Category: Uncategorized

Iran Buckles Under Sanctions Pressure

Posted on by The Progressive Policy Institute

The Obama administration won an important foreign policy victory yesterday as Iran skulked back to the negotiating table.  In other words, the latest rounds of sanctions imposed by the UN, United States, and European Union have worked.

To be clear, sanctions’ aim was never to “bring Iran to its knees,” as Supreme Leader Khamenei claimed in 2008.  Further, it’s easy to doubt their effectiveness when we we hear accounts that Tehran is skirting sanctions with fake bank accounts and false flags on ships’ registries. This narrative essentially implies that because Iran is evading sanctions, then they must not be working.

It’s exactly the opposite: Sanctions are imposed to make life difficult for Tehran, and stories about evasion are actually clear indications of their effectiveness.  Every second an Iranian official has had to spend time figuring out a way around a sanction is time he should be doing his regular job.

Sanctions have coincided with a significant economic reforms inside Iran, aimed at ending over $100b in government subsidies on everything from bread to energy.  Opaque attempts at economic reform appear to have been painful for average Iranians.  And while I am not enough of Iran expert to steadfastly link sanctions, a weakening domestic macro-economic situation, and Iran’s inclination to head back to the negotiating table, I’m happy to point out the not-so-odd coincidence.

Before we get too excited, it should be obvious that the outcome of new negotiations is far from certain.  Iran will likely play its tired game of engaging diplomatically while attempting to refuse meaningful compromise.  That’s why it’s crucial that the Obama administration, European Union, and UN not reward Iran just for talking.  To keep Iran from getting the bomb, the international community has to keep its boot on Tehran’s neck until the day it agrees to unfettered access to all of Iran’s nuclear facilities.

photo credit: Daniella Zalcman

High-Speed Rail Funding Back on Track

Posted on by The Progressive Policy Institute

Hats off to the Obama administration. The $2.4 billion in high-speed-rail grants announced yesterday by the U.S. Department of Transportation not only helps fix deficiencies in the original round of rail awards back in January, but shows welcome political moxie.

By allocating the bulk of its FY 2010 investment to California and Florida, the administration has thrown its support behind true “bullet train” service, or trains running on dedicated rights of way at more than 150 mph. It now appears possible that high-speed segments could be open in California’s Central Valley and between Tampa and Orlando, Fla., by 2016.

That’s a big change from the first round of grants last January, which we argued was flawed by a scattershot approach of approving projects that only marginally increased passenger train speeds on upgraded freight track. What was needed, we believed, was funding focused on “do-able” 150-mph-plus links that would serve as templates for an emerging state-of-the-art passenger train initiative.

For the most part, the administration has done just that. To be sure, it has not come up with a way to finance HSR over the long haul and it still faces multiple challenges in Congress, especially if Republicans take over one or both chambers. But what’s striking about yesterday’s awards is the administration’s firmer grasp of how to get HSR segments up and running in the face of local obstacles.

Consider California, which received the biggest grant yesterday, $902 million. The DOT award requires the state to primarily focus on rail development in the Central Valley between Merced and Bakersfield, where land acquisition costs are low and trains could reach their full speed, rather than build costly urban segments through greater Los Angeles and between San Francisco and San Jose that have stoked Nimby opposition.

That’s a shrewd way to get a workable segment built and in revenue service to make the case that HSR is an attractive choice of transportation for Californians. Kicking off construction in the Central Valley also gives a political boost to Rep. Jim Costa (D-Calif.), a strong HSR backer who is in a tough race with Andy Vidak, a Republican with Tea Party backing.

Likewise, the administration took a decisive step toward fully funding the Tampa-Orlando HSR line (which we’ve repeatedly supported) by awarding $800 million to the project yesterday. Florida now has $2.05 billion in the kitty to complete the $2.6 billion project, including the $1.25 billion it received in January.

The new grant has already softened criticism by Republican gubernatorial hopeful Rick Scott. In the last few days Scott has dialed down his rhetoric against the rail line as an example of federal overreach. With groundbreaking scheduled for early 2011 and the Obama administration hinting at more money from discretionary funds, it appears unlikely that Scott would sacrifice thousands of construction jobs by scrapping the project outright. The Democratic candidate, Alex Sink, is a strong supporter.

Two other projects awarded grants yesterday, while not strictly high speed, will improve rail service in critical corridors. DOT gave Connecticut $121 million to help double track the Amtrak line between New Haven and Springfield, Mass., and upgrade service to 110 mph.

As part of the agreement, Connecticut agreed to release $260 million in state funds to rebuild other infrastructure, which will eventually increase train service from six daily roundtrips to 25 or more. This would make the Springfield segment an integral part of the Northeast Corridor and eventual route of a proposed “inland” corridor between New York and Boston.

A flaw of past federal policy was its failure to flag rail lines abandoned by freight carriers as potential passenger routes. As a result, thousands of miles of secondary lines between major cities, considered duplicative by freight railroads, were torn up between 1970 and today.

A similar fate now threatens 135 miles of rail line between Kalamazoo and Dearborn, Mich., owned by Norfolk Southern (NS). The track, used for Amtrak’s Chicago-Detroit trains, was downgraded this summer, a preliminary step toward a petition for abandonment by NS.

Yesterday, DOT stepped in with a $150 million grant to fund Michigan’s purchase of the line. Since Amtrak already owns 97 miles adjacent to this section, the proposed purchase would result in public ownership of nearly 80 percent of the Chicago-Detroit corridor, laying the foundation for a high-speed passenger route.

Yesterday’s awards include the remaining funds in the $8 billion stimulus package as well as money allocated for FY 2010 by the Democratic Congress. Funding for HSR has yet to be agreed upon by Congress for FY 2011. Outside of discretionary funds within DOT, yesterday’s announcement represents the last definite federal distribution for high-speed rail.

