Category Archives: Economy

Delivering the Next Economy: The States Step Up

Source: Bruce Katz, Jennifer Bradley, Amy Liu, Brookings Institution, Metropolitan Policy Program, November 2010

From the summary:
In January, 37 governors, many of them new, will take office facing daunting challenges, including many immediate needs for which there is precious little time or money to meet. But at the same time, they have an opportunity to lead their states, and the nation, into the next economy, which must be driven by exports, powered by low carbon, fueled by innovation, rich with opportunity. An economy with those characteristics will also be metropolitan-led.

Deeper budget cuts and more public sector layoffs will not re-balance and re-start our economy. Only wise, strategic investment does that. States should, therefore, do three things to revive their state economies and lay the groundwork for future prosperity:

1) Invest in new ways to support the assets that drive the next economy.
2) Cut to invest to jumpstart the transition to the next economy.
3) Leverage investments through smart metropolitan strategies.

The Role of Unemployment as an Automatic Stabilizer During a Recession

Source: Wayne Vroman, U.S. Department of Labor, ETAOP 2010-10, November 16, 2010

From the press release:
The Unemployment Insurance (UI) system helps the population most directly affected by recessions–those who have lost jobs through no fault of their own. This focus makes it one of the most effective targeted tools for maintaining American families’ purchasing power and keeping the economy on track during an economic downturn. Unemployment creates a snowball effect where people who have lost their job reduce their spending causing businesses to lose money and others to lose their jobs. Unemployment insurance acts to reduce this effect by helping the unemployed to continue to purchase vital goods and services for their family.
Related:
Unemployment Insurance Benefits and Family Income of the Unemployed
Source: Congressional Budget Office, November 17, 2010
New CBO & DOL Studies Underscore Need For Full‐Year Renewal Of Unemployment Insurance
Source: National Employment Law Project, Press Release, November 18, 2010

The Federal Government’s Long-Term Fiscal Outlook: Fall 2010 Update

Source: U.S. Government Accountability Office, GAO-11-201SP, November 15, 2010

From the summary:
GAO’s annual fall update of its long-term simulations underscores the need to address the long-term sustainability of the federal government’s fiscal policies. While the economy is still fragile and in need of careful attention, there is wide agreement on the need to look not only at the near-term but also at steps that begin to change the long-term fiscal path as soon as possible without slowing the recovery. With the passage of time the window to address the long-term challenge narrows and the magnitude of the required changes grows. The federal government faces long-term fiscal pressures that predate the economic downturn and are driven on the spending side largely by rising health care costs and an aging population.

Austerity

Source: Challenge, Vol. 53, No. 6, November/December 2010
(subscription required)

From the Editor:
Should the United States inject more stimulus into the economy through a second round of government spending? We present pieces on this critical subject, all of which question the need for austerity at this moment. The recovery since mid-2009 has not been strong by historical standards–those that followed similarly steep recessions in 1973-75 and 1982 were much more robust. The reasons are not hard to find. The extreme indebtedness of American consumers, the overreaching of the financial community, and the collapsed housing values have made it especially difficult to regenerate consumer and business spending. For more than a year, the unemployment rate has exceeded 9 percent.

In light of these factors, big spending by government, according to Keynesian economists, makes enormous sense. But largely because of major tax cuts, the country entered the recession with large budget deficits. The sharp reduction in tax revenues since then has expanded the deficit even further.

Now, a group of passionate and influential economists, policymakers, and private citizens has arisen to demand, not fiscal stimulus, but the opposite–out of fear of generating future recessions. These deficit hawks are effectively putting a lid on any new stimulus plans. The economist Robert Pollin challenges the deficit hawks in one of the most comprehensive pieces written on the subject and shows a way forward.

Articles include:
Austerity Is Not a Solution: Why the Deficit Hawks Are Wrong
Robert Pollin

When Is Austerity Right?: In Boom, Not Bust
Arjun Jayadev and Mike Konczal

Absurd Austerity Policies in Europe
Philip Arestis and Theodore Pelagidis

The Massive Shedding of Jobs in America
Andrew Sum and Joseph McLaughlin

America and the Crossroads of Capitalist Globalization
Peter Nolan

Rising Inequality, Public Policy, and America’s Poor
Lane Kenworthy

How Well Have Americans Been Doing?
Stephen J. Rose and John Schmitt’s

The Failure of Capitalism
Mike Sharpe

States’ Tax Revenues Show Gradual Recovery

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 81, October 2010

From the press release:
The second quarter of 2010 represented the second period in a row that states reported overall gains in tax collections — following five straight quarters of decline — according to a new study by the Rockefeller Institute of Government.

