Category: Uncategorized

NYT: Race Gap on Conventional Loans

Posted on by The Progressive Policy Institute

In the New York Times Lisa Prevost  referenced PPI Senior Fellow Jason R. Gold’s proposal to mitigate the inequitable access to loans in the conventional market between minority applicants and nonminority applicants.

The statistics show that Black and Hispanic applicants are far more likely to be turned down and that they are opting for F.H.A. loans that can prove expensive because of the high mortgage insurance premiums. This situation leads to a problematic dual housing market based on racial and ethnic groups. Before the need of a broadening of the lower-down-payment availability, Gold suggested the creation of HomeK accounts. This system would enable workers to single out up to 50 percent of their contributions from a retirement account into this HomeK account:

The HomeK accounts would give workers the option of using up to half of their contributions to 401(k) retirement savings for a down payment on their first home.

Read the entire New York Times article here.

KUOW: Is The Tea Party Over?

Posted on by The Progressive Policy Institute

Raymond Smith, PPI senior fellow, was interviewed by Ross Reynolds of KUOW-Seattle on the Tea Party’s waning influence.

Smith made it clear that the Tea Party was declining, but not gone yet. He explained that in the long run, the Tea Party wasn’t a sustainable party in the U.S. two-party system, like many others fringe parties. It is more like a political movement, an anti-system party without any chance to take power:

In a two-party system, either it gets control of one of the two major parties, or it burns itself out.”

Listen to the entire KUOW-FM interview here.

Private Sector Investment and Innovation Must Be Encouraged

Posted on by The Progressive Policy Institute

PPI has consistently argued that in most cases, pro-investment and pro-innovation policies will give the best long-term results for raising the living standard of ordinary Americans, boosting domestic production, creating jobs and raising real wages. Today, private investment and nonresidential investment in equipment and structures as a share of GDP is still significantly below pre-recession levels. As a result, we believe that government policymakers should pay close attention to promoting investment, innovation, and productivity.

These principles should influence the government approach to mergers such as proposed combination of Comcast and Time Warner Cable. Antitrust authorities should assess the merger on the basis of how it might affect investment, innovation, and productivity as well as competition grounds. In addition, PPI research, based on official government statistics, shows that investment in the tech/info sector is creating job opportunities for blacks and Hispanics.  These benefits should be part of the merger assessment process as well. (See https://www.www.progressivepolicy.org/2014/01/can-tech-help-inner-city-poverty/).

Protecting the Environment for Innovation: A Regulatory Improvement Commission

Posted on by The Progressive Policy Institute

A Regulatory Improvement Commission would solve the issue of regulatory accumulation, the layering on year after year, of new rules atop old ones. The fundamental problem is not that government keeps creating new rules, but that it never rescinds old ones. As a result, U.S. businesses and entrepreneurs are enmeshed in an ever-growing web of complex rules that are sometimes duplicative, sometimes in conflict with each other, and sometimes obsolete. Like barnacles on a ship’s hull, the sheer number and weight of regulations imposes a drag on economic growth. Regulatory accumulation also raises the costs of entry to entrepreneurs, and creates big opportunity costs as the time and attention of business managers is consumed by compliance with rules rather than creating new products or better business processes.

This problem demands an institutional response. It is unrealistic to expect the same agencies that promulgated rules to eliminate or modify them. Some new entity must be created and charged exclusively with pruning old rules that inhibit innovation and entrepreneurship. PPI has proposed creation of a Regulatory Improvement Commission (RIC) to fill this vacuum. It is modeled on the Defense Base Realignment and Closure Commission (BRAC), which Congress created in 1990 to create a politically feasible way to reduce excess military infrastructure.

The RIC would consult experts, business and the public to draw up a list of regulations that should be eliminated or improved, and present it to Congress for an up or down vote. As a small body that convenes occasionally, and relies largely on staff loaned to it by Congressional and Executive Branch offices, its costs would be negligible. The savings — both in terms of retiring costly rules and reducing the drag of regulatory accumulation of economic growth and entrepreneurship — could be enormous.

Like BRAC, the RIC would provide political cover to Members of Congress, who otherwise would have to vote individually on rules often defended by entrenched and politically powerful interests. The process of “getting it done” has already begun: Sens. Angus King and Roy Blount last year introduced bipartisan legislation in the Senate to establish the RIC.

The above remarks were prepared for delivery at the Kauffman Foundation’s 2014 State of Entrepreneurship event on February 12.

For recent PPI work on regulatory reform, see our latest policy memo and op-ed.

