Brookings Press Blog

The Cost of Doing Nothing: Not Enacting Health Care Reform Comes with a Hefty Price Tag

An op-ed in the Boston Globe argues that Congress failing to deliver on health care reform carries a significant economic cost. Linda Bilmes, coauthor of The People Factor, and Rosemarie Day, deputy director of the Commonwealth Health Insurance Connector Authority of Massachusetts, write:

Less health insurance equates to more premature deaths, and shorter life expectancy. It also impairs the quality of life—and hence the productivity—of those who are living. This is evident in comparing the health of Americans who live in states with high levels of insurance with those who do not.

Bilmes and Day argue that the current debate over whether the country can afford the estimated $850 billion price tag of health care reform misses the point. Doing nothing comes with a hefty cost, as well, because the uninsured impose big financial and economic costs on the United States.

- Read the op-ed

- Learn more about The People Factor

Is America truly the “Land of Opportunity”? Isabel Sawhill and Ron Haskins dispel 5 myths

Hard work + talent = financial success

For generations, Americans have believed that this formula will allow them to get ahead in our land of opportunity. But do Americans really enjoy more economic opportunity than people in other countries? Is each generation better off than the previous one? Ron Haskins and Isabel Sawhill provide somewhat surprising answers to such questions in a myth-busting piece in Sunday’s Washington Post (October 31).

- Read “5 myths about our land of opportunity”

- Learn more about Haskins and Sawhill’s new book Creating an Opportunity Society

One Year Later

Books for Understanding and Dealing with the Financial Meltdown

 

This week marks the one-year anniversary of the demise of Lehman Brothers and the beginning of more government intervention in the financial markets than at anytime since the Great Depression. Both individuals and institutions have been forced to adjust to this new financial world. A number of Brookings books look at various aspects of the financial meltdown and how to move forward in its aftermath.

 

Too Big To Fail: The Hazards of Big Bank Bailouts, was originally published in 2004 and presciently warned that too little had been done to reduce creditors' expectations of Too Big To Fail protection. In an updated and revised version of the book, Gary H. Stern and Ron Feldman offer new insights and new recommendations for policymakers.

 

The damage from a depressed housing market was exacerbated by the subprime lender implosion, sending shock waves through the financial sector and international economies. In Borrowing to Live: Consumer and Mortgage Credit Revisited, editors Nicolas P. Retsinas and Eric S. Belsky lead an elite group of experts in dissecting the state of consumer and mortgage credit in the United States and pointing the way out of the current impasse.

 

Once heralded as a financial innovation to diversify risk and enable Wall Street to finance Main Street, securitization of debt helped create the subprime mortgage meltdown of 2006. In this implosion, debt was absorbed by a concentrated group of financial entities, and in 2008 credit markets consequently froze. In Prudent Lending Restored: Securitization After the Mortgage Meltdown, noted economists Yasuyuki Fuchita, Richard Herring, and Robert Litan offer suggestions on how we can reform securitization, including a solution to insure the mortgage market against default risk.

 

On a more personal level, the downturn in the stock market forced individuals to reconsider their retirement plans. Working Longer: The Solution to the Retirement Income Challenge advocates pushing retirement back by two to four years. Doing so, according to authors Alicia H. Munnell and Steven A. Sass, would help workers to save more money for retirement and shorten the amount of time they need to live off of their retirement savings.

 

Today’s workers have greater responsibility for planning for retirement due to the dramatic shift in America’s pension system over the past 25 years. Where workers could previously depend on defined-benefit pension plans, increasingly they now must manage defined-contribution 401(k) plans and IRAs. Automatic: Changing the Way America Saves argues for a fresh approach to increase saving, simplify retirement planning, and help manage the risks associated with today's individual account environment.

 

- Learn more about:

• Too Big To Fail

• Borrowing to Live
• Prudent Lending Restored
• Working Longer
• Automatic

- Watch what Fed Chairman Ben Bernanke had to say about the financial system during a speech at Brookings

HOPE VI and the New Promise of Public Housing in America’s Cities

Book launch hosted by current HUD Secretary Shaun Donovan and former secretary Henry Cisneros

Among lessons learned, HOPE VI has taught us that replacing public housing with vouchers isn't always the best option for displaced families. “Many of them ended up in new ghettos of Section 8 because they took the path of least resistance and because landlords were unscrupulous and piled people on top of each other to get the money,” said Henry Cisneros, former Secretary of the U.S. Department of Housing and Urban Development (HUD) under President Bill Clinton. “In some cases we didn’t improve people’s lives as we could have done,” he added. Today, current HUD Secretary Shaun Donovan faces many of the same challenges.

