Category: Uncategorized

SmartData Collective: What the Internet of Things Means for Physical Industries

Posted on by The Progressive Policy Institute

SmartData Collective’s Mark van Rijmenam highlighted PPI’s Michael Mandel remarks on the Internet of Things and the video of his participation in the Washington Post “All Things Connected” event.

He explains that “the Internet has transformed digital industries, while the Internet of Things will transform physical industries.” He estimates that 20% of GDP comes from the digital industries, which means that 80% comes from the physical industries. This shows that the transformation of physical industries can have a massive impact on the GDP. In addition he explains why he believes that the Internet of Things will be a job creator instead of a job destructor, as is often thought of technological advances.

Read the article and find the video here.

The Hill: Don’t reform the tax code on the backs of over-taxed energy producers

Posted on by The Progressive Policy Institute

William F. Shughart II, writing for the Hill, referenced an observation made by the Progressive Policy Institute that major U.S. energy companies are “Investment Heroes.”

A high-growth strategy requires strong investment — private and public — in our nation’s productive and knowledge capacities.

To read the rest of the article, visit The Hill’s website here.

Keystone Pipeline: Important Debate for Yesterday

Posted on by The Progressive Policy Institute

Listening to the Republicans in Congress, one might think that the Keystone XL pipeline is the biggest energy issue facing the country today and that swift approval of the controversial project is vital to America’s interests. Election-year politics aside, however, the merits of the case for the pipeline have been eclipsed by changing circumstances.

When the project was first proposed and the political battle lines were drawn, America was importing significantly more oil than we were producing. That is no longer the case. Thanks to the boom in shale and unconventional oil production, the United States is on the verge of becoming the world’s largest oil producer. From an energy security and geopolitical perspective, the Keystone pipeline has become largely irrelevant. The question today is not whether we should import heavy crude from Canada (supposedly as an alternative to importing from less friendly countries). The critical question today is what American should do with the glut of oil we are producing ourselves.

The arguments for the pipeline are rupturing. We no longer need Canada’s tar sands oil to enhance our “energy security.” This claim rested on the specious notion that having access to large sums of crude from close by would cushion U.S. consumers from price shocks at the pump. Even if this were true, the last time I checked North Dakota was closer to home than Alberta.

The only serious argument left to Keystone proponents is that building the pipeline and processing Canadian crude in the United States will create jobs. Given our painfully slow recovery, of course, that is not an argument to be taken lightly. But America’s new energy reality points to a different path toward a renewal of national prosperity. Instead of building a pipeline to import another country’s heavy and difficult crude, we should build pipelines to safely and economically move America’s own lighter, sweeter crude to market. Investing in revamped refinery capacity that is more suited to processing our own oil, as opposed to the heavy oils of Canada and Venezuela, would not only create jobs, but would be more consistent with our new place in the energy world. Such a course would make it easier to balance the twin imperatives of spurring domestic economic growth and competitiveness and lowering U.S. greenhouse gas emissions.

On the merits, we should put this anachronistic debate to bed. We have far more important energy policy questions to discuss that are actually rooted in the facts and circumstances of today.
Should we lift the ban on exports of petroleum? This issue raises a host of questions, but global oil market dynamics suggest that the ban is itself anachronistic. I have concerns that added incentives to extract domestic oil could have negative environmental impacts, but we can manage those and can extract great value from our domestic resources without sacrificing environmental best practices and without opening up currently protected areas to development. Further, I am attracted to the idea of dedicating a fraction of export revenue to conservation and clean energy (which we did when we opened up offshore resources), as the think tank Third Way has proposed.

Can we come to consensus on natural gas exports in light of new resource and global political realities? I favor exports, but not at the expense of reasonable environmental safeguards around fracking that will not in any significant way deter responsible developers from producing the resource.

And we must put climate change back on the national energy policy agenda. If the Keystone debate has served any purpose, it has helped opponents raise the volume (if not always the quality) of the discourse around climate. XL opponents feel strongly that America should not abet exploitation of the difficult-to-develop and energy-intensive tar sands, lest we be complicit in the negative climate impacts that would result. I happen to agree with that argument, but the real question now is this: As U.S. oil production surges, why should our political leaders keep fighting over a project we simply don’t need?

While it likely won’t happen until the silly season of the midterm elections is over, we need to focus our energy debates on the issues that matter today. That will be enough of a challenge without spilling blood over yesterday’s battles.

 

This op-ed was originally published by Real Clear Politics, read it on their website here.

The State Tax Complexity Index: A New Tool for Tax Reform and Simplification

Posted on by The Progressive Policy Institute

Across the political spectrum there is broad agreement that tax reform is long overdue. Yet reform remains an elusive goal—not just in Washington, but also at the state level. Ideological standoffs, the excessive influence of special interests, the impending midterm elections, and mistrust of government are just some of the road blocks to reform.

