This is a repost from Forbes. 

The federal debt limit expired on March 1. Why does it matter? Markets didn’t move and the holders of the $22 trillion in national debt didn’t utter a peep of worry that the U.S. government wouldn’t pay its interest or redeem its bonds. The government is now taking temporary measures to pay its bills—delaying intragovernmental transfers and probably looking for coins in the couch cushions. The U.S. loses its legal authority to pay out cash in fall 2019.

Not many nations can announce they legally can’t pay all of their debts and yet avoid a wiggle in the credit risk of their bonds. Imagine a nation, say Argentina or Italy, signals the government can’t legally pay debt; their interest rates would soar. When the limit is reached, the U.S. Treasury can’t borrow any more, which one would think would cause a crisis of confidence, severely impacting the real economy for fear the government would default on our debt. But the risk premium on U.S. Treasuries did not budge much.

That Americans own most of the debt helps calm markets, but interest rate increases can trigger recessions.  

The Federal government, Social Security, Medicare, Military and the Federal Retirement system own 27% of the debt. Social Security, Medicare, the Military and the Federal Retirement System, all government agencies, hold a surplus and invest in U.S. government bonds. Foreign governments and investors hold 30 percent of it. Individuals, banks and investors hold 15 percent. The Federal Reserve holds 12 percent. Mutual funds hold 9 percent. State and local governments own 5 percent. The rest is held by workers through pension funds, insurance companies, and savings bonds.

Unlike virtually all other countries, the U.S. needs congressional approval to raise the debt limit, a self-imposed brake on spending imposed in 1917 during the rapid spending under World War 1. The mechanics of lifting it will become, again, a pitched political battle between President Trump and a passive Republican Senate versus House Democrats in the fall.

Interest rates, already one of the fastest rising costs in the federal budget, will rise as the political crisis builds, because foreign borrowers will demand an additional risk premium. And rising interest rates will impact U.S. Treasuries, mortgages, credit cards, car loans, student debt, and corporate debt. If workers, households, students, and corporations can’t pay their bills because of the interest rate shocks, the economy could go into recession.

Not raising the debt ceiling can lead to a shutdown. Punting on the debt limit has led to frequent government shutdowns, as government takes even more drastic action to slow down spending. Non-essential government spending stops, hitting a wide range of programs and agencies.

In December we endured a government shutdown and after 6 weeks Congress and the President agreed to a budget bill that included paying its debt. You might remember that bill hammered out in February only extended the debt limit to—you guessed it—March 1, 2019. As with all debt limits, the Treasury Department can take “extraordinary measures” (which actually now are virtually standard operating procedure) to put off the day of reckoning, but most budget experts think that will only get us to about September.

In the background of the micro politics is the macro issue of the government running unprecedented deficits in good economic times. Though the economy is doing well the federal deficit is soaring, mainly driven by the Trump tax cuts. The bipartisan Congressional Budget Office predicts the annual deficit will be over $900 billion this fiscal year and keep rising to over $1 trillion annually starting in 2022.

Annual deficits add to debt so that the ratio of debt to GDP will hit 78 percent this fiscal year—twice its average over the past 50 years. Debt to GDP could eventually reach 90 percent or higher, the same as it was at the end of World War II.

Debt can be good. There is no magic ratio that will suddenly tank the economy. But persistent debt increases during an economic expansion leave fiscal policy with very little power to fight a recession. Even the Federal Reserve’s ability to lower interest rates will fight against risk premiums generated by more debt.

Since 1917 Congress has had to solve the politics around fiscal hygiene.  House Democrats have reinstated the “Gephardt Rule,” named for former Majority Leader Dick Gephardt (D-MO), which automatically increases the debt limit when Congress enacts spending bills.  (This is what most countries do rather than taking separate votes on debt limits.) Makes sense to me—if you’re going to authorize spending, then pay for it. And if tax revenue isn’t high enough, then you have to borrow the funds. But Senate Republicans won’t enact the rule—despite support from a scholar at the conservative American Enterprise Institute and elsewhere—as a way to depoliticize a task of a functioning government.

The paradox of Washington (and other places with contentious negotiations) is that dangerous situations can increase brinkmanship, not lead to safer bipartisan solutions. Gephardt got the rule passed because Ds and Rs both wanted to avoid a default. But the very taboo of a default encourages some legislators to proposed adding controversial legislation to the debt bill. Gaming the crisis can force divisive proposals through that would otherwise fail.