Speaker Boehner on Debt Limit Hot Seat

Posted on by The Progressive Policy Institute

WASHINGTON, D.C.—PPI President Will Marshall released the following statement on the House’s impending vote on increasing the debt limit:

Speaker Boehner’s decision to bring a ‘clean’ debt limit increase to the House floor this evening is a welcome if belated concession to political reality. It acknowledges President Obama’s point that raising the debt limit doesn’t enable new spending, but only ensures that America honors the bills it’s already agreed to pay. And it’s an unmistakable repudiation of the Tea Party’s destructive fiscal brinkmanship over the last several years.

“Nonetheless, the Speaker still must find enough Republican votes to get the debt ceiling increase through the House. A failure will call into question both Boehner’s ability to lead the House majority and the Republican Party’s willingness to put partisanship aside and govern in the national interest.”

– END –

How Do Tea Parties End?

Posted on by The Progressive Policy Institute

Just how close is the Tea Party to its demise? Last week, Fox News didn’t even bother airing the group’s official response to Barack Obama’s speech, in which the president forcefully called for an end to tactics that prevent the government “from carrying out even the most basic functions of our democracy.” Even Speaker of the House John Boehner, who seemed so downtrodden last year, now has an extra spring in his step, and is daring to push for immigration reform over the vocal objections of the far right. All but the most extreme Republicans have abandoned their shutdown tactics, and though the GOP still vows to repeal Obama’s signature health law given the chance, the changing power dynamics on Capitol Hill are palpable.

Indeed, it’s been a rough few months for the Tea Party. Fewer Americans than at any time since 2010 now call themselves members or supporters of the group. The tactic of running far-right candidates in Republican primaries clearly cost the GOP control of the Senate in 2010 and again in 2012. Their intransigence also helped to prevent Mitt Romney from defeating the president they have so vilified. All this has sparked counter-mobilization by the GOP Old Guard too: Since last fall’s ill-conceived Tea Party-led gambit to shut down the government, defund the Affordable Care Act and potentially default on the national debt, establishment Republicans have boldly lashed out at conservative outside groups that once had them cowering in fear, while pouring millions of dollars into races across the country to bolster moderates against right-wing insurgents.

At the same time, some of the leading Tea Party figures on the national stage are now departing from elective office, including Rep. Michele Bachmann (R-Minn.), who won’t seek reelection this year, and Jim DeMint of South Carolina, who left the Senate last year to become president of the Heritage Foundation. Others have consolidated their positions as national laughingstocks—most notably former veep wannabe Sarah Palin, but also the filibustering, Dr. Seuss-reading Sen. Ted Cruz (R-Texas) who seems to be following the same trajectory, only faster. Others have been busy distancing themselves from the Tea Party, such as Sen. Marco Rubio (R-Fla.) taking a more moderate stance on immigration and Sen. Rand Paul (R-Ky.) choosing to emphasize civil liberties over more radical tactics..

There may still be plot twists, turns and even reversals ahead for the Tea Party, but the main question now is not if the group is in decline but what its endgame will be. Tea Party proponents have been quick to claim a long and victorious lineage in U.S. history, ranging from their namesake tax revolt in Boston in 1773 to the 1978 anti-tax Proposition 13 rebellion in California. It’s no surprise that the Tea Party is eager to stress such antecedents, since both led to huge victories: the American Revolution and the rise of Reaganism. Both historic episodes also share a heroic story of grassroots anti-government struggle followed by a supposed triumph of liberty.

So how does the Tea Party’s story end? Consider a wider lens, one that includes comparable movements in other democracies. The Tea Party is but one example of a common form of political insurgency—one that almost always loses in the long run. This kind of counter-establishment movement is common enough that comparative politics has a term for it: the “anti-system party”—a group that seeks to obstruct and delegitimize the entire political system in which the government functions. As explained by Giovanni Sartori, the Italian political scientist who coined the term in 1976, an anti-system is driven not by “an opposition on issues” but “an opposition of principle.”

“An anti-system party would not change—if it could—the government but the very system of government,” Sartori wrote. “[A]n anti-system opposition abides by a belief system that does not share the values of the political order within which it operates.”

Sartori had foremost in mind the various communist parties active in Western Europe during the Cold War, but the concept has been applied to movements as varied as right-wing nationalists, radical libertarians and ethnic separatists all across the world.

