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State of the Union: The Power of Pronouncements

Posted on by The Progressive Policy Institute

This week, I taught the first class of a graduate seminar at Virginia Tech titled “Collaborative Governance.”  Our readings included a Foreign Affairs essay where the author confidently pronounced a number of pretty simple and strong directions for policymakers.  One of the students—who is earning a Ph.D.—became extremely frustrated.  “It’s just so simplistic!” she complained.  “There’s no subtlety, no context.”

So it goes with policy pronouncements, and so it often goes with the State of the Union.  People are often frustrated that they don’t hear the specifics about what government should do.

Yet, as we discussed in class, the fact remains that the broad, often simplistic pronouncements we heard last night still do push the ship of state in one direction rather than another.  And the fact also remains that the gulf between hard policy and the politics of policy can be perilous.

Democracy and governance held a place at once enthusiastic and general in the speech.  The commitment to the metaphysical promise of democracy was very clear:  “We must never forget that the things we’ve struggled for, and fought for, live in the hearts of people everywhere.”  About South Sudan, for instance, the president celebrated the outbreak of self-determination and freedom.

But questions were unanswered:  Here’s what President Obama said about Afghanistan:

There will be tough fighting ahead, and the Afghan government will need to deliver better governance. But we are strengthening the capacity of the Afghan people and building an enduring partnership with them.

“Need to deliver better governance” is the sort of generality that drives people like my frustrated student nuts.  The Karzai government is currently riven about whether to ratify the results of last October’s Parliamentary election and actually seat the government, with Karzai’s Attorney General trying to declare the results invalid.  The U.S. government’s position is that the elections should be upheld—but the overarching policy on how best to achieve governance in Afghanistan is still less than completely clear.

The allusions to the stirring outbreaks of democracy in Tunisia and Sudan were inspiring but equally indeterminate.  Of Tunisia, the president said, “[T]he United States of America stands with the people of Tunisia, and supports the democratic aspirations of all people.”

We support the democratic aspirations of all people—but the speech did not mention the extremely thorny issue of our traditional partner Egypt, an autocratic nation where a Tunisia-inspired democratic revolt was happening as the president spoke. That gap spoke volumes about the difficulty of translating broad aims into hard policy.

But the saving grace came in passages about American democracy itself.  In 2010, here’s what President Obama said about our system:

Democracy in a nation of 300 million people can be noisy and messy and complicated. And when you try to do big things and make big changes, it stirs passions and controversy. That’s just how it is.

This was striking both for its objectivity and its slightly defensive quality.  There was a slight but crucial reframing of a highly similar statement in this year’s SOTU:

And yet, as contentious and frustrating and messy as our democracy can sometimes be, I know there isn’t a person here who would trade places with any other nation on Earth.

Perhaps it was the Giffords shooting, or the sight of the Tunisian activists in the street, or the Congressspeople sitting together—but the statement brought tears to my eyes.  This year, President Obama’s observation of the messiness of American democracy became an article of pride.  This is a generality we can all embrace.

State of the Union: Republican Response Preaches to the Choir

Posted on by The Progressive Policy Institute

If Rep. Paul Ryan’s response to the State of the Union Address was intended to broaden support for his party’s agenda, or actually “respond” to the President’s speech, I suspect it failed.  Ryan offered, instead, a base-friendly reinterpretation of the “state of the union” that made downsizing government not just an end in itself, but the answer to every problem.

Obama’s own proposals were brushed away in the response with the claim that “investment” just means “spending,” and that government needs to get out of the way and let the private sector take care of our needs.  Actually, Ryan barely alluded to the current economic challenge, other than to say it wasn’t fixed by the 2009 stimulus legislation.  Obama devoted much of his speech to a recitation of small, tangible ideas for what the federal government can do to promote private-sector growth and national competitiveness.  Ryan’s response contained just one idea: limited government.

In a brief response, to be sure, nobody should expect a detailed agenda.  But Ryan used about half his words for dog whistles to conservative activists.  There were references to the Founders’ Original Intent, beloved (however selectively) of Tea Party folk, and to the Declaration of Independence, which is the document whereby conservative legal beagles try to sneak divine and natural law into the constitutional design.  Ryan’s brief list of legitimate functions for government included “protecting innocent life,” a shout-out to the anti-abortion movement.  Gold bugs were treated to a ritualistic invocation of the importance of “sound money.”  And Ryan even appealed to the nasty, Randian underside of conservative hostility to “welfare” by citing a vague fear that America is turning “the social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.”

As for the tone of the response, Ryan certainly did not reciprocate Obama’s constant pleas for bipartisan cooperation, instead treating the overthrow of every Obama policy of the last two years as the starting point for his party’s policy.

I’ve written elsewhere that Obama’s speech may have represented a clever trap to expose Republican extremism by embracing remarkably modest initiatives keyed to public sector roles in economic growth that most Americans have supported for decades.  If so, Ryan walked right into that trap, and showed it’s the GOP who are now vulnerable to the charge that they are talking about everything other than the economy, and have no ideas for fixing it other than indiscriminate attacks on government, taxes, and regulations.

But there’s more: Those conservatives who didn’t think Ryan gave them enough red meat had the opportunity to tune into a second GOP response, on behalf of the Tea Party Express, from the noted fire-breather Rep. Michele Bachmann of MN.   She omitted even Ryan’s meager bipartisan grace notes, and lurched from a cartoonish chart of unemployment rates to a set of dubious anecdotes about the crushing burden of regulations on “job creators” (the new conservative word for “corporations”).  As she closed her remarks, her choice of the Battle of Iwo Jima as the best metaphor for America’s current position was appropriately puzzling.

Like other State of the Union addresses, this one is best understood as a framing device for future conflict and cooperation between the two parties.  Judging by the GOP response(s), that party is determined to pursue confrontation with the goal of seeing how much damage it can do to the size and strength of the federal government.  The economy has become just an afterthought.  

Grading the State of The Union: A Solid B+

Posted on by The Progressive Policy Institute

Last week, the Progressive Policy Institute released a Memo to President Obama, which contained 10 Big Ideas for Getting America Moving Again. How did the President’s speech match up to our recommendations?

Overall, he did quite well. Eight of our ten ideas were largely consonant with proposals included in the address, and the future-oriented rhetoric echoes the language in our memo. We also appreciate his willingness to look to both sides of the aisle to find solutions.