September is the end of the federal fiscal year so we face a potential shutdown and the expiration of the federal budget. Some Democrat and Republicans want to raise the debt limit sooner than the fall, but if the recent past is any guide, that won’t happen. There is little, if any, trust between congressional Democrats and the Trump Administration.

Debt and the threat of default extract little, if any, political cost

It is a cliché to say that the budget process has broken down. Indeed, it actually works the way some of the most partisan actors want. As Stan Collender, one of the best budget commentators we have, has observed: “Congress is very willing to bend or completely ignore its own budget rules whenever leaders want, especially because members don't fear any political retribution for doing so.” Last November, he predicted “more budget cliffhanger endings in the future, and we shouldn’t count on the congressional leadership to push changes to stop them from happening.” And that’s where we are now, and where we seem to be stuck for the foreseeable future.

This is a repost from Forbes. 
'Los Angeles, California, USA - November 22nd 2011:

Los Angeles, California, USA - November 22nd 2011 - GETTY

President Trump has two seats to fill on the Federal Reserve Board of Governors—those people who (along with a rotating cast of regional Federal Reserve Bank presidents) set interest rate policy, target inflation rates and supervise banks in the US. Trump had been considering nominees for two seats, which carry a 14-year term: conservative commentator Stephen Moore and former Republican presidential candidate and ex-CEO of the Godfather pizza chain Herman Cain. Both have criticized the Fed—and Trump’s own choice for chairman, Jerome Powell—for keeping interest rates too high.

On Monday, after weeks of criticism, Cain “withdrew” his name from consideration, reportedly over concerns that sexual harassment charges that arose during his presidential campaign would resurface in confirmation hearings. Many observers think the withdrawal was engineered by the White House, as at least four Republican senators had announced their opposition, enough to defeat Cain if no Democrats voted for him.

Moore, for now, seems to be hanging in there, although a series of controversial past statements about women may sink him as well. CNN has reported older comments where Moore said women tennis players seeking equal prize money wanted “higher pay than an equally skilled man…the opposite of what is meant by pay equity." He also wrote that men’s college basketball should have “no more women refs, no women announcers, no women beer vendors, no women anything" unless they were physically attractive, and that one female announcer should wear a halter top on air. (Moore now claims he was joking.)

Moore has vocal supporters, including Forbes commentator John Tamny, who think Moore’s economic views are important and should be represented on the Fed. Tamny writes that professional economists oppose his nomination based on “pathetic theories...rooted in the view that central planning actually works.”

But professional economists from widely different political camps disagree. New York Times columnist and Nobel prizewinner Paul Krugman said Moore is “manifestly, flamboyantly unqualified for the position.” And Harvard economist and former Chairman of the Council of Economic Advisers under George W. Bush Greg Mankiw calls Moore a “rah-rah partisan” who does not have “the intellectual gravitas for this important job.”

Although some conservatives are digging in to support Moore, Cain may actually have been better qualified for the Fed (although I would not support either nominee.) As economist Brad DeLong pointed out, Cain has business experience and served as chairman of the board for the Kansas City Federal Reserve Bank (although DeLong thinks there would be many better choices from the business community). Meanwhile Moore, in DeLong’s view, has been “willing to dump whatever of his previous policy positions (free trade? TPP? gold standard? anything else?) over the side whenever his political masters demand.”

Trump’s previous Fed nominees have been non-controversial and easily confirmed, including both the Chairman and the Vice-Chairman positions. But Moore represents a sharp turn, with a public record attacking the Fed. In January, Moore told the Washington Post that “Trump, who is not an economist, has more sense of the economy than these 500 overpaid economists at the Federal Reserve,” one of several pointed criticisms of the institution and its policies.

So why is Trump nominating political ideologues for the Federal Reserve Board and not well-established professionals? Forbes commentator Kenneth Rapoza thinks Trump is “stacking the bench” at the Fed, trying to keep interest rates down in the face of a weakening economy that could hurt his 2020 re-election campaign. And as I recently argued here, the Fed may lack adequate tools to fight the next recession. So trying to keep it from happening in the first place may be Trump's best bet, and “stacking the bench” at the Fed with Moore and others like him may be part of his strategy.

This is a repost from Forbes. 

Nobel Prize-winning economist Richard Thaler made a splash on Thursday at the Brookings Institution, slamming 401(k)s and promoting Social Security. It was a bit surprising given Thaler's conservative bent. He proposed that the Social Security Administration should get into the annuity business by allowing retirees to direct some of their retirement savings toward their Social Security balances to beef up their monthly payments.