Without adopting the phrase itself, the Tea Party in both words and deeds has positioned itself as America’s newest anti-system party. Claiming the mantle of patriotism, Tea Partiers say they love the United States while hating the U.S. government—its practices, its rules and especially its procedures for achieving compromise and consensus. The litany of anti-government Tea Party efforts is by now familiar. In Congress: shutting down the government, abusing the filibuster, threatening a default on the debt. During elections: suppressing the minority vote under the guise of fraud prevention, undermining the Voting Rights Act, aggressively gerrymandering for partisan advantage, challenging the citizenship of the president. In political rhetoric: vilifying the “47 percent” who are “bribed” by the welfare state, denouncing Republican-inspired and market-based health care reforms as socialism, lamenting the passing of the white Christian conservative hegemony of “real America.”

The Tea Party’s rhetoric and actions may be bold, but they are not sustainable. While anti-system parties’ ideal outcome would be to take over and re-make the political system entirely, this rarely happens—it requires a full-blown revolution, not mere incremental change. To the chagrin of most Tea Partiers, the world’s preeminent anti-system party was undoubtedly the Bolsheviks during the late tsarist era in Russia.

More typically, anti-system parties are seduced into becoming a part of existing structures of power, such as when the French Communist Party joined Socialist-led governments when they came to power the 1980s and 1990s. More often, however, anti-system parties bring political ruin upon themselves through their own excesses and then dissolve into political irrelevance, which is increasingly the trajectory of The Tea Party.

This process is well underway not only in the United States but also in several other Western democracies in which anti-system parties emerged after the global financial meltdown of 2008-2009. One telling example is Britain, where in 2010 the Eurosceptic, right-wing populist UK Independence Party (UKIP) launched a challenge to the Conservative-Liberal coalition government. The party has been rallying behind a leader, Nigel Farage, who has been dubbed “the British Ted Cruz.” But under Britain’s winner-take-all electoral system, the UKIP now seems likely to swing the next general election back to Labour by siphoning votes off in regions that would otherwise be Tory strongholds, thus ensuring the UKIP’s own political irrelevance.

In Italy, the anti-system Five Star Movement had a robust third-place showing in the 2013 national elections, winning one in four votes. But the group then refused to join a new government, instead maintaining what they deemed a principled unwillingness to compromise. Similarly, in Greece, the radical-left Syriza Party placed a strong second in 2012 elections but decided not to join a broad coalition, instead becoming the country’s main opposition party. In both Italy and Greece, the political system has already begun to move on and forge fresh political alliances and new majority configurations—all without the participation of the anti-system parties, whose members preferred to remain obstructionists rather than part of the solutions to their countries’ crises.

Although such self-defeating behavior usually seals the fate of anti-system parties, a more hopeful endgame suggested by Sartori is that of “reciprocal relegitimization.” In this scenario, both sides of the conflict accept the basic legitimacy of the other, and the perspectives of the anti-system parties become integrated into a new consensus. Think of nascent democracies such as post-apartheid South Africa and post-Pinochet Chile. Some bitterly divided former communist countries in Europe, such as Poland and the Czech Republic, have also been able to reconcile forces of both right and left and to refashion themselves as model European states. Those unable to do so, notably Ukraine today, face ongoing strife.

Although the United States is generally not as polarized as these societies, the U.S. government has been bitterly divided in recent years. Fortunately, the basis for reciprocal relegitimization in the United States has, in fact, already begun to come into focus, coinciding with the Tea Party’s weakening. The eleventh–hour vote last fall to reopen the federal government and avert a catastrophic default offered the faint outlines of a centrist governing coalition. The measure passed the Senate 81–18 and the House 285–144, with support from the leadership of both parties in both houses and from the president. The subsequent budget deal, struck between Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) and passed into law in December despite Tea Party laments, rolled back the mindless cuts of the 2013 sequester and promises to avert future crises. In the House, as throughout much of the nation, Republicans have begun to move beyond the Tea Party’s thrall.

So what happens next? Asked about oppositional “third party” movements in American history, the historian Richard Hofstadter famously said they are like bees—“once they have stung, they die.” The Occupy Movement, the Tea Party’s ostensible left-wing anti-system counterpart, already had its day, made its mark and has expired as a political force. The Tea Party has most definitely stung. Now there can be but one last stage ahead.

This op-ed was originally published by Politico Magazine.

Has the FCC Chairman Solved the Net Neutrality Quagmire?