For a full list of DOT grants, see https://www.fra.dot.gov/rpd/passenger/2243.shtml

Metro “Plot”: What A Crock

Posted on by The Progressive Policy Institute

When officials stress that the public was never in danger, you should take them at their word.  Why? Because it’s very likely the DC “metro plot” was never real.  It was, in short, nothing more than an entrapment exercise.  Here’s an excerpt from the Washington Post:

Officials stressed that the public was never in danger. Still, Neil H. MacBride, U.S. attorney for the Eastern District of Virginia, said it was “chilling that a man from Ashburn is accused of casing rail stations with the goal of killing as many Metro riders as possible through simultaneous bomb attacks.”

Here’s what likely happened: Someone (a friend, relative… whomever) had a vague conversation with Farooque Ahmed about attacking the DC metro system.  This person became concerned enough to alert law enforcement, who sent in an undercover agent, posing as an al Qaeda member, to meet and evaluate Ahmed.

The undercover agent and Ahmed then probably developed plans to case various metro stations. That’s because in order to prosecute him, the law enforcement would need demonstrable evidence that Ahmed took action to execute an attack plot.  It’s tough to get a conviction by testifying that Ahmed really, really wanted to do something, but never did anything beyond that.

If (a big if) this is what happened, it opens serious issues: Would Ahmed have surveyed the attack locations had he not come in contact with the undercover agent?  To put it another way — did law enforcement “create” a terrorist out of someone who was otherwise just talking a big game?  And, as evidenced by the District Attorney’s comments, is law enforcement content to reap the benefits of the positive press coverage?

Much of this is informed speculation on my part, but if the public was allegedly never in danger, why did we need to hear about it in the first place?

Photo credit: the futuristics

More Equal Than Others

Posted on by The Progressive Policy Institute

If Republicans do better than expected on November 2, there will be a lot of talk about voter anger and anxiety, Democratic misteps, the economy, the fiscal situation, health care reform, and so on and so forth. Some of this talk will be interesting and relevant

But any analysis of surprising Republican wins (if they happen) that doesn’t dwell at some length on this year’s massive deployment of “independent” money won’t be getting the story right.

A New York Times editorial yesterday nicely captured how two shadowy conservative groups suddenly painted a bullseye on sophomore Rep. Bruce Braley of Iowa:

Bruce Braley, a Democrat from northeastern Iowa, has been a popular two-term congressman and seemed likely to have an easy re-election until the huge cash mudslide of 2010. The Republican Party had largely left him alone, but then a secretive group called the American Future Fund began spending hundreds of thousands of dollars on distortion-heavy attack ads….The fund, based in Iowa, has spent at least $574,000 to run a series of anti-Braley ads. One that is particularly pernicious shows images of the ruined World Trade Center and then intones, “Incredibly, Bruce Braley supports building a mosque at ground zero.” Actually, Mr. Braley has never said that, stating only that the matter should be left to New Yorkers.

Another implies that Mr. Braley supports a middle-class tax increase because he voted to adjourn the House at a time when some Republicans had proposed cutting income taxes on everyone. In fact, Mr. Braley supports extending the Bush-era tax cuts for the middle class, while letting them expire for families making $250,000 or more to avoid adding $700 billion to the deficit.

Mr. Braley has also been the subject of $250,000 worth of attack ads by the U.S. Chamber of Commerce, which also has not disclosed its contributors.

The kind of money being tossed into this race by the American Future Fund and the Chamber is some serious jack for a place like northeastern Iowa. If Braley ultimately loses, you can attribute that to an incumbent’s complacency, or the Mood of the Midwest, or any number of other factors, but you can’t escape the reality that Braley would be coasting to re-election if two anonymous schmoes with big checkbooks hadn’t gotten up one fine morning and decided to take Braley out. They dialed up an upset in IA-1, and whether or not it happens on November 2, it’s sign of the new political world we must all get used to now that the U.S. Supreme Court has gone the extra mile in ensuring that unlimited use of anonymous corporate cash in campaigns is treated as thought it is central to the preservation of liberty. And that’s why in this supposed land of equality, some Americans, and even some political candidates, are more equal than others.

This article is cross-posted at The Democratic Strategist

Photo credit: David Goehring

Losing Patience in Pakistan

Posted on by The Progressive Policy Institute

At last, some good news from Afghanistan: The New York Times reported last week that U.S. and Afghan forces are “routing” the Taliban in Kandahar province. In the northwest, Special Operations forces and air strikes have taken a heavy toll on insurgent commanders and “shadow governors,” according to The Washington Post.

These tactical gains are impressive. But they also spotlight the weakest link in our strategic chain, and no, it’s not Afghanistan’s mercurial leader, Hamid Karzai, or the corrupt and feckless central government. It’s Pakistan.

President Obama’s surge seems to be taking hold, but coalition forces can’t break the insurgency’s back as long as Pakistan continues to provide a sanctuary for the Taliban and allied terrorist groups.

Aided by better intelligence and a highly accurate new mobile rocket, in addition to more troops, coalition forces have successfully targeted Taliban leaders and driven insurgents from strongholds they have long held in Kandahar. The onslaught apparently has demoralized some Taliban foot soldiers, who are said to resent their high command for urging them to stand and fight from the relative safety of Pakistan.

U.S. officials say they are under no illusion of crushing the insurgency altogether, but they hope that, by inflicting heavy losses, they can turn the tide and induce top Taliban leaders to enter into peace negotiations with the Afghan government.

But there’s a problem: insurgent leaders are slipping over the border to Pakistan, where they can regroup for new attacks, or simply wait for NATO forces to leave. Says Gen. David Petraeus, “There is quite relentless pressure. It forces them on the run. But again, if you don’t take away the safe haven, it doesn’t have a lasting effect.”

