A conference on the distributional effects of government spending and taxation was held at the Levy Institute’s conference center in fall 2004 and is summarized under The Distribution of Income and Wealth program. The presentations outlined how governments play a large role in affecting inequality, since countries spend at least a quarter of GDP on social welfare and most governments tax one group in order to transfer benefits to another.

 

Contents:

 

INSTITUTE RESEARCH

Levy Institute Measure of Economic Well-Being

• EDWARD N. WOLFF, AJIT ZACHARIAS, and ASENA CANER, How Much Does Wealth Matter for Well-Being? Alternative Measures of Income from Wealth

Strategic Analysis

• WYNNE GODLEY, ALEX IZURIETA, and GENNARO ZEZZA, Prospects and Policies
  for the US Economy:Why Net Exports Must Now Be the Motor for US Growth

Program: Distribution of Income and Wealth

• CONFERENCE: The Distributional Effects of Government Spending and Taxation

Program: Financial Markets and Monetary Policy

• J�RG BIBOW, Assessing the ECB’s Performance since the Global Slowdown: A Structural Policy Bias Coming Home to Roost?
• PHILIP ARESTIS and ASENA CANER, Financial Liberalization and Poverty:
  Channels of Influence

Explorations in Theory and Empirical Analysis

• GREG HANNSGEN, Gibson’s Paradox,Monetary Policy, and the Emergence of Cycles
• GREG HANNSGEN, The Transmission Mechanism of Monetary Policy: A Critical Review
• MATHEW FORSTATER, Visions and Scenarios: Heilbroner’s Worldly Philosophy, Lowe’s
  Political Economics, and the Methodology of Ecological Economics

INSTITUTE NEWS

• New Appointment: DIANE ELSON
• New Research Associate
• New Research Scholars
• NIHCM Foundation Award

CALL FOR PAPERS

• Conference: "Time Use and Economic Well-Being"

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

The Levy Institute’s October 2004 conference on the distributional effects of government spending and taxation addressed topics ranging from the social benefits of various types of economic development to the economic fortunes of future retirees, and included keynote speaker David Cay Johnston’s stinging indictment of the distributional properties of the American tax system. A synopsis of the conference proceedings is included in this issue of the Report.

 

Contents:

CONFERENCE

• The Distributional Effects of Government Spending and Taxation

NEW PUBLICATION

• Levy Institute Measure of Economic Well-Being: How Much Does Wealth Matter for
  Well-Being? Alternative Measures of Income from Wealth

NEW PUBLIC POLICY BRIEF

• The Case for Rate Hikes: Did the Fed Prematurely Raise Rates?

LEVY INSTITUTE NEWS

• New Appointments
• Rebitzer Wins Award

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 15, No. 1 PDF (644.31 KB)

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. Hence, the Fed, in raising rates, was unnecessarily jeopardizing the economy’s weak recovery.

In this new brief, we learn about the flaws in the Fed’s thinking that have led to its frequent policy mistakes. Author L. Randall Wray traces several strands of current central bank thinking back to their roots in the Fed’s internal discussions in the mid-1990s. Transcripts of these discussions have recently been released, a development that has yielded some disturbing and telling insights about the way in which monetary policy is formed.

Download Public Policy Brief Highlights No. 80A, 2004 PDF (243.36 KB)

The conference was held October 15–16, 2004, at the Levy Institute’s research and conference center at Blithewood on the campus of Bard College, Annandale-on-Hudson, N.Y.

The American economy has grown reasonably fast since the second half of 2003, and the general expectation seems to be that satisfactory growth will continue more or less indefinitely. In this issue of the Report, a new Strategic Analysis argues that the expansion may indeed continue through 2004, and for some time beyond.