Posted on by The Progressive Policy Institute

Up until the D.C. Circuit’s recent decision in Verizon v. FCC, extreme voices of the political spectrum dominated the “net neutrality” debate. The far left pressed for extensive government interference in the dealings between broadband providers and websites. And the far right questioned the FCC’s authority and need to regulate Internet services. The D.C. Circuit truncated both sides of the distribution of voices; by rejecting the left’s draconian methods, and by affirming the FCC’s authority and basis to regulate Internet services, the Court paved the way for a reasonable compromise. To satisfy the Court, however, the new regulatory regime must leave “substantial room for individualized bargaining and discrimination in terms” of special-delivery arrangements; else it would amount to an outdated mode of regulation called “common carriage.”

The solution, which Bob Hahn, Bob Litan and I have been peddling for a few years, involves the FCC making case-by-case decisions or “adjudication” in administrative law. In a nutshell, the FCC would permit special-delivery arrangements between broadband providers and websites, but the agency would police abuses of that newfound discretion through a complaint process. Adjudication would ensure consumer protections on the Internet, and it will bolster the incentives of both websites and broadband providers to invest at the edges and the core of the network, respectively, generating even more benefits to consumers.

Fortunately, the two Bobs and I are no longer the sole defenders of adjudication. In the two weeks since the decision, adjudication has been endorsed by Professor Kevin Werbach in the Atlantic, Professor John Blevins in the Washington Post, and Professor Stuart Benjamin in his blog post. Most importantly, the concept was floated by FCC Chairman Tom Wheeler in a recent speech in Silicon Valley, and made even more explicit in his speech at the State of the Net conference this week. From an economic perspective, adjudications are the most efficient and most equitable solution available to the Commission. Continue reading “Has the FCC Chairman Solved the Net Neutrality Quagmire?” →

Keep Nuclear Energy On The Table

Posted on by The Progressive Policy Institute

On Tuesday, President Obama’s State of the Union address touched briefly on the all-of-the-above energy strategy that his administration has made a priority for the past few years. However, one thing missing from his remarks about energy was nuclear power. Nuclear energy production must remain an important component of any successful U.S. energy strategy and part of the global climate change solution.

As President Obama rightly noted, “[America’s] energy policy is creating jobs and leading to a cleaner, safer planet.” Nuclear power isn’t the only answer to American energy needs, nor should it be. But it is an important part of the well-balanced solution. The United States is leading the way to safer and more economical plants and the sector continues to innovate and improve the technology for the next generation of nuclear energy facilities. Progressives must not run from supporting nuclear energy and should continue to consider it a viable clean energy alternative as part of a comprehensive energy plan.

Congress Should Heed the President’s Call and Pass Patent Troll Reform

Posted on by The Progressive Policy Institute

In his State of the Union address, President Obama promised to go it alone on many issues, but there is one issue where he will find Congress to be a willing partner: ending patent trolling.

Over the past year, Democrats and Republicans have quickly coming together to try to solve this growing area of litigation abuse that has been vexing America’s high-tech economy. In these lawsuits, shell businesses called Patent Assertion Entities (PAEs) – or derogatorily “patent trolls” – game the patent litigation system. They purchase dormant patents, wait for others to independently develop comparable technology, and then file patent infringement suits which is a strict liability tort. As the President explained last year, PAEs “don’t actually produce anything themselves.” They ‘see if they can extort some money’ by claiming they own technology others developed.

The President has made good on his promise to step up his efforts to stop patent litigation abuse. In his State of the Union address, he made a short, but important call for reform, saying “let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”

At the end of last year, the House passed Judiciary Chairman Goodlatte’s bill to reform the patent and litigation systems by a 325 to 91 vote – a rare, large bipartisan margin. Around the same time, Senate Judiciary Chairman Leahy introduced his own bill with some, but not all of these measures. It is time for everyone to come together and get something done.

The American people want their government to work again, and patent troll reform has a strong chance to succeed even in today’s bitter political climate. Democrats and Republicans both understand that patent trolling is pure litigation prospecting. It does not serve justice or inventors. Leaders of both parties should heed the President’s renewed call to pass patent troll reforms that support innovation, both as an American ideal and as a way to create jobs for the American people.

The American Prospect: Investments and Entitlements

Posted on by The Progressive Policy Institute

Entitlement programs have tended to squeeze out public investment. What is there to be done about that?

Having rolled the rock of entitlement reform up Mt. Sisyphus more than a few times over the last decade or so, I know it’s important to begin with the obligatories.  I prefer to define the challenge as “modernizing social insurance” but in truth such semantic fine-tuning doesn’t make the politics of reform easier.  Any suggestion that Medicare and Social Security need fixing touches the rawest of liberal nerves. It’s seen as sacrilege – literally, as Vice President Biden might say — by votaries of the programmatic status quo. This quasi-religious fervor has never made much sense to me, given the utterly pragmatic and experimental spirit in which FDR conceived Social Security. Nonetheless, let me say for the record that I’m reasonably fond of Social Security, Medicare and Medicaid and, far from compassing their destruction, would like to see them reformed for the benefit of my children and theirs.