This policy report undertakes a unique examination and comparison of the complexity of all 50 state tax systems plus the District of Columbia – the State Tax Complexity Index (“Index”). The Index measures complexity in terms of the number of tax expenditures for each state revenue system and highlights several findings that are relevant to the national tax reform debate.

The report includes a short history of state income tax systems and demonstrates the shortcomings in state income tax systems across different systems and taxation methods. Weinstein comments:

State tax systems tend to mirror the flaws so evident in our federal tax code: they are regressive, economically distorting and absurdly complex.

He continues:

“Although some continue to argue for a national sales tax or ‘flat tax,’ our study shows the best way we can promote simplicity in state tax codes is to eliminate cumbersome and seldom used tax breaks. Eliminating these breaks would reduce complexity, increase government revenue and finance lower tax rates across the board. Doing so would also increase fairness, as most breaks only benefit higher-income individuals and businesses.”

Read the full brief, including the index, here.

USA Today: Mortgage reform roils Washington

Posted on by The Progressive Policy Institute

USA Today‘s Darrell Delamaide quoted PPI’s Jason Gold on GSE reform.

He recalled the debate over the future of the two government-controlled entities that back most mortgages today — Fannie Mae and Freddie Mac — caused by the new bipartisan Senate bill that would wind down and replace Fannie and Freddie with a complex mix of private lending and government guarantees. He reminded with PPI that reform should prevail over liquidation regarding Fannie and Freddie.

Shuttering the GSEs completely … makes little sense. The idea that you can completely dismantle a housing finance infrastructure that is the foundation of an $11 trillion market is a fantasy the likes of which is only found in Washington.

Read the entire USA Today article here.

Bloomberg West: Does Tech Help the San Francisco Economy?

Posted on by The Progressive Policy Institute

PPI’s Michael Mandel spoke on Bloomberg Television‘s “Bloomberg West” on April 4th to discuss the pros and cons of tech tax breaks. He identified the lessons to be taken from the San Francisco tech boom example and gave his arguments for why governmental support of tech has been imperative for economic growth in San Francisco:

The Tech Info boom has the potential to spread jobs and spread growth across a broader part of society than people think. [In SF] they were very encouraging and welcoming to tech firms, they offered some very targeted tax breaks. […] If a city administration is focused on attracting tech firms, that is actually a potent force for development.

Watch the entire video on Bloomberg Businessweek here.

Bringing U.S. Energy Policy Into the 21st Century

Posted on by The Progressive Policy Institute

U.S. lawmakers don’t drive around in 1970s-era cars, yet they don’t seem to mind energy policies that are equally out of date. Attempts to export shale oil and gas, for example, have run smack into legal and regulatory barriers as old as a Gran Torino.

Energy companies have been urging Congress to lift the lid on exports and start treating oil and gas again like any other commodity that’s freely traded in world markets. Tapping global demand for U.S. shale oil and gas, they say, will spur domestic production and create even more jobs in a sector that’s already racked up robust employment gains.

Russia’s naked power play in wresting Crimea from Ukraine has given fresh impetus to the export push.

From outraged Republicans to eastern Europeans living anxiously in Moscow’s shadow come calls to use America’s shale windfall to wean Europe off dependence on Russian gas, oil and coal.

The idea that surging U.S. gas and oil production is a new source of geopolitical power is a seductive one, though there are practical difficulties inherent in using energy as an instrument of foreign policy.

Vladimir Putin’s Russia is not as scary as the Soviet Union, but it remains an energy superpower. Moscow supplies Europe on average with roughly a third of its energy; many Baltic and central European countries rely almost completely on Russian gas, oil and coal. Some observers think such realities have muted Europe’s reaction to Putin’s aggression.

Taking market share from Moscow would diminish its political leverage, while also weakening its petro-centric economy. Energy accounts for as much as a quarter of Russia’s GDP, 60 percent of its exports, and the lion’s share of its revenues. The problem, of course, is that Washington doesn’t export oil and gas, companies do. They go where the profits are, not where geopolitics dictates.

In any event, U.S. gas and oil exports are stalled by old laws and rules as well as potent domestic opposition. For example, the 1975 Energy Policy and Conservation Act bars most exports of U.S. crude oil. Exporting natural gas isn’t illegal, but it requires getting the U.S. Department of Energy’s approval to build terminals for liquefying the gas so it can be shipped overseas. Amid industry complaints that the Department of Energy is slow-walking approvals, Congress recently held hearings on ways to expedite LNG export licenses.

