Category: Uncategorized

Myths and Realities of Regulatory Uncertainty

Posted on by The Progressive Policy Institute

Ezra Klein joined others this week in mocking the “uncertainty” rhetoric that Republicans and some business leaders have been parroting to argue for lower taxes and lighter regulation.  As Stan Collander, Brad DeLong, and Ezra himself have all done an excellent job of arguing, there is plenty of reason for ridicule.  Most of the talk about businesses being paralyzed by uncertainty over taxes and regulations is little more than politically-driven spin.

The problem I have with Ezra’s post this week is that he chose the wrong example to pick on.  He points to Derek Thompson’s  interview with Eric Spiegel, CEO of Siemens USA, who complains about the uncertainty his company faces in the wake of the failure to pass an energy bill in Congress.  Thompson and Klein both equate this position with the less policy-specific confusion and outrage Republicans are attributing to the business community at large.   Thompson sums it up with this broad conclusion:

It’s another piece of evidence that “government should remove uncertainty” is a euphemism for “government should enact the laws that make me profitable.” For some companies, “make me profitable” might mean simply slashing taxes on income and capital gains, cutting public spending and getting out of the way. For other companies like Siemens, it means government getting in the way. It means putting a new tax on carbon, giving tax money to companies building wind blades, and adding new regulations for renewables.

In this case, there is more to it than that.  The kind of uncertainty problems that Spiegel describes are actually legitimate, at least in part.  The energy industry has been holding its breath for years waiting for the EPA and Congress to decide what they are going to do about regulating carbon emissions.  With the energy bill now faded into legislative limbo, it looks like the industry will not get the resolution it needs anytime soon, which means billions of dollars worth of investment will be trapped in limbo as well.  The uncertainty is so real that several people in the industry have privately told me that they almost don’t care what Congress chooses to do with carbon pricing, as long as it does something, so they can stop waiting and start building.   Or as another energy CEO put it recently, “There’s a lot of capital sitting on the sidelines just waiting for more regulatory clarity.”

It’s worth differentiating the energy industry’s need for long-term clarity in climate policy from the standard fear and loathing Republicans are promoting.  Here’s why.  A lot of the decisions energy companies need to make are binary choices that change dramatically depending on the policy assumptions: whether a new plant should be coal or natural gas, whether a new wind farm is viable without tax incentives, whether a new nuclear plant could be approved and running within ten years.  It’s hard to make economically rational decisions when the outcomes are so dependent on unresolved political questions.  This is fundamentally different from arguments that companies are afraid to hire new workers this quarter due to taxes or health care regulations.

There is no shortage of unsupportable statements about uncertainty that belong to the realm of political fiction.  Rep. Boehner’s latest call for a moratorium on new regulations certainly qualifies, blaming the “uncertainty that’s being created by the Democrats’ agenda” for leaving every employer and investor in America “frozen” with fear.   That kind of rhetoric is obviously exaggerated, and it should either be refuted or ignored altogether.

However, we should not allow Republicans crying wolf to drown out the voices that have legitimate gripes about regulatory uncertainties that Congress needs to address.  And we should be careful not to confuse the two for each other when we hear them pleading their case.

The Three Little Dutch Boys

Posted on by The Progressive Policy Institute

The economic news out of Washington this week has an eerie ring of déjà vu: Congress just passed an emergency spending bill, the Fed is buying debt securities to keep the economy from sliding toward collapse, and the Administration announced it is committing billions of dollars to mortgage relief for homeowners facing foreclosure. To be sure, none of these actions has the scale or urgency of the initial responses to the financial crisis, but they are perfect examples of the policy philosophy that has dominated both economic policy since the crisis: a focus on playing defense, rather than offense.

What we saw this week were Congress, the Administration, and the Federal Reserve continuing their roles as the three little Dutch boys of the American economy, sticking fingers in the dyke to save the country from disaster. The rhetoric of stimulus is oversold and misplaced: Washington’s fiscal and monetary policies have essentially all been economic tourniquets that are better characterized as containment measures than stimulus. The Fed is shifting into quantitative easing, but only as much as necessary to fight off deflation. Congress is sending aid to the states, but only enough to keep them from having to lay off teachers. Treasury and HUD are providing assistance to the housing market, but only enough to keep people from being kicked out of their houses.