Thaler wants to solve a problem that all Americans with 401(k) and IRA plan balances face. How do you take $92,000—the median level of holdings for workers approaching retirement age—and make it last a lifetime? That is, how do you avoid outliving your money? This is not a problem for Social Security or a defined benefit plan because they are paid out in lifelong income—they are annuities.

Annuities are helpful. They allow families to convert lump sums to lifetime income. Yet as New School research economist Anthony Webb argues, while annuities are attractive in theory—people like their Social Security and defined benefit plans—few households actually purchase annuities. Part of the reason is that people think they will die sooner than the actuarial tables predict. But this behavioral bias is less important than the simple fact that voluntary, private annuities are not good deals.

Annuities are a bad bargain not because of the rapacious profits of insurance companies—well, that is part of the problem—but because people who volunteer to buy annuities run a higher risk of living a long time. Insurance companies know that only healthy retirees are likely to buy annuities, so they must charge prices that reflect the low mortality rates of those who actually buy their product. The exorbitant prices of annuities and other insurance products—think individual health care plans—are a result of what the industry calls adverse selection.

Thaler wants to alleviate that issue by allowing retirees to essentially purchase annuities through Social Security. He suggests that savers could devote between $100,000 and $250,000 of their 401(k) or IRA wealth to the government annuities, whose prices would reflect a fairer actuarial value—not the lower mortality of people who currently buy annuities, but the higher mortality rate of the population as a whole.

As Thaler explained Thursday, “I’d much rather do this than have the fly-by-night insurance company in Mississippi offering some private version of the same thing.”

But there are three problems with Thaler’s proposal, and they are fatal. First, we believe this proposal would do little to encourage annuitization. Second, it would weaken the Social Security Trust Fund. Finally, it would favor high-income people at the expense of lower earners.

To address the first point, Thaler’s proposal would do little to overcome the behavioral biases against annuitization. All that would likely happen is that people who currently buy annuities from insurance companies would now buy them from the Social Security Administration.

But as insurance companies have found over the years, annuity purchasers have lower-than-average mortality. So the Social Security Administration would make a loss if it priced those annuities in reference to the average mortality of the population. The loss from adverse selection would ultimately be borne by the Trust Fund. The winners would be the wealthy, who currently buy annuities from insurance companies, and in the future would get better prices from the Social Security Administration.

At the Retirement Equity Lab at The New School for Social Research, we have a better way of increasing lifetime income in retirement: Social Security Catch-Up contributions. This plan wouldn’t hurt Social Security’s finances and its benefits wouldn’t accrue mainly to the rich. The catch-up plan represents a better way to get more annuities from Social Security.

Here’s the plan at a glance: At age 50, workers would be defaulted into catch-up contributions of 3.1 percent of salary, a 50 percent increase on current employee contributions. Participants would be credited with a 50 percent bonus in their contribution record, so that a worker making $50,000 would be credited with a contribution of $75,000.

The catch-up plan has two good outcomes. First, the proposal uses the power of defaults to achieve widespread participation—more of a shove than a nudge. It also uses the progressivity of the Social Security benefit formula to protect against adverse selection. Although our calculations show that catch-up contributions would be attractive to higher earners, the wealthy would receive a lower rate of return on contributions than lower earners due to the progressive nature of the Social Security benefit formula.*

We hope Richard Thaler can formalize his idea and embrace the catch-up proposal. On one crucial point, at least, we are on the same page: strengthening and expanding the popular and efficient Social Security system.



*Higher earners have lower mortality than lower earners, so adverse selection on the basis of mortality will be offset by the lower returns higher earners will receive on their contributions.

This is a repost from Forbes. 

As tax day approaches, American taxpayers will wonder if they benefited from the Trump tax cut. Most people don’t think they did. Only 17% of Americans think the bill is reducing their taxes, even though the nonpartisan Tax Policy Center estimated that up to 80% would see some reduction in their federal taxes. There are five reasons for this mismatch between reality and impressions.

First, many people will technically have lower taxes, but the cuts are so tiny as to be hardly noticeable. The Tax Policy Center estimates the 60% of Americans at the lower end of the income distribution will have federal tax savings of less than $1,000. Also, most people believe the tax cuts didn’t benefit people like them but only the very wealthy. They are right. Those in the top 1% save $51,000.