America’s import-oriented energy policies are a legacy of the 1970s energy crises. They are predicated on an assumption of fossil fuel scarcity and U.S. vulnerability to volatile global oil markets. Today’s reality is abundance, thanks to horizontal drilling techniques and shale fracturing, aka, “fracking.” Next year, the United States is expected to overtake Saudi Arabia as the world’s largest oil producer.

The energy world has been turned on its head, but U.S. policies haven’t changed. Powerful interests are invested in preserving the status quo. Chemical companies, which use natural gas as a feed stock, say ramping up exports would raise domestic gas prices and thereby threaten a revival in U.S. manufacturing. Some analysts say we’d be better off using more natural gas in the transportation sector, for cars as well as heavy-duty trucks, because this would cut both carbon emissions and oil imports.

The fiercest opposition to exporting oil and gas comes from environmental activists. In an open letter (PDF) to President Obama, a coalition of environmental groups led by anti-XL Pipeline crusader Bill McKibben, slammed the administration’s plans for building LNG terminals along U.S. coastlines. “We believe that the implementation of a massive LNG export plan would lock in place infrastructure and economic dynamics that will make it almost impossible for the world to avoid catastrophic climate change,” the letter asserts. Most of the nation’s fossil fuel reserves, it adds, should stay “in the ground.”

It’s highly unlikely, though, that the public will support attempts to stuff the shale genie back in its bottle. According to the U.S. Energy Information Administration, jobs in the oil and natural gas industry grew by 32 percent between 2007 and 2012, even as overall employment fell 11.4 percent. The glut of cheap gas is also a boon to energy-intensive industries in the United States, which are beginning to attract significant investment from Europe, where energy costs are much higher.

Moreover, it’s not a foregone conclusion that taking advantage of America’s shale bonanza will bring on an environmental catastrophe. On the contrary, fuel switching in the electricity sector from coal to natural gas already has brought a 10 percent decline in U.S. greenhouse gas emissions, according to the Environmental Protection Agency. If gas catches on as a transport fuel, that also would yield lower emissions. In any event, fossil fuels will continue to be a major part of America’s fuel mix for decades to come, green fantasies notwithstanding, and lawmakers must manage the nation’s energy portfolio — including zero-carbon-emitting nuclear energy—in a way that both spurs economic growth and reduces the risks of global warming.

In truth, no one really knows what will happen if America once again becomes a major energy exporter. We can’t say for sure whether domestic prices will spike, or how global markets would react to an influx of U.S. oil, or what the net effect on global carbon emissions would be. Nor is it certain that exports by energy companies would buttress U.S. diplomacy. The sensible course is to experiment—to lift restrictions on oil and gas exports at a measured pace, measure economic and environmental impacts, and make adjustments as we go. That should be part of a political bargain in which Democrats agree to ease export controls in return for GOP support for more public investment in research and development of renewable fuels and clean technology.

What makes no sense is to let the dead hand of 40-year-old energy policies constrain America’s freedom of action today. As the shale revolution approaches its 10th anniversary, it’s time to bring U.S. energy policy into the 21st century.

This piece was originally published at the Daily Beast.

Connections Between Communications Networks: Should the FCC Breathe Life Into Internet Middlemen?

Posted on by The Progressive Policy Institute

The Netflix–Comcast arrangement has brought fresh accusations of so-called “net neutrality” violations. The flames were stoked when Netflix’s CEO, in a blog posting, bemoaned the plight of “intermediaries” such as Akamai, Cogent, and Level 3; he advocates new “net neutrality” rules to prevent Internet service providers (ISPs) from charging a toll for interconnection to these Internet middlemen. Some commentators fear that, if direct connections between ISPs and content providers such as Netflix proliferate, Internet middlemen “will become mere resellers of access” or “may be cut out of the loop altogether.”

In light of the D.C. Circuit’s decision in Verizon v. FCC , which rejected the FCC’s effective prohibition of payments from content providers to ISPs, a widespread acceptance is emerging for case-by-case review of discrimination complaints by a content provider against an ISP. In this middle ground, pay-for-priority deals would be tolerated but the arrangements would be policed for abuses by the FCC. Should the same protections be extended to resolve interconnection disputes involving Internet middlemen?

Although I accept the case for regulatory protections of content providers, the FCC may not be the right venue to deal with the antitrust and political aspects of interconnection disputes involving Internet middlemen. Before explaining why, however, a brief refresher on how we got here is in order.

The term “net neutrality” was first coined by Tim Wu to describe a world in which all packets on the Internet are equal and should be treated that way by ISPs. This vision implies no favoritism of an individual content provider’s packets over another’s. And the strong form of net neutrality implies that if there is priority treatment of a content provider’s packets, it should be priced at zero.

