Research AreasFinance, Jobs & MacroeconomicsFinance Archive

For PERI research on Finance and Macroeconomics from the current year, please go to the program home page.

How to Create 19 Million Jobs and Push Unemployment Below 5 Percent

December 2011 -- Robert Pollin, James Heintz, Heidi Garrett-Peltier and Jeannette Wicks-Lim show that since 2009, U.S. commercial banks and large nonfinancial corporations have been carrying huge cash hoards and other liquid assets, totaling $1.4 trillion. Small businesses, by contrast, have been locked out of credit markets. The authors examine the impact on job creation of mobilizing these excess liquid assets into productive investments, finding that U.S. employment could expand by about 19 million jobs by the end of 2014, with unemployment falling below 5 percent. 

>> Download "19 Million Jobs For U.S. Workers: The Impact Of Channeling $1.4 Trillion In Excess Liquid Asset Holdings Into Productive Investments"

Setting a Financial Transaction Tax Rate that Optimizes Revenues

December 2011 -- To inform debates on the most effective ways to design financial transaction taxes, Robert Pollin and James Heintz review evidence on trading costs and elasticities in U.S. financial markets and elsewhere. They examine the potential impact of a proposed FTT rate of 0.03 percent on all financial market trades currently being discussed in Congress. This low figure contrasts with the existing 0.5 percent rate on the UK stock market, for example. The authors show that there is no reasonable scenario in which this low rate could generate more revenues than a 0.5 percent FTT. They find that a 0.5 percent FTT generates between 3 and 17 times more revenue than the tax under consideration. 

>> Download “Transaction Costs, Trading Elasticities and the Revenue Potential of Financial Transaction Taxes for the United States” 

Watch Your Health and Your Pocketbook: A Bi-Partisan Scheme for Regulatory Deform

October 2011 -- Gerald Epstein write on TripleCrisis about the political mantra of "job-killing regulations."

>> Download "Watch Your Health and Your Pocketbook: A Bi-Partisan Scheme for Regulatory Deform"

Models for Industrial Policy that Promotes Productive Investment

September 2011 -- Robert Pollin considers how best to promote productive investments in the United States, especially investments that advance a clean-energy economy. He looks at three issues related to a productive federal industrial policy: 1) the ‘crowding-in’ of private investments that will accrue from public ones; 2) how we might re-focus current successful industrial policies; and 3) developing and promoting cooperative and community ownership models so as to benefit all regions of the U.S. equitably and provide alternatives to the private corporation.

>> Download “A Policy Framework for Advancing Productive Investments and Clean Energy throughout the U.S. Economy”

U.S. Deficits and Debts amid the Recession

August 2011 -- Robert Pollin examines three sets of major issues regarding the current U.S. government’s fiscal deficit and outstanding debt, tied to the recession and 2009 economic stimulus program. Since its enactment, critics of stimulus program have claimed that it will drive up interest rates and inflationary pressures and dramatically increase the government’s debt burden. Pollin shows that these outcomes haven’t occurred. He then considers why the stimulus didn’t achieve more to advance a healthy economic recovery. He finally proposes a series of policies for fighting mass unemployment in the short-run and reducing structural deficits in the long-run.

>> Download "U.S. Government Deficits and Debt Amid the Great Recession: What the Evidence Shows"

The Closing of the Gold Window, Forty Years On

August 2011 -- Gerald Epstein explores the long-term impacts of President Nixon's closure of the gold window.

>> Read "A First Ever Default? Closing the Gold Window, Forty Years On"

The Role of Excessive Speculation in Driving Up Gas Prices

June 2011 -- Robert Pollin and James Heintz show that a major factor contributing to the recent run up in gasoline prices at the pump is large-scale speculative trading in crude oil in the commodities futures market. They estimate that, for the month of May, the rise in speculative trading on oil has led to an 83-cent-per-gallon premium on gas prices at the pump. Pollin and Heintz emphasize that the federal government, and specifically the Commodities Futures Trading Commission, has the authority to control excessive speculation on oil through provisions in the Dodd-Frank Financial Reform Act, and must now exercise that authority.

