:: Levy Economics Institute of Bard College ::

Public Policy Briefs

Public Policy Briefs | January 2010
No Going Back: Why We Cannot Restore Glass-Steagall’s Segregation of Banking and Finance The purpose of the 1933 Banking Act—aka Glass-Steagall—was to prevent the exposure of commercial banks to the risks of investment banking and to ensure stability of the financial system. A proposed solution to the current financial crisis is to return to the basic tenets of this New Deal legislation. [more]
Public Policy Brief No. 107, 2010

Public Policy Briefs | November 2009
Can Euroland Survive? Social unrest across Europe is growing as Euroland’s economy collapses faster than the United States’, the result of falling exports and a weaker fiscal response. The controversial title of this brief is based on a belief that the nature of the euro itself limits Euroland’s fiscal policy space. [more]
Public Policy Brief No. 106, 2009

Public Policy Briefs | October 2009
It Isn’t Working: Time for More Radical Policies The Obama administration has implemented several policies to “jump-start” the American economy—efforts that have largely focused on preserving the financial interests of major banks. The authors of this new policy brief believe that maintaining the status quo is not the solution, since it overlooks the debt problems of households and nonfinancial businesses—and re-creating the financial conditions that led to disaster will simply set the stage for a recurrence of the Great Depression or a Japanese-style “lost decade. [more]
Public Policy Brief No. 105, 2009

Public Policy Briefs | August 2009
The New New Deal Fracas: Did Roosevelt’s “Anticompetitive” Legislation Slow the Recovery from the Great Depression? A wave of revisionist work claims that “anticompetitive” New Deal legislation such as the National Industrial Recovery Act (NIRA) and the National Labor Relations Act (NLRA) greatly slowed the recovery from the Depression; in this new public policy brief, President Dimitri B. Papadimitriou and Research Scholar Greg Hannsgen review these claims in light of current policy debates and cast into doubt the argument that NIRA and NLRA significantly prolonged or worsened the Depression. [more]
Public Policy Brief No. 104, 2009

Public Policy Briefs | August 2009
Financial and Monetary Issues as the Crisis Unfolds A group of experts associated with the Economists for Peace and Security and the Initiative for Rethinking the Economy met recently in Paris to discuss financial and monetary issues; their viewpoints, summarized here by Senior Scholar James K. Galbraith, are largely at odds with the global political and economic establishment. [more]
Public Policy Brief No. 103, 2009

Public Policy Briefs | August 2009
The Global Crisis and the Implications for Developing Countries and the BRICs: Is the B Really Justified? The term BRIC was first coined by Goldman Sachs and refers to the fast-growing developing economies of Brazil, Russia, India, and China–a class of middle-income emerging market economies of relatively large size that are capable of self-sustained expansion. Their combined economies could exceed the combined economies of today’s richest countries by 2050. [more]
Public Policy Brief No. 102, 2009

Public Policy Briefs | June 2009
Promoting Gender Equality through Stimulus Packages and Public Job Creation Beyond loss of income, joblessness is associated with greater poverty, marginalization, and social exclusion; the current global crisis is clearly not helping. In this new Public Policy Brief, Research Scholar Rania Antonopoulos explores the impact of both joblessness and employment expansion on poverty, paying particular attention to the gender aspects of poverty and poverty-reducing public employment schemes targeting poor women. [more]
Public Policy Brief No. 101, 2009

Public Policy Briefs | April 2009
It’s That “Vision” Thing: Why the Bailouts Aren’t Working, and Why a New Financial System Is Needed The Federal Reserve’s response to the current financial crisis has been praised because it introduced a zero interest rate policy more rapidly than the Bank of Japan (during the Japanese crisis of the 1990s) and embraced massive “quantitative easing.” However, despite vast capital injections, the banking system is not lending in support of the private sector. [more]
Public Policy Brief No. 100, 2009

Public Policy Briefs | March 2009
The Return of Big Government: Policy Advice for President Obama In the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. [more]
Public Policy Brief No. 99, 2009

Public Policy Briefs | February 2009
The Case Against Intergenerational Accounting: The Accounting Campaign Against Social Security and Medicare The Federal Accounting Standards Advisory Board (FASAB) has proposed subjecting the entire federal budget to “intergenerational accounting”—which purports to calculate the debt burden our generation will leave for future generations—and is soliciting comments on the recommendations of its two “exposure drafts.” The authors of this brief find that intergenerational accounting is a deeply flawed and unsound concept that should play no role in federal government budgeting, and that arguments based on this concept do not support a case for cutting Social Security or Medicare. [more]
Public Policy Brief No. 98, 2009

Public Policy Briefs | January 2009
After the Bust “Change” was the buzzword of the Obama campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas Palley, the neoliberal economic policy paradigm underlying that agenda must itself change if there is to be a successful policy response to the crisis. [more]
Public Policy Brief No. 97, 2009

Public Policy Briefs | October 2008
The Commodities Market Bubble Money manager capitalism—characterized by highly leveraged funds seeking maximum returns in an environment that systematically underprices risk—has resulted in a series of boom-and-bust cycles in equities, real estate, and commodities. Because subsequent cycles have been increasingly damaging to the broader economy, we are now at the point where we are experiencing the most severe financial crisis since the Great Depression. [more]
Public Policy Brief No. 96, 2008