Peering arrangements between networks have always been outside the purview of net neutrality, because the FCC had expressed the view for years that the backbone market was competitive and not in need of regulation. In their dealings with ISPs, Internet middlemen such as Cogent carry the packets of myriad content providers, making discrimination vis-à-vis an individual content provider impractical. Moreover, unlike “settlement-free” peering, exchanges of unequal amounts of traffic between two networks have involved positive prices for years, which is also inconsistent with the zero-pricing principle of net neutrality. Accordingly, the FCC did not extend net-neutrality protections to peering arrangements in its Open Internet Order (see footnote 209).

Flash forward to the Netflix-Comcast arrangement, which bypasses the middlemen. To the extent that such direct connections become the new norm, these intermediaries may find themselves marginalized, or even obsolete. What role, if any, should the FCC play in preventing such a development? Stated differently, should ISPs be forced to deal with these middlemen at regulated interconnection rates?

The answer to this question can be informed by a limiting principle that should define the scope of the FCC generally: Is there some important social objective not recognized by antitrust laws for getting the FCC involved in these affairs?

Setting aside any of the particulars of the Netflix-Comcast arrangement, an ISP could make life difficult for these middlemen by requiring content providers to purchase data transport or content delivery services (“middle-mile services”) from the ISP as a condition of getting access to its customers (or getting a working connection). As a variant of this strategy, an ISP could refuse to supply terminating access to middlemen, forcing the content provider to deal directly with the access provider.

It is not clear how additional protections for these middlemen, above and beyond those afforded by antitrust laws, would advance any important social objective: Why is it a good thing to promote standalone providers of these middle-mile services via regulatory protection? Unlike content providers, who generate positive spillovers (information and artistic content can be viewed as “public goods”) and thus cannot be expected to monetize their investment, the Internet middlemen are more akin to resellers of a homogenous product (data packets), and are likely to capture the entire value-added of these services.

The best justification I can conceive for the FCC’s providing a backstop for these middlemen is that it is better for providers of these services to be independent from the provision of broadband access, because their independence ensures that content providers will get “better” treatment in middle-mile services. But the question of whether this “better” treatment is a worthy social objective is really a political judgment that should come from Congress, not the FCC.

To the extent that independent firms can provide middle-mile services at a lower cost than ISPs, basic Coasian economics predicts that market forces should ensure their survival. Why would Comcast, in its “make or buy” decision, exclude Akamai from the market if doing so would impose higher costs on Comcast? Over the last three months, Akamai has outperformed the Nasdaq index (a 30% return versus virtually no return), indicating that financial markets are not discouraged by these direct, pay-for-priority developments.

Moreover, to the extent any exclusionary conduct by an ISP leads to higher prices or lower output, the antitrust laws offer all the protection these middlemen need. Competition laws were designed to prevent, among other things, a dominant firm from leveraging its market power from one market (broadband access) into another (data transport or content delivery service). Because these cases could get a serious hearing in an antitrust court, middlemen do not need any additional regulatory protection.

In what appears to be a plea for regulatory intervention, Cogent’s CEO recently claimed that ISPs “are attempting to leverage their monopoly on broadband residential Internet connections to increase their profits by imposing tolls on traffic requested by their customers and delivered by other Internet service providers.” Although such comments likely caught the telecom regulator’s attention, by articulating an antitrust claim, Cogent made a pretty good case for why no FCC involvement was needed.

The case for preemptive protections for Internet middlemen is ultimately based in politics, rather than economics. Either we let the market naturally develop and let middlemen live or die on the economic merits, or Congress bans vertical integration in this space because it produces a political outcome we cannot tolerate. There is no added economic benefit for the FCC to dicker around the margins.

This article was originally posted by Forbes, read it on their website here.

Mandel Speaks at All Things Connected Washington Post event

Posted on by The Progressive Policy Institute

Michael Mandel, chief economic strategist at the Progressive Policy Institute, described the Internet of Things as the “extension of the Internet to the physical world. He told the audience at Washington Post Live’s All Things Connected forum, “The Internet has transformed digital industries, while the Internet of Things will transform physical industries.”

Senate hearing on student loans did not HELP

Posted on by The Progressive Policy Institute

Yesterday’s hearing of the Senate Health, Education, Labor and Pensions (HELP) Committee on student loans seemed to clearly answer the question of who is to blame for our $1.2 trillion and climbing student debt debacle. The only problem is, it was inaccurate. That makes the conversation unproductive regarding making federal aid policy effective.

If you believed the hearing, private lenders, loan servicers (TIVAS), and greedy state guaranty agencies (GAs) are to blame. During the hearing Sen. Patty Murray (D-Wash.) prided her role in passing recent cuts to GA-collected fees, as “providing relief to struggling borrowers.”

