Category: Uncategorized

Homeownership for millennials to rise faster in N.C. than other states

Posted on by The Progressive Policy Institute

Writing for Triangle Business Journal, Sarah Chaney quotes PPI Economist Diana Carew on North Carolina’s higher rate of homeownership among Millennials.  As the article describes, North Carolina has created an attractive economic climate, drawing in more first-time home owners than other states. According to Carew, this is a trend that will continue in North Carolina and the state should expect homeownership rates for Millennials to continue to rise.

Broadly speaking, some states are doing a better job than others at attracting young workers – and North Carolina happens to be one of them, says Diana Carew, an economist at the Progressive Policy Institute.

“That’s because they’ve got great apprenticeship programs, the Research Triangle, good regulatory policies,” she says.

Read the full article on Triangle Buisness Journal’s website.

Has McDaniel Outplayed Cochran in Mississippi?

Posted on by The Progressive Policy Institute

Election season is in full swing as states across the country hold primary runoffs today. The nation will be keeping an especially close eye on the heated GOP Senate runoff in Mississippi between incumbent Thad Cochran and challenger Chris McDaniel. Cochran, who has represented the Magnolia State for 36 years, faces an uphill battle. In typical incumbent fashion, Cochran appeared to be running a rather relaxed campaign until two weeks ago when he failed to secure 50 percent of the Republican primary vote. Ever since, he has been playing a desperate game of catch-up. Is it too late?

Cochran’s late arrival to the campaign gave McDaniel the valuable opportunity to successfully establish himself as a competitive opponent, mobilizing voters and growing his base before Cochran even hit the trail. Realizing this, and with only two weeks to appeal to voter groups outside of his base, Cochran has desperately attempted to court black voters from both parties in this open runoff and portray himself as the more moderate and proven candidate. His unconvincing voting record in the Senate, however, is unlikely to bring out many more black voters than those of whom already supported him in the primary. From voting no on raising the minimum wage to opposing the Affordable Care Act, Cochran has not exactly been the ideal candidate for representing black interests in Mississippi. Additionally, Cochran’s effort to court black voters could backfire by giving McDaniel supporters another reason to come out and vote, as race is still an incredibly divisive factor in Mississippi elections.

Compounding the problem for Cochran is thehistorically low voter turnout for runoff elections that most often favors the challenging candidate. In 37 out of 40 elections since 1980 there has been a decrease in voter turnout in Senate runoffs in comparison to the primaries. Because many people lose interest after the primary until the general election, it isdifficult for incumbents to turn the tide and increase their turnout of voters in the runoff. This could potentially minimize any gains Cochran may have made with black voters these past two weeks. Therefore, even if Cochran manages to appeal to black voters in time, there is no guarantee that they will show up in force to change the course of the race.

Also working against Cochran is the strong constituency of Tea Party supporting PACs and celebrities whom have thrown their weight behind McDaniel. Although Cochran still maintains the support from the Republican “establishment” both within Washington and with business minded voters on the ground, their enthusiasm for him has not matched that of McDaniel’s supporters. The recent debate over the Export-Import Bank’s charter reauthorization could have been Cochran’s saving grace in this respect. Mississippi has a thriving manufacturing industry that exports internationally with help in the form of Ex-Im bank subsidies, and PACs supporting McDaniel have openly opposed renewing the bank’s charter. Unfortunately for Cochran, this issue only garnered national attention days before the runoff, nullifying the potential benefits of pro-business groups’ donations and organizing efforts.

Lastly, a McDaniel victory today would have obvious national implications for the Republican Party. The upset in Virginia just two weeks ago when Tea Party challenger Dave Brat unexpectedly defeated prominent House majority leader Eric Cantor shook the GOP establishment and sent a glaring message to Washington: The public’s disapproval of Congress should serve as a warning to Republican incumbents across the country, and you should not dismiss these two races as outliers.

With the popular discontent facing Congress today, Republican incumbents should heed the mistakes made by both Cantor and Cochran and not take their reelection campaigns lightly. Their failure to do so will ensure the same undesirable fate their colleagues have met and give Democrats an even wider playing field with which to attract moderate voters in coming elections.

Bloomberg: Millennials Seen Surging as Homeowners in U.S.: Mortgages

Posted on by The Progressive Policy Institute
In Bloomberg, “Millenials Seen Surging as Homeowners in U.S.: Mortgages,” Alexis Leondis and Shobana Chandra’s look at the difficulties facing young Americans aspiring to be homeowners in today’s economy. Economist Diana Carew at PPI is quoted on the future prospects of millennial homeownership throughout the United States.
Cities in Texas and North Carolina, where the cost of living is cheaper and jobs are more plentiful, may see homeownership rates for millennials rise faster, said Diana Carew, an economist at the Progressive Policy Institute.”

Read the full article on Bloomberg.

The FSOC Experiment

Posted on by The Progressive Policy Institute

Treasury Secretary Jack Lew is testifying before Congress on Tuesday and Wednesday on the Financial Stability Oversight Council (FSOC). The FSOC is charged with identifying “systemically important financial institutions” (SIFIs) that could under certain circumstances pose potential threats to the financial system, and taking appropriate action to reduce that threat. Clearly, in the aftermath of the financial crisis something like the FSOC was necessary and appropriate.

Yet the FSOC should be viewed as a regulatory experiment. No one knows how it will work in practice, or whether it even will. Moreover, an essential principle of pro-growth progressivism is that regulation, while essential, needs to be targeted appropriately in order to reduce unanticipated costs to consumers and businesses.

For example, the Sarbanes-Oxley Act of 2002 was conceived as a way of preventing corporate and accounting abuses at large companies such as Enron. But Sarbanes-Oxley turned out to impose relatively large costs on small start-up companies that were ready to go public by forcing them to set up overly complicated accounting systems, while doing nothing to prevent the financial crisis that started unrolling in 2007.

