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Obama Needs New Growth Story

Posted on by The Progressive Policy Institute

President ObamaThe White House this week is dribbling out new details about Obama’s forthcoming jobs package. Liberals already are complaining that the president is thinking too small, while conservatives dismiss his ideas as just more “stimulus” in drag.

Neither critique gets to the heart of the problem. The U.S. economy is enduring an investment and job drought that began well before the Great Recession hit late in 2007. The public is strikingly pessimistic about the nation’s economic prospects and has lost confidence in the conventional remedies pushed by both parties.

More than a batch of new programs, Americans need a new story about how to regain our economic dynamism. We need a fundamentally new model for economic growth, and the president’s kit-bag of new micro-initiatives doesn’t add up to one.

His proposals mostly seem sensible, but absent a new vision for dealing with the economy’s structural problems, they give off a whiff of spaghetti-against-the-wall desperation. The administration is hoping that something, anything will move the needle on job creation and get unemployment trending down.

Here, according to various media accounts, is what the White House job package is likely to include:

  • A $5,000 tax credit for hew hires.
  • A five percent reduction in payroll taxes on any net increase in wages.
  • $50 billion in new spending on infrastructure.
  • An overhaul of patent laws to encourage faster innovation.
  • A new mortgage refinancing scheme to help “underwater” homeowners avoid foreclosures that are depressing housing prices.

Liberals have a point in arguing that these initiatives are unlikely to have more than a marginal impact on jobs and economic growth. The tax credit and payroll tax reduction will likely expand employment, but they also will reward companies for hiring workers they would have hired in any case. Michael Greenstone, former chief economist for the president’s Council of Economic Advisers, estimates the tax credit will create 900,000 additional jobs at a cost of $30 billion. The United States must create 21 million new jobs over the next decade to return to full employment.

Modernizing America’s antiquated infrastructure is essential, even if the immediate job gains are likely to be modest. While it’s conceivable that $50 billion could leverage large-scale private investment in new infrastructure, there’s a catch: The administration does not envision funneling that money into a truly independent infrastructure bank. That’s likely to scare off private investors, who need assurances that big capital projects will be chosen on economic rather than political grounds.

The real problem, however, isn’t that Obama isn’t spending enough. It’s that this spray of programmatic buckshot won’t deal with structural impediments to economic innovation and growth. As PPI has argued, U.S. policy makers need a new model of economic growth centered on production, not consumption; on saving and investing, not borrowing; and on exports, not imports.

Obama needs to fit his specific initiatives within the broader story of an American economic comeback sparked by a shift from debt-fueled consumption to domestic production. This narrative should explain how overconsumption—by both U.S. households and governments—helped to create the job slowdown, wage stagnation, financial bubbles and exploding debts that have plagued our economy since 2000. It would connect America’s twin economic imperatives: creating jobs and controlling the national debt. It would say: If we don’t curb the unsustainable growth of entitlement spending (mostly for health care consumption), we will squeeze out strategic public investments the nation’s physical, human and knowledge capital—infrastructure, skilled workers, and new technology.

But a “producer society” narrative doesn’t just reinforce progressive demands for more strategic public investment. It also lends weight to conservative calls for policies that create a climate more conducive to innovation, entrepreneurship, and business creation. In fact, it will take a new fusion of liberal and conservative economic prescriptions to get America moving again.

Key elements of such a fusion include a sweeping overhaul of personal and corporate taxes, a light-handed approach to regulating companies that invest heavily in innovation, stronger constraints on Medicare and Medicaid spending, new investments in technical education to supply workers for advanced manufacturing, and the transformation of our archaic K-12 school system by choice and digital learning. And, as I’ve written elsewhere, it also requires a new partnership between U.S. workers and those companies that are investing in creating jobs in the United States.

President Obama’s ideas for spurring job growth are fine as far as they go, but they don’t go nearly far enough. He needs to offer the country a new story of economic success, that once again makes America a dynamo of production and middle class job creation.

Photo credit: OFA

Wingnut Watch: Romney’s Perry Problem

Posted on by The Progressive Policy Institute

In the traditionally sluggish Dog Days of late August (interrupted, of course, on the East Coast by the occasional earthquake or hurricane), wingnuts, like other Americans, have been a bit distracted from politics. But those answering the phone calls of ever-vigilant pollsters are building a wave of buzz for new presidential candidate Rick Perry for which there is little recent precedent. Perhaps it is just a reflection of long-simmering unhappiness with the candidate field, but in survey after survey, national and local, Perry is quickly moving ahead of not only the Star of Ames Michele Bachmann, but also long-time front-runner Mitt Romney. Five national polls taken since August 15 show Perry up over Romney by margins ranging from six to thirteen points. Two polls of Iowa Republicans taken during the same period show Perry edging out Bachmann, even though the Texan skipped the Iowa GOP Straw Poll and has appeared in the state exactly once. Two new polls in South Carolina show Perry trouncing the field; one has Perry up 23 points over Romney and 29 points over Bachmann. Even in Mitt Romney’s stronghold of New Hampshire, Perry is rapidly moving into serious contention. Where available, poll internals typically show Perry racing past Bachmann among Tea Party conservatives, and holding his own against Romney with more conventional conservatives and moderates alike.

It’s unclear at this point whether the various controversies already surrounding Perry—from his published views on the New Deal and the Great Society to questions about his intelligence—are being brushed off by Republican voters or simply haven’t sunk in. But the reining question in the conservative chattering classes is whether his rivals—and particularly Mitt Romney—should be panicking or beginning to go negative on him, or at least reconsidering their strategies.

The thinking in RomneyLand, it is being reported, is that Perry’s surge in the polls is likely to abate somewhat on its own, and that MSM scrutiny of the Texan will also take a toll. Perry is also gaffe-prone, and doesn’t have a reputation as a particularly good debater (there will be three televised candidate debates in September alone). The main trouble for Team Romney, however, is strategic timing. One nightmare scenario is that Perry will trounce the field in Iowa, giving him enough of a bounce to run a strong second in New Hampshire and then build up an invincible head of steam going into South Carolina and then other southern states. Uncertainty over the primary calendar is a big issue as well. If a Romney-friendly state like Michigan manages to move up to the early stages of the contest as it did in 2008, he can perhaps stick to his original game-plan. But if, say, Georgia and Florida wind up holding primaries the week after South Carolina, then the risk of a Perry sweep would go up considerably. In theory, the Perry-Bachmann competition over the hard-core conservative vote in Iowa could create an opening for Romney in that state; a Romney victory upset there followed by a win in New Hampshire could leave him in a very good position. But this “quick kill” approach is obviously the strategy that blew up on Romney—and for that matter, Hillary Clinton—in 2008.