Second, as Forbes contributor Howard Gleckman explained, the tax changes affected withholding through increases in the standard deduction and other provisions, especially the limit on deductibility of state and local taxes (SALT). But many taxpayers didn’t change their withholding allowances, so they may not have withheld the correct amounts in each time period. This means their tax refund is smaller than expected. The smaller-than-expected refund could be feeding a perception that taxes have increased even when they fell slightly.

Third, most Americans perceive the Trump tax cuts didn't benefit them because the highest income groups benefited the most . This is not only because of the rate changes, but because the drop in corporate taxes and rise in corporate profits ended up as higher incomes for the wealthiest households. The biggest winners in the Trump tax cuts were corporations and the households that get income from corporate profits—that is, the very wealthiest Americans. The top corporate income tax rate dropped by almost 40%, from 35% to 21%. And that cut is permanent, while the household rate cuts expire after 2025. The imbalance between household and corporate benefits is unpopular, with 62% of Americans saying it bothers them “a lot” that “some corporations don’t pay their fair share.” Even 42% of Republicans are bothered “a lot” about this.

Fourth, most Americans might doubt they benefited from the Trump tax reform because they believe the tax cuts are causing big deficits they will have to pay for sooner or later. Forbes contributor Chuck Jones showed the tax cuts were largely responsible for a 17% increase in the federal deficit last fiscal year. The Congressional Budget Office (CBO) estimates that deficits will average 4.4% of GDP between now and 2029, much higher than the average 2.9% from the previous fifty years. And federal debt—growing every year with the deficits—will reach an estimated 93% of GDP by 2029 (as CBO notes, this would be “a larger amount than at any time since just after World War II.”)

Fifth, most Americans might think they didn’t benefit from the Trump tax cuts because the cuts aren’t just an economic issue—they are political. Pew Research found that the two parties increasingly disagree about whether taxes are fair—64% of Republicans think so, but only 32% of Democrats agree. That’s the biggest gap since Pew began asking this question over twenty years ago.

Democratic presidential candidates are reading the polling data and are attacking the tax cuts as unfair. Senator Bernie Sanders (I-VT) wants to increase the estate tax. Senator Kamala Harris (D-CA) is proposing revisions to benefit lower- and middle-income households. And Senator Elizabeth Warren (D-MA) advocates a wealth tax on the super-rich. You know something is changing politically when a billionaire, in this case hedge fund manager Ray Dalio, says capitalism is unfair and the president should declare inequality a national emergency.

Bottom line: People aren’t feeling a benefit from the tax bill. And feelings matter in politics. Bill Clinton won the presidency with a theme of “It’s the economy, stupid,” while incumbent George H.W. Bush correctly noted (in vain) that the economic recession technically ended over a year before the 1992 election. But voters didn’t feel a recovery and voted to make a change. If the economy slows or stumbles, President Donald Trump may be vulnerable to similar voter feelings, even if most people technically got a small benefit from the tax bill.

This is a repost from Forbes. 
Photocredit: Getty

Photocredit: Getty

Like Halley’s Comet, the idea that people are faking disability claims reoccurs with regularity. The recurrence doesn't happen seasonally, but politically: Republicans are more likely to propose to cut disability benefits. In 2019, it is Democrats opposing the Trump Administration’s proposed Fiscal Year 2020 Budget, which targets people with disabilities. Sadly, Trump may feel he can manipulate latent prejudice against people with impairments. That approach would not only hurt people with disabilities; it would hurt the economy overall.

Cutting Benefits Is Bad Economic Policy

By cutting funding to programs that directly aid people with certain kinds of disabilities,* research the causes of disability,** and help the disabled be fully engaged citizens,*** we are missing a chance to engage a productive workforce. Simply put, it does not make economic sense to cut programs that help people with disabilities work, live in their own homes, get to their jobs, and access the opportunities that all Americans enjoy.

Unfortunately, the Trump Administration is proposing to take a system that is already inadequate and make it worse. Integrating working-age adults who are disabled is part of an economic strategy and the choice is stark: Do we have a society and suite of policies aimed towards engagement or warehousing? Currently, the U.S. leans too much toward the latter.

Comparative studies find employment rates of disabled workers are relatively high in Nordic countries. In Sweden and Denmark the disabled are much more likely to work because these nations with social-democratic systems more successfully integrate individuals with adverse health conditions.

