A Better Path Forward on Open Internet

This morning, President Obama spoke out urging the Federal Communication Commission (FCC) to regulate broadband Internet as as a utility.

In a September policy brief, The Best Path Forward on Net Neutrality, PPI Senior Fellow Hal Singer and Brookings Non-Resident Senior Fellow Robert Litan explained how Title II enforcement in the late 1990s chilled cable/telcom investment. They argue that by relying on its Section 706 authority the FCC can promote greater investment across both edge and content providers compared to Title II. It will also allow the FCC to avoid any unintended consequences, such as creeping regulation, that encompasses content providers or other ISP services.

Download “2014.09-Litan-Singer_The-Best-Path-Forward-on-Net-Neutrality

PPI Statement on President Obama’s Endorsement of Title II Regulation

PPI President Will Marshall released the following statement today after President Obama’s announcement urging the Federal Communication Commission (FCC) to regulate broadband Internet as a public utility under its Title II authority:

“’I hear you,’ President Obama assured voters in his post-midterm press conference last week. But his endorsement today of subjecting the Internet to heavy-handed regulation suggests otherwise.

“In fact, the president’s statement is exactly the wrong reaction to the election. It endorses a backward-looking policy that would apply the brakes to the most dynamic sector of America’s economy.

“The shellacking the president and his party suffered last week was largely about the economy. In exit polls, 70 percent of voters said they were mostly concerned about the economy, and an overwhelming majority of them described economic conditions as ‘not so good’ or poor.

“If the election yields any lesson, it is that Democrats need to offer the public a more convincing plan for accelerating economic growth and restoring shared prosperity. Such a plan should begin by building on America’s comparative advantages in digital innovation and entrepreneurship.

“Imposing public utility-style regulation on the Internet points in the opposite direction. It would very likely reduce private investment in broadband, which as PPI has documented in a series of policy reports, is a prime catalyst for job and business creation in the United States.

“It is also inconsistent with the Democratic Party’s legacy. After all, the Internet took off in the 1990s, thanks in significant degree to the ‘light touch’ approach to regulation adopted by the Clinton-Gore Administration.

“We hope President Obama will reflect on that legacy of pro-growth progressivism and reconsider his endorsement of Title II regulation of the Internet.”

How Democrats Can Recover

Electoral defeats are painful, but clarifying. As Democrats survey the damage left by a larger-than-expected Republican wave, it’s possible to discern four signposts on the road to a progressive recovery.

First, the party needs to start working on a post-Obama agenda.

Anti-Obama sentiment engulfed Democratic candidates everywhere, dragging red-state senators underwater and nearly drowning seemingly safe incumbents in purple or blue states, like Sens. Mark Warner of Virginia and Jeanne Shaheen of New Hampshire. The main “issue” in all these campaigns was the Democratic candidates’ supposed fidelity to Barack Obama. Only in this sense did Republicans succeed in nationalizing the midterm, but it was enough.

In his press conference Wednesday, a rather clueless President Obama took no responsibility for the wipeout and conveyed no urgency about making course corrections. This suggests that while Obama will be the main bulwark against GOP hubris and extremism over the next two years, Democrats will have to look elsewhere for the new ideas and arguments they need to regain the political initiative and rebuild support for progressive goals.

Second, those ideas won’t come from the party’s current congressional leadership, either.

Speaker Nancy Pelosi and Majority Leader Harry Reid are able legislative tacticians, tough partisan warriors, and world-class fundraisers. The charge now being leveled against them by some on the left—that they haven’t been aggressive enough in confronting Republicans—is ludicrous.

But agile tactics and fighting spirit aren’t enough, especially if voters think they are mainly in the service of expanding benefits for favored party constituencies. What Democrats need is a larger vision for restoring shared prosperity that can unite the interests of core partisans with those of moderate and independent voters. The current leadership has discouraged creative thinking by party pragmatists about ways to speed up economic growth, improve the regulatory environment for innovation, or make government work better. Instead, they’ve enforced conformity to focus-grouped “messages” tailored narrowly to different slices of the electorate.

Yes, I know that raising the minimum wage is popular. But it didn’t lift Democrats last Tuesday, and neither did alarmist rhetoric about a “war on women.” Next time around, Democrats will need to offer voters something more inspiring than a tired pastiche of messages aimed at bribing or scaring voters. It’s time to replace the current team with a younger crop of rising leaders open to bigger, bolder ideas for tackling America’s big problems.

