Deepankar Basu, UMass Amherst economics professor, wrote an article for ZNet in which he details the causes of the European debt crisis and outlines two different paths for recovery. According to Basu, the two underlying causes include peculiarities of Germany’s growth process in the 2000s and the loss of policy options for countries that are part of European Monetary Union (EMU). Basu outlines two different paths for recovery without dismantling the union. The first option, favoured by European elites, is to advance emergency loans to Greece, and if necessary to the other countries too, and enforce Structural Adjustment Program (SAP)-type conditionalities (so-called “austerity” measures). The second option, and the one that should be favored by the working class, is to is to work out a sensible debt-restructuring program with bondholders and force the German economy to reflate. (ZNet, 5/23/10)
Two city councilors in New York City plan to introduce living wage legislation governing publicly subsidized development projects. This legislation would guarantee wages of at least $10.00 per hour instead of $7.25 that it is now. Robert Pollin, UMass Amherst economics professor and co-director of the Political Economy Research Institute, has studied living wages and is cited in the article. According to Pollin, about 140 municipalities in the U.S. have passed similar legislation. (New York Times, 5/25/10)
Michael Ash, economics, and Max Page, art, co-authored an op-ed piece for the Daily Hampshire Gazette about budget cuts that call for a “shared sacrificed.” (Daily Hampshire Gazette, 4/20/10)
The myth of ‘shared sacrifice’
by Daily Hampshire Gazette
AMHERST – “Shared sacrifice.” You will hear the governor say it every time he talks about the budget. It is the phrase used by Charles Murphy, chair of the House Ways and Means Committee, when he unveiled a budget that cuts local aid – schools, police and fire, libraries, parks – by $234 million, and public higher education by $132 million.
It was echoed by Michael Widmer of the Massachusetts Taxpayers Association when he endorsed the House’s budget; “They (cities and towns) need to share in the pain given our fiscal realities.”
“Shared sacrifice” must poll well in focus groups. But it is a lie and a fraud.
There is nothing shared about the pain in the state budget being debated in the Senate. Ask anyone in a position of power this simple question: How are the most fortunate in our Commonwealth being asked to contribute to our common problem, namely an economic crisis and budget deficit?”
We’ll supply the answer: Nothing.
There is nothing in the governor’s budget nor in the House’s that demands any “shared sacrifice” from those most able to share.
Gov. Deval Patrick and Speaker Robert A. DeLeo can repeat this stock phrase all they want, but the reality is that the budget is balanced on the backs of working families, schoolchildren and college students, and the pain is shared only by those millions among us who lack political pull.
For a state that was at the forefront of the American Revolution, the Industrial Revolution and Civil Rights revolution, Massachusetts is falling quickly behind the times. People are waking up to the idea that a robust public sector delivers what we need and cannot buy any other way: clean air and water; education from pre-K through college; health insurance. People increasingly understand that we need fair and reliable taxes to pay for these public goods. Massachusetts and America both expanded h! ealth insurance, but only the federal version pays with progressive taxes.
Voters in Oregon voted overwhelmingly – by an 8 percent margin – to raise the corporate income tax and to assess an income-tax surcharge on the wealthiest citizens. In nearby New York, taxes on the wealthiest citizens are part of the solution to budget deficits.
Consider this: Simply by returning the tax on unearned income – dividends and interest – to 12 percent, where it stood until 1999, we can wipe away all of the local aid cuts passed by the House, all of the cuts to public higher education and all of the cuts to Mass Health, our state’s health insurance program for the poor. The tax on unearned income is paid almost exclusively by people making over $200,000 a year.
The governor and the Massachusetts Legislature have shown spectacular cowardice in the face of anti-tax zealots. Our so-called leaders whisper in hushed tones, “They’ll murder us at the polls if we vote for ta xes. Taxes are off the table.”