Romney has a number of more immediate trials to overcome during the Labor Day weekend. He’s the featured speaker at a Tea Party Express event in New Hampshire, a development that has spurred a formal protest by the rival tea party group FreedomWorks, which has long harbored an animus towards Romney.

The same weekend all the major candidates will face an early and potentially difficult test: a command-performance inquisition in South Carolina by a conservative group that has joined forces with ideological commissar Jim DeMint to quiz the hopefuls on various matters of conservative orthodoxy. Most of the media attention on the event has focused on Romney’s initial refusal to participate on specious-sounding scheduling grounds, followed by his sudden decision yesterday that he would, after all, come to Columbia to pay homage to DeMint. But there is another subplot to the story that could become important: one of DeMint’s co-inquisitors will be Iowa Rep. Steve King, who has yet to make a presidential endorsement despite his close relationship with Michele Bachmann. King rivals Tom Tancredo as a right-wing firebrand on the immigration issue, where Rick Perry’s record is significantly out of line with prevailing conservative views. It wouldn’t be that surprising to see King hold the Texan’s feet to the fire on this issue and then sadly decide he has to back someone else back home in Iowa.

Speaking of Labor Day weekend, and of Iowa, there’s all sorts of confusion surrounding the long-anticipated appearance of Sarah Palin at a big Tea Party gathering just outside of Des Moines on Saturday. This event was where a lot of Palin-watchers originally thought she might either launch or definitively foreswear a presidential campaign. Team Palin has thrown cold water on that assumption (saying the deadline for an announcement of her plans is the end of September, not Labor Day), and now, her appearance is “on hold” due to conflicts with local Tea Party planners. One report is that Palin and her staff are fed up with the vacillation of event organizers over a speaking role—offered, withdrawn, and then reoffered—for former Delaware Senate nominee Christine O’Donnell, who is fresh from one of the more disastrous book launch tours in recent memory. In any event, Palin will do at least one public event in Iowa this weekend, followed quickly by another in New Hampshire. But the ranks of those expecting her to run for president in 2012 are thinning rapidly.

Photo credit: Aaron Webb

A Negative Sign for Investment and Job Growth

Posted on by The Progressive Policy Institute

There’s a good rule of thumb–you get what you reward.

Here’s a summary of current U.S. policy towards big corporations: Invest in the U.S., create jobs, and get sued by the government.

You would think that during a business investment drought, any company that puts big money into the U.S. would be patted on the back. But no…

AT&T is the company which is putting the most money into the U.S.—almost $20 billion in capital spending in 2010. AT&T is also planning to bring back call center jobs from overseas. AT&T is also getting sued by the Justice Department to block the merger with T-Mobile.

Frankly, this sends a signal to U.S. companies that getting out of the reach of government regulators by going overseas is the right strategy.

Crossposted from Innovation and Growth.

Welfare Nostalgia Won’t Help Poor

Posted on by The Progressive Policy Institute

Some liberal commentators marked the 15th anniversary of welfare reform this week with a curious lament: Welfare rolls aren’t growing fast enough.

“If you think the point of the program is to help the poor, then no, welfare reform is not working,” asserts Ezra Klein of the Washington Post. He cites an article by Jake Blumgart in The American Prospect, who frets that welfare rolls have “merely inched upward” during the late recession and jobless recovery.

“At the heart of the worst recession in 80 years, TANF (Temporary Assistance for Needy Families) funds only reached 4.5 million families, or 28 percent of those living in poverty,” Blumgart writes. “By contrast, in 1995, the old welfare system covered 13.5 million families, or 75 percent of those living in poverty.”

Before we wax too nostalgic for the good old days of big welfare rolls, it’s worth remembering that progressives led the charge for welfare reform.

“Ending welfare as we know it” was arguably President Bill Clinton’s most radical challenge to the political status quo, and the biggest policy change to happen on his watch. By the time he took office in 1992, the welfare system was held in nearly universal contempt by Americans across the socio-economic spectrum. Not only had it failed to make a dent in poverty, but taxpayers believed it undermined work, personal responsibility and family. The system also had failed the poor, providing them neither effective preparation for work or links to jobs, nor public subsidies sufficient to lift them out of poverty.

Clinton had a better idea: Rather than subsidizing dependence on the state and isolation from the economic mainstream, public assistance ought to require and reward work. To “make work pay,” Clinton got Congress in 1993 to approve a massive expansion of the Earned Income Tax Credit, which is essentially a “work bonus” for low-wage earners. The credit has become a social policy rarity—an anti-poverty program that actually works.

On Aug. 21, 1996, after having vetoed two draconian bills sent to him by the Republican Congress, Clinton signed a law which put a time limit on benefits, and replaced the old, open-ended welfare entitlement with a block grant to the states. In combination with the work bonus and other reforms (e.g., cracking down on deadbeat dads and expanding child care support) and a robustly growing economy, the results were galvanic.

More than 7 million people left the rolls between 1996 and 2001. From its peak of 14.4 million in March 1994, the number of people on welfare dropped by 63 percent to 5.3 million in 2001. Millions of welfare recipients left the dole for jobs. Teen pregnancy and out-of-wedlock birth rates dropped dramatically. And the number of Americans living in poverty declined dramatically, by nearly 8 million people.

While some liberals predicted that ending the entitlement would produce scenes of Calcutta-style misery in America—and a few quit the Clinton administration in protest—the public heartily approved. By realigning U.S. social assistance with a strong work ethic and personal responsibility, Clinton’s reforms helped mitigate public hostility toward public assistance and unlock Americans inherent generosity—overall federal and state spending (including EITC costs) to support low-income families actually rose after 1996. They also deprived culture warriors of a favorite, racially tinged theme: When was the last time you heard a Republican candidate mock “welfare queens?”

In the late 1990s, of course, jobs were plentiful. Now the economy isn’t creating enough jobs to bring unemployment back down to earth. Obviously this undercuts policies aimed at speeding transitions from welfare to work, and liberals are right to draw attention to the hardships the jobless recovery imposes on our most vulnerable families.

