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The Recession and Unemployment

Posted on by The Progressive Policy Institute

PPI’s Michael Mandel was quoted in The Washington Post about the long-term effects of the recession on unemployment.

Many workers are nervous about their livelihoods despite the economic recovery — and for good reason, it turns out.

Among those workers who lost a good job because of the struggling economy over the past three years, roughly one in four found a job that pays as well, according to data released Friday by the Labor Department.

The others remained unemployed, stopped looking for work or accepted jobs at lower wages.

“This data is telling a story of unemployment inflicting long-term damage for a lot of people,” said Michael Mandel, an economist at the Progressive Policy Institute, a centrist think tank. “This won’t turn around until wages overall start rising — and so far, we haven’t seen any strong signs of that.”

Read the entire article HERE.

Election Watch: Akin’s Flap May Doom GOP Senate Takeover Chances

Posted on by The Progressive Policy Institute

It’s a rare event when a Senate contest affects a presidential campaign—or indeed, an entire election cycle. But for the moment, that’s what seems to have happened in Missouri, thanks to freshly minted GOP nominee Todd Akin’s witless talk about abortion and rape, and his determination (so far) to stay in the race despite threats and importuning from practically the entire Republican Party and conservative movement (with the exception of a few Christian Right colleagues). Most immediately, Akin’s big mistake has demolished what Republicans thought to be their most promising Senate takeover opportunity this year. Shortly after his primary win over two other major conservative opponents earlier this month, Akin, long considered the weakest of the available candidates, had already opened up a big lead over Sen. Claire McCaskill, and was beginning to consolidate conservative support very rapidly. Now a new Rasmussen poll (of all things!) shows McCaskill up by ten points, with Akin’s favorable/unfavorable ratio at a disastrous 35/53 level.

No one but Akin himself can get the wounded candidate off the ballot at this point, and with the deadline for an easy withdrawal and replacement by the state party having already passed, it would be complicated to make the switch, aside from the depleted resources, hurt feelings and late start a new nominee would inherit. So we are now in the midst of a game of “chicken” in which Akin may still believe the state and national GOP will relent and support his candidacy once the current furor has ended, and Republicans will undoubtedly keep the pressure on to convince him he’s throwing away a Senate seat and the good will of the party forever and ever. My money’s on an eventual withdrawal, but the hard-core public support he’s gotten to hang tough from Mike Huckabee, a pretty formidable figure in the GOP and a potential 2016 presidential candidate, is an important counterweight to that temptation. Another factor will be whether grassroots Christian Right forces around the country embrace Akin as a martyr to their ban-abortion-with-no-exceptions cause, and provide him with the money to run a credible campaign without the party, 501(c)(4) and super PAC funds he’s been denied. Continue reading “Election Watch: Akin’s Flap May Doom GOP Senate Takeover Chances” →

FCC: A Broadband Assessment without Mobile is Incomplete

Posted on by The Progressive Policy Institute

This week the FCC concluded that “broadband is not being deployed to all Americans in a reasonable and timely fashion” in its eighth annual “Broadband Progress Report.”  It found 19 million Americans are still without fixed broadband access.

But note the word ‘fixed’ – this conclusion doesn’t include mobile access. The FCC didn’t forget wireless broadband; they explicitly chose not to include it. In fact, the FCC is operating under the mandate that all Americans should have access to fixed and mobile broadband. They use this as a justification for excluding mobile in their determination – that it should be assessed separately, even though no such assessment has been made. So someone who has a smartphone but no access to a wireline connection still counts as not having access.

That’s just silly – by excluding mobile access, the FCC is missing the fastest growing segment of the broadband market. And at this point it may take longer for all Americans to have access to fixed broadband than to mobile. The Telecommunications Industry Association estimates investment on mobile broadband infrastructure could total $100 billion through 2015. The FCC’s own data suggests that if access to either fixed or mobile were counted, the number of Americans without broadband access could be as low as 5.5 million.

Such an obvious exclusion makes the report’s findings hard to use in a meaningful way. It’s like judging a book by its cover – you’re missing a vital part of the story. Yet important regulatory decisions are being derived from this report. The only conclusion I derived from this report is that the FCC needs to adapt its mandates in a way that keeps pace with the fast-changing broadband landscape.

