April 2013 -- Thomas Herndon, Michael Ash and Robert Pollin examine Reinhart and Rogoff’s research on the relationship between public debt and GDP growth for advanced economies in the post World War II period. Reinhart and Rogoff argue that the rate of economic growth for these countries has consistently declined precipitously once the level of government debt exceeds 90 percent of the country’s GDP. In recent years, Reinhart and Rogoff’s results have been highly influential as support for austerity policies in both Europe and the United States. Herndon, Ash and Pollin find that a series of data errors and unsupportable statistical techniques led to an inaccurate representation of the actual relationship between public debt levels and GDP growth. They  find that when properly calculated, average GDP growth for advanced economies at public debt-to-GDP ratios over 90 percent is not dramatically different than when debt-to-GDP ratios are lower.  

>> Download "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff"

March 2013 -- In the aftermath of the financial crisis, many observers have concluded that the U.S. financial system has grown to excessive size relative to the economy’s non-financial sectors. Gerald Epstein and James Crotty explore ways to conceptualize the U.S. financial sector’s appropriate size and quality. They then look at the efficiency of the financial sector in financing real economic activity and the social purpose of financial innovation. They conclude from this preliminary research that “the financial sector may need to be only one-half to one-quarter as large as it is currently to serve the existing needs of the real sector.”

>> Download “How Big Is Too Big? On the Social Efficiency of the Financial Sector in the United States”

February 2013 -- The crisis that began in 2007-2008 forcefully reminds us that financial instability is endemic to capitalist economies that lack dynamically changing financial regulations to keep the forces of leverage and credit within sustainable bounds. Nonetheless, today’s mainstream economists remain intractably opposed to such measures. In The Handbook of the Political Economy of Financial Crises, edited by Martin Wolfson and Gerald Epstein, an international group of experts describes the theoretical, institutional, and historical factors that can help us understand the forces behind financial crises and the strengths and weaknesses of theoretical perspectives and policy approaches that have tried to control these financial tsunamis.

>> Read more about The Handbook of the Political Economy of Financial Crises

June 2012 -- After the onset of the Great Recession, commercial banks in the U.S. began accumulating huge cash reserves at the Federal Reserve — $1.6 trillion by mid-2011. This was a result of the Fed pushing the federal funds rate to near zero in 2008, and holding it there through 2011 and beyond. Over this same period, non-corporate businesses obtained zero net credit. Under such circumstances, conventional central bank operations are greatly weakened as a policy tool. Robert Pollin considers policies for escaping this trap: raising the inflation target, depreciating the currency, targeting long-term interest rates, taxing excess reserves, and expanding federal loan guarantees for smaller businesses.

>> Download "The Great U.S. Liquidity Trap of 2009-11: Are We Stuck Pushing on Strings?"

May 2012 -- As we continue to suffer the consequences of the global financial crash, a tax on financial market transactions has been gaining support as a way to bring some measure of control over speculative financial practices. The movement to establish a tax in the U.S. has been energized by the National Nurses Union under the theme “Heal America, Tax Wall Street.” In this "Economic Prospects" column for New Labor Forum, Robert Pollin describes the mechanics of the tax, its international support, and how to set a rate that can have a real impact on excessive speculation and the nation’s economic health.

>> Download "A U.S. Financial Transaction Tax: How Wall Street Can Pay for Its Mess"

May 2012 -- In this article in The Nation, Robert Pollin and Heidi Garrett-Peltier look at the military's record as a jobs engine, and as a source of technological innovation, and recommend that to achieve both of these objectives optimally, the federal government is best off shifting its resources to other investments.

>> Download "Benefits of a Slimmer Pentagon"

May 2012 -- In this "Economic Prospects" column for New Labor Forum, Robert Pollin describes the mechanics of a financial transaction tax, its international support, and how to set a rate that can have a real impact on excessive speculation and the nation’s economic health.

>> Download "A U.S. Financial Transaction Tax: How Wall Street Can Pay for Its Mess"

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"

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” 

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"

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”

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"

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"

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"

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"

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"

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?"

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

>> Read "Fighting to Prevent Global Hunger"

For earlier PERI research on Finance and Macroeconomics, please go to the program archive page.