Economic Stewardship in Times of Crisis

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The COVID-19 pandemic has illustrated what happens when the government fails to deliver on what Americans expect and need. Americans believe that it is the responsibility of the U.S. government to keep its people safe and sound, invest for the future, and be good stewards of taxpayer dollars and well-regulated markets—in short, to create a fair system that gives everybody a shot at the American dream. Sadly, in recent years, the federal government has failed on most of these issues, as the concurrent public health crisis and deep recession wreak massive hardship for millions of families.1 Unsurprisingly, Americans are frustrated across the board, with 69 percent stating in a recent poll that the United States is on the wrong track when it comes to fiscal policy management.2

Budgets reflect values. And the Trump administration has shown its cards clearly regarding the federal budget. Three years ago, rather than actually address the dual problems of slow productivity growth and massive economic inequality, the administration, then-Speaker of the House Paul Ryan (R-WI), and Senate Majority Leader Mitch McConnell (R-KY) rammed through Congress a massive tax cut, one that was heavily weighted toward the largest corporations and the wealthy. The legislation, known as the Tax Cuts and Jobs Act (TCJA), was packed with budget gimmicks intended to mask its significant costs.3 In the process, it kept income and wealth inequality at record high levels and left unaddressed many issues that plagued families long before the pandemic: low wage growth, high health care and education costs, and growing indebtedness. Yet today, in the face of a devastating pandemic, many of the same congressional leaders are delaying the next legislative package of economically essential coronavirus relief on the grounds of the very deficits that the TCJA helped create.4 This is despite the overwhelming economic and popular consensus that fiscal policy must do “whatever it takes” to address the pandemic and take far bolder actions to build resilience in the face of coming climate shocks and systemic inequalities.5

Putting bare-knuckle politics aside, this issue brief considers how U.S. policymakers should assess fiscal policy in the era of COVID-19—and for at least the foreseeable future beyond the pandemic. In short, responsible fiscal policy in today’s economic reality may be best demonstrated by a government that serves taxpayers by investing in higher productivity, more financial security, expanded opportunity, and greater worker power; by securing inequality-reducing revenues; and by protecting the economy against likely financial, climate, and public health crises.6

Investing in the future

The Center for American Progress’ recent research on budgets and fiscal policy focuses squarely on how policymakers can secure productivity growth, expand opportunity, and reduce inequality.7 Pursuing these goals can help create a virtuous cycle, whereby faster growth in the present, equitably shared, contributes to faster growth in the future. These investments are a top priority; when they are made with an eye toward increasing productivity growth and expanding opportunity, the stronger economy can itself make paying any interest on those investments easier. Consider the example of when doctors take out loans to attend medical school: Their higher future earnings from a lucrative career make it easier for them to pay off incurred loan debt.

Investments in education, research, and infrastructure are just a few examples of taxpayer dollars that government puts toward future productivity and that yield expanded opportunity and reduced inequality. The combination of faster productivity growth and more economic equality will ultimately translate into a lower burden on taxpayers for any debt-financed investments. More people will have higher incomes than would otherwise be the case, increasing federal government revenue in the process. This does not mean that deficits will pay for themselves, but deficit-financed, well-designed investments will substantially lighten the load of the additional debt. The GI Bill that financed education for millions of veterans after World War II; the interstate highway system; government research that helped build the internet; federal research funding for pharmaceutical research to eradicate diseases and find new treatments; and the construction of the Tennessee Valley Authority, which broke the utility monopolies and lowered energy costs for millions of families and businesses, are just a few examples of investments that yielded productivity returns far beyond their upfront costs.8 However, it must be recognized that too many of America’s past investments have excluded people of color, undermining the broadly shared prosperity essential for long-term fiscal responsibility.9

Governments are not households

Analogies to household borrowing are unavoidable tools for helping people understand financial matters, but they have significant limitations and even downsides when it comes to truly appreciating the operation of government borrowing. In particular, households often face obstacles in borrowing the money necessary to invest in their own futures, as the example of student loans amply highlights. They also have finite life spans where they borrow money to invest in education and housing early in their career; increase their earnings and savings if all goes well; and eventually enter retirement. Households typically aim to pay off all or most of their debt by the time they retire. Limited access to affordable debt and finite investment horizons mean that households cannot fully address all their needs and are left with a lot of financial risks. For example, many households, especially African American and Latinx households, end up with significant high-cost student and auto loan debt early in their careers, hampering their ability to buy a house or start a business.10