So what’s the problem? Leaving aside some lesser flaws and anachronisms — including the fact that the basic Social Security benefit isn’t generous enough — the big entitlement programs present us with two large dilemmas. As currently structured, they squeeze out public investment and they create generational inequity. This post focuses on the former, economic problem, because it tends to get less attention than the distributional problem. Since the government’s resources are always going to be finite, it’s important that it strike a sensible balance between spending that supports present consumption and public investment that makes Americans more productive and competitive down the road. Today the balance is badly out of whack.

Regardless of where they stand on entitlement reform, most progressives agree that jobs and economic growth should take precedence over austerity. What I think many are missing is the link between constraining the growth of social insurance costs and a stronger economy. America is stuck in a slow growth trap. Since 2000, the economy has averaged less than 1.8% GDP growth a year, its worst performance since before World War II era. The slowdown in job and GDP growth, as well as middle class wage stagnation, began before the recession-cum-financial crisis of 2007-2008.

The basic problem, in other words, is structural. Due mainly to lagging business investment and innovation, eroding competitiveness, and skill shortages, our economy has lost its productive mojo. Americans have grown accustomed to consuming more than they produce, and borrowing to make up the difference.  Federal spending priorities have reinforced this consumption bias. Since the 1960s, Washington has been channeling an ever-rising proportion of the revenues it raises into consumption, especially of health and retirement benefits, while the portion of the budget devoted to economic and social investment has shrunk.

Feeding this dynamic is the inexorable growth of automatic, formula-driven spending on older Americans. Such “mandatory” spending now accounts for 60% of the nation’s budget. Meanwhile, discretionary spending (excluding defense), has fallen to just 17 percent. (In 1962, the ratio was roughly reversed: Discretionary spending (including defense) 67% percent of federal spending, mandatory spending 26%.) With most of federal spending on autopilot, the domain of democratic deliberation, where our elected representatives debate the nation’s needs, decide which priorities are worth funding and figure out how to pay for them, keeps shrinking. Lawmakers oversee a dwindling portion of the nation’s income and outgo, most of which already has been pre-committed to the big entitlement programs by politicians who are long dead.

I can think of many things to call this “crowding out” phenomenon, but progressive is not one of them. After all, domestic spending supports priorities liberals once fought and bled for. These include common goods like transport, water, and other vital infrastructure that supports economic growth; our national commitment to science and technology, perhaps our prime source of comparative advantage in global competition; and, the public education and training institutions that make “equal opportunity” more than a hollow slogan. Also being starved are progressive programs to help people lift themselves out of poverty, curb hunger, and expand early learning opportunities for families that can’t afford costly day care, not to mention environmental protection, public health and law enforcement.

Medicare and Social Security, which alone account for more than 37% of federal spending, are on track to absorb (along with interest on the debt) almost every dollar of revenue Washington collects over the next several decades. Meanwhile, the Urban Institute estimates that federal spending on children will decline about 20 percent over the next decade.  This growing disparity seems perverse at a time when poverty rates are higher for children than seniors (18 versus 14.8 percent in 2012, as measured by the Supplemental Poverty Measure). From the standpoint of investing in children and families, uncontrolled mandatory spending on seniors is like a fiscal version of the Doomsday Machine from Dr. Strangelove.

The fiscal skirmishing in Washington has aggravated this systematic whittling down of public investment. Since 2011, the Obama administration and Congressional Republicans have agreed to nearly $4 trillion in debt reduction over the next decade. Of the $2.7 trillion in savings thus far (excluding the effects of the odious “sequester” in future years), $1.55 trillion has come from spending cuts, $700 billion in new revenues from the fiscal cliff deal, and about $450 billion in interest savings. In other words, for every dollar in new revenue, lawmakers have cut spending by $2, and almost all of that has come out of the hide of domestic spending.

This is the inevitable consequence of twin ideological obduracies – the GOP’s anti-tax fanaticism and Democrats’ denial of the need to align social insurance with the inescapable reality of an aging society.  And it suits conservatives just fine. Before the Murray –Ryan budget deal softened the sequester’s bite (for two years anyway) The Wall Street Journal’s Stephen Moore chortled over the sequester’s “success:”

The sequester is squeezing the very programs liberals care most about – including the National Endowment for the Arts, green-energy subsidies, the Environmental Protection Agency and National Public Radio. Outside Washington, the sequester is forcing a fiscal retrenchment for such liberal special-interest groups as Planned Parenthood and the National Council of La Raza, which have growth dependent on government largess.

