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Libor scandal and public data manipulation

Posted on by The Progressive Policy Institute

I found myself reacting to the Libor scandal more strongly than a lot of the earlier revelations of financial institutions misdeeds. First, the banks were just blatant out-and-out lying about a simple number.

Second, their lying led to a distortion of a crucial piece of publicly available data–the Libor rate. In a market economy, intentional misrepresentation of a market price is not a victimless crime –in fact, the victims are everyone who relied on that price to make decisions.  That includes regulators who presumably watched Libor as one of their guides to the amount of stress in the global banking system. Here’s a chart of Libor across the key period (downloaded fromhttps://www.fedprimerate.com ).

Would Libor have shown more signs of stress sooner if it wasn’t being manipulated in 2007 and 2008? And would banks, regulators, and investors reacted sooner? We’ll never know.

But this confirms what I’ve written in the past–the financial crisis was in part a data crisis, where all sorts of numbers were sending misleading signals. In particular, the strength of the financial position of the banks was overstated.

The question is whether the Libor scandal is a vestige of the past, or a sign of future troubles to come. My sense is that we’ll see a lot more opportunities for manipulation of private data to send misleading public signals. Forget about financial markets for the moment. I’m thinking now about the way that websites continually try to game Google’s search algorithms in order to get a higher ranking. Hotels and restaurants have a big incentive to try and manipulate their reviews on consumer sites such as Yelp. App developers have an incentive to game their reviews on the Apple and Google app stores.

Will the bad information drive out the good? Or can we build information aggregation mechanisms that are more difficult to manipulate?

This item is cross-posted from Michael Mandel’s blog, Mandel On Innovation and Growth.

Telecom Giants Top List of Companies Investing in U.S.

Posted on by The Progressive Policy Institute

PPI’s recent report on Investment Heroes has continued to be picked up by major media outlets.  This time, National Journal focused on the investment in the U.S. economy made by telecom companies.

AT&T and Verizon top a list of 25 major companies investing in the United States, according to a report released by the Progressive Policy Institute.

The think tank named its top 25 “investment heroes” that are spending resources domestically.The list of non-financial companies also includes tech and telecom giants such as Intel, IBM, Comcast, Time Warner, Sprint, Google, and Apple.

Tech companies like Apple have faced scrutiny over their outsourcing policies as domestic joblessness remains high. Other companies have cited their relative economic strength and contributions to the broader economy as reasons why lawmakers should be hesitant to impose new regulations on issues like privacy, cybersecurity, or antitrust.

Read the entire article HERE

 

 

 

Betting On America: How Much Do Apple and Google Invest at Home?

Posted on by The Progressive Policy Institute

The Atlantic recently published a piece on PPI’s most recent policy report Investment Heroes. The article provides analysis of the implications of Google and Apple’s investment and placement on Michael Mandel and Diana Carew’s list.

One of the more frustrating aspects of the thriving U.S. tech sector is that while its leading companies generate fabulous profits, they don’t actually employ that many American workers — especially compared to industrial titans of yore. At its 1970s peak, General Motors had more than 600,000 U.S. workers on its payroll. Apple, by comparison, claims just 47,000, most of whom are part of its retail operations. Google has about 18,500. They’ve perfected the low-employment, high-profit business model.

But measuring a tech company’s economic impact by its headcount alone is more than a bit misleading, in part for reasons I’ve written about previously. Michael Mandel of the Progressive Policy Institute, an occasional Atlantic contributor, has done some of the most interesting work on the topic, showing how California’s tech behemoths indirectly support hundreds of thousands of workers who produce and market mobile apps.

This week, Mandel and his PPI colleage Diana Carew, are out with a new report that illustrates another key way in which tech companies inject life into the economy: business investment, otherwise known as capital expenditures. That’s the money firms spend to upgrade and expand their operations, for instance by buying machinery, upgrading servers, or building new factories and offices. Google and Apple were numbers 24 and 25 on PPI’s list of companies investing most in the United States, right after Chrysler, and not far off from General Motors or Target (Their list excludes financial firms).

Read the entire article HERE.

American Economy: Points of Light

Posted on by The Progressive Policy Institute

PPI’s Chief Economic Strategist Michael Mandel was cited in The Economist this week regarding the growth and potential in America’s mobile technology sector. The Economist points to Mandel’s numbers as a promising aspect of the growing U.S. services exported around the world.

Services have long been an American strength, consistently making up 30% of its exports. Within that sector, though, the share held by lower-value tourism and travel has slipped, while royalties and so-called private services—such as scientific, engineering and other consulting, plus financial services—have advanced. Exports of such services to Brazil, India and China nearly doubled between 2006 and 2010.

This trend has been pushed on by digital technology, which makes effortless the sale of many services across borders. Michael Mandel of the Progressive Policy Institute, a think-tank, reckons there are now 311,000 people employed making applications, games and so forth for smart devices such as Apple’s iPhone, and for Facebook. Zynga, one of the largest makers of online games and mobile entertainment applications, recorded $1.1 billion in revenue last year, largely from the sales of virtual goods in its games. A third of this came from players who live outside America.