Today, the issue is how broadly the FSOC should construe its mandate. With excess debt at the heart of the financial crisis, the FSOC clearly needs to target the large highly-leveraged global banks.

But should large asset managers such as Vanguard or Fidelity be subject to the same intensified regulatory regime? There is one argument in favor of FSOC designating large asset managers as SIFIs, and two arguments against.

The argument in favor of SIFI designation of asset managers: Since regulators don’t know where the next financial crisis is going to come from, better to get all the big financial institutions under tighter control now. This might be called the “precautionary principle” of regulation—asset managers are not potential threats now, but they conceivably might be in the future, so let’s round them up now.

The two arguments against SIFI designation of asset managers: First, asset managers are a very small source of leverage and debt in the economy. To the degree that financial crises have historically been caused by excess debt, the fuel for the next crisis is unlikely to come from asset managers.  Indeed, if we were to tick off potential sources of the next crisis, our list would start with trouble spots such as student debt and state and local pension shortfalls (which represent an excess of liabilities over assets).

Perhaps more important, designating large asset managers as SIFIs may have the perverse effect of reducing both stability and growth.  Regulators will be stretched further, so less regulatory resources will be available to monitor the activities of the large global banks, the undeniable nexus of the most recent financial crisis.  At the same time, because the asset managers will be forced to follow an extra set of rules, their ability to direct capital to the areas of highest return will be impaired, lowering overall growth.

Wise regulation in the 21st century requires focusing on the most important problems. To regulate out of fear is to give up on the growth that we need.

In Its Dealings with ISPs, Netflix is Holding a Powerful Card

Posted on by The Progressive Policy Institute

By producing compelling online content and interfacing directly with its customers, Netflix is holding a powerful card—and I’m not talking about its Emmy-award-winning show. Rather than playing this card, Netflix is asking the Federal Communications Commission (FCC) to intervene in its dealings with Internet service providers (ISPs). Before delving into Netflix’s potential counter-strategy and the need (if any) for regulatory intervention, a bit of background is in order.

FCC Chairman Tom Wheeler announced last week that the agency is launching a new investigation of “interconnection” agreements, which as the name suggests, govern connections between Internet networks. Interconnection has taken center stage since Netflix struck deals with Comcast and Verizon in February; prior to those direct connections with ISPs, Netflix paid “transit” providers such as Cogent and Level 3 to obtain access to the ISPs’ networks. Presently, interconnection arrangements are governed by private contracts.

Interconnection issues are not implicated in the FCC’s pending Open Internet proceeding, which addresses the treatment of traffic within an ISP’s network, as opposed to on its doorstep. Yet some companies are trying to conflate the issues and leverage the religious fervor and grassroots political machines of the net neutrality movement. Adding to the drama is Netflix’s suggestion that it was forced to accept terms for direct connections at gunpoint; according to some accounts, the counter-parties were purposefully degrading the quality of the connection with Netflix until Netflix coughed up some cash.

Is there a constructive role for the regulator? The Progressive Policy Institute (a D.C. think tank with which I am affiliated) held a conference on interconnection last month, and invited Wharton Professor Kevin Werbach to make the case for FCC regulation of interconnection. At the conference and in his writings, Werbach cited some classic interconnection showdowns, including Comcast-Level 3 and Verizon-Cogent, as the basis for intervention: A benevolent referee could resolve these disputes quickly, Werbach argues, and get traffic flowing to Internet customers.

To evaluate the potential benefits of intervention, I looked into these disputes and was surprised by what I found: Based on historical frequencies, the likelihood of a dispute between networks is rare, and the likelihood of a dispute leading to a service outage for consumers is even rarer. By my count, there have been just six major interconnection disputes since 2002 (five of which involved Cogent)—about one every other year—and the average number of days without service across these disputes was close to zero. In other words, even when these disputes occur, traffic generally continues to flow pursuant to a standstill agreement while the dispute is worked out. Unless something has radically tipped the balance of power in the Internet ecosystem, history suggests that the benefits of the FCC’s intervening in these affairs—in terms of forgone service outages—are likely small.

On the other side of the ledger, inserting the FCC into these negotiations could impose significant costs on society. For example, mandatory interconnection at regulated rates could undermine the incentive of ISPs to expand or enhance broadband networks. Some have blamed mandatory roaming for certain wireless operators’ decision not to build out in high-cost areas (but rather rely on roaming). Moreover, the FCC’s assistance could discourage access-seeking networks, including transit providers and some large content providers such as Google, from expanding their networks into last-mile services. According to this cost-benefit analysis, the FCC should stay out of these affairs.

Two other considerations should give the Chairman pause about intervening on interconnection. First, for customers who are hooked on Netflix exclusive content, such as House of Cards or Orange Is the New Black, Netflix is the “must-have” network. I could access the Internet at super-fast speeds through my cable operator or my telephone provider (and soon through my mobile device), but there is no good substitute for what Netflix is producing. So if push came to shove, and my ISP started fooling with my Netflix connection, I would consider switching ISPs to see whether Frank Underwood maintains his presidency or Piper Chapman gets out of jail. Although this choice in super-fast connections is not available to all customers—by the FCC’s latest count, nearly three-quarters of U.S. households are served by two or more wireline ISPs with download speeds of at least 6 Mbps—the choice is available to enough households to make the ISPs think twice about degrading Netflix.

Second, Netflix has a potent counter-strategy that, if deployed, could be significantly more powerful in its dealing with ISPs than regulation: By charging its subscribers different prices based on their ISP, Netflix can gently steer its customers to “low-priced” ISPs—that is, ISPs that charge low or no interconnection fees. For example, Google Fiber, an ISP with a limited national footprint, recently announced that it would abstain from charging Netflix (or any content provider) an interconnection fee.