Continue reading at The Daily Beast.

 

 

Wall Street Journal: Sullen Voters Set to Deliver Another Demand for Change

PPI President Will Marshall was quoted in a Wall Street Journal article on public dissatisfaction facing both parties, examining how the trend of “change elections” reflects growing discontent among American voters.

Will Marshall, president of the Progressive Policy Institute, a centrist Democratic research group, predicts that public frustration with politics will only intensify after the midterms, and will be a central issue for both parties in 2016.

“There will be tremendous pressure on the presidential candidates,” said Mr. Marshall, “to say how they are going to get out of this impasse and break the stalemate.”

Read the rest of the article at Wall Street Journal.

The Hill: Midterms confirm political stalemate

Although Republicans won a more sweeping victory than expected in yesterday’s midterm elections, the results tell us surprisingly little about what Americans expect of their political leaders.

Instead, the outcome confirms a new pattern of alternating partisan victories every two years, as Republicans dominate midterm elections and Democrats marshal superior electoral strength in presidential elections. The pressing political question today is how to break that pattern, which otherwise augurs deepening polarization and paralysis in Washington.

Exultant Republicans, of course, are hailing their sweep as a repudiation of President Obama. That’s true, up to a point. Midterm elections always are partly a barometer of public attitudes toward the sitting president, and there was no mistaking yesterday’s thumbs down verdict.

But if voters are dissatisfied with Obama’s performance, there’s little evidence they have fallen for Republicans or want the country to take a sharp right turn. On the contrary, exit polls found that voters disapprove of the Republican Party even more than Obama. Strikingly, 61 percent said they are dissatisfied or even angry with Republican leaders in Congress, even as they propelled GOP victories across the board.

Continue reading at The Hill.

How the Hidden Jobs Numbers Influenced the Election

Why were Democrats trounced so soundly? Many of the losers—including Mark Udall of Colorado, Mark Pryor of Arkansas, Michelle Nunn of Georgia, and Kay Hagan of North Carolina—were done in by state economies that are fundamentally a lot worse than the headline statistics show.

Consider Udall’s fate in Colorado, where the unemployment rate was only 4.7% in September, down from 8.5% only three years earlier, and not much above the 4% in 2007. Looks pretty healthy, right? The only problem is that Colorado’s labor force participation rate has plummeted by more than 5 percentage points since 2007, one of the biggest drops among the states. That means there are 220,000 Colorado residents who could be out looking for jobs, but aren’t, probably because they don’t like what they could get. Udall’s margin of defeat, as of this afternoon: roughly about 75,000 votes.

The same problem shows up in state after state. Mark Pryor faced an electorate where the labor force participation rate had dropped by almost 6 percentage points from 2007 to 2014, the largest decline of any state. That’s 135,000 Arkansas residents out of the workforce, who would have been there in 2007. Pryor’s margin of defeat is 143,000.

You get the picture. Here’s a list of the top worst states, ordered by decline in labor force participation rate since 2007.

  1. Arkansas -5.9
  2. New Mexico -5.6
  3. Georgia -5.6
  4. Alabama -5.5
  5. Tennessee -5.5
  6. Colorado -5.3
  7. Nevada -5
  8. Mississippi -4.9
  9. Washington -4.8
  10. North Carolina -4.7

The Hill: Why Red-State Democrats Matter

Washington’s political handicappers have spoken: Tonight will be a massacre—a Night of the Long Knives for red-state Democrats.

Let’s hope they are wrong, and not just for partisan reasons. It’s always a small but delectable victory for democracy when the voters humble the political seers and entrail-readers. We’re reminded that running for office is more art than science, and that the people really are in charge after all.

What’s more, a Republican Senate takeover would almost certainly harden the political stalemate that has brought the U.S. government to a screeching halt. It would purge states that voted for Mitt Romney in 2012 of high-profile Democrats, more perfectly aligning ideological and party allegiances across the widening chasm between red and blue America.

The problem is, while such ideological and partisan “cleansing” might be making our politics more homogenous from a philosophical and regional point of view, it is also making our country ungovernable.