And the Quetta Shura, whose leader, Mullah Omar, was so hospitable to al Qaeda when the Taliban ran Afghanistation, continues to orchestrate and finance the insurgency from Pakistan with impunity. If the United States and NATO are to permanently weaken the Taliban and force them to the negotiating table, that has to change.

Zalmay Khalilzad, a former U.S. Ambassador to Afghanistan, argues that Pakistan’s double game threatens to prolong America’s costly intervention. On the one hand, Pakistan is an indispensible partner: it supplies the main supply routes for coalition forces, and tacitly colludes with drone strikes against al Qaeda and Taliban targets. On the other, Pakistan gives sanctuary not only to the Quetta Shura and but also the notorious Haqqani terrorist network, whose ties with Pakistani intelligence go back to the anti-Soviet jihad in Afghanistan.

Pakistan’s military leaders, he says, “believe that our current surge will be the last push before we begin a face-saving troop drawdown next July. They are confident that if they continue to frustrate our military and political strategy – even actively impede reconciliation between Kabul and Taliban groups willing to make peace – pro-Pakistani forces will have the upper hand in Afghanistan after the United States departs.”

Khalilzad is right: the United States can’t allow our supposed ally to subvert our strategic goals in Afghanistan. Yet just last week, the administration announced a new $2 billion military aid package to Pakistan. This comes on top of a five-year, $7.5 billion civilian aid package for Pakistan approved last year.

This is the kind of thing that gives engagement a bad name. We need a more challenging approach: The United States should demand that Pakistan break decisively with Islamist terrorist groups and not allow its territory to be used as a staging point for attacks on its neighbor. If Pakistan refuses, we should target insurgent havens anyway and freeze aid. If it complies, we should make a long-term commitment to strengthening Pakistan’s economic and governing institutions, and to mediating regional conflicts.

U.S. officials have been reluctant to put too much pressure on Pakistan to act against the Haqqani network and the Afghan Taliban leadership. They don’t want to undermine the democratically elected government of President Asi Ali Zardari, or risk alienating Pakistan’s military and intelligence services, which are cooperating in the U.S. campaign against al Qaeda.  But Pakistan already has demonstrated the military ability to reclaim tribal areas when it suited its purpose.  Up until now, Pakistan has tried to have it both ways: help America fight al Qaeda, while retaining ties to terrorist groups to influence future events in Afghanistan (and to keep the pot boiling in Kashmir). Such ambivalence collides with America’s strategic interest, and it’s time for Pakistan to choose.

Chris Christie’s Tunnel Caper (Cont’d)

Posted on by The Progressive Policy Institute

New Jersey Republican Gov. Chris Christie had the power to kill the Hudson River rail tunnel or improve it. Today, for the second time, he killed it, saying, “I cannot place upon the citizens of the state of New Jersey an open-ended letter of credit.”

Lost in the controversy about Christie’s blunt style or national political ambitions, which drew a lengthy story in yesterday’s Wall Street Journal, is the fact that Christie’s own state agency, run by his own political appointee, is the prime reason why the project faces the reported runaway costs that the governor says the state can’t afford.

Originally, the trans-Hudson tubes were aligned to connect in Manhattan with Amtrak’s rebuilt Penn (Moynihan) Station, with a future connection to Grand Central Terminal on Manhattan’s East Side.

This plan was to connect trains using the new tunnel to Amtrak’s Northeast Corridor, as well as to rail lines spreading to Long Island, upstate New York, New England, and eastern Canada.

Instead, New Jersey Transit opted, mostly for parochial reasons, to abandon the Penn Station alignment in favor of a dead-end terminal under 34th Street usable only by NJT.

This decision was made under the administration of Democratic Gov. Jon Corzine. Christie defeated Corzine last November and appointed a new executive director for NJT, James Weinstein. It was Weinstein who Christie turned to in September to chair a committee whose three-page memo the governor subsequently used as the rationale for his decision to terminate the tunnel— a memo that never brought up the obvious design flaws of the dead-end plan or even addressed the potential cost overruns of the current project in any detailed way.

Among the co-signers of the memo was Bill Baroni, a prominent New Jersey Republican who Christie appointed as deputy executive director of the Port Authority of New York and New Jersey last February.

The Port Authority had pledged $3 billion to the Hudson tunnel, but now seems very happy to use the money for road purposes. In an interview earlier this year, Baroni cited two New Jersey projects, expanding the Goethals Bridge, and raising the Bayonne Bridge by 65 feet to allow larger ships to enter Newark harbor, as high-priority items for the port authority.

In trying to salvage the tunnel project during a two-week reprieve granted by Christie, federal officials reportedly offered several options to the state. They included one that eliminated the state’s risk of cost overruns.

But Weinstein, who acted as Christie’s representative in the talks, said the state wanted more hard cash than the $3 billion already pledged by the Federal Transit Administration.

It’s widely known that the transit agency has no ready funds because Congress has delayed passage of a new surface transportation authorization bill.

So as it stands today, the country’s largest rail infrastructure project will stay sealed at the whim of a single governor relying on a few hundred words of vague analysis by handpicked cronies.

For more details, see “A Tale of Two Tunnels.”

How to Actually Assess Progress in Afghanistan

Posted on by The Progressive Policy Institute

You’d think this morning’s Washington Post article by Greg Miller should throw some cold water on the relatively upbeat assessment I made yesterday:  I said Petraeus is “trying to hit the Taliban leadership hard, driving it to the negotiating table from a position of weakness,” which “might be speeding up a potential resolution to the conflict.”

The headline appears to play me the fool: “Taliban unscathed by U.S. strikes”.  Ouch, right?  It would appear, based on the first few paragraphs of Miller’s piece, that the Taliban is doing fine:

Escalated airstrikes and special operations raids have disrupted Taliban movements and damaged local cells. But officials said that insurgents have been adept at absorbing the blows and that they appear confident that they can outlast an American troop buildup set to subside beginning next July.
It ultimately assesses that “there is little indication that the direction of the war has changed.”