Like a credit card, Google Fiber is best understood as a “platform provider” that connects end users with content providers. When certain credit cards sought to impose relatively higher fees on merchants, merchants countered by imposing surcharges (or discounts) on the merchandise to steer customers to the lower-priced cards. Some large banks responded by imposing a “no-surcharge rule” on merchants, forcing merchants to charge the same price for goods regardless of which card was used. Following the abolition of no-surcharge rules in Australia (a similar movement is afoot in the United States), the number of merchants surcharging payment card transactions has increased steadily over time, leading to a significant reduction in merchant transaction fees.

Applying that lesson here, Netflix could charge Google’s customers a discount (say $6.99 per month as opposed to its standard $7.99 charge) for Netflix service. Alternatively, Netflix could charge customers of a high-priced ISP a surcharge (say $9.99 per month). By revealing to its subscribers the identity of the low-priced ISP, this counter-strategy could temper the interconnection charge of the high-priced ISP. Unlike cable networks, which rely on the cable operator to interface with the video customer, Netflix and other online providers are customer-facing and thus wield significantly greater bargaining power in their dealings with the platform provider—as long as they are willing to use it.

I asked a Netflix spokesperson at a recent Aspen Institute event whether Netflix has contemplated this counter-strategy. His answer, which begins at about 1:50:32 on the video, was (1) he has at least considered it, but (2) the interconnection fee charged by ISPs to date was “so small” in relation to Netflix’s content costs that a surcharge would not make sense. Admittedly, my question was tough, but this answer does not engender much sympathy for Netflix’s plight.

Before seeking further regulatory intervention, Netflix should avail itself of all potential counter-strategies in its dealings with ISPs. To do anything less is to ask the FCC to carry your water. As Frank Underwood put it, “There is but one rule: Hunt or be hunted.” Netflix is holding a powerful trump card that potentially obviates the need for regulation, but it seems disinclined to use it. Until Netflix has gone on the hunt and failed, the Chairman should shelve interconnection rules and focus his attention on the Open Internet rules now pending before him.

Twitter: @halsinger

This article was originally posted at Forbes.com

Just what is it that makes Hillary such a formidable front-runner?

Posted on by The Progressive Policy Institute

The release of Hillary Rodham Clinton’s new book once again underscores the unending interest in her as a 2016 candidate. But just what is it that makes her such a formidable front-runner? One important answer is that although Hillary is not the first presidential candidate to be perceived as an heir apparent, as a standard-bearer, as a presumptive nominee, or even as a political icon, she is the only person to have simultaneously occupied all four niches. It’s the political equivalent of a four-run grand slam in the first inning — and it’s the major reason she has such unprecedented momentum.

Hillary as heir apparent: In recent decades, it’s been common for presidential administrations to have an heir apparent. Both George H.W. Bush and Al Gore parlayed vice presidential incumbency into party nominations and popular-vote majorities. But neither candidate possessed a distinctive political identity or generated much electricity among the electorate, as evidenced by Gore’s Electoral College shortfall and Bush’s failed reelection bid. Hillary has not only locked down the campaign machinery that won four of the last six presidential elections, but has continued to mesmerize the electorate in a way that neither Gore nor the elder Bush (nor Joe Biden) ever managed to achieve.

Hillary as standard-bearer: Few non-incumbent presidential candidates have entered the field with as strong a personal and ideological constituency as does Hillary. On this front, her candidacy most closely resembles that of Robert F. Kennedy in 1968: recognized leader of a large party faction, close relative of a popular former president, high-profile Cabinet secretary and even U.S. senator from New York. Yet while RFK may have been the legitimate inheritor of the Kennedy “Camelot” years, he was far from an heir apparent and in fact had to fight tooth and nail against the incumbent administration of his own party for the nomination. Hillary provides unquestioned political and policy continuity with prior Democratic administrations alongside a vast base of supporters that she has won over in her own right.

Hillary as presumptive nominee: Not since Ronald Reagan in 1980 has a party had so clear a consensus candidate who wasn’t already an incumbent president or vice president. Echoing the clout gained by Hillary from 2008, Reagan’s strong support among Republicans in 1980 came partly from his fierce challenge to — and then staunch support of — Gerald Ford in the 1976 Republican primaries. The lingering fame of Reagan’s days in Hollywood also endowed him with exceptionally high name-recognition and the aura of celebrity, both of which advantages Hillary enjoys today at least as much as Reagan did in 1980.

Hillary as political icon: Reagan, Franklin Roosevelt and John Kennedy all achieved the status of political icon, but only after they had been served as president. The only other modern presidential contender who was truly iconic before assuming office was Dwight Eisenhower, based on his leadership of Allied Forces in Europe in their victory over the Axis. Hillary may not have won World War II, but over the past 20 years she has richly earned her status as a feminist icon, which makes her uniquely appealing to the female voters who make up a majority of the electorate. While Eisenhower was a war hero and household name in 1952, he was also a political neophyte who previously had no clear party affiliation and had never run for public office. By contrast, Hillary combines her standing as a feminist icon with the manifold advantages of being the heir apparent of the last two Democratic presidencies, the standard bearer of a great swath of the electorate and the presumptive nominee of the Democratic Party.

Yes, every silver lining has a cloud, and Hillary does have some electoral vulnerabilities. Being an heir apparent isn’t necessarily so appealing when the electorate wants change, as discovered by sitting Vice Presidents Richard Nixon in 1960 and Hubert Humphrey in 1968. Being a presumptive nominee can also veer perilously close to being seen a presumptuous nominee, a lesson Hillary learned all too well in 2008. Some unknowable percentage of the electorate remains unwilling to vote for any female presidential candidate, and especially for one considered a feminist icon. And being perceived a liberal standard bearer proved to be a huge liability to a generation of Democratic presidential aspirants from Sen. George McGovern (S.D.) through Vice President Walter Mondale to Gov. Michael Dukakis (Mass.).

Nonetheless, starting out a game with a four-run grand slam is an advantage any team would wish for — even if it galvanizes the other team and can’t, in itself, guarantee that the larger game will be won.

This op-ed was originally published by The Hill, find the article on their website here.