DeMarco Half Right on Short Sales

Posted on by The Progressive Policy Institute

Edward DeMarco, the beleaguered chief of the Federal Housing Finance Agency, announced this week that Fannie Mae and Freddie Mac will take steps to accelerate “short sales” to reduce home foreclosures. Short sales allow the owner of a mortgage, in this case Fannie Mae and Freddie Mac, to accept a loan payoff for less than a full balance. This way, Fannie and Freddie take a much smaller financial hit than if they had to foreclose on a home altogether. And this saves taxpayers money.

So far, so good. But I’m puzzled as to why DeMarco only goes half way. PPI has a better idea: enable short sales back to the homeowner. That would have the dual benefit of saving taxpayers money and keeping people in their homes. But this would mean reducing the amount of principal on an underwater loan, and DeMarco is adamantly opposed to principal reduction. Continue reading “DeMarco Half Right on Short Sales” →

Should the FTC Make Innovation a Bigger Priority?

Posted on by The Progressive Policy Institute

The FTC’s recent settlements with Google and Facebook raise an interesting question about how such regulatory run-ins can affect future innovation.

The FTC fined Google $22.5 million for misrepresenting privacy assurances to users of Apple’s internet browser. And the FTC is requiring that Facebook obtain consumers’ express consent before sharing their information, maintain a comprehensive privacy program, and get independent biennial privacy audits after Facebook allegedly shared consumer information when they claimed it was being kept private.

My purpose is not to say whether these settlements were justified or not. The problem I’m referring to is not just one or two regulatory actions, but the fear that the government is going to keep regulating until these companies are scared into becoming more cautious. The analogy is yelling at a child every time he or she colors outside the line. Eventually the child will stop coloring.

In effect the FTC is drawing the lines within which these companies must operate and expand. The Googles and Facebooks of the world will have to watch their every move, and anticipate in advance how potential innovations may be scrutinized. Continue reading “Should the FTC Make Innovation a Bigger Priority?” →

Election Watch: Democrats and Republicans Elated By Romney/Ryan Ticket

Posted on by The Progressive Policy Institute

Without question, the big election-related event of the last week was the surprising announcement—both its content and its timing, before the Summer Olympics had ended—of Paul Ryan as Mitt Romney’s running-mate. I cannot recall any such event that (a) had so pervasive an immediate impact on the party in question’s general election strategy, and (b) was welcomed with such joy by activists in both parties.

The two dimensions of the choice are closely related. Whatever else you think of Romney/Ryan, this ticket represents a large strategic concession to the Obama campaign, which has been struggling all year to convert the election from a referendum on the economy to a choice of two future agendas for the country. Indeed, Romney’s promise that he would sign the Ryan Budget if passed by Congress was exhibit A in that effort. With Ryan on the ticket itself, and drawing enormous media attention for his views, the Obama campaign can declare “mission accomplished” in its most fundamental strategic mission (which is not to say, of course, that the “referendum” phenomenon has gone away entirely or that a downward lurch in the economy between now and November 6 might not be disastrous).

But the excitement of conservative activists about Ryan reflects their own unhappiness with the “referendum” strategy, not to mention their fears that Romney (a) might not be reliable if he wins, and (b) might not have a mandate to carry out the policies they desire. I’ve argued before that one of Romney’s problems is that he’s never quite ended the GOP primaries. The choice of Ryan achieves that objective decisively, and could give the GOP campaign slightly more tactical flexibility that it would otherwise enjoy. Continue reading “Election Watch: Democrats and Republicans Elated By Romney/Ryan Ticket” →

Why Romney’s Medicare Taxes Are So Low

Posted on by The Progressive Policy Institute

As the presidential candidates debate the fate of Medicare, it’s worth noting a very simple fact: Mitt Romney paid only 0.07% of his income in Medicare taxes in 2010. By comparison, the typical American worker paid 1.45% of his or her income in Medicare taxes plus an equal amount paid by the employer. In other words, Romney’s Medicare tax rate was about one-fortieth of the norm.

How did he manage this trick? The key is that investment income, which made up 97% of Romney’s total income in 2010, is not subject to payroll taxes that pay for Medicare or Social Security. That means he only paid Medicare taxes on his speaking and directing fees. If Romney had paid the full Medicare tax rate on all of his income, he would have paid about $628,000. Instead he paid $15,908.

Oddly enough, despite his relatively meager contribution, Mitt is also likely eligible for free Medicare coverage. Current Medicare rules stipulate that as long as he paid into the system for 10 years, he can still receive full coverage.