But wait just a minute. Disrupting the Taliban isn’t the goal of the recent increase in op-tempo.  The article fails to dis-aggregate the Taliban writ-large from its relatively small cadre of leaders.

While the organization plods on in a holistic sense, Petraeus’ raids and airstrikes are designed to telegraph a message to the leadership:  “You can keep fighting, but you, Mr. Senior Taliban Leader, might be next.”  With that life and death calculation staring them in the face, Petraeus rightly calculates that the Taliban’s leadership will be more interested in talking — a negotiation that will tip the leverage in NATO’s favor.

This is the same fundamental misunderstanding of international sanctions against Iran.  No one believes they’ll put a fundamental break on the Iranian economy.  But they will make life tougher on the mullahs, who now have to work hard to skirt them.  The calculation is that one day, Tehran will say, “Man, I’m sick and tired of all this running around.  Maybe we should sit down and negotiate with the West and we can get back to life as normal.”

Neither calculation may end up as an unqualified success, but the instincts behind them are right.

The Smoothie King Enhancers in Afghanistan

Posted on by The Progressive Policy Institute

Let’s say you’re jonesing for a smoothie at your favorite hipster juice bar.  Not content with the strawberry, papaya, and kiwi in your standard Mangosteen Madness™, you pony up for a little something extra.  Let’s go crazy – say you drop the extra 78 cents on the counter and tell the Smoothie King to throw in a “Caffeine Charge” just to make sure the day keeps on sailing by.

That’s kind of what’s happening in Afghanistan these days.  The “clear, hold, and build” of counterinsurgency doctrine may be the Mangosteen strategy, but it’s becoming increasingly clear that General Petraeus is doubling down with a “Caffeine Charge” of his own.  He’s trying to hit the Taliban leadership hard, driving it to the negotiating table from a position of weakness.

As Dexter Filkins detailed in the NYT a few weeks ago, NATO military operations in Afghanistan have aggressively targeted Taliban militants with airstrikes and Special Forces operations.  Well-reputed columnists like David Ignatius, Joe Klein, and Fred Kaplan all write that this marks a shift away from the counterinsurgency strategy that Petraeus literally wrote the book on.  However, Paula Broadwell, a guest-author on Tom Ricks’ blog, disagrees, noting that the recent increase in counter-terrorism operations is an important subset of an across-the-board op-tempo increase in all COIN disciplines.

Despite disagreements over the shift, the important point is that it might be speeding up a potential resolution to the conflict.  General Petraeus has long said that we’re not going to kill or capture our way out of Aghanistan, and he told Katie Couric over the summer that negotiations are “historically the way counterinsurgency efforts ultimately have been concluded.”

The issue is ensuring that negotiations, quietly underway, take place on the most favorable grounds possible to America.  And if that goal is achieved, then semantics about COIN vs. CT won’t matter in the end.

Photo credit: terriseesthings

In Defense of the Blue Dogs

Posted on by The Progressive Policy Institute

Virtually every election cycle produces some sort of “lessons learned” debate in both major parties.  Big victories invariably generate a scramble for credit among factions and leaders.  Big defeats often lead to “struggles for the soul” of this or that party.  Such struggles typically reflect old battles and grievances as much as fresh evidence of public opinion or the success or failure of particular strategies and tactics.  And that’s why they sometimes begin well before voters actually weigh in.

The first major trumpet blast on the Democratic side was by The Nation’s Ari Berman, who penned a New York Times op-ed with the unsubtle title: “Boot the Blue Dogs.” In fairness to Berman, the Times’ word limits forced him into a CliffsNotes version of his argument, which he has elucidated at greater length in an entire book.  But his essay does cover a lot of ground heavily occupied by those on the Left who believe that the willingness of the Obama administration and the Democratic congressional leadership to tolerate moderate-to-conservative Democrats has doomed the party politically and substantively:

With President Obama in office, some notable beneficiaries of the Democrats’ 50-state strategy have been antagonizing the party from within — causing legislative stalemate in Congress, especially in the Senate, and casting doubt on the long-term viability of a Democratic majority….

A smaller majority, minus the intraparty feuding, could benefit Democrats in two ways: first, it could enable them to devise cleaner pieces of legislation, without blatantly trading pork for votes as they did with the deals that helped sour the public on the health care bill. (As a corollary, the narrative of “Democratic infighting” would also diminish.)

Second, in the Senate, having a majority of 52 rather than 59 or 60 would force Democrats to confront the Republicans’ incessant misuse of the filibuster to require that any piece of legislation garner a minimum of 60 votes to become law.

The obvious response to Berman’s argument is that Democrats (particularly in the Senate) have been perfectly free throughout the last two years to pursue this small-majority strategy, but chose not to for one reason or another (often because some left-leaning Democratic senators opposed measures to reduce the power of the filibuster, which they have deployed during periods of Republican ascendancy).

Perhaps “booting” the Blue Dogs will make the caucus more collegial, but it won’t increase the number of progressive House or Senate members.  So what’s the harm of having Blue Dog members who will help maintain the majority, and on many occasions, will vote with the caucus as well?  As for the idea that a more ideologically consistent caucus will be able to draft “cleaner” legislation, what difference does that make if you don’t have the votes to enact it?

An additional argument that is often heard (but that Berman does not include in his Times piece) is that the power of the Democratic Party’s message is directly proportional to its consistency.   It’s pretty easy to go from this line of reasoning down the rabbit hole of cognitive science or “branding” theory, but there are a lot of progressives who seem to believe that intraparty dissent undermines progressive messaging.  By the same token, of course, democracy and the First Amendment undermine progressive messaging, but that seems a small price to pay.