One reason enough Republicans voted to partially suspend the sequester is that it will also eviscerate defense spending. There was a time when the GOP identified itself as the part of national strength and “resolve” expressed through more military spending. Today Tea Party types and libertarians apparently feel more threatened by the federal government than by America’s enemies.

Of course, progressives could avoid a zero-sum conflict between entitlements and domestic programs by borrowing more money or hiking taxes. Unfortunately, either expedient collides with economic and political reality. More borrowing would propel the national debt to 100 percent of GDP and beyond, driving up interest and shrinking the “fiscal reserve” we’ll need to combat future downturns. Given the halting recovery, big tax hikes now are economically dumb as well as politically infeasible. Many liberals have convinced themselves that the entitlements can be made solvent as the boomers surge into retirement simply by raising the payroll tax. This is probably the least progressive “solution” imaginable. By making labor more expensive, it would discourage employers from hiring workers, especially young and low-skilled ones. And it would transfer more wealth from young workers to retirees.

What progressives ought to do instead is strike a more equitable balance between mandatory and domestic spending (if not eliminate the distinction altogether by bringing entitlements on budget). Yet when President Obama dared to endorse “chained CPI,” a more accurate inflation measure that would reduce cost-of-living adjustments for Medicare and Social Security recipients, he was instantly flamed by lefty activists. Declared Stephanie Taylor of the Progressive Change Campaign Committee:

You can’t call yourself a Democrat and support Social Security benefit cuts. The president is proposing to steal thousands of dollars from grandparents and veterans by cutting cost-of-living adjustments, and any congressional Democrat who votes for such a plan should be ready for a primary challenge.

Will Democrats allow themselves to be intimidated by such reactionary liberalism, as Republicans now cower before Grover Norquist and the Club for Growth? If progressivism means anything, surely it’s a commitment to adapting old policies and programs to new economic and social realities. As custodians of America’s venerable social insurance programs, progressives are responsible for ensuring they work for future generations as well as for past ones. Today that means making the Big Three solvent amid an unprecedented demographic bulge; rebalancing the intergenerational compact to avoid putting unjust financial burdens on the young; and shifting public resources from consumption – especially by well-off retirees – to investments aimed at accelerating growth and social mobility.

 

This op-ed was originally published by The American Prospect as part of their forum titled: Progressive Perspectives on the Future of the New Deal/Great Society Entitlement Programs. You can find this piece, as well as the other articles in the discussion, on their website here.

PPI Applauds Obama’s Call for Year of Growth and Opportunity

Posted on by The Progressive Policy Institute

WASHINGTON, D.C.—Progressive Policy Institute Chief Economic Strategist Michael Mandel released the following statement after President Obama’s State of the Union Address:

“The Progressive Policy Institute strongly supports many of the proposals and thoughts advanced by President Obama in tonight’s State of the Union address. We agree with his emphasis on ‘concrete, practical proposals to speed up growth, strengthen the middle class, and build new ladders of opportunity into the middle class.’ Growth should come first on the progressive agenda, not redistribution. Increasing the minimum wage, as the President proposed, is a good idea, but only as part of a larger high-growth strategy.

“Equally important, we believe that the President is on the right track when he highlights innovation, investment, and technology. PPI’s research suggests that tech growth enables progressive goals, boosting jobs and creating opportunities for blacks and Hispanics. Indeed, from 2009 to 2013, employment of blacks and African-Americans in computer and mathematical occupations grew by 41 percent and employment of Hispanics in computer and mathematical occupations rose by 33 percent, far outpacing the overall growth of jobs over the same stretch. That’s why we were gratified to hear the President announce a deal with tech companies to help connect many schools, making it easier for inner city and rural students to take advantage of the opportunities created by growth.

“We applaud the President’s observation that ‘first-class jobs gravitate to first-class infrastructure.’ Studies released after the financial crisis confirm the economic benefits of spending on roads, highways and bridges. The country, states, and localities will gain in multiple ways from an increase in infrastructure spending.

“We appreciate President Obama’s willingness to tackle tax reform to lower rates for businesses that create jobs here at home. However we note that there are a variety of ways to accomplish this goal, some better than others.