In the U.S. and U.K., meanwhile, disabled workers are more often unemployed and otherwise excluded from the labor force, thanks to an excessive focus on the development of workfare programs that encourage labor force participation as the principle means of achieving equality. Indeed, the cost savings sought by the Trump Administration have to do with a proposal to “test new approaches to increase labor force participation.” This approach has resulted in a limited policy focus that fails to account for all the economic and cultural steps needed to ensure parity of participation of people with disabilities. Investments in active labor market policies may improve the employment of chronically ill people.

U.S. policy has provided little incentive for employers to economically engage disabled people. First, we do not have a cultural commitment to ensuring that workers with disabilities have the opportunity to work in the paid labor market; in fact, research suggests that accommodating people with disabilities is sometimes seen as unfair. Second, U.S. employers have little financial incentive to help disabled workers stay on the job, since the government does not coordinate employer actions with the employees’ particular needs. 

Research shows the obvious: bad health is one of the main determinants of early retirement. But depending on the policies of a nation, bad health does not necessarily constitute a barrier to labor force participation. Working depends foremost on the broader context of an economy and policies which can either promote or hinder the employment of workers who are not entirely healthy.

Misplaced Blame

Included in the proposed $72 billion in cuts to disability programs are reductions in Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Not only is this a betrayal of Trump's campaign promise, it hurts one of the most vulnerable groups in the country.

SSDI allows individuals under retirement age, after two years of demonstrated disability, to get disability benefits and Medicare. Since the disabled often quit their careers early, the benefits are quite low—the average is $1,234 per month. And despite perennial accusations of fakery from the right, the disabled are some of the most vulnerable in society. As a group they aren’t faking it—people on disability are three to six times more likely to die than people in their age group who are not on disability.

The U.S. has always had among the lowest levels of long term disability recipiency. It is quite difficult to get on SSDI—less than 4% of the working age population receives such benefits—though the rates have increased over the last thirty years. While opponents of disability benefits might see this as evidence of falling standards, the basic reason for the increase is that millions of women entered the workforce in previous generations, and thus became eligible to apply for disability.

Crucial to understanding the stubborn persistence of disability is to recognize that in determining disability, the SSDI program considers a number of factors in addition to a person’s health impairment, such as the level of accommodation offered in the workplace and the wages and working conditions of the jobs available. Disability means more than having difficulty with routine activities. Eligibility requires a worker be “unable to perform any substantial gainful activity on any job in the economy for at least one year.” The “substantial gainful activity” refers to any job that generates earnings of $1,180 per month for most people anywhere in the national economy.

The economic environment has a lot to do with whether a person applies for disability. Structural changes in the economy, including declining job and wage prospects for low-skilled workers, have made disability benefits more attractive, as the Economic Policy Institute has shown. This effect is difficult to quantify, however. It is much easier to get someone to stay in the labor market with their physical and mental disabilities than it is to get someone who has left back into the market. That is why programs that help the disabled stay engaged and be accommodated at work are important and practical.

What Is Next For the Disabled And Those at Risk of Disability?  

On April 2, Senators Bob Casey (D-Penn.) and Sherrod Brown (D-Ohio) wrote to Trump’s budget director Mike Mulvaney stating their concern about the cuts and asking to restore the recommendations for funding. As the Senators wrote:

“You have proposed $84 billion in cuts, chiefly, to Social Security Disability Insurance. These are funds that support hard working Americans who have developed disabilities over the course of their lives. The workers who would be denied benefits under your cuts are people who have not only contributed to our economy over decades but have also paid into the Social Security Disability Insurance fund. Our government promised American workers that if they work, grow our economy and they develop a disability – we will take the funds they have contributed in their taxes to provide some care, relief, and dignity.”

Trump's cuts won’t help the disabled work. And in the end that is exactly what a sensible policy should do.


* Examples include the Traumatic Brain Injury program, the Paralysis Resource Center, the Alzheimer’s Disease program, the Lifespan Respite Care program, the Autism Surveillance program, the Independent Living Centers, the Limb Loss Resource Center, Gallaudet University, and the state Council on Developmental Disabilities.

** Examples include the University Centers on Developmental Disabilities, the National Institute on Disability, Independent Living, and Rehabilitation Research.

*** Examples include the Voting Access for People with Disabilities program, state Assistive Technology programs, the National Family Caregiver Support Program, the Native American Caregiver Support Services program, the Interagency Autism Coordinating Committee, the Office of Disability Employment Policy, and Section 811 Housing for Persons with Disabilities.