The federal government, in contrast, can borrow on highly favorable terms to finance necessary investments and has a much longer time horizon. It can thus address large, known but longer-term risks by temporarily increasing its borrowing. The federal government can borrow on more favorable terms for a number of reasons, including the size of the U.S. economy, the dollar’s role as the global reserve currency, and the role of public debt as the foundational asset of the financial system for liquidity, credit pricing, and other purposes. The federal government’s capacity and necessity to borrow are not only far larger than those of households but also fundamentally different. It can address key challenges such as borrowing and spending to counter the boom-and-bust cycles of the economy, for example, by supporting households and businesses hurt by the pandemic. It can also respond to financial, public health, and climate crises in its fundamental role of protecting people, boosting financial stability, and increasing productivity growth. When addressing federal budget matters, policymakers therefore should be cautious in using household analogies that drive questions such as, “Where will the money come from?” or “How will we pay it back?”—not because those questions cannot be asked or answered, but because the answer in the governmental context is so different from the answer in the household context.11

Protecting the country in times of national crisis—such as wars—has historically justified exceptionally heightened levels of debt, usually expressed as a ratio of debt held by the public to gross domestic product (GDP). And in fact, while wars waste a great many things—not the least of which is life—they have also resulted in productivity booms that are due in part to government investment in technological and manufacturing capacity and to productivity innovations that arise from what are commonly extremely tight labor markets during those periods.12 Indeed, the years following World War II saw the nation’s biggest boom in middle-class opportunity for workers—not including, by intentional policy design, Black workers.13 Public debts as a percentage of GDP declined as the economy grew more quickly, a reasonable level of worker wage growth and inflation were maintained, and the wealthy paid their fair share in taxes.

Today, the pandemic-related economic crisis, systemic racism, and climate change all pose similar existential crises, and each demands a similarly robust response—one that increases technological and manufacturing investment and tightens labor markets by addressing the nation’s needs.14 Recent economic research highlights in particular the importance of investing, including through short-term deficits, to support workers’ productivity growth and a more equitable distribution of economic resources. This combination of faster growth and more equality could allow the nation to avoid the economic scarring that can come when a crisis dislocates workers for extended periods.15

The pandemic-related economic crisis

The country is suffering from a deep and prolonged recession that is hurting families and businesses. Even though GDP growth rebounded from July 2020 to September 2020 and recovered most of the ground lost in the preceding months, people had 10.7 million fewer jobs in September 2020 than in February 2020, and the employed share of people ages 25 to 54 was only 75 percent—far below the 80.5 percent share in February and below any levels recorded from 2011 to 2019.16 Moreover, the labor market recovery is showing signs of slowing. Financially strapped households are already out of options when it comes to paying their bills. The U.S. Census Bureau reports that 15.1 percent of renters had fallen behind on their rent at the end of September.17 The widespread and lingering economic pain from the recession will eventually hurt all kinds of businesses and further slow the recovery, unless Congress quickly enacts another large and well-targeted fiscal stimulus.

The COVID-19 pandemic presents precisely such a case for a robust fiscal response to save lives and prevent the kind of sustained job loss that occurred for too many workers in the years following the 2008 financial crisis and Great Recession, when fiscal austerity returned far too soon. The International Monetary Fund recently praised fiscal policy for doing “whatever it takes to save lives and livelihoods” as countries go through COVID-19 lockdowns, but it continued to emphasize the importance of smart investment:

When the health crisis is contained, the emphasis will shift to exiting from exceptional government interventions and to ensuring the sustainability of public finances while building resilience against future shocks and addressing preexisting challenges such as inequalities and global warming.18

In the aftermath of the COVID-19 pandemic, the United States will need to make significant investments to support job creation in so many hard-hit communities; build small-business opportunity nationally, especially in communities of color where the racial wealth gap has left families vulnerable to the dual onslaught of the public health crisis and the deep recession; address the climate crisis and so many other problems that have been neglected for far too long; and much more.19

Empowering workers to advance responsible fiscal policy

Empowering worker power to collectively secure fair wages would also support the advancement of responsible fiscal policy. Because unions help raise wages, they support both economic security for workers and higher productivity, both of which have positive fiscal impacts.20 More fundamentally, worker power is important because unions have proved to be powerful tools in focusing workers on their essential interests as citizens in a democracy.21 Vibrant multiracial unions have also been essential to countering the threats of racism and racial division, which are proving to be dangerously powerful forces that undermine the very tenets of the United States’ economic and national strength nearly every day in President Donald Trump’s America.22