Read the entire article HERE.

Where Are The Women Wonks?

Posted on by The Progressive Policy Institute

PPI managing director for policy and strategy Anne Kim writes about the gender discrepancy amongst think tank staff in Washington for the Washington Monthly. She elicits why she thinks the particularly strong trend exists as it does.

 Every day in Washington, D.C., brings numerous announcements about the various policy events, forums, and conferences around town that serve as meet-and-greets for the city’s thinking elite. In addition to a prepackaged muffin or a stale sandwich and some badly brewed coffee, these events typically feature a slate of experts on whatever topic is the focus. Also typically, most of these experts are men.

One recent big-name panel on money in politics, for example, featured seven white men (including the moderator) and just one woman: Jane Harman, the Woodrow Wilson Center resident and former congresswoman. Another recent all-day, all-star conference on economic policy included only twelve women among the fifty featured speakers.

Certainly, some of the most powerful people in policy today are women, such as the Center for American Progress’s president, Neera Tanden, and Sarah Rosen Wartell, president of the Urban Institute. But male “brand-name” policy experts far outnumber the women. Men—white men—dominate the senior management at many of the most influential D.C. think tanks. And men—white men—dominate the ranks of “scholars” in many institutions.

Read the entire article here

Investment Heroes: Who’s Betting on America’s Future?

Posted on by The Progressive Policy Institute

American voters are finding it hard to get excited about this year’s presidential election. Job growth is slow. Economic growth is slow. Real wages have been essentially stagnant since 2009. It’s the same old story as when the recovery began three years ago. We are in an atmosphere of economic uncertainty. Voters—swing voters especially—are looking for news that will boost their confidence from all the economic doom and gloom going around. We are a country that needs to hear more (if not have more) economic successes.

Such successes begin at home with investment—business investment, government investment, and household investment. Government has to invest in infrastructure, education, and research. Households have to invest in their own human capital. And businesses have to invest in buildings, equipment, and software. All are essential—but in this report we will focus on business investment. Domestic business investment generates growth, raises productivity, increases wages and creates jobs for Americans. It can span the gamut from new office buildings to improved production lines to faster communications equipment to deeper natural gas wells.

Unfortunately, U.S. business investment tanked during the Great Recession, and has yet to recover. The graph below shows the extent of the drop-off—in 2011, non-residential investment remained more than 7% below 2007 levels, adjusting for prices. By comparison, personal consumption in real terms was higher in 2011 compared to 2007. We find ourselves in an investment drought, not a consumption drought.

Equally as important, before the recession companies were expanding their domestic investment at a rapid pace. In fact, we estimate there would have been a total of $1.4 trillion more in non-residential business investment over 2008-2011, in 2005 dollars, had business investment continued to grow at the same average annual rate in the ten years before the recession (4.8% over 1997-2007). That extra investment could have gone a long way creating jobs, boosting productivity, and enhancing U.S. competitiveness.

The decline and lackluster recovery in business investment has a wide range of causes, including globalization, regulatory barriers, and weak demand. Many companies are investing overseas rather than in the United States. Multiple layers of regulation, even if well-intentioned, have the impact of discouraging capital investment and innovation. And the continued weakness in demand at home makes it difficult to justify building new factories. But no matter what the reason, this weakness is having an adverse effect on economic growth and is one of the main reasons behind the job drought.

That’s why PPI wants to highlight those companies that are still investing domestically in buildings, equipment, and software. Using publicly available financial reports, PPI constructed a list of the top 25 nonfinancial U.S.-based companies ranked by their U.S. capital spending in 2011. In many cases this required detailed calculations and assumptions, since companies often report global capital spending without breaking it down by country. Financial companies were excluded because they do not publicly report their capital expenditures. (A more detailed explanation of our methodology can be found later in this memo.)

PPI calls these companies “Investment Heroes” to make a key point: the U.S. economy is at its best—in terms of growth and job creation—when companies and workers are partners with the same objectives. Half of the leading companies are telecom and energy, but the list also includes tech, retail, automotive, and entertainment companies.

Download the entire report.

Help Wanted: ‘Chief U.S. Investment Officer’

Posted on by The Progressive Policy Institute

Most people didn’t notice that Commerce Secretary Bryson resigned late last month. And why would they? The Commerce Department has long been one of the more obscure federal institutions, viewed by many as a hodge-podge of important but seemingly unrelated agencies like the Patent & Trademark Office, National Oceanic & Atmospheric Administration, Bureau of Economic Analysis, and Census Bureau. The agency is so partitioned that most Commerce employees probably haven’t noticed the unexpected departure.