This is little more than politically charged rhetoric. There is no question young Americans are struggling more than any other age group, and this is exacerbated by student debt. But in reality, the finger-pointing for whom to blame is not so cut and dry, and any real improvement to the student aid system must reflect that.

Just as with the subprime mortgage crisis, everyone involved played a role in driving our student debt burden. States have decreased funding for public universities (for example, Colorado is expected to stop all funding by 2022), schools have increased tuition to fill the difference, borrowers have little incentive to make smart borrowing decisions, for-profit institutions have a less than stellar track record, and funding has been readily available regardless of credit backgrounds to enable equal access and opportunity. Of course, there is also the epidemic lack of financial literacy of student borrowers. Lenders, school counselors, parents, or the borrowers themselves could all be to blame.

Moreover, the underlying dominance of four-year college model is also partly to blame. The fact is not all four-year degrees are created equally, and not all jobs require a four-year degree. Yet the lack of other viable options for workforce success could explain why everyone is encouraged to pursue a four-year degree. It could partly explain the astonishing rise in graduate school over the last decade, as poor employment prospects force college graduates to find ways to stand out, and the rising student debt that comes along with it.

Certainly some private loan servicers are not completely innocent, and may not always put student interests above their own short-term goals. But the harsh tone taken by Sen. Elizabeth Warren (D-Mass.) yesterday does not address the larger issues at play. Her comment, “Sallie Mae has repeatedly broken the rules and violated its contracts with the government, and yet Sallie Mae continues to make millions on its federal contracts,” even prompted the Department of Education to come to Sallie Mae’s defense.

Indeed, not all private-sector participants among the accused are approaching borrowers with mal-intent. Take for example state guaranty agencies (GA), the legacy administrators of the Federal Family Education Loan Program (FFELP) for a given state. Left out of the hearing discussion seemed to be the important fact that GAs are non-profit companies designated by the Department of Education. Their fees are used for an important cause – for extensive financial literacy training programs set up across state networks. The more their fees are cut, the fewer financial literacy services they will be able to provide.

The demonization of private loan servicers might lead one to think that federalizing student loan servicing would solve the problem. However, isolating TIVAS is counter-productive. Not only are student loan servicers not the greedy profiteers they are made out to be, but there is no reason to believe the government would be more cost-effective at loan administration. Further, there is no evidence that expanding the federal role in student loan administration would do much to relieve the existing student debt burden.

Instead, Congress should work with TIVAS and GAs as partners as they work to reform the federal student aid program. Just as the issues surrounding the student debt burden are systemic, so too must be the solution. Pointing fingers at a select few accomplishes little, even if it does sound good during election season.

If there is any take-away from yesterday’s hearing, it is that student loans have become the latest issue in need of greater awareness and education concerning all of the aspects. There are over 80 million young Americans under age 20 that are counting on policymakers to get the federal aid system right for when they invest in college. Luckily, since the re-authorization of federal student aid programs is almost certain to get postponed for yet another year, it is not too late.

This article was originally posted by The Hill, read it on their website here.

TechCocktailDC: 5 Factors That Determine Whether The Internet of Things Can Save the US Economy

Posted on by The Progressive Policy Institute

PPI’s Michael Mandel was quoted in an article by Ronald Barba for Tech Cocktail DC. He was cited in “5 Factors That Determine Whether The Internet of Things Can Save the US Economy” on the figures for Internet of Things (IoT), the environmental necessity of the IoT, the recognition of IoT as a job creator,  and on the benefits this affords the workforce:

Mandel thinks that the Internet of things will eventually prevent the need for human trainers; rather, we can simply learn new skills through innovative solutions that connect the digital and physical spaces.

Read the entire article on Tech Cocktail website here.

The Need to Support Business Investment

Posted on by The Progressive Policy Institute

Here’s the situation: Fundamentally, investment is what drives productivity and growth. Unfortunately, more than six years after the Great Recession started, business investment is still weak. The chart below shows  nonresidential investment in structures and equipment as a share of GDP. It’s pretty easy to see that such capital expenditures have basically plateaued below 8.5% of GDP, compared to more than 9.7% at the time when the economy went into the tank.

From a policy perspective, given this weakness in investment, we should be doing everything we can to increase the incentives for capital spending. The best course is probably wholesale reform of the corporate tax system, but politically that’s out of the question right now.

A second-best alternative is to extend “bonus depreciation.” Bonus depreciation, which allows companies to immediately expense a certain portion of their capital spending, has the effect of lowering the hurdle rates for new investment.The provision officially expired as of the end of 2013. But Congress can renew bonus depreciation for 2014.