Public Policy Briefs | August 2008
Shaky Foundations: Policy Lessons from America's Historic Housing Crash A bursting asset bubble inevitably requires central bank action, usually when it is already too late and with adverse spillover effects. In this sense, the Federal Reserve and other central banks already target asset prices; yet, by taking aim at them only on the way down—as in the current housing and credit crisis—the “Big Banks” create a self-perpetuating cycle of perverse incentives and moral hazard that often gives rise to yet another round of bubbles. [more]
Public Policy Brief No. 95, 2008

Public Policy Briefs | April 2008
Financial Markets Meltdown In this new Public Policy Brief, Senior Scholar L. Randall Wray explains today’s complex and fragile financial system, and how the seeds of crisis were sown by lax oversight, deregulation, and risky innovations such as securitization. [more]
Public Policy Brief No. 94, 2008

Public Policy Briefs | January 2008
Minsky’s Cushions of Safety In this brief, Senior Scholar Jan Kregel reviews Hyman P. Minsky’s concept of financial fragility—in short, that the structure of a capitalist economy becomes more fragile over a period of prosperity—and concludes that the current crisis is in fact the result of insufficient margins of safety based on how creditworthiness is assessed in the new “originate and distribute” financial system. [more]
Public Policy Brief No. 93, 2008

Public Policy Briefs | October 2007
The U.S. Credit Crunch of 2007 It is now clear that most economists underestimated the widening economic impact of the credit crunch that has shaken American financial markets since at least mid-July. A credit crunch is an economic condition in which loans and investment capital are difficult to obtain; in such a period, banks and other lenders become wary of issuing loans, so the price of borrowing rises, often to the point where deals simply do not get done. [more]
Public Policy Brief No. 92, 2007

Public Policy Briefs | October 2007
Globalization and the Changing Trade Debate The failure of the Doha Development Round of World Trade Organization (WTO) negotiations in July 2006 was the first major collapse of a multilateral trade round since World War II. Research Associate Thomas Palley sees the failure as an event that could mark the close of a 60-year era of trade policy largely centered on increasing market access and reducing tariffs, quotas, and subsidies. [more]
Public Policy Brief No. 91, 2007

Public Policy Briefs | July 2007
Cracks in the Foundations of Growth With economic growth having cooled to less than 1 percent in the first quarter of 2007, the economy can ill afford a slump in consumption by the American household. But it now appears that the household sector could finally give in to the pressures of rising gasoline prices, a weakening home market, and a large debt burden. [more]
Public Policy Brief No. 90, 2007

Public Policy Briefs | January 2007
The Economics of Outsourcing According to Research Associate Thomas I. Palley, global outsourcing represents a new economic challenge that calls for a new set of institutions. [more]
Public Policy Brief No. 89, 2007

Public Policy Briefs | November 2006
U.S. Household Deficit Spending Over the past decade, deficit spending by consumers has supported the United States economy. Research Associate Robert Parenteau analyzes the financial balance of American households and finds that the pace of deficit spending is likely to stall and, possibly, reverse course. [more]
Public Policy Brief No. 88, 2006

Public Policy Briefs | November 2006
Maastricht 2042 and the Fate of Europe Unemployment in the European Union (EU) is a serious problem that threatens to disrupt the integration of accession countries, the character of individual countries, and the continued existence of the EU. European integration poses a huge conundrum for European employment because the conventional theory explaining unemployment in Europe—labor market rigidities—is wrong. [more]
Public Policy Brief No. 87, 2006

Public Policy Briefs | October 2006
Rethinking Trade and Trade Policy The theory of comparative advantage says that there are gains from trade for the global economy as a whole. In this second brief of a three-part study of the international economy, Research Associate Thomas Palley observes that comparative advantage is driven by technology, which can be influenced by human action and policy. [more]
Public Policy Brief No. 86, 2006

Public Policy Briefs | June 2006
The Fallacy of the Revised Bretton Woods Hypothesis The stability of the international financial system is in doubt. Analysis of the system has focused mainly on the sustainability of financing the American trade deficit and has failed to understand the microeconomics of transactions within the system. [more]
Public Policy Brief No. 85, 2006

Public Policy Briefs | May 2006
Can Basel II Enhance Financial Stability? Even as the United States enjoys an economic expansion, there is an undercurrent of concern among economic analysts who follow financial markets. Some feel that the expansion of the credit derivatives markets poses the threat of a crisis similar to the Long-Term Capital Management debacle of 1998. [more]
Public Policy Brief No. 84, 2006

Public Policy Briefs | January 2006
Reforming Deposit Insurance The Federal Deposit Insurance Corporation (FDIC) currently insures bank deposit balances up to $100,000. According to some observers, statutory protection creates moral hazard problems for insurers because it allows banks to engage in risky activities. [more]
Public Policy Brief No. 83, 2006

Public Policy Briefs | August 2005
The Ownership Society As his new term begins, President George W. Bush has been trying to focus his domestic agenda on what he calls the “ownership society,” a sweeping vision of an America in which more citizens would hold significant assets and be free to make their own choices about providing for their health care and retirement, and educating their children. [more]
Public Policy Brief No. 82, 2005

Public Policy Briefs | June 2005
Breaking Out of the Deficit Trap For some time, Levy Institute scholars have been engaged with issues related to the current account, government, and private sector balances. We have argued that the existing imbalances in these accounts are unsustainable and will ultimately present a serious challenge to the performance of the American economy. [more]
Public Policy Brief No. 81, 2005