“Finally, President Obama is right to make increasing college access and affordability a top legislative priority. Record levels of student debt at a time of historically low real earnings and high underemployment threaten to saddle an entire generation. It is clear the current structure of postsecondary education is no longer working.

“America needs a high-growth strategy. President Obama’s proposals would take some big steps in that direction.”

– END –

Financial Times: Barack Obama battles a sense of drift on State of the Union goals

Posted on by The Progressive Policy Institute

Barney Jopson writing for Financial Times quoted Michael Mandel, PPI’s Chief Economic Strategist, this morning.  Jopson’s article reflected on the President Obama’s accomplishments of 2013 in an effort to project the substance of tonight’s State of the Union address. The article discusses the President’s successes and failures at passing legislation since his last address, Mandel comments that:

Michael Mandel, chief economic strategist at the centrist Progressive Policy Institute, says the president should get credit for the result regardless of how it was achieved.

Read the entire Financial Times article here.

How Young People are Being Left Out of the Economic Recovery

Posted on by The Progressive Policy Institute
The latest unemployment figures seem promising for the young, but peeling back the numbers reveals that those without college degrees are being left out of the job market.
From the looks of it, young Americans are finally on their way to economic recovery. The latest jobs figures show unemployment for young Americans—those age 16-34—fell to 10.5 percent in December, down from a high of 15.1 percent in November 2009 and by a full 2 percent since last summer.A closer look, however, reveals not all young Americans are sharing equally in the labor market recovery. In fact, some young Americans are hardly experiencing a recovery at all. And many that are seeing a rebound in their economic fortunes still have a long way to go.Happily it doesn’t have to be all doom and gloom. There are ways policymakers can help struggling young Americans reclaim their future, starting with making their plight a bigger priority in 2014.As it has been for years, young Americans with a college degree are much better off than those without one. The stark contrast is evident when looking at labor force participation rates, which is the share of the population that is counted as employed or unemployed. For young Americans with a post-secondary degree, labor force participation rates have been stable since 2010, but for those with some college or only a high school diploma, rates continue to fall. For young Americans without a college degree, it appears unemployment is falling at the expense of labor force participation.Still, as young college graduates are all too aware, a four-year college degree is no longer a guaranteed ticket to financial success.  It turns out that those with a college degree are finding jobs, but increasingly ones that are lower-skill. The result is a rise in underemployment and historically low real earnings. In 2012, young Americans age 18-34 working full-time with a bachelor’s degree earned about $54,300, in real terms. This is only slightly higher than the 16-year record low set in 2011, and in annual terms remains $3,300 below where it was pre-crisis in 2007.

Adding insult to injury is the rising student debt burden, about 90 percent of which comes from a decades old federal aid system that needs reform. Under the current system, college students are essentially stuck in the middle of a game of chicken between generous federal aid and rising college tuition. For example, the “historically low” increase in college tuition last year was still three times the average increase in real earnings for young college graduates in 2012. With average debt levels now at a staggering $29,400 per borrower, many young Americans and their parents are understandably rethinking the value of a college education.

As tough as young college graduates have it, this is still far better than the reality of young Americans without a degree. New PPI research finds that the unemployment rate for young Americans age 16-34 with only a high school diploma, though falling, remains over 14 percent, compared to 5 percent for young college graduates. Worse, real average annual earnings for young Americans with only a college degree were just $32,900 in 2012, still about 4 percent lower than real earnings in 2007.

Fortunately, opportunities exist for policymakers to help. With a concerted effort, we can design policies that directly target young Americans in and out of school and encourage better alignment of the skills of young Americans have with the needs of employers. This may include comprehensive education reform, redefining post-secondary education and training, addressing the rising cost of college and student debt, and promoting investment and asset building activities.

For example, over the next year, the Higher Education Act (HEA) is coming up for reauthorization. HEA could provide policymakers with an opportunity to reaffirm the value of college, by using the administration of federal student aid to encourage alternative forms of higher education.  Going to a four-year college is so ingrained in society it seems to be the only acceptable option after high school; there is now almost one four-year college for every U.S. county. As a result, poor performing colleges get a free pass that doesn’t do anyone any favors—especially their graduates.

The first step to helping young Americans in 2014 is to convince policymakers to take their economic struggles seriously. If policymakers use the start of a new year as a new start for young Americans, 2014 could be a better year for all 80 million young Americans. Moreover, it could lay the groundwork for economic growth and prosperity in America for years to come.

 This piece was originally published by The Daily Beast, you can read it on their website here.

Can Tech Help Inner City Poverty?