Systemic racial inequality

Consider systemic racial inequality. The protests against police brutality this summer have once again laid bare how any federal government response addressing the massive inequities highlighted by the pandemic will need to wrestle with the persistent and widespread racial wealth gap. The gap between Black and white families’ wealth serves as a key example. Black households typically own a fraction of the wealth of white households. In 2019, the last year for which data are available, the median wealth of Black families amounted to $24,100, or 12.8 percent of white families’ median wealth of $188,200.23 This lack of wealth has left Black families especially vulnerable in the pandemic as they are more likely to experience layoffs24 and higher health care costs due to a greater exposure to the coronavirus.25 They have fewer resources to cover the loss of income and higher health care costs, resulting in greater financial vulnerabilities and fewer opportunities to invest in their children’s remote learning.26 The pandemic thus made an already massive economic inequality much worse.27

Federal efforts to shrink the Black-white wealth gap must be part of any responsible fiscal policy and need to take several forms. First, the federal government should do no harm and avoid a return to fiscal austerity. Aggressive reductions in public services hurt many people of color in two ways: They lose access to stable, well-paying jobs with decent benefits that are often unavailable to them in the private sector, and they lose vital services in health care, education, transportation, and other areas.28 Next, the federal government needs to address the persistent exclusion of Black entrepreneurs and inventors from federal funding for research and development.29 Third, the federal government must make direct investments in raising wealth for Black families so that they can enjoy the same economic opportunities as white families. These direct investments can include regular savings for children until they reach age 18, commonly known as baby bonds; debt-free college; easier access to low-cost, low-risk savings options; and full enforcement of anti-discrimination and civil rights legislation in mortgage and housing markets.30 Without such investments, a large and growing share of the population will continue to face much harder and more widespread financial struggles than is the case for white families, and persistent and systemic inequality will continue to hamper inclusive, broad-based growth and drive social fracture and conflict—all of which is deeply harmful to fiscal policy.

Climate change

Climate change’s economic impacts are similarly stark. Communities of color will be the hardest hit when it comes to the effects of the climate crisis, but those impacts extend widely across the economy and all the way to the most powerful: The risk of a climate change-driven financial crisis grows every day that markets and regulators refuse to act on climate change.31 Already, weather-related natural disasters have taken thousands of lives and cost nearly half a trillion dollars in the past three years alone.32 This year’s fire season was so intense in the West that the skies of major American cities were darkened in broad daylight.33 Farmers, ranchers, fishermen, and others in the agricultural sector are feeling the pain of nature’s punishingly fast changes.34 The necessity of an overwhelming response on climate—one focused on a 100 percent clean energy target, a worker-centered approach, and environmental justice—grows more pressing by the day.35 Indeed, precisely because there is no silver bullet, trillions of dollars in federal investments need to be deployed across a wide range of initiatives—including research and development; safe and healthy infrastructure; worker and community transitions; rural conservation and sustainable agriculture; and special efforts to target communities that have historically carried an unfair burden from pollution. This is critical to addressing the existential challenge that is the climate crisis.36

Ultimately, smart investments that enhance productivity and protect people and the planet are fundamentally in furtherance of responsible fiscal policy in that they bolster the economic, social, and environmental foundations for growth and prosperity.

Raising revenues and reducing inequality

This is not to say that structural deficits do not pose potential economic risks over the long term. As such, policies that undermine the country’s revenue base heighten those risks. Unfortunately, the mistakes of recent years have added up.

In particular, the 2017 TCJA was predicated on cut-and-grow mythology that has time and again been proved wrong. The law also ignored independent scorekeepers and relied on budgetary gimmicks, leading it to be deficit-financed and have an effective price tag well north of the roughly $2 trillion official price tag should core features of the law get extended.37 The bulk of those funds were redistributed upward, going to the wealthy and to the largest, most profitable corporations, which have used their tax cuts not to invest in job creation or workers through new economic capacity or productivity, but instead to finance share buybacks and mergers and acquisitions.38 Quite simply, the tax cuts were a missed opportunity to make productivity-enhancing investments to build America’s future.39 And while billed as tax reform, the bill left untouched some of the most wasteful tax expenditures—such as the private equity so-called carried interest loophole. It even created some large new ones, such as the 20 percent deduction for business income earned through pass-through entities, the foreign-derived intangible income deduction that actually contains incentives to offshore production, and the opportunity zone tax shelter that provides extraordinary capital gains reductions for the wealthy but few guardrails to ensure that the investment funds benefit existing populations in underserved communities.40

More broadly, greater revenues are needed not only to support economic investments in middle-class job creation, climate change mitigation, and more, but also to play a role in directly reducing inequality. A return to more progressive rates of tax on high incomes, capital gains, and wealthy estates; stronger tax enforcement, especially with respect to the wealthy; and more are all important tools to create a fairer tax system.41 Closing irresponsible business loopholes, such as the pass-through tax loophole, and reversing the tax cuts for corporations that have brought corporate revenue well below historic and international norms are equally critical to countering the extraordinary accumulation of wealth and power at the very top.42 These changes will also generate more revenue to support vital programs that many American families need for their financial security and to enjoy equal economic opportunity.