Over and over since the crisis, policy makers in both parties have remained optimistic that the U.S. economy was inherently dynamic and resilient enough that we could rely on growth to materialize from somewhere, as long as we put a solid floor underneath to contain the damage and prevent more negative shocks to the economy. Given the huge amounts being spent and our country’s history from past recessions, this was not an unreasonable approach at the time, especially for those with any concern for fiscal responsibility.

So far, the containment strategy has proved extremely successful in keeping us from sinking into a full-blown depression. However, at this point, we still have farther to go on the path to a sustainable recovery than most economists and politicians had hoped. This morning we got the new jobless numbers, and they aren’t good.  Wall Street was hoping for better news, and the markets’ negative reaction only compounds the growing anxiety (even allowing for the low volume in August, when stocks historically are more vulnerable to bad news). The extended string of bad economic news, coupled with a lack of credible cheerleading from Washington, is creating a palpable crisis of confidence in our economy and our leadership.

While the Fed is signaling between the lines that it may be prepared for stronger action, Congress and the President seem to be headed in the other direction. Campaign politics have lawmakers talking more about contractionary fiscal discipline than taking any new actions to boost the economy. Even in the debate about extending the Bush tax cuts, the options being considered do not include anything stimulative compared to the status quo. Congress has painted itself into a corner by waiting until taxes are automatically set to go up if it fails to act, and now it will likely be forced to extend most or all of them simply to avoid a contractionary fiscal outcome. Again, playing economic defense.

It’s time we think seriously about shifting gears and talking about reasonable stimulus again, instead of waiting for the next hole to plug. As Will Marshall has argued here, keeping public spending and debt under control is critically important, and Democrats need to talk openly about how we prepare for the day of reckoning when the spending claw-backs kick in, since Republicans have lost all credibility on fiscal discipline. However, growth is still the most urgent concern; the signals from bond-market vigilantes are telling us that, as Stan Collander argues well today.

There is a still a place in the debate for looking into additional stimulus, both on the tax side and with additional cost-effective spending. For example, public investment in infrastructure can be used to leverage private capital off the sidelines as well by making the private sector an active partner in stimulus efforts. Instead of continuing to put fingers in the dyke, we need to be more proactive in finding the companies in the private sector who want to rebuild the dyke, and put people and money to work again.

Photo Credit: OliBac’s Photostream

Spur Job Growth By Making Business Registration Easier

Posted on by The Progressive Policy Institute

Americans love small businesses and admire the job-creating doggedness and independence of entrepreneurs and dreamers.  Then why aren’t we making it easier to start a business?  Aspiring business owners face a daunting amount of red tape and hassle.  With job creation at the top of the national agenda, the time has come to do better in making it easier to start a business

The OECD, which measures barriers to entrepreneurship (including administrative burdens to open a business, legal barriers to entry, bankruptcy laws, property rights protection, investor protection, and labor market regulations), ranks the U.S just 14th of 29 OECD countries.

We know that small businesses are the engine of job growth in the United States, accounting for 2/3 of new jobs over the past 15 years, according to the Small Business Administration. That’s why one way to spur desperately needed job creation in the United States would be to make the business registration process faster, more comprehensive and thoughtful about the needs of small businesses, and thoroughly integrated with the state business registration process.

We propose the Administration task the Federal CIO, Vivek Kundra, with redesigning business.gov and undertaking a strategic design review of the federal and state small business registration process, redesigning it to create an integrated business registration website encompassing both federal and state requirements and contemplating the entire lifecycle of needs for small business start-ups, thus creating a one-stop shop for business registration in the United States.

The portal would incorporate all states’ business registration requirements into an integrated one-stop system. The registrant would need to only visit a single website to register his or her business both with the Federal government and the relevant state government. (This would have to be done with federal leadership, with the federal government providing a framework and platform to let states add their requirements to it.)

