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Memo to President Biden: The Progressive Way to Ease Student Debt Burdens

Posted on by The Progressive Policy Institute

Note: In this brief, I use the term education debt, rather than student debt, since most affected borrowers are no longer students, and this category of debt affects a wide swath of society, not just students.          

After his inauguration on January 20, one of President Joe Biden’s first official acts was signing an executive order to extend the pandemic-related pause on student loan payments and interest, as well as to halt collection of student loans in default, through September 30. For millions of young Americans struggling to pay off college loans, the order will be a welcome down payment on Biden’s campaign promise to deliver major debt relief.

While campaigning for the presidency last spring, Biden unveiled a plan to forgive a minimum of $10,000 per borrower. The President’s advisers say the administration will submit a legislative proposal for debt relief to the new Congress. 

The case for relief is strong. Over the past four years, the Trump administration and Republican lawmakers have provided little in the way of help for struggling borrowers beyond the temporary pause on repayments. With young people struggling to keep their heads above water amid the Covid pandemic and recession, it is no surprise that Democratic policymakers are looking for ways to relieve their financial stress.  

In May 2020, House Democrats also called for $10,000 worth of education loan relief for “distressed” borrowers as part of their Health and Economic Recovery Omnibus Emergency Solutions (HEROES) bill. This category of borrowers included those with delinquent or defaulted loans, and others considered “financially distressed.” According to the U.S. Department of Education, as many as 20 percent of education loans are in default. This provision got caught up in partisan wrangling over the size and cost of the HEROES act, and was dropped from the compromise stimulus bill Congress passed in late December 2020. 

Since his victory last November, Biden has faced persistent calls from progressives to forgive education debt for the 45 million Americans who owe close to $1.6 trillion in loans. Sens. Elizabeth Warren and Chuck Schumer dramatically raised the bidding by urging Biden to take executive action to forgive up to $50,000 of federal education debt. Reps. Ayanna Pressley (D-MA), Ilhan Omar (D-MN), Alma Adams (D-NC), and Maxine Waters (D-CA) introduced a companion resolution in the House in December 2020.  

Although popular on the left, such calls to “go big” have drawn a skeptical response from many independent analysts. “In sheer magnitude, canceling $50,000 in student debt would rank among the largest transfer programs in U.S. history,” notes the Brookings Institution’s Adam Looney. “At a cost slightly above $1 trillion, it would equal the total amount spent on cash welfare since 1980. And its largest effect would be to improve the finances of college-educated workers, who have already tended to be winners in an economy marked by ever-rising inequality.” 

President Biden likewise has expressed skepticism about the distributive impact of these proposals. He’s also told Congressional Democrats he would prefer a legislative fix to an easily reversible executive order – something that looks more likely after the January 5 Georgia runoffs flipped control of the Senate to his party.

Digging into the data on the demographics of Americans with education debt, it becomes clear that Biden’s approach isn’t just more affordable, it’s also more progressive and equitable. Approximately 48 percent of outstanding student loans are held by those with graduate degrees; that is double the share of those who owe loans and earned an Associate’s degree or less. In fact, slightly over a third of all education debt is concentrated in the highest income quartile – households making over $97,000 per year.

Without better targeting, debt relief would mostly benefit higher-income households, which hold a third of student loans and have greater ability to pay them back. A 2019 analysis by the Urban Institute finds that “forgiving larger amounts of debt would distribute a larger share of benefits to higher-income households, and reducing the amount of debt forgiven should increase the share of benefits going to lower-income households.” Based on this analysis, the $50,000 proposed by Sens. Warren and Schumer would have regressive effects and distribute relief to households at the top of the income scale. 

In contrast, Biden’s plan aims at lower-income borrowers who need debt relief the most. Relief in the amount of $10,000 per borrower would eliminate all debt for 37 percent of borrowers (16.3 million people) and cut in half debts owed by another 9.3 million borrowers at an estimated cost between $250-300 billion. These borrowers are disproportionately young and low-income, and include veterans, single parents, and those in a minority group. Two-thirds of borrowers that default on their payments owe a comparatively low average amount of $9,625. These borrowers also are less likely to repay their loans because they never completed their college degrees or earned only a certificate.

However, it’s not clear whether President Biden’s plan will include an income-based eligibility test to ensure that relief is concentrated on needy rather than affluent families. PPI recommends that the administration target its plan by phasing out relief for borrowers making over $125,000. This would address concerns that about the regressive nature of untargeted debt relief and substantially reduce the cost of the proposal. 

Perhaps most important, the President’s approach recognizes the limits of debt relief and leaves fiscal space for tackling the fundamental problem: America’s broken financing model for higher education. Over the past two decades, the cost of higher education has approximately doubled and ballooning tuition prices have forced students to borrow more to finance their education.

Although federal subsidies – chiefly grants and loans – tilt heavily toward college-going young people, college is not the only pathway to good jobs for young adults and U.S. workers. It’s true that the average college-educated worker reaps a lifetime premium of higher earnings in the labor market. But most Americans don’t go to college. As of 2019, 70.1 percent of Americans 25 and older had not earned a four-year degree, while just 29.9 percent earned a four-year degree or higher. Given his well-known empathy for the struggles of America’s working-class families, PPI recommends that the President pair debt relief with increased public investment in apprenticeships and work-based “career pathways” training programs that connect workers, including those coming out of high school, to well-paying careers.  

PPI has proposed a suite of ideas for how to expand career pathways to employment for millions of Americans including investments for a 10-fold increase in apprenticeships, creating incentives for partnering public and private programs that focus on transferable skills and credentials, and incentivizing private intermediaries who create “outsourced” apprenticeships programs. Although they are beyond the scope of this memo, PPI believes these and related ideas are crucial to ending the bias in federal policy toward college-bound youth. We hope the Biden administration will give high priority to investing more in building a robust system of work-based learning, career training, and apprenticeships for the majority of young Americans who don’t attend four-year colleges.

Recommendations for the Biden Administration

  • Draft legislation to provide $10,000 in immediate education debt forgiveness for those with an annual income of less than $125,000 per year. This will deliver relief for those at greatest risk of defaulting on their student loans, especially students from low-income and minority families. The estimated cost of President Biden’s plan is $250-300 billion, and it would eliminate all education debt for 37 percent of borrowers (16.3 million people) and cut in half debts owed by another 9.3 million borrowers. Our recommendation of an income-based eligibility test is expected to reduce the overall cost.
  • Continue giving borrowers a break on payments and interest by extending the pause on federal student loan payments for the duration of the pandemic and Covid recession. President Biden has extended the pause through September 30.
  • Make income-based repayment more accessible and generous for borrowers. Switching to a universal IBR system that is opt-out for new and existing loans, and which automatically re-enrolls borrowers, would make payments more manageable and automatically tied to income, decreasing the likelihood of default and missed payments. 
  • Modernize the Public Service Loan Forgiveness Program to reward national or community service for our public servants by offering $10,000 of education debt relief for every year of service up to five years—after which the loan would be forgiven. This would include individuals with up to five years of prior service and automatically enroll workers in schools, government, and other nonprofit organizations. This would encourage workers to pursue careers in public service.
  • Accelerate attainment of credentials by making the process for earning college credit through Advanced Placement (AP), International Baccalaureate (IB) programs, and college courses taken in high school at community colleges, more transparent and accessible, as PPI’s Paul Weinstein has argued.

Education Debt Has Led to a Social Crisis, Which the Pandemic Has Made Worse

Those who have borrowed for degrees are more likely to be lower-income, Black, and less likely to have generational wealth, making them more likely to default, which can lead to further worsening of poverty and the racial wealth gap. To understand why the proposal of $10,000 relief per borrower could have the most impact on lower-income families and those most struggling during the pandemic, it is worth digging into the demographics of who is behind on payments and what groups are holding the most debt:

  • According to the U.S. Department of Education, 20 percent of borrowers are in default, and a million more go into default each year. Two-thirds of borrowers who default never completed their college degrees or earned only a certificate and owe a comparatively low average amount of $9,625. Those who default include veterans, parents, and first-generation college students who are more financially vulnerable to default. Without a credential and with limited access to good jobs, borrowers are forced to default and, in doing so, accrue additional interest and fees on the principal loan. These borrowers are in no position to pay back their defaulted loans.

Default can have catastrophic implications for future access to credit, and result in garnished wages, seized tax refunds, and harm other measures of financial wealth. Given the age at which most of these borrowers took out loans, many begin their adulthood at an economic disadvantage. At this scale, the education debt crisis is not only hurting those who are struggling the most, but it is holding back an entire generation with negative implications for their children’s generation. The financial strain the pandemic has inflicted on workers will make it more difficult for defaulted borrowers to get back on track with payments.

Debt Relief: Down Payment on Reform

As the pandemic rages, and more Americans lose their jobs and businesses, short-term education debt relief can help our most vulnerable borrowers ride out the storm. But we also need longer-term, structural reforms aimed at driving down the tuition costs for both college and post-secondary skills training. 

Short-Term Relief and Considerations

The Trump administration implemented limited short-term relief for education debt by temporarily suspending loan payments through February 2021 on federal educational loans as of March 2020. Further short-term relief is desirable, in line with President Biden’s proposal for $10,000 of forgiveness. As one of his first actions in office, President Biden signed an executive order extending the pause on student loan payments and interest through September 30. Biden should continue to extend the pause as long as the Covid recession continues to place financial strain on borrowers.