 

Surgery on a Healthy Patient

Posted on by The Progressive Policy Institute

As Congress considers new Internet openness rules to replace the “net neutrality” regulations recently struck down by the courts, critics of U.S. broadband have called for a major overhaul of how we regulate the net. At the extreme, they seek a complete “reclassification” of the Internet as nothing more than a juiced-up telephone, thereby moving it from modern rules that apply to information services to the “common carrier” rules that applied to the Bell system. They contend this would allow for stronger “open internet” protections and improve the speed of, and access to, the web.

This radical surgery is needed, they argue, because the American Internet is purportedly monopolized by a handful of providers and, as a result, is too slow and too expensive. If we don’t act now, some critics predict we’ll soon be “a third world country” online.

Is this radical surgery necessary? Or are the critics like the practitioners who intervene even when no treatment is needed? In a research paper published this week by the Progressive Policy Institute, I investigated the state of the U.S. Internet, and found it getting faster, more affordable, and more competitive. Whatever merit there may have been to such criticisms when they were first levied almost a decade ago, U.S. broadband has clearly left them in its tracks.

Continue reading at Roll Call.

The State of U.S. Broadband: Is It Competitive? Are We Falling Behind?

Posted on by The Progressive Policy Institute

Advocates for new regulation of the U.S. broadband Internet base their case on the related contentions that (i) our nation lags behind the rest of the world in quality, price, and deployment of broadband, and (ii) the market for U.S. broadband service is not competitive. This paper analyzes the latest U.S. and international data on speed, price, profits, and investment, and concludes that both of these contentions are false.

As to the first component of the advocates’ argument: the U.S. ranks 10th in the world in average broadband speed among nations surveyed by Akamai, and trails only South Korea and Japan among our major trading partners, countries with extraordinarily high urbanicity. We trail only Japan in the G-7 in both average peak connection speed and percentage of the population connection at 10 Mbps or higher. On price, the record is even more clear—the United States has the most affordable entry-level prices for fixed broadband in the OECD.

Other measures also belie the claim that U.S. broadband lags behind our international peers. Our per capita investment in telecom infrastructure is 50 percent higher that of the European Union, and as a share of GDP our broadband investment rate exceeds those of Japan, Canada, Italy, Germany, and France.

In short, when looking holistically at data on rankings, investment, prices, and affordability in their entirety, no evidence suggests that the United States is an underperforming dullard sitting in the back row of the broadband room. Our networks are faster, our prices more competitive, and our investments larger than mostof the world’s other major industrial nations.

The second pillar of the critics’ argument is also tenuous. U.S. broadband is provided in a dynamic, quickly changing market marked by dramatic shifts in products, services, and competitors, and breakneck innovation. In such a market, the best evidence that competition is working and producing good results is the high quality of service and affordability that we see in the United States today. Critics often claim that the purportedly “small number” of broadband providers is evidence that the U.S. market is uncompetitive, although the significant capital costs of creating these networks, while limiting the ultimate number of providers, also compels them to compete to rationalize their investments. And to the extent that a narrow focus on the number of competitors in the market has any relevance, it is noteworthy that 90 percent of Americans can choose between at least one wired and one wireless provider offering four Mbps broadband, and 88 percent of Americans can choose from at least two different wired services providers.

Moreover, the profit margins of U.S. broadband providers are generally one-sixth to one-eighth of those companies (such as Apple or Google) that use broadband, contradicting the idea of monopolistic price-gouging by providers.

The result of this competition is that 96 percent of U.S. households have access to speeds equal to or greater than 10 Mbps, and 99 percent of Americans can now access service of at least 3 Mbps. Over 50 percent have access to service at 100 Mbps or more. This perhaps is the best evidence that critics of U.S.broadband performance misrepresent the state of broadband in America today.

We should want U.S. broadband to be diffused rapidly, priced reasonably, and used to build social, political, and economic citizenship. The evidence presented here shows that the current approach to broadband regulation is serving these goals admirably. To go further, we will need government to develop policies and programs that achieve these goals in a way that supports the current regime of high investment and continuous innovation by competitive broadband providers, not in a way that would limit or upend it.

Download the complete report. 

CNN: No time to turn back on world’s most combustible region

Posted on by The Progressive Policy Institute

Suddenly, Iraq is coming apart at the seams. Its government seems powerless to stop the rapid advance of the Islamic State of Iraq and Syria, a group so extreme and aggressive that even al Qaeda has disowned it. Let’s hope President Obama has a contingency plan to prevent Islamist extremists from destroying the tenuous order that’s existed there since U.S. forces pulled out two and a half years ago.

The new war in Iraq calls into question four key decisions that have shaped President Obama’s approach to the old one, and Middle East policy in general.

The first was the decision not to press harder to keep a residual U.S. force in Iraq. Now Sunni insurgents have reclaimed large swaths of Anbar Province, which U.S. forces had pacified at considerable sacrifice, as well as the important northern city and oil hub of Mosul. At a minimum, the White House seems to have placed too much confidence in the Iraqi army, which despite intensive U.S. training and billions of dollars’ worth of advanced equipment, has failed to check the insurgency. The president needs to act swiftly to use U.S. intelligence and counterterrorism assets to stiffen the resolve of Iraqi forces and help them launch an effective counteroffensive against ISIS.

Continue reading at CNN.

Eric Cantor’s downfall tests GOP

Posted on by The Progressive Policy Institute

Who now will challenge the rising tide of right-wing populism?

House Majority Leader Eric Canton’s shocking defeat sends two important messages to the Republican establishment, neither of which is chiefly about immigration.

First, today’s rightwing populism is just as hostile to Big Money as it is to Big Government. Lest we forget, the tea party was spawned during the late economic crisis, during which millions of Americans not only lost their jobs, but also saw the value of their houses and retirement funds take a sickening plunge. Despite several years of “recovery,” the specter of downward mobility still haunts the conservative base.

