tax incentives. This section is dedicated to an empirical assessment of tax incentives and includes a detailed review of recent studies on tax incentives and new analysis using data on individual projects in Indiana from 2005 through 2010. …

Trickle-Down Economics and Broken Promises: How Inequality Is Holding Back Our Economy

Source: Ben Olinsky and Asher Mayerson, Center for American Progress, December 4, 2013

From the summary:
For more than 30 years, conservative politicians have tried to sell Americans on the notion that giving tax cuts to the wealthy will spur economic growth and job creation, generating broad-based economic prosperity. Their marketing of this “trickle-down economics” has been successful: After decades of campaigning, many Americans now accept the oft-repeated assertion that lower taxes and less regulation leads to job growth. Congress followed suit, lowering tax rates sharply for the highest-income earners, while leaving tax rates relatively unchanged for other groups. When President Ronald Reagan took office in 1981, the marginal tax rate for the highest income bracket was 70 percent, but that fell to just 28 percent by the time he left office. Even after modest increases since then, the top marginal tax rate for top earners today hovers at just more than half of what it was in 1980 (see figure 1). At the same time, Congress and the courts have taken repeated steps to roll back labor and financial regulation, further contributing to the skyrocketing wealth of the top 1 percent.

Yet empirical economic data show that these misguided policies did not deliver on their promises, as our nation’s economy after the tax increases of 1993 significantly outperformed the periods after tax cuts in the 1980s and 2000s. Investment growth, productivity growth, employment growth, middle-class income growth, national fiscal health, and overall economic growth were weaker or declined under trickle-down policies.

Far from generating broad prosperity, these misguided policies have also led to an unprecedented level of income inequality in the United States. …
See also:
The Impact of Inequality on Growth by Jared Bernstein
The Impact of Redistributive Tax and Transfer Programs on Risk-Taking Behavior and Labor Mobility by Adriana Kugler
The Great Laissez-Faire Experiment: American Inequality and Growth from an International Perspective by David R. Howell

Impacts and Costs of the October 2013 Federal Government Shutdown

Source: Office of Management and Budget, November 2013

From the blog post:
…Today, OMB is releasing a report that catalogs the breadth and depth of this damage, and details the various impacts and costs of the October 2013 Federal government shutdown.

The report explains in detail the economic, budgetary, and programmatic costs of the shutdown. These costs include economic disruption, negative impacts on Federal programs and services that support American businesses and individuals, costs to the government, and impacts on the Federal workforce.

While the report covers a variety of areas, it highlights five key impacts and costs. …

America the Unequal: Origins and Impacts of a Policy Revolution

Source: Josh Bivens, Dēmos, 2013

This paper reassesses the origins and effects of the neoliberal policy revolution launched in the late 1970s. … This paper argues that growing inequality is not just the most salient economic fact of life for the vast majority of American families over the past generation; it is also a direct consequence of profound changes in economic policy, with systematic distributional implication. We begin by charting out the changes in policy that were undertaken, and then provide an examination of why these changes were proposed and (more importantly) what led to their adoption. The paper concludes by assessing what can be learned about policy impacts on the distribution of economic rewards, and by identifying the challenges and opportunities inherent in undertaking a political campaign to brake or reverse the rise in inequality …

U.S. Metro Economies Outlook – Gross Metropolitan Product, with Metro Employment Projections

Source: IHS Global Insight, November 2013

From the press release:
The nation’s cities are struggling more economically in 2013 than they did in 2012, according to a report done by IHS Global Insight for The U.S. Conference of Mayors. The report findings show that one-third (119) of the nation’s 363 U.S. metropolitan are as — cities and their surrounding suburbs — will see stagnant or declining economies this year. That number has increased significantly since last year, when only one-fifth (73) of U.S. metros experienced no growth. …[T]he report also shows that while two-thirds (244) of U.S. metropolitan areas will see
some measure of economic expansion in 2013, almost 40 percent of the cities/metros will grow by only 1 percent or less.
See also:
Key Findings

Investing in Young Children: A Fact Sheet on Early Care and Education Participation, Access, and Quality

Source: Stephanie Schmit, Hannah Matthews, Sheila Smith and Taylor Robbins, Center for Law and Social Policy (CLASP), Fact Sheet, November 2013

High-quality early care and education can play a critical role in promoting young children’s early learning and success in life, while also supporting families’ economic security. Young children at highest risk of educational failure – those experiencing poverty and related circumstances that may limit early learning experiences – benefit the most from high-quality early care and education programs. This joint fact sheet, from CLASP and NCCP, reveals that significant underinvestment in early care and education programs at the state and federal levels has left large numbers of eligible children underserved.

The Glass Floor: Education, Downward Mobility, and Opportunity Hoarding

Source: Richard V. Reeves and Kimberly Howard, Brookings Institution, Center on children and Families, November 2013

From the summary:
From an intergenerational perspective, the U.S. income distribution is sticky at both ends. Affluence and poverty are both partially inherited. Policy and research has focused on upward mobility, especially from the bottom. But relative intergenerational upward mobility is only possible with equivalent rates of downward mobility, where much less attention has been directed. Those born into more affluent families may be protected from falling by a “glass floor,” even if they are only modestly skilled.

In this paper we identify a group raised in higher-income households (top two-fifths of family income), who are predicted on the basis of their skills—both cognitive and non-cognitive—to fall down the ladder, but who remain in the higher-income bracket.