A stronger argument, I’d submit, is that some Blue Dogs are fundamentally at odds with other Democrats on politically critical issues involving first principles, such as progressive taxation and economic inequality.  If House Democrats with a robust majority cannot implement the longstanding position of the Democratic Party favoring the repeal of Bush tax cuts for the wealthy (while maintaining middle-class tax cuts), the majority truly is of limited utility.

Part of the problem with this whole debate, of course, is that all Blue Dogs aren’t the same, and that no one—not Ari Berman, not Nancy Pelosi, not Tim Kaine—has the authority to define the boundaries of dissent for Democrats.  Moreover, what are the implications of a tougher party line for dissenting progressives?

What if President Obama strongly promotes a trade agenda, or a deficit reduction compromise, that infuriates the Democratic Left?  When President Clinton split with House Democrats over trade and welfare reform measures, who were the good, loyal Democrats in that fight?  Maybe that’s obvious to Ari Berman, but maybe not so much to others.

A final planted axiom in Berman’s essay should be noted for purposes of clarity: the idea that Blue Dogs exist because they were “recruited” by Rahm Emanuel.  Obviously many leading Blue Dogs have been around for much longer than 2006 or 2008.  Others have been political powers in their own districts, and national party financial backing, while helpful, wasn’t necessarily the key factor in their decisions to run for Congress.  But in any event, the suggestion that the national party could, if it chose, “recruit” more progressive candidates who could win in tough territory is not supported by much actual evidence.  Certainly primary challenges to Blue Dogs this year haven’t gone very well.

None of this is to say that congressional leaders and the White House couldn’t more effectively deploy sticks and carrots to encourage greater party discipline.  In the Senate, support for the party on cloture motions ought to become as automatic as it used to be.

But losing seats in, and perhaps control of, the House or Senate this year does not make such disciplinary measures any easier for Democrats, and the idea of deliberately shrinking the House and Senate Caucuses isn’t likely to go over very well with either Members or with the Democratic rank-and-file.  In any event, looking at the most vulnerable Democratic seats in the House, plenty of Blue Dogs are going to be “booted” and replaced with right-wing Republicans, so we will soon see if that has any sort of salutary effect on the Democratic Party.

Lessons From the New NSF Innovation Survey

Posted on by The Progressive Policy Institute

Last week the National Science Foundation released its 2008 Business R&D and Innovation Survey, which surveys over 1.5 million for-profit organizations and benchmarks the number of “new or significantly improved products and processes” U.S. firms developed between 2006 and 2008.  The data reveals much about the state of innovation in the U.S. economy.

First, the survey reveals while nine percent of all firms developed at least one new good or service and nine percent developed at least on new business process, there are significant discrepancies among industries.

Far and away the most innovative industry was software publishing: 77 percent of software firms innovated a new product or service and 19 percent innovated a process.  Following software designers are navigational and electromedical instruments, computer equipment, communications equipment, and pharmaceuticals. In other words, four of the top five innovative industries between 2006 and 2008 were IT-related industries.

These industries are big winners across the board for the U.S. economy: They pay more, have higher labor productivity, and have weathered the economic recession far greater than most.  Indeed, the average annual wage in 2008 within these industries equaled $74,000—170 percent above the average U.S. wage.  And between 2002 and 2008, labor productivity increased on average by 70 percent.

On the other end of the spectrum, the five industries producing the least innovation are: real estate, finance/insurance, nonmanufacturing industries, wood products, and health care services.  These industries generally pay lower and grow more slowly.

Another key finding from the survey is that firms are pursuing just as much process as product innovation.  According to the survey, process innovation—the creation of new business practices or methods of production—represents half of the innovation done by U.S. firms.

This is good news. Several studies find that process R&D may have a greater economy-wide impact because the spillover effect from process innovation to the overall economy may be larger.  This is because it is harder to protect the intellectual property generated by process innovation than new products and is new processes are less rivalrous (many firms can use a better process, but it is harder for many firms to produce the same new product, giv­en finite market demand).  One study finds that firms also invest more in product R&D when they invest more in process R&D, which makes incentivizing process R&D good policy.

Yet, despite the benefits of process innovation, few firms take advantage of the R&D tax credit for it.  One of the main reasons for this is while process R&D is technically eligible under the definition of qualified R&D, in prac­tice it is extremely difficult for companies to take the credit, in part because the Treasury and IRS interpret the statute very narrowly.  If Congress made it clear that the intent of the credit was to allow a broad range of process R&D to qualify, it would make it easier for firms to qualify for the credit, which in turn would not only encourage firms to conduct more R&D. It would also reduce the cost differential between R&D facilities located in the United States and other nations.

Finally, the survey shows that manufacturing firms exhibited a considerably higher overall incidence of innovation than firms as a whole. About 22 percent of all the companies in manufacturing industries reported one or more product innovations between 2006 and 2008, and about 22 percent reported process innovations (compared to nine percent in overall firms).

While manufactures are often characterized as part of the “old, dirty economy,” successful manufacturing firms are often highly technical, innovative, and capital intensive.  However, throughout the last decade the manufacturing sector has lost more than million jobs and has gone from representing over 13 percent of total employment to 9 percent in 2009.  The service sector, on the other hand has grown by 4.5 million in the same time period.  Because of the growing importance of the service sector, it is particularly worrying that the survey found little innovation in many high-wage service industries such as health care and finance.

Innovation is a buzz word in Washington, yet often there is little consensus about the exact policy priorities to promote innovation in the economy.  Data such as NSF’s innovation survey highlights the uneven landscape of innovation in the United States.

Photo credit: Jonathan Jones

Why 2012 Looks Good for Democrats

Posted on by The Progressive Policy Institute

One hears a lot about the “enthusiasm gap” this election. But maybe the better term is “enthusiasm lack.” The vast majority of the American electorate is not at all jazzed up about their choices, and even if Republicans take back the House next Tuesday, it will hardly be because they inspired the American electorate. This is good news for Democrats in 2012, if they are smart enough to take advantage.