>> Download "How Wall Street Speculation is Driving Up Gasoline Prices Today"

Alternatives to Austerity for State and Local Governments

June 2011 -- The Great Recession has created fiscal crises for state and local governments. In response, leaders of both parties are advancing agendas to downsize state and local governments by cutting taxes, slashing wages and benefits for public workers, or even selling off state-owned facilities. Robert Pollin and Jeffrey Thompson argue that these austerity policies are not the only possible responses to the crises, and propose alternative approaches that can close the budget gaps in the short term, promote a sustainable recovery, and, over the long term, help insulate state and local government budgets from the effects of recessions.

>> Download "Fighting Austerity and Reclaiming a Future for State and Local Governments"

Can There Be Real Reform Under Dodd-Frank?

March 2011 -- Gerald Epstein and Robert Pollin ask: under what conditions is the Dodd-Frank financial reform law capable of controlling speculation and promoting stability? The legislation lays out only a broad framework for a financial regulatory system with little specificity, leaving implementation as contested terrain. Yet supporters of real financial regulation can still achieve significant victories, and Epstein and Pollin offer three areas where these efforts should be focused: 1) proprietary trading, 2) oversight of credit rating agencies, and 3) regulation of commodities futures derivative markets.

>> Download "Regulating Wall Street: Exploring the Political Economy of the Possible"

Are 'Free Trade' and Exports the Keys to Recovery?

February 2011 -- Gerald Epstein explores Obama's pledge to double exports over five years.

>> Read "Outsourcing, Trade Agreements, and Employment: Lame Duck or Just Plain Lame?"

The Power of the Commodities Futures Trading Commission

January 2011 -- Robert Pollin explores how a poorly regulated Commodities Futures Trading Commission could exaccerbate hunger worldwide.

>> Read "Fighting to Prevent Global Hunger"

Globalization and Labor in Japan and the U.S.

November 2010 -- James Heinz explores the intersections between the current trajectory of globalization, changes to the structure of employment, and policies for maintaining opportunities for decent employment. He argues that recent trends in the global economy have produced structural changes in employment that compromise the welfare of working people. He looks in particular at Japan and the U.S., and considers the experience of both countries with regard to financial bubbles and subsequent crises, and the impact of these factors on labor markets.

>> Download "The Structure of Employment, Globalization, and Economic Crises: Rethinking Contemporary Employment Dynamics with a Focus on the U.S. and Japan"

The Wrong Enemy at the G-20

November 2010 -- Gerald Epstein looks at the attacks on the Federal Reserve at the G-20 meetings, and criticism of their quantitative easing policies.

>> Read "Fed Bashing at the G-20: A Return to the Gold Standard Anyone?"

Why the Deficit Hawks Are Wrong

November 2010 -- Robert Pollin question common assumptions about the effects of large-scale austerity measures in this review of arguments by the leading deficit hawks. Now released in Challenge, Pollin’s critique scrutinizes, and refutes arguments that: 1) large fiscal deficits cause high interest rates and inflation; 2) deficits erode business confidence; 3) the multiplier for stimulus policies is close to zero; and 4) we court disaster with huge long-run deficits. Pollin shows that by critiquing these positions, we can bring greater clarity to workable recovery program.

>> Download “Austerity Is Not a Solution: Why the Deficit Hawks Are Wrong”
>> Watch a video interview with Robert Pollin on this topic

Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives

September 2010 -- In Prioritizing Approaches to Economic Development in New England, Jeffrey Thompson provides ample evidence that infrastructure (roads, bridges, dams, energy transmission systems, drinking water, and the like) and education are effective approaches for creating jobs and generating economic growth. By necessity, infrastructure repairs employ local workers and use local materials. These activities would also meet an increasingly urgent need: evidence reviewed by Thompson shows that 40% of bridges in the region are structurally deficient; 80% of the region’s dams present significant hazard; most of our roads are in poor or mediocre condition; and our drinking water infrastructure is in need of $12 billion worth of repairs and renovations.