Advancing prudent financial regulation

The 2008 financial crisis and the Great Recession laid bare the connection between the banking system and fiscal responsibility: Not only did millions of Americans lose their jobs and homes, but the public debt and the Federal Reserve System’s balance sheets both rose dramatically. Essentially, America saw the socialization of much of the private sector debt that the banking system and capital markets had created but mismanaged, while unemployment and the real economy slowdown caused more fiscal outlays and a collapse in federal and state tax revenue.43 None of this was news to experts, who for years understood that financial fragility has strongly negative impacts on employment and macroeconomic outcomes, which in turn further exacerbates weaknesses in the financial system.

Unfortunately, COVID-19 presents the risk of another financial crisis that requires sustained attention in order to avoid it.44 Critical funding markets broke down in March, and the Federal Reserve System has deployed extraordinary levels of emergency lending to support the financial system, corporations, and municipalities, acting in ways that even exceed what was done during the 2008 financial crisis.45 Moreover, banks remain exposed to homeowners who cannot pay their bills, to commercial real estate owners whose incomes depend on renters and small businesses that cannot pay the rent, and to other losses that may ripple through the economy. At particular risk are financial institutions and markets exposed to an increasingly highly indebted corporate sector, which includes an oil and gas industry that has struggled for years.46 If these issues are not addressed and financial risks become too large, the costs of a financial crisis fall squarely on the taxpayer, not only through the immediate draws on the federal government safety net but also through the real economy implications for recessions: a macroeconomic slowdown, more unemployment, fewer revenues, and higher expenditures.

As the negative interaction between real economy downturns and financial sector fragility can produce unexpectedly large outcomes for employment and other macroeconomic variables, fiscal responsibility during the COVID-19 economic crisis demands a prudent approach to financial regulation.47

Prudent financial regulation puts the real economy first

In simple terms, prudent financial regulation starts by ensuring core components of the financial system are regulated to take the risks necessary to serve their important real economy functions and not more. These include deposit-taking and lending for banks; securities underwriting and customer-focused trading for securities firms; and business and consumer insurance services for insurance companies. Banking organizations, for example, should not be engaged in taking high-risk, swing-for-the-fences bets on the ups and downs of the market, which do little more than fill the bonus pools of traders and executives at the expense of their customers and clients.48 All financial firms should maintain robust buffers in the form of loss-absorbing capital and high-quality liquid assets to help them weather the inevitable storms in the financial markets.49 Additionally, specific financial products and the markets in which they may operate—be they consumer loans, securities, derivatives, or otherwise—should be transparent and well-regulated to protect consumers and investors; to ensure fair and efficient markets for all market participants; and to otherwise support the maximum possible long-term alignment between those markets and the public interest, such as relating to worker empowerment, climate change efforts, racial justice, and more general environmental, social, and governance (ESG) matters.50 In essence, prudent financial market regulation is a way to ensure that the federal purse will not be unduly taxed by another foreseeable and preventable crisis.

To date, many of the reforms to bank capital, risk-taking, swaps, consumer protection, and more put in place by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 have helped to insulate the financial system from the pandemic’s economic impacts.51 Yet the Federal Reserve Board and other financial regulators have chipped away at the Dodd-Frank Act’s capital and other regulatory foundations in the years since its passage, exposing taxpayers to heightened risks of failed banks.52 Real-time choices made by regulatory leadership matter, too: Irresponsible capital releases for dividends or share buybacks, amazingly, were permitted to continue well into the beginning of the pandemic lockdown.53

Although the situation appears calm at the moment, continued attention is critical, as financial markets seem to be pricing in far higher losses in the corporate sector than they normally do.54 Additionally, the failure of Congress to pass sufficient fiscal support for families, small businesses, and states and local governments presents a continued risk to the financial system.55

Nor do the immediate risks to the financial system end with COVID-19. As was highlighted in a recent unanimous report by a climate-related risk advisory committee to the U.S. Commodity Futures Trading Commission, the already present harms of climate change, and the ensuing risks of a climate-related financial crisis, only make it more urgent that financial regulators get their houses in order.56 Key tools to address this challenge include enhanced climate-related corporate transparency, including the emissions financed by the financial sector; bank stress tests and capital regulation; transparency regarding ESG approaches by asset managers and asset owners; and a range of tools to promote the clean energy transition and small-business resiliency.57

Conclusion

Despite all the mistakes and wastefulness of recent years, America retains extraordinary fiscal advantages. The dollar remains the global reserve currency, and U.S. debt forms the foundation of the financial system and central banks around the world. In fact, in an era of low inflation and secular growth challenges, fiscal capacity may be far more robust than previously fathomed.58 But that does not mean it should be wasted. Instead, America’s taxpayer dollars should be deployed to create jobs, boost productivity, and address long-term challenges—and in doing so, secure America’s economic growth, social inclusion, and, indeed, fiscal strength. Paired with an approach to revenues that reduces inequality and a prudent approach to financial regulation, this would be a truly different path forward than the reckless one that America has been traveling—because at the end of the day, a responsible approach to fiscal policy means having a government that is accountable to, investing in, and faithfully protecting the American people.