Democrats would be doubly damaged by the lopping off of a major part of their pragmatic wing. They’d lose not only control of the Senate, but also political figures who know how to appeal to moderate and independent voters and thus help keep the party centered. Without such talented pragmatists as Mary Landrieu (La.), Kay Hagan (N.C.), Mark Begich (Alaska), Jeanne Shaheen (N.H.), and Mark Pryor (Ark.), and Mark Udall (Colo.), Democrats would be a more orthodox—and less interesting—party.

And, most galling of all, a GOP sweep tonight would reward conservative Obama-haters and put firebrands like Sens. Ted Cruz in the driver’s seat.

It’s a progressive nightmare, and Democrats are searching for explanations. The media is serving up a simple story-line: It’s all Obama’s fault.

That’s not entirely wrong. With his job approval scraping rock bottom (40 percent), the president has become something of a millstone around the necks of red- and purple-state Democrats. That’s why we’ve seen more of Bill and Hillary Clinton than Barack Obama on the hustings in the battleground states. Six years into his presidency, and despite a rebounding economy, 70 percent of the public believe the country is on the wrong track. Some key voter groups that swooned over Obama in 2008 have soured on his cool and disengaged approach to leadership.

So the president will have to take his lumps, but let’s not go overboard. Congressional Democrats are even less popular, and Republicans even less so. This suggests that deeper structural forces are also at work.

Continue reading at the Hill.

 

The FCC Chairman Steps Into The Abyss

Last Friday, Gautham Nagesh reported that the FCC  was inching closer to adopting a proposal put forward by Mozilla as its solution to the net neutrality problem. Under this “hybrid” approach, the FCC would reclassify the portion of a broadband provider’s network that interfaces with edge providers as a Title II service, while regulating the remaining portion that interfaces with end users as an information service.

The key line from Mr. Nagesh’s article reads as follows: “While the FCC still believes there should be room for such [priority] deals, its latest plan would shift the burden to the broadband providers to prove that the arrangements would be beneficial to consumers and equally available to any company that would like to participate.”

This leak portends good and bad news. First the good news: The FCC is coming to recognize that some paid priority deals could be beneficial for all parties, including end users. This recognition puts the lie to the “zero-sum hypothesis” peddled by net neutrality proponents—namely, that any priority arrangement must come at the expense of non-prioritized traffic. Hooey, say the network engineers; paid priority has existed in other portions of the network, and can be readily engineered to keep others whole.

And now the bad news: In a bow to political pressure, the FCC seems intent on establishing a presumption that any priority deal violates its rules unless the broadband provider can prove otherwise. Mr. Nagesh’s phrase “shift the burden” was a misnomer, as the FCC’s 2010 Open Internet order established the same presumption by declaring that any paid priority deals “would raise significant cause for concern” and were “unlikely [to] satisfy the no-reasonable-discrimination standard.”

Moreover, the D.C. Circuit ruled that such a presumption effectively barred such deals and was tantamount to common carriage: “If the Commission will likely bar broadband providers from charging edge providers for using their service, thus forcing them to sell this service to all who ask at a price of $0, we see no room at all for ‘individualized bargaining.’” We’ve tried this presumption before and it failed.

Critically, the D.C. Circuit laid out a legal path for the FCC to regulate pay-for-priority deals without resort to common carriage. So long as broadband providers were free to bargain individually with edge providers, the court explained, these arrangements could be regulated under the FCC’s 706 authority.

And how to establish such freedom? By flipping the presumption around, so that priority deals are reasonable until a complaining edge provider can prove otherwise. One can envision two types of complaints arising under this case-by-case framework: (1) an edge provider was denied a priority offering that was extended to its rival, or (2) an edge provider who declined priority from a broadband provider suffered a degradation in its quality of service. After demonstrating discrimination or degraded service, the burden should shift back to the broadband provider, thereby sparing the edge provider of significant legal expense.

Quarantined from political forces, smart lawyers at the FCC set about drafting rules that would thread this needle—again, without resort to Title II reclassification. The agency released a Notice of Proposed Rulemaking (“NPRM”) a few months after the D.C. Circuit’s ruling, which explained that pay-for-priority deals would be subjected to a “commercial reasonable” standard, and “prohibited under that rule if they harm Internet openness.” In other words, such deals were presumed to be commercially reasonable unless an edge provider could prove otherwise. The NPRM also proposed to adopt a rebuttable presumption that a broadband provider’s exclusive pay-for-priority deal would be commercially unreasonable. From an economic perspective, those two strokes were utterly brilliant, as they efficiently placed the burden on the appropriate party.

