Nothing warms the heart quite like a story of the high and mighty brought low. Harvard economists Carmen Reinhart and Kenneth Rogoff were the high and mighty—prestigious academics whose influential paper on government debt and economic growth was widely cited by policymakers and commentators to justify painful austerity policies. The underdogs who brought them down were three members of the UMass-Amherst economics department: graduate student Thomas Herndon and professors Michael Ash and Robert Pollin. As Dean Baker of the Center for Economic and Policy Research (CEPR) argues, it is no accident that UMass economists were the ones to debunk Reinhart and Rogoff. The department, Baker notes, “stands largely outside the mainstream” of the economics profession and so is “more willing to challenge the received wisdom.”
Posts Categorized: Policy
The letter below will be submitted to policymakers in support of pending legislation that would raise the U.S. minimum wage to $10.50 per hour. The bill, which is titled the “Catching Up to 1968 Act of 2013,” is sponsored by Congressman Alan Grayson.
As noted in the petition itself, we have also prepared a technical appendix and set of references covering all the points raised in the petition.
Economists who would like to be signatories to this letter should please send name and institutional affiliation to firstname.lastname@example.org.
We, the undersigned professional economists, support the “Catching Up to 1968 Act of 2013,” sponsored by Congressman Alan Grayson of Florida. This measure would raise the federal minimum wage from its current level of $7.25, established in 2009, to $10.50 per hour, and with automatic increases indexed to inflation thereafter.
Nearly two decades ago, a blue-ribbon panel of poverty experts selected by the national Academy of Sciences told us that the official U.S. government poverty measure is “demonstrably flawed … it needs to be replaced.” As a corrective step, the Census Bureau began publishing an alternative Supplemental Poverty Measure (SPM) in 2011.
The SPM represents genuine improvements, but it fails to address the most important criticism of the poverty line: it is too damned low. The poverty number betrays the experience of those left out of the official count, but who struggle mightily to put food on the table or keep the lights on. If poverty is the inability to meet one’s basic needs, then one in three Americans is poor—a rate more than twice that based on the SPM.
To combat the continuing recession in the U.S. and to move toward full employment, the clearly optimal policy is for the federal government to increase spending now on programs that contribute to economic growth while improving the quality of life, such as education, infrastructure, research & development, and – not least – reduction of emissions of heat-trapping gases. President Obama as well as Federal Reserve Bank Chairman Bernanke appear to be well aware of this.
Michal Kalecki’s (1943) classic paper, “Political Aspects of Full Employment” remains surprisingly modern, and its message still is worth revising. If you read and/or watch the current debates on economic policy in the mainstream media you would think that public deficits and debt are the main economic problem ahead. Further, if you look at Obama’s budget proposal, with the offer of reducing payments to social security recipients, you would think that entitlement programs are unsustainable and must be overhauled. On the other hand, the mainstream media is not as vocal on the unemployment problem, and in some quarters the current rate of unemployment, 7.6%, is seen as not too high, and only slightly above full employment, which is put by some at 5.5% (the so-called natural rate).