Reviewing the data, education debt forgiveness targeted at borrowers with low incomes and the unemployed would have the greatest impact. However, some concerns remain over how policymakers can target relief to those who need it the most. Some experts have suggested that policymakers could isolate undergraduate debt from graduate school debt in order to prioritize these more needy borrowers. This would avoid regressive effects that could give a large portion of relief to those with graduate school debt, such as doctors and lawyers, that are in a better financial position to pay back their loans. At the $10,000 level, however, the Biden plan avoids many of the greatest concerns about the potential for regressive outcomes relevant to higher dollar per borrower proposals. Adding an income cap of $125,000 for borrowers will target relief for households who need it the most.

Following dramatic victories in the Jan. 5 Georgia run-off elections, Democrats have taken control of the Senate. This likely clears the way for legislation to provide debt relief, as President Biden prefers. Citing the need for action during the pandemic and recession, some Democrats have been urging him to use a provision in the Higher Education Act to sidestep legislation and cancel the balances of millions of Americans. That would likely trigger legal challenges, and Biden is right to first seek a legislative fix using budget reconciliation.  

Advisers of President Biden have suggested that education debt relief could be included in anticipated stimulus legislation aimed at pandemic relief. On the other hand, a legislative path for education debt relief could also take longer if additional relief legislation proves difficult to enact in the near term, a worthy consideration given the present economic crisis. 

More difficult to measure are the intangible or second-order benefits that education debt relief would bring to borrowers, especially those who have defaulted. Worries about their debt burdens undoubtedly affect their career choices, such as whether to pursue a public interest job, and their life choices, such as whether and when to buy a house or have a child. Those with significant education debt are more likely to experience depression and anxiety as a direct result of their debt, which can lead to mental health issues down the road. Mental health experts point to Millennials coming of age with slower economic growth than any other generation in history as part of the reason for why their mortality rates, driven by suicides and drug overdoses, have risen sharply since 2008. It is also difficult to capture the effect that education debt relief would have on rates of entrepreneurship in younger generations or how intergenerational wealth might change if millions were no longer in default and saddled with debt.

Long Term Solutions

Targeted education debt relief is only a temporary fix. There are several other policy solutions that would help address the education debt crisis.

Congress should also adopt Biden’s proposal to modernize income-based repayment (IBR), loans. Such programs calculate a borrower’s monthly payment based on their income and other factors, such as family size and location. Currently, borrowers must opt-in to IBR through a lengthy process. Automatically enrolling new borrowers and re-enrolling existing borrowers in IBR and tying their payments to their eligible income would streamline the process, as well as making it easier for existing borrowers to take advantage of the program. By making enrollment automatic for borrowers and the terms much simpler, it is estimated that on-time payments will rise and default rates should decrease on net. 

The Public Service Loan Forgiveness program was introduced in 2007 as a way to reward workers who pursue public service by forgiving their federal student loans after 10 years if they make consistent payments and are an employee of a qualifying public service employer. Like IBR, the unnecessary complexity and difficulty of navigating the program has led to low enrollment and success in rewarding public servants. Automatically enrolling employees of qualifying employers would increase take-up and help reduce debt in a way that rewards work and service. The program should offer $10,000 of education debt relief for every year of service up to five years—with full forgiveness after five years. This would include individuals with up to five years of prior service in schools, government, and other nonprofit organizations.

To get at the root of the education debt problem, as President Biden has acknowledged, we need broad higher education reform and more pathways to good jobs beyond college. Periodic education debt relief should not become a band-aid solution for higher education’s broken financing system. Fully addressing these challenges is beyond the scope of this brief, but below are a few points to consider. 

Since the 1990s, the cost of higher education has approximately doubled and institutions have responded to declining state investment by passing off the cost to students through rising tuition prices. Told repeatedly that a college degree is the best pathway to the middle class, it’s little wonder that young Americans increasingly turned to loans to finance their education. For too many, however, the high price of going to college isn’t leading to jobs with earnings sufficient to propel them into the middle class and allow them to pay off their debts.

When considering how to create lasting reforms to higher education, the Biden administration should develop a plan for a systemic restructuring of higher education consisting of two parts: (a) creative ways to reduce college costs rather than expanding subsidies in an endless game of catchup; and (b) a big public investment in building a robust career ladders infrastructure of work-based learning as an alternative route to middle-income jobs.

Many progressives have been thinking creatively about how to tame the rising price of higher education in the longer term. For example, my PPI colleague Paul Weinstein proposes a set of imaginative reforms including leveraging direct federal spending on higher education to force institutions to cut tuition and fees by reducing “administrative bloat,” requiring faculty to teach more, thereby opening up additional spots for students, increasing tuition revenue, and, lastly, by moving U.S. colleges toward three-year bachelor’s degrees.

Conclusion

President Biden and Congressional Democrats have a rare opportunity to move fixing America’s broken higher education financing model to the center of the nation’s agenda. They should follow targeted education debt relief with bold progressive reforms aimed at two critical national goals: Lowering college costs and thereby reduce the need for borrowing, and boosting public  investment in the skills and career prospects of the majority of young Americans who do not get college degrees. 

Beyond “Buy American”: Why U.S. Manufacturing Needs A National Resilience Council

Posted on by The Progressive Policy Institute

We strongly support President Biden’s signing of the Executive Order beefing up Buy American provisions for federal purchases. The executive order would use “the full force of current domestic preferences to support America’s workers and businesses.

But much more needs to be done, since domestic manufacturing is much weaker than most people realize.  Most important, multifactor productivity in domestic manufacturing–the broadest measure of the ability of U.S. factories to turn inputs into useful goods–actually fell from the previous business cycle peak in 2007 to 2019, before the Covid recession started.  In other words, domestic manufacturing is becoming less competitive, not more competitive.

That’s why Biden needs to go beyond Buy American in order to boost domestic manufacturing. In our August 2020 report on how to “Spur Digital Manufacturing in America,” we propose a  “National Resilience Council” to lead a push to stimulate local production, shorten supply chains, create high-wage factory jobs and make our manufacturing sector more resilient in crises.

The National Resilience Council would be tasked with identifying those industries and capabilities that are strategic, in the sense of improving the ability of the economy to deal with shocks like pandemics, wars, and climate changes. These areas are likely to be underinvested by private sector companies, who quite naturally don’t have an incentive to tackle these sorts of large-scale risks.

The goal would be a resilient manufacturing recovery,  based on flexible, local, distributed manufacturing—relatively small efficient factories that are spread around the country, using new technology, knitted together by manufacturing platforms that digitally route orders to the nearest or best supplier. To achieve this goal, we make four concrete proposals:

  • First, we should double the National Science Foundation’s roughly $8 billion budget, with more of an emphasis on manufacturing-related areas such as materials sciences.
  • Second, the government can shore up the nation’s supplier base by providing $200 million in low-cost loans and grants to help small and medium manufacturers test and adopt new production technologies, including digital advances such as robotics and additive manufacturing. Even in a low-interest rate environment, capital is relatively scarce for companies that are too small to tap the bond market
  • Third, the National Resilience Council should sponsor a Manufacturing Regulatory Improvement Commission, along the lines that PPI has suggested in the past. We have no desire to roll back essential environmental and occupational health regulations. But we do want to consider whether rules governing manufacturing have become so restrictive as to unnecessarily force out jobs
  • Fourth, the federal government should take the lead to create a common “language” so that product designers, manufacturers, and suppliers can more easily work together online, just like DARPA helped create the basic structure of the Internet in the late 1960s. Just as a young person can write an app, put it online, and find users around the world, it should be possible to create a design for a new product and easily find potential local manufacturers.

A more extensive set of policies to enhance the resilience of US manufacturing can be found here.

This blog was also posted to Medium. 

 

A Day of Deliverance and Hope

Posted on by The Progressive Policy Institute

Presidential inaugurations are usually festive occasions in which Americans celebrate the orderly and peaceful transfer of power to new political leaders. With the coronavirus pandemic raging and thousands of troops on guard to deter violence by deranged followers of Donald Trump, that’s not exactly the mood in Washington today.

Overshadowed by these grotesque legacies of Trump’s presidency, the inauguration of President Joe Biden and Vice President Kamala Harris is a somber affair. Nonetheless, it’s a day of deliverance, and fresh hope, for America.

We are delivered from a pathological liar and demagogue who likely will go down in history as the most deformed character ever to occupy the White House. Our democracy has survived, though by an unnervingly narrow margin.

There will be much talk in the days ahead of healing, as there should be. President Biden wisely resists pressure from within his own party to govern in the same corrosive, zero-sum way that Trump and his Republican enablers have. The last thing America needs is for Democrats to join Republicans in fanning the flames of civil strife. 

But before there can be reconciliation, there must be truth and accountability. 

On Nov. 3, 2020, the American people fired President Trump. Psychologically unable to accept the peoples’ verdict, Trump concocted a myth of massive voter fraud and spent the next two months urging Republican election officials to falsify the election results. His seditious scheming culminated on Jan. 6, when a mob of supporters invaded the Capitol and threatened lawmakers certifying the 2020 vote. Five people died in the Trump riot. 

For this unprecedented assault on U.S. democracy from within, the House rightly impeached Trump for a second time. To drive home the gravity of his crime and uphold the authority of our Constitution, the Senate should swiftly convict him.

This is simple justice, not vengeance. It is a vital act of democratic self-preservation. 