But they are wrong to assume that welfare’s cash payments are somehow still central to America’s efforts to fight poverty, relieve social distress or shorten recessions. Clinton’s emphasis on “work first” made the unemployment system, rather than welfare, the safety net of first resort for low-income families in downturns. And indeed that is what has happened.

According to a recent Urban Institute fact sheet:

“Unemployment benefits substitute for welfare: three in ten low-income (below 200 percent of the federal poverty level) single parents received unemployment benefits in 2009, double the share receiving in 2005. This suggests that as more single mothers went to work during the late 1990s and early 2000s, more could qualify for unemployment benefits in the event of job loss. Also, many states have recently expanded eligibility for unemployment benefits.”

The other big, countercyclical response to the recession and sluggish job growth has come from the food stamp program (now called SNAP). Last month, the Urban Institute reported that nearly 45 million people receive help from SNAP, an increase of about 69 percent since the recession began in 2007. Many states have seen dramatic growth in their food assistance caseloads as well.

In other words, poor families increasingly rely on other social supports to tide them over hard times. Liberals have a point, however, in arguing against enforcing strict time limits on welfare benefits during a prolonged job drought. Although the Clinton reforms held up well during the 2000-2001 recession, this one is far worse. The “work-first” architecture isn’t perfect, and progressives should be open to sensible modifications based on new and unforeseen economic challenges.

Rather than resurrect the old dependency-fostering entitlement, however, progressives should try more creative approaches. We should be prepared to spend more money to help more families from sinking into poverty through no fault of their own. But, in keeping with the spirit of Clinton’s reforms, new funding should go to support work. This could take the form of a new public works initiative or—perhaps more likely, given GOP control of the House—direct subsidies to employers to hire low-income workers.

The states already have the ability to waive work requirements for a portion of their caseloads; Washington could broaden such authority temporarily, until job growth starts to pick up. Here again, the challenge will be getting GOP austerity freaks to get in touch with their inner “compassionate conservative.”

In any event, it’s hard to see how relitigating the 1996 reform will help the poor. The entitlement ethos isn’t exactly making a comeback in America. And there’s no evidence it would work any better now than before.

 

Defense’s Careful Contribution to Deficit Reduction

Posted on by The Progressive Policy Institute

PPI’s Will Marshall and Jim Arkedis have a piece in the Detroit News this morning on the defense budget. Here’s an excerpt:

Recently, Republican and Democratic leaders of Congress unveiled their choices to head the so-called “super committee” entrusted with forging a long-term agreement to reduce the nation’s deficit.

The stakes are high for the Department of Defense. Should the super committee fail to propose legislation, or a divided Congress fail to pass a compromise, the deal to avert national default would automatically trigger a $500 billion cut from the Pentagon’s budget. Added to the $350 billion already cut by the deal, the Pentagon’s budget could shrink by $850 trillion over 10 years.

If the Department of Defense is forced to make such a substantial contribution to deficit reduction, one point is clear: Our political leaders remain unwilling to tackle the national deficit’s two main cost drivers — entitlements and taxes.

Nothing is set in stone, but the congressional super committee now faces two crucial questions: Should defense contribute more toward deficit reduction? And, if so, how do we save?

Our answers are that defense can contribute, but carefully.

Continue reading in the Detroit News by clicking here.

Photo credit: Brave Heart.

Strategic diplomacy needed on Israel

Posted on by The Progressive Policy Institute

PPI Senior Fellow Josh Block writes in Politico:

Seven months ago, Secretary of State Hillary Clinton expressed strong U.S. opposition to the Palestinians’ unilateral statehood bid at the United Nations. One month ago, Congress threatened to cut off U.S. aid for the Palestinian Authority if it carried on. Yet President Mahmoud Abbas is still moving full-speed ahead to September with his U.N. initiative.

The Obama administration and Congress have rightfully taken a firm stance against unilateral recognition of a Palestinian State. But with every sign indicating that the Palestinian leadership won’t be changing course, it’s time for the White House to assert a more active approach to blunt the potential impact of this collision.

The United States must begin a vigorous public effort to lobby other countries, large and small, to oppose the Palestinian effort and join President Barack Obama in pressuring the PA to call it off. Acting decisively now, we can persuade the Palestinians not to press ahead with this damaging course – which undermines our quest for peace and risks anti-Israel terrorism and violence on the Palestinian side, when carelessly raised hopes are dashed.

The good news is that the administration has plenty of opportunities to speak out. Last week, a delegation of 18 Washington-based ambassadors from four continents took part in a fact-finding mission to Israel and the West Bank. They were not from major international players but smaller countries like Albania and Macedonia in the Balkans and St. Lucia and Grenada in the Caribbean.

The administration should start by inviting these 18 ambassadors to the White House and directly appealing that their countries vote against the Palestinian bid. In this game by numbers, the smaller countries—which account for a sizable portion of the U.N. General Assembly—can make a meaningful difference.

This can underscore for the Palestinians and the international community the peace is the goal — not just statehood — and there are no short cuts to negotiation.

Read the rest at Politico here.

Wingnut Watch: Perry’s Tightrope

Posted on by The Progressive Policy Institute

Rick PerryWith the end of the brief, Weekly Standard-driven boomlet for a Paul Ryan presidential candidacy, it’s increasingly certain that the 2012 GOP presidential field is set. Yes, there are still some observers who believe (with hope or fear) that Sarah Palin is going to announce a 2012 bid in Iowa at a big Tea Party rally over the Labor Day weekend. But Team Palin’s abrasive push back against a Karl Rove prediction that this would happen is a pretty clear indicator that it won’t, unless St. Joan of the Tundra really enjoys misdirection.

So there are by most accounts three viable candidates—Perry, Romney and Bachmann—with Ron Paul formidable enough to wreak some occasional havoc, and perhaps someone else—most likely Rick Santorum, possibly Herman Cain—having enough juice in Iowa to affect other candidates’ performances at the margins. Perry is the “it” candidate of the moment, and fans of Bachmann are praying that her candidacy can survive his current surge in the national and early-state polls.