Public Policy Briefs | December 2004
The Fed and the New Monetary Consensus The most charitable interpretation of the Federal Reserve’s recent interest rate hikes is that they appear to have been premature. A convincing array of data on payrolls, employment-to-population ratios, and other labor market indicators show that the current recovery has not yet attained the degree of labor market tightness that was common in previous recoveries, and therefore that the threat of inflation is minimal. [more]
Public Policy Brief No. 80, 2004

Public Policy Briefs | August 2004
The Case for Rate Hikes For a time, the Federal Open Market Committee (FOMC) seemed to have learned from the mistakes of the past. Instead of taking good economic performance as a sign of incipient inflation, Chairman Alan Greenspan kept interest rates relatively low in the late 1990s, even as unemployment plummeted. [more]
Public Policy Brief No. 79, 2004

Public Policy Briefs | June 2004
The War on Poverty after 40 Years Twenty to 25 years ago, a debate was under way in academe and in the popular press over the War on Poverty. One group of scholars argued that the war, initiated by Presidents Kennedy and Johnson, had been lost, owing to the inherent ineffectiveness of government welfare programs. [more]
Public Policy Brief No. 78, 2004

Public Policy Briefs | June 2004
The Sustainability of Economic Recovery in the United States A rebound of consumption, investment, and consumer confidence in the second half of 2003 has raised hopes that the United States' recovery from the 2001 recession is on a sustainable course. According to this brief by Philip Arestis and Elias Karakitsos, however, the trend in the short-term factors affecting the economy has changed for the better, but long-term factors remain at risk. [more]
Public Policy Brief No. 77, 2004

Public Policy Briefs | April 2004
Asset Poverty in the United States Economic growth and a rising stock market in the 1990s gave the impression that everyone was accumulating wealth and asset poverty rates were declining. The impression was supported by the official, income-based poverty measure, which exhibited a sharp decline. [more]
Public Policy Brief No. 76, 2004

Public Policy Briefs | December 2003
Is Financial Globalization Truly Global? In 2002 more than $1 trillion worth of new bonds was sold across international boundaries. The total stock of cross-border bond holdings was more than $9 trillion. [more]
Public Policy Brief No. 75, 2003

Public Policy Briefs | November 2003
Understanding Deflation Most recent discussions of deflation seem to overlook the main dangers posed by a deflationary economy and appear to offer superficial solutions. In this brief, the authors argue that, barring drastic changes in asset and output prices, deflation itself is not the main problem, but rather the recessionary conditions that sometimes give rise to deflation. [more]
Public Policy Brief No. 74, 2003

Public Policy Briefs | August 2003
Asset and Debt Deflation in the United States In an asset and debt deflation, the process of reducing debt by saving and curtailing spending takes a long time, say authors Philip Arestis and Elias Karakitsos. Current imbalances and poor prospects for spending in the private sector affect the balance sheets of the commercial banks. [more]
Public Policy Brief No. 73, 2003

Public Policy Briefs | August 2003
What Is the American Model Really About? The “American Model” serves as a point of reference in discussions of economic policy around the world, especially in Europe. Many claim that the American version of the free market represents an ideal type—it is the highest form of capitalism. [more]
Public Policy Brief No. 72, 2003

Public Policy Briefs | January 2003
Can Monetary Policy Affect the Real Economy? Central bankers and many economists have abandoned “activist” policies and monetarism and adopted in their place a new view of the role of monetary policy. This view draws on many of the tenets of more traditional theories of money—monetarism’s emphasis on inflation control and skepticism about the use of easy-money policies to permanently increase output, and the Keynesian view that the total stock of money is not an important driving force behind either inflation or unemployment—yet it also takes a dim view of democratic input to the policymaking process. [more]
Public Policy Brief No. 71, 2003

Public Policy Briefs | November 2002
Physician Incentives In Managed Care Organizations This brief considers the interaction between physician incentive systems and product market competition in the delivery of medical services via managed care organizations. At the center of the analysis is the process by which health maintenance organizations (HMOs) assemble physician networks and the role these networks play in the competition for customers. [more]
Public Policy Brief No. 70, 2002

Public Policy Briefs | November 2002
Should Banks Be “Narrowed”? In this brief, Biagio Bossone of the International Monetary Fund evaluates narrow banking from the perspective of modern theories of financial intermediation. These theories portray the status quo banking system as a solution to otherwise intractable problems of imperfect information, risk, and even moral hazard. [more]
Public Policy Brief No. 69, 2002

Public Policy Briefs | August 2002
Optimal CRA Reform At issue in the debate over the renewal of the Community Reinvestment Act (CRA) of 1977 are the various yardsticks regulators use to judge whether individual institutions are meeting the credit and service needs of low- and moderate-income (LMI) communities. Based on careful examination of new CRA data and assessments of comments by selected stakeholders, the author concludes that if the new rules are to succeed, regulators will have to strike a careful balance between various competing interests vying to tip the balance of power in their favor. [more]
Public Policy Brief No. 68, 2002

Public Policy Briefs | November 2001
The Economic Consequences of German Unification Although the costs associated with moving an antiquated socialist economy toward its capitalist counterpart was anticipated to be significant, German industrial efficiency was expected to quickly overcome any challenges. Things turned out rather differently. [more]
Public Policy Brief No. 67, 2002