On July 14, the current and former HUD secretaries teamed together to host a discussion on the next steps for urban revitalization and opportunity. Secretary Donovan announced new funding for the current HOPE VI program and outlined the future of Choice Neighborhoods.

In the new book From Despair to Hope: Hope VI and the New Promise of Public Housing in America’s Cities, Cisneros and co-editor Lora Engdahl document the evolution of HOPE VI, one of the most ambitious urban redevelopment initiatives yet. The authors also chronicle the major federal effort to replace desolate public housing with mixed-income communities, and discuss the lessons learned.

- Learn more about the book, From Despair to Hope

- Read articles on the event from CQ Politics and Next American City

What will America do without skilled workers?

The People Factor cited in the Federal Times

“A survey of federal agencies commissioned by Sen. George Voinovich, R-Ohio, discovered that between 1997 and 2000, federal agencies spent about 1.9 percent of their financial payroll on training, while the private sector spends 4 percent and leading organizations even more,” stated a recent article in the Federal Times. With the economic slowdown, there is heightened need for skilled workers in the United States, but with the continuous downsizing of even the wealthiest firms, companies are tempted to downsize their human resources also. But is this truly possible? What repercussions await a great country with workers of little skill? The People Factor: Strengthening America by Investing in Public Service, by former Commerce Department Assistant Secretary Linda Bilmes and W. Scott Gould, deputy secretary of the Veterans Affairs Department, addresses the issue.

So what can America do to increase its number of skilled workers? The People Factor argues that the country cannot prosper without a strong, highly functioning federal work force to manage the government. Bilmes and Gould call for a $10 billion investment to improve recruiting, better training and enhanced management of the federal workforce predicting that the investment will yield $300-$600 billion in productivity gains.

In an age where human resources remain the most important factor for global growth, The People Factor urges the nation to invest in its greatest resource—public service.

- Get more information on The People Factor

- Learn about America’s “people factor” in the full article by Tim Kauffman of the Federal Times

What is "The People Factor?"

In the time it takes to watch this video, Federal government agencies will have...

• Solved multiple crimes

• Supervised the safe take-offs and landings of hundreds of airplanes

• Paid food stamps to hungry citizens

• Issued a national weather forecast

• Monitored the skies for any sign of enemy attack

• Rescued struggling ships at sea

• And processed some $50 million in banking transactions.

But after a century of neglect, the cracks are beginning to show. Due to rapid globalization, business has changed and adapted in order to survive. By contrast, the government systems and structures that served an earlier age are still in place. In The People Factor: Strengthening America by Investing in Public Service, Linda J. Bilmes and W. Scott Gould provide a compelling business case for investing in the civil service so that it may better serve the nation. By investing $10 billion to improve recruiting, training and management of the federal workforce, the authors predict that investment will yield $300-$600 billion in productivity gains.

- Follow The People Factor, the blog

- Watch The People Factor, the video

- Learn more about The People Factor, the book

Too Big to Fail?

Déjà vu, 5 years later

Gary H. Stern and Ron J. Feldman's book, Too Big to Fail, was first published back in 2004. While it seems fitting that we've just released an updated paperback edition, CNBC's Gloria McDonough-Taub puts it best when she says, "...the book is back – with new insight and new recommendations....You can imagine all the questions the authors are fielding now – like why wasn’t their book written back in 2004 given more attention? Oy!" Perhaps we'll all pay closer attention this time around.

- Read Gloria McDonough-Taub's "Bullish on Books" post on CNBC.com

- Read the transcripts from Gary Stern's interview with CNN's "Your Money"

- Learn more about the new paperback edition of Too Big to Fail

Brookings Book Discusses Dangers of Bank Bailouts

Too Big To Fail
By Gary H. Stern and Ron J. Feldman
Foreword by Paul A. Volcker

The past few breathtaking weeks have produced federal intervention in the U.S. economy at levels not seen since the Great Depression. This turmoil has raised anew the debate over moral hazard and the questions of if and when the government should use public funds to shore up failing financial institutions. Freddie Mac, Fannie Mae, AIG—where will it end? And, for that matter, why them and not Lehman Brothers?