Meanwhile, Perry himself is negotiating a pretty interesting tightrope that shows both the power and perils of wingnuttery. On the one hand, it’s important that he provide a credible challenge to Bachmann for the support of serious Tea Party and Christian Right activists; perhaps his camp even thinks they can drive her from the race before voting begins by pushing down her poll numbers and drying up her money sources. This would explain the savagely carnivorous nature of his early speeches, and certain other maneuvers like his decision to sign onto the Susan B. Anthony List’s highly prescriptive anti-abortion pledge, which Mitt Romney declined to do. That pledge, it should be noted, would prohibit Perry from appointing his 2008 presidential favorite, Rudy Giuliani, to any cabinet post with an influence on abortion policy.

But at the same time, Perry is having some problems generated by wingnut-pleasing passages in his 2010 book, Fed Up, most notably an expression of interest in repealing the Sixteenth Amendment (which made possible the establishment of a federal income tax), and exceedingly hostile remarks about the constitutionality and morality of Social Security. Indeed, he’s already back-peddling pretty fast on Social Security, as reported by the Wall Street Journal:

His communications director, Ray Sullivan, said [last] Thursday that he had “never heard” the governor suggest the program was unconstitutional. Not only that, Mr. Sullivan said, but “Fed Up!” is not meant to reflect the governor’s current views on how to fix the program.

Perry is also drawing unfriendly mainstream media attention for more conventional (among today’s conservatives, at least) sentiments denying man-made global climate change and treating evolution as a mere egghead theory. But one Perry controversy also shows how thoroughly previously unconventional views have become common among GOP elites. His attack on Federal Reserve Board Chairman Ben Bernancke made some Republican opinion-leaders nervous on grounds that a potential POTUS should not be assaulting the independence of the Fed. Hardly anyone questioned the underlying policy stance Perry embraced, suggesting a Ron-Paul-style deflationary monetary policy in the midst of a deep recession.

As Perry’s audition as a possible chief executive continues, the broader question is whether the specific views of Republicans matter a whole lot to anyone outside the hothouse atmosphere of conservative activists. A new Gallup survey testing the incumbent against Romney, Perry, Paul and Bachmann among registered voters showed remarkably little variation. Romney, predictably, did best, edging Obama 48-46. But Gallup also showed Perry tied with Obama at 47-47, with Paul only trailing by two points (47-45) and Bachmann only trailing by four (48-44).

Those who wonder why the Obama re-election team is reportedly planning a scorched-earth campaign criticizing the eventual Republican nominee should stare at those numbers a while. A “comparative” campaign is not simply essential in order to prevent the election from becoming a referendum on life in the Obama Era at a time when “wrong-track” sentiments are extraordinarily high. Perry, Paul and Bachmann, at least, offer a treasure trove of oppo research opportunities that any Democratic candidate would be foolish not to exploit.

But it’s equally interesting to wonder if findings like Gallup’s will convince conservative activists there is no electoral risk attached to their own choice of a candidate. If so—if, in other words, “electability” is not really a factor in so polarized an electorate–you can expect them to indulge themselves ideologically without much in the way of inhibition.

Photo credit: Gage Skidmore

Should America Pork Out?

Posted on by The Progressive Policy Institute

On his show last week, Chris Matthews of MSNBC’s Hardball recommended that the president “pork out.” Remember those pet infrastructure projects Republicans sacrificed at the altar of declared fiscal discipline? Matthews wants the president to serve up a feast of pork as a temporary jobs plan.

The basic premise of the Matthews’ plan is that the president packages–in one bill–all of the pet projects that were requested over the past two years by Congress but failed to become law. Discarding the projects that are wasteful or don’t create jobs, the president sends the bill to Congress testing where the GOP’s allegiance lies: with the nation’s 25 million unemployed or the political gain of depressing the economy.

Can a serving of pork really pass Congress and create jobs?

Possibly. Much of the pork spending is basically targeted infrastructure spending. Bipartisan support for earmarks has been historically pervasive, and remains widespread today despite a House enforced moratorium. Senator Lindsay Graham (R-Tenn.) threatened to shutdown the Senate over $50,000 toward deepening the Charleston harbor, and presidential candidate Michele Bachmann (R-Minn.) sneaked a $700 million bridge overhaul past the earmark ban by not listing the actual cost of the bridge in the bill.

Quick calculations state that if every $1 billion of federal spending spent creates 11,000 job-years and the jobs are temporary, one year long, then allocating $10 billion would create roughly 110,000 gross jobs. Funds could be weighted to ensure the states with the highest unemployment rates receive the most money.

Furthermore the current state of the economy is a rare moment of slack in the inherent tension that exists between federal spending and private investment. Worries that earmark spending muscles out the private businesses are exemplified in a Harvard study that found earmarking by certain Congressman can lead to a 15 percent decrease in that districts’ private sector spending — a worrisome proposition. Except, right now corporations are not spending and instead are sitting on $2 trillion in cash. Federal spending repercussions are lessened because there is little private spending to crowd out.

To preempt deficit hawks, the plan should be part of a long-term deficit reduction package or paired with back-loaded spending cuts to be revenue neutral. An ideal deficit reduction plan would include a much-needed boost to the job market through targeted short-term infrastructure spending supported by former IMF chief economist Ken Rogoff while reducing the deficit over the long term. While a national infrastructure bank would be idyllic, political realities make pork a workable substitute for targeted infrastructure spending.

A good bully pulpit speech could help extinguish any other political opposition. The specificity and detailed local impact of the pork makes the plan a powerful political cudgel.

Envision the president trotting out to the Rose Garden bill in hand, declaring, “The economy is hurting, but I have a jobs plan right here that’ll create over 100,000 jobs right now at a time when 9.1 percent of Americans are out of work. It won’t add one dime to the deficit but it will pay for a wastewater treatment plant in Nevada where the state unemployment rate is 12.9 percent. Yet your representative, Dean Heller, won’t support it. It won’t add one dime to the deficit, but it will pay for a college in Florida where the state unemployment rate is 10. 7 percent. Yet your representative, John Mica, won’t support it.”

Rinse and repeat that speech for three days, and it’s hard not to expect a few Republican defections. Standing tall for spending cuts is fun and games until your district gets hurt. Even if for some reason the plan doesn’t pass, the tenor of Washington will finally be attuned to what the people want and need – jobs.

Photo Credit: Kejonbro

 

 

Score One for NATO

Posted on by The Progressive Policy Institute

Libyan rebels—the “rats” as Muammar Qaddafi calls them—are closing in on the eccentric dictator. Although a hundred things could go wrong in post-Qaddafi Libya, Americans should always welcome a tyrant’s fall.