The website would have interactive components, modeled along the lines of TurboTax, with wizards/dialogue boxes, and with the registration process asking questions, demonstrating intelligence, and providing constructive guidance and advice. It should be smart enough to recognize, “You’re registering an electricians business in Arkansas with 10 employees. We recommend a sole proprietorship as the corporate form of governance.” That is, it wouldn’t have just a bunch of links where one can learn more about different corporate forms. It could give advice based upon the information the registrant is entering—in part by tapping into a database with insights on how other similar businesses are structured.

The redesigned business registration process would also contemplate the entire lifecycle of needs and concerns for the small businesses. For example, it would bring information forward to the registrant about whether there are loan programs the business is eligible for, such as relevant Small Business Administration (SBA) or Economic Development Agency (EDA) loans, or information about lines of credit from local commercial lenders. (And the system should actually go in and automatically use the already-entered data to populate the information on that loan form – almost getting to the point where all the registrant needs to do is click “Submit.” Indeed, the system architecture would have a principle that the registrant never needs to enter the same information more than once.)

If the entrepreneur signals the company will be in the business of making products, the website should proactively present any export promotion programs the company might engage with through the Department of Commerce. Again, not just providing links to the Department of Commerce website, but recognizing, “You’re producing custom machine tools and the Department of Commerce has Program X to support it.” Thus, the business registration process would directly support the Administration’s goal to double U.S. exports in five years.

Also, the system should tie directly into the country’s statistical agencies so they can recognize, “We have a small business that just registered,” and that data should go directly and immediately to Bureau of Economic Analysis and the Census Bureau so that we get a much more real-time view of the state of the economy. Of course, implicit in this vision is the need to connect disparate and siloed federal and state databases and information technology systems so that they communicate with one another and bring to bear information in real time to support the small business.

Finally, the small business registration process should be made on an open application platform, in such a way that it could allow competition in the marketplace. So a Citibank or Bank of America, for example, could co-brand it as a “Small Business Starter Kit.” Thus, if an entrepreneur goes into a BofA location to apply for a line of credit, BofA could say, “We’ve got everything you need to start your business right here. Get set up online here now.” The point is the government should make the web interfaces to the registration process open and accessible, so other companies can integrate them with other value-added services they provide to small businesses.

One model is Portugal, where the new “Firm Online” program has completely digitalized the process of registering a business, streamlining the process from it taking 20 different forms and roughly 80 days to launch a business to creating a single website through which new businesses can register in as little as 45 minutes. Within months of launching the new service, more than 70,000 new businesses registered. Portugal’s system uses electronic (digital) signatures (which the U.S. system does not) when authentication is required. It is also responsive to the life cycle needs of a start-up business, providing suggestions for sources of capital, talent, etc. Portugal now ranks 2nd of the 30 OECD countries in online business sophistication. Other countries like South Korea enable entrepreneurs to create firms through their mobile devices.

The modern economy is marked by incredibly intense competition, both globally and domestically. American businesses need every single advantage they can get—and making the process of new business registration in the United States the very best in the world would be an excellent place to start.

Photo Credit: Muffet’s Photostream

How the Military is Leading the Way on Energy Security

Posted on by The Progressive Policy Institute

As a U.S. Army veteran I am used to dealing with the military, an organization that, by necessity, takes swift and decisive action when necessary, despite the fact that many see it as a conservative organization that is resistant and slow to change. In Washington, I am becoming used to dealing with another organization that is much more conservative and even more resistant and slower: the United States Senate. I am proud to say that the U.S. military is once again taking decisive action on energy independence and security, as well as addressing the military repercussions of climate change. The military is taking action where the United States Congress will not.

On July 27 I attended the White House Forum on Energy Security along with a group of veterans from Operation Free, a nationwide coalition of military veterans from all eras and ranging from Privates and Airmen to Generals and Admirals – all of whom support the goal of energy independence, security, and addressing the national security repercussions of climate change.