Overall state tax revenues grew by 2.3 percent in the second quarter of 2010, according to the Institute’s latest State Revenue Report. Thirty-four states reported gains in revenue during the second quarter, with 12 showing double-digit growth.

The Greening of America Revisited: Can the U.S. Create High-Skill Green Jobs?

Source: Andrew Ross, New Labor Forum, Vol. 19 no. 3, Fall 2010
(subscription required)

From the abstract:
There have been very few silver linings to the Great Recession, but one of them has been the prospect of launching a new industrial revolution powered by renewable energy. In the absence of any other candidates, green industrial policies have been prioritized as a recipe for economic recovery and the key to job creation, whether for building and operating the new energy infrastructure, or weatherizing the existing built environment. The urgency of the climate crisis raised the stakes much higher. Shunning the call for sustainability would not simply be a missed economic opportunity. It would be tantamount to a death sentence for large portions of the world’s population. The desperation of the jobless may have been the proving ground for green planning, but a humanitarian calamity of epochal proportions would be its final verdict if the transition from dirty to clean did not turn out right.

Cuts in local government employment accelerated sharply in September

Source: Don Boyd and Lucy Dadayan, The Nelson A. Rockefeller Institute of Government, Data Alert, October 12, 2010

The September employment report from the Bureau of Labor Statistics showed that total employment in the nation declined by 95,000 jobs. The declines reflected a loss from August to September of 7,000 state government jobs and 76,000 local government jobs. The cuts include positions in education and other areas.

City Fiscal Conditions in 2010

Source: Christopher W. Hoene & Michael A. Pagano, National League of Cities, Research Brief, October 2010

The nation’s city finance officers report that the fiscal condition of the nation’s cities continues to weaken in 2010 as cities confront the effects of the economic downturn.

Local and regional economies characterized by struggling housing markets, slow consumer
spending, and high levels of unemployment are driving declines in city revenues. In response, cities are cutting personnel, infrastructure investments and key services.

Findings from the National League of Cities’ latest annual survey of city finance officers include:
– Nearly nine in ten city finance officers report that their cities are less able to meet fiscal needs in 2010 than in the previous year;
– As finance officers look to the close of 2010, they report declining revenues and spending cutbacks in response to the economic downturn;
– Property tax revenues are beginning to decline in 2010, after years of annual growth, reflecting the gradual, but inevitable, impact of housing market declines in recent years;
– City sales tax revenues declined dramatically in 2009 and are declining further in 2010;
– Fiscal pressures confronting cities include declining local economic health, public safety and infrastructure costs, employee-related costs for health care, pensions, and wages, and cuts in state aid;
– To cover budget shortfalls and balance annual budgets, cities are making a variety of personnel cuts, delaying or cancelling infrastructure projects, and cutting basic city services; and,
– Ending balances, or “reserves,” while still at high levels, decreased for the second year in a row as cities used these balances to weather the effects of the downturn.

Recent Trends in the Distribution of Income: Labor, Wealth and More Complete Measures of Well Being

Source: Timothy M. Smeeding & Jeffrey P. Thompson, Political Economy Research Institute (PERI), University of Massachusetts-Amherst, Working Paper Series, Number 225, June 2010

From the abstract:
The impact of the great recession on inequality is unclear. Because the crises in the housing and stock markets and mass job loss affect incomes from across the entire distribution, the overall impact on inequality is difficult to determine. Early speculation using a variety of narrow measures of earnings, income and consumption yield contradictory results. In this paper, we develop new estimates of income inequality based on ‘more complete income’ (MCI), which augments standard income measures with those that are accrued from the ownership of wealth. We use the 1989-2007 Surveys of Consumer Finances, and also construct MCI measures for 2009 based on projections of assets, income, and earnings.

We also assess the level and trend in the functional distribution of income between capital and labor, and find a rising share of income accruing to real capital or wealth from 1989 to 2007. The recent economic crisis has diminished the capital share back to levels from 2004. Contrary to the findings of other researchers, we find that the labor share of income among high-income groups declined between 1992 and 2007.