Economic Policy

Exploration of the intersection of policy and economic trends, public finance, and economic development

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IGPA Experts use cutting edge social science research methods to analyze public policy. Our independent evidence and analysis is non-partisan, data-driven, and based in the best academic scholarship available.
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Better fiscal planning

Authors

  • Nancy Hudspeth

In the wake of the Great Recession, state governments have struggled to manage their finances. Ongoing challenges include reductions in federal spending, rapidly rising health care and pension costs, and diminished receipts due to a sluggish economic recovery. Budget planning techniques (or tools) can help states make the difficult decisions needed to achieve fiscal sustainability.


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Public opinion and political viability of budget tools

Authors

What are the political prospects of various plans to boost revenue or reduce spending? One way to answer is via opinion polls. Few say they support broad tax increases or spending cuts on education or Medicaid. Targeted taxes on the wealthy and reductions in benefits to state employees, by contrast, generate positive reactions. However, caution is always in order with polls. Some opinions seem open to change. For instance, support for raising taxes on the rich falls when people are told what rates they currently pay, on average.


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Benefits and costs of state budget changes to higher education

Authors

  • Walter W. McMahon

Higher education (and K-12) are different from other parts of the state budget. It is an investment in the creation of human capital skills used by the typical graduate for 60 years at work, at home, in the community, and after retirement. These skills generate the increased earnings and broader development that are the core of the state’s economy. The budget is affected as earnings generate tax revenues and the wider benefits of learning contribute to lower Medicaid, welfare, public health, and prison costs.


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Options for health care policy

Authors

Health care spending dominates the overall state budget in Illinois, with Medicaid dominating Illinois’ health care budget. The state already made substantial cuts to optional services in Medicaid in 2012. The state is looking towards aggressively pushing “care coordination” to the Medicaid program in the near term, but skepticism about the potential for cost savings is warranted. The scientific literature regarding the effects of disease management, care coordination, and Medicaid managed care generally does not suggest there are huge savings likely from these approaches.


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Is it possible to make "easy" cuts to human services spending by attacking waste, fraud, and abuse?

Authors

Illinois has experienced a long run of cuts to its human services programs, yet still more cuts may be needed if new revenue or savings in other areas do not materialize. The view that many "welfare" recipients are gaming or exploiting the system is a popular one with the public. The promise to get tough on waste, fraud, and abuse is an appealing alternative to across-the-board cuts in human services or to reducing or eliminating specific benefits or programs.


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Across the board cuts

Authors

Cutting spending across the board is one approach to budget reduction that is prominent in political discussion. An across the board (ATB) cut would reduce budgets of all departments, agencies, or programs by the same percentage. The 2013 federal budget sequester was a form of ATB cutting.


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Ameliorating illinois' structural deficit by bending the cost curve

Authors

  • Richard J. Winkel

Immediate and dramatic cuts in state spending would be painful to Illinois residents who rely on those state programs. Such cuts might spark political protest and be difficult to pass through the legislature. Even assuming that any tax increases are not possible or not sufficient, however, legislators can still address the spending side of the budget by reducing the growth of spending.


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Including retirement income in the illinois income tax base

Authors

Illinois allows individuals to subtract retirement income from the tax base, leaving no state income tax on payments received from Social Security, 401(k) plans, Individual Retirement Accounts, defined benefit pension plans, and virtually any other payment from a qualified retirement plan. Illinois is virtually unique among states in providing such a blanket exclusion.


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Jeffrey Brown is the Josef and Margot Lakonishok Endowed Professor in Business and the tenth Dean of the College of Business at the University of Illinois at Urbana-Champaign. He also serves as a professor of finance and was the founding director of the Center for Business and Public Policy. He is the Director of the Retirement Research Center at the National Bureau of Economic Research (NBER) in Cambridge, MA.  He is a Trustee and chair of the Audit Committee for TIAA, where he also serves on the Risk and Compliance Committee and the Investment Committee. He also serves as a member of the Governing Board of the Center for Audit Quality (CAQ) and as Vice Chair of the Board of Managers of UI Singapore Research LLC. 

 

Brown has published extensively on public and private insurance markets, including articles in The American Economic Review, The Journal of Political Economy, The Journal of Finance, The Journal of Financial Economics, and numerous other journals and books.  He is the recipient of the Lumina Award for Outstanding Research in Insurance and E-Commerce, the Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security, the ARIA Early Career Scholarly Achievement Award, and the RIIA Achievement in Applied Retirement Research Award. He was also named a University Scholar by the University of Illinois in 2011. Brown has edited four books, the most recent of which explores how the Great Recession affected higher education. He is a co-founder and former co-editor of the Journal of Pension Economics and Finance and an associate editor of the Journal of Risk and Insurance. He has served as a consultant to numerous federal government agencies as well as many of the leading U.S. financial services firms. Prior to graduate school, he was a Brand Manager at the Procter & Gamble Company


In The News

A permit trading program for carbon dioxide (Cap and Trade)

Authors

  • Daniel Karney

According to the dictum “tax waste, not work," Illinois could avoid some increase to the personal income tax on productive labor efforts by instead taxing pollution emissions that contribute to climate change. This short paper investigates likely effects of a tax on emissions or an equivalent cap-and-trade permit system with permits sold by the state instead of being handed out for free.


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(.PDF 487.85 KB)

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