We have collectively been touring and speaking throughout the country and in Washington, D.C. in support of breaking our dependence on largely foreign oil and pushing Congress to take real steps toward a comprehensive clean energy climate plan. We have come to support the American Power Act developed through a bipartisan effort by Senators John Kerry and Lindsey Graham with Senator Joseph Lieberman and cooperation from the White House.

July 27 was supposed to be the day that the Senate finally took real action on the issue we have all been working hard for over the past year. It didn’t happen. As we all got on airplanes throughout the country in high spirits, something was happening on Capitol Hill: nothing.

By the time we hit ground in Washington, D.C. we learned that everything had changed. The Senate didn’t have the sixty votes needed to proceed to an up-or-down vote on the bill. We went to the Hill again to meet with fence-sitting Senators and their staff. The opinion we encountered there was disappointing, but not surprising: we need to do something about the issues of energy security, energy independence, and climate change, but we’re not going to do anything now.

Some, echoing Republican sentiment, said the issue hadn’t been discussed enough yet, that the Senate process of debate and hearings needs to be completed, that it would force them to choose ‘winners and losers’ and they are not ready to do that.

Hadn’t been discussed enough? We’ve been talking about energy security and independence since the 1970s. Other countries are taking action while we are being left behind. The CIA includes repercussions of climate change and our dependence on foreign fossil energy in its assessments. The State Department does as well.

Now the U.S. military is taking serious steps to address the issue. It devoted an entire section of the 2010 Quadrennial Defense Review Report (p. 84) to responding to climate change issues.  Secretary of the Navy Ray Mabus has expressed a clear vision of a force independent of fossil fuels. The military is taking action by reducing the use of fossil fuels, researching the use of alternative sources, and increasing the efficiency of its energy use, whether on battlefield outposts in Afghanistan or home installations in Texas. Speakers from each branch of the U.S. military have discussed similar opinions, expressing that action on this issue shouldn’t be taken for political reasons, but for security reasons. The money we pay for oil goes to regimes opposed to our interests. The cost of procuring, transporting, and securing that fuel is extreme, in dollars and to the lives of our troops.

This contrasts greatly with the attitude of too many Senators, who continue to choose politics over security. The U.S. Congress trusts the military and veterans on other security issues. Energy independence, energy security, and planning for the possible consequences of climate change are national security issues. The military is taking action, even if Congress won’t. If they’ll listen on other national security issues, let’s hope they’ll trust the military when it comes to a comprehensive clean energy climate plan that makes us energy independent.

Photo Credit: DVIDSHUB’s Photostream

Do Americans Think Their Kids Will Do Better?

Posted on by The Progressive Policy Institute

Kevin Drum notes my last post and then wonders, “What I’m more curious about is what this looked like in the 50s, 60s, and 70s. Was optimism about our kids’ futures substantially higher then?”

The results I showed were mostly from a fantastic database of polling questions called “Polling the Nations”, which I recommend to everyone (though it’s not free, it’s not that expensive relative to other resources).  That’s why they only start in the mid-80s, and there’s a gap between the mid-00s and the two or three polls I cite from this year and last (my look at this question was a few years ago).

Anyway, Kevin’s query reminded me that there’s another compilation of polling questions that is also amazing—the book, What’s Wrong, by public opinion giants Everett Carll Ladd and Karlyn Bowman.  And it’s a free pdf.

So, let me add some results to those I posted before.  I’m focusing, to the extent possible, on questions that ask parents about their own children.  When people are asked about “kids today” instead of their own kids, they are much more likely to be Debbie Downers—a phenomenon that journalist David Whitman dubbed the “I’m OK, They’re Not” syndrome, which is much more general than questions about children’s future living standards.  Also, let’s be careful to distinguish between levels and trends.

First, let’s look at the confidence parents have that life for their children will be better.