It is time for some anger an! d zealotry on our side – the side that believes that we build our common wealth by investing in our schools and universities, by protecting the most vulnerable, by keeping our water clean and our libraries open.
This budget season gives us a chance to show our children that our state has good values – that we value schools and teachers and health care for the poor over continued tax breaks for the rich. That is the choice before our governor and Legislature.
This year provides a critical test of whether any circumstances can push Massachusetts Democrats to stand up for working people and the middle class. If our representatives are prepared to continue the destruction of our Commonwealth rather than asking the Lexus-driving class to help out, then they should expect to share in the sacrifice – at the ballot box this November.
Max Page is a professor of architecture and history and Michael Ash is an associate professor of economics, both at the University of Massachusetts Amherst.
Richard Wolff, UMass Amherst economics professor emeritus, comments in a story about 2010 graduates entering the job market, noting that anxiety amongst students about finding a job is very high. Ultimately, he recommends that students pursue a field they are really passionate about because they are more likely to become really good at what they do. According to Wolff, in this volitile market, they will be just as likely to make a career out of a subject they enjoy as one they choose for job security. (Gazettenet.com, 5/15/10)
Gerald Epstein, economics and co-director of the Political Economy Research Institute (PERI) and Jane D’Arista, PERI, offer comments on efforts in Congress to bring more regulation and transparency to derivative trading by large banks. They support such moves and say it is a key to meaningful reform of the financial sector. (Firedoglake.com, 5/10/10)
A column promoting breaking up large banks cites research done by Gerald Epstein, James Crotty and Iren Levina, Political Economy Research Institute, on financial industry concentration. Their research shows that between 1993 and 2009, the top five commercial banks in the U.S. went from having 16.56 percent of total bank assets to 45.23 percent. The top five investment banks had 36.43 percent of overall revenue in 1993 and 65.61 percent by 2009, they say. (Huffington Post, 5/5/10)
The following working paper by Ben Zipperer and Peter Skott is now available on our website:
The interaction between income distribution, accumulation, employment and the utilization of capital is central to macroeconomic models in the ‘heterodox’ tradition. This paper examines the stylized pattern of these variables using US data for the period after 1948. We look at the trends and cycles in individual time series and examine the bivariate cycical patterns among the variables.
The following working paper by Fabian Slonimczyk and Peter Skott is available on our website:
This paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. Using an efficiencywage model we show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality. Evidence from the US suggests that these theoretical results are empirically relevant. The over-education rate has been increasing and our regression analysis suggests that the decrease in the minimum wage may have led to a deterioration of the employment and relative wage of low-skill workers.
Mwangi wa Githinji, UMass Amherst economics professor, has been awarded the Faculty Research Grant/Healy Endowment Grant for the March 2010 award cycle. Offered by the UMass Amherst Office of Research, the Faculty Research Grant/Healey Endowment Grant program encourages scholarly research and creative activities by members of the campus faculty; the program’s goal is to increase extramural sponsored research activity.
His research project, titled Industrialization by Destination: The relationship between trade and industrialization in African countries, involves a two part study. First, he will examine the level of sophistication of trade and its relation to industrialization in the country of origin, both historically and cross country in Africa. Second, he will estimate what determines the sophistication of the exports. In particular, he is interested in seeing whether African countries that exported to less sophisticated markets (mostly other African countries) had more sophisticated exports than you would expect given their human capital, GDP, physical capital, institutions and land size.
Robert Pollin, economics professor and co-director of the Political Economy Research Institute (PERI), comments in a story analyzing the Federal Reserve’s role in addressing high unemployment, particularly among black workers. Pollin says he believes economic thinking is changing and it now makes sense for the Fed to buy corporate bonds to fund high-employment businesses, especially those that will create jobs in urban areas, much as it acted to cut the federal funds rate in the 2008 economic crisis. He says the Fed has other mechanisms to control inflation without hurting employment, but it just doesn’t use them. (City Limits, 4/19/10)