However, we were disappointed that he did not discuss the sluggish housing market, and that he did offer any ideas to address the roots of the partisan rancor in Washington.

Our overall grade: B+

Here’s a proposal-by-proposal scorecard:

 

1. Removing Obstacles to Growth: A Regulatory Improvement Commission

 

We proposed: A periodic review process conducted by a Regulatory Improvement Commission, modeled loosely on the BRAC Commissions for military base closures.

The President said: “To reduce barriers to growth and investment, I’ve ordered a review of government regulations.”

Analysis: The President clearly understands that we need to prune obsolete and ineffective regulations and stimulate economic innovation and entrepreneurship. But agency self-review is inadequate.

Grade: A-

2. Internal National Building: A National Infrastructure Bank

 

We proposed: Smart, innovative financing solutions that enable us to restore the backbone of our economy. A well-structured National Infrastructure Bank can play this role by leveraging public dollars with the participation of private-sector investors.

The President said: “The third step in winning the future is rebuilding America.  To attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information — from high-speed rail to high-speed Internet.”

Analysis: Making infrastructure one of five sections of the speech gave it real prominence. But the President needs to do more than just propose “that we redouble those efforts.”   He needs to lay out a mechanism to do that rationally, and to identify clear funding for it. A National Infrastucture Bank could accomplish that.

Grade: A-

3. A Way to Pay for High-Speed Rail

We proposed: Restructuring the Highway Trust Fund into a Surface Transportation Trust Fund that recaptures its original mission—to build and maintain an efficient national transportation network—and updates that mission to reflect 21st-century priorities, including upgrades to our passenger and freight rail systems.

The President said: “Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail. “

Analysis: We applaud the President’s full-throated commitment to high-speed rail. However, he’s going to need to figure out a way to pay for it. We suggest he read Mark Reutter’s excellent memo on how to finance high-speed rail.

Grade: A-

4. Restoring Fiscal Discipline in Washington

 

We proposed: Restoring fiscal discipline in Washington by trimming the $1.1 trillion in outdated tax expenditures, capping domestic spending (including defense), eliminating supplemental defense budgets, and slowing mandatory expenditures by reducing benefits for affluent retirees.

The President said: “Starting this year, we freeze annual domestic spending for the next five years… we cut excessive spending wherever we find it –- in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes… we should also find a bipartisan solution to strengthen Social Security for future generations…we simply can’t afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans.”

Analysis: The President clearly gets the seriousness of the looming debt crisis, but understands the difference between smart cuts and needed investments. But he could have come out more strongly in favor the Fiscal Commission’s work, and he only paid lip service to entitlements.

Grade: B+

5. Setting National Targets: A Balanced Energy Portfolio

We proposed: A national Balanced Energy Portfolio with a target fuel mix allocated into thirds by 2040: one third of our electricity generated by renewable resources, one third by nuclear power, and one third from traditional fossil fuels.

The President said: “By 2035, 80 percent of America’s electricity will come from clean energy sources.  Some folks want wind and solar.  Others want nuclear, clean coal and natural gas.  To meet this goal, we will need them all — and I urge Democrats and Republicans to work together to make it happen.”

Analysis: The President is thinking big, but also recognizing that nuclear and natural gas need to be part of any energy mix.

Grade: A

6. Greening the Pentagon: An Energy Security Innovation Fund

We proposed: An Energy Security Innovation Fund, housed in the Pentagon, to help companies bridge the gap. Such a fund would leverage public dollars with private money to support research and deployment of the most promising green products.

The President said: “We’re telling America’s scientists and engineers that if they assemble teams of the best minds in their fields, and focus on the hardest problems in clean energy, we’ll fund the Apollo projects of our time.”

Analysis: The next clean energy breakthrough is going to require support from the government. But Obaa should look beyond the Department of Energy and recognize that the military can be a fertile source of innovation, too.

Grade: A-

7. Bringing Public Education into the 21st Century

We proposed: To radically transform public education by growing charter schools, ending teacher tenure as we know it, spurring a network of “Innovation Zones”, and creating a “Digital Teacher Corps”.

The President said: “Our schools share this responsibility.  When a child walks into a classroom, it should be a place of high expectations and high performance.  But too many schools don’t meet this test.”

Analysis: Education is clearly the key to our ability to “win the future,” and the President understands this. We support his Race to the Top program and the call for more bright young people to go into education. But we also hope he thinks more creatively about radical new ideas for 21st century education, embracing the possibilities of charter schools, digital education, and “innovation zones.”

Grade: A-

8. Lifting Housing Markets: One Million Homeowner Vouchers

We proposed: An innovative way to jump-start the housing market would be for the federal government to provide a million vouchers that allow low-income renters to become homeowners.

The President said: (Nothing)

Analysis: Surprisingly, the President failed to mention the sluggish housing market, which many economists believe is one of the leading factors holding back an economic recovery.

Grade: F

9. Align Innovation and Immigration

We proposed: Aligning innovation and immigration by providing a citizenship path for foreign students with advanced technical degrees and illegal immigrants’ children who are interested in national service.

The President said: “I strongly believe that we should take on, once and for all, the issue of illegal immigration… I know that debate will be difficult.  I know it will take time.  But tonight, let’s agree to make that effort.  And let’s stop expelling talented, responsible young people who could be staffing our research labs or starting a new business, who could be further enriching this nation. “

Analysis: The President deserves points for having the courage to bring up immigration reform. But he clearly gets it: our global competitiveness depends on continuing to be a magnet for the world’s best and brightest.

Grade: A

10. Taking Power from Special Interests: A Fair Way to Finance Elections

We proposed: A hybrid Fair Elections system introduced by Sen. Dick Durbin (D-Ill.) to allow federal candidates to choose to run for office without relying on large contributions by using federal money to match small donations.

The President said: (Nothing)

Analysis: Campaign finance reform is not on the agenda, and the President does not seem particularly interested in putting it there. This is too bad. A great way to break the partisan rancor in Washington would be change the way politicians get elected to office. As long as congressional campaigns are privately funded, and as long as the big donations come primarily from ideologues and special interests, pragmatic candidates are going to have a tough time raising the resources they need to get started, and a difficult time winning in all-important low-turnout primaries.