Because Romney is self-employed, he is paying both the employer and employee shares of the Medicare tax. We therefore compared his tax rate to the combined employer-employee rate for wage and salary workers (2.9% for Medicare taxes). And because he is self-employed Romney got to deduct a portion of his Medicare taxes to calculate his adjusted total income for tax purposes.

A new 3.8% Medicare tax on investment income for high income Americans, scheduled to go into effect in 2013 as part of healthcare reform, would dramatically boost the Medicare taxes paid by people with Romney-like returns. However, there are efforts underway in Congress to get it repealed.

Will Mitt Follow Ryan on Housing?

Posted on by The Progressive Policy Institute

Even as Mitt Romney basks in praise for his “bold” choice of Rep. Paul Ryan, he’s begun to distance himself from his running mate’s controversial proposals for revamping Medicare and Medicaid. Progressives should also ask Romney what he thinks of another of Ryan’s “bold” ideas: privatizing Fannie Mae and Freddie Mac.

Ever since Washington bailed them out four years ago – costing taxpayers $140 billion – the two mortgage giants have been in federal conservatorship. In Path to Prosperity, his budget blueprint, Ryan calls for their “eventual elimination.”

Where does Romney stand on Fannie and Freddie? It’s hard to tell, because since locking up the GOP nomination, Romney has been extremely reticent on the subject of housing. During the Nevada primary – in a state considered ground zero in the housing crisis – he did not exactly ooze sympathy for people at risk of losing their houses. Instead, he advised that government “not try and stop the foreclosure process. Let it run its course and hit the bottom.” In Florida, another hard-hit state, Romney focused not on solutions but on assailing Newt Gingrich for being a highly paid consultant to Freddie Mac as the housing bubble blew up. Continue reading “Will Mitt Follow Ryan on Housing?” →

Why Ryan Wants to Dump Fannie and Freddie

Posted on by The Progressive Policy Institute

PPI’s Jason Gold was quoted in the Fiscal Times about the willigness of Paul Ryan to severe the government’s relationship with the troubled mortage giants Fannie Mae and Freddie Mac:

“As the election season wears on, it’s just too big of a thing to ignore,” said Jason Gold, a senior fellow at the Progressive Policy Institute. “You’ll see the administration putting housing out there, because there’s such a void in Romney’s policies.”

Read the entire article here.

Election Watch: Campaign Attacks Heat Up with Conventions Around the Corner

Posted on by The Progressive Policy Institute

With the national political conventions right around the corner, both presidential campaigns have become notably more aggressive. The president, his super PAC and key surrogates have kept up a regular drumbeat of attacks on Mitt Romney’s record at Bain Capital, his identification with wealthy Americans, and his refusal to release tax returns. The Romney campaign’s latest gambit has been an ad claiming that Obama has “gutted” the 1996 welfare reform law and is now in favor of sending unconditional cash assistance to recipients.

Both campaigns have also continued the habit of loudly crying “foul” against opposition tactics. The Romney campaign and the conservative commentariat have become almost unhinged over the taunting of their candidate by Senate Majority Leader Harry Reid, who has repeatedly claimed a (unnamed) reliable source privately told him Romney’s hiding a decade of paying little or no federal taxes. It’s become axiomatic on the Right that Reid is simply making it all up, while some Democrats busily speculate about the possible identity of Reid’s source (with the Huntsman family of Utah, which has many close connections with Romney and with Bain Capital, and is also friendly with Reid, being the most common guess). Romney’s “welfare ad,” which tries to turn an agency announcement that the administration would entertain waiver requests from states into some sort of unilateral abolition of work requirements, gained a quick denunciation from former President Clinton, whose image is in the ad, and from welfare policy specialists in both parties.

It has been widely assumed that the “softening up” of Romney via a focus on his character and business record would soon give way to an all-out Democratic assault on the Ryan Budget and other controversial GOP policies, but the personal lines of attack, having exhibited some signs of success in undermining the candidate’s personal favorability ratings, are lingering on. Obama’s new catch-phrase “Romney Hood” represents one way his campaign is seeking to cross the bridge from biography to policy. Continue reading “Election Watch: Campaign Attacks Heat Up with Conventions Around the Corner” →

Simply False: Mitt Romney’s Cynical Welfare Nostalgia

Posted on by The Progressive Policy Institute

PPI’s Will Marshall, with years of experience in welfare reform during the Clinton years, criticized the false attacks by the Romney campaign on the Obama administration’s so called “dismantling” of work requirements to receive welfare.  In his article in the Daily Beast, Marshall explains how Romney’s cynical politics are “simply false.”