Extending bonus depreciation is not a panacea for the country’s economic ills. But at a time when Congress is deadlocked, bonus depreciation may be one of the easier ways of keeping business investment from weakening even more.

Forbes: Why CIOs Need To Think About The Internet Of Things

Posted on by The Progressive Policy Institute

Forbes’ Howard Baldwin wrote an article on March 26th about the Internet of Things and its importance for CIOs, referencing PPI’s Michael Mandel presentation for the Washington Post‘s “All Things Connected” event:

The webinar launched with one of the best explanations of the Internet of Things I’ve heard, from Michael Mandel, chief economic strategist, Progressive Policy Institute. He described the Internet of Things as the “extension of the Internet to the physical world. The Internet has transformed digital industries, while the Internet of Things will transform physical industries.” The former represent about 20% of the GDP, Mandel said, but physical industries – manufacturing, transportation, public service, health care – represents the other 80%. That in turn represents a huge impact to the economy.

Read the entire article on Forbes website here.

Where Government is Working

Posted on by The Progressive Policy Institute

With the federal government in gridlock, cities step into the breach.

Welcome to New Orleans, city of the future.

Wait, New Orleans? The decadent old tourist trap that’s been trading on its fading cultural glories for decades? That’s right – the Crescent City has its mojo working again.

Since the ravages of Hurricane Katrina, the Big Easy has reinvented itself as a mecca for entrepreneurship and a magnet for young and highly educated workers. Forbes ranked New Orleans number one in IT job growth. Another ranking of America’s “cities of aspiration,” which blends economic performance, quality of life measures and demographics, lists New Orleans second behind Austin, Texas. New Orleans is also leading the transformation of urban education. An amazing 79 percent of its students attend charter schools, and — more amazing still — they are on track to become the first inner city students in the nation to outperform their counterparts in the rest of the state.

New Orleans also benefits from dynamic political leadership and a cooperative civic culture. Mayor Mitch Landrieu is a tough-minded progressive who has cut the city’s budget by a quarter, spun off inefficient public health clinics and forced the city’s regulators to dramatically speed up licensing and permitting. Voicing a pragmatism that’s all too rare in the ideological hothouse of Washington, Landrieu notes that “government can be too big and too small at the same time.” He has also launched the New Orleans Business Alliance, the city’s first public-private partnership for economic development, and has used the money freed by his “cut and invest” approach to upgrade municipal infrastructure and improve public safety (an astronomical murder rate is the city’s biggest problem).

What’s happening in New Orleans, however, is hardly unique. It’s emblematic of a larger story: A renaissance in local governance as Washington sinks deeper into paralysis.

While Congress becomes both more ideologically polarized and less productive than ever, local governments are innovating, collaborating and equipping their citizens and communities with tools for successful problem-solving.

This “metropolitan revolution”, as Bruce Katz and Jenifer Bradley of the Brookings Institution have dubbed it, illustrates the genius of American federalism. Its subtle dynamics seem to ensure that not every level of our government can be broken at the same time.

It’s also a dramatic role reversal from a couple decades ago, when the nation’s big cities were synonymous with failure and decline. From New York to Detroit, Cleveland to Los Angeles, U.S. urban centers were beset by deindustrialization and toxic waste, rising poverty, soaring crime rates, municipal corruption, racial friction and middle class flight to the suburbs.

Overwhelmed by these economic and social maladies, many urban leaders took refuge in victimhood and looked to Washington for salvation. As I’ve noted elsewhere, many cities seemed to develop a cargo cult mentality, waiting like Pacific islanders during World War II for pallets of federal aid to drop miraculously from the sky – which never came.

What came instead was a new wave of reform-minded mayors preaching self-reliance and homegrown solutions to local problems. These included pragmatic progressives like John Norquist in Milwaukee, Ed Rendell in Philadephia, Cory Booker in Newark and Martin O’Malley in Baltimore, as well as moderate Republicans Rudy Guiliani and Michael Bloomberg in New York. They used innovations like data-driven analysis and community policing to drive crime rates down. They experimented with ways to reduce welfare dependency and demolished public housing complexes that concentrated and isolated the poor. A few brave souls took over abysmal inner city school systems, cutting swollen bureaucracies, launching innovative charter schools, and holding principals and teachers accountable for student performance.

Metros on Top

Today, America’s cities and metro regions are the star performers of our federal system. They are America’s main hubs of economic innovation and dynamism and are reviving the U.S. economy from the ground up.