Grade: F

Conclusion:

Overall, it was a great speech. It laid out the problems that we face as a nation, and provided a vision of an America that invests smartly in the future, building infrastructure, providing educational opportunities, and remaining a magnet for the best and brightest in the world, and all in a way that could move us past partisan divides.

State of the Union: Obama Gets Innovation Upside-Down

Posted on by The Progressive Policy Institute

In his State of the Union speech, President Obama spent a lot of time on innovation, regulation, and jobs–that’s good. Unfortunately, in all three cases he got his priorities upside down.

Let’s start with innovation.  I counted how many words the President devoted to different areas of innovation.

  • 2 words for biomedical research, the area where the U.S. is far ahead of the rest of the world.
  • 68 words devoted to extolling the job-creating virtues of space travel and NASA, an agency which currently has no mission unless it gets a lot more money.
  • 113 words for  high-speed-wireless broadband, a worthy goal.
  • 361 words in favor clean energy, a technology where the U.S. has little competitive advantage over the rest of the world.

In other words, Obama spent his time lauding our least competitive areas of innovation, while giving the back of his hand to biomedical research, the area where we have the clear global advantage.

If you think I’m exaggerating, take a look at these two charts.  When it comes to life sciences, the U.S. is way ahead. U.S. companies account for 44% of   R&D spending by life sciences companies around the world in 2010, according to etimates by Battelle/R&DMagazine.  And U.S. government support for health research is unsurpassed, accounting for 70% of  global public sector funding.

On the other hand, the U.S. support for  energy research is mediocre, at best. U.S. companies account for only 25% of global energy R&D spending by businesses.  And in 2008, before Obama took over, the U.S. government funding for energy R&D accounted for only 20% of the global public sector spending on energy R&D.  That’s pitiful.

Here’s what a recent R&DMagazine piece says about U.S. energy R&D:

the level of R&D spending in the U.S. energy sector is small in absolute terms and as a percent of revenue (0.3%) when compared with other sectors. For example, the total amount of private sector investment in all forms of energy research in our portfolio would likely amount to little more than half of the leading life science R&D investor, Merck, or the leading software/IT R&D investor, Microsoft, both of which invested more than $8.4 billion in R&D in 2009.

Mr. President, every time you talk about clean energy creating jobs, you are placing your bet on the wrong horse.  Communications and biosciences are the best bets we have in the near-term.

Now we come to regulation. I’m afraid once again the President started out right, and ended upside-down. He began by explaining how he would get rid of rules that imposed an unnecessary burden (29 words). But then he spends triple the time ( 102 words) defending his administration’s regulatory efforts.  He should have stopped while he was ahead.

Finally, we come to jobs, which were spread through the whole speech. This is my ‘soft’ count of how many times the word ‘jobs’ were mentioned in connection  with various areas of the economy (your count may differ)

  • IT-1
  • Space-1
  • Clean energy –2
  • Education–3
  • Infrastructure –2
  • Exports–4

Exports got the most mentions as a source of jobs—-but no mention of imports, and no mention of the fact that our trade deficit in advanced technology products hit an all-time record in November, going into double digits for the first time.  The reason? Imports of advanced technology products have surged, while exports are basically flat.  Before worrying about exports, we should worry about recapturing some of the jobs lost to imports.

This piece is cross-posted at Mandel on Innovation and Growth

Assessing the State of the Union Address

Posted on by The Progressive Policy Institute

It was encouraging to see President Obama last night make such an impassioned call for investing in America’s future, while clearly taking seriously the deficit challenges. It was also very encouraging to see that many of his ideas were consonant with PPI’s 10 Big Ideas for Getting America Moving and that he is charting a course past old partisan divides.

Over the course of today and tomorrow, the gang here at PPI is going to be analyzing the President’s address and the ideas contained therein. So check back with us soon for smart insights you won’t want to miss.

Howard Berman Stands Up for Foreign Assistance

Posted on by The Progressive Policy Institute

Foreign aid doesn’t have a constituency, and is often first on the chopping block, a maxim that is no different in the Tea Party Congress. In their haste to slash every penny of government spending (save the tough bits, of course), they have again failed to appreciate why foreign aid exists in the first place.

Unveiled last week was a Republican proposal to slash everything under the sun when it comes to aid: 84 percent of the USAID budget, the U.S. Trade Development Agency, the Woodrow Wilson Center, the USDA Sugar Program, economic assistance to Egypt, and many other programs.

To be sure, America needs a serious discussion about foreign aid reform. But we shouldn’t be questioning its very existence.

That’s why much credit is due to Rep. Howard Berman (D-CA), ranking member (and former Chairman) of the House International Relations Committee, who rises to stand in the path of neo-isolationism:

We all remember the period when the United States tried to go it alone, unwilling to cooperate with other countries and demonstrate global leadership,” We’ve finally begun to turn that all around.  Let’s not go back to the bad old days when the U.S. turned away from the rest of the world, and lost so much of its influence and respect.”

This is nothing short of casting the ideological die. On one side is the principle of standing for an America whose security is enhanced and values forwarded by being engaged as an active world leader. On the other side is an America that shirks from its vast and critical international responsibilities because most conservatives lack the gumption to have a tough discussion on revenues and spending.
Let’s talk about reforming aid and protecting America’s interests and values, not about taking our ball and going home.

The Right Growth Formula

Posted on by The Progressive Policy Institute

The specter of economic decline is haunting America. President Obama seeks to banish it by making jobs and U.S. competitiveness the centerpiece of his State of the Union report to Congress tomorrow. This sets the stage for a critical contest between dueling theories about how America can get its economic mojo back.

Over the weekend, Republicans flooded the media with preemptive strikes against Obama’s expected calls for boosting public investment to spur growth. “With all due respect to our Democratic friends, any time they want to spend, they call it investment, so I think you will hear the president talk about investing a lot Tuesday night,” GOP Senate leader Mitch McConnell told “Fox News Sunday.” “This is not a time to be looking at pumping up government spending in very many areas.”

True to form, Republicans have a very simple theory for rekindling jobs and growth: Cut federal spending. That’s why they’ve tapped their leading fiscal hawk, House Budget Committee Chairman Paul Ryan, to respond to Obama’s speech. And Rep. Michele Bachmann will offer an unofficial, “Tea Party” riposte to the President online.