Contents: New Strategic Analysis – “Prospects and Policies for the US Economy: Why Net Exports Must Now Be the Motor for US Growth” * New Publication – “Levy Institute Measure of Economic Well-Being: United States, 1989, 1995, 2000, and 2001” * New Policy Note – “Those ‘D’ Words: Deficits, Debt, Deflation, and Depreciation” * New Working Papers – “Some Simple, Consistent Models of the Monetary Circuit,” “Investigating the Intellectual Origins of Euroland’s Macroeconomic Policy Regime: Central Banking Institutions and Traditions in West Germany After the War,” “Changes in Household Wealth in the 1980s and 1990s in the US,” “Keynesian Theorizing During Hard Times: Stock-Flow Consistent Models as an Unexplored ‘Frontier’ of Keynesian Macroeconomics,” “Assessing the ECB’s Performance since the Global Slowdown: A Structural Policy Bias Coming Home to Roost?,” “Gibson’s Paradox, Monetary Policy, and the Emergence of Cycles”, “Financial Liberalization and Poverty: Channels of Influence” * Conference – 14th Annual Hyman P. Minsky Conference on Financial Structure: Can the Recovery Be Sustained? US and International Perspectives * Levy Institute News – Upcoming Event, Conference: The Distributional Effects of Government Spending and Taxation * New Board Members * New Book * Publications and Presentations by Levy Institute Scholars * Recent Levy Institute Publications”

Download Volume 14, No. 3 PDF (1.21 MB)

In this issue: an overview of the 14th Annual Hyman P. Minsky Conference on Financial Structure. A common observation among participants was the atypical business cycle pattern associated with the 2001 recession: strong GDP growth and very little job growth.

 

Contents:

 

Institute Research – Levy Institute Measure of Economic Well-Being – Levy Institute Measure of Economic Well-Being: United States, 1989, 1995, 2000, and 2001; Strategic Analysis – Is Deficit-Financed Growth Limited? Policies and Prospects in an Election Year; Program: Distribution of Income and Wealth – The "War on Poverty" after 40 Years: A Minskyan Assessment · Changes in Household Wealth in the 1980s and 1990s in the United States; Program: Financial Markets and Monetary Policy – Conference: The 14th Annual Hyman P. Minsky Conference on Financial Structure, "Can the Recovery Be Sustained? US and International Perspectives" · Investigating the Intellectual Origins of Euroland’s Macroeconomic Policy Regime: Central Banking Institutions and Traditions in West Germany after the War; Program: Federal Budget Policy – Inflation Targeting and the Natural Rate of Unemployment · Those "D" Words: Deficits, Debt, Deflation, and Depreciation; Explorations in Theory and Empirical Analysis – Some Simple, Consistent Models of the Monetary Circuit · Keynesian Theorizing during Hard Times: Stock-Flow Consistent Models as an Unexplored "Frontier" of Keynesian Macroeconomics; Institute News – New Board Members: Lakshman Achuthan; J. Ezra Merkin · New Levy Institute Book · Upcoming Event: Conference, The Distributional Effects of Government Spending and Taxation, October 15–16; Publications and Presentations – Publications and Presentations by Levy Institute Scholars · Recent Levy Institute Publications

Download Volume 13, No. 3 PDF (578.22 KB)

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. Many commentators worried that the FOMC’s unusually easy stance would usher in a period of runaway inflation, but inflation stayed in the 2 to 3 percent range.

Now, with scant evidence of an inflationary threat, Greenspan and his committee seem intent on raising interest rates. Greenspan argues that the current anemic expansion is “self-sustaining” and no longer needs the support of low interest rates.

Senior Scholar L. Randall Wray evaluates the Fed’s concern about a coming inflation and its decision to begin raising interest rates. He begins with an examination of key market developments that might signal inflation. Most economists worry about inflation when labor markets begin to tighten and employees gain the bargaining power necessary to demand pay raises. Wray marshals an array of evidence demonstrating that workers can only wish for such conditions. The economy has created no net new jobs since the beginning of the current presidential term. To match the 64.4 percent proportion of adults who held jobs during the Clinton era, the economy would have to generate four million new positions. It is clear that the job market will not be a source of inflation any more than it was during the Clinton boom.

Download Public Policy Brief Highlights No. 79A, 2004 PDF (410.07 KB)

In this issue, Senior Scholar L. Randall Wray’s comments on President Bush’s tax relief and spending stimulus, and all that red ink.

Contents: Comment, “Greenspan and All That Red Ink” * New Strategic Analysis, “Is Deficit-Financed Growth Limited? Policies and Prospects in an Election Year” * New Policy Note, “Inflation Targeting and the Natural Rate of Unemployment” * New Working Papers, “Does Financial Structure Matter?,” “Fiscal Consolidation: Contrasting Strategies and Lessons from International Experiences,” “Borrowing Alone: The Theory and Policy Implications of the Commodification of Finance,” “A Post-Keynesian Stock-Flow Consistent Macroeconomic Growth Model: Preliminary Results,” “A Stock-Flow Consistent General Framework for Formal Minskyan Analysis of Closed Economies,” “The ‘War on Poverty’ after 40 Years: A Minskyan Assessment” * Levy Institute News, “Upcoming Event,” “14th Annual Hyman P. Minsky Conference” * Publications And Presentations, “Publications and Presentations by Levy Institute Scholars,” “Recent Levy Institute Publications”

Download Volume 14, No. 2 PDF (426.40 KB)

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. Charles Murray and other scholars argued that welfare programs only encouraged shiftlessness and burdened federal and state budgets.