Andy Green is the managing director of Economic Policy at the Center for American Progress. Christian E. Weller is a senior fellow on the Economic Policy team at the Center and a professor of public policy at the University of Massachusetts Boston’s McCormack Graduate School of Policy and Global Studies.

To find the latest CAP resources on the coronavirus, visit our coronavirus resource page.

Endnotes

  1. U.S. Census Bureau, “Measuring Household Experiences during the Coronavirus Pandemic: Household Pulse Survey – Phase 2 (August 19, 2020 – October 26, 2020), ” available at https://www.census.gov/data/experimental-data-products/household-pulse-survey.html (last accessed October 2020).
  2. Peter G. Peterson Foundation, “FT-Peterson Economic Monitor,” available at https://www.pgpf.org/ft-peterson-us-economic-monitor (last accessed October 2020). This publication and certain others in this issue brief—in particular, those noted in this endnote—were made possible in part by a grant from the Peter G. Peterson Foundation. In all cases, the statements and the views expressed are solely the responsibility of the Center for American Progress. Seth Hanlon, Alan Cohen, Sara Estep, “Rising Deficits, Falling Revenues: The Fiscal Damage Caused by the New Republican Tax Law” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/economy/reports/2018/11/29/461579/rising-deficits-falling-revenues/; Christian E. Weller, Sara Estep, and Galen Hendricks, “Budgeting the Future” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/04/02/467911/budgeting-the-future/; Alexandra Thornton and Sara Estep, “Taking Stock of Spending Through the Tax Code: Tax Expenditures Are Skewed to the Wealthy Even After TCJA” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/07/25/472678/taking-stock-spending-tax-code/; Seth Hanlon, “Unrigging the Economy Will Require Enforcing the Tax Laws” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/03/12/481539/unrigging-economy-will-require-enforcing-tax-laws/; Gregg Gelzinis, “Bank Capital and the Coronavirus Crisis: 4 Ways the Federal Reserve Can Improve the Resilience of the Banking System” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/05/12/484722/bank-capital-coronavirus-crisis/; Private convening hosted by the Center of American Progress via videoconference in cooperation with the University of Massachusetts’ Political Economy Research Institute, June 12, 2020, notes on file with authors.
  3. Hanlon, Cohen, Estep, “Rising Deficits, Falling Revenues.”
  4. Steven T. Dennis, “GOP Rekindles Deficit Concerns, Adding Snag to Talks on Aid,” Bloomberg, May 11, 2020, available at https://www.bloomberg.com/news/articles/2020-05-11/gop-finds-deficit-scold-voice-again-adding-snag-to-talks-on-aid?sref=T513XH2G.
  5. International Monetary Fund, “Fiscal Monitor: Policies for the Recovery” (Washington: 2020), available at https://www.imf.org/en/Publications/FM/Issues/2020/09/30/october-2020-fiscal-monitor; Andres Vinelli and Christian E. Weller, “Temporary Fiscal Deficits To Avoid Permanent Economic and Social Damage From the Coronavirus,” Center for American Progress, May 29, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/05/29/485581/temporary-fiscal-deficits-avoid-permanent-economic-social-damage-coronavirus/; Alexis Krieg, “Understanding the True Economic Cost of COVID-19,” Omidyar Network, September 29, 2020, available at https://omidyar.com/understanding-the-true-economic-cost-of-covid-19/.
  6. For a similar approach, see Josh Bivens, “Thinking seriously about what ‘fiscal responsibility’ should mean” (Washington: Economic Policy Institute, 2019), available at https://www.epi.org/publication/what-fiscal-responsibility-should-mean/.
  7. Weller, Estep, and Hendricks, “Budgeting the Future.”
  8. See, generally, Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London: Anthem Press, 2013). On the GI Bill, see, generally, U.S. Department of Defense, “75 Years of the GI Bill: How Transformative It’s Been,” January 9, 2019, available at https://www.defense.gov/Explore/Features/story/Article/1727086/75-years-of-the-gi-bill-how-transformative-its-been/. On the Tennessee Valley Authority, see Michael Hiltzik, The New Deal: A Modern History (New York: Free Press, 2011), pp. 72–78.