Now, I’m all for fiscal discipline. I’ve chided progressives for posing a false choice between deficit reduction and economic growth. Restoring fiscal stability is an essential ingredient of any credible plan for robust growth.

But cutting spending by itself won’t help us rebuild our infrastructure (which is the foundation for productivity), strengthen our comparative advantage in science and technological innovation, or produce a highly skilled workforce. As virtually all serious economists recognize, these are tasks for government.

Yet today’s Republicans are so besotted by anti-government populism that you can’t even count on them to be good capitalists anymore. Perhaps conservative think tanks should organize seminars to reacquaint House Republicans with Adam Smith, whose defense of laissez faire economics did not blind him to government’s responsibility to supply public goods like roads, ports and education. As he wrote in the Wealth of Nations:

The third and last duty of the [government] is that of erecting or maintaining those public institutions and those public works, which, although they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could not repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.

As PPI maintains in Getting America Moving Again, a new Memo to President Obama, it will take both more public investment and more dynamic markets to reinvigorate our economy. We need to boost spending on research and commercialization of new inventions. We also need to boost spending on modernizing the nation’s transport and energy infrastructure – for example, by building high speed rails and smart grids that can accommodate clean energy generation. This can and must be done within a new framework for restoring fiscal stability that cuts tax expenditures, caps spending on defense and domestic programs, and most importantly, slows the unsustainable growth of the big entitlement programs.

At the same time, we also need to revamp archaic tax and regulatory policies that dampen incentives for economic innovation and entrepreneurial risk-taking. To that end we have proposed a base-closing style commission charged with culling the accumulation over time of burdensome rules and regulation.

In truth, neither party’s economic orthodoxies are equal to the challenge facing our country. That’s why President Obama needs to challenge both sides tomorrow to unite behind a bold plan for a national economic resurgence.

The Republicans Take Out Their Budget-Cutting Scissors

Posted on by The Progressive Policy Institute

Now that we’re past the Kabuki exercise of the health reform “repeal” vote (for the record, just three House Democrats voted for repeal); the attention of Congress is inevitably refocusing on spending issues.  And that intrepid group of very conservative folks, the House Republican Study Committee, has come forward with the year’s first semi-detailed list of non-defense discretionary cuts, which along with some pixie-dust math and a lot of TBD across-the-board measures, is said to amount to $2.5 trillion over ten years.

The proposed cuts fall into three basic categories: long-time deficit reduction targets that sound good but don’t accomplish much (the “mohair subsidy” and such small federal programs as the Economic Development Administration and the Appalachian Regional Commission); highly political targets closely associated with Democratic initiatives or constituencies (national and community service; Davis-Bacon “prevailing wage” rules; NEA and NEH; Title X Family Planning); and bigger-ticket items that involve massive reductions in federal or state employment and/or services (cancelling the enhanced Medicaid match rate).  There are also proposals that would raise some large foreign policy concerns, such as elimination of USAID and of economic assistance to Egypt.

It’s notable, of course, that these proposals do not touch the defense or homeland security sectors of federal spending—or Social Security and Medicare, for that matter.  According to an analysis by the Center for Budget and Policy Priorities, the RSC’s overall spending goals require an overall reduction of 42 percent in the areas it does not exempt.

One issue that conservatives will likely refuse to debate is the potential impact of such cuts on economic recovery, since they categorically reject Keynsianism these days and also refuse to accept public employment as real.  Said RSC member Tom McClintock (R-CA): “Presidents like Hoover and Roosevelt and Bush … and now Obama, who have increased government spending relative to GDP all produced or prolonged or deepened periods of economic hardship and malaise.” Democrats used to charge Republicans with wanting to bring back the fiscal policies of Herbert Hoover, but now Hoover himself is being rejected as a big-spending liberal, reflecting a view of the Great Depression that was exceptionally fringy until very recently.

The RSC package is probably intended as something of a mine canary for the official House Republican non-defense-discretionary spending offensive that will occur in conjunction with the expiration of the current continuing resolution for appropriations and a vote to increase the public debt limit.  It will be interesting to see exactly how many Republican lawmakers line up behind the package, and if any strongly object to provisions that will definitely cause them political heartburn.

In a related note, Republicans have chosen House Budget Committee chairman Paul Ryan of Wisconsin to present their response to the State of the Union Address.  This indicates the extent to which GOPers want the 2011 focus to remain on budget cuts.  Ryan’s success may also determine whether his name keeps coming up as a possible dark horse 2012 presidential possibility.  Ryan, of course, is closely identified with a budgetary approach (his famous 2010 “Road Map”) that includes significant changes in Social Security and Medicare.  Perhaps consideration of what a non-entitlement-reduction budgetary offensive like RSC’s would involve will revive Republican interest in Ryan’s original thinking.

In non-legislative political news, the big headline was Sen. Joe Lieberman’s decision against running for a fifth term in 2012.  With major rivals lining up in both parties, and with Lieberman’s approval ratings in Connecticut looking very poor, his retirement decision was no great surprise.  But the discussion of his legacy will be interesting, since few recent political figures have stimulated such widely disparate assessments, from centrist martyr to unprincipled backstabber.

On the 2012 presidential front, reports indicate that Sarah Palin is finally making some concrete inquiries about what it would take to start up a proto-campaign in Iowa, and pressure continues to mount on Mike Pence to eschew an Indiana gubernatorial run and give cultural conservatives a guaranteed champion in the White House field.  A new PPP poll shows Mike Huckabee opening up a comfortable national lead among Republicans for the 2012 nomination, with 24 percent of the vote, and Sarah Palin and Mitt Romney tied for second at 14 percent and Newt Gingrich not far behind at 11 percent.

Lessons From Tunisia

Posted on by The Progressive Policy Institute

With Tunisia calming down, it is worth reflecting on what the events might mean for us here in the good ol’ US of A.

The first point is that the Obama administration struck precisely the right balance between offering encouragement to the protesters and avoiding interfering in Tunisian internal matters. It is not quite true, as Andrew Sullivan implies, that Obama said nothing about the upheaval. The President released a statement saying he applauds Tunisians’ strength and dignity in standing up to corruption, an important comment that showed that America would not block the will of the Tunisian people. Nationalism is a powerful force in the modern world, and opposing it in now Tunisia would be a disastrous decision.

