By Felix Field and Brandon Kahn

What if a single government policy could change the lives of millions of workers overnight? The minimum wage was first established in 1938 through the Fair Labor Standards Act (FLSA), a key component of President Franklin D. Roosevelt’s New Deal. The New Deal aimed to revive the economy from the depths of the Great Depression and address the widespread struggles of workers seeking fair employment and livable wages. The FLSA marked an important early step in the federal government’s recognition of workers’ rights. Today, the minimum wage remains a major topic of debate, as many hold differing opinions on its potential economic impact. Some argue that raising it could cause inflation and higher unemployment rates. In contrast, others contend that it is a necessary tool for improving workers’ quality of life and reducing economic inequality.

We studied how state minimum wage changes might impact unemployment rates to find evidence of either a positive or negative impact on the economy using a method similar to that of economists Card and Krueger. David Card and Alan Krueger use a “natural experiment” method to study the impact of minimum wage changes on employment in New Jersey and Pennsylvania. In their study on the impact of minimum wage changes on employment, they looked at two similar states, New Jersey and Pennsylvania, with the only difference being New Jersey’s recent increase in state minimum wage. In these two states, they compared the employment numbers of fast food chains. Fast food chains were chosen as they are one of the biggest minimum wage employers. They found that employment numbers were relatively similar between the two states despite New Jersey’s minimum wage increase (Card and Krueger 776). These findings challenged the predominant economic theory, which said that raising the minimum wage would lead to higher unemployment. We hope to replicate a similar experiment to Card and Krueger’s using Delaware’s unemployment rate after minimum wage changes in 1988 compared to Maryland’s unemployment rate during the same time. Continue reading →

By Grace Kinum and Katie Ng

As the United States faces a looming national debt crisis, we must ask, is our social security system the most efficient? We researched how different Social Security structures may influence national debt. We focused our comparison on the United States and Sweden, two countries with similar demographic challenges but completely different structures and policies. We specifically looked at the World Bank’s data, through St.Louis FRED, to examine how these structures influenced their national debt levels using debt-to-GDP graphs. 

 In the United States, President Roosevelt implemented the Social Security Act in 1935 during the Great Depression. Social Security is a mandatory government spending program that has grown over the years and continues to expand. The system uses a pay as you go structure. Payments collected from paychecks pay for benefits immediately. 

Until recently, the collected payments exceeded the amount the government was paying out. The surplus created a Social Security trust. However, the government used it for other expenses (Glenn). According to the journal issue “The Great Social Security Debate” by Beland Daniel, this poses an issue to the United States because the fertility rate is decreasing along with the working age population. However, the population over 65, when a person is eligible to receive benefits, is increasing. The amount of people paying into the system is increasing while the number of people receiving benefits is increasing, broadening the deficit. 

The trust fund created in response to the baby boom is projected to run out in 2042. It has become increasingly clear that the debt crisis in the United States is becoming an issue as spending on programs like Social Security continues to grow. Without increasing government revenue, the large projected deficit for the upcoming fiscal year poses risks of eventual dependency on other countries to finance the United State’s debt. This dependency could lower other nations’ confidence in the United State’s fiscal stability and cause eventual economic decline. 

The Swedish Social Security system also includes a pay as you go component and a defined contribution system. In a defined contribution system money is held and invested in individual accounts meaning that the benefit amount is dependent on the success of those investments. The Swedish population faces challenges similar to those in the United States, such as declining fertility rates and an aging population. However, the defined contribution system places less financial strain on the Swedish government than the defined benefit model in the United States which impacts national debt differently. 

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By Aidan Aybar and Haley McGill

Ronald Reagan was elected as the 40th President of the United States in 1980 and served from 1981-1989. He was a member of the Republican party, he enacted many conservative policies during his two terms, including a set of economic policies that came to be known as “Reaganomics”. 