  9. See, for example, Mehrsa Baradaran, “Jim Crow Credit,” 9 U.C. Irvine L. Rev. 887 (2019), available at https://scholarship.law.uci.edu/ucilr/vol9/iss4/4; Kristina Costa, Lia Cattaneo, and Danielle Schultz “When Communities Didn’t Have a Say: How Federal Infrastructure Dollars Were Used to Bulldoze Communities of Color” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/green/reports/2018/04/24/449961/communities-didnt-say/; Michela Zonta, “Racial Disparities in Home Appreciation: Implications of the Racially Segmented Housing Market for African Americans’ Equity Building and the Enforcement of Fair Housing Policies” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/07/15/469838/racial-disparities-home-appreciation/; Michela Zonta, “Expanding the Supply of Affordable Housing for Low-Wage Workers” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/08/10/488313/expanding-supply-affordable-housing-low-wage-workers/.
  10. Danyelle Solomon and Christian E. Weller, “When a Job Is Not Enough: The Latinx-White Wealth Gap” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/race/reports/2018/12/05/461823/job-not-enough/; Angela Hanks, Danyelle Solomon, and Christian E. Weller, “Systematic Inequality: How America’s Structural Racism Helped Create the Black-White Wealth Gap” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/race/reports/2018/02/21/447051/systematic-inequality/.
  11. See Josh Bivens, “More FAQS on deficits and debt: Where is the money coming from?”, Economic Policy Institute, September 14, 2020, available at https://www.epi.org/blog/more-faqs-on-deficits-and-debt-where-is-the-money-coming-from/; Jared Bernstein, “Rethinking Debt,” Democracy Journal 23 (2012), available at https://democracyjournal.org/magazine/23/rethinking-debt/.
  12. Brendan Duke, “To Raise Productivity, Let’s Raise Wages” (Washington: Center for American Progress, 2016), available at https://www.americanprogress.org/issues/economy/reports/2016/09/02/142040/to-raise-productivity-lets-raise-wages/. See also Robert Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016).
  13. See Baradaran, “Jim Crow Credit.”
  14. See Center for American Progress, “Blueprint for the 21st Century: A Plan for Better Jobs and Stronger Communities” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/economy/reports/2018/05/14/450856/blueprint-21st-century/; Seth Hanlon and others, “America Can Do Big Things: A Budget Plan for a Better Future” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/06/11/471022/america-can-big-things-budget-plan-better-future/; Harry Stein, “America Can Still Do Big Things: Dispelling the Fiscal Hysteria that Thwarts Good Public Policy,” Harvard Law and Policy Review 11 (2017): 141–174, available at https://harvardlpr.com/wp-content/uploads/sites/20/2017/02/HLP107.pdf.
  15. See Vinelli and Weller, “Temporary Fiscal Deficits To Avoid Permanent Economic and Social Damage From the Coronavirus.”
  16. U.S. Bureau of Labor Statistics, “Databases, Tables and Calculators by Subject: Unemployment,” available at https://www.bls.gov/data/#unemployment (last accessed October 2020).
  17. U.S. Census Bureau, “Week 15 Household Pulse Survey: September 16 – September 28,” October 7, 2020, available at https://www.census.gov/data/tables/2020/demo/hhp/hhp15.html.
  18. International Monetary Fund, “Fiscal Monitor.”
  19. Center for American Progress, “Blueprint for the 21st Century.”
  20. David Madland, “The Future of Worker Voice and Power” (Washington: Center for American Progress, 2016), available at https://www.americanprogress.org/issues/economy/reports/2016/10/11/143072/the-future-of-worker-voice-and-power/. See also Duke, “To Raise Productivity, Let’s Raise Wages”; Weller, Estep and Hendricks, “Budgeting the Future.”
  21. See Josh Pacewicz, Partners and Partisan: The Politics of the Post-Keynesian Society (Chicago: University of Chicago Press, 2016).
  22. For more on unions’ role in countering extremism, see Ibid. On the importance of multiracial unions in countering racism, see James W. Loewen, Sundown Towns: A Hidden Dimension of American Racism (New York: The New Press, 2018).
  23. Neil Bhutta and others, “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin 106 (5) (2020), available at https://www.federalreserve.gov/publications/files/scf20.pdf.
  24. Olugbenga Ajilore, “The Persistent Black-White Unemployment Gap Is Built Into the Labor Market,” Center for American Progress, September 28, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/09/28/490702/persistent-black-white-unemployment-gap-built-labor-market/.
  25. Christian Weller, “Systemic Racism Makes Covid-19 Much More Deadly For African-American,” Forbes, June 18, 2020, available at https://www.forbes.com/sites/christianweller/2020/06/18/systemic-racism-makes-covid-19-much-more-deadly-for-african-americans/#4fca04037feb.