Public Policy Briefs | November 2001
Racial Wealth Disparities Despite decades of policies aimed at improving the economic position of African Americans in terms of relative income and earnings, they remain substantially behind whites. The research presented in this brief indicates that the wealth gap is even more staggering. [more]
Public Policy Brief No. 66, 2001

Public Policy Briefs | August 2001
Easy Money through the Back Door This brief assesses the experiences of Europe’s policy regime in the two years since the introduction of the euro in 1999, particularly the performance of the European Central Bank (ECB), the institution in charge of conducting monetary policy for the euro area. Conventional accounts of European growth, price, and labor market performance over recent years focus on labor market institutions and wage trends. [more]
Public Policy Brief No. 65, 2001

Public Policy Briefs | June 2001
Campaign Contributions, Policy Decisions, and Election Outcomes Proposals for campaign finance reform are essentially based on the belief that political influence can be bought with financial donations to a candidate’s campaign. But do contributions really influence the decisions of legislators once they are in office? In this brief, Christopher Magee examines the link between campaign donations and legislators’ actions. [more]
Public Policy Brief No. 64, 2001

Public Policy Briefs | March 2001
The Future of the Euro This brief provides a detailed description of the Stability and Growth Pact, an agreement entered into by the member states of the European Union that has far-reaching implications for the long-run value of the euro, and therefore, on the real economy in terms of output growth and employment. Yet despite the fact that the pact underpins the adoption of the single currency and has fundamentally redefined the scope and nature of economic policymaking in the member states, public discussion about it is relatively scant, especially on our side of the Atlantic, even though the economic health of the European Union does matter to the economic and strategic position of the United States. [more]
Public Policy Brief No. 63, 2001

Public Policy Briefs | December 2000
Is There a Skills Crisis? Despite seven years of economic growth a large gap exists in the wages earned by workers at the top of the earnings scale and those at the bottom. The leading explanation for this growth in wage inequality continues to be the skills-mismatch theory. [more]
Public Policy Brief No. 62, 2000

Public Policy Briefs | November 2000
Whither the Welfare State? The idea that saving is the force driving private investment and economic growth has become ever more entrenched in mainstream economic thought as well as in the minds of policymakers and the general public. Even though the empirical evidence that increased household saving will directly stimulate private investment and economic growth is scant, the idea remains prominent and underlies policy debates on topics ranging from Social Security to a balanced federal budget to reducing the national debt. [more]
Public Policy Brief No. 61, 2000

Public Policy Briefs | June 2000
A Dual Mandate for the Federal Reserve The Federal Reserve currently has two legislated goals—price stability and full employment—but a debate continues about making price stability the Fed’s primary and overriding goal. Evidence from the recent history of monetary policy contradicts arguments in favor of assigning primacy to inflation fighting and supports giving full employment equal importance. [more]
Public Policy Brief No. 60, 2000

Public Policy Briefs | February 2000
Financing Long-Term Care The nation is not prepared to deal with the jump in expenditures for long-term care that will come with the aging of the baby-boom generation. Only a small part of that care is paid for privately (out-of-pocket or through private insurance). [more]
Public Policy Brief No. 59, 2000

Public Policy Briefs | December 1999
A New Approach to Tax-Exempt Bonds The current system of tax-exempt bond financing is inefficient and inequitable because a large portion of the federal subsidy provided by the tax exemption does not reach state and local governments and accrues instead to the wealthiest investors. In addition, the current system excludes large institutional investors, both domestic and foreign, with their huge pools of capital, and it lacks the stable oversight characteristic of the taxable bond market. [more]
Public Policy Brief No. 58, 1999

Public Policy Briefs | December 1999
Do Institutions Affect the Wage Structure? Union strength is capable of boosting wages for workers at the low end of the income scale. Even when differences in education and industry type are accounted for, workers in right-to-work states have a greater probability of earning close to the minimum wage than workers in states with relatively high union density. [more]
Public Policy Brief No. 57, 1999

Public Policy Briefs | November 1999
Risk Reduction in the New Financial Architecture The causes for the instability that has marked the financial system over the past decade lie deep in the economic theory that urges easy and efficient substitution of one piece of paper for another, in the technology-driven tight articulation of receipts and payments, and in the growth of leverage that diminishes the creditworthiness of major institutions when an interruption in their receipts requires them to seek funds. Many of the proposals aimed at reducing risk in the financial system, however, do not recognize these changes or their importance. [more]
Public Policy Brief No. 56, 1999

Public Policy Briefs | August 1999
Does Social Security Need Saving? Projections of an impending crisis in financing Social Security depend on unduly pessimistic assumptions about basic demographic and economic variables. Moreover, even if the assumptions are accepted, the projected gap between Social Security revenues and expenditures would not constitute a “crisis” and could be eliminated with relatively simple adjustments when it occurs. [more]
Public Policy Brief No. 55, 1999

Public Policy Briefs | July 1999
Down and Out in the United States Despite a long period of strong economic growth, more than 28 million working-age persons were categorized by the Bureau of Labor Statistics as out of the labor force in 1998. A small portion of this population will move into the labor force, but the majority will remain without work. [more]
Public Policy Brief No. 54, 1999