Percentage of parent confidence that life for their children will be better
Year Very confident Fairly confident Not at all confident
1973 26% 36% 30%
1974 25 41 28
1975 23 39 32
1976 31 39 25
1979 25 41 29
1982 20 44 32
1983 24 38 33
1988 20 45 28
1992 17 46 31
1995 17 44 34
2000 46* N/A 48*
Source: Roper Starch Worldwide; *Washington Post/Kaiser Family Foundation/Harvard

That last one shouldn’t be directly compared with the others—not only did it only offer a yes-or-no response, it was also asked of all adults.  More on that in a sec.  What we see from the Roper surveys is a fairly steady decline in solid confidence, but not much of a trend in pessimism.

The main dynamic is that parents have moved from being “very” confident to “only fairly” confident.  It looks like there may have been a small decline in optimism from the late 1980s through the mid-1990s.  But it’s interesting that from 1973 to 1995, between 61percent and 70%percent were at least fairly confident that their kids would be better off.

The Washington Post polling result provides a nice opportunity to look at the “I’m OK, They’re Not” pattern, since all adults were asked the question, even though fewer than half had children under 18 in their household.  In a poll my employer* commissioned from Greenberg Quinlan Rosner Research and Public Opinion Strategies, we asked parents about their expectations for their children’s living standards.  We asked people who had no children under 18 at home about “kids today.”

Pooling everyone together, 47 percent of adults said kids would have higher living standards. But the parents were much more optimistic about their own children, with 62 percent saying their kids’ living standards would improve.  So the Washington Post result might have been right in the range of the Roper results had the question been asked only of parents.
Other polls have asked whether parents think their children will be better off when they are the same age:

Percentage of parents that think their children will be better off when they are the same age
Year Better off financially Not better off
1981 47 43
1982 43 41
1983 44 45
1985 62 29
1986 74 19
1991 66 25
1994 47* 39*
1995 54 39
1996 52 39
1996 51‡ N/A
1997 51‡ N/A
1999 67‡ N/A
Sources: ABC News/Washington Post;  *Newsweek; ‡Pew Research Center

So optimism declined between the mid-1980s and early-1990s, recovered starting in the mid-1990s, and generally remained above early 1980s levels (when the economy was in recession).  Except for 1983 majorities or pluralities hold the optimistic position.

Another series of polls asked parents whether their children will have a better life than they have had.  They also indicate a decline in optimism from the late 1980s to the early 1990s and a subsequent rebound:

Parents outlook on their children’s life
Year Better life About as good
1989 59% 25%
1992 34 33
1995 46 27
1996 50 26
2002 41* 29*
Sources: BusinessWeek; *Harris Poll

Strong majorities thought the children would have as good a life as them or better, and while more people thought their kids would have a better life than thought they would have a worse life, optimism failed to win a majority of parents in a number of years.  The trends appear to reveal a decline in optimism from the mid- or late-1990s to the early 2000s.  Considering all of these trends thus far, a fairly clear cyclical pattern is emerging, as Kevin observed in his post.

The early 2000s dip also shows up in Harris Poll questions asking whether parents feel good about their children’s future:

Percentage of parents that feel good about their children’s future
Year Feel good
1997 48%
1998 65
1999 60
2000 63
2001 56
2002 59
2003 59
2004 63
Source: Harris Poll

The dip is revealed to be related to the 2001 recession, as optimism rebounded thereafter, again following the business cycle. Again, solid majorities generally take the optimistic position.

The longest time series available asks parents whether their children’s standard of living will be higher than theirs.  Unfortunately, it appears that most of these polls ask the question of adults without children too:

Percentage of parents that believe their children will achieve a higher standard of living
Year Higher standard of living Lower standard of living
1989 52% 12%
1992 47 15
1993 49 17
1994 43 22
1994 45* 20*
1995 46 17
1996 47* N/A
1998 55* N/A
2000 59* N/A
2002 61* N/A
2004 53* N/A
2006 57* N/A
2008 53* N/A
2009 47/62† N/A
2010 45‡ 26‡
Sources: Cambridge Reports/Research International; *General Social Survey; †Economic Mobility Project; ‡Pew Research Center

Once again the cyclical pattern emerges, though it is not quite as clear in the mid-2000s.  Optimism is far more prevalent than pessimism in every year, reaching majorities from the late 1990s until the current recession.  Even today, optimism is no lower than in the mid-1990s, and the EMP poll implies that when looking just at parents with children under 18 living at home, solid majorities continue to believe their kids will have a higher living standard.