Thompson describes how, instead of making these investments, state policymakers are too often turning to corporate tax breaks to lure businesses to their state and public subsidies for employers who promise to hire workers in the state. These policies have been tried for decades, but Thompson presents the clear evidence that these tax subsidies don’t work to create jobs or revitalize state economies.

>> Download "Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives"

Interest Rate Exogeneity: Theory, Evidence and Policy Issues for the U.S. Economy

August 2010 -- The idea of an exogenous money supply—controlled entirely through central bank interventions—was a fundamental tenet of monetarism and New Classical economics. Post Keynesians have developed an extensive literature arguing that the money supply is in fact endogenous—that market forces combine with central banks in establishing the money supply. But Post Keynesians disagree on a related question: to what extent are interest rates set exogenously by central banks? This paper presents evidence regarding the movement of interest rates in U.S. financial markets relative to the Federal Reserve-controlled Federal Funds rate. Concluding that market interest rates are primarily set through market forces, that is, are largely endogenous. This is the instability of deregulated financial markets, which leads market participants to make wide swings in their risk assessments over time. It follows that effective regulatory policies to stabilize markets and control interest rates directly will increase the degree of interest rate exogeneity.

>> Download "Interest rate exogeneity: Theory, evidence and policy issues for the U.S. economy"

Controlling Dangerous Financial Products through a Financial Pre-Cautionary Principle

July 2010 -- High risk, opaque, and extremely complex financial products such as collateralized debt obligations and credit default swaps have been among the key causes of the worst economic crisis since the Great Depression. Regulators, buyers, and even many issuers of these investor or capital market products (as distinct from consumer products) did not understand how they worked in calm times, much less in times of extreme market stress. Not only have these products helped cause the crisis but they have also made the crisis extremely difficult to resolve. In response, building on the analogy of the Food and Drug Administration (FDA), a number of analysts have proposed a requirement that financial products be approved by a government regulatory authority the Financial Stability and Product Safety Aministration (FSPSA), before they can be marketed.

>> Download "Controlling Dangerous Financial Products through a Financial Pre-Cautionary Principle"

A Plan for a U.S. Manufacturing Revivial

April 2010 -- In this cover article for New Labor Forum, Robert Pollin and Dean Baker ask: Can we establish a growth engine driven by something other than financial bubbles? Can we renew the automobile industry and, more generally, re-establish a healthy manufacturing sector? Can we accomplish these various tasks while also rebuilding the economy on a new foundation of clean energy as opposed to fossil fuel energy sources? Are all of these projects also compatible with expanding decent job opportunities throughout the U.S. economy?

Pollin & Baker lay out a specific plan to support the revival of the manufacturing sector, including the U.S. auto industry. They sketch a program to substantially increase the number of buses on the streets of our communities, and explore a longer-term project of expanding U.S. manufacturing capacity in rail transportation products and the renewable energy industry.

>> Download “Reindustrializing America: A Proposal for Reviving U.S. Manufacturing and Creating Millions of Good Jobs”

Beyond Inflation Targeting

January 2010 - This volume, edited by Gerald Epstein and Erinc Yeldan, develops concrete, country-specific alternatives to inflation targeting, the dominant policy framework of central bank policy that focuses on keeping inflation in the low single digits to the virtual exclusion of other key goals. Chapters focus on alternative policy goals, such as employment creation, poverty reduction and sustainable development, and themes such as class attitudes toward inflation and unemployment and the gender impacts of restrictive monetary policy. The authors show that to reach policy goals beyond inflation control, central banks must look beyond traditional financial policy instruments.