And it’s crucial because if we are delivered today from Trump, we are not yet delivered from Trumpism. Americans should never forget his cowardly and disloyal accomplices, especially the eight Senate Republicans and 146 House Republicans who voted to reject the states’ certification of the electoral college vote. 

Most worrisome are the millions of Trump voters who apparently have swallowed his lies, not to mention the fanatics who subscribe to crackpot theories propagated by QAnon and alt-right sites that peddle hatred and call for armed insurrection. To counteract the online radicalization of the right, Congress should empanel a 9/11-style commission to study the election and its aftermath and report to the public what really happened.  

Ultimately, however, Republican leaders are going to have to rededicate themselves to dealing with facts, evidence and objective reality and purge their own ranks of extremists. We’ve never been fans of GOP Minority Leader Mitch McConnell, but his honesty about the Jan. 6 insurrection is a start. “The mob was fed by lies,” he told the Senate. “They were provoked by the president and other powerful people.”

Finally, we’re grateful today to President Biden and Vice President Harris for making a convincing case to the American people for denying Trump a second term. We’re confident that they will restore experience, reason, honesty and decency to the White House after a ruinous four-year detour into delusional populism. 

And we’re hopeful that the ambitious agenda our new president has outlined – at once progressive and pragmatic – will make our democratic government work again. That’s the best recipe for bringing Americans together. 

10 Questions About Trump, Big Tech, and Free Speech

Posted on by The Progressive Policy Institute

Twitter permanently banned Trump. Facebook suspended his account for at least two weeks. Apple and Google pulled the Parler app from their app stores. Amazon booted Parler off AWS. Stripe stopped processing payments for the Trump campaign’s website.

These decisions, among others, have sparked a renewed debate over the power that Big Tech companies have in society, and whether we need to revisit Section 230, net neutrality, or the Fairness Doctrine. Currently, the public discussion is dominated by loud voices making extreme, and often incorrect, claims. In my opinion, these voices are only grappling with the surface-level issues related to tech platforms and speech, which I address in the first seven questions. The final three questions are much harder to answer and require thinking on the margin about what our society values and what tradeoffs we are willing to make. If we focus our time and attention on these latter questions, we can hope to make real progress over time.

1. Is Big Tech more powerful than the government?

Austen Allred, the founder and CEO of Lambda School, tweeted, “Twitter, Facebook, Apple and Google, especially when acting in concert, are much more powerful than the government.” This claim doesn’t hold up to any level of scrutiny. The government has the power to tax you, imprison you, and kill you; the tech companies can delete your free account. Some conservatives have even argued the government should “nationalize Facebook and Twitter to preserve free speech,” the mere possibility of which should tell you who’s more powerful.

 

Journalist Michael Tracey said that Big Tech is “more powerful than most if not all nation states”, which seems absurd considering nine nation states have nuclear weapons.  He also claimed that you “cannot create an ‘alternative’ … at this point” which is directly contradicted by the fact that TikTok went from zero to nearly a billion users in just the last few years.

2. Has President Trump been silenced by Twitter and Facebook?

Trump has been permanently banned from Twitter and suspended from Facebook for at least two weeks. Obviously, his ability to speak directly to his audiences on those platforms has been greatly diminished. But that doesn’t mean he has been silenced or censored. A recent Reuters article asked “How will Trump get his message out without social media?” In short: The same way that every president did prior to 2008. What communications and media networks existed back then? Newspapers, magazines, broadcast TV, cable TV, radio, podcasts, email, text messages, and the open web.

Twitter is not real life. As economist Adam Ozimek said, “Only 22% of adults use Twitter. In contrast almost every house has a TV. The idea that there is some monopoly over access to the public here is really not compelling. Maybe you spend too much time on Twitter if you think that.” Furthermore, only about 10% of Americans are daily active users of Twitter. So that means if you check Twitter at least once a day, then you’re more “online” than 90% of Americans. Active Twitter users likely overrate its importance in the average person’s life relative to newspapers, talk radio, broadcast TV, and cable TV.

It’s also important to remember that Trump’s words haven’t been banned from the platform, only his personal accounts. If the president gives a public speech, or if the White House issues a press release, thousands of journalists will still cover and broadcast his words, in tweets and Facebook posts of their own. For example, on Wednesday, the White House released a statement from Trump urging “NO violence, NO lawbreaking, and NO vandalism of any kind.” The statement was immediately shared on Twitter by reporters and sent out via text message to the Trump Campaign’s subscribers.

Twitter and Facebook suspending Trump’s account is significant, there is no denying that. But the president of the United States can still communicate with the public.

3. Is deplatforming extremists a civil rights issue?

Some conservatives have tried to argue that if liberals think a baker should be required to bake a cake for a gay wedding, then Amazon should be required to provide cloud hosting for Parler and Twitter shouldn’t be allowed to ban Trump. However, these cases are not similar. The case of the baker and the gay wedding was controversial because it involved the collision of two protected characteristics: religious beliefs (of the baker) and sexual orientation (the gay couple).

 

In the cases of Parler and Trump, they were not deplatformed for belonging to a protected class or because of an immutable characteristic — they were deplatformed for inciting violence and insurrection. Repeated antisocial behavior is a perfectly legitimate basis for a platform to remove a user (or for a company to cease doing business with a counterparty). The question is not “should Amazon be allowed to discriminate against conservatives” but actually “should Amazon be required to do business with groups hell-bent on breaking the law.”

No one believes that every user should be allowed on every platform. Not even Parler allows users to post whatever they want:

[Parler’s] community guidelines warn users to avoid spam, blackmail, bribery, plagiarism, support for terrorist organizations, spreading false rumors, suggesting people should die, describing “sexual organs or activity,” showing “female nipples,” and using language or visuals “that are offensive and offer no literary, artistic, political, or scientific value.” Parler also advises users against “any other speech federally illegal in USA,” which the platform incorrectly claims includes doxing and “content glorifying violence against animals.”

That’s why appeals to slippery slope-type arguments are so unpersuasive in this debate. Every platform draws the line somewhere, and that line might move over time as public opinion shifts and as new information arises about what is and isn’t working under the prevailing content moderation policy. We don’t need to protest Facebook’s decision to ban Paul Joseph Watson, Laura Loomer, Alex Jones, and Milo Yiannopoulos by comparing it to what African Americans experienced in the Deep South during Jim Crow, as Will Chamberlain did in this 2019 article for Human Events. These are not civil rights issues — these are questions about what kinds of behavior particular platforms are willing to allow in their communities.

4. Would repealing Section 230 prevent Big Tech from deplatforming users they disagree with?

There continues to be lots of misinformation regarding Section 230 of the Communications Decency Act. Many Republican elected officials and conservative activists argue that recent events show why we need to repeal Section 230, which provides platforms and other interactive computer services immunity for the content users post. This argument relies on an intentional misrepresentation of the statute and the relevant case law. Here is the key part of Section 230 — “the 26 words that created the internet”, as Jeff Kosseff put it:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

Prior to Section 230, if a platform tried to moderate content (say by taking down hate speech or incitements to violence), then the platform owner became liable for all the content that remained on the platform. This created perverse incentives. Platform owners basically faced two choices: (1) Engage in zero moderation to retain immunity — and watch the platform get overrun by Nazis or (2) Engage in maximum moderation to avoid getting sued for libel or other harmful content. Section 230 fixed this incentive problem by granting immunity to platform providers for users’ speech, thus enabling the platforms to engage in reasonable levels of content moderation.

 

Repealing Section 230 would do nothing to alleviate concerns about bias or censorship. As Senator Ron Wyden, one of the authors of Section 230, said, “I remind my colleagues that it is the First Amendment, not Section 230, that protects hate speech, and misinformation and lies, on- and offline. Pretending that repealing one law will solve our country’s problems is a fantasy.” All repealing Section 230 would do is force platforms back into the “all or nothing” choice on moderation. And because advertisers will not advertise on a platform filled with Nazis and pornography, it wouldn’t really be a choice at all. It’s likely the platforms would become much more aggressive in how they moderate content (if they continue to allow users to post at all). In other words, without Section 230, Trump would have been banned from Twitter years ago.

5. Is Twitter consistently enforcing its terms of service?

Whenever Twitter deplatforms a prominent right-wing figure, conservatives and others concerned with censorship accuse the platform of being biased because it leaves up similarly violent or misleading information from authoritarian rulers in Iran and China. FCC Chairman Ajit Pai called out a few tweets from Ayatollah Khamenei, the Supreme Leader of Iran, last May:

 

More recently, a tweet from the Chinese Embassy in the US tried to paint the ongoing Uyghur genocide in a positive light by saying it was furthering women’s empowerment: “Study shows that in the process of eradicating extremism, the minds of Uygur women in Xinjiang were emancipated and gender equality and reproductive health were promoted, making them no longer baby-making machines. They are more confident and independent.” Twitter initially refused to take down the tweet after Ars Technica reporter Tim Lee reached out to ask why it didn’t violate Twitter’s policies. Only after many others publicly shamed Twitter for its decision did the company finally relent and remove the tweet.

Those who say Twitter has enforced its policies inconsistently are right. But that doesn’t mean Twitter should leave Trump and other extremists alone. Arguing “worse people have gotten away with it” is like saying we shouldn’t arrest a murderer because some serial killers are still roaming free. Twitter should also ban dictators from using its platform and more quickly remove content that promotes or condones violence against anyone or any group of people.