Taken together, there is very little evidence that a supposed stagnation in living standards is reflected in Americans’ concerns about how their children will do.  The survey patterns show that parental optimism follows a cyclical pattern, generally is more prevalent than pessimism, and did not decline over time.  In fact, we can compare beliefs in 1946 to 1997 for one question—whether “opportunities to succeed” (1946) or the “chance of succeeding” (1997) will be higher or lower than a same-sex parent’s has been:

·       Roper Starch Worldwide (1946)—64 percent of men said their sons’ opportunities to succeed will be better than theirs (vs. 13 percent worse); 61 percent of women said their daughters’ opportunities to succeed will be better than theirs (vs. 20 percent worse)
·       Princeton Religion Research Center (1997)—62 percent of men said their sons will have a better chance of succeeding than they did (vs. 21 percent worse); 85 percent of women said their daughters will have a better chance (vs. 7 percent worse)

As one would expect, mothers in 1946 believed their daughters would have more opportunity, but surprisingly that view was even more prominent in 1997.  And among men, there was very little change.  Notably, unemployment was slightly lower in 1946 than in 1997, so this isn’t a matter of apples to oranges.

Or even more strikingly, consider two polls asking the following question: Do you think your children’s opportunities to succeed will be better than, or not as good as, those you have? (If no children:) Assume that you did have children.
·       Roper Starch Worldwide (1939)—61 percent better vs. 20 percent not as good vs. 10 percent same (question asked about opportunities of sons compared with fathers)
·       Roper Starch Worldwide (1990)—61 percent better vs. 21 percent not as good vs. 12 percent same

While the 1939 question only refers to males, given the relatively low labor force participation of women at the time, it is perhaps still comparable to the 1990 question.  However, the unemployment rate was 17.2 percent in 1939 compared with 5.6 percent in 1990.  Still, the two are remarkably close.

OK, can we put this question to bed?  Americans believe their children will do as well or better than they have done, and this belief hasn’t weakened over time.  Now let’s get back to arguing about objective living standards rather than subjective fears about them.

* For the love of God, nothing you’ll ever read on my blog has anything to do with my job—there are people at Pew whose ulcers flare at employees’ side hustles like mine.

This item is cross-posted at ScottWinshipWeb.

Photo Credit: fiskfisk’s Photostream

The Fed Can Not Only Lead A Horse To Water, It Can Also Turn On The Hose

Posted on by The Progressive Policy Institute

The Federal Reserve’s outlook on the economic recovery continues to get gloomier.  In its statement released following the FOMC meeting today, the Federal Reserve acknowledged that “the pace of recovery in output and employment has slowed in recent months,” and “economic recovery is likely to be more modest in the near term than had been anticipated.”  Not good news, especially when interest rates are already about as low as they can go.  With today’s announcement that it is committed to keeping rates at rock-bottom levels ”for an extended period” going forward, the Fed also signaled that it is ready to go beyond rate setting to strengthen the economy.

After keeping the federal funds at historic lows for so long, with only disappointment to show for it, the Fed has decided that it’s no longer enough to lead the U.S. economy to water and wait for it to drink.  So as part of its announcement today, the Fed signaled that it will once more resort to quantitative easing to pump money directly into the economy.  Because there are risks to this strategy (see Krugman), the Fed couched this move in modest terms, explaining that it will be buying long-term Treasury notes to “keep constant” the level of assets on its balance sheet, which currently includes a large portfolio of mortgage securities it purchased to stabilize markets during the financial crisis.

The Fed will simply be rolling over its portfolio into Treasuries as the mortgage securities retire, which is actually not putting new money into the economy, as much as it is preventing the money supply from shrinking if the Fed’s portfolio were allowed to get smaller.  But there are signals here for those who have been anticipating a new push for quantitative easing from the Fed.