Rather than ponder what comes next, the ever-parochial U.S. media is fixated on whether Qaddafi’s ouster will boost President Obama’s sagging poll ratings. Thus do all those ordinary Libyans who gave and risked their lives to liberate themselves get reduced to bit players in Washington’s never ending political melodrama.

Obama deserves some credit for lending a hand, but he wasn’t the instigator of the Libyan intervention. That honor goes to France and Britain, who were most determined to prevent Qaddafi from carrying out threats to obliterate regime opponents. Already mired in two wars, the United States was happy to fall in behind its allies, and after some opening salvos, content itself with mainly providing logistical support.

So credit NATO as well as the rebels if Qaddafi is toppled or flees. Assuming Libya does not dissolve into Iraq-style chaos, either outcome would be a big morale boost to an alliance that hasn’t gotten much respect lately. NATO’s decision to enforce a “no fly, no drive” zone in Libya was widely panned as ineffectual, a half measure that would make Europeans feel good but only prolong the violence and end at best in stalemate. On the other side, non-interventionists of the left and right complained that NATO has used its U.N. mandate to protect civilians as cover for waging an offensive war on the regime.

Well, that’s true—NATO’s real, if undeclared, goal has been regime change. Airstrikes on regime ground forces first stopped Qaddafi’s drive on the rebel stronghold of Benghazi, and have played a critical role in the rebels’ counterattack since then. A heavy NATO bombardment paved the way for their dramatic entry into Tripoli over the weekend. Maybe the Chinese or Russians are scandalized by NATO’s loose construction of the U.N. resolution, but strictly playing defense would undoubtedly have led to more bloodshed.

NATO’s success may or may not breathe new life into the creaky old alliance, which suffers from a cloudy rationale and steep cuts in European defense spending. It would, however, challenge assumptions about the supposed folly of using limited force in situations where the strategic stakes don’t justify “all-in” intervention. Foreign policy realists recoil at the idea of limited war— recall the Powell Doctrine, which says go in big or don’t go in at all—but in fact such interventions have become the norm since the end of World War II. None of the NATO allies has a compelling strategic interest in what happens in Libya, but there as elsewhere a strong humanitarian case for intervention could be made.

If Libya turns out well, it will be another step toward entrenching the “responsibility to protect” as a new global norm. But isn’t this a slippery slope? If limited war worked to prevent massacres in Libya, don’t we have a moral obligation to intervene next in Syria, whose thuggish dictator has killed close to 2,000 civilians over the last five months?

Well, no. International politics, like domestic politics, is the art of the possible. Each case is unique and requires its own careful balancing of prudential and moral considerations. Given Libya’s relative backwardness and Qaddafi’s political isolation, the risks of Western military intervention there are less than in Syria. Call it opportunism if you like, but it beats the perverse logic of denying anyone help because we can’t help everyone.

The most persuasive objections to the Libyan intervention have always turned on the question of what comes after Qaddafi. Have we opened the door to radical Islamists, as many U.S. conservatives fear? Can the National Transitional Council (NTC) established by the rebels last February, and united mostly by hatred of Qaddafi, sustain the support of a fragmented, tribal society? Will a rural country without a large, educated middle class be able to establish a stable, representative and effective government?

We’ll see. But having abetted the NTC’s victory, the NATO allies should have considerable leverage over the course of events there, especially if they are willing to follow military with economic and political support. In any event, Qaddafi’s imminent fall will likely invigorate the Arab spring and encourage a tougher regional and international response to Syrian dictator Basher al Asad’s depredations in Syria.

That alone would be a solid return on NATO’s modest investment in helping Libyans free themselves from a mad tyrant.

Photo credit: Defence Images

Wingnut Watch: The GOP’s ‘Movement Conservative’ Conquest Achieved

Posted on by The Progressive Policy Institute

Last week was a pretty good week for hard-core conservative ideologues in terms of their domination of the Republican Party. In the Fox News/Washington Examiner presidential candidates’ debate on Thursday night, every single would-be president on the stage—even Jon Huntsman—rejected a hypothetical deficit reduction deal involving a 10-1 ratio of spending cuts to tax increases. At the same event, an extended exchange in which Tim Pawlenty went after Michele Bachmann for being a windy bomb-thrower who had never actually been able to accomplish anything in public life went pretty well for the windy bomb-thrower. Meanwhile, the discussion of cultural issues featured differences of opinion that ranged from hard-core opposition to same-sex marriage (with the exception of the pariah Huntsman) and abortion to hard-core opposition to same-sex marriage and abortion enshrined in the U.S. Constitution.

At the Iowa GOP Straw Poll on Saturday, over half the votes were cast for two candidates generally considered to be minor fringe characters in the House Republican Caucus until quite recently, Michele Bachmann and Ron Paul. Tim Pawlenty, who began his national political career calling for a Republican Party that would be amenable to the views and practical needs of Sam’s Club shoppers, ended his audition for Electable Conservative Alternative to Mitt Romney with an ignominious third-place finish. Given his world-class organization in Iowa, T-Paw’s poor showing in this test of organizing strength indicated his failure to make the sale to serious conservatives, and he dropped out of the race the very next morning. Other than Bachmann and Paul, the candidate with the most to boast about on Saturday was Rick Santorum, who managed to get past Herman Cain to finish fourth and keep alive a campaign focused almost entirely on representing the most extreme right-wing cultural views (Santorum’s big moment in the Thursday debate was probably his passionate defense of a ban on abortions where the woman in question had been raped).

Bachmann’s narrow win over Paul in the Straw Poll was significant in Wingnut World for three reasons. First, it confirmed Paul’s continued marginalization in the GOP because of his highly unorthodox views on foreign policy and defense (in the debate, Paul spent an extraordinary amount of time defending Iran’s pursuit of nuclear weapons, and went all Chomsky in attacking the CIA’s meddling in Iran in the 1950s, not a major concern of conservative Republicans then or now). Second, it lifted Bachmann into the top tier of candidates moving towards the actual delegate-selection contests next year. And third, it confirmed the relevance of wingnut-friendly Iowa in the nominating process; a Paul win would have called that relevance into question.