Not so, said John Oliver and 3.7 million angry letters ostensibly submitted to the FCC. (Given the esoteric language of those letters, which invoked Title II authority, I suspect that a great many were form letters generated by public-interest groups clamoring for Title II-based solutions.) Ever since that political groundswell, the Chairman has backpedaled from the elegant, light-touch solution of the NPRM.

Indeed, key players at the FCC are trying their best to create the impression that every path to the finish line must be routed through Title II. Consider this October 27 FCC blog posting by three high-ranking FCC officials, explaining the remaining policy options on the table:

Panelists at the opening roundtable, which focused on tailoring policy to harms, debated paid prioritization—a topic central to many comments in our record.  Some parties have urged a flat ban on these practices. Others believe a presumption that paid prioritization violates the law would protect Internet openness. This is a central issue: how best can the Commission prevent harm to the virtuous circle of innovation, consumer demand, and broadband deployment, which unites the interests of consumers, edge providers, and other stakeholders?

Say what? How about that option that the FCC outlined in the NPRM, urged on by the D.C. Circuit, in which pay-for-priority deals were presumptively reasonable unless a complainant could prove that they “harm Internet openness.” By removing that critical option from the conversation, Title II seems all but inevitable.

Notwithstanding this sleight of hand, the Chairman still has two solutions on the table: A political-free solution embodied in the NPRM that draws from the FCC’s 706 authority and hugs closely to the D.C. Circuit’s decision, and a highly politicized solution drafted by a conflicted party—seeking to coordinate a price-fixing conspiracy for an input (priority) via regulation—that would reclassify a portion of a broadband providers’ network as a Title II service.

If the Chairman can’t figure out which solution is better for the dual task of protecting consumers and promoting broadband investment, then perhaps the two Republican commissioners should toss him a line by touting the virtues of the forgotten NPRM. Without it, he will fall deep into the abyss.

This piece is cross-posted from Forbes.

RealClearEducation: Cut College Costs: Make 3-Year Degrees the Norm

In an op-ed for RealClearEducation, PPI Senior Fellow Paul Weinstein argues that three-year college degree programs can slash the cost of gaining an undergraduate degree by 25 percent, unlike most higher-education reform ideas that simply expand financial aid and allow colleges to continue to raise prices at will.

“As I recently wrote in a report for the Progressive Policy Institute, the Three-Year Degree policy would require any college or university that has students who receive federal aid to make earning a bachelor’s degree in three years the norm. If combined with a proposal to simplify and streamline the alphabet soup of federal grant programs and tax incentives into a single grant (Simplified Higher Education Grant) worth $3,820, these two reforms could cut the financial burden for graduates by over $20,000 at public institutions (in-state) and by as much as $41,000 at private schools, with no new federal spending.”

Read the entire op-ed on RealClearEducation.

Press Release: PPI Releases Policy Memo Revealing FDA Regulations Struggling to Keep Up With the Digital Age

WASHINGTON—The amount of regulation on the pharmaceutical industry has increased 40 percent since 2000, according to a policy memo released today by the Progressive Policy Institute (PPI). Moreover, some new draft regulations proposed by the Food and Drug Administration (FDA) this year fail to embrace data-driven innovation.

In FDA Regulation in the Data-Driven Economy, PPI Economist Diana Carew details new regulations proposed by the FDA designed for a slower, information-poor age. The memo concludes with policy recommendations for how the FDA can improve outcomes while still protecting consumers in a data-driven economy.

“In a data-driven economy, regulators should encourage greater information sharing, instead of pre-emptively regulating information in a way that controls and ultimately restricts it,” Carew writes. “Regulators should take the role of watchful guardians over data and information flows, taking action when there is evidence of harm or injury.”

“We hope that regulators within the FDA and across other regulatory agencies will be able to use this example as a guide for approaching future regulatory questions surrounding data. Embracing the data-driven economy is the best way to promote future prosperity and well-being for all Americans.”