This is a repost from Forbes. 
Federal Reserve Chair Janet Yellen during a news conference on December 13, 2017 (Photo by Alex Wong/Getty Images)

Federal Reserve Chair Janet Yellen during a news conference on December 13, 2017 (Photo by Alex Wong/Getty Images) - GETTY

Economists extol the theoretical virtues of competition. But in the practice of their own profession, they seem to oppose it, especially in opening up professional economics to women. A recent survey of economists about the profession's climate has documented widespread abuse, harassment and systematic exclusion of women. Almost every other social science and laboratory science has made more progress against these problems than economics.

Why does economics do so badly regarding women--are economists especially mean or sexist? I don’t think so, though there is some evidence studying economics will make you less generous. The best explanation is simple, and ironically consistent with economic theory. People will act in their own self-interest to limit competition and if women, or any group, are excluded there is less competition for coveted tenured professorships.

About a third of first-year graduate students and new PhD.s in economics are women, a share unchanged for twenty years. The percentage of undergraduate economics degrees awarded to women peaked at 35 percent in 2003 and has since fallen to between 30 and 33 percent even though the majority of college students--57 percent-- are now women, up from 39 percent in 1960.  And things are no better at the top of the food chain.  The share of women among full professors in PhD granting economics departments was 6% in 1993 and only 13.9% in 2017.  Compare this to senior women professors in science and engineering--14.2 % were women in 1993, rising to 36.9 % in 2013, over two-and-a-half times the level in economics.

Just 20 % of female economists surveyed said they were satisfied with the overall climate in economics, compared to 40% of men. And only 25% of women felt valued within economics compared to 47 % of men. That is a lot of undervaluation!  Compare these dissatisfaction scores to a broad survey of employees which found only 31% felt valued at work. Men in economics are happier than a broad national sample while women economists feel less so.

The recent attention paid by the American Economics Association dealing with abuse against women begins with a senior undergraduate economics thesis at the University of California at Berkeley. Undergraduate Alice Wu analyzed posts on the web site "Economics Job Market Rumors," a web forum focused on the job market for economics PhDs. Wu analyzed over a million posts and found that a reliable way to predict whether a post was about a woman was whether it contained explicitly sexual references – hotter, hot, tits, lesbian, bang. In contrast, posts about male candidates were much more likely to contain academic and professional terms – slides, motivated, philosopher, keen, textbook.

Economists ought to know best that cutting out the competition is a way to maintain privilege, income, and better jobs. So it is a good that the profession may finally be learning its own lessons. The American Economics Association (AEA), led by former Fed chiefs Janet Yellen and Ben Bernanke and former IMF chief economist Oliver Blanchard, is taking affirmative action steps within the profession to beef up the competition among economists, giving women a fair shake and limiting male privilege.

Here is what the AEA is doing to increase inclusion of a group it has excluded for many reasons – more on bigotry and exclusion later. The AEA Executive Committee has agreed to:

  • approve a formal policy on harassment and discrimination;
  • fund an ombudsperson, a referee to permanently record complaints and investigate harassment and discrimination in any professional context;
  • use a vetting process to ensure candidates in the profession for leadership have not violated the Code or the policy on harassment and discrimination; and,
  • work with committees with the profession aimed at promoting underrepresented groups, like the Committee on the Status of Women in the Economics Profession to develop a clearinghouse for best practices/training materials etc.

There are no quotas or dicta to hire women. The focus is on highlighting an exclusionary culture and working to change it.

These professional steps matter. When I interviewed for my first teaching job fresh out of U.C. Berkeley with my PhD at age 25, these processes could have helped me stop the practice of going to hotel rooms for job interviews. Hour after hour I was asked to sit on the bed while three or four male professors sat in chairs and interviewed me for an assistant professorship. A friend of mine told me she had it slightly worse--she was perched on an unmade bed. Questions about marriage, planning for children, and one's commitment to the profession were common.

She is now a dean at a major university and I hold an endowed chair--we are among that 13.9 percent of full economics professors who are women. But how many of our sisters drew the line and left the profession? And how much has this hostile climate discouraged women undergraduates from even pursuing graduate economics education in the first place?

Federal Reserve Governor, Lael Brainard wrote in February that evidence makes clear the contribution of economics to society will be greater when a broader range of people are engaged and that greater diversity results in better outcomes.