Meanwhile, down in South Carolina, the long-awaited announcement of Rick Perry’s presidential candidacy further tilted the field to the right. His speech, delivered at the annual gathering of devotees of the fervent take-no-prisoners conservative website RedState.com, was a masterpiece of the rawest ideological red meat. Perhaps the most significant moment was when Perry slipped into a tirade about high taxes a nasty comment about the injustice of low-to-moderate-income Americans owing no federal income taxes while “we” are expected to pay more. The desire to raise taxes on the poor is one of the more ironic preoccupations of Tea Party activists, reflecting the reverse class warfare sentiments made so plain in the foundational “rant” by Rick Santelli that launched their movement back in 2009.

Bachmann and Perry, both major figures in the iconography of both the Tea Party Movement and the Christian Right, now represent two-thirds of the viable Republican presidential field for 2012. Realization of that fact has some of the more Establishment-minded Republicans a bit panicked. The New York Times columnist Ross Douthat looked at the field on Sunday and didn’t like what he saw:

No one doubts Romney’s intelligence or competence, but he has managed to run for president for almost five years without taking a single courageous or even remotely interesting position. The thinking person’s case for Romney, murmured by many of his backers, amounts to this: Vote for Mitt, you know he doesn’t believe a word he says.

But his phoniness would remain a weakness even if he won the presidency. He’s a born compromiser pretending to be a hard-liner, and the hard-liners know it—which means he would enter the Oval Office with conservative knives already sharpened and ready for his back.

Rick Perry has many of the qualities that Romney seems to lack: backbone, core convictions, a killer instinct and a primal understanding of the right-wing electorate. He also has the better story….

What Perry doesn’t have, though, is the kind of moderate facade that Americans look for in their presidents. He’s the conservative id made flesh, with none of the postpartisan/uniter-not-a-divider spirit that successful national politicians usually cultivate.

And Douthat didn’t even address Bachmann’s even more strident stance. He concluded his column with that most thread-bare of Republicans cries for help: a plea to Chris Christie to repudiate months of disavowals of candidacy by jumping into the race. Other elite malcontents are promoting a candidacy by the very epitome of conservative fiscal orthodoxy, Paul Ryan, a more reliable figure than Romney who is also more seemly than Perry.

Aside from these desperate measures to add to the field the big debate in the chattering classes right now about the Republican nominating contest is whether it’s effectively a Romney-Perry contest or if Bachmann can remain viable by winning Iowa. Either way, the pressure will remain on Romney to perpetually prove his conservative bona fides, and the most GOP “moderates” can hope for, as Douthat observes, is that he’s lying through his teeth.

Any doubt that the “movement conservative” conquest of the GOP has now been consummated should pretty much be consigned to the trash bin. The main question now is whether conservatives prefer their presidential candidate to be cool and shifty, or raw and shrill.

Photo credit: DonkeyHotey

Political Memo: The “Centrist Premium”: The High Cost of Moderation

Posted on by The Progressive Policy Institute

For most of the last 30 years, self-described ideological moderates have comprised a plurality of the American electorate. While the share of moderates has dropped slightly in recent years, 38 percent of voters in 2010 still described themselves as such.

In Congress, on the other hand, moderates are decidedly—and increasingly—a minority. Among Democrats, the moderate New Democrat and Blue Dog Coalitions suffered heavy losses among their respective memberships in 2010 and are now outnumbered by their liberal counterparts in the Progressive Caucus. Among Republicans, moderate members are an even rarer species. In fact, there are only 33 members of the moderate Republican Main Street Partnership who are not also part of the 177-member conservative Republican Study Committee.

Analysts have offered up structural explanations—such as gerrymandering and the current political primary system—for why there aren’t more moderates in elected office to reflect America’s true ideological complexion. This paper looks at another structural disadvantage that moderate candidates and incumbents face: campaign finance.

For better or for worse, financing plays a major role in a candidate’s viability and success. Financing buys the ads and ability to raise a candidate’s profile, counter the opposition and turn out the vote. A hefty campaign war chest can be enough in itself to discourage potential rivals. According to the Federal Election Commission, House Congressional races cost a grand total of nearly $1.1 billion in 2010—or $2.5 million per seat. Moreover, elections are becoming increasingly expensive. The spending in 2010 was nearly double the $563 million spent just a decade ago in 2000.

Read the entire memo.

Policy Brief: Labor and the Producer Society

Posted on by The Progressive Policy Institute

Our country is struggling to find a way out of overlapping economic crises. One is cyclical: an agonizingly slow, jobless recovery from a recession made worse by a financial crash. The other crisis is structural. Our economy suffers from a dearth of capital investment and innovation, mismatches between workers’ skills and available jobs, and unsustainable budget and trade deficits.

Even before the recession struck late in 2007, the Great American job machine was sputtering. According to a recent report by the McKinsey Global Institute, “Between 2000 and 2007, the United States posted a weaker record of job creation than during any decade since the Great Depression.” Not only are good jobs vanishing, wages have been falling for all but the top U.S. earners.

One explanation for America’s ebbing dynamism is a long pause in innovation. Since 2000, technological advances have stalled, outside of the dynamic communications industry. In particular, tighter regulation—for good or for bad—appears to be slowing innovation in the healthcare sector.

Research from the Kauffman Foundation also points to a loss of entrepreneurial verve. The number of business start ups, which Kauffman says generate most of U.S. net job growth, has plummeted by about a quarter since 2006.

If there’s a bright spot in the U.S. economy, it’s the recovery of corporate profits and stock prices since 2009. Yet these developments also highlight a stark inequity: Returns on capital are up, but returns on labor are down.

The U.S. economy seems to have arrived at an inflection point. As the Obama administration puzzles over how to rekindle growth, one thing should be clear: There can be no going back to the old economic model of debt-fueled consumption, where U.S. households borrowed to maintain their living standards, aided and abetted by government deficits.

Read the entire policy brief.

Did the Debt Deal Open the Door to a Third Party?

Posted on by The Progressive Policy Institute

Most political reporters have chalked up the debt ceiling deal as a “W” for House Republicans and a humiliating loss for President Obama. But when we consult actual voters, the political scorecard looks quite different.

Americans, says veteran pollster Stan Greenberg, aren’t just irritated by the games politicians play, they are “explosively angry” at Washington. There’s no love lost for either party, but Congressional Republicans now actually rank lowest in public esteem. The only “winners” in the debt limit fiasco were potential third party candidates.

According to Greenberg’s latest Democracy Corps survey, a majority of Americans (53 percent) say they would consider voting for a third party candidate. That could just be a momentary measure of public disgust, but it also points to the first serious opening for a challenge to the two-party duopoly since Obama took office. And when you break down the numbers by party affiliation, or lack of it, things start to get interesting.