The memo focuses on one draft FDA guidance in particular, issued in February 2014, entitled “Guidance 
for Industry: Distributing Scientific and
 Medical Publications on Unapproved New Uses— Recommended Practices,” which lays out a lengthy list of rules and restrictions for how drug and medical device manufacturers are allowed to communicate with healthcare professionals and “healthcare entities,” such as hospitals, on unapproved new uses. It discusses the draft guidance and explains why it is not adequate for the digital age. Finally, recommendations for the draft guidance are provided, and the memo concludes with an expansion of the discussion to how this case study can serve as an example for regulators struggling with rulemaking in this time of unprecedented economic transformation.

PPI has undertaken extensive research on regulation in the 21st century, aimed at guiding regulators and policymakers through this transition. Our work strives to strike the right balance between protecting consumers and encouraging innovation in an interconnected world.

Download FDA Regulation in the Data-Driven Economy

FDA Regulation in the Data-Driven Economy

The shift to data-driven growth is one of the most important forces behind the strong performance of the U.S. economy in recent years. Online sales are up by 16% over the past year, and Americans are getting more and more of their information online. Indeed, data-related products and services account for roughly 30% of real personal consumption growth since 2007, second only to the 40% coming from the growth of healthcare-related goods and services.

Yet regulators are struggling to keep up with the digital age. The accumulation of regulations designed for a slower, information-poor age fail to take advantage of new opportunities to improve outcomes while still protecting consumers. The issue of how to regulate in the data-driven economy has been widely discussed, including in several policy papers by the Progressive Policy Institute. For example, our proposal for a Regulatory Improvement Commission, designed to relieve the build-up of outdated and duplicative regulations over time, has been written into legislation and introduced in both the House and Senate.

The Food and Drug Administration (FDA), in particular, is facing a variety of regulatory issues which involve the intersection between the data-driven economy and the more traditional world of health-related regulations. For example, the FDA took a carefully balanced approach in its rule making on mobile medical applications, choosing to exercise enforcement discretion, instead of regulating apps that do not track medical information, such as counting calories.

Download “2014.10-Carew_FDA-Regulation-in-the-Data-Driven-Economy

Is the CFPB Committing Regulatory Overreach?

The Consumer Financial Protection Bureau (CFPB) is touted as one of the crowning achievements of the Dodd-Frank Act. But a new CFPB report on student loans is highly flawed, raising doubts about its regulatory reach over the private student-loan market.

The CFPB was created to bring all consumer financial products under one regulatory umbrella. It oversees everything in the financial sector that affects consumers — from credit cards, to mortgages, to auto and student loans. In its short history, the agency has responded so quickly and forcefully to allegations of consumer harm that few have questioned its expanding authority or overlapping jurisdiction with other federal regulators.

Last week, the CFPB issued its third annual report on student loan complaints. The agency first created a platform for student loan complaints in 2012, and embarked on a massive solicitation for general comment on private student loans in 2013. Shortly after, CFPB brought private non-bank loan servicers under its oversight authority.

At first glance, the report paints a picture of student borrowers victimized by unscrupulous private lenders and loan servicers. Complaints regarding loans and loan servicers are up 38 percent year over year, with many complaints indicating private lenders and servicers “provided no options [to modify repayment plans], leading the borrower to default.” Complaints against student loan giant Navient (formerly Sallie Mae) were up a staggering 48 percent, with the entire rise dubiously occurring in the month of December. An unwary reader could easily conclude that the private student-loan market is the heart of the student debt crisis, squeezing hardworking young college graduates of every dollar.

But a closer look reveals the report is fundamentally flawed. Although such a database is valuable for identifying concerns and promoting accountability, it should never be used as stand-alone justification for new regulation or policy. Yet that is exactly what this report does — it is basing policy recommendations simply on a compilation of unsubstantiated complaints.

Worse, the report is misleading in two big ways. First, the report makes the private student-loan market seem entirely to blame for the growing student debt crisis. And second, it offers no analytical evidence that private student lenders are unwilling to work with struggling borrowers.

Continue reading at The Hill.

Real Clear Policy: Restarting Nuclear Power

Director of PPI’s Energy Innovation Project, Derrick Freeman, penned an op-ed on today’s RealClearPolicy regarding the restarting of Japan’s nuclear reactors following the shutdown after an earthquake and tsunami led to meltdowns at the Fukushima Daiichi plant in March 2011 — with lessons for policymakers here in the U.S.