But neither is it true that the administration inserted itself into the equation, the way Abe Greenwald and others wanted it to. The Obama-ites kept their profile deliberately low, wary of making American support the issue that could be blamed for fomenting the revolution in a part of the world deeply suspicious of U.S. intervention. Unlike Greenwald et al., the administration understands that Tunisians hardly need the assent of an American president before bravely taking, or continuing, action. If anything, Tunisians would be wary of interference from a U.S. president that had praised the strong relations between the nations.

Second, the fact that America let an Arab dictator it supported fall will not go unnoticed. One of Al Qaeda’s major grievances with the U.S. is that America supports autocratic, corrupt, “un-Islamic” regimes like Saudi Arabia, Egypt, and Jordan. In the 1990s, senior Al Qaeda members, including Osama bin Laden, became (wrongly) convinced that it was U.S. power that was allowing these regimes to remain in power. As scholar Fawaz A. Gerges writes in his essential book The Far Enemy, bin Laden “considered Saudi Arabia an occupied country and its regime incapable of forcing the Americans out.” Gerges continues: “[H]e declared war on the United States, not on Saudi Arabia, because, as he told his cohorts, once the United States is expelled from the area, its local clients would fall like ripened fruits.” For Al Qaeda deputy Ayman al-Zawahiri the country in question was Egypt, but the logic was the same. The “near enemy” was propped up by “the far enemy,” America.

It will therefore be of great interest to Arabs and Muslims—and hardly just Al-Qaeda—that in fact America does not unconditionally support local despots. Should regime opponents emerge that are not inimical to American interests, the U.S. will not eternally stand in their way.

The real question is what lesson will be taken away from this. Will it be that America is in fact not behind the region’s many woes, that the U.S. is not the far enemy? Or rather, conversely, will it be that the U.S. will support tyrants until the Arab people rise up and cast them off? The two are not mutually exclusive, of course. One can imagine both becoming internalized by Middle Easterners in the coming days.

PPI’s SOTU Memo to Obama: Ten Big Ideas to Get America Moving Again

Posted on by The Progressive Policy Institute
NEWS RELEASE

FOR IMMEDIATE RELEASE
JANUARY 21, 2011

PRESS CONTACT: Steven Chlapecka – schlapecka@ppionline.org, T: 202.525.3931

PPI’s SOTU Memo to Obama:

Ten Big Ideas to Get America Moving Again

 

WASHINGTON, D.C. – The Progressive Policy Institute today released a “Memo to President Barack Obama” outlining 10 big ideas for sparking a national economic resurgence.

“PPI’s message is simple: it’s time to get America moving again,” reads the memo. “It’s time to champion big ideas that can move us past the partisan deadlock, and towards a more prosperous future.

“The President has a real opportunity to rise above partisan rancor and rally the country behind a bold plan for rebooting the economy,” said PPI President Will Marshall. “‘Getting America Moving Again’ offers a pragmatic alternative to the false economic choices posed by the left and the right. ”

Specifically, PPI urges the president to:

1. Create a Regulatory Improvement Commission to prune obsolete and ineffective regulations and stimulate economic innovation and entrepreneurship.

2. Seed a National Infrastructure Bank to tap private capital to rebuild America.

3. Establish a results-oriented Surface Transportation Trust Fund to provide $5 billion in targeted seed money for high-speed rail projects.

4. Start restoring fiscal discipline in Washington by trimming the $1.1 trillion in outdated tax expenditures, capping domestic spending (including defense), eliminating supplemental defense budgets, and slowing mandatory expenditures by reducing benefits for affluent retirees.

5. Set a target for a new balanced energy portfolio: one third renewables, one third nuclear, one third fossil fuels, achievable by 2040.

6. Start a Pentagon Energy Security Innovation Fund that helps small businesses develop the next generation of green energy products.

7. Radically transform public education by growing charter schools, ending teacher tenure as we know it, spurring a network of “Innovation Zones”, and creating a “Digital Teacher Corps”.

8. Provide One Million Homeowner Vouchers to kickstart the housing market and make homeownership a reality for low-income families.

9. Align Innovation and Immigration by providing a citizenship path for foreign students with advanced technical degrees and illegal immigrants’ children who are interested in national service.

10. Create a Fair Elections federal election financing system that allows candidates to match federal dollars to small contributions.

Download the entire memo.

# # #

 

For more information, please contact Steven Chlapecka at schlapecka@ppionline.org, 202.525.3931 (office), 202.556.1752 (cell).

The History of Retrospective Regulatory Review

Posted on by The Progressive Policy Institute

As part of President Obama’s executive order on “Improving Regulation and Regulatory Review,” he called for agencies to conduct ”Retrospective Analyses of Existing Rules,” and to “modify, streamline, expand, or repeal” the ones that are ”outmoded, ineffective, insufficient, or excessively burdensome.”

Definitely moving in the right direction….but the key is how to implement this requirement in a way that works. Unfortunately, the track record of agencies performing such mandatory retrospective analyses on their own rules is not dissimilar to the results of doctors conducting surgery on themselves.

I quote from a 2007 GAO report entitled ”Reexamining Regulations: Opportunities Exist to Improve Effectiveness and Transparency of Retrospective Reviews.”

Every president since President Carter has directed agencies to evaluate or reconsider existing regulations. For example, President Carter’s Executive Order 12044 required agencies to periodically review existing rules; one charge of President Reagan’s task force on regulatory relief was to recommend changes to existing regulations; President George H.W. Bush instructed agencies to identify existing regulations to eliminate unnecessary regulatory burden; and President Clinton, under section 5 of Executive Order 12866, required agencies to develop a program to “periodically review” existing significant regulations.17 In 2001, 2002, and 2004, the administration of President George W. Bush asked the public to suggest reforms of existing regulations.

For the mandatory reviews completed within our time frame, the most common result was a decision by the agency that no changes were needed to the regulation. There was a general consensus among officials across the agencies that the reviews were sometimes useful, even if no subsequent actions resulted, because they helped to confirm that existing regulations were working as intended.

Our limited review of agency summaries and reports on completed retrospective reviews revealed that agencies’ reviews more often attempted to assess the effectiveness of their implementation of the regulation rather than the effectiveness of the regulation in achieving its goal.

Agencies reported that the most critical barrier to their ability to conduct reviews was the difficulty in devoting the time and staff resources required for reviews while also carrying out other mission activities.