  26. Dania Francis and Christian E. Weller, “The Black-White Wealth Gap Will Widen Educational Disparities During the Coronavirus Pandemic,” Center for American Progress, August 12, 2020, available at https://ap-stage.devprogress.org/issues/race/news/2020/08/12/489260/black-white-wealth-gap-will-widen-educational-disparities-coronavirus-pandemic/.
  27. Danyelle Solomon and Darrick Hamilton, “The Coronavirus Pandemic and the Racial Wealth Gap,” Center for American Progress, March 19, 2020, available at https://www.americanprogress.org/issues/race/news/2020/03/19/481962/coronavirus-pandemic-racial-wealth-gap/.
  28. Michael Madowitz, Anne Price, and Christian E. Weller, “Public Work Provides Economic Security for Black Families and Communities” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/10/23/492209/public-work-provides-economic-security-black-families-communities/.
  29. Christian E. Weller and others, “Redesigning Federal Funding of Research and Development: The Importance of Including Black Innovators” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/race/reports/2020/08/18/489609/redesigning-federal-funding-research-development/.
  30. Christian E. Weller, Connor Maxwell, and Danyelle Solomon, “Simulating How Progressive Proposals Affect the Racial Wealth Gap” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/race/reports/2019/08/07/473117/simulating-progressive-proposals-affect-racial-wealth-gap/.
  31. Andy Green, Gregg Gelzinis, and Alexandra Thornton, “Financial Markets and Regulators Are Still in the Dark on Climate Change” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/06/29/486893/financial-markets-regulators-still-dark-climate-change/.
  32. John Podesta and others, “A 100 Percent Clean Future” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/green/reports/2019/10/10/475605/100-percent-clean-future/.
  33. BBC, “California wildfires: Smoke turns skies orange,” September 10, 2020, available at
    https://www.bbc.com/news/world-us-canada-54096319.
  34. Bidisha Bhattacharyya, Ryan Richards, and Rita Cliffton, “Building a 100 Percent Clean Future Can Drive an Additional $8 Billion a Year to Rural Communities” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/green/reports/2020/01/08/479168/building-100-percent-clean-future-can-drive-additional-8-billion-year-rural-communities/.
  35. Podesta and others, “A 100 Percent Clean Future.”
  36. Ibid.
  37. Hanlon, Cohen, Estep, “Rising Deficits, Falling Revenues.”
  38. Ibid.; Robert J. Jackson Jr., “Stock Buybacks and Corporate Cashouts,” U.S. Securities and Exchange Commission, June 11, 2018, available at https://www.sec.gov/news/speech/speech-jackson-061118 ; Andy Green, Christian E. Weller, and Malkie Wall, “Corporate Governance and Workers: Why Today’s Economy Fails Working Families—and What To Do About It” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/08/14/473095/corporate-governance-workers/.
  39. Galen Hendricks, Seth Hanlon, and Michael Madowitz, “Trump’s Corporate Tax Cut Is Not Trickling Down,” Center for American Progress, September 26, 2019, available at https://www.americanprogress.org/issues/economy/news/2019/09/26/475083/trumps-corporate-tax-cut-not-trickling/.
  40. Kimberly Clausing, “Options for International Tax Policy After the TCJA” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/01/30/479956/options-international-tax-policy-tcja/; Thornton and Estep, “Taking Stock of Spending Through the Tax Code”; Olugbenga Ajilore, “The Treasury Department’s Regulations for Opportunity Zones Ignore the Communities They Should Serve,” Center for American Progress, October 19, 2018, available at https://www.americanprogress.org/issues/economy/news/2018/10/19/458989/treasury-departments-regulations-opportunity-zones-ignore-communities-serve/.
  41. Seth Hanlon and others, “America Can Do Big Things: A Budget Plan for a Better Future;” Alexandra Thornton and Galen Hendricks, “Ending Special Tax Treatment for the Very Wealthy” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/06/04/470621/ending-special-tax-treatment-wealthy/; Galen Hendricks and Seth Hanlon, “Capital Gains Tax Preference Should Be Ended, Not Expanded” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/09/28/490816/capital-gains-tax-preference-ended-not-expanded/; Hanlon, “Unrigging the Economy Will Require Enforcing the Tax Laws.”
  42. Kimberly Clausing, “Business Tax Principles for Economic Recovery in the Time of Coronavirus,” Center for American Progress, May 15, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/05/15/485020/business-tax-principles-economic-recovery-time-coronavirus/; Clausing, “Options for International Tax Policy After the TCJA”; Alexandra Thornton, “11 Ways the Wealthy and Corporations Will Game the New Tax Law” (Washington: Center for American Progress, 2018), https://www.americanprogress.org/issues/economy/reports/2018/07/25/453981/11-ways-wealthy-corporations-will-game-new-tax-law/.