Nonetheless, there are compelling reasons for Japan to flick the “on” switch for nuclear energy. Since the mothballing of its reactors, the Japanese economy has been in decline, and the country’s utility sector has experienced tremendous losses each year. Nuclear power, once 30 percent of Japan’s electricity generation, has had to be replaced with other fuels, primarily fossil. Resource-poor Japan has been obliged to depend more on imported natural gas, coal, and oil to meet its electricity needs. This reliance comes at a very heavy price for both Japan and its citizens.

Read the op-ed in its entirety at RealClearPolicy.

PPI Weekly Update: Seizing the Political Center, U.S. LNG Exports, & Policy Choices Facing the FCC

PPI President Will Marshall penned an essay for last Friday’s cover of POLITICO Magazine, “How to Save the Democratic Party From Itself.” In his “moderate manifesto,” Marshall encourages Democrats to avoid following Republicans down the path of polarization and extremism, which will only deepen the political impasse, narrow their appeal to the moderate electorate, and risk future American economic decline. Instead, he argues, the Democratic Party should seize the political center and champion pro-growth policies that promote economic opportunity and reduce barriers to innovation.

“Democrats have been moving steadily to the left, about as fast but not nearly as far as Republicans have shifted rightwards,” Marshall writes. “If Democrats follow the GOP into the fever swamps of ideological purity, the nation’s political crisis will only grow deeper… Only by leading from the pragmatic center can Democrats capitalize on GOP extremism and rally broad public support behind new ideas for breaking the partisan log jam in Washington.”

Yesterday, Marshall wrote a blog post in reaction to the results of Wednesday’s ABC-Washington Post poll, which painted a grim outlook for the Democratic Party. The poll found the president’s job approval rating hovering at 40%, the lowest of his tenure, and the Democratic Party’s popularity at its weakest in 30 years, with more than half of Americans seeing the party unfavorably for the first time. “The poll’s big takeaway is the public’s profound antipathy toward the hyper-partisan and dogmatic approach to politics that has come to characterize what I’ve called the Polarized States of America,” Marshall writes. “The politics of polarization has been good for ideologues, uber-rich activists and narrowly focused pressure groups, but it’s been a colossal bust with the American people.”

This week, PPI released a new policy report, “Exporting U.S. Natural Gas: The Benefits Outweigh the Risks,” authored by Derrick Freeman, Director of PPI’s Energy Innovation Project. The report examines the LNG export debate and concludes with policy recommendations that strike a pragmatic balance between the needs of our economy and legitimate environmental concerns.

PPI Senior Fellow Hal Singer & Economist Diana Carew joined a Minority Media and Telecommunications Council (MMTC) net neutrality panel on Tuesday entitled, “Title II versus Section 706: Identifying the Regulatory Framework that Furthers the Goals of Broadband Adoption, Competition, and Deployment.” The panel discussed whether a more regulated Internet would foster the type of digital inclusion and engagement of broad communities, especially those that are underserved communities and small businesses. Attendees heard proposals for which regulatory framework is more likely to ensure universal broadband adoption and deployment, while fostering competition and innovation in a broadband-driven economy.

Research performed by PPI Chief Economic Strategist Michael Mandel to measure the ever-growing “App Economy,” both in the United States and abroad, has been highlighted in multiple different sources recently, including The Houston Chronicle, The HILL, The Courier-Mail, and ARN.

On Tuesday, October 28th, PPI will host an event, “Seizing the Mobile Moment: Policy Choices Facing the FCC and Why Consumers Should Pay Attention,” at the National Press Club. Please join us for a keynote and panel discussion on the challenges facing the FCC in the wireless ecosystem. Roger Sherman, Chief of the FCC’s Wireless Telecommunications Bureau will keynote the event. A roundtable discussion moderated by PPI Senior Fellow Hal Singer will immediately follow, featuring Michael Mandel of PPI, Peter Rysavy of Rysavy Research and the Wireless Technology Association, Roger Entner of ReconAnalytics, and Mary Brown of Cisco. The discussion will explore a variety of policy options that could affect America’s mobile experience for decades to come.