Most agencies’ officials reported that they lack the information and data needed to conduct reviews. Officials reported that a major data barrier to conducting effective reviews is the lack of baseline data for assessing regulations that they promulgated many years ago. Because of this lack of data, agencies are unable to accurately measure the progress or true effect of those regulations.

Agencies and nonfederal parties also considered PRA [Paperwork Reduction Act–MM] requirements to be a potential limiting factor in agencies’ ability to collect sufficient data to assess their regulations. For example, EPA officials reported that obtaining data was one of the biggest challenges the Office of Water faced in conducting its reviews of the effluent guideline and pretreatment standard under the Clean Water Act, and that as a result the Office of Water was hindered or unable to perform some analyses. According to the officials, while EPA has the authority to collect such data, the PRA requirements and associated information collection review approval process take more time to complete than the Office of Water’s mandated schedule for annual reviews of the effluent guideline and pretreatment standard allows.

This last one is especially fun, and shows up over and over again in the literature on retrospective regulatory review. Basically, the OMB has to review and approve data collection by the government, which means that collecting data to prove that a regulation doesn’t work requires more paperwork.

This piece is cross-posted at Mandel on Innovation and Growth

Photo Credit: hashmil

China’s Reverse Robin Hood: Stealing Intellectual Property from the Poor

Posted on by The Progressive Policy Institute

Many of the facts relating to the globalization of intellectual property (IP) theft over the last decade are not debatable. For example, IP theft has decreased the market share of U.S. firms and destroyed or prevented the creation of millions of U.S. jobs. While currently 18 million Americas are employed in IP-intensive industries, the U.S. economy loses over $20 billion annually to IP theft and in 2007 IP theft reduced global trade by 5 to 7 percent.

However once one gets beyond a simple fact-based analysis the debate over IP theft becomes more contentious. Specifically when it comes to policy prescriptions such as the true societal cost of IP theft, enforcement strategies and stakeholders rights, there is significant disagreement. One of the most contentious elements of IP theft is how to deal with developing countries. As technology spreads to emerging markets, specifically in Eastern Europe and Asia, faster than legal frameworks to prosecute IP violations, theft has steadily risen. For example, although emerging markets only account for 20 percent of the software market, they make up 45 percent of software piracy. China is a particular conspicuous violator. According to the EU, China remains the number one country in terms of number of seized pirated goods, both in number and volume, at EU borders. And over 90 percent of video games consumed in China are pirated.

Still many IP opponents like to argue that IP is a plot hatched by the North to keep the South poor. Countries like China argue that they are poor and technology transfer (much of it forced or stolen) is an integral part of their development strategy. If IP laws keep developing countries from getting drugs or other IP-based technologies critical to overcoming barriers to growth then an argument could be made that IP laws should change. Indeed, IP laws are not divinely manifested, but created within a legal geography because society values the creation of knowledge and believes such knowledge ought to be protected in the marketplace. The question becomes, is this the type of IP violation that is coming from China—a form of redistribution from rich OECD countries to China, a developing nation?

No it is not. China and other IP violating nations are willing to take IP wherever they can find it, not just pulling a Robin Hood of stealing from the rich to give to the poor. They will steal from the even poorer to give to the poor. This point was has hit home to me when I recently met an entrepreneur named Emanuael Narh while in Ghana. Narh is the CEO of Step Technologies, a small start-up based out Accra that allows customers to monitor their home security system through mobile devices. Step Technologies came into existence through the Ghana Multimedia Incubator Centre (GMIC), Ghana’s sole IT incubator program. Narh designed his prototype while still an undergraduate at the University of Ghana and developed it further in his year of compulsory national service where the concept was noticed by representatives of GMIC. Over the last several years GMIC has provided work space and helped Narh develop his idea to a commercial level, file patent work, find seed funding, and partner with distributors, and two years ago Step Technologies was finally ready to begin manufacturing. After going through an extensive bidding process a Chinese manufacturing firm won the contract and Step Technologies transferred their technical details and information for production. However, over the next several months GMIC noticed something peculiar; within the Chinese manufacturer’s supply network in China devices identical to that of Step Technologies’ began to appear in the market without the permission of Step and without paying a licensing fee.

When I asked Narh about what he thought happened he was cautious to not make any accusation without evidence. He simply said, “We eventually changed manufacturers out of fears our concept was not safe.” Others I have met with involved in developing Ghana’s IT sector who are aware of Step Technology’s situation were less cautious, telling me flat out, “of course the manufacturer stole the idea.”

Step Technologies’ story is not unique. China has developed an explicit strategy that holds that it is acceptable to take IP from anywhere in the world, not just from the rich North. If the victims of Chinese IP theft are from rich countries it is coincidental and if they are from poor countries, then it is collateral damage. To emphasize the point consider the fact China’s GDP is 192 times greater than Ghana’s and China’s GDP per capita is over seven times greater. Rampant IP theft from China (as well as other developing countries like Russia) is not some kind of Robin Hood strategy to bootstrap the poor on the backs of those who can afford it, it is a systemic national strategy to use or take whatever from whomever possible.

Leaders throughout Africa are well aware that in order to grow their economies they must move from commodities to knowledge-based enterprises. Step Technologies is a model for doing so; an Africa entrepreneur, aided by a government-funded incubator program, is eventually competitive in the marketplace. (By the way, Step Technologies has found another manufacturer and is now in major markets throughout Africa with plans to go global in the next several years). This is the type of economic development that benefits Africa and the global economy. Yet the process of creating knowledge-intensive industries is long and difficult and without any potential recourse for IP theft from market-dominating countries the route can be next to impossible. As one Ghanaian fund manager responded to my question about IP theft from China, “It’s a struggle but what can we do?”

Africa has enough challenges to development, IP theft from WTO nations should not be yet another hurdle.

This piece is cross-posted at Innovation Policy Blog 

Photo Credit: Nick Humphries

 

 

 

 

 

 

Chinese-U.S. Exchange Rates and Knowledge Capital Flows: Why We Feel Poorer

Posted on by The Progressive Policy Institute

The short summary:   The Chinese policy of buying dollars can be best understood as an indirect purchase of U.S. knowledge capital–technology and business know-how.  That, in a nutshell, is why we feel poorer today. Unless the Obama Administration understands the link between the undervalued yuan and the global  flows of knowledge capital,  negotiations with China are doomed to fail.