Consider the latest Associated Press-GfK Poll. With just a week until the election, one third of all likely voters say that they either haven’t yet made up their minds, or they are leaning in favor of one candidate but could still change their minds, though these undecideds are leaning slightly towards Republicans. This is hardly the sign of a passionate electorate.

Of course, midterm elections almost always have lower turnout than presidential elections anyway – typically about 40 percent of registered voters turnout in mid-term years, as opposed to 60 percent in presidential years. That missing 20 percent (or a third of those who vote in presidential elections) are often younger people and poorer people, but also those who tend to pay minimal attention to politics either because none of the candidates inspire them or they can’t see the difference.

Some quick back-of-the-envelope math: If 40 percent of the electorate winds up voting next week, but of that 40 percent only two-thirds feels strongly one way or another, we’re now down to roughly 27 percent of the electorate that has a strong feeling about the outcome. Since Republicans are doing better than Democrats among likely voters, let’s say that 15 percent of the electorate consists of Republican voters who currently feel strongly about how the election turns out. These are your hard-core, Tea Party-type Republicans who a Republican House majority would be representing.

Probably the only way this is a sustainable governing strategy is if the rest of the electorate remains so alienated and cynical that it continues to stay home while hard-core Republicans try to dismantle the idea of the modern state. Maybe this is the Republicans’ plan: make Washington so dysfunctional that nobody sees the point in voting anymore.

But here’s the more likely scenario: The presidential election of 2012 will bring out many of the voters who stayed home in 2010. Democrats will win back seats because turnout among registered Democrats and Democratic-leaning independent moderates will increase. (When Obama tells crowds ““If everybody who voted in 2008 shows up in 2010, we will win this election,” he is probably right.)

But in order for this to happen, Democrats have a challenge: they need to stay sane. They need to let the Republicans say and even try to do some of the ridiculous things that only 15 percent of the total electorate supports, all the while reinforcing how moderate and reasonable they are being, and not getting dragged into the gutter.

When the economy recovers (as it is already starting to), and the existential angst and fears of economic uncertainty dissipates, the Democrats (if they can refrain from counter-ranting and be the adults in the room) will come out looking much better, and will have a real mandate to proactively solve the major problems facing our country, like modernizing to meet the energy and infrastructure needs of the 21st century.

There will be, of course, many recriminations next Wednesday within the Democratic faithful that Obama didn’t do this, or didn’t do that. But the past is the past.

The hand that Democrats are being dealt is this: Republicans are likely to win the House on a platform that appeals to maybe 15 percent of the total electorate (though 30-40 percent of the active electorate). But as long as Democrats can be savvy, remaining moderate and letting hard-core Republicans fulminate hysterically as only they know how about absurdities like repealing the 17th Amendment, 2012 will be a very good year to be a Democrat.

Photo credit: Rakka

Economic Uncertainty and the Challenges of For-Profit College Regulation

Posted on by The Progressive Policy Institute

The so-called “gainful employment” rule currently being proposed by the Department of Education (DOE) has generated extensive controversy. The rule, designed to crack down on widespread recruiting frauds that can lead to huge student loan debts and ultimately put taxpayers on the hook, has drawn 90,000 comments.

DOE announced recently that it would implement the new regulations on July 1, 2011, as planned, though it may make a few changes in finalizing the rules.

Today, PPI is releasing a new memo by PPI senior fellow Michael Mandel on how to understand the new “gainful employment’ rule.  You can read the full memo here.

But here’s the quick summary:

Mandel argues that in an uncertain economic environment like the one we are currently facing, it’s really hard to make specific rules about debt-to-income ratios or to predict in what sectors there is going to be demand for employment even a few years down the line. (Mandel shows how poorly the Bureau of Labor Statistics “hot job” list has predicted the future in recent years.)

Mandel also worries that too much focus on debt-to-income ratios is going to disproportionately hurt those students who most need education – poorer students from hard-hit states who don’t look like a great investment given the formulas drawn up by the DOE guidelines, but need the most help if they are going get the training they need to be part of any economic recovery.

The big point is that given the current economic uncertainty, you want institutions that are capable of reacting quickly to market demand for training and skills-acquisition. And while there are obviously needed reforms to prevent for-profit colleges from taking advantage of students and student loan programs, too many rules and regulations are going to make it difficult if not impossible for for-profit colleges to respond quickly to market needs for skills.

As Mandel writes: “When the economy starts growing again, we want our educational institutions to be able to react quickly, not drag behind. DOE’s proposed approval process is a disaster, hurting the parts of the educational system that are the most flexible.”

Gainful Employment: The Real Issue

Posted on by The Progressive Policy Institute

Sometimes a proposed piece of legislation or new rule can catalyze debate about a key issue. That seems to be the case for the ‘gainful employment’ rule currently being proposed by the Department of Education (DOE). The rule addresses a very real problem: The large amounts of debt being taken on by some students, mainly those attending for-profit colleges. However, if enacted in its current form, the new rule would require many institutions—for-profit, non-profit, and public alike—to follow complicated new procedures that could greatly limit their flexibility in offering new programs and potentially reduce the educational options open to students.

Are the benefits of the gainful employment rule worth the costs? DOE’s narrow cost-benefit analysis says they are, but its analysis fails to address a broader issue: How should higher education institutions be expected to deal with an uncertain and rapidly changing economic environment? In a world where tomorrow’s labor market may be very different than today’s, should colleges be encouraged to anticipate the changes, or should they stick to the steady teaching of accumulated knowledge and skills for existing jobs?

This policy brief will make one observation about today’s economy, and then draw three implications for policy. The observation is simple: Young educated workers face vastly more uncertainty in the labor market than recent generations of graduates. Young workers with a bachelor’s, associate degree, or other postsecondary education must deal with much higher unemployment rates, falling real wages, and a job landscape that keeps shifting.