6. Does Europe repress speech less than the US now?

There is also renewed debate about whether there should be one unified internet, or whether a splinternet is a better approach, with each nation governing its own internet.

 

While a further splintering of the internet seems almost inevitable at this point, it would be strange if Europe splits apart over concerns about repression of speech in the US, as Bruno Maçães speculated. The EU has many current (or proposed) laws that repress speech much more than in the US, including:

That’s to say nothing of how the US compares to authoritarian countries such as Russia or China. As Garry Kasparov said, censorship in the USSR is “when the state attacks a company for offending an official … not the other way around.” Or as Jameel Jaffer put it, “forcing publishers to publish the government’s speech is what happens in China.”

7. Can private companies violate your First Amendment rights?

Any debate over a high-profile user getting banned from a social media platform quickly devolves into the two sides talking past each other. Those critical of the decision to ban a user say that it’s a violation of that person’s free speech or First Amendment rights. The other side immediately latches on to the First Amendment part of that claim, pointing out (correctly) that the First Amendment restrains the government from infringing on ability to speak, not private companies or individuals. Since it’s so short, let’s just look directly at the text to make sure we’re all on the same page (emphasis added):

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Clearly, the First Amendment was not meant to abridge the rights of private entities and citizens. But “free speech” is a much broader concept than what’s written in the Bill of Rights. That’s one of the harder questions.

8. How much should private companies restrict free speech and free expression?

In everyday use, “freedom of speech” means the ability for someone to express their views or opinions without fear of retaliation (beyond verbal criticism). In other words, it means that people can speak their mind without fear of a disproportionate response. That doesn’t mean those restraints on speech are bad! As a society we make tradeoffs all the time between different values depending on the context. It just means that “free speech” as a concept is not limited to the First Amendment.

Some conservatives and libertarians think that by pointing out that private companies have First Amendment rights too, that’s the end of the conversation, when in reality it’s only the beginning of the conversation. We must admit that these tech platforms are powerful and the decisions they make affect billions of people worldwide. It is legitimate to raise concerns about who gets to be on and off the platform (even while recognizing the companies themselves are under cross-pressures, with conservatives arguing for a more hands-off approach and liberals arguing for more aggressive moderation).

To start answering the tougher questions, we first need to move past the false dichotomy of the individual and the state. As Noah Smith wrote in his own post about Big Tech and free speech, “Between the government and individual citizens lie a variety of mezzanine authorities who have real power, and whose actions can lead to a real loss of liberty.” Noah continued by citing one his previous pieces (emphasis added):

An ideal libertarian society would leave the vast majority of people feeling profoundly constrained in many ways. This is because the freedom of the individual can be curtailed not only by the government, but by a large variety of intermediate powers like work bosses, neighborhood associations, self-organized ethnic movements, organized religions, tough violent men, or social conventions…whom I call “local bullies.”…

In a perfect libertarian world, it is therefore possible for rich people to buy all the beaches and charge admission fees to whomever they want (or simply ban anyone they choose). In a libertarian world, a self-organized cartel of white people can, under certain conditions, get together and effectively prohibit black people from being able to go out to dinner in their own city. In a libertarian world, a corporate boss can use the threat of unemployment to force you into accepting unsafe working conditions. In other words, the local bullies are free to revoke the freedoms of individuals, using methods more subtle than overt violent coercion.

Such a world wouldn’t feel incredibly free to the people in it.

That’s why merely citing the First Amendment rights of private companies in these cases can leave people feeling hollow. And it’s why we need to thoroughly examine the market power in each layer of the tech stack to decide which layers should have both the responsibility and the ability to moderate content.

The answer here is that there is no clear answer: The decision to ban or not ban accounts or types of speech is inherently political and it’s wrapped up in the profit-maximization desires of the relevant companies. There is no clear rule you can write that will cover every case and there will be backlash no matter what decision these companies make. The existence of the public debate is what constrains platforms. On one side, groups concerned with freedom of expression will limit the platforms’ willingness to moderate. On the other side, those concerned with the negative externalities of certain speech will push platforms to be more heavy handed with their moderation. It is in these debates that societies can determine the level of moderation that is appropriate.

9. Which layer of the tech stack should have the responsibility for moderating content?

Here’s a framework for thinking about these issues: How much capital investment and time does it take to construct or find an alternative vendor, especially given government regulation? How close to the end users on social media platforms are these services? You can think of the tech stack in roughly three layers:

  1. The top layer is the social media apps and websites themselves (e.g., Facebook, Twitter, Parler, etc.);
  2. The middle layer is intermediaries or aggregators of apps and websites (e.g., app stores, browsers, search engines, etc.);
  3. The bottom layer is infrastructure providers (e.g., cloud providers, content delivery networks, the Domain Name System, internet service providers, utilities, payments, etc.).

On the top layer, it is relatively easy for a company to create its own app or website. Scaling these platforms to take advantage of network effects can be difficult, but it’s by no means impossible (see TikTok, Discord, Telegram, Signal, Snapchat, etc.).

In the middle layer, Google and Apple have a virtual duopoly (99% market share) in the smartphone operating system market, which makes their decisions regarding the default app stores on Android and iOS devices very important. But while securing distribution in the two major app stores can be hugely beneficial, it’s not necessary for adoption. Users can navigate directly to a website in a browser and Progressive Web Apps are bringing more and more functionality to web apps that was previously limited to only native apps. Companies can also have their users sideload another app store on Android devices, like Epic Games did for Fortnite. Hypothetically, if Chrome were to block users from accessing websites like Parler at the browser level, then that would be worrisome, as Chrome controls 63% of the browser market (while still noting that users can download alternative browsers such as Firefox or Brave).

On the bottom layer, one troubling story is what an internet service provider did in rural Idaho: YourT1Wifi.com, an internet service provider based in Priest River, Idaho, decided to block access to Twitter and Facebook after some of its customers complained about the platforms banning President Trump. That’s why large ISPs have committed themselves to net neutrality principles that would require no blocking, and why we need net neutrality legislation that would require no blocking without going through Title II at the FCC. It’s also why it’s good news that Elon Musk’s Starlink, a satellite broadband service, is already in public beta.

The bottom layer includes services that would be harder for social media platforms to replicate on their own: utilities (e.g., electricity, natural gas, water, sewage, telephone), internet service providers (ISPs), content delivery networks (CDNs), the Domain Name System (DNS), credit card companies (Visa and MasterCard), cloud providers (e.g., AWS, Azure, Google Cloud) and other payment systems (e.g., Stripe, PayPal, etc.). It would be very hard for a business to lay its own internet fiber, build its own electrical grid, or create an alternative to the Domain Name System. Utilities are especially powerful because they have a lot of local market power (often they’re a de facto monopoly in a community). By contrast, payment processors and cloud providers compete in global markets that are highly competitive, giving companies alternative options if they’re banned by one service provider. Generally speaking, we should be more wary of imposing liability on this layer of the tech stack for what users post on social media. Instead, policy should hew towards neutrality (with exceptions for illegal activity).

10. When should we require neutrality?

Following the framework detailed above, Apple and Google banning Parler from their app stores is a bigger deal than Facebook and Twitter banning Trump from their platforms. And what occurred in the infrastructure layer (i.e., AWS banning Parler and Stripe banning the Trump Campaign) is a bigger deal than what the app stores did. That means we should closely examine the AWS and Stripe cases to make sure these are indeed competitive markets.

First, AWS does not have a monopoly on cloud services (it has a 32% market share). Gab, a free speech social media platform with zero censorship and lots of Nazis, and PornHub, a website that needs no explanation, both operate without relying on the Google and Apple app stores or AWS for cloud services. Parler put itself in this situation by relying on a risk-averse mainstream cloud provider when there were numerous other options for hosting (including self-hosting). (The latest news is the Parler is now switching over to Epik, the cloud provider that hosts Gab). The same is true for Stripe, which only has an 18% market share. While the payment processor is part of the infrastructure layer, there are dozens of other competitors in the market that are available to the Trump Campaign. If these companies in the infrastructure layer had been monopolies, policymakers should have stepped in to enforce a neutrality standard.

 

 

David Sacks, an entrepreneur and venture capitalist, expressed a common sentiment among those displeased with the recent bans by Big Tech: If individuals or apps get banned at every layer of the tech stack — from consumer-facing apps down to infrastructure services — then there is no recourse for those who have been deplatformed. But that’s not actually true. If a user gets banned from Facebook or Twitter, there are numerous alt-tech social media platforms they can join. And after Parler was banned from the Google Play Store and the Apple App Store, it could still be accessed directly from a browser on the open web (or downloaded from a sideloaded app store on Android devices).

As David Ulevitch, a venture capitalist at Andreessen Horowitz, pointed out, even AWS doesn’t “hold the keys to the internet.” There are dozens of other cloud providers, and many companies still self-host using their own servers on-premise (traditional on-prem spending exceeded cloud spending until just last year). While it might be preferable for infrastructure companies to remain neutral (and they might welcome a law taking the decision off their hands), in competitive segments of the infrastructure layer we shouldn’t be too worried about companies exercising their right to not do business with reckless social media platforms.

Conclusion

Somewhat overlooked in this whole debate is that it’s not just Big Tech that’s turned on Trump and his supporters. Virtually all of corporate America has decided enough is enough. The Wall Street Journal is collecting an ongoing list of corporations that have paused PAC donations to politicians. It’s up to more than 50 corporations and includes every household name you can think of, from AT&T to Boeing to Walmart. The most common targets of corporate ire are Trump and the Republican members of Congress that objected to the certification of the Electoral College. The House of Representatives just voted to impeach the president for a second time. Maybe this whole debate is missing the forest for the trees — maybe it’s about way more than Big Tech?