Public Policy Briefs | July 1999
Full Employment Has Not Been Achieved Claims that the nation has reached full employment take for granted the need for a reserve pool of labor to maintain price stability and labor market flexibility. But are millions of jobless and underemployed workers the best we can do in these times of economic expansion? And what will happen when the inevitable downturn comes? Reduction of the workweek and employment subsidies have been proposed to achieve higher employment, but neither is sure to raise employment and both may have serious side effects. [more]
Public Policy Brief No. 53, 1999

Public Policy Briefs | July 1999
Government Spending in a Growing Economy Based on neoclassical theory, cutting budget deficits has come to be seen as a principal way to increase long-run growth, but the empirical evidence is ambiguous on the outcome of this macropolicy. A new model, the classical growth cycles (CGC) model, offers an alternative theoretical framework for analyzing the complex effects of fiscal policy. [more]
Public Policy Brief No. 52, 1999

Public Policy Briefs | March 1999
Small Business and Welfare Reform The Levy Institute conducted a survey of small businesses to elicit information about their hiring and employment practices, especially the hiring of former welfare recipients; preferences regarding education, training, and other characteristics of potential employees; effects of increases in the minimum wage on employment decisions; and their responses to various forms of government wage and training subsidies. Analysis of the survey results indicates weaknesses in the assumptions on which recent welfare reform has been based. [more]
Public Policy Brief No. 51, 1999

Public Policy Briefs | February 1999
Public Employment and Economic Flexibility Central banks, national governments, and international organizations have resisted policies that would promote full employment because high employment and high capacity utilization are associated with structural rigidities that result in sluggish growth, inflationary pressures, and other undesirable consequences. What has been almost entirely overlooked is the way in which public sector activity can enhance flexibility with regard to labor, capital goods, natural resources and environmental protection, methods of production, and location of economic activity. [more]
Public Policy Brief No. 50, 1999

Public Policy Briefs | December 1998
Corporate Governance in Germany The postwar system of corporate governance in Germany is being threatened by the failure of some industries to maintain their competitive position (with resulting significant job losses) and pressures for financial liquidity driven by those who have accumulated substantial financial holdings, institutions competing for control of those holdings, and those concerned about the funding of the pension system. The strength of the competitors (mainly the Japanese) lies not in cost differences, but in their capabilities, based on financial commitment and organizational integration, to innovate and thereby to build the long-run future of the corporation. [more]
Public Policy Brief No. 49, 1998

Public Policy Briefs | December 1998
Japanese Corporate Governance and Strategy Despite the crisis in the Japanese financial sector, prolonged recession, and competitive challenges, Japan’s formidable productive system remains strong. Nevertheless, the system of corporate governance, which has pursued a strategy of retaining corporate revenues and reallocating labor resources and returns to labor in order to invest in productive capabilities, faces short-term pressures from a transformation of the financial sector and long-term pressures from the growth of intergenerational dependence. [more]
Public Policy Brief No. 48, 1998

Public Policy Briefs | December 1998
Regulating HMOs HMO medicine sets up an inevitable conflict between the physicians’ traditional fiduciary role and the financial interests of the health plan and its physicians. Regulatory interventions, such as the formulation of rules regarding clinical practice, put government in a micromanagement role it cannot hope to perform well. [more]
Public Policy Brief No. 47, 1998

Public Policy Briefs | November 1998
Self-Reliance and Poverty The United States' official poverty measure defines the poor in terms of a family’s actual, yearly cash income relative to an estimate of the income needed to sustain a minimally acceptable standard of living. An alternative definition, designed to reflect a family’s ability to achieve economic independence, would instead rest on its capacity for generating income. [more]
Public Policy Brief No. 46, 1998

Public Policy Briefs | October 1998
Did the Clinton Rising Tide Raise All Boats? During the recent robust expansion only 700,000 of the almost 12 million jobs created went to the half of the population that does not have at least some college education. Even though the number of officially unemployed fell to less than 4 million in the 25-and-over age group, there remain in that group over 26 million potentially employable workers—the combined number of those who are actively seeking work (and are counted as officially unemployed) and those who are currently out of the labor force but would be willing to participate. [more]
Public Policy Brief No. 45, 1998

Public Policy Briefs | September 1998
The Asian Disease: Plausible Diagnoses, Possible Remedies Asia presents a cumulation of apparently rational decisions that produced disastrous results—a textbook illustration of “financial instability” developing from the economics of euphoria. A combination of factors produced the crisis as enormous capital inflows were drawn to the “Asian miracle“-pegged exchange rates with fluctuating interest rates, integrated economies, moral hazard created by central banks, and short-term lending and derivatives trade without sufficient evaluation of risk and credit analysis of borrowers. [more]
Public Policy Brief No. 44, 1998

Public Policy Briefs | September 1998
How Big Should the Public Capital Stock Be? Investment in infrastructure is necessary for a strong, flexible, and growing economy. However, the relationship between public capital and economic growth is not linear. [more]
Public Policy Brief No. 43, 1998

Public Policy Briefs | August 1998
Automatic Adjustment of the Minimum Wage The fact that every change in the minimum wage requires an act of Congress means that debate over the wisdom of having a minimum is repeatedly returned to the political arena. As inflation continues to erode the value of the minimum wage, each legislative delay means that a larger increase is required. [more]
Public Policy Brief No. 42, 1998