Viewed in the usual economic light, Chinese exchange rate policy in recent years looks like a gift to the U.S..   By buying up dollars to keep the yuan low, China–still a poor country– is effectively lending money to the U.S.–still a rich country–to buy Chinese products.  According to the official statistics, the U.S. has run a cumulative $1.4 trillion trade deficit with China since 2005. But over the same period, Chinese ownership of  dollar-denominated financial assets in the U.S. has risen by $1.3 trillion.

To put it another way, the conventional statistics seem to be saying that  the U.S. is getting $350+ billion a year in cheap clothing, electronics products, and toys at no real cost today.  What’s not to like?

But if this explanation was really correct–if  that purchase of dollars  was a gift from China–the U.S. would  be feeling happy and prosperous right now.  We have received all of these cheap goods and services, without having to give up very many of our own resources.

But of course, the U.S. doesn’t feel rich and happy right now–we feel poorer, while the Chinese are feeling more prosperous. How can we explain this?

The  reason why the Chinese purchase of dollars seems like a gift is  because we have a 20th century statistical system trying to track a 21st century  global economy. We can do a decent job tracking the flows of goods and services and a passable job tracking financial flows.  But there is no statistical agency tracking global knowledge capital flows–and that’s where the real story is. Take a look at this diagram.

The first three boxes represent the conventional view: The U.S. gets cheap goods and services, and then pays for them by selling financial  assets.

But that leaves out the  the transfer of knowledge capital  from the U.S. to China. In effect, the Chinese purchase of dollars is a mammoth subsidy for the transfer of technology and business-know into China.

Consider this. When China keeps the yuan low, that’s an inducement for U.S.-based companies to set up factories and research facilities in China, both for sale in China and for imports back to the U.S. .  And that, in turn, requires a transfer of  technology and business know-how from the U.S. to China.

My favorite example is furniture makers.  Over the years, U.S. furniture makers had accumulated this vast storehouse of knowledge–for example, how to make  coatings on dining room tables that are less likely to chip or discolor from heat or liquids. That’s one of the differences between a low-quality and a high-quality table.

As the manufacturing of furniture was offshored to China, the knowledge capital had to be transferred as well.   And that, in turn, helped turn the Chinese furniture industry into a global exporting powerhouse.

Now, let’s stop and make  three points here. First, we need to compliment China. It is not easy to absorb knowledge capital from the outside and make good use of it.  Frankly, all sorts of other countries could have tried the same exchange rate trick, and it wouldn’t have worked for them.

Second, the transfer of knowledge capital to China doesn’t mean that the same knowledge capital  disappears in the U.S. However, our knowledge capital  does become less valuable because there is more global competition–and that’s why we feel poorer. (see my earlier post on the writedown of knowledge capital)

Third, what’s needed from Washington is a sophisticated  response that both focuses on rebuilding our own knowledge capital, while at the same time slowing down the exchange-rate knowledge capital pump. More to come on this.

crossposted at Mandel on Innovation and Growth

False Start

Posted on by The Progressive Policy Institute

House Republicans start work today on their first big initiative – repealing President Obama’s health care reform. That the new GOP majority has made its top priority a purely symbolic and, let’s face it, vengeful act speaks volumes. Don’t expect the 112th Congress to be a model of legislative decorum and bipartisan comity.

Sobered like everyone else by the Tucson tragedy, Republicans have promised a “thoughtful” debate. But the sophomoric title of their bill – “Repealing the Job-Killing Health Care Law Act” – gives the game away. Even Speaker John Boehner, supposedly the adult among the new class of conservative enfants terribles, can’t refrain from calling the Accountable Care Act “job crushing” and “job destroying” on his website.

In fact, while the new health care law has some flaws, wholesale destruction of jobs is probably not one of them. Although no one can credibly predict the net employment effects of this highly complex reform, it seems likely that adding 30 million new paying customers to health insurance markets would increase demand for medical services.

In any case, House leaders know they can’t undo the President’s health reform in toto, but nonetheless feel they have to give their militant cadres a chance to get animosity to Obamacare out of their system. Once the House passes the repeal bill, probably tomorrow, it will die in the Democratic Senate. Then Republicans will get down to the more serious business of trying to pick apart the Accountable Care Act piecemeal.

In GOP eyes, the ripest targets include the requirement that everyone buy health insurance, a new long-term care insurance program, and taxes on insurance companies. While few Democrats want to undo the party’s historic achievement in finally getting most Americans covered, some will likely join GOP efforts to kill or amend these provisions.

That’s especially true of the individual mandate. It is opposed by a majority of voters, and 20 states are challenging its constitutionality in the courts. Yet, as Republicans well know, it’s also the linchpin of reform. At the heart of Obamacare is a deal in which insurance companies agree to stop cherry picking healthy customers and denying affordable coverage to people with “preexisting conditions” in exchange for adding most of the uninsured to their customer base. The deal unravels without the mandate, because then only the sickest people would take advantage of the new law, driving up premiums for everyone. Democrats tempted to oppose the mandate should keep that in mind.

As House Republicans lash the mandate as an infringement on freedom that should stink in the nostrils of all liberty-loving Americans, a little history is in order. One reason we have an individual mandate is that Republicans have opposed alternative ways to extend coverage for all Americans. They successfully blocked President Clinton’s employer mandate in 1994. And of course, they vehemently object to a national health care system that insures everyone (and taxes them to pay for it) whether they want it or not.

In reality, no truly voluntary health scheme can get around the adverse selection problem. The individual mandate is an imperfect solution, but the right question is, compared to what? The “alternatives” advanced by the GOP last during the great debate over Obamacare did not even pretend to cover most of the uninsured.

As Jill Lawrence reports in Politics Daily, health policy analysts are thinking creatively about different ways to induce people to seek health insurance. But the last thing House Republicans want to do is to improve Obamacare. Their goal is evisceration.

That’s too bad, because the nation could use a serious debate about refinements in the $1 trillion Accountable Care Act. The new long-term health care benefit incorporated in the bill (the Class Act) does need a second look from budget-conscious lawmakers. It’s especially important that the Act’s rather weak cost containment provisions be strengthened. And there will be plenty of adjustments to be made as this enormous bill is implemented between now and 2014, when its main provisions fully kick in.

