How Has the Financial Crisis Affected the Finances of Older Households?

  • Authors: Richard W. Kopcke, Anthony Webb
  • Date: June 6, 2012
This brief considers the impact of recent declines in stock prices and nominal interest rates on older households, examining the effect of the crisis on the financial wealth of older households, the impact of the financial crisis on the investment and total incomes of retired households, and the impact of the financial crisis on lifetime consumption.

Tax Structure and Revenue Instability: The Great Recession and the States

  • Authors: Howard Chernick, Cordelia Reimers, Jennifer Tennant
  • Date: March 3, 2013
Though the great recession has had the most severe overall effect on state tax revenues of any downturn since the Great Depression, impacts varied widely across states. Tax revenues were affected through two different channels. The first is due to the collapse in realized capital gains income following the sharp decline in the stock market. State tax bases are affected in proportion to pre-recession reliance on capital gains income, in turn closely associated with the degree of income concentration. Largely due to capital gains income, the income of high-income taxpayers is more cyclically sensitive than that of lower-income taxpayers. The second channel, the differential effect on state output and employment, has its greatest impact on incomes below the top 5 percent of the distribution. We hypothesize that variation in revenue impact across states is due to differences in the severity of the income shocks at different levels of income, the degree of income inequality, the importance of capital gains in top incomes, and the level and progressivity of tax burdens. Progressive states are likely to be more vulnerable to revenue losses in economic downturns. Progressivity and income volatility may interact to amplify the recession’s fiscal impact.

Recession Depression: Mental Health Effects of the 2008 Stock Market Crash

  • Authors: Melissa McInerney, Jennifer M. Mellor, Lauren Hersch Nicholas
  • Date: February 2, 2013
How do sudden, large wealth losses affect mental health? Most prior studies of the causal effects of material well-being on health use identification strategies involving income increases; these studies as well as prior research on stock market accumulations may not inform this question if the effect of wealth on health is asymmetric. We use exogenous variation in the interview dates of the 2008 Health and Retirement Study to assess the impact of large wealth losses on mental health among older U.S. adults. We compare cross-wave changes in wealth and health for respondents interviewed before and after the October 2008 stock market crash. We find that the crash reduced wealth and increased depressive symptoms and the use of anti-depressants. These results suggest that sudden wealth losses cause immediate declines in mental health; for example, a loss of $50,000 of non-housing wealth increases the likelihood of feeling depressed by 1.35 percentage points, or by 8%.

The Great Recession and the Social Safety Net

  • Author: Robert A. Moffitt
  • Date: April 4, 2013
The social safety net responded in significant and favorable ways during the Great Recession. Aggregate per capita expenditures grew significantly, with particularly strong growth in the SNAP, EITC, UI, and Medicaid programs. Distributionally, the increase in transfers was widely shared across demographic groups, including families with and without children, single-parent and two-parent families. Transfers grew as well among families with more employed members and with fewer employed members. However, the increase in transfer amounts was not strongly progressive across income classes within the low-income population, increasingly slightly more for those just below the poverty line and those just above it, compared to those at the bottom of the income distribution. This is mainly the result of the EITC program, which provides greater benefits to those with higher family earnings. The expansions of SNAP and UI benefitted those at the bottom of the income distribution to a greater extent.

Public Attitudes About Macroeconomic Policy in the U.S.

  • Authors: Steven M. Fazzari, Stanley Feldman, Cindy D. Kam, and Steven S. Smith
  • Date: April 4, 2013
Since at least the Great Depression, most economists and most Americans appear to have accepted that the government should play a significant role in managing the economy by adopting policies that stabilize employment, encourage economic growth, and control inflation. Nevertheless, Americans have always differed on the proper form and extent of government intervention, and these differences may have sharpened in recent decades. In general, policy attitudes appear to have sorted into liberal and conservative clusters and aligned more fully with partisan preferences (Abramowitz 2010). The Great Recession occurred in this context of party polarization and probably contributed to a continuation of change in party control of the institutions of government.

Recession, Religion, and Happiness, 2006-2010

  • Authors: Michael Hout, Orestes P. Hastings
  • Date: December 12, 2012
The General Social Survey panel of 2006-2010 tracked Americans' reactions to the election of Barack Obama and the Great Recession (officially lasting from December 2007 to March 2009) as well as to events in their personal lives. Americans were less happy in 2010 than in 2006; the percent "very happy" decreased by four percentage points and the percent "not too happy" increased almost as much. In the cross section, standard predictors - including church attendance, family income, and marital status - continued to matter. Looking from the dynamic perspective of the panel study, though, we see that job loss and changing family incomes mattered far more. Changes in marital status were also important for changing morale; marrying made people happier while divorcing made them unhappy. The subjective sense that finances were improving mediated a significant portion of the income-happiness association. The effects of unemployment and marriage are estimated in a way that supports the inference that finding a job or a mate actually causes happiness to increase.

Private Financial Transfers, the Great Recession, and Family Context

  • Authors: Aaron Gottlieb, Natasha V. Pilkauskas, Irwin Garfinkel
  • Date: May 5, 2013
Using longitudinal data from the Fragile Families and Child Wellbeing Study (N=4,701), we studied private financial transfers (PFTs) among mothers with young children during the Great Recession. We explored whether the unemployment rate was associated with PFTs received and whether family income and family structure moderated this association. We found that an increase in the unemployment rate was associated with higher odds of PFT receipt and an increase in PFT dollars received, suggesting that increased financial need, rather than decreased network resources, was the primary determinant of PFT receipt in the Recession. We also found that family income moderated the association between the unemployment rate and PFTs, whereas family structure did not. Specifically, poor and near poor mothers experienced higher odds of PFT receipt in response to high unemployment, whereas mothers with household incomes between two and three times the poverty threshold experienced lower odds of PFT receipt. Published: Gottlieb, A., Pilkauskas, N. and Garfinkel, I. (2014), Private Financial Transfers, Family Income, and the Great Recession. Journal of Marriage and Family, 76: 1011–1024. doi: 10.1111/jomf.12134.

Wealth Levels, Wealth Inequality, and the Great Recession

  • Authors: Fabian T. Pfeffer, Sheldon Danziger, Robert F. Schoeni
  • Date: June 6, 2014
This research brief assesses two questions about the extent to which the Great Recession altered the level and distribution of wealth through 2013--the most recent year of data available on wealth held by American families. 1. By how much did wealth levels decline during the Great Recession, and by how much did they recover through 2013? 2. Did wealth inequality increase, decrease, or remain steady during the Great Recession?