Posted on by The Progressive Policy Institute

Tech/information companies these days flock to high-density urban areas such as New York and San Francisco. Fewer and fewer entrepreneurs want to put their startup out somewhere in a suburban office park.  Instead, they place their new firm in places which are attractive to young tech workers.

As a result, the tech/information boom is generating jobs in downtown areas that are more accessible to inner city workers, who are typically less likely to have cars. What’s more, there’s a social element: If tech/information companies are located in dense downtown areas, they are more likely to want to help local schools.

The question is: Who is going to get those jobs? As has been repeatedly reported,  tech has a major diversity problem, especially in the startup community (see, for example, this recent article).  Organizations such as All Star Code, Black Girls Code,  and CoderDojo NYC are helping connect inner city youth with tech opportunities, but it’s a slow process.

However, despite the diversity problems, there are reasons for optimism in the broader tech/information industry, going beyond startups. In fact, we’ve just gotten a round of new data from 2013 which shows how tech growth is helping black and Hispanics. This new data enables us to update previous results that we reported.  Take a look at the chart below.

 

From 2009 to 2013, employment of blacks and African-Americans in computer and mathematical occupations grew by 41%,  compared to 7.5% growth for black workers in all occupations. Over the same period, the employment of Hispanics in computer and mathematical occupations rose by 33%, compared to 15% for Hispanic workers in all occupations.

What kind of tech jobs are we talking about? The data doesn’t give a clear picture, although it looks like blacks and Hispanics are getting a wide range of tech jobs, from software developers to customer support. But here’s a couple of charts that give more insight.

This chart shows that  black workers are getting a rising share of  computer and mathematical jobs, while their share of  in managerial and professional occupations, a much broader classification.  That suggest that educated black workers are shifting over to tech.

The situation is somewhat different for Hispanic workers, who have gained ground both in tech jobs and in the broader managerial/professional occupations at roughly the same rate.  In this case the rise in the Hispanic share of tech jobs is part of a broader set of gains in high-skill jobs.

Encouraging Investment in America

Posted on by The Progressive Policy Institute

In an ideal world, Congress would take up tax reform comprehensively, as part of a high-growth strategy. In fact, PPI is currently working on a tax framework for progressives, for how to modernize the entire tax system for individuals and corporations.

Unfortunately, the reality is that wholesale reform is not currently a politically viable option. Therefore, we must consider discrete pieces of tax legislation, with the idea that as long as we are promoting innovation and growth, small measures are better than nothing. One such tax measure currently up for Congressional debate is an extension of the so-called “bonus depreciation” deduction, first enacted in 2008. The intention of the deduction is to encourage U.S. companies to invest domestically, by allowing them to deduct 50 percent of their capital expenditure costs upfront instead of over time. In other words, it makes it more financially attractive for U.S. companies to invest in America – be it to increase factory production, purchase new transportation equipment, or deploy broadband networks.

PPI has done extensive research on the importance of encouraging domestic investment as part of a high-growth strategy. Our annual “U.S. Investment Heroes: Companies Betting on America’s Future” report highlights the top 25 U.S. companies investing in America’s productive capacity, through their domestic investment in plants, properties, and equipment. In our 2013 report, we found that “several companies on our list highlighted this measure [bonus depreciation deduction] in their discussion of 2012 capital investments” as a key reason for their strong U.S. investment.

Investment is the building block for job creation and gains in wages and standard of living. That means we must do everything we can to promote economic growth through investment, including the extension of the bonus depreciation deduction.

The Fiscal Times: College Grads Are Elbowing Aside Less Educated for Jobs

Posted on by The Progressive Policy Institute

Eric Painin, writing for The Fiscal Times, featured recent work by Diana Carew, an economist for PPI, on recent graduates and their struggle to find employment. Painin used Carew’s recent report Jobs and Wages for Young Americans: Is Recovery Coming? to draw attention to the “Great Squeeze” in employment for Young Americans, writing:

“Since 2009, many of the occupations with the fastest employment gains for young people have been lower-skill jobs that typically pay less, according to a new report by economist Diana G. Carew of the Progressive Policy Institute.

Production, health care support and food preparation and serving occupations were the three main occupational groups to see gains for young Americans across all levels of educational attainment. The downside is that all three groups have mean hourly earnings significantly lower than the national average for all occupations.

Notably, young college graduates saw a 15 percent increase in office and administrative employment while more generally employment in this group declined, the report stated. “This is consistent with the argument that young college graduates are struggling with high underemployment,” Carew wrote – and in the process are squeezing their less educated rivals aside.”

Find the full article on The Fiscal Times‘ website here.