By a whopping, 45-point margin (70-25) independents are the most receptive to a third party candidate. These voters swung decisively toward Obama in 2008, cementing his majority, but they are utterly up for grabs in 2012.

Democrats, on the other hand, are the most solid in their partisan commitment. By 57-39 percent, they reject the idea of a third party challenge. The big surprise is how open Republicans seem to be to bolting from their party’s ticket. A substantial majority (58-38) say they are willing to consider a third party alternative, with 38 percent “strongly” willing.

It’s hard to know exactly what to make of this. Maybe these numbers register tepid enthusiasm for GOP front runner Mitt Romney (the poll was taken before Michele Bachmann won Iowa’s straw poll and Rick Perry threw his Stetson in the ring). It’s possible GOP voters just don’t see the candidate yet who can unhorse Barack Obama. But since there aren’t many GOP moderates left, there’s another, more chilling possibility: Maybe the current crop of GOP hopefuls aren’t conservative enough for a sizeable chunk of the Republican base.

In any case, what Greenberg describes as the “unsettled” nature of Republicans’ partisan attachment could be good news for Obama and the Democrats. It could portend renegade candidacies that splinter conservatives; it’s not difficult, for example, to imagine Ron Paul running on a libertarian line if he doesn’t win the GOP nomination.

On the other hand, the public’s increasingly sour mood toward politics as usual has thrown the spotlight on a new political venture called Americans Elect. It’s a non-profit (full disclosure: I’ve volunteered to help) that is organizing a virtual or online nominating convention next June. The basic idea is to use the internet and social media to bypass the duopoly and give voters who don’t feel at home in either party a way to directly chose their own presidential ticket and platform.

Americans Elect isn’t a third party but is offering what it describes as a “second process” for choosing the next president. And it’s working to ensure that whoever wins the internet-based convention will be guaranteed ballot access in all 50 states.

I’ll have more to say about this intriguing experiment in empowering voters later. For now, it’s enough to say that the debt debacle has whetted Americans’ appetite for something completely different in national politics – and political entrepreneurs are responding.

The Consumption Economy Is Dying-Let it Die

Posted on by The Progressive Policy Institute

With the stock market plunging, we’ve heard plenty of warnings that a “pullback” in consumer spending could trigger another recession. Let me suggest an alternative. The last thing this economy needs is more debt-fueled consumer spending which mainly creates jobs overseas. Instead, we should be focused on boosting investment in physical, human, and knowledge capital.

Now, who am I to be dissing the American consumer? Don’t I know that consumer spending “accounts for 70% of economic activity,” as many economic reporters have written in recent weeks? (Indeed, if I have to read that number in another story, I might be forced to go all Office Space on a piece of expensive consumer electronics.)

It’s true that consumer spending creates economic activity. But it’s not true that all that economic activity is in the United States. Many of the consumer goods we buy are imported. If you buy a shirt or television, you are stimulating manufacturing jobs in China, or perhaps Mexico. You aren’t doing as much to stimulate jobs at home.

This is true across the economy, but a helpful example is the clothing, or apparel, industry. Since the fourth quarter of 2007, clothing purchases by consumers have increased by about 5% in real terms, according to the latest figures from the Bureau of Economic Analysis. Over roughly the same period, shipments from U.S. apparel factories fell by 31% in real terms, while apparel jobs fell by 26%. The winner: Factories in China and elsewhere making clothes for the U.S. market.

It’s not just clothes, of course. In many stores, it’s getting harder and harder to even find products that say “Made in the U.S.A.” That’s one reason why much of the economic stimulus escaped out the back door in the form of imports.

Now, this doesn’t mean imports are evil. When we buy goods from overseas, we generate some jobs in retail and wholesale. If you buy a shirt for cheaper than it would otherwise be if we made it here, you have more money left over to buy other things, like health care.

But the big problem with consumer spending is that if you buy a product made outside the U.S., it doesn’t encourage domestic investment. And that’s what we really need. In the past, a dollar spent on a shirt would start a virtuous circle, as the clothing factory expanded, adding more workers and buying new sewing machines. That investment in new machines, in turn, would create more business for the sewing machine company, who would then hire more workers who would need new shirts.

Today, the cycle is happening overseas. We have a genuine investment shortfall in the U.S., where both business and government are way below historical norms for spending on equipment, buildings, software, and infrastructure.

Consider this: Personal consumption in real terms is 11% below its long-term trend, based on the 1997-2007 period. That sounds bad enough. But nondefense government investment is 17% below its long term trend, as state and local governments cut back. And counting all private sector enterprises, nonnresidential investment is a stunning 25% below its long-term trend.

nonresidential investment.png

These figures are devastating for our economic future, both short and long-term. Low investment means fewer jobs and weaker productivity growth. The longer the investment shortfall lasts, the more damage it does. However, we’re not going to close the shortfall by encouraging debt-financed consumer spending. Instead, we need to redirect resources to productive investment.

Here’s a couple of examples of what we can do. First, I like to see the Obama administration publicly identify and applaud “investment heroes”: the top companies who are investing domestically in either physical capital or knowledge capital (R&D, design, and other forms of intellectual investment). The bully pulpit of the president can be a wonderful tool, if it directed toward the right cause, and this would send a signal of the importance of investment.

Second, Obama should come out in favor of countercyclical regulatory policy. We should accelerate the regulatory approval process during periods of economic weakness to boost corporate investment, just as countercyclical monetary and fiscal policy have been used to stimulate consumer spending. This is a message that has to be sent from the top to encourage regulators to consider the effects of their action on the economy.
The potential list of policies to boost investment goes on and on, including targeted infrastructure spending, as I described in my previous Atlantic piece, and perhaps a rationalization of the corporate tax code.

But what’s important is that none of these policies is about boosting consumer spending. If we want Americans to prosper, we need consumer spending to become less important to the economy, not more. In the end, we need a production economy, not a consumption economy.

The piece was originally written for the Atlantic.