Bottom line: If economists are true to our teaching, the competition might help improve the field. That is not all the field needs, but allowing half the population to compete fairly should help.

This is a repost from Forbes. 

A new report on retirement security from the Government Accountability Office contains what seems like a stunning finding: 48% of older households have “no retirement savings.” By “no retirement savings,” however, the GAO means only that they have no defined contribution plan, that is, an IRA or 401(k). As the report states in the next couple of lines, some of the 48% have a defined benefit plan (often called a pension). Of Americans nearing retirement, 29% have neither a DB nor a DC plan.

But by not stating clearly the issue about DBs, the new GAO report gave Andrew Biggs at the think tank, AEI, an easy opportunity to score a point in the debate between those who do and those who do not think Americans have enough retirement savings. Despite the GAO's inexact wording, Americans do not have enough retirement savings, even when considering DB plans.

True, if you have a DB benefit with enough years of service, it doesn’t matter so much that you don’t have what the GAO calls “retirement savings” (though even if you have a DB plan you may still need a supplement; some DB income levels are quite low). Everyone has a friend or relative who sacrificed relative wage increases for a generous teacher or union pension that is a lot more secure than someone’s 401(k).

On the other hand, people with lump-sum DC plans for retirement always worry about spending it down too fast—as they should. You need to save about 20% more in a DC plan than in a DB plan just to ensure you have enough money if we live to 90 (though most of us won’t live that long). People with DC accounts should be worried since they don’t have benefits-for-life, the longevity insurance that someone with a traditional plan has. Having a DC plan to insure against living to 90 is like having to fund your own kidney transplant. DB plans have longevity insurance; with DC plans you are on your own.

Although the GAO report is excellent—as are the previous entries in the series—the bigger picture is that the GAO understates the magnitude of the retirement savings crisis. This is because average DC account balances are wholly inadequate. A recent study from my research center at the New School found that the median DC account balance of workers aged 55-64 was $92,000—enough to provide an income of just $300 a month over the course of retirement. Including those with no retirement savings at all, the median account balance is a mere $15,000. 

These numbers make sense in light of the fact that most Americans do not expect to be financially secure when they retire. Stagnating wages make it difficult to save without getting ripped off, and both employers and the government have done next to nothing to help workers. Notably, there is no deep political divide on the issue of retirement income security. Seventy-six percent of Americans are concerned they won’t achieve a secure retirement; those numbers are 78% for Democrats and 76% for Republicans.

The widespread and bipartisan worry could have significant political ramifications, as Rachel Cohen reports in The New Republic:

There are signs that retirement will play a significant role in the 2020 race. In February, Bernie Sanders reintroduced the Social Security Expansion Act, with sponsorships from three other leading Democratic presidential contenders: Cory Booker, Kirsten Gillibrand, and Kamala Harris. They belong to a congressional caucus dedicated to increasing Social Security benefits. Formed last fall, it already has more than 150 Democratic members, and Sanders and Elizabeth Warren, another presidential candidate, are its co-chairs in the Senate.

Why not just expand Social Security to solve the retirement crisis? If we expanded Social Security to provide adequate retirement for the vast majority of Americans, workers' payroll taxes would rise to about 30% of pay—up from around 12% today. Rarely do nations secure pensions for all workers with a just a pay-go system. Nations that achieve widespread retirement security do so with both advance-funded and Social Security-type pensions.

Everyone needs an alternative to the crumbling 401(k) and IRA system, and something more than what is currently being proposed in Congress. An improved U.S. retirement system would mandate contributions, arrange for professionally managed investments, and pay out annuities. Blackstone Executive Vice Chairman Tony James and I have put together such a plan as a supplement to Social Security: Guaranteed Retirement Accounts.

The bottom line is that Americans do not have enough retirement savings. This is not because we drink too many lattes, as financial writer Helaine Olen has argued for many years, but because employers and workers are not required to contribute to retirement savings plans above and beyond Social Security. Many low-income workers once had some retirement security; janitors and ladies garment workers weren’t rich, but they had pension plans at work. Some gig workers, like job-to-job carpenters, also had pensions when they were in a union. What we need today is a portable universal pension system that supplements Social Security.

Some may still deny there is a problem. But the number of poor or near-poor people over the age of 62 is set to increase by 25% between 2018 and 2045, from 17.5 million to 21.8 million. If we do nothing in the next 12 years, 40% of middle-class older workers will be poor and near poor elders.  That is a problem.