The race’s improbable victor, college professor Dave Brat, excoriated Cantor as a creature of Wall Street, K Street, and big business lobbies in Washington. He called the outcome a victory for ordinary people over monied interests. “Dollars don’t vote,” he told delirious supporters last night. Cantor poured about $5 million into his campaign, while Brat had just two paid staffers and spent a measly $77,000.

It’s true that Brat frequently assailed Canton as squishy on “amnesty” for illegal aliens. And it’s likely the Majority Leader’s downfall will scare many Republicans away from efforts to reform immigration this year. But as John Judis points out, Brat actually accused Cantor of siding with big businesses’ quest for “cheap labor” at the expense of “cheap wages” for native residents of Virginia’s Seventh District.

In short, Republican attempts to deflect populist rage from powerful economic actors to big, bad government aren’t working. The intra-party feud between a populist and libertarian grass roots and a plutocrat-friendly establishment is nowhere near over – it’s intensifying.

Here’s the second message from Cantor’s upset: GOP leaders will have to confront the populists on ideological, not just electoral, grounds.

As has been the case with other tea party primary victories, Brat’s win puts what should be a safe Republican District in play. That’s why the GOP establishment is working hard to deny populist upstarts money and endorsements. Brat’s success suggests that’s not enough. At some point, party leaders will have to challenge the hard right’s attempts to impose ideological litmus tests on GOP candidates.

The question is, who is to define the Republican agenda? Will it be elected leaders who actually govern in the party’s name? Or will it be a tacit alliance of populists abetted opportunistically by professional fund-raisers with an agenda – the Club for Growth, the Senate Conservative Fund, etc.?  The latter are intensely oppositional and have little interest in compromise or governing. And that’s a big problem for Republicans.

In our two-party democracy, neither can afford doctrinal purity. They have to assemble broad, heterogeneous coalitions to win elections. The populists’ demands are alienating minorities, women and the young and narrowing the GOP coalition. This has created a huge structural disadvantage in presidential elections, and could eventually trickle down-ballot and cost Republicans control of their Congressional bastion.

Cantor seems to have understood that. With an eye on succeeding John Boehner as House Speaker, he was encouraging efforts by “reform conservatives” to develop a positive governing agenda for the GOP. That probably was his undoing.

If someone as intrinsically conservative as Eric Cantor can be cast as a closet compromiser and traitor to the cause, then Republicans really are in danger of being engulfed, and politically marginalized, by the extremists in their midst.

Will any GOP leader stand up to them?

This blog post is cross-posted from Republic 3.0.

Why progressives should hold their applause for student loan order

Posted on by The Progressive Policy Institute

President Obama issued an executive order yesterday to expand Pay As You Earn (PAYE), the administration’s flagship income-based student loan repayment program. The president’s action offers millions of workers welcome if modest relief from student debt burdens. But progressives should hold their applause, because it also has two downsides.

First, expanding PAYE boosts government public subsidies for a broken higher-education financing model. Second, it will reinforce the already strong bias in public policy toward college attendance at the expense of other post-secondary options for young Americans.

Unlike the standard student-loan repayment program, which has fixed repayment schedules, PAYE is an income-driven repayment program, meaning that how much you pay is based on how much you earn. Eligible borrowers repay up to 10 percent of their monthly income, with any remaining balance forgiven after 20 years. Its commendable goal is to make repayment easier for graduates who take important jobs that pay less — social workers, school teachers, workers in the nonprofit sector.

With the new order, PAYE eligibility will expand to an additional 5 million people who borrowed before the original October 2011 cutoff. It follows last year’s campaign to dramatically increase PAYE enrollment, during which the Department of Education contacted 3.5 million eligible borrowers with limited success. Legal questions surrounding the new order have already been raised regarding presidential authority, especially since the cost to the government remains unknown.

In expanding PAYE, Obama underscored his desire to assure affordable access to college. The idea that college is for everyone rests on the well-established fact that college graduates earn more money than high school graduates on average.

But as I’ve recently argued, while some form of post-secondary education is necessary, not everyone needs a bachelor’s degree. The point was even made recently by Secretary of Labor Thomas Perez.

The wage premium for college graduates is growing not because the degree is worth so much more, but because high school diplomas as worth so much less. In fact, real earnings for recent college graduates have been falling over the last decade, and underemployment remains at record highs. New research shows the number of college graduates taking white-collar jobs declined since 2000, and is now at 1990 levels. If wage growth for recent college graduates was in line with tuition increases, today’s conversation surrounding college affordability would look very different.

Moreover, the new tools of digital learning — such as online courses — should be driving education costs down, yet tuition continues to climb. That suggests the entire financing model for higher education needs reform. And because there are too few viable pathways into the workforce after high school, our $100 billion per year federal student aid system is channeling people into four-year colleges who may be better suited for less expensive options.

Expanding PAYE may relieve the financial strain on borrowers in the short term, but it will almost certainly exacerbate the burden on the federal student aid system in the long run. With PAYE, increased access and opportunity for students comes at the cost of accountability for educational institutions. Borrowers have less incentive to make smart borrowing decisions, or complete in a timely manner. And schools have less incentive to control costs.

When income-based repayment was first introduced in 1993, then called “pay-as-you-can,” it was to encourage “public service” jobs — those jobs earning a relatively modest income. But the idea was not for everyone to enroll in such a plan, only those who needed longer repayment terms to avoid default. Then, in a debate remarkably similar to today, President Clinton acknowledged that the longer terms under income-based repayment were not ideal for most borrowers, and in fact the standard 10-year repayment plan worked well for the majority.

Still, if PAYE expansion goes forward, there are ways to keep its costs in check. First, expand PAYE only to undergraduate loans. If the main intention is to promote college affordability, then it makes sense to focus on undergraduates. Graduate school borrowers, who tend to have higher levels of debt, could apply annually instead of being automatically eligible.