It’s also worth caveating that much of the foregoing analysis will look very different depending on whether law enforcement and national security agencies have been in direct contact with the tech companies regarding imminent threats of violence. If that’s the case, then I think many of the tech platforms decisions look different (save for the decisions to ban Trump). In that context, they wouldn’t be exercising their own discretion over what speech should or should not be allowed on their platforms so much as responding to an implicit or explicit government order. Given the lack of publicly available information right now, we can’t know for sure what the government did or did not tell the tech companies.

At the end of the day, these are complicated issues. Here are the bottom-line takeaways:

  • Social media apps and websites can survive without depending on Big Tech (many alt-tech sites already do).
  • Trump may be banned from Facebook and Twitter, but he’s still the president of the United States and he has not been silenced.
  • Banning right-wing extremists or those who incite violence is not a slippery slope toward an Orwellian dystopia, and it’s certainly not a civil rights issue.
  • No, Big Tech is not more powerful than the government; the government can tax you, imprison you, and kill you.
  • A private company can’t violate your First Amendment rights, but it can restrict your ability to speak freely.
  • Repealing Section 230 would not solve any of these issues; nationalizing the companies in question would cause even more problems.
  • Twitter should ban both Trump and the Supreme Leader of Iran from its platform (and CCP propaganda).
  • This is not about just Big Tech — most large corporations no longer want to be associated with Trump, Parler, or the Republicans who objected to the certification of the Electoral College.
  • Despite all this, the US still values free speech more than any other country in the world.

 

This piece was also published on Agglomerations here.

The Latest in Social Science Research

Posted on by The Progressive Policy Institute

Earlier this month, I attended the annual meeting of the Allied Social Science Associations (ASSA), organized by the American Economic Association, on behalf of PPI. The three-day conference featured hundreds of presentations and papers on economics and social science research and was held virtually this year, sparing me a frigid trip to Chicago. The three topics that I highlight below from the conference address housing, inequality, and wealth building, with links to relevant PPI policy ideas.

Creating Moves to Opportunity: Experimental Evidence on Barriers to Neighborhood Choice

Raj Chetty and Nathaniel Hendren of Harvard University presented the latest findings from their housing mobility program in the Seattle area, Creating Moves to Opportunity. The researchers designed a randomized controlled trial that gave low-income families the choice to move to higher opportunity areas through housing vouchers. They “provided services to reduce barriers to moving to high-upward-mobility neighborhoods: customized search assistance, landlord engagement, and short-term financial assistance” and families were not required to move to high-opportunity neighborhoods to receive a voucher. 

Their services-based intervention proved successful. Families who received support in search assistance, landlord engagement, and short-term financial assistance moved to high-upward-mobility areas at a rate of 53%, compared with 15% of those who did not. Additionally, families who chose to move to higher opportunity areas reported higher levels of neighborhood satisfaction after moving, tended to stay in their new neighborhoods, and did not make sacrifices on other aspects of neighborhood quality. 

This study fits into a larger body of research and evidence illustrating that social programs are more effective when explicitly designed to reduce administrative burdens and search costs for participants. The authors note that “these findings imply that most low-income families do not have a strong preference to stay in low-opportunity areas; instead, barriers in the housing search process are a central driver of residential segregation by income. Interviews with families reveal that the capacity to address each family’s needs in a specific manner from emotional support to brokering with landlords to customized financial assistance was critical to the program’s success. The authors conclude that “redesigning affordable housing policies to provide customized assistance in housing search could reduce residential segregation and increase upward mobility substantially” and note that the intervention is relatively inexpensive given the induced outcomes and overall size of the programs.

Rethinking Inequality with James K. Galbraith, Joseph E. Stiglitz, Jason Furman, and Teresa Ghilarducci

This macroeconomics panel provided a sweeping assessment of different trends in inequality, shining a light on the way that the pandemic has revealed and worsened inequities. 

Of note, Jason Furman of Harvard University focused his discussion on several key points about inequality. He explained that while the pandemic has caused a massive increase in inequality, an overlooked outcome of government aid through stimulus checks and unemployment insurance might ultimately be a reduction in inequality as measured in many Americans’ after-tax income. Furman discussed that the causes of inequality are complex and that there is not one grand unifying theory for the widening gap over the past few decades. He did point to competition policy as one key area where inequality could be reduced through more “vigorous antitrust enforcement” to bring the market closer to competition.

With reference to his first point on a potential decrease in inequality during the pandemic, PPI’s Brendan McDermott recently discussed in a blog post the essential role that government assistance has played in poverty reduction during the Covid recession and how at the onset of the pandemic, researchers found that the poverty rate fell because of “a massive infusion of federal aid.”  

Can Baby Bonds Address Historic Racial Injustice?

Steven McMullen of Hope College shared his paper examining whether baby bonds can help reduce the racial wealth gap among Black families. A baby bond is a government-funded trust account which every child receives at birth. He considers higher deposits from the government for children in lower-income households, creating a progressive impact. The policy would be race-neutral, even if the effect is not. When the participants reach adulthood, the money would be released to be used for purposes such as education, housing, or retirement spending. The author concludes that this is a promising proposal to increase intergenerational wealth among Black and lower-income families and close the yawning racial wealth gap.

In a 2020 paper titled “Democratize Capital Ownership,” PPI’s Jason Gold discusses his idea for government-funded baby bonds linked to national service as a way to tackle the widening wealth gap. He proposes that the federal government seed an account at birth for every U.S. child and the initial investment would be put into a market index or target date fund. Families would be able to contribute post-tax earnings and the funds would be released at age 18 if the account holder agrees to perform a year of national service before they turn 25. The account savings could be used for “post-secondary education, a down payment on a first home, or starting a business.”

Thank you to the ASSA organizers and presenters for a smooth and productive conference this year despite the pandemic and virtual format!

Connecting America: A Radically Pragmatic Broadband Agenda for Joe Biden’s First 100 Days

Posted on by The Progressive Policy Institute

President-Elect Biden ran on a commitment to be a President for all Americans, not just those who voted for him. To make good on that promise, he and his team will need to find opportunities for common ground and constructive compromise as they build their agenda for the first 100 days. One issue they would be smart to prioritize: Getting every American connected to broadband.

The COVID-19 pandemic, and the failed experiment in distance learning it forced upon our nations’ schools, have underscored the urgent need to close our digital divide. Unlike many other issues, broadband policy offers real promise for bipartisan consensus because it cuts across traditional red-blue and urban-rural lines. Infrastructure deployment gaps are found primarily in rural and tribal areas. Broadband adoption rates are lowest among low-income households and in communities of color. Plus, common sense consumer protections like net neutrality rules and consumer privacy safeguards enjoy overwhelming bipartisan support.

In a comprehensive broadband bill, there would be something for everyone to get behind.

The Biden administration has an opportunity to make historic progress expanding broadband access and accelerating adoption. And Biden will find bipartisan partners in these goals, so long as the Administration resists activist demands for the dead-end path of government micromanagement and instead focuses on targeted spending, smart reforms, and dynamic public-private partnerships.

The incoming Administration needs a radically pragmatic agenda that builds on the progress already being made, while accelerating efforts to close the most difficult and persistent gaps that remain.

Here are some ideas for where they should start:

Protect Consumers Online

Pass a Permanent Net Neutrality Law. To pass a broadband agenda that prepares us for the future, we first need to stop getting bogged down in dead-end fights from the past. For the last two decades, different versions of net neutrality have bounced between Congress, the Federal Communications Commission, the courts, and most recently the states, but the issue remains unresolved. While alarmist predictions about the imminent demise of “the internet as we know it” have proven unfounded, consumers and innovators all deserve the clarity and certainty of permanent net neutrality protections. The core principles – no blocking, no throttling, no paid prioritization – enjoy almost universal bipartisan support. President Biden and Congress should come together to pass clear, permanent net neutrality protections – while steering clear of the entirely unrelated (and much more controversial) idea of regulating the internet as a public utility under 1930s “common carrier” rules.

Protect Consumer Privacy. American voters overwhelmingly prefer a federal privacy law to a patchwork of inconsistent, contradictory state laws. The new Administration should work with Congress to pass a comprehensive new set of privacy protections that apply consistently to every company that collects or uses consumer data. Sensitive data – such as health, financial, or location information – demands a higher level of protection, and the Federal Trade Commission and state Attorneys General need clear authority to police and punish data privacy violations.

Connect Rural America

Make Historic Investments in Broadband Infrastructure. Joe Biden’s campaign platform called for investing $20 billion in rural broadband. This funding is urgently needed. While nearly $2 trillion in private investment over the past 25 years have built networks that reach 95% of American communities, market forces alone won’t be sufficient to attract private investment to get last-mile network infrastructure to every home in some remaining unserved pockets where low populations and difficult terrain make for much higher per-home deployment costs. A smart strategy won’t look to replace private funding, but will instead leverage even greater private investment by matching capable providers with project-based assistance on a transparent, competitive basis. Republicans will fight Biden on any number of spending priorities, but rural broadband programs may be an exception, since much of the funding would flow toward rural, Republican-held districts and states.