Reagan focused on “supply side” economics and the idea that tax cuts would expand the economy and increase federal government revenue (Reagan Library). The 1970’s were a period of economic stagnation and inflation. During this time, “the inflation rate peaked at just over 13 percent, and prime interest rates rose as high as 21-and-a-half percent” (Gramm). When Reagan took office, he sought to improve the economy and took a different approach to solve the problem. 

To do this, Reagan took several steps during his first year. Reaganmoics included policies such as “engineer[ing] the passage of $39 billion in budget cuts into law”, “25 percent tax cut spread over three years for individuals”, and “faster write-offs for capital investment for business” (Reagan Library).

The tax cuts had significant impacts on the economy and functioned as an expansionary policy. Inflation dropped from 13.5% in 1980 to 5.1% in 1982 and a recession set in with unemployment levels of over 10% in October of 1982 (Reagan Library). For the remainder of Reagan’s two terms, there was record economic growth and low unemployment rates along with “record annual deficit and a ballooning national debt” (Reagan Library). 

In 2017, Donald Trump “signed into law the biggest tax overhaul since the Tax Reform Act of 1986” (Gale et al). These tax cuts are expiring soon, but the current administration is in favor of extending them. Over the past 40 years, “income inequality has increased sharply” (Tax Policy Center). Income taxes can help mitigate income inequality as “high-income households pay a larger share of their income in total federal taxes than low-income households” (Tax Policy Center). Therefore, it is important to investigate the historical impacts of Reagan’s tax cuts on inequality as the current administration seeks to enact similar economic policies.

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By Aidan Aybar and Haley McGill

George W Bush introduced the No Child Left Behind Act (NCLB) in 2002 with the goal “to expand opportunities for American children of all backgrounds and provide all our children with the quality education they deserve while preserving local control” (White House Archives). The NCLB required all schools to test children on their reading and math skills and report results. These results and goals were known as Adequate Yearly Progress (AYP). Children were required to be tested every year from third to eighth grade and they were also tested once in high school. The goal of NCLB was to have all students reach the level of “proficiency” that each state set for itself by 2013-2014. Each state chose what tests to use meaning they were not standardized across the nation. 

If schools did not meet the requirements, the NCLB distributed consequences. “A school that misses AYP two years in a row has to allow students to transfer to a better-performing public school in the same district. If a school misses AYP for three years in a row, it must offer free tutoring. Schools that continue to miss achievement targets could face state intervention. States could “choose to shut these schools down, turn them into charter schools, take them over, or use another, significant turnaround strategy” (Klein). The purpose of these consequences was to encourage schools to stay on track and if they did not meet the consequences, students would end up in better situations. 

The results of the No Child Left Behind Act proved to be less promising. There seemed to be a wide range of results based on the income level of the school district. When comparing the math exams of New York in particular, “[w]hile 86.3 percent of students in rich, or so-called low-need districts scored proficiently, only 28.6 percent did so in Buffalo, 30.1 percent in Syracuse, and 33.1 percent in Rochester” (Herszenhorn). The resources that children have access to seemed to greatly affect their test scores. Additionally, in lower resourced schools, students had much larger class sizes which could have also been a factor in their low test scores (Herszenhorn). 

In his New York Times opinion piece, Sean F Reardon, a Professor of Education and sociology at Stanford, shares a similar sentiment (he wrote his piece in 2013, 11 years after the NCLB was enacted). When analyzing the scores of math and reading standardized tests over 1960-2010, he found that “rich-poor gap in test scores [was] about 40 percent larger [in 2013] than it was 30 years ago” and “the rich now outperform the middle class by as much as the middle class outperform the poor” (Reardon). 

But let’s see what the economic data says about it.

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By Tatyana Avilova

From December 22, 2018, until January 25, 2019, the United States government shut down for 35 days, marking the longest government shutdown in U.S. history. The shutdown caused disruptions to the operation of several federal government agencies, including the U.S. Department of Agriculture (USDA). One of the USDA programs affected by the shutdown was the Supplemental Nutrition Assistance Program (SNAP), which provides benefits to eligible, low-income families to help supplement their grocery budget. In this post, I examine the impact of the government shutdown on SNAP participation and expenditure.

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