Second, schools should give borrowers the information they need to make an informed decision about which plan is the best for them, and have the Department of Education regularly report on program metrics. Finally, limit, if not eliminate, the provision for “public service” that forgives any remaining balance after 10 years. With the income-based benefits already provided by PAYE, this provision becomes a second subsidy for the same loan.

The president’s executive order could be interpreted as a way of compensating young college graduates for the slow-growth economy they graduated into. Yet while such compassion is admirable, the administration also needs to grapple with the root causes of soaring college costs, including the dearth of pathways into the workforce for young Americans who may not need a four-year bachelor’s degree.

This op-ed is originally appeared in The Hill, find their posting here.

CNN: Should the American Gulliver be tied down?

Posted on by The Progressive Policy Institute

Having recently warned of the high costs and limited utility of U.S. military force, President Barack Obama is in Normandy to mark the 70th anniversary of one of its grandest achievements: the D-Day invasion.

No contradiction there – that America helped win the “good war” obviously doesn’t mean military intervention will always succeed. But Friday’s ceremony is a timely reminder of a paradoxical truth: The long peace the world has enjoyed since World War II is no historical accident. It rests upon the bedrock of America’s willingness to use force not only in the defense of its core national interests, but also to uphold the liberal world order.

Over the past seven decades, there have been no great power wars, the Soviet Union and communism have expired, the community of democracies has grown larger, and unprecedented global prosperity has lifted billions of people out of grinding poverty. Despite terrorism and spasms of ethnic and religious violence, analysts say the number of people dying in conflicts has dropped dramatically since 1945.

Continue reading the article at CNN.

The New York Times: Shifts in Wireless Market May Sway a Sprint Deal

Posted on by The Progressive Policy Institute

Edward Wyatt’s piece this morning, “Shifts in Wireless Market May Sway a Sprint Deal,” examines how the evolving mobile and wireless markets affect the prospects for a possible Sprint and T-Mobile merger.  PPI’s senior fellow Hal Singer is quoted commenting on how the lines separating once discrete markets seem to be fading, and whether this trend affects the deal’s chances:

If regulators continue to see the wireless and wireline business as discrete markets, they will continue to be skeptical,” said Hal J. Singer, a principal at Economists Incorporated and a senior fellow at the Progressive Policy Institute. “But if they can be convinced that the lines between wireless and wireline are beginning to blur,” there might be a chance for a merger to be approved, he said.

You can read the full article on The New York Times website, here.

Adapting U.S. China Policy to the Information Age

Posted on by The Progressive Policy Institute

Since the tanks rolled into Tiananmen Square 25 years ago today, the U.S. has not hesitated to criticize China’s dismal record on human rights and civil liberties.  Not much has changed. Since traditional state-to-state diplomacy has done little to affect China’s behavior, the American government needs to change tack.  If Washington is serious about change, it needs an information age strategy that directly targets and engages its greatest ally for change: the Chinese people.

The Internet has revolutionized communication, left deep impressions on China, and has opened up a new avenue for foreign policy action. Beijing has banned Twitter and Facebook, but their Chinese equivalents, Weibo and Wechat, have over 500 million and 355 million users respectively.  Social networks are proven activist tools, used during uprisings such as the Arab Spring for disseminating information and organizing protests.  But there are several steps Washington could take to help Chinese human rights, democracy activists and environmentalists connect, get access to information and publicize their movements.

The first step is to provide unfiltered, encrypted Internet access.  One method would be for the State Department to sponsor Virtual Private Network (VPN) services to distribute to Chinese civic society groups.  VPN’s enable users to view the global internet and all traffic is protected.  This technology is already used widely by expats, well-off citizens and domestic businesses with privacy concerns.  Despite several attempts, VPN providers consistently thwart government attacks on their networks, and any permanent blockage would additionally run the risk of damaging domestic businesses who also rely on these networks.  By contracting with VPN providers, (most of them outside of China), State would provide Chinese activists with access to reliable information and a more secure, private organization platform.

A digital age strategy should also include exposing the Chinese public to different kinds of information. The official voice of the United States government today – including statements by officials, Congressional hearings, or government news outlets such as Voice of America – is overwhelmingly censorious.  These criticisms are all valid, but such public shaming often lends credence to the CCP refrain that Westerners want to destabilize, bully and threaten China.  There is a nuanced difference here between standing up for democracy and actually bringing about democracy.  When Congress calls for the Chinese embassy’s street in D.C. to be renamed for a jailed dissident – few regular citizens will be aware, and those who are may not get the point.

Democratic evolution is served by giving Chinese citizens facts about their life and our system, thus letting the contrast speak for itself.  For example, the American embassy in Beijing maintains @BeijingAir, a Twitter handle with automated readings of air quality in the capitol every hour on the hour.  Even though Twitter is blocked, the readings are smuggled into Chinese social media and taken as the standard, reliable reading for air quality.  So much so that when the consulates in Shanghai and Guangzhou started doing the same, Chinese officials complained to the media that the U.S. was purposefully trying to make China look bad.

The fact is, they don’t need help looking bad.  Straight, localized information about rampant corruption, environmental degradation, and harsh repression are powerfully subversive of party control.  That’s exactly why the CCP has kept a choke hold on the flow of information.  Instead, they produce nonsensical propaganda, such as a claim that Beijing’s air has gotten better every year for the last 14 years.  Chinese social media outlets such as Weibo, We Chat, QQ, Renren, radio broadcasts and podcasts should be flooded with accurate, reliable local Chinese news.

Radio Free Europe (RFE) in Turkmenistan provides an example of this strategy at work in another authoritarian environment.  The current RFE station director changed the programming from “long, turgid segments featuring Turkmen dissidents” to news stories based on vetted listener tips and story requests. The response was overwhelming, as website views shot from a few hundred to 14,000 per day over two years.