The first implication: The increased uncertainty means that colleges have to take more responsibility for informing students about what their education dollar is buying them. In particular, the for-profit sector needs major reforms to deal with what a recent GAO report called “deceptive and questionable marketing practices.” With students facing a tougher time in the job market, for-profit institutions must move away from high-pressure sales tactics, increase transparency about potential outcomes, pay more attention to debt levels, and raise admissions standards. Non-profits and public institutions must bite the bullet as well by offering more information about estimated payback periods and making sure that their students don’t graduate with excess debt.

Download the entire memo here

Maybe You Do Need a Weatherman to Know Which Way the Wind Blows

Posted on by The Progressive Policy Institute

The title of this piece might seem a bit counterintuitive given the presumed certainty of Republican gains on November 2, but within that context, there really is a surprising amount of uncertainty about which party is likely to get the late breaks in this cycle.

On the one hand, state polling is showing some good signs for Democrats in Senate and some gubernatorial races.  Two left-for-dead candidates, Joe Sestak of Pennsylvania and Russ Feingold of Wisconsin, have rebounded into highly competitive positions, according to some polls.  Joe Manchin of WV seems to have recovered from a near-fatal swoon.  Poll numbers for Richard Blumenthal of Connecticut have stabilized, as they have (at a lower level) for Patty Murray of Washington and Barbara Boxer of California.  At least one poll shows Robin Carnahan of Missouri with a mini-surge, and Michael Bennet of Colorado seems to have drawn even with Ken Buck.  The brief period of hysteria about a possible Tea Party takeover of New York politics has ended in derision.  And at the moment, Democrats are optimistic about winning at least one southern governorship, in Florida, and believe they have an outside shot in Georgia and (surprise, surprise) South Carolina as well (polls are showing Nikki Haley losing support and making the race competitive).

But at the same time, certain meta-indicators are ominous for Democrats. Gallup’s last two generic congressional ballot tracking polls have shown Republicans with double-digit leads among likely voters, an unprecedented phenomenon.  Worse yet, in a low-turnout scenario, Gallup has Republicans up by 17 percent, which if accurate would produce House gains well above what most analysts have been talking about.  And Gallup’s not alone: another highly respected research firm, Pew, put out its own generic ballot poll this week giving Republicans a ten-point advantage among likely voters.

So how can we explain the macro-micro disconnect in polling at this moment? It’s possible that Gallup and Pew just have it wrong (Alan Abramowitz of Emory University has charged Gallup with making crucial errors), and that other generic polls will soon demonstrate that those results are outliers.  Another common theory is that statewide races operate according to different dynamics than overall partisan preferences, and that while Republicans may make big House gains, that doesn’t necessarily translate into victory in close statewide races.

At RealClearPolitics today, Sean Trende suggests it’s the state polls that may be off, thanks to inadequate likely voter screens that are modeling the electorate’s partisan composition too favorably to Democrats.  Using a partisan composition model based on the two 2009 gubernatorial contests, Trende hypothesizes that Republicans statewide candidates may on average perform better than their polling by a 3-4 percent margin, which would, of course, throw many close races to the GOP.

Complicating all this analysis of public opinion research, of course, is the fact that the two parties’ ground games are just now really kicking in, which could change turnout patterns, along with the phenomenon of very heavy early voting.  On this latter front, the preliminary data indicates that Democrats seem to be doing a relatively good job of early voting mobilization, but don’t have the sort of advantage they enjoyed in 2008, and may not have an advantage at all in certain key states (e.g., Colorado, Nevada and Florida).

Then you get into some really hazy phenomena that may affect particular races.  The most discussed is California’s Proposition 19, which would legalize small-scale cultivation and use of marijuana.  There is a persistent belief among California Democrats that Prop 19 will turn out younger voters (and perhaps African-Americans and Latinos) at higher levels than in other states, giving Democrats a crucial boost in close contests.

But overall, the varying indicators of late trends (unless unanimity suddenly emerges between now and November 2) are providing some real mystery and drama in this bitter cycle, and plenty of questions to mull over in the post-election rumination period that will ensue.

T-Minus 10 to Implosion of Middle East Peace Talks

Posted on by The Progressive Policy Institute

The Israeli-Palestinian peace talks effectively died this week.  That’s what happens when you take your case to the press.

Though the hard left no doubt cheers a Palestinian effort to seek unilateral recognition from everyone from the UN Security Council to the Poughkeepsie Dog Catchers Society, it’s simply neither a serious nor well-considered effort.

The move is bad for everyone, including peace-seeking Palestinians.  A UNSC resolution will be vetoed by the Americans and will split the Europeans; its failure will then cause regional Arab powers to blame everyone but themselves at a time when Arab engagement is crucial to success.

The PA went public with this ill-conceived demand as a response to Bibi Netanyahu’s impossible pre-condition offer of extending a moratorium on settlement construction only in return for Palestinian recognition of Israel as a Jewish state.  Doing so is a non-starter for the PA – it would essentially prevent ex-patriot Palestinian refugees from staking a claim to property and/or cash from the Israeli government.

Bibi’s demands were the beginning of the end, and should have spurred the Obama administration’s negotiators to keep the talks quiet at all cost.  Of course, maybe they tried, and tried hard, but the two parties were never on the same page from the beginning.

A resolution to this conflict will only be achieved through painstaking negotiations behind closed doors. When the parties begin to litigate their case in the court of international public opinion, it is nothing more than a desperation Hail Mary on 4th-and-a-million with no time on the clock.

If talks aren’t dead, they’re in a coma and on life support.  The White House needs to get both sides to shut up, and find a face-saving way for Bibi to extend the settlement moratorium that somehow addresses – or agrees to delay – the question of Israel’s Jewishness/Palestinian refugees.