In recent years, despite the fact that the extent of poverty has not significantly diminished since the early 1970s, the debate over poverty has seemingly ended. In a country in which middle-class citizens struggle to afford health insurance and other necessities, the problems of the worst-off Americans seem to many remote and less than pressing. Moreover, the welfare reform bill of 1996 has deflected much of the criticism of the welfare state by ending the individual-level entitlement to Aid to Families with Dependent Children benefits (now known as Temporary Assistance to Needy Families) and putting time limits on welfare recipiency, among other measures.

Download Public Policy Brief Highlights No. 78A, 2004 PDF (243.92 KB)

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. Slow, rather than rapid, economic growth is better in 2004, the authors say, as rapid growth would result in higher long-term interest rates, which would threaten the property market boom and weaken investment in 2005 and beyond. The authors are sure, however, that the current administration will find it difficult to refrain from additional procyclical fiscal stimulus in light of the upcoming presidential election. The result could lead to a rapidly declining US economic growth rate following the election in November.

Download Public Policy Brief Highlights No. 77A, 2004 PDF (333.34 KB)

The sharp reversal from surplus to deficit of the federal budget has prevented a deep recession, but long-term strategic economic difficulties remain. A new Strategic Analysis suggests that the government continue its substantial fiscal stimulus while enhancing the country’s international competitiveness, so as to stimulate export growth and use the domestic jobs thereby created to fill in the remaining employment gaps.

 

Contents:

Institute Research – Levy Institute Measure of Economic Well-Being – Levy Institute Measure of Economic Well-Being: United States, 1989 and 2000; Strategic Analysis – Deficits, Debts, and Growth: A Reprieve But Not a Pardon; Program: Distribution of Income and Wealth – Inequality of the Distribution of Personal Wealth in Germany 1973-1998; Program: Financial Markets and Monetary Policy – The Future of the Dollar: Has the Unthinkable Become Thinkable? · Financial Globalization and Regulation · Does Financial Structure Matter? · Fiscal Consolidation: Contrasting Strategies and Lessons from International Experiences; Explorations in Theory and Empirical Analysis – Borrowing Alone: The Theory and Policy Implications of the Commodification of Finance · A Post-Keynesian Stock-Flow Consistent Macroeconomic Growth Model: Preliminary Results · A Stock-Flow Consistent General Framework for Formal Minskyan Analyses of Closed Economies; Institute News – Upcoming Events: 14th Annual Hyman P. Minsky Conference, April 23-24, and The Distributional Effects of Government Spending and Taxation, October 15-16; Publications and Presentations – Publications and Presentations by Levy Institute Scholars · Recent Levy Institute Publications

Download Volume 13, No. 2 PDF (523.84 KB)

Topics at the 2004 Minsky conference included fiscal
and monetary policies for the expansion of
national economies as well as the global economy;
exchange rate misalignments resulting from “brutal”
gyrations in the currency markets, and their
possible cures; and trade and capital flows as they
might impinge upon the conduct of monetary and fiscal policies. The international economic role of
the United States was also examined.

The conference was held April 23–24, 2004, at the Levy Institute’s research and conference center at Blithewood on the campus of Bard College, Annandale-on-Hudson, New York.

Download Conference Proceedings, April 23–24, 2004 PDF (748.07 KB)

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. According to Senior Scholar Edward N. Wolff and Research Scholar Asena Caner, poverty measures should include wealth as well as income. Their study of asset poverty in the United States between 1984 and 1999 focuses on the lower end of the wealth distribution and shows that asset poverty rates did not decline during the period studied, and that the severity of poverty increased. It also shows that asset poverty is much more persistent than income poverty.