Set Clear Priorities. The Biden Administration will be keen to avoid the mis-steps of earlier federal broadband initiatives, such as the Commerce Department’s Broadband Technology Opportunities Program, which squandered millions in 2009 Recovery Act funding building duplicative broadband networks in communities that already had high-speed fiber infrastructure. This time around, federal funding must be targeted to truly unserved areas – those where high-speed broadband isn’t yet available. We can’t ask Americans living in broadband deserts to wait even longer while taxpayer funds get diverted to subsidize networks in areas that already have high-speed service.

Let Every Technology – and Every Capable Provider – Compete for Funds. Many federal broadband programs are hamstrung by outdated, dial-up era eligibility rules that actively discourage many capable providers from participating. With less competition for federal funds, progress is slowed and taxpayer dollars don’t stretch as far. Bipartisan bills introduced earlier this year in both the House and Senate proposed to scrap these obsolete, anti-competitive Eligible Telecommunication Carrier restrictions; the incoming Administration should embrace these bipartisan reforms. Federal broadband programs should set clear thresholds for speed and latency – and then allow every capable provider and every kind of broadband technology (fiber, cable, fixed wireless, etc.) that can meet these standards to apply and compete for funding.

Demand Real Accountability. Government watchdogs have documented how mismanagement and poor oversight undermined earlier federal rural broadband programs. For example, the USDA’s Rural Utility Service promised in 2011 that its $3.5 billion in stimulus funding would connect 7 million homes – but ended up connecting only a few hundred thousand. “We are left with a program that spent $3 billion, and we really don’t know what became of it,” concluded the GAO. We need much stronger oversight this time: every provider applying for federal funding must commit to connecting a specific number of homes by a certain date – and should be forced to return the funding if they fail to meet these commitments.

Accelerate Broadband Adoption

Understand the Challenge. While broadband service is available in 95% of U.S. neighborhoods, only 73% of American households subscribe to home broadband. This “adoption gap” is rooted in a complex set of underlying factors, exacerbated by digital literacy gaps and a lack of understanding in some quarters of the opportunities opened up by home broadband service. In fact, 60% of Americans who don’t have home broadband cite a lack of interest or need as their primary reason for not signing up, while fewer than 20% cite affordability as the main obstacle. Sen. Ed Markey (D-MA) introduced legislation earlier this year aimed at helping us better understand the barriers to broadband adoption, by authorizing new experiments and pilot programs and gathering more data on the challenge. The Biden Administration should embrace that proposal as a starting point, and recognize that broadband adoption is a complex and nuanced challenge.

Build on Models that Work. Most major broadband providers have offered low-cost broadband programs for years to eligible low-income customers. For example, the largest of these programs (Comcast’s Internet Essentials) has connected roughly 8 million low-income Americans since 2011, offering home broadband for just under $10 per month. These initiatives offer important lessons that need to be internalized into federal broadband adoption efforts – most critically, the importance of wrapping discounts or subsidies with comprehensive digital literacy training and comprehensive community outreach programs. The shortest path toward boosting broadband adoption is to build on top of models that are working – not tearing them down and starting from scratch.

Subsidize Low-Income Broadband Adoption. Broadband providers’ low-income adoption initiatives have brought home broadband service to millions of low-income families nationwide. Modernizing low-income FCC programs to support standalone fixed broadband service – and ensuring the program is open to every capable provider meeting defined speed thresholds – would further help vulnerable families, ensuring that every American can afford home broadband service. Democrats in Congress fought to include a $3 billion Emergency Broadband Benefit in the COVID-19 relief package passed in December, which will offer a subsidy of up to $50 per month help low-income and unemployed Americans stay connected during this pandemic. This is a welcome short-term solution, but Congress must remember that broadband adoption challenges will persist long after the COVID-19 emergency has subsided.

Americans need COVID-19 vaccinations now — here’s how Biden can ramp up the process

Posted on by The Progressive Policy Institute

The advisers of President-elect Joe Biden have been developing plans to speed up COVID-19 vaccine distribution. One idea the transition team has announced is to release available doses immediately rather than holding back half to ensure second doses are available. While this could potentially delay some people from getting a second dose, the risk is worth it.

Americans have been warned this summer there will be a vaccine shortage. Health care officials were instructed to abide by a strict prioritization schedule and this created a “shortage mentality” that’s slowed the distribution of available vaccines. Of the 30.6 million doses of coronavirus vaccine distributed to health care facilities thus far, an abysmal 36 percent — about 11.1 million — have been administered. Releasing all available doses will help expedite this process.

To meet his goal of administering 100 million vaccine doses in his first 100 days in office, Biden will need to do more than releasing all available doses. Hospitals are already overwhelmed with a surge in coronavirus cases and have limited capacity to administer vaccines. With little federal support, overworked and under-resourced public health departments have been slow to deliver vaccines.

So how does Biden accomplish this important goal?

Read the rest here.

Follow Arielle Kane on Twitter @ariellesophia for daily updates and takes on U.S. health care policy.

PPI Applauds President-Elect Biden’s Ambitious Agenda to Get the Pandemic Under Control

Posted on by The Progressive Policy Institute

America, it appears we have a real president again.

President-elect Joe Biden yesterday unveiled an ambitious agenda for getting the pandemic under control, helping jobless Americans recover through the Covid recession, throwing a lifeline to millions of small businesses, strengthening the safety net for our most vulnerable citizens, and opening public schools.

PPI applauds the President-elect for stepping boldly into a total vacuum of leadership in Washington. His decision to “go big” with a $1.9 trillion package is just the jolt we need to galvanize national action and spur the sharing of resources to vaccinate Americans faster, protect the vulnerable and speed up economic recovery.

Above all, it’s a welcome sign that experience, honesty and compassion are returning to the White House after a four-year absence. In Joe Biden, Americans will once again have a leader who can make their government work for them.

The details of the Biden plan will be worked out in the weeks ahead. What follows are reactions by PPI policy analysts to its key proposals.

History tells us that Biden’s front-loaded $1.9 trillion fiscal stimulus plan is essential for helping the U.S. economy accelerate out of the Covid Recession and bring jobs back to millions of Americans.  Small businesses, especially, will benefit from the flow of money to poor and middle-class Americans. And if the country has to take on more deficits, this period of low interest rates is the perfect time.

The Biden plan does come with some important risks. We may be facing a weaker dollar down the road, which would lead to rising import prices and higher inflation. Nevertheless, those potential problems are worthwhile given the magnitude of the current crisis. – Dr. Michael Mandel, Chief Economic Strategist 

President-Elect Biden’s proposed $1.9 trillion coronavirus relief plan extends the 15% increase in the Supplemental Nutrition Assistance Program (SNAP) benefits and proposes additional $3 billion in funding for the Women, Infant and Children program, both programs are incredibly essential to supporting the more than 30 million adults and over 12 million children suffering from food insecurity in the United States.  The plan also includes $350 billion in aid to state and local governments which is critically needed during this economic downturn because many cities and local governments use those flexible dollars to support their anti-hunger initiatives including food pantries, senior nutrition and other nutrition programming.  – Crystal Swann, Senior Policy Fellow

The American Rescue Plan is ambitious and boldly prioritizes the needs of working families and those struggling the most during this Covid recession. PPI supports President-elect Biden’s call for an increase in the minimum wage to $15, with a phased approach that takes into account regional differences. The expansions of the Child Tax Credit and Earned Income Tax Credit will reduce child poverty by an estimated 50 percent and alleviate economic hardship for workers without children. The Rescue Plan also has critical support for housing and unemployment, provides funding for childcare, and extends paid family and sick leave for workers affected by the pandemic through September, expanding these benefits to cover an additional 100 million workers. We encourage Congress to move forward swiftly to provide this relief to the American people. – Veronica Goodman, Social Policy Director

It’s refreshing to see the Biden-Harris administration release a policy plan that meets the gravity of this moment. After 20 million Americans have been infected with and almost 400,000 Americans have died from Covid-19, it’s clear that we need policies that will stem the tide of the raging pandemic. A national vaccination effort as proposed by President-elect Joe Biden is the quickest way to get back to normal life and improve the economy.

I am pleased to see the incoming administration prioritize many good policies including increasing surveillance of virus mutations, using the National Guard and the Defense Production Act to support vaccination and testing efforts, and investing $20 billion dollars in the ‘last mile’ of vaccine distribution to get it into more people’s arms faster. While the darkest days of the pandemic may still lie ahead, the plan put forth by the Biden-Harris administration is the quickest way to end this pandemic once and for all. – Arielle Kane, Director of Health Care

President-elect Biden should be commended for offering an ambitious action plan to end the covid pandemic and save the American economy. If even a fraction of these new relief measures were enacted, they would cement the United States’ fiscal response to the pandemic recession as the largest in the world. PPI also applauds the president-elect’s commitment to pursue automatic triggers and stands ready to support those efforts however we can. Lawmakers should enact such mechanisms to provide economic support consistent with the real needs of our economy while preserving fiscal space for the next component of Biden’s recovery agenda. Building back better will require making unprecedented investments in infrastructure and scientific research to mitigate climate change and lay the foundation for long-term growth. – Ben Ritz, Director of the Center for Funding America’s Future

Congressman Conor Lamb Talks Impeachment, Energy with PPI

Posted on by dcadmin

PPI President Will Marshall welcomes Congressman Conor Lamb of Pennsylvania’s 17th District to the PPI Podcast, just days after Rep. Lamb’s dramatic floor speech following the insurrection in the Capitol, in which he lambasted Republicans for supporting the Trump lies that inspired the assault, plus his thoughts on impeaching the president again;

Rep. Lamb shares how he and Biden won their elections in the crucial swing state of Pennsylvania, and the critical importance in that state of energy issues — including Biden’s opposition to a ban on natural gas drilling and a balanced approach on energy which helped him return flip Pennsylvania blue.

