Source: Alan S. Blinder – Gordon S. Rentschler Memorial Professor of Economics, Princeton University, and Mark Zandi – Chief Economist, Moody’s Analytics, July 27, 2010
The U.S. government’s response to the financial crisis and ensuing Great Recession included some of the most aggressive fiscal and monetary policies in history. The response was multifaceted and bipartisan, involving the Federal Reserve, Congress, and two administrations. Yet almost every one of these policy initiatives remain controversial to this day, with critics calling them misguided, ineffective or both. The debate over these policies is crucial because, with the economy still weak, more government support may be needed, as seen recently in both the extension of unemployment benefits and the Fed’s consideration of further easing.
In this paper, we use the Moody’s Analytics model of the U.S. economy–adjusted to accommodate some recent financial-market policies–to simulate the macroeconomic effects of the government’s total policy response. We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0. For example, we estimate that, without the government’s response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.
Source: Nancy Folbre, New York Times Economix Blog, July 26, 2010
Most Americans, even if they have jobs themselves, care about those who can’t find jobs. Recent polls report that a strong majority consider it a higher priority to help the unemployed than to reduce the federal deficit.
Most Americans also care about the well-being of the most vulnerable members of our community – individuals with disabilities, the frail elderly and children growing up in poverty. That’s why we have programs like Medicaid, Medicare and Head Start. Unfortunately, many states, unable to raise the revenue they need, are cutting spending on such programs.
Maybe we could improve home-care services by providing more federal support for jobs in this sector of the economy.
At least two specific proposals along these lines, based on very different designs, have been put forward.
Source: Jacob S. Hacker, Gregory A. Huber, Philipp Rehm, Mark Schlesinger, Rob Valletta, July 2010
The Economic Security Index (ESI), sponsored by the Rockefeller Foundation, measures the share of Americans who experience at least a 25% drop in their available family income whether due to a decline in income or a spike in medical spending or a combination of the two, and who lack an adequate financial safety net to catch them when they fall. A higher ESI therefore indicates greater insecurity, much as a rising unemployment rate signals a faltering economy.
Data are available for the ESI from 1985 through 2007, with projections for the most recent years (a less complete form of the index is available back to the late 1960s).
The ESI looks at actual economic losses, not at who fears or is vulnerable to them. The threat of such losses is real and growing for all Americans.
According to ESI:
– Financial insecurity has increased.
In 1985, 12.2 percent of Americans experienced a major economic loss sufficient to classify them as insecure in the ESI. During the recession of the early 2000s, this had risen to 17 percent. In 2007, before the current downturn, the picture had improved (13.7 percent), but measured insecurity remained higher than in the 1980s. Because the economic downturn after 2007 was substantial, we project the ESI forward based on the 1985-2007 experience. These projections suggest that in 2009, the level of economic insecurity experienced by Americans was greater than at any time over the past quarter century, with approximately one in five Americans (20.4 percent) experiencing a decline in available household income of 25 percent or greater.
– The extent of economic security varies substantially across the population but has risen for virtually all groups.
Economic Insecurity: The Long View
Source: Michael Powell, New York Times Economix Blog, July 23, 2010
Source: Penelope Lemov, Governing, July 15, 2010
When it comes to raising money and spending it, states and localities face formidable political obstacles.
– Public Rejects Variety Of Options For Fixing State Budgets
Source: Pew Research Center, June 28, 2010
– New Fiscal Year Brings More Grief for State Budgets, Putting Economic Recovery at Risk
Source: Erica Williams, Phil Oliff, Ashali Singham and Nicholas Johnson, Center on Budget and Policy Priorities, June 29, 2010
Source: Nancy Kober, Center on Education Policy, July 15, 2010
From the summary:
In the spring of 2010, CEP surveyed a nationally representative sample of school districts to learn about their fiscal situation and how the funds provided under the American Recovery and Reinvestment Act (ARRA) have impacted them over the last year. CEP found that the federal funds helped districts save or create teaching jobs and stabilize budgets, but that most districts expected to layoff teachers in the 2010-11 school year. The report also addresses districts’ efforts to carryout ARRA’s four reform areas, district uses of State Fiscal Stabilization Funds and supplemental Title I and IDEA funds, and problems faced by districts in implementing ARRA.
– Press release
Source: National Employment Law Project, July 2010
From the press release:
New analysis released today by the National Employment Law Project lists every U.S. Senator and Representative who voted against extending unemployment benefits last month and the cost of that opposition to their states – both in terms of the thousands of unemployed workers who continue to be cut off benefits every week, and the millions in economic stimulus that each state is missing out on as a result of the lapsed programs….Yet another poll finds overwhelming support for extension of unemployment benefits to help the unemployed, despite deficit concerns.
Source: David Moberg, In These times, Vol. 34 no. 7, July 2010
Democrats and unions fail to make job creation a national priority.
Source: Alan Greenblatt, NPR, July 12, 2010
Cities and counties are in sorry shape. What’s more, they may be among the last entities to feel like they’ve emerged from the recession.
Source: Shawn Fegley, Society for Human Resource Management (SHRM), June 2010
According to this research, the majority of HR professionals indicated that their organizations have been negatively affected by the U.S. and global economic recession. In this ever-changing economic climate, organizations are looking for ways to manage costs while at the same time dealing with the escalating expenses of employee benefits. So it is not surprising that 72% of HR professionals reported that the benefits offerings at their organization have been affected in some way.
Additional noteworthy findings included the following:
– Employee benefits remained relatively stable from 2009 to 2010. Last year’s study revealed a small decrease in the percentage of organizations offering benefits from 2008 to 2009.
– The areas that experienced the biggest downward trend since 2009 were housing and relocation benefits and business travel benefits.
– Even though employee benefits have remained relatively stable since 2009, benefits offerings experienced a downward trend when compared with results from five years ago.
– With a few exceptions, the survey findings suggest that organizations with larger staff sizes were more likely than smaller ones to offer any given benefit.
– More than three-quarters (79%) of organizations reported they reviewed their benefits programs annually, and 10% reported reviewing them even more frequently.
– Organizations spent on average 19% of an employee’s annual salary on mandatory benefits, 18% on voluntary benefits and 11% on pay for time not worked benefits.
The Juggle – The Decline of Family-Friendly Benefits
Source: Sarah E. Needleman, Wall Street Journal, July 8, 2010
Source: Michael Powell, New York Times, Economix Blog, July 1, 2010
An already storm-tossed economy is about to receive a thorough drenching, as states across the nation face a collective budget shortfall of $140 billion this summer.
The details, contained in a new report from the Center on Budget and Policy Priorities are sobering, not the least for what they suggest about the fragility of the national recovery. Tax receipts — property, income, you name it — have dwindled and dwindled some more; the federal stimulus gas tank is near empty; and as many as 900,000 workers could lose their jobs as a result of state budget cutting in the coming fiscal year.
Nor is there much help on the way.