Honest information also gives civil activists a fact base for comparison.  Last year, for instance, a picture of U.S. Ambassador went viral.  A Chinese netizen snapped a shot of the Ambassador buying his own coffee and uploaded it.  As the image went viral, comparisons between aloof, corrupt Chinese officials to the wholesome do-it-yourself Chinese American flew and again, Chinese officials complained.  In the same vein, when President Obama releases his tax returns every year, that story should be online, in Chinese.  The idea of Chinese President Xi Jinping reporting his wealth details is inconceivable.  The U.S. debate about fracking – showing how regular citizens have a say and can lobby the government – should be reported.  When a U.S. corporation is investigated and penalized, public trials and all should be available as an example of everyday democracy at work.

The Tiananmen Square massacre still holds two important lessons for American policy makers.  First, the Chinese people can rally for change, and many aspire to real democracy.  Second, there is no limit to what the CCP will do to stay in power.  The violation of basic human liberties by the Chinese government is and should be news.  But rhetoric and policy both need to balance the stand against the Chinese government with shows of support for the Chinese people.  The best way to show our support is by promoting information.  Access to information matters, the distribution of accurate information matters, and a basis for comparison matters.

China has been compared to a boiling pot of water.  The heat continues to rise while the government keeps pressing harder on the lid.  For 25 years the U.S. has tried to negotiate with the government to take its hand off the lid; they will not.  It’s time to add fuel to the fire.

Make college affordability about accountability

Posted on by The Progressive Policy Institute

June is fast turning into college affordability month on Capitol Hill. A fresh crop of college graduates, a final push for midterm election talking points, and the impending retirement of HELP Committee Chairman Sen. Tom Harkin (D-Iowa) have all raised the profile of student debt. But while promoting opportunity is essential, we can do more to address affordability by focusing on accountability — for schools and for students.

It is undeniable that rising student debt burdens are imposing a tremendous strain on young Americans. Though 70 percent of borrowers have outstanding loans of less than $25,000, all are struggling under the weight of a slow-growth economy.

Yet forgiving all of the student loans and interest payments in the world still doesn’t address why the postsecondary education system has become so unaffordable. Neither will blindly throwing more money into Pell Grants, a program with unknown effectiveness.

Continue reading the article at the Hill.

Course Correction

Posted on by The Progressive Policy Institute

Community colleges should be matching students to jobs, not funneling everyone into a four-year degree. A response to Richard D. Kahlenberg.

The United States is facing one of the greatest workforce challenges in recent history. Wages have been stagnant for a decade and middle-skill jobs have evaporated—and yet unfilled vacancies for high-wage computer and tech jobs are at record levels. Few have been as badly affected by the shifting landscape of the labor market as young Americans, who must adapt to the global competition for jobs with no guarantee of a secure retirement. Already a wealth gap exists relative to older generations at their age, and lower net worth, alongside rising student debt, will inevitably leave lasting economic scars.

In his recent Democracy essay [“Community of Equals?,” Issue #32], Richard Kahlenberg correctly points out that the failure of our nation’s community colleges is partly to blame. He rightly emphasizes the important role community colleges play in the well-being of our nation’s workforce, writing, “Their success or failure will help determine whether America remains globally competitive and whether American society can once again promote social mobility in an era of rapidly changing demographics.”

So ineffective have community colleges become that they are hardly considered a viable pathway into the workforce. In fact, a four-year credential seems to be the only acceptable postsecondary pathway; you either earn a bachelor’s degree or accept a fate of underemployment and low pay. It follows that since 2000, the number of two-year colleges has remained flat while the number of four-year institutions has increased by more than 400, or 17 percent. There are now about 2,900 four-year colleges in the country, or roughly one four-year institution for every U.S. county.

Kahlenberg wisely advocates reforming the entire community college system. However, his analysis and proposed solutions are flawed in three important ways. First, community colleges are failing not because of de facto segregation, as Kahlenberg insists, but because they don’t adequately prepare students for the workforce. The best way to fix this is through private-sector engagement, not heavy-handed government intervention. Second, the goal of community colleges should be to prepare students for the workforce, not just to pave a path to a bachelor’s degree, as Kahlenberg suggests. Finally, failure within the postsecondary education system is not confined to two-year colleges. Four-year colleges are also facing serious challenges.

The first flaw in Kahlenberg’s analysis is his foregrounding of socioeconomic segregation as the main problem facing community colleges. He writes, “[O]ur higher education system, like the larger society, is increasingly divided between rich and poor, an arrangement that rarely works out well for low-income people.” He suggests that the demise of community colleges stems from a vicious cycle of reinforcing racial and low-income stratification, where only poor people go to community colleges while better-off people get an automatic pass to attend a four-year institution.

Kahlenberg offers the fact that four-year colleges enjoy greater government support as proof of inherent preferential treatment toward more affluent Americans. He laments that “direct federal aid to higher education disproportionately benefits four-year over two-year colleges” and that “wealthy four-year universities receive large public subsidies in the form of tax breaks that are largely hidden from public view.” Yet this is hardly proof of income or racial bias. Four-year colleges are more expensive, and provide a longer, more comprehensive service than community colleges, so it’s not surprising that more federal aid goes to four-year institutions. Moreover, if private nonprofit schools are able to use tax-supported donor funds to defray rising costs instead of increasing tuition or relying on students to take on more debt, then that should be applauded, not assailed.

By focusing on segregation, Kahlenberg misses the fact there are other factors at play. For example, our nation’s K-12 education system bears much of the blame for perpetuating the failure of community colleges. Too many young Americans graduate from high school without rudimentary skills, forcing community colleges to retrain students in basic education. For instance, the Northern Virginia community college system—an exemplary system by Kahlenberg’s definition because it grants automatic admission to Virginia state universities upon completion—offers a course in learning “whole numbers.” But I found no courses specifically in SAS, STATA, Eviews, or other statistical analysis software that high-wage employers are looking for. By being forced to offer mainly remedial courses, such community colleges disserve the many students who do have basic skills and prohibit the integration of people from different backgrounds that Kahlenberg strives to encourage.