The Too Big to Fail [TBTF] concept was presciently detailed in Too Big to Fail: The Hazards of Bank Bailouts, a book published in 2004 by the Brookings Institution Press. Authors Gary Stern and Ron Feldman, then of the Federal Reserve Bank of Minneapolis, maintained that too little had been done to reduce creditors’ expectations of TBTF protection. It is largely a problem of moral hazard, in which the anticipation of a safety net reduces a creditor’s or a bank’s incentive to act prudently, with unfortunate net costs to the nation’s economy. The financial institutions take government intervention for granted. As policymakers alternately attack Wall Street and feed it billions from public coffers, the public need to familiarize themselves with the larger picture. Reading Too Big to Fail would be a helpful step in that direction.

“This is a valuable and comprehensive treatise on TBTF a critically important policy issue that needs to be addressed well before banking or financial crisis occurs. Policymakers, regulators, government officials, legislators, and private financial companies should read and heed the authors’ analysis and recommendations.” RICHARD M. KOVACEVICH, former Chairman, Wells Fargo

-Learn more about Too Big to Fail

The Push for Working Longer

Working Longer continues to receive nationwide attention

Did you laugh when you heard that working longer could save your retirement plan? Did you scoff and decide that others could work past the retirement age of 62, but certainly not you? Be prepared, because the last laugh may not be yours; it seems the bandwagon is filling up as the media alerts Americans to the possibility that Brookings authors Munnell and Sass are spot on! Working longer could indeed be the solution to the retirement income challenge. Following coverage by the Wall Street Journal and The Economist, The New York Times has just reviewed the Brookings Institution Press book Working Longer.

Harry Hurt’s conclusion: this “thought-provoking” guide “tackles the issue of surviving one’s so-called golden years” but the ultimate decision to push the retirement age lies with Congress. Hurt does not seem hopeful stating that he has“learned to expect the worst”.

- Read Alicia Munnell and Steven Sass’ plan for salvaging your retirement plan in Working Longer: The Solution to the Retirement Income Challenge.

- Read The New York Times' review of Working Longer.

- Read The Economist's review of Working Longer.

- Read The Wall Street Journal's review of Working Longer.

U.S. Foreign Policy Needs a New Playbook

Stale Cold War mentality fosters distrust toward the United States

America has a bad habit of compromising its core values of freedom and democracy by forging alliances with dictators who don’t support these basic tenets. During the Cold War, all a developing country needed to do in order to gain U.S. support was to stay out of the Soviet orbit—the enemy of our enemy was our friend. We thus found ourselves siding with despots such as Ferdinand Marcos, Mobutu of Zaire, the Shah of Iran—the list goes on. Similarly, being a source of vital resources or a protector of “international stability” in today’s world is too often sufficient qualification for U.S. aid.

Author Hilton Root takes a shrewd look at what is happening in American foreign affairs in Alliance Curse: How America Lost the Third World. He challenges long-held assumptions about our actions abroad, arguing that “outmoded” may be a more accurate description of our foreign policy than “current.”

Root’s book, just published by the Brookings Institution Press, comes at a turning point in America’s history. Unfortunately, our recent track record shows that we haven’t learned from the past. In Pakistan, a hotbed of Islamic fundamentalism, the United States has contributed billions of dollars to Pervez Musharraf’s government, largely to secure its support in the war on terror. That aid, however, still has not secured the loyalty of the military regime or the friendship of the population. Root questions the wisdom of providing aid to governments that remain corrupt and tyrannical, in light of the potential blowback.

So, what should America do at this crossroads? Root, a professor of public policy at George Mason University, argues that fostering economic development—not propping up dictators—is the better course for the country’s short-term and long-term goals. In the long term, it is actually a more effective strategy for building stability and winning the hearts and minds of the developing world.

You can hear from the author himself about his alternative strategy to close the gap between security and economic development. Hilton Root will be appearing at Politics & Prose Bookstore in Washington, D.C. this Saturday, July 19th at 1 p.m. Don’t miss out!

- Learn more about Alliance Curse.

- Learn more about the event at Politics & Prose.