Photo credit: Grace

Wingnut Watch: Wisconsin Recall Relief and Iowa Showdown

Posted on by The Progressive Policy Institute

There is joy and relief in Wingnut World today thanks to the narrow failure of Wisconsin Democrats to win enough recall elections to take over the state’s Senate chamber (needing three new seats out of the six being contested, Democrats won two and lost the crucial third by just over 2,000 votes). Though this was a very unusual election in which vast quantities of last-minute conservative money (a total of $8 million was spent in the pivotal district, a bit more than the average state legislative race) probably made the difference, you can expect many jabberers from the Right to call this the final, definitive victory of the people over “labor bosses” determined to keep Scott Walker from giving job-creators the encouragement they need to invest in the state. Next week’s recall elections for two Democratic senators, which are not expected to go well for Republicans, probably won’t get as much national attention. Democrats will then have a tough decision to make about whether to seek a recall of Walker next year. But overall, the main importance of the Wisconsin struggle is that it will likely become a sort of laboratory for what the contending parties—and their ideological allies—will do nationally in 2012.

Aside from Wisconsin, and the continued preparatory skirmishing over the budget timeline set out in the August 1 debt limit, there are two main preoccupations among conservative activists and talkers. One is the war of interpretation over economic developments, including the threat of a double-dip recession, the Standard & Poor’s downgrading of its rating for federal bonds, and the extreme instability of U.S. and global stock markets. So far few, if any, conservatives are bending their general line on the ontological necessity of sharp and immediate federal spending cuts and radical deficit reduction measures in the face of poor economic growth indicators. For example, conservatives have shown no signs of interest in the president’s call for extension of the payroll tax cuts agreed to last December. Presidential candidate Michele Bachmann gets points for audacious consistency in arguing that the bond downgrading, explained by S&P as in no small part attributable to pessimism about future debt limit agreements because of Republican fanaticism on taxes, was actually caused by the debt limit agreement itself.

The second preoccupation in Wingnut World, as in the broader world of political junkies, is with the developments in the Republican presidential race that will unfold over the next few days. In Iowa, a presidential candidate debate on Thursday will immediately be followed by Saturday’s State Republican Party straw poll in Ames. The debate, sponsored by Fox News and the conservative Washington Examiner, will include not only the candidates competing in the Straw Poll, but also Mitt Romney, who is not, and could therefore be the target of zingers from rivals desperately trying to create some turnout-generating buzz in Ames.

In terms of what is likely to happen at the Straw Poll, there is a general consensus that Tim Pawlenty has the best organization but little enthusiasm; Michele Bachmann has the most enthusiasm but a questionable organization; Rick Santorum could well surprise people by doing better than Herman Cain; and Ron Paul, with the right combination of committed supporters and superior organization, could win the whole thing if turnout is not very high. Both Pawlenty and Bachmann really need a win in Ames. But it’s Pawlenty who needs it the most, having focused on Iowa for many months and positioned himself to become the “electable conservative alternative to Mitt Romney” down the road. His limited financial means and terrible poll standings across the country—and the impending entry of another “electable conservative alternative to Mitt Romney,” Rick Perry—could mean curtains if he doesn’t pull off the Straw Poll victory.

Speaking of Perry, he’s apparently going to announce or at least semi-announce his candidacy in South Carolina in the friendly confines of the annual get-together of Erick Erickson’s Red State community. The fact that his speech in Charleston occurs the very same day as the Straw Poll has caused some angst among Iowa Republicans, who view it as an effort to horn in on their media attention. So it’s not surprising Perry is planning to scurry up to Iowa (to Bachmann’s original home town of Waterloo) on Sunday. From Perry’s point of view, a Paul win in Ames, damaging Bachmann and perhaps finishing off T-Paw, and making the entire exercise (which he skipped) otherwise irrelevant, would be ideal. But even before announcing, Perry has managed to vault himself into the top tier of candidates, essentially succeeding in taking over T-Paw’s spot as the putative “unity candidate” between the electability-challenged Bachmann and the ideologically-challenged Romney. That’s quite a feat for a guy who keeps flip-flopping on hot-button social issues; has gotten dangerously cozy with religious extremists; has a habit of startling his fellow-conservatives with stunts like his 2008 championship of Rudy Guiliani; and has never been terribly popular in his own state.

Photo credit: WordShore.

Where Americans Can Cut Back

Posted on by The Progressive Policy Institute

Dollar billWhere can Americans cut back if the economy slips back into recession again? After all the talk about the “new frugality” and the deepest recession in 75 years, it might seem like households have tightened their belts as much as possible.

Surprisingly, however, the economic figures show several key areas where Americans have actually increased consumption compared to 2006, the year when housing prices peaked. Judge for yourself whether we can cut back more or not. (Note: all consumption changes are measured in inflation-adjusted 2005 dollars, comparing the 2nd quarter of 2011 with the second quarter of 2006)

1. Clothing — Consumption: + 8.9% since 2006

Despite the economic weakness, Americans spent on clothing at an almost $350 billon annual rate in the second quarter of 2011. Nothing seems to stop the waves of inexpensive shirts, dresses, and coats coming from overseas. Clothing imports from China, especially, are up 37 percent since 2006, and Americans are snapping them up. Perhaps we could buy a a few less t-shirts with funny sayings on them?

2. Personal care products — Consumption: +14.4% since 2006

We like to look our best, even in a recession. Perfume, makeup, shampoo, shaving cream and razors, body gels–Americans spend about $100 billion a year on these personal care items. Not only that, we’re spending more on imported cosmetics, which are up 26 percent since 2006. Are all those goos and gels really necessary?

3. Televisions — Consumption: +287.4% since 2006

No, that’s not a misprint. The government adjusts for the size of the television, among other things, and the average size screen has soared since 2006. If we don’t adjust for size and other variables, Americans are spending 12.7% more on televisions today compared to 2006. Total personal consumption outlays on televisions, according to the BEA: About $40 billion, pretty much all imported. Do you really need an even bigger TV?

4. Alcoholic Beverages (off-premises) — Consumption: +10.7% since 2006

Perhaps it’s not surprising that Americans need an extra drink these days. Still, the total home spending on alcoholic beverages is about $110 billion, at annual rates, according to the Bureau of Economic Analysis. A few less glasses might put a few extra dollars in the pocket.

Remember, all these figures apply to Americans in the aggregate. Those people who have been out of work for months or years don’t have room to cut back at all.

And remember–when journalists write that “consumer spending is 70 percent of economic activity,” they are completely wrong. What the U.S. economy needs is more production, not more consumption–and in a globalized economy, the two are not synonymous at all. And that, my friends, will be the subject of tomorrow’s post.

Photo credit: iChaz.