Public Policy Briefs | July 1998
Side Effects of Progress Why does a dynamic growing economy have a persistent long-term unemployment problem? Research Associates Baumol and Wolff have isolated one cause. Although technological change, the engine of growth and economic progress, may not affect or may even increase the total number of jobs available, the fact that it creates a demand for new skills and makes other skills obsolete can cause an increase in the overall rate of unemployment and the length of time during which an unemployed worker is between jobs. [more]
Public Policy Brief No. 41, 1998

Public Policy Briefs | May 1998
Overcoming America’s Infrastructure Deficit Condemned bridges, dilapidated school buildings, contaminated water supplies, and other infrastructure shortcomings threaten American growth, productivity, and prosperity. The authors of this brief propose a plan for financing infrastructure projects that is designed to have minimal effect on the federal budget and to promote sound fiscal operation. [more]
Public Policy Brief No. 40, 1998

Public Policy Briefs | May 1998
The Unmeasured Labor Force Is the current labor market as tight as official statistics would seem to indicate? If incumbent workers increase their hours of work, it is irrelevant to the unemployment rate, but hardly irrelevant to the level of labor supply. The authors of this brief find that job insecurity and stagnating wages have made Americans willing to work those extra hours to build a financial cushion, and a 1 percent increase in hours worked per worker for a fixed labor supply is equivalent in terms of labor supply to a 1 percent increase in the number of workers. [more]
Public Policy Brief No. 39, 1998

Public Policy Briefs | December 1997
Who Pays for Disinflation? Using theoretical predictions, econometric results, and the example of the Volcker disinflation, Willem Thorbecke establishes that through disinflation’s burden on the durable goods and construction industries, small firms, and low-wage workers and its benefits to bond market investors, it effects a redistribution of wealth from the poor to the rich. Because of this distributional consequence, he argues, engineering a disinflationary recession now to wring more inflation out of the economy would be inappropriate. [more]
Public Policy Brief No. 38, 1997

Public Policy Briefs | December 1997
Investment in Innovation Since the 1970s corporate America has become obsessed with shedding employees to cut costs and with distributing revenue to stockholders. However, the way for it to regain its competitive edge and thus to restore the promise of secure and remunerative employment for its workers is to reform its system of governance. [more]
Public Policy Brief No. 37, 1997

Public Policy Briefs | October 1997
Dangerous Metaphor: The Fiction of the Labor Market The concept of a labor market, responding to familiar underpinnings of supply and demand, completely colors thought on the relationship between employment, wages, and inflation, according to James K. Galbraith. [more]
Public Policy Brief No. 36, 1997

Public Policy Briefs | October 1997
Reflecting the Changing Face of America On the United States' census form, American citizens are told they may list any ethnic ancestries with which they identify, but are instructed to “mark one only” in the question on race. Joel Perlmann asserts that it is in the public interest to allow people to declare themselves as having origins in more than one race. [more]
Public Policy Brief No. 35, 1997

Public Policy Briefs | September 1997
Safeguarding Social Security The falling ratio of workers to retirees in the United States has raised concerns about Social Security’s ability to continue to provide a base level of support for all retired workers and to remain in balance with all of government's other fiscal obligations. Of alternative plans that have been proposed to safeguard the system, Walter Cadette argues against radical revamping through privatization and suggests instead minor modifications in the existing tax and benefits structure. [more]
Public Policy Brief No. 34, 1997

Public Policy Briefs | August 1997
Is There a Trade-Off between Unemployment and Inequality? Rebecca M. Blank considers how the flexibility of American labor markets and the regulation and redistribution policies of European labor markets may determine employers’ responses to worldwide economic transformations that result in increasing wage disparity in the United States and continuing high unemployment in Europe. [more]
Public Policy Brief No. 33, 1997

Public Policy Briefs | August 1997
What’s Missing from the Capital Gains Debate? The recent enactment of a capital gains tax cut resulted, according to the authors, from the absence of a true appreciation or consideration of the real beneficiaries of such a cut, its probable actual effects, the distinction between productive and nonproductive sources of capital gains (two-thirds of capital gains accrue to real estate, which is a fixed, nonproductive asset), and distortions in our current income accounting system (which shield most real estate income from taxation). The across-the-board cut, which treats real estate appreciation and true capital gains as the same, is a giveaway to real estate and will steer capital and entrepreneurial resources to a search for unearned income. [more]
Public Policy Brief No. 32, 1997

Public Policy Briefs | May 1997
A New Path from Welfare to Work The author of this brief asks why welfare, workforce development, and unemployment insurance are operated as separate entities. If the goal of the new welfare law is to end dependency and foster a work ethic, then it needs to be tied more closely to existing policy aimed at developing the workforce. [more]
Public Policy Brief No. 31, 1997

Public Policy Briefs | April 1997
Prescription for Health Care Policy With health care delivery increasingly shaped by market and budgetary discipline, the provision of health care for all seems an ever-more-distant goal.The high cost of American health care is the inevitable by-product of its method of financing. [more]
Public Policy Brief No. 30, 1997

Public Policy Briefs | February 1997
Institutional Failure and the American Worker David R. Howell argues that the collapse of low-skill wages in the United States cannot be explained by a skill mismatch resulting from a technology-driven decline in the demand for low-skill labor. [more]
Public Policy Brief No. 29, 1997