The conversation shares the need for a new Democratic approach on energy and climate that recognizes that natural gas is speeding the deployment of renewable energy to the grid; and that our goal should be decarbonizing the economy, not abolishing fossil fuels precipitously, which would cost many Pennsylvania and other energy state workers their jobs and damage their economy.

PODCAST: Congressman Conor Lamb Talks Impeachment, Energy with PPI

Posted on by The Progressive Policy Institute

PPI President Will Marshall welcomes Congressman Conor Lamb of Pennsylvania’s 17th District to the PPI Podcast, just days after Rep. Lamb’s dramatic floor speech following the insurrection in the Capitol, in which he lambasted Republicans for supporting the Trump lies that inspired the assault, plus his thoughts on impeaching the president again.

Rep. Lamb shares how he and Biden won their elections in the crucial swing state of Pennsylvania, and the critical importance in that state of energy issues — including Biden’s opposition to a ban on natural gas drilling and a balanced approach on energy which helped him flip Pennsylvania back to blue.

The conversation shares the need for a new Democratic approach on energy and climate that recognizes that natural gas is speeding the deployment of renewable energy to the grid; and that our goal should be decarbonizing the economy, not abolishing fossil fuels precipitously, which would cost many Pennsylvania and other energy state workers their jobs and damage their economy.

Listen to the podcast here.

How Concerned Should We Be About Deficits?

Posted on by The Progressive Policy Institute

When President-elect Biden begins rolling out his ambitious recovery agenda on Thursday, economists and policymakers will debate to what extent it should be constrained by the $21.6 trillion national debt he inherits from Donald Trump. Self-proclaimed “fiscal conservatives” want the federal government to pursue deep spending cuts after running an unprecedented $3.1 trillion budget deficit in 2020, which has left the government owing more money than our economy produces annually for the first time since World War 2. But many progressives are urging Biden to spend trillions more to bolster the post-covid economy, arguing that deficits are inconsequential in an era of low interest rates and inflation.

Going all-in on either approach could be catastrophic for the American economy if the advocates of doing so turn out to be wrong about the ramifications. The best course for Biden, therefore, is to balance the risks on both sides by prioritizing critical public investments today while preserving fiscal flexibility to operate in any macroeconomic environment tomorrow.

Read the full piece here.

Why A Digital Advertising Services Tax Will Undercut the Small Business Recovery: The Maryland Case

Posted on by The Progressive Policy Institute

EXECUTIVE SUMMARY

As of November 2020, employment in Maryland was down more than 4 percent compared to a year earlier. Small businesses are suffering. Nevertheless, the state’s revenues for the 2021 fiscal year are coming in better than expected in spring 2020, buoyed by federal stimulus and continued employment of white collar workers.

Under the circumstances, enacting a new tax that would be especially harmful to small businesses seems like a mistake. However, in spring 2020 Maryland state legislators approved a new tax on annual gross revenues derived from digital advertising services in Maryland, with the proceeds to be devoted to education. The bill, which broadly covered “advertisement services on a digital interface,” was vetoed in May 2020 by Governor Larry Hogan, with the veto potentially in line to be overridden by the state legislature in the session that began mid- January 2021.

In this paper we will explore the economics of digital advertising and the economics of a digital advertising services tax, with special attention to Maryland. We make four main points:

  • The price of digital advertising has fallen by 42 percent since 2010 across the United States. This decline has fueled a sharp reduction in ad spending as a share of GDP.
  • Our calculations suggest that the falling price of digital advertising is saving Maryland businesses and residents an estimated $1.2 billion to $2 billion per year, based on the size of the state’s economy.
  • Passing the digital advertising services tax is likely to reduce the cost benefits of digitaladvertising to Maryland businesses and residents. In particular, the tax will drive up the price of help-wanted ads in Maryland, making it harder to connect unemployed Maryland residents with local jobs. In addition, employers will rely less on public ads and more on personal connections with friends and family, disadvantaging less- connected groups such as minorities and immigrants.
  • Raising money for education is a worthwhile goal. But the appropriate source of funds are broad-based taxes such as sales tax or an income tax, rather than a narrow and distortionary tax on one small but vital segment of the economy. In addition, moving to a combined corporate income tax framework could help reduce income shifting and increase tax revenues.

 

THE ECONOMICS OF DIGITAL ADVERTISING

Before discussing the particulars of the Maryland digital advertising tax, we’ll consider the broader economics of digital advertising. Prior to the widespread use of the Internet, the legacy media–newspapers and local television and radio stations– had a near-stranglehold on local advertising. Newspapers, especially, used that market power to raise advertising rates, because local retailers and other businesses had no other good alternatives if they wanted to reach nearby consumers. According to data from the Bureau of Labor Statistics, the average price of newspaper advertising tripled between 1980 and 2000, rising far faster than the overall consumer price level (which doubled over the same period).1

As a result, businesses had to pay increasingly large sums for consumer-oriented advertising in the pre-Internet days. For retailers, restaurants and other local businesses who wanted to reach new customers, there were few viable alternatives.

Equally important, local employers had to shell out for “help-wanted” ads in newspapers in order to find good workers. Newspapers could and did jack up the price of these employment ads because businesses—especially small businesses—had no other way to reach potential employees before the era of digital advertising.

When we look back to the era before digital advertising, it is stunning how newspapers used help-wanted advertising as a high-priced cash cow. Consider, for example, the price of help-wanted ads in the Washington Post before the widespread use of digital advertising. In 1980 the Washington Post charged potential employers $1.98 for a single line in an employmentclassified ad, placed a single time in a dailyedition.

By 1990 the price of that same single line in a Washington Post help-wanted ad had risen to $6.70, a 240 percent increase. The price increases continued for the next decade, with the price of a line in a help-wanted ad rising to $11.06 by 2000, another 65 percent gain, far exceeding the 34 percent increase of the consumer price index over the same period.2

These ads were expensive—running just one five-line help wanted ad for just one week in 2000 would cost around $85, without volume discounts and including the more expensive Sunday edition. Small businesses who did not have their own HR departments, especially, had no other choice except to pay big bucks to the newspapers in order to hire.

Employers got huge price relief as the Internet became more important. Rather than being forced to run high-priced ads in newspapers, they could shift their help-wanted ads to online portals such as Craigslist, Monster.com and Indeed.com, which were both much cheaper and much easier for jobseekers to search. For comparison, today a Craigslist job posting in the DC area—which gives employers a full paragraph to work rather than just five lines–costs $45 for 30 days (Baltimore is priced at $35 per ad).3

Since 2010, the overall price of digital advertising has fallen by 42 percent, according to the BLS. (That figure excludes print publishers such as newspapers.). By comparison, the price of newspaper advertising, both print and digital, is down by only 7 percent since 2010.

This drop in price for digital advertising has been a tremendous boon for businesses, especially small businesses like restaurants and retailers, who used to have a limited set of options for consumer advertising. Businesses of all typesnow find it much cheaper and easier to post help wanted ads and find qualified help.

On a macro level, businesses and consumersare benefiting from the lower cost of digitaladvertising. In 2019, advertising amounted to about 1 percent of gross domestic product (GDP). That’s down from 1.5 percent in 2000, and an average of about 1.3 percent in the 1991-2000 period.4

In other words, the shift to digital advertising has lowered ad spending by about 0.3-0.5 percent of GDP. This is money that goes directly into the pockets of businesses and consumers.

What about Maryland? According to the Bureau of Economic Analysis (BEA), Maryland’s state GDP was roughly $400 billion in 2019.5 Applyingnational figures, that suggests digital advertisingis saving Maryland businesses and consumers about $1.2-2.0 billion per year.

IMPACT OF DIGITAL ADVERTISING TAX

Keeping in mind the lower price of digital advertising, what economic impacts would we expect from the proposed digital advertising services tax? H.B. 732 proposed a new tax on the annual gross revenues derived from digital advertising services in Maryland. The tax rate would vary from 2.5 percent to 10 percent of the annual gross revenues derived from digital advertising services in Maryland, depending on a taxpayer’s global annual gross revenues. To be required to pay the tax, a taxpayer must have at least $100 million of global annual gross revenues and at least $1 million of annual gross revenues derived from digital advertising services in Maryland.

Note that this is a tax on gross receipts, a type of state tax that has been judged by economists as intrinsically problematic.6 Gross receipt taxes are exceptionally sensitive to market structure, since the tax can be theoretically applied at each stage of the advertising production and sales process, which could lead to double (or multiple) taxation. In this case, the Maryland tax authorities will have to determine the “real” seller of the digital advertisements, which in many cases is not obvious.

Note also that the legislation does not actually specify what it means for digital advertising services to be “in Maryland.” That task is left up to the state’s Comptroller. But it seems clear that at a time when users are increasingly concerned about privacy, the legislation will effectively force advertisers to identify the location of people who view or click on digital ads. That is a move in the wrong direction, and might even violate the laws of some states or countries where the digital advertising companies are headquartered.