That is a shame. Rather than being irrelevant, the Secretary of Commerce now plays a critical role as a champion for domestic investment – effectively America’s ‘Chief Investment Officer.’ Recent actions by President Obama put the Commerce Department at the forefront of encouraging U.S. investment.  That places a significant responsibility on the Department, since business spending on stuff like new office space and equipment is critical to stimulating economic growth.

Continue reading “Help Wanted: ‘Chief U.S. Investment Officer’” →

Top 10 Mistakes Candidates Make on National Security

Posted on by The Progressive Policy Institute

Editor’s note: This item is cross-posted from Truman’s Doctrine Blog.

With the Fourth of July coming up there are a lot of politicians talking about national security. These are the top ten mistakes they make. Next week we will have the top ten ways to win on national security.

10. Holocaust comparison.

It doesn’t matter whether you’re Glenn Beck or a human rights advocate. As soon as you’ve made the Holocaust / Hitler / Nazi comparison, your audience has stopped listening.

Continue reading “Top 10 Mistakes Candidates Make on National Security” →

Prescription for Decline

Posted on by The Progressive Policy Institute

PPI President Will Marshall writes for Foreign Policy on the impact healthcare costs are having on the US economy and the “American decline.”

Lost in all the uproar over the U.S. Supreme Court’s June 28 “Obamacare” ruling was the crucial link between health-care reform and the issue voters care most about: the economy. America’s current health-care “system” isn’t just an ungainly, costly, and unjust mess. It also undercuts the United States’ ability to compete and win in world markets.

Amid the debate over “American decline,” this connection deserves a lot more attention than it’s getting. To revive U.S. international competitiveness, the country clearly needs to rein in runaway health-care costs. But it has to be done in the right way — not just by clamping down on spending, but also by boosting medical innovation and productivity.

Now that the court has upheld the individual mandate requiring most citizens to obtain health insurance, U.S. policymakers would ideally turn to the challenge of medical cost containment. This is unlikely to happen, however, because Republicans have vowed to make the repeal of the Affordable Care Act a centerpiece of their 2012 campaign message. Republican presidential candidate Mitt Romney dutifully promised Thursday to kill the “bad law,” even though it’s conceptually identical to the Massachusetts health plan he backed while governor of the state.

Read the entire article HERE

PPI Event – Improving Charter School Accountability: The Challenge of Closing Failing Schools

Posted on by The Progressive Policy Institute


The Progressive Policy Institute hosted a forum to discuss the importance of holding charter schools accountable and closing those schools that are failing.  David Osborne, Senior Fellow at PPI, released his report “Improving Charter School Accountability: The Challenge of Closing Failing Schools”

Accompanied by Greg Richmond, Nancy Van Meter, and Lindsey Burke, the forum stressed the potential for success of charter schools as a whole, but pointed to the importance of closing those charters that are failing their students.  While the causes for failing schools was debated, there was a general consensus that these failing schools must do better and should be held to higher standards in their charters.

According to Osborne’s report, the primary way of achieving higher accountability and success is to start at the beginning, with the actual charters and authorizers.  More training, larger staffs, better funding, and improved information are all critical to improving the quality of charter school authorizers and the schools that they are responsible for.

Download the report here: Improving Charter School Accountability: The Challenge of Closing Failing Schools

Continue reading “PPI Event – Improving Charter School Accountability: The Challenge of Closing Failing Schools” →

Election Watch: Romney Crosses Finish Line, Congressional Primaries Unfold

Posted on by The Progressive Policy Institute

The presidential nominating contest officially came to a close on Tuesday with Utah’s primary—a reminder that this winner-take-all state was Mitt Romney’s ultimate fallback had the last real competitor standing, Rick Santorum, been able to make the Midwestern breakthrough he was so close to achieving.

Now down ballot primaries take over the spotlight, and Tuesday offered an interesting assortment of congressional contests.

There were two competitive Republican Senate primaries. One fairly nominal race was in New York, where one of 2011’s special election flavors of the month, Rep. Bob Turner (R-NY), who held the Queens seat vacated by Anthony Weiner, lost to right-wing judicial activist and Conservative Party nominee Wendy Long for the dubious privilege of taking on heavily favored Sen. Kirsten Gillibrand (D-NY) in November.

Continue reading “Election Watch: Romney Crosses Finish Line, Congressional Primaries Unfold” →

PPI in the News: Elect more women to end gridlock

Posted on by The Progressive Policy Institute

 

More than 300 women, a record high, have filed to run for Congress this year, which means a likely gain of female members come November. In addition to greater parity for women–who’ve been chronically underrepresented–more women in Congress could bring another benefit: Less gridlock.

Female senators have a markedly more bipartisan vote record than their male peers do. Moreover, studies in personality research find that women are more cooperative than men, more willing to compromise, more empathetic and, moreover, more polite.

As Debbie Walsh, director of the Center for American Woman and Politics at Rutgers University puts it: “Women are more likely to work across the aisle and find compromise.”

Read the entire article HERE