Republicans really miss welfare—the issue, not the program.

For decades, they used it to drive a wedge between Democrats and white working-class voters. But the GOP had no choice but to drop “welfare queens”  from its lexicon after President Bill Clinton signed a landmark bill in 1996 “ending welfare as we know it.”

Now Mitt Romney, running a thoroughly retro presidential campaign, is trying to bring the issue back to life. With all the subtlety and scrupulous regard for fact his campaign has shown in other attacks on President Obama—which is to say, absolutely none—it’s now accusing Obama of “unilaterally dismantling” the 1996 law by bureaucratic fiat.

What triggered this hyperbole was a Department of Health and Human Services decision last month to grant states waivers from federal welfare rules to help them cope with the effects of a prolonged economic slump. Liberals have had a field day noting that Romney’s attack on the HHS is doubly hypocritical: first because some Republicans were among the governors asking the agency for more flexibility, and second, because devolving decisions from Washington to the states is supposed to be a core principle for conservatives.

Proving once again that he does not fear the hobgoblins of inconsistency, Romney brushed such criticisms aside while stumping in Iowa on Wednesday. Instead, he accused the Obama administration of having “removed the requirement of work from welfare.”

That is simply false.

Read the entire article HERE.

Why the Tech Boom Has Not Yet Entered Bubble-land

Posted on by The Progressive Policy Institute

There seems to be a theory going around that the current tech boom has entered into bubble territory. In a piece entitled “Is the dot com bubble about to burst?”, one journalist wrote:

Sometimes, when a love affair ends, you can’t remember what it was you ever saw in someone in the first place. That is the feeling right now of a lot of once-amorous investors who breathlessly wooed Facebook at its flotation in May and paid $38 for the privilege of a share in the social network.

And certainly some other tech stocks have been disappointing to investors, including Zynga and Pandora. Indeed, some skeptical  spirits have pointed to the surge in the venture capital investments as a sign that the top is here.

But let’s be serious. While the tech boom will likely enter Bubble-land eventually, we are nowhere near that point. I will offer three reasons. First, as long as the big telecom companies are still pouring billions into extending the capabilities of their  high speed mobile networks,  there will be new apps to develop and new companies to start.  Indeed, we have not yet seen an iPhone with 4G connections.

Continue reading “Why the Tech Boom Has Not Yet Entered Bubble-land” →

The Big Companies Betting On America: AT&T And Verizon Lead The Way

Posted on by The Progressive Policy Institute

PPI’s popular summer policy brief, Investment Heroes, was picked up this week over at Forbes with analysis and commentary from Diana Carew. Carew explains how capital investments designed to increase efficiency still create jobs, points to foreign companies that would have made the list, and makes the case for a more positive view of Apple’s spending.

For all the talk about the trillions sitting on the balance sheets of the biggest U.S. companies, you might think that the S&P 500 is sitting on its hands and waiting for sunnier skies before investing capital.

The truth is rather different though, and a July report from the Progressive Policy Institute explains that capital investment, a critical means of growth for the economy, is hardly at a dead stop.

According to PPI, while the level of business investment remains below its 2007 peak, there are still companies shelling out hard-earned cash for new buildings, equipment and software. The think tank’s report lists 25 “Investment Heroes,” or companies that are pumping billions of dollars into the U.S. economy through their capital expenditures.

Looking over the list one thing becomes immediately clear: capital-intensive industries like telecom and energy are still spending. AT&T and Verizon Communications top PPI’s list, which drew on 2011 financial reports and regulatory filings by 150 of the biggest companies in the U.S.  with $20.1 billion and $16.2 billion in capital expenditures respectively. Exxon Mobil comes in third, with$11.7 billion, followed by Wal-Mart ($8.2 billion) and Intel ($7.4 billion).

Read the entire story HERE.

Move Over Demand, Make Room for Investment

Posted on by The Progressive Policy Institute

It’s become conventional wisdom: when the economy falters, it’s because people aren’t spending. Give people money and they will spend their troubles away (and our troubles, thanks to the money multiplier).  Everyone is a winner. This advice is at the top of campaign trail talking points. It has been given by economists ranging from Bruce Bartlett and Paul Krugman to Ben Bernanke.