Public Policy Briefs | November 1996
Making Work Pay Barry Bluestone of the University of Massachusetts and Teresa Ghilarducci of the University of Notre Dame show that although the poverty rate for elderly Americans has declined over the past three decades, the total number of persons in poverty has grown and the number of poor nonelderly adults in poverty has nearly doubled since 1970. The authors argue for a comprehensive and coherent strategy aimed at the working poor and those susceptible to highly fluctuating incomes. [more]
Public Policy Brief No. 28, 1996

Public Policy Briefs | September 1996
Targeting Inflation The targets for monetary policy adopted by the Fed in recent years have not proven to be closely correlated with inflation, leading some theorists and policymakers to advocate the use of a price index, such as the consumer price index (CPI), as both the target and the goal of monetary policy. The authors of this brief show that such a choice is not wise because the CPI does not accurately reflect market-caused price increases and is not under the control of monetary policy. [more]
Public Policy Brief No. 27, 1996

Public Policy Briefs | July 1996
Making Unemployment Insurance Work What is needed to solve the problem of growing long-term unemployment is a two-tiered system that distinguishes between short-term and long-term unemployment. The system should continue to function as an insurance program for 26 weeks to allow workers to search for employment that represents the best match with their experience, skills, and credentials. [more]
Public Policy Brief No. 26, 1996

Public Policy Briefs | April 1996
Capital Gains Taxes and Economic Growth This brief assesses the effect of a capital gains tax cut on firms’ decisions to undertake new investment projects and the possible effect of such projects on economic growth and employment. The authors' analysis takes into account such factors as projects’ degree of uncertainty, investors’ degree of risk aversion, whether capital gains losses are deductible against capital gains income, whether the market value of an investment project is affected by the imposition of capital gains taxes, and whether the project is financed by internal or external means. [more]
Public Policy Brief No. 25, 1996

Public Policy Briefs | February 1996
Revisiting Bretton Woods Raymond F. Mikesell outlines the activities of the International Monetary Fund (IMF) and the World Bank over the course of their history and evaluates the organizations' success in meeting their original and subsequent goals. [more]
Public Policy Brief No. 24, 1996

Public Policy Briefs | September 1995
A Critical Imbalance in U.S. Trade According to Wynne Godley, the significance of the deficit in the United States' balance of payments has been underestimated in both public policy and academic discussions, despite the fact that American markets are increasingly dominated by foreign manufacturers. Godley analyzes the problem posed by the current balance of payments deficit. [more]
Public Policy Brief No. 23, 1995

Public Policy Briefs | September 1995
Closing the R&D Gap Both spending and tax policies have been implemented in the United States with the goal of stimulating private sector research and development (R&D). Thomas Karier questions whether current R&D policy, especially the research and experimentation tax credit, can contribute to closing the gap between nondefense expenditures on R&D in the United States and such expenditures in other countries, such as Japan and Germany. [more]
Public Policy Brief No. 22, 1995

Public Policy Briefs | May 1995
The Consolidated Assistance Program In this brief, Oren M. Levin-Waldman examines the structure of existing welfare programs and concludes that the current array of benefits could be synchronized and consolidated to create a new system that would provide economic incentives to work. [more]
Public Policy Brief No. 21, 1995

Public Policy Briefs | April 1995
Assessing the Constitutional Route to Federal Budget Balance Charles J. Whalen evaluates the political and economic arguments in favor of a constitutional amendment requiring a balanced budget and concludes that, although today’s federal budget process needs reform, the balanced budget amendment is not a solution. [more]
Public Policy Brief No. 20, 1995

Public Policy Briefs | April 1995
Cooperate to Compete Takao Kato outlines the types of human resource management practices (HRMPs) used in Japan and the effect of these employee participation programs on employee productivity and economic competitiveness. From these findings about the effects of HRMPs on Japanese productivity, Kato draws several conclusions for the direction that American policy might take in order to raise productivity in the United States. [more]
Public Policy Brief No. 19, 1995

Public Policy Briefs | January 1995
The Economics of Aging S. Jay Levy presents a preliminary study of the consumption patterns of retirees and nonretirees during the 1980s, paying particular attention to the distribution of the national consumer product. [more]
Public Policy Brief No. 18, 1995

Public Policy Briefs | January 1995
Narrow Banking Reconsidered The functional approach to reforming the financial system advocates the structural separation of the depository and lending functions of banks. As a result of such a separation, monetary and credit policy undergo a parallel separation, and government supervision and regulation of the banking industry are modified. [more]
Public Policy Brief No. 17, 1995

Public Policy Briefs | November 1994
Infrastructure Investment for Tomorrow The author presents a long-term public investment proposal to preserve and upgrade the nation's infrastructure system, offering a unique financing plan to eliminate much of the backlog of deferred maintenance that plagues America’s roads and bridges. The plan would allow states and municipalities to get out from under this burden with a one-time upgrading program, and then attain a new capacity to maintain and improve their infrastructure networks. [more]
Public Policy Brief No. 16, 1994

Public Policy Briefs | September 1994
Monetary Policy Uncovered Experience with a variety of targets has cast doubt on the likelihood that a single variable can be found to be closely and reliably linked to future inflation; it is even less likely that such a variable, should it be found, would somehow be under the control and manipulation of the Federal Reserve. This brief provides a review of the experiments with various targets undertaken by former Fed Chairman Paul Volcker and current Chairman Alan Greenspan. [more]
Public Policy Brief No. 15, 1994