In reality, our community colleges are failing for a reason more obvious than a socially ingrained elitism. It’s because they aren’t providing students with a positive return on investment. They are not adequately preparing their students for the workforce with dynamic training programs that align with local employer demands.

Indeed, the best way to promote economic and social mobility is to prepare our workforce for jobs that match such demands. The key is to engage the private sector: the employers. They must be an active partner to community colleges, participating in curriculum design and engaging with prospective hires. Nowhere in his essay does Kahlenberg mention the role of the private sector, leaving a rather large hole in his analysis.

Instead, the author’s proposed reform of reallocated government spending will only preserve the status quo. Worse, it would exacerbate the skills mismatch, as community college administrators would have little incentive to work with local employers. His focus on bringing in more middle-class students to community colleges would also do little to help millions of struggling young Americans of all backgrounds.

Real reform of community colleges would also engage the education-technology revolution that is passing too many postsecondary education institutions by. Low-cost, high-speed broadband has the potential to transform workforce training, creating enormous economic and social opportunity by including people of all socioeconomic backgrounds. For example, the University of Colorado’s College of Engineering and Science recently launched a program to help its students master communications technologies to collaborate with engineers from around the world. Designed to teach students the online skills they need to succeed in business, the program saw a diverse student body—50 percent female, 30 percent Latino—in its first year. The emergence of massive open online courses and customized education is also of great promise, and could even encourage higher completion rates—an area of concern in the postsecondary education industry.

If community colleges realigned their mission to prioritize workforce preparedness, the growing socioeconomic divide Kahlenberg writes about would likely be to a certain extent reversed. Perhaps more students of varied backgrounds would want to enroll if they knew the associate degree held more clout in the workforce. The segregation that plagues today’s system would improve organically, in a virtuous cycle, without heavy-handed government mandates.

A second problem with Kahlenberg’s essay is his assumption that the end goal of the community college system is for everyone to get a four-year degree. Here Kahlenberg is not alone; it seems as if the bachelor’s degree is seen by the entire postsecondary education industry as the Holy Grail for the economic woes that afflict young Americans.

This is simply not true. Not every job requires a four-year degree and not everyone needs one. For example, according to the Bureau of Labor Statistics, over the next decade new jobs requiring either an associate degree or a postsecondary non-degree award are expected to grow faster than jobs requiring a bachelor’s degree. Many of these jobs—such as those for medical or engineering technicians, or for computer support specialists—pay well and are vocational or technical. This suggests some four-year students could probably get a better return on investment from a two-year credential or non-degree certification.

The fact is that when it comes to a bachelor’s degree, it matters where you go to school and what you study. While on average those with a bachelor’s degree earn $1 million more in their lifetime than those without, the variance in return on investment is large.

There is no question that some form of postsecondary training or education is necessary in today’s economy. Young Americans without education beyond a high-school diploma are dropping out of the labor force at an alarming rate, or working less, unable to compete for decent jobs. But the question we should be asking is: What type of postsecondary credentials do we need? We must design postsecondary education policies that reflect the reality on the ground by promoting more alternative pathways into the workforce outside of a bachelor’s degree.

This brings us to the third flaw in Kahlenberg’s analysis. By wanting to funnel everyone into four-year schools, he ignores the fact that the four-year model is already beginning to implode. It turns out that the recent building binge of four-year colleges may not have been the greatest idea, as we are now saddled with many ineffective four-year schools. A painful truth is that the failure of postsecondary education is not confined to community colleges, and many four-year institutions are also facing tough questions from students and parents.

Young college graduates know all too well that having a bachelor’s degree is not a guaranteed ticket to financial success. They have seen their real average annual earnings drop by 15 percent over the last decade, as the hollowing out of middle-skill jobs over that time has forced more graduates to take lower-paying jobs that do not require a four-year degree. In fact, my research has shown that college graduates are forcing those with less education and experience out of the labor force—what I call the “Great Squeeze.” At the same time, they face rising student debt levels, now more than $29,000 per borrower. Too many young Americans are leaving the postsecondary education system with thousands in debt and little to show for it.

In his essay, Kahlenberg argues that four-year institutions provide a better service because they spend more per student than community colleges. He notes that “stunningly, over the past decade, inflation-adjusted spending on public research universities has increased roughly $4,200 per student, compared with just a $1 per student increase for community colleges.”

But this just shows how much more expensive it is to provide everyone with a four-year degree. Further, it wrongly assumes that because four-year research universities spend more per student, the student is getting a better education. The most recent data shows in that 2011, public universities spent more on “auxiliary enterprises,” which includes bookstores, dorms, and dining, than on academic support and student services.

Moreover, public funding for postsecondary education has been decreasing across the board, with four-year colleges also feeling the pinch. In Colorado, for example, annual public funding for postsecondary institutions is expected to decrease to zero by 2022. As state spending falls and tuition rises, the federal government has shouldered the burden of ensuring equal access. This includes the expansion of federal student aid and programs like income-driven repayment. According to the College Board, Pell grants are up 118 percent over the last decade. It turns out the increased spending per student at public universities is being paid for in large part by the student and the taxpayer.

By encouraging everyone to get a four-year degree, we will add more debt on the backs of young Americans and put greater strain on the federal aid system. This is especially true if more young Americans feel obligated to pursue graduate school to stand out to employers, taking on even more debt in the process. We need to have other viable pathways into the workforce that don’t require major time and financial commitments.

What we need is a community college system that can stand on its own. It should be a standard, if not common, pathway into the workforce. Its success should depend on how many students are able to achieve a decent standard of living upon completion, with transfers into four-year colleges as one possible option. Certainly, some colleges are getting the formula right, leading the way with innovative practices and programs that integrate local employers to the benefit of their students. Yet such cases remain the exception rather than the rule.

The goal of the postsecondary education system should be to facilitate America’s workforce preparedness. Only when we realize that multiple pathways are needed to reach this goal—rather than a one-size fits all approach—will we undertake the radical reforms we truly need.

This article was originally posted by Democracy.