But what if that isn’t the whole story – the government has spent hundreds of billions in a series of stimulus measures aimed at consumers and it hasn’t been enough.  Growth is painfully slow and today’s jobs report shows we are still not creating enough jobs–163,000 in July–to absorb recessionary losses. So what’s going on – was the stimulus too little?  Is demand being unusually stubborn?

We’re missing something: it’s not only about demand; it’s also about investment. And the July 2012 annual revision to GDP confirms we are in an investment drought.  The graph below tells the story.

Halfway into 2012, real nonresidential private investment is still 7% below its pre-recessionary level. And after initially increasing, real government investment is now almost 10% below its pre-recession level – and falling. Meanwhile, demand appears to be doing fine. Both real personal consumption expenditures (PCE) and real retail sales, two commonly used measures of consumer demand, have fully recovered from the recession – and then some.

Continue reading “Move Over Demand, Make Room for Investment” →

Election Watch: Texas and Georgia Go Conservative, Presidential Race Drags On

Posted on by The Progressive Policy Institute

There were two state primaries on July 31, in Georgia and Texas (actually a runoff for candidates failing to secure a majority in May). The latter got the lion’s share of national attention, with the predictable if not universally predicted victory of former state solicitor general Ted Cruz over Lt. Gov. David Dewhurst for the GOP Senate nomination.

Cruz won easily (57-43), overcoming a major financial disadvantage, Dewhurst’s universal name ID (he’s been in his statewide post for 10 years), and his opponent’s strong backing from most Texas Republican officials, most notably Gov. Rick Perry and two candidates dispatched from the field in May (Dallas Mayor Tom Leppert and former SMU, NFL and ESPN star Craig James). While most observers interpreted the results via the familiar template of Tea Party Insurgent Defeats Moderate Establishment Pol, what made the race fascinating was that Dewhurst was an unlikely target for an ideological purge.  A self-described “constitutional conservative” with strong backing from Texas business and social-conservative groups, about the only “heresy” he could be credibly accused of was a record of occasional negotiations with Democrats in the Texas legislature. But that was enough: Cruz’s vast array of out-of-state backers (e.g., the Club for Growth, Jim DeMint’s Senate Conservative Fund, various Tea Party groups, Sarah Palin) argued that weak-kneed Beltway Republicans needed to be sent another message against any compromise with Democrats on the difficult fiscal issues expected to come up immediately following the November elections—win or lose.

Another interpretation is simply that the line separating “true conservatives” from just regular conservatives is continuing to move to the Right. Cruz is notable for embracing some of the odder memes of the Tea Party Movement, such as the demonization of any sort of controls on economic development as emanating from a United Nations-led conspiracy dating back to the adoption of a vague “Agenda 21” at the Rio conference on sustainable development back in 1992 (this has been a particular obsession of the John Birch Society, but has inspired actual legislation in Alabama and pops up regularly in state and local GOP party platforms). Continue reading “Election Watch: Texas and Georgia Go Conservative, Presidential Race Drags On” →

WaPo Wrong on Principal Reduction

Posted on by The Progressive Policy Institute

The Washington Post waded into the principal reduction battle yesterday, endorsing Federal Housing Finance Agency Acting Director Edward DeMarco’s refusal to allow Fannie Mae and Freddie Mac to write down principal balances on delinquent underwater mortgages. The Post editorial endorsed what is a fatally flawed assessment by FHFA of the large potential savings to taxpayers from a carefully crafted program to reduce principal balances for delinquent underwater borrowers.

FHFA’s “analysis” of the presumed risks and rewards of principal reduction appears to be aimed at justifying the hard line that DeMarco and Fannie and Freddie have drawn against granting principal forgiveness in any form other than through short sales. In fact, both Fannie and Freddie, with FHFA’s approval, have recently moved to ramp up their short sales volumes. In a short sale transaction, the homeowner sells her house for less than the amount owed on her mortgage and the lender accepts the net sales proceeds without requiring additional payment. This is a forgiveness of mortgage principal that is equal to the amount by which the mortgage loan balance exceeded the net sales proceeds. Why principal writedowns are allowed in the form of short sales, but not in any other form, simply is incomprehensible. Continue reading “WaPo Wrong on Principal Reduction” →