Failing that, we’ll look to start these talks up again under the next Israeli government.

A Tale of Two Tunnels

Posted on by The Progressive Policy Institute

1993. That’s when both Switzerland decided to construct a low-elevation rail line through the Alps and New Jersey committed itself to a new train link to Manhattan under the Hudson River.

But here the similarities end. Switzerland is now celebrating the breakthrough of the Gotthard Base Tunnel – at 35½ miles, the longest rail tunnel in the world – while New Jersey waits to see if Republican Gov. Chris Christie will officially kill a much shorter tunnel that began construction only last year. (His decision is expected shortly following a two-week review requested by federal officials.)

Chalk up the contrast – mission accomplished vs. mission barely begun before halted – to the cumbersome and increasingly dysfunctional way America handles infrastructure projects.

The problems in New Jersey began with the enormous array of legal and environmental hoops required to get the tunnel – dubbed Access to the Region’s Core or ARC – through local, state and federal approval processes. These “soft costs” added years of delay and were a major cause of the cost overruns that Gov. Christie cited as the reason for his decision to cancel the tunnel.

But the real hurdle was not bureaucratic red tape but the absence of a government entity that structures, strategizes and finances infrastructure projects free from the transient squabbles of politicians and their appointed minions.

Swiss Precision

An orderly system was developed for the biggest infrastructure project in Swiss history. An infrastructure fund was established with long-term financing based on taxes approved by voters. A single minister, Moritz Leuenberger, has been responsible for guiding the tunnel project through the shoals of Swiss politics as well as negotiating a bilateral agreement with the European Union.

When completed in 2019, the tunnel and related improvements will funnel about 300 high-speed passenger and freight trains (the latter running upward of 99 mph) beneath the Alps every day. The line is expected to serve as a key overland corridor between northern and southern Europe for the rest of the century.

The ARC tunnel is considerably less ambitious in scope, but nevertheless critical to the future of one of the most economically important regions in the U.S. The double-track rail line into Manhattan, opened in 1910 by the Pennsylvania Railroad, is now saturated to capacity with Amtrak and NJ Transit trains. ARC would add two more tracks, doubling the number of trains that could pass under the river and terminate at a new underground station in Manhattan.

Breaking a Campaign Promise

Serious study of the project began in 1993 as a venture between NJ Transit, the Port Authority of New York and New Jersey, and New York’s Metropolitan Transportation Authority. The MTA bowed out and the Federal Transit Administration (FTA) stepped in more recently.

The three agencies have been uneasy partners, cooperating on the engineering side of the project while simultaneously seeking to limit their share of the costs. The FTA has committed $3 billion, but says it doesn’t have more because of Congress’ failure to pass a new surface transportation authorization bill.

The Port Authority has also pledged $3 billion, but with a growing lack of enthusiasm after Bill Baroni was appointed deputy executive director of the Port Authority by Christie. (Baroni is a prominent New Jersey Republican with no background in infrastructure or transportation policy.)

And then there’s Christie himself, who inherited the project after defeating ardent tunnel advocate, Democratic Gov. Jon Corzine, last November.

Christie supported the project during the gubernatorial race, but now says he began doubting the project’s financial viability last winter. After a cursory report from a committee that included Baroni and other Christie appointees, the governor concluded that the tunnel could cost between $2 billion and $5 billion over its current price tag of $8.7 billion.

Armed with that headline figure, Christie announced two weeks ago that he was canceling the project because “I can’t put taxpayers on a never-ending hook.” Admitting that he was breaking a campaign promise, he added coolly, “This is a mathematics question. We’re broke. I’m not going to be contributing to that and put us further into debt for a project if we can’t afford it.”

Nearly $500 million has already been spent, and a $583 million contract was awarded for the design of the Manhattan side of the tunnel. New Jersey is on the hook for about half of the already expended funds.

Following the announcement, U.S. Secretary of Transportation Ray LaHood met with Christie. He wrested out a concession that the governor would agree to a two-week review of the project by NJ Transit and FTA officials.

Word in the media is that Christie’s resolve has only increased since then. He has refused to consider increasing the state’s gas tax or placing a small surcharge on motorists going into Manhattan to pay for possible cost overruns, eliciting scathing criticism from U.S. Senator Frank Lautenberg and other Democratic officeholders.

Nobody (neither federal nor state officials) has informed the public of detailed cost estimates for the project. Indeed, it appears that the two parties are barely talking as mutual distrust and recriminations paralyze the process.

Angling for Higher Office

Christie’s decision to withdraw from the project has only solidified his reputation as a darling of the Republican right. In recent weeks Christie was on a national tour backing GOP candidates for governor, two of whom (John Kasich in Ohio and Scott Walker in Wisconsin) have announced their opposition to accepting federal stimulus money to build passenger rail lines.

By scrapping ARC, Christie can burnish his reputation as a cost cutter to deficit-minded Republicans and independents who don’t have to commute to New York. From this point of view, the cancellation is an easy call for a man widely believed to be angling for a slot on the national Republican ticket in 2012 or 2016.

Last Friday, the breakthrough of the shaft of the Gotthard Tunnel was carried live on Swiss television. Since then, an outpouring of praise and admiration has rained down on the country from the world press and politicians. A recent poll found that 67 percent of Swiss residents support the rail project as a way to divert traffic from highways and protect the country’s mountains, lakes and resorts.

Meanwhile, wags in New Jersey have labeled the fruits of 17 years of planning and preliminary construction the “tunnel to nowhere.” Of course, the problem of moving people through one of the most congested parts of the world isn’t going away. Long after Christie leaves office, New Jersey’s economic well-being will suffer, while the costs that the governor says taxpayers can’t afford will only escalate.

But that’s not part of the political hardball now being played along the banks of the Hudson River.

Photo credit: Becka Spence