Houston, for example, as Derek Thompson of The Atlantic notes, has added more than two jobs for every one it lost in the Great Recession. Katz and Bradley report that cities like Portland and Tampa are concentrating on boosting exports into global markets. In Northeast Ohio, Cleveland and other cities are collaborating on joint strategies to become a hub of advanced manufacturing, targeting 3-D printing in particular. After the recession/financial crisis, Bloomberg launched an imaginative competition to attract engineering and applied science campuses to New York, to lessen the city’s economic dependence on Wall Street.

To Katz and Bradley, it all adds up to “an inversion of the hierarchy of power in the United States.”

The urbanologist Alan Ehrenhalt sees another kind of inversion at work in America’s metropolitan regions. As he explained in an interview with Smartplanet.com:

The demographic inversion simply means that, contrary to where we were a generation ago, with the inner city meaning “the place where poor people live” and the exurbs being where the affluent flee to; in the future, the center of the city is going to be where affluent people choose life. Not necessarily by tens of millions, but in significant numbers. Suburbs are going to be the place where immigrants and the poor congregate.

What’s behind this change? The disappearance of heavy manufacturing from many cities, says Ehrenhalt, has made them more attractive places to live. So has the steady decline in crime rates over the past several decades. And millennials in particular seem to find urban life more exciting than the placid suburbs most of them grew up in.

O Come Emanuel

If there’s a poster child for the metro revolution it’s probably Chicago Mayor Rahm Emanuel. A former adviser to President Clinton and Member of Congress, the acerbic Emanuel left his job as President Obama’s Chief of Staff to run for Mayor after longtime Mayor Richard Daley decided to call it quits. “Washington is dysfunctional politically, and it’s not just a momentary thing,” he explained to the New York Times’ Tom Friedman.

We’ve always said that there’d be a day when all that the federal government does is debt service, entitlement payments and defense. Well, folks, that day is here. So, federal support for after-school programs has shrunk. We added to ours, but I had to figure out where to get the money. The federal government is debating what to do with community colleges. We’ve already converted ours to focus on skills development and career-based education. I worked for two great presidents, but this is the best job I’ve had in public service.

None of this means Washington is at risk of becoming irrelevant – sorry, conservatives. But it does argue the merits of a serious push for a systematic decentralization of decisions and resources to state and local governments. It’s time to revisit former Congressional Budget Office chief Alice Rivlin’s ideas for devolving large responsibilities from Washington. And even during the present political stalemate, there are things Congress and the White House can do to enable local leaders to succeed. One is a generous waiver policy to allow for greater state and local experimentation. Combining lots of small programs – the federal government has 82 for teacher training alone – into broad, performance-based grants would also promote both local flexibility and efficiency.

Most important, progressives should get out of the habit of treating Washington as the line of first resort when some urgent problem demands a governmental response. Congress, the National Journal reports, is more ideologically polarized than ever. Not coincidentally, the previous Congress was the least productive in modern times. The current one – already effectively closed for serious business until November’s midterm elections — could turn out to be even more barren of legislative achievement.

And since no one seems to know how to throw the engines of polarization and hyper-partisanship into reverse, Washington is likely to remain mired in impotence and inertia for quite a while.

But don’t give up on democracy in America just yet. As conservatives try to undermine public confidence in government yet further, progressives should look outside Washington to local governments that are proving to be effective instruments for advancing the common good.

The piece is cross-posted from Republic 3.0.

College – Worth it or worth less?

Posted on by The Progressive Policy Institute

College has never been worth so much – or so little.

New research from the Pew Center shows the wage gap between those with a college degree and those without is at an all-time high. Moreover, the college wage premium has actually been widening. Yet at the same time, real average earnings for young college graduates are at historic lows – down 6 percent from 2007 levels, even as the labor market recovers. Average student debt per borrower has climbed to a staggering $29,400.

Does this double-sided truth about the “value” of college mean that today’s four-year model is sustainable, or is it a sign that change is coming?

At first blush, one might conclude that going to college – specifically a four-year college – is a necessity. But that misses the point of what’s actually driving the wage gap between college and non-college grads, something that young college graduates already know – that not all of this boost is because of a lift-off in the bachelor’s degree job market.

In reality, a college degree is worth “more” in large part because a high school diploma is worth so much less. My research shows college graduates, particularly recent graduates, are increasingly taking lower-skill jobs at the expense of their less educated peers. Because many new jobs being created are low-skill instead of middle-skill, college graduates are getting first dibs, squeezing those with less education from the workforce.

Even worse, the price to compete for these lower-skill jobs is getting higher. As college becomes less affordable, and the labor market less generous, fewer people are able to buy the seemingly only ticket in town for success. New Fed data shows outstanding student debt increased $53 billion in the last 3 months of 2013 alone, with student loans dominating all new borrowing by young Americans under 30 in 2013. Succeeding in today’s higher education model allows for little margin of error: either you make the sacrifice and get the four year degree, or it’s game over.