Download Public Policy Brief Highlights No. 76A, 2004 PDF (249.57 KB)

As 2004 begins, the Levy Institute can look back on the 2002–03 period as one of accomplishment and transition. Several initiatives were begun, new personnel were added, and the Institute continued its efforts in its traditional areas of strength. Thus, we can report that the Institute remains vibrant and as determined as ever to contribute to the formation of economic policy at a time when the world faces many new and daunting challenges

Download Biennial Report, 2002–2003 PDF (2.02 MB)

Like a recurrent nightmare, the Bush administration, apparently emboldened by its success in getting Congress to start down the road to privatizing Medicare, seems ready to resurrect its proposals to privatize Social Security. Senior Scholar Thomas Hungerford comments in this issue of the Report.

Contents: Comment, "Saving Social Security from Those Who Would ‘Save’ It" * Summary of Conference, "International Perspectives on Household Wealth" * New Publication, "The Levy Institute Measure of Economic Well-Being" * Strategic Anaylsis, "Deficits, Debts, and Growth: A Reprieve But Not a Pardon" * New Policy Notes, "Pushing Germany Off the Cliff Edge," "Deflation Worries," "Is International Growth the Way Out of US Current Account Deficits? A Note of Caution," "The Future of the Dollar: Has the Unthinkable Become Thinkable?" * New Working Paper Titles, "Financial Sector Reforms in Developing Countries with Special Reference to Egypt," "Minsky’s Acceleration Channel and the Role of Money," "Macroeconomic Policies of the Economic and Monetary Union: Theoretical Underpinnings and Challenges," "Household Wealth, Public Consumption, and Economic Well-Being in the United States," "Measures of the Real GDP of US Trading Partners: Methodology and Results," "Inflation Targeting: A Critical Appraisal," "Do Workers with Low Lifetime Earnings Really Have Low Earnings Every Year? Implications for Social Security Reform," "Savings of Entrepreneurs," "Aggregate Demand, Conflict, and Capacity in the Inflationary Process," "Understanding Deflation: Treating the Disease, Not the Symptoms," "A Rolling Tide: Changes in the Distribution of Wealth in the US, 1989-2001," "Wealth Transfer Taxation: A Survey," "On Household Wealth Trends in Sweden over the 1990s," "The Evolution of Wealth Inequality in Canada, 1984-1999," "Financial Globalization and Regulation, "Inequality of the Distribution of Personal Wealth in Germany 1973-1998" * Levy Institute News: New Website, Upcoming Event: 14th Annual Hyman P. Minsky Conference * Publications and Presentations by Levy Institute Scholars, Recent Levy Institute Publications

Download Volume 14, No. 1 PDF (465.79 KB)

The Winter Summary highlights the recent Levy Institute conference "International Perspectives on Household Wealth," which focused on the dynamics of the distribution of wealth across population subgroups, income levels, and regions. A common finding was the rapid growth in wealth, but increasing inequality, during the 1990s as a result of the euphoria in the financial markets.

 

Contents: Institute Research – Program: Distribution of Income and Wealth – Conference: International Perspectives on Household Wealth · Do Workers with Low Lifetime Earnings Really Have Low Earnings Every Year? Implications for Social Security Reform · Savings of Entrepreneurs · A Rolling Tide: Changes in the Distribution of Wealth in he US, 1989-2001 · Wealth Transfer Taxation: A Survey · On Household Wealth Trends in Sweden over the 1990s · The Evolution of Wealth Inequality in Canada, 1984-1999; Program: Financial Markets and Monetary Policy – Inflation Targeting: A Critical Appraisal · Aggregate Demand, Conflict, and Capacity in the Inflationary Process; Program: Federal Budget Policy – Deflation Worries · Is International Growth the Way Out of US Current Account Deficits? A Note of Caution · Measures of the Real GDP of US Trading Partners: Methodology and Results · Understanding Deflation: Treating the Disease, Not the Symptoms; Institute News – Upcoming Event: 14th Annual Hyman P. Minsky Conference; Publications and Presentations – Publications and Presentations by Levy Institute Scholars · Recent Levy Institute Publications

Download Volume 13, No. 1 PDF (251.91 KB)

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. Such lending, together with sales of equities, is regarded as one of the chief benefits of globalization. But financial investment does not always flow where it is needed most. While it appears that the world cannot be satiated with US securities, issues of emerging economies account for less than 6 percent of total international holdings of debt securities (D’Arista 2003). And, as Argentina discovered recently, international lenders can be fickle, selling enough foreign currency and securities to cause a currency crisis.