  43. Federal Reserve Bank of St. Louis, “Federal Debt Held by Federal Reserve Banks,” available at https://fred.stlouisfed.org/series/FDHBFRBN (last accessed October 2020). See also, for example, Simon Johnson, “Testimony to Senate Budget Committee, Hearing on ‘A Status Report on the U.S. Economy’,” August 3, 2010, available at https://baselinescenario.files.wordpress.com/2010/08/testimony-to-senate-budget-committee-august-2-2010-final.pdf.
  44. The Center for American Progress appreciates the opportunity to have discussed these topics at a private convening with the University of Massachusetts’ Political Economy Research Institute on June 12, 2020. Notes are on file with authors.
  45. Marc Jarsulic and Gregg Gelzinis, “Making the Federal Reserve Serve Everyone in the Aftermath of the Coronavirus Pandemic,” Center for American Progress, May 14, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/05/14/484951/making-fed-rescue-serve-everyone-aftermath-coronavirus-pandemic/.
  46. Ibid.; Gregg Gelzinis, Michael Madowitz, and Divya Vijay, “The Fed’s Oil and Gas Bailout Is A Mistake: Financial Stability, Public Funds, and the Planet Are at Risk” (Washington: Center for American Progress, 2020), available at https://www.americanprogress.org/issues/economy/reports/2020/07/31/488320/feds-oil-gas-bailout-mistake/.
  47. The seminal work on financial fragility and real economy interactions is Ben Bernanke, Mark Gertler, and Simon Gilchrist, “The Financial Accelerator in a Quantitative Business Cycle Framework,” Review of Economics and Statistics 78 (1) (1996), available at https://www.nber.org/papers/w6455.
  48. See Gregg Gelzinis, “Hollowing Out the Volcker Rule: How Regulators Plan to Undermine a Pillar of Financial Reform” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/economy/reports/2018/10/03/458638/hollowing-volcker-rule/.
  49. Gregg Gelzinis, Andy Green, and Marc Jarsulic, “Resisting Financial Deregulation: Progressive Banking Policies to Strengthen—Not Slash—Financial Reform” (Washington: Center for American Progress, 2017), available at https://www.americanprogress.org/issues/economy/reports/2017/12/04/443611/resisting-financial-deregulation/.
  50. See Andy Green and Andrew Schwartz, “Corporate Long-Termism, Transparency, and the Public Interest” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/economy/reports/2018/10/02/458891/corporate-long-termism-transparency-public-interest/.
  51. Gelzinis, “Bank Capital and the Coronavirus Crisis.”
  52. Ibid.
  53. Ibid.
  54. Gillian Tett, “A Disturbing New Signal from the CDS Market,” Financial Times, October 29, 2020, available at https://www.ft.com/content/43c721a7-03b9-40d1-9d9f-ef319b923909.
  55. See Ryan Zamarripa and Jesse Lee, “House HEROES Act Reflects Urgency of Ongoing Public Health and Economic Crises Caused by Coronavirus,” Center for American Progress, June 10, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/06/10/485685/house-heroes-act-reflects-urgency-ongoing-public-health-economic-crises-caused-coronavirus/; Andres Vinelli, Christian E. Weller, and Divya Vijay, “The Economic Impact of Coronavirus in the U.S. and Possible Economic Policy Responses,” Center for American Progress, March 6, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/03/06/481394/economic-impact-coronavirus-united-states-possible-economic-policy-responses/.
  56. Market Risk Advisory Committee Climate-Related Market Risk Subcommittee, “Managing Climate Risk In The U.S. Financial System” (Washington: U.S. Commodity Futures Trading Commission, 2020), available at https://www.cftc.gov/sites/default/files/2020-09/9-9-20%20Report%20of%20the%20Subcommittee%20on%20Climate-Related%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf.
  57. Green, Gelzinis, and Thornton, “Financial Markets and Regulators Are Still in the Dark on Climate Change”; Gregg Gelzinis and Graham Steele, ”Climate Change Threatens the Stability of the Financial System” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/11/21/477190/climate-change-threatens-stability-financial-system/. See also Alexandra Thornton and Andy Green, “How Congress Can Help Small Businesses Weather the Coronavirus Pandemic,” Center for American Progress, April 13, 2020, available at https://www.americanprogress.org/issues/economy/news/2020/04/13/483067/congress-can-help-small-businesses-weather-coronavirus-pandemic/.
  58. Weller, Estep, and Hendricks, “Budgeting the Future.”