No group epitomizes the failings of the current college system more than those who enrolled in college but failed to graduate – college drop-outs. Though often left out of the conversation, the latest figures show that the average four-year completion rate for those entering four-year colleges was 38.6 percent and that the six-year completion rate is still just 58.8 percent (rates are lower for two-year schools, but many transfer to other institutions). Minorities and low-income Americans are even less likely to complete college, exacerbating already growing inequality.

College drop-outs face the worst struggle of all. On average, they make little more than those with a high school diploma but are still saddled with thousands in student debt. They are at the highest risk of defaulting on their student loans, by some estimates up to four times more likely than graduates. They are the most vulnerable in terms of financial security, from slipping into a hole they cannot climb out of.
The large share of college drop-outs is evidence that the current structure of postsecondary education as the main vehicle for workforce preparation isn’t working.

Their fate is also an indication that the future of college may – and should – look very different. The ongoing revolution of low-cost, high speed broadband makes education more accessible, affordable, and customizable. This, coupled with decreasing returns on the four-year college model, should lead to more post-secondary pathways into the workforce (such as German-style “apprenticeships”). These alternative pathways have the potential to be just as effective at preparing people for the world of work, except at a lower cost. The nature of today’s innovative data-driven economy means preparing for tomorrow’s high-skill, high-wage jobs will naturally include digitally-oriented training and a dynamic curriculum.

The ideal post-secondary system of the future should correct some of the biggest workforce challenges facing Americans today. These are Americans who are unable to afford college, or who don’t want to take on thousands in student debt to succeed.

One way this could happen is if the current four-year model of college becomes one of several options after high school. Instead, what we could see is employers becoming better integrated into the workforce preparation process, as current workforce demands are unmet and training becomes a lower cost proposition that can be virtually administered. We may also see a renaissance in vocational training, which can cost-effectively prepare workers for well-paid technical and even computer and data-driven jobs. Industry certifications could take the place of a degree. It may be that only a few will pursue a four-year degree, much like a doctorate-level credential is pursued today, in specialty fields.

Still, wholesale change is unlikely to happen quickly, so long as the generous federal student aid system in place prolongs the current college model. The federal government administers more than 90 percent of new student aid – to the tune of more than $100 billion annually – but demands little accountability on the part of institutions and borrowers in terms of graduation rates and employment success.

For the millions of young Americans who’ve already been left behind, reform can’t come soon enough. That’s why the conversation to rethink college must begin now.

This piece is cross-posted from Republic 3.0.

Politico Magazine: Rand Paul’s Foreign Policy Is a Mess

Posted on by The Progressive Policy Institute

If the Crimea crisis has revealed flaws in President Barack Obama’s passive “realism,” it has also exposed the utter incoherence of Rand Paul’s foreign policy—which, despite a reputation for being principled and bold, is in fact all over the place.

If that sounds too harsh, try making sense of the Kentucky senator’s contorted response to Russia’s aggression in Ukraine. Paul, the latest favorite for the GOP’s 2016 presidential candidate, came out blasting in a recent Time op-ed, declaring that Russian President Vladimir Putin “must be punished” for violating Ukraine’s sovereignty and asserting that Obama isn’t up to the job. “If I were president, I wouldn’t let Vladimir Putin get away with it,” Paul huffed.

Such gasconade seemed out of character for the anti-war libertarian. He opposes U.S. intervention just about everywhere—whether in Syria, which he sees as an invitation to another Iraq-style quagmire, or Iran, where he rejects preemptive U.S. strikes in favor of diplomacy or, failing that, a containment policy. Sure enough, the day after his Time article appeared, Paul was back to his usual dovish tone. In a Brietbart op-ed, he prescribed the “strategic use of soft power” to counter Putin and accused unnamed politicians—clearly his GOP presidential rivals—of beating their chests: “What we don’t need right now is politicians who have never seen war talking tough for the sake of their political careers.” Those who invoke Ronald Reagan to justify their bellicosity, he added, should remember that some similarly overzealous hawks called the Gipper an appeaser for negotiating nuclear arms accords with Soviet leaders.

Confused?

Let’s step back to January 2011, when the ophthalmologist-turned-politician Paul rode the high tide of Tea Party insurgency into the U.S. Senate. Despite having zero international experience, he was nothing if not clear and consistent on foreign policy. Like his father and libertarian icon, the now-retired Texas congressman Ron Paul, Rand called for America to mind its own business instead of trying to solve other countries’ problems. He regularly excoriated GOP neoconservatives for having pushed the nation into protracted and costly wars during the Bush administration, and made no secret of his desire to get America out of the superpower business.

Continue reading at Politico Magazine.