WASHINGTON (CN) – Economists told Congress on Tuesday that in the decade since the Great Recession of 2007 – 2009 gripped a persistent wealth disparity, sluggish regional markets and low rates of turnover in labor have continued to dog the U.S. economy.
Coming before the Joint Economic Committee on Tuesday,
The economists who testified before the Joint Economic Committee on Tuesday included Timothy Kane, of the Hoover Institution; John Lettieri, a co-founder and director at the Economic Innovation Group; and Jared Bernstein, a former chief economist under President Barack Obama and current senior fellow at the Center on Budget and Policy Priorities.
While the panel’s perspectives on economic theory varied greatly, each expert agreed that despite declining national unemployment numbers, when taken state by state, many U.S. citizens still face significant economic hardships.
According to Kane, the areas that were hit hardest by the recession have experienced the most robust recovery. But he said aging populations, state labor policies that are unfriendly to entrepreneurs, and shifting industrial forces, like the creep of automation, have hindered sweeping positive growth.
Lettieri said unlike previous recessions, where recovery is accompanied by a resurgence in startup activity and job creation, startup rates have barely budget since the current recovery got underway.
“New firms are what keep the economy in a constant state of rebirth,” Lettieri said. “Job turnover has plummeted … only 1 in 14 positions in the economy turned over [since 2007].”
Without this “churn” Lettieri explained, it’s impossible for workers or business owners to find an unoccupied rung on the ladder to greater opportunity.
Bernstein agreed that this has contributed greatly to stagnation. But he diverged from his co-panelists in telling the committee that income inequality is the main problem confronting the U.S. economy.
“Cutting taxes on the high end earners and crossing fingers in hopes that it trickles down has been proven time and again not to have the same bang for the buck of other policies,” he said.
Instead, Bernstein advocated greater investment in education.
“There’s an $8 return per child on preschool investment and it’s something we don’t do in this country, unlike other countries which invest five times as much in children precisely to tap those returns,” he said. “Direct investment in this infrastructure or helping small firms in the supply chain in places like rural Ohio to connect with the global economy comes from direct intervention. Hoping that it trickles down just doesn’t work.”
Bernstein reemphasized the point several times before finally asking the committee if they thought it would be “misguided” to prioritize tax cuts over things like job training or early education which show a demonstrable returns.
Committee chairman Rep. Pat Tiberi, R-Ohio, moved away from the social aspects of the economy and instead pressed the experts for insight on minimum wage.
But Kane said increasing wages is not as a viable solution to the woes large numbers of people continue to experience compared with improving market conditions.
“A state that raises its minimum wage to $15 is saying that if someone is earning $14 an hour its illegal for them work. That’s a ridiculous anti-work program. Hard work should be rewarded, not punished. In right to work states, there has been phenomenal employment growth,” Kane said.
Bernstein later accused Kane of cherry picking and criticized his position as disingenuous, arguing that even if with positive GDP growth, living standards are not lifted which he said hurts any shot at improving economic opportunity for workers.
“Are minimum wage laws anti-work? Not at all. I thought what we just heard from Tim was quite misleading given the research that’s been done and it’s some of the highest quality research we have because we have so many of these experiments done where states have raised wages,” he said. “So, we can do a comparison. Moderate increases in wage consistently have their intended effect, the idea that they’re disemploying [sic] anyone has consistently been proven wrong.”