>> Read more about Beyond Inflation Targeting

The Multiple Benefits of a Tax on Financial Transactions

December 2009 -- In this paper from PERI and the Center for Economic and Policy Research, Dean Baker, Robert Pollin, Travis McArthur and Matt Sherman present updated calculations on the potential of a financial transactions tax to provide  revenue. The authors analyze the potential revenue generated by financial transactions taxes across a range of financial assets, and under a range of scenarios They find that potential revenue from a financial transactions tax would come to between $177 and $354 billion annually. In addition to raising this significant revenue, a transactions tax has the potential benefit of reducing the volume of speculation in a seriously bloated financial sector.

>> Download “The Potential Revenue from Financial Transactions Taxes”

Rethinking Monetary and Financial Policy

November 2009 -- A key component of the solution to the current world financial crisis will be more aid and support from rich countries and international institutions to the developing world, in order to generate large scale increases in decent work and avoid a downward spiral into depression. But what macroeconomic policy frameworks should be used to promote decent employment?  In this paper for the International Labour Organization, Gerald Epstein summarize employment-oriented macroeconomic and financial policies that governments in developing countries can adopt to help promote more and better employment as a key to reducing poverty over the medium to long run.

> Download "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction"

The Employment Benefits of Alternatives to Military Spending

October 2009 -- In this study, produced in collaboration with the Institute for Policy Studies, Robert Pollin and Heidi Garrett-Peltier update their 2007 analysis of the relative employment impacts of public investment in military versus other priorities, expanding their analysis to include clean energy investments and induced job creation. The authors compare the effects of a $1 billion investment in the military with the same investment in clean energy, health care, education, or individual tax cuts. They show that non-military investments create many more jobs across all pay ranges. With a large share of the federal budget at stake, Pollin and Garrett-Peltier make a strong case that non-military spending priorities can create significantly greater opportunities for decent employment throughout the U.S. economy than spending the same amount of funds with the military.

>> Download "The U.S. Employment Effects of Military and Domestic Spending Priorities: An Updated Analysis"

The Role of Asset-Based Reserve Requirements in the Financial Reconstruction

September 2009 -- In this column for the New America Foundation's "New American Contract," Robert Pollin asks "How do we design measures that are capable of promoting both financial stability and broadly-shared social welfare?" One element of the framework he envisions is an asset-based reserve requirement, which would require financial institutions to maintain a cash reserve proportional to the riskier assets in their portfolios. Pollin lays out the history of such requirements and the mechanisms by which they create stabilization in financial markets and create incentives for banks to make channel funds towards socially desirable economic activities.

>> Read "Credit Allocation Policies to Advance Financial Stability and Social Welfare"

Why U.S. Financial Markets Need a Public Credit Rating Agency

June 2009 -- In this article published in The Economist’s Voice, Robert Pollin, James Heintz, and M. Ahmed Diomande of the New York State Senate Finance Committee  argue that the private ratings agencies —Moody’s, Standard & Poors, and Fitch—operate within a perverse incentive system. These agencies are hired by the very companies they purport to evaluate without bias, and financial companies tend to hire ratings agencies which  they deem likely to rate their instruments highly. The authors recommend a simple correction: a public ratings agency (which reserves the category of “not ratable” for any instrument they deem too complex to accurately assess) staffed by civil servants whose performance is evaluated on the basis of the correlation between their ratings and actual market performance over time.

>> Download "Why U.S. Financial Markets Need a Public Credit Rating Agency"

How Infrastructure Investments Support the U.S. Economy

January 2009 -- With the deterioration of economic conditions in recent months, public investment is back on the policy agenda, as a job-creation program linked to the need to revitalize the nation’s crumbling infrastructure. This report examines the employment impacts of an expanded infrastructure investment program and what it would take to create millions of jobs. It assesses the long-run impacts of such a program on productivity and economic growth, and offers brief observations on U.S. competitiveness and environmental sustainability that emerge from the findings. 

>> Download "How Infrastructure Investments Support the U.S. Economy"

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