In short, a party serious about governing would seize the opportunity to make fundamental improvements in the 2010 health reform law. In embracing a rollback strategy instead, House Republicans have gotten off on the wrong foot.

Repeal ObamaCare Week Begins

Posted on by The Progressive Policy Institute

It’s officially Repeal ObamaCare Week in the U.S. House, and the air will be filled with the noise of a renewed battle over the alleged benefits and demerits of that landmark legislation. Once the repeal bill has formally passed the House and formally died in the Senate, Republicans will move on to their real agenda of disabling health reform indirectly.

It’s not clear at this point which provisions will be targeted most aggressively: the individual mandate that makes coverage of the less healthy uninsured possible; the Medicaid mandates on the states (many of which are itching to cut Medicaid); the long-term care insurance program; the funds made available to set up health insurance exchanges—these are all possibilities. And while House Republicans are instructing their committee to begin drafting “replacement” legislation for the 2010 Act, there’s no real indication they are serious about their own “ideas” for health reform, other than as a way to deny association with the health care status quo.

As the health reform repeal saga plays itself out, pressure is steadily mounting to find some way to avoid defeat of a debt limit increase, which will probably be necessary by March. And while the growing number of Republicans (including three proto-presidential candidates) demanding a defeat of this measure all say they are holding it hostage to a major deficit-reduction package, there’s no consensus on how much in the way of spending cuts will serve as an adequate ransom.

On the 2012 front, Democratic prospects for hanging onto the Senate took a hit as Sen. Kent Conrad of North Dakota announced he would not run for another term that year. ND Democrats lost their other senator, Byron Dorgan, to retirement last year, while veteran at-large House member Earl Pomeroy was defeated.

Meanwhile, a Republican senator thought to be vulnerable to a 2012 conservative primary challenge, Richard Lugar of Indiana, took his political life in his hands by calling for a return to the federal assault gun ban of the Clinton years, which expired in 2004. Another step like that will probably feed rumors that Lugar’s privately decided to retire, though he’s shown no sign of it publicly.

In other 2012 news, New Jersey Gov. Chris Christie announced he was not interested in running for president this cycle. Christie had become a very hot property of late among Republicans looking for an alternative to what is shaping up as a dangerously weak field, though the logistics of a first-term governor running for president were probably prohibitive. An effort to draft Rep. Mike Pence of Indiana (currently mulling over a 2012 gubernatorial candidacy) to run for president was publicly launched, with influential RedState blogger Erick Erickson cheerleading from the sidelines. And Sarah Palin’s interview with Fox’s Sean Hannity last night might well be interpreted as her effort to rally conservative base support as assessments of her potential presidential strength go south. Speaking of Palin, Nate Silver took issue with the common meme (most recently articulated by Ross Douthat) that her notoriety is a pure media construction, noting that polls show her to be the most galvanizing figure in American politics.

The Democratic candidate for president in 2012, Barack Obama, got some good news as his job approval rating moved over 50 percent for the first time in months in two major polls, from CNN and ABC-Washington Post. And as you have probably heard, the White House staff got a familiar addition this last week, as former DLC president and Clinton staffer (and most recently, staff director for the Bowles-Simpson deficit reduction commission) Bruce Reed became vice-president Joe Biden’s chief of staff, joining his close friend and Clinton-era colleague Gene Sperling (the new chairman of the National Economic Council) as major new administration hires.

Hu’s on First

Posted on by The Progressive Policy Institute

China’s President Hu is winging his way to DC as I type, set to dine with President Obama this evening.  The summit will be an interesting mix of symbolism and substance — most summits share elements of both, of course, because the two sides are usually equally interested in the wonkery and pageantry.  This time, not so — the substance and symbolism are bifurcated. China values the image of a proper reception on the world’s stage, while the U.S. is more interested in taking a hard line, discussing military ties, North Korea, human rights, currency revaluation and the like.

PPI has churned out a fair bit of China-related material in the last several months, and if you’re trying to read up on everything China-related during the summit, here’s a good guide to set you on the right path:

1.  In December, PPI hosted a forum on US-China relations, featuring Sen. Chris Coons (D-DE), Asst SecDef for Asia Chip Gregson, plus James Fallows, Joseph S. Nye Jr., and Mike Chase (see below).  We were trying to get at the question of balance in dealing with China’s rise — emphasizing cooperation where we can, being aggressive when we must, while properly understanding the limits of China’s power. As Nye put it during the panel:

There is a rise in Chinese power, but it’s a mistake to over-estimate it. The size of China’s economy and our economy may be equal in size by 2030, but they will not be equal in composition, and per capita income will only be 1/3 of our per capita income.

You can watch the CSPAN coverage here.

2.  Naval War College professor and PPI author Michael Chase has written three memos on the Chinese military, which you can read here (on China’s military budget), here (on its anti access and area denial strategy), and here (on its growing naval capacities).  Here’s his basic conclusion:

In short, the U.S. will need to strengthen its ties to key countries in East Asia and develop strategic and tactical military concepts and capabilities that would allow it to counter China’s growing military power. Meanwhile, U.S. policy makers must seek collaboration with the Chinese military in an effort to highlight the benefits of being a global stakeholder to Beijing.

3.  Finally, yours truly has penned a series of China-related posts in the last few months, on issues like North Korea, Chinese soft power (or lack thereof), and open-seas sovereignty issues.

Even though there seem to be a thousand pressing issues, here’s an overarching one that could could have grave implications in years to come:

Sino-American tensions in military relations are nothing new, but Secretary Gates’ trip continues to expose a fascinating—and potentially dangerous—rift inside the Chinese bureaucracy: the lack of communication between Beijing’s military and civilian leaders.

This week, China unveiled the J-20, its first and only stealth fighter.  China’s bizarre choice of this week—during Gates’ visit—to flex its newfound military muscles by test-flying the J-20 for the first time. When Gates signaled to President Hu that the test flight was unnecessarily provocative, Hu replied that it had “absolutely nothing to do” with Gates’ visit. Pointedly, Gates acknowledged his concern about the Chinese military acting independently of the political leadership, a problem that could in a worst-case scenario lead to unauthorized military action against, for example, Taiwan.

Getting China’s leaders to communicate with one another is well-outside the Obama administration’s powers, of course, but continuing to press Beijing’s political leadership on the issue is a good start.