Because the digital advertising services tax, as proposed, is a tax on gross receipts rather than income, it has the potential to badly hurt profit margins. Consider Yelp, for example, the well-known company whose mission is to connect consumers with local businesses. As reported in Yelp’s 2019 annual report, the company has global revenues of $1 billion, virtually all fromdigital advertising, and an after-tax profit marginof 4 percent. Since Maryland accounts for 2 percent of U.S. GDP, that suggests Yelp’s Maryland revenues are $20 million, well over the threshold for applying the 10 percent tax rate in the proposed legislation.

The implication is that the proposed digital advertising services tax could turn Yelp’s Maryland business into a money-losing proposition. That’s insane. Yelp’s only options would be to either withdraw from the Maryland market or significantly raise its advertising prices (which would be difficult to do in a competitive market).

Whether digital advertising companies raise their rates or withdraw from Maryland, it would be bad news for local businesses trying to recover from the pandemic recession, and bad news for consumers who would just be crawling out of their pandemic-induced depression. Using digital advertising, owners are able to reach customers, showcase products, even confirm they are still open. Raising the price of digital advertising and reducing its availability could help slow those recovery efforts.

Or consider the impact of the proposed tax on “help wanted” postings. Since these ads have to identify a location of the job, it will be easy to connect the receipts to Maryland. Clearly what will happen is that Craigslist and other job sites will likely put a surcharge on Maryland- based help-wanted ads to account for the digital advertising services tax. The implication is that advertising for a job in Maryland will be more expensive than it was prior to the tax. That may even put Maryland employers at a disadvantage in attracting talented workers.

At the margin, Maryland employers will reduce their purchases of digital help-wanted advertising. In that way, the introduction of a digital advertising services tax will slow down the rate of hiring in the state.

The other likely effect is that employers will rely more on personal networks such as friends and family to fill positions, rather than advertising on the open internet. This is bad news for groups that are less well-connected, such as low-income workers, minorities and immigrants.

THE NEED TO RAISE REVENUE

Some people argue that taxing advertising to pay for education is a good trade-off for society. After all, the benefits of education are undeniable, while advertising is annoying to many people.

But advertising does have the virtue of allowing consumers to uncover cheaper and better goods and services, and aiding jobseekers in finding better employment opportunities. Recent economic research has actually looked at the plusses and minuses of taxing or fining advertising and transferring the proceeds to low-income workers.7 Calibrating the model using real world numbers, they found that the “advertising equilibrium modeled is surprisingly close to being efficient.” The implication, at least from the initial research, is that taxing digital advertising doesn’t gain much.

What are the alternative sources of revenue for education in Maryland? There is now the possibility of additional state support packages from the federal government in 2021. And in terms of taxes, without delving deeply into details, economists believe that the best taxes are broad and non-distortionary. That would argue in favor of increasing the top tier of the Maryland income tax, now set at 5.75 percent for taxable income over $250,000, especially since many high-income individuals have done well during the pandemic recession. Such an increase would raise revenues without imposing large deadweight losses on the state economy.

On the corporate income side, one possibility is for Maryland to shift to a system of “combined filing” for state corporate income tax. That would treat a parent company and its subsidiaries as one entity for state income tax purposes, according to the Center for Budget and Policy Priorities, “thereby helping prevent income shifting” and potentially raising money.8

By comparison, a tax on digital advertising would dampen the ability of Maryland businesses to reach out to customers precisely at the time when it is needed—coming out of the pandemic recession. Small Maryland businesses trying to regain their customers need as much access to digital advertising as possible. Putting a tax on digital advertising is like taxing the future—and that’s never a good idea.

Why America Should Go To Summer School

Posted on by The Progressive Policy Institute

America’s school children are falling behind. They have been trailing their European and Asian counterparts in grade school for some time, but our nation’s management of Covid-19 has widened the gap further. One study from McKinsey and Company estimates that by June students will have lost on average 5 to 9 months of learning by June.

The situation in high poverty areas is even worse. According to a Rand Corporation study, 33 percent of teachers in the highest-poverty schools said that their students were significantly less prepared than last school year.

And while the rollout of Covid-19 vaccines offer some hope that we will eventually return to normalcy, their impact will likely not be enough to save the current school year.

But we can act to help our schoolchildren catch up—and give parents some needed relief—by offering free summer school for children grades K through 8.

Read the full piece here.

The IRS and the Second Stimulus Payments

Posted on by The Progressive Policy Institute

It’s hard to take your eyes away from the ongoing political drama in Washington, as the presidential transition turns violent and even fatal. Yet at the same time, it’s important to note additional evidence that basic government competency functions have been ignored under the Trump Administration.

As the Washington Post reported earlier this week, the IRS has sent out about 68% of the second stimulus payments. But many Americans will have to file a 2020 tax return to get their money, much to their disappointment.

This problem should not have been a surprise to the IRS. As the  even-keeled “Accounting Today” noted: “The Internal Revenue Service is once again depositing the latest round of Economic Impact Payments in the wrong bank accounts in a replay of problems experienced last year by many taxpayers.”   According to the Post article, the National Consumer Law Center “blamed the IRS for not being ready after it had months to prepare for this second round of aid payments and said as many as 20 million people could be impacted.”

In a narrow sense, the IRS fumbled the ball on an issue that was clearly going to reoccur, perhaps because of all the other demands on the agency. Tax preparation companies sometimes set up temporary bank accounts for taxpayers to receive their refunds. Instead of mistakenly using those temporary accounts, and running the risk of the deposit being rejected, the IRS could have mailed the checks to the current address on the return.

That’s one of those problems which can be a surprise the first time, but should be easily fixable the second time around. Unfortunately, the IRS made it worse.  WHen this problem occurred for the first stimulus check, the IRS tried to issue new payments or allow updated information on the bank accounts. This time the needs of the upcoming tax season means that the IRS doesn’t have the human or computing resources to make fixes. As a result, it’s telling Americans to file their tax return to get their money.

In a broader sense, this points out long-standing issues with government IT spending and execution. In a September 2020 report, PPI showed that the government has fallen short on IT spending by hundreds of billions of dollars relative to the private sector.  An October 2020 PPI report focused directly on the IRS, and the dangers of pushing the IRS beyond its core mission of handling tax returns rather than giving out money for social policy purposes,  which the agency was never set up up to handle.

There’s no free lunch here. If we want the IRS to handle a wider scope of activities, it needs more resources and more attention to consumer service. In the short run, we should focus on making sure the agency does its core mission right.

 

 

 

 

Who Let Trump Happen?

Posted on by The Progressive Policy Institute

President Trump’s misbegotten presidency crashed and burned yesterday with a treacherous assault on American democracy. It failed, as most of Trump’s half-baked schemes do. But now the country needs a reckoning with a Republican Party that let it happen.

Senator and soon-to-be Majority Leader Chuck Schumer (D-N.Y.) got it right last night: For Americans, January 6, 2021 is another day that will live in infamy. Our country was attacked not by a foreign power, but from within. The assailant was a lame-duck president the American people wisely fired last November.

I watched Trump harangue the mob he had summoned to Washington for his last-ditch effort to bully Congress into nullifying the 2020 election results. It was a performance worthy of a dictator: A farrago of big lies about his imagined “landslide” victory, paranoid attacks on his usual stock villains – the media, even Hillary Clinton – and threats to destroy the careers of “weak Republicans” who balked at his blatantly unconstitutional demand that Congress overrule the voters and award him a second term.

It was also an undisguised incitement to mob violence, with Trump promising to lead his supporters in a march up Capitol Hill. Actually, he retired to the White House to watch his handiwork on television. Waving Trump and Confederate flags, Trump supporters stormed America’s citadel of democracy, disrupting the certification vote, sending lawmakers into hiding, trashing the Capitol and raining obscenities and abuse on the police.

Trump lit the match, but he had plenty of accomplices. The shambolic MAGA insurrection would not have happened had not leading Republican politicians played along with Trump’s claims of having been cheated of reelection.

Read the rest of the piece here.

Trump vs. Democracy

Posted on by The Progressive Policy Institute

It’s scoundrel time in Washington.

Biden won the popular vote by more than 7 million votes, yet Trump persists in peddling QAnon-is style conspiracy theories about stolen votes, and claims laughably to have won by a landslide. The choice facing U.S. lawmakers today couldn’t be more simple or stark: Fantasy or reality, Trump or democracy?

Incredibly, scores of Republicans appear poised to endorse Trump’s blatant bid to steal what he couldn’t win honestly. The motives animating this squalid band of coup plotters vary.

Some are True Believers — Trump cultists addled by conspiracy theories and conditioned by right-wing propaganda to regard Democrats as mortal enemies rather than worthy political competitors.

Others are spineless hacks who find it expedient to bow to Trump rather than incur his wrath, be hounded by MAGA mobs, and face primary opponents.

Then there is the third and worst category — the opportunists. They know Biden won fair and square, but pander to Trump’s fanatical base by pretending there may be something to his delusional claims. Leading the cynics’ caucus are Sens. Josh Hawley and Ted Cruz, who evidently want to run for president, and Sen. Ron Johnson, who seems intent on following in the footsteps of another Republican Senator from Wisconsin, Joe McCarthy.

Whatever their motives, all who side with Trump’s lies will betray the will of U.S. voters and break their oath to defend the Constitution. It’s a kind of sedition that should disqualify those who commit it from public service.

That’s why it’s important for citizens to watch what happens in Congress today, and take careful note of who stood up for American democracy and who didn’t.

This piece was also published on Medium.