Download Public Policy Brief Highlights No. 75A, 2003 PDF (337.92 KB)

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. Whether or not prices are falling, the proper remedy for a recession is the Keynesian one: government deficit spending, used to finance useful programs and tax cuts. These measures will reduce unemployment, increase growth, and relieve deflationary pressures.

Download Public Policy Brief Highlights No. 74A, 2003 PDF (107.13 KB)

The main focus of this conference was on the distribution of household wealth and savings in the United States and other advanced industrialized countries. Most of the papers highlighted recent trends in wealth inequality in this set of countries during the 1990s. Comparative work on a few less-developed countries was also be presented. Other topics included the roles of entrepreneurship in wealth accumulation and asset poverty in the US

The conference was held October 17–18, 2003, at the Levy Institute’s research and conference center at Blithewood on the campus of Bard College, Annandale-on-Hudson, N.Y.

The slowdown in economic growth and rising unemployment in the euro area have revealed serious fault lines in the stability and growth pact governing the zone’s macroeconomic policies. In an editorial, Philip Arestis and Malcolm Sawyer state that the pact threatens to become an “instability and no growth pact,” with the thrust of fiscal and monetary policies pushing the Eurozone economies in a deflationary direction.

Contents: Editorial – Europe’s Imposed Stability, Now It Has to Create Growth * New Working Papers topics include: US Workers’ Investment Decisions for Participant-Directed Defined Contribution Pension Assets; Mexicans Now, Italians Then: Intermarriage Patterns; Finance and Development: Institutional and Policy Alternatives to Financial Liberalization Theory; The Conditions for a Sustainable US Recovery: The Role of Investment; Is Europe Doomed to Stagnation? An Analysis of the Current Crisis and Recommendations for Reforming Macroeconomic Policymaking in Euroland; How Long Can the US Consumers Carry the Economy on Their Shoulders?; Reinventing Fiscal Policy; The Case for Fiscal Policy * New Policy Notes: Reforming the Euro’s Institutional Framework * Caring for a Large Geriatric Generation: The Coming Crisis in US Health Care * Levy Institute News: Upcoming Event

Download Volume 13, No. 3 PDF (339.91 KB)

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. The downward spiral between the banks and the private sector induces a credit crunch that adversely affects the US economy, which is vulnerable to exogenous shocks and lacks the foundations for a new, long-lasting business cycle.

Download Public Policy Brief Highlights No. 73A, 2003 PDF (292.66 KB)

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. Senior Scholar James K. Galbraith argues, however, that the United States has relied heavily on government intervention in housing, health care, pensions, and education. Not only have these programs been largely successful and popular, but they also provide a Keynesian stimulus to spending that helps account for the strength of the US economy. Now that the United States is in a weak, jobless recovery, the key to restoring growth may lie in the kinds of governmental programs that have helped to sustain and stabilize the US economy in the past.

Download Public Policy Brief Highlights No. 72A, 2003 PDF (237.95 KB)

This issue provides an overview of the Institute’s Annual Hyman P. Minsky Conference, the focus of which was the formulation of economic policy for sustainable growth; topices included the effects of low interest rates and the reemergence of budget deficits, the implications of ongoing current account deficits, and the potential for deflation in the American economy in the near future.

Contents: 13th Annual Hyman P. Minsky Conference on the State of the US and World Economies: Economic Policy for Sustainable Growth * New Working Paper topics include: How Far Can US Equity Prices Fall under Asset and Debt Deflation?; On the Effectiveness of Monetary Policy and Fiscal Policy; Testing for Financial Contagion between Developed and Emerging Markets during the 1997 East Asian Crisis; Credibility of Monetary Policy in Four Accession Countries: A Markov Regime-Switching Approach; The Levy Institute Measure of Economic Well-Being; Does Trade Promote Gender Wage Equity? Evidence from East Asia; and The Nature and Role of Monetary Policy When Money Is Endogenous * New Strategic Analysis: The US Economy: A Changing Strategic Predicament * Levy Institute News: Leon Levy-In Memoriam; New Research Associate

Download Volume 13, No. 2 PDF (730.93 KB)

The 13th Annual Hyman P. Minsky conference, held April 15, 2003, at the Hilton New York, focused on the uncertainty surrounding the United States’ recent economic recovery, as well as the monetary and fiscal
policy prescriptions for renewed growth, employment, and
price stability.

These proceedings were published as part of the Summer 2003 Summary.

Download Conference Proceedings, April 15, 2003 PDF (532.74 KB)