Economists, policy experts, and activists discussed how to prepare for the next recession at an event hosted by the Economic Policy Institute with support from the Groundwork Collaborative. Christina Romer, Professor of Economics at the University of California, Berkeley and a former chair of the Council of Economic Advisers, delivered the keynote address.
“Policymakers’ actions influence when and whether we have a recession, and how destabilizing it will be for families and communities across the country,” said Angela Hanks, Deputy Executive Director of the Groundwork Collaborative. “Policies that make us more unequal, and those that make families and communities less economically secure only serve to worsen the impact of economic downturns. Our leaders should be investing in workers and communities now to ensure they are prepared to weather the effects of another recession.”
In new research presented at the conference, EPI Research Director Josh Bivens argues the United States is poorly prepared for the next recession, but not for the reasons policymakers and commentators commonly cite. Instead, Bivens argues political decisions, not economic constraints, underpin this lack of preparedness. Key policy shortcomings include the failure make progress in reducing inequality during the current economic expansion; the failure to tame the power of the financial sector; and the failure of most policymakers to recognize the clear evidence that that fiscal policy, particularly increases to public spending, is the most effective tool for ending a recession and aiding recovery. Bivens points out that the Trump administration has shown little interest in evidence-driven policymaking, and entering the next recession without smart and nimble macroeconomic managers in the White House is likely to hamper an effective response.
“There is a real possibility that the economy could slip into a recession in the next couple of years,” said Bivens. “Contrary to conventional wisdom, we have plenty of ‘space’ to use fiscal and monetary policy to fight the next downturn. The constraints are not high debt-to-GDP ratios or low short-term interest rates, but politicians’ unwillingness to provide the fiscal stimulus we’ll need.”
In a companion paper, Center for Popular Democracy Chief of Campaigns & Policy Connie Razza outlines the components necessary for advocates and policymakers to develop a blueprint for fighting the next recession and ensuring that the economy emerges as more just and equitable.
“As we prepare for the next recession, we need plans that consider more than economic multiplier effects,” said Razza. “Instead, we need to develop effective policy proposals and the political infrastructure to win them. Done right, this political infrastructure can help ensure that the recovery is broad-based and reduces rather than increases inequality along lines of income class, race, and gender.”
Video from the event can be viewed on epi.org.