Public Policy Briefs | September 1994
Linking Public Capital to Economic Performance Following up on findings by J. Bradford DeLong and Lawrence Summers that a robust statistical relationship exists between productivity and private sector investment in plant and equipment, the author explores whether there is also a connection between economic growth and public spending. [more]
Public Policy Brief No. 14, 1994

Public Policy Briefs | June 1994
Investment Tax Credit Reconsidered In this brief, Thomas Karier explores the efficacy of the investment tax credit (ITC) in stimulating private investment spending. He notes that there are three possible channels through which an ITC can act on investment: price, income, and multiplier effects. [more]
Public Policy Brief No. 13, 1994

Public Policy Briefs | May 1994
An Alternative in Small Business Finance At a time when small businesses are suffering from a credit crunch, “niche” financial institutions are filling the void left by more traditional sources of financing, such as commercial banks. The authors argue that the most important of these niche players are community-based factor companies, which are rapidly expanding from their client base in apparel and textiles to finance a range of firms in everything from electronics to health care. [more]
Public Policy Brief No. 12, 1994

Public Policy Briefs | March 1994
A Path to Good Jobs? Robert M. Hutchens examines three paths by which a young person with limited academic credentials may avoid a life of unemployment and low wages: obtaining additional formal schooling, securing a job that provides secure employment at “good” wages, or acquiring a job that provides skills and thereby opens a door to good future jobs. [more]
Public Policy Brief No. 11, 1994

Public Policy Briefs | November 1993
Job-lock: An Impediment to Labor Mobility? Recent survey results and anecdotal evidence appear to indicate that workers sometimes sacrifice job opportunities by remaining in their current position in order to retain health benefits. If “job-lock” is real, the nation pays an economic price in terms of a misallocation of workersamong productive opportunities, higher relocation and training costs for workers who have stayed too long in their jobs, and the loss of innovation, employment, and competition associated with start-up ventures. [more]
Public Policy Brief No. 10, 1993

Public Policy Briefs | October 1993
The Investment-Finance Link The author of this brief offers evidence that policies aimed at stimulating private sector investment through interest rate reductions are, at best, misguided. He concludes that, while there may be benefits from policies aimed at increasing saving or lowering the budget deficit, a higher level of business investment is not one of them. [more]
Public Policy Brief No. 9, 1993

Public Policy Briefs | September 1993
Financing Prosperity in the Next Century The authors of this brief propose a series of reforms aimed at making bank regulations compatible with the changing financial system. They present evidence to support their contention that change in the market for financial services has reduced the importance of depositories as they have traditionally operated. [more]
Public Policy Brief No. 8, 1993

Public Policy Briefs | June 1993
Immigration Policy: A Tool of Labor Economics? Vernon M. Briggs argues that, while mass immigration in the past was consistent with then-existing labor market needs, today it is incompatible with the nation's economic development trends and labor force requirements. [more]
Public Policy Brief No. 7, 1993

Public Policy Briefs | May 1993
A Path to Community Development The establishment of a system of federally regulated, for-profit community development banks (CDBs) would help to fill the financial gap in areas inadequately served by traditional banks, requirements of the Community Reinvestment Act (CRA) notwithstanding. These organizations would be charged with delivering credit, payment, and savings opportunities and providing basic financing to households and small businesses in underserved areas. [more]
Public Policy Brief No. 6, 1993

Public Policy Briefs | May 1993
The Limits of Prudential Supervision According to Bernard Shull, although the recent round of banking legislation—most notably the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and the Federal Deposit Insurance Corporation Improvement Act (FDICIA)—did take steps toward preventing financial crises, it did not go far enough in the area of unifying the regulatory structure. Shull proposes unifying federal bank regulatory agencies that presently have flexible authority over competing institutions. [more]
Public Policy Brief No. 5, 1993

Public Policy Briefs | March 1993
Public Infrastructure Investment: A Bridge to Productivity Growth? This brief presents contrasting views on the effects of public infrastructure investment on private sector productivity. David Alan Aschauer states that the slower rate of productivity growth since the early 1970s—coupled with an aging population, the declining proportion of workers to the total population, and other demographic factors—poses a dilemma for policymakers interested in strengthening the long-term relative position of the United States in an increasingly competitive global economic environment. [more]
Public Policy Brief No. 4, 1993

Public Policy Briefs | January 1993
Community Development Banking This brief proposes that the establishment of a nationwide system of community development banks (CDBs) would advance the capital development of the economy. The proposal is based on the notion that a critical function of the financial system is not being adequately performed by existing institutions for low-income citizens, inner-city minorities, and entrepreneurs who seek modest financing for small businesses. [more]
Public Policy Brief No. 3, 1993

Public Policy Briefs | September 1992
An Economic Assessment: Contained Depression or the Foothills of Recovery? Robert Barbera and David A. Levy offer contrasting assessments of the United States' economy during the late 1980s and early 1990s. [more]
Public Policy Brief No. 2, 1992

Public Policy Briefs | July 1992
Restructuring the Financial Structure To avoid excessive concentration of economic and financial power, Athony M. Solomon recommends institutional and regulatory reform of the financial system by such means as nationwide banking, restrictions on federal deposit insurance, consolidation of financial regulation, balancing numerical standards with supervisory discretion, increased accountability of banks’ management boards, and leveling the playing field across institutions, markets, and countries. [more]
Public Policy Brief No. 1, 1992