The First Signal: The Fed is clearly ready to buy market securities to inject money into the economy as needed.  This baby step toward quantitative easing is likely a preview of more dramatic asset purchases if the Fed sees real evidence of deflation or a double-dip recession.  Be prepared for more.

The Second Signal: The Fed is not necessarily interested in using mortgage securities as an asset vehicle for expanding the money supply.  Doing so would keep mortgage rates low, which would help prop up an ailing housing market.  But mortgage rates are already the lowest on record, and that hasn’t helped sales much, so the Fed doesn’t need to waste time trying to lead another horse to water in housing markets.

The overall signal from today’s FOMC statement is not good news for the economy.  The Fed is becoming less optimistic and less certain about the future.  Bernanke and company are apparently convinced that stronger actions may still be needed for sustained stimulus.  The fact that they are coming around to that view may do some good for restoring confidence in Fed policy.  And the Fed needs all the help it can get these days, because it’s running out of useful monetary tools to boost the economy.

Hopefully the signals from today’s statement will be heard in Congress, where lawmakers still have a lot of steps they can take before the end of the year to bring better stimulus and more confidence to the economy.

Photo Credit: Ken_Mayer’s Photostream

The United Nations Plot to Take Over Denver (and other nasty dramas from today’s big primaries)

Posted on by The Progressive Policy Institute

This is the busiest primary day since the June 8 blockbuster, with three states (CO, CT and MN) holding primaries and a fourth (GA) holding a runoff.  So there’s a lot of ground to cover.

Colorado

A factor in all the Colorado races is that most counties in the state went to an all-mail-ballot system this year, which could boost overall turnout but will definitely affect the timing of votes (though Colorado’s had heavy early voting for a while now).

Colorado’s Senate races have become very competitive in both parties coming down the stretch.  Appointed Sen. Michael Bennet (D) got hit with a controversial (in its timing) New York Times piece about his involvement in an unsuccessful investment by the Denver public schools, which immediately generated an attack ad by his opponent, former state House Speaker Andrew Romanoff (D), who has been pounding Bennet for weeks as someone too close to Wall Street.  Late polls show a very close race, with Survey USA indicating Romanoff has moved ahead while PPP shows Bennet hanging onto a small lead.

On the Republican side, polls also differ as to whether district attorney Ken Buck has maintained his lead over former Lt. Gov. Jane Norton, despite his recent gaff-a-thon.  Norton surprised a lot of observers by inviting John McCain into the state to campaign with her at the very end; we’ll see if she knew what she was doing.  While both candidates are quite conservative, Buck’s the preferred candidate of the Tea Party folk and the national conservative chattering classes, so if he wins they will claim another Establishment scalp.

The ongoing meltdown known as the Colorado Republican gubernatorial contest is also ending with no clear leader; one poll has Tea Party activist Dan Maes narrowly leading; the other shows former congressman Scott McInnis narrowly regaining the lead.  As you may have heard, McInnis’ campaign imploded in July when the Denver Post revealed that a wonky series of columns he “wrote” as part of a lucrative think tank contract were heavily plagiarized.  But Maes has been hounded by campaign finance violations and poor fundraising, and also earned heavy derision by claiming a popular bike-sharing program in which Democratic gubernatorial candidate John Hickenlooper was involved is in fact part of a United Nations plot to take over Denver.  You really can’t make this stuff up.

The “winner” of this primary will immediately be under heavy pressure to drop out and allow the state party to choose a more electable candidate, and also to beg former congressman Tom Tancredo to close down his campaign on the far-right, theocratic Constitution Party ticket, which polls indicate would split the GOP vote in half and guarantee a Hickenlooper victory.

Georgia

Rivaling Colorado in inter-Republican drama has been the gubernatorial runoff in Georgia, which polls show as coming down to a real nail-biter between primary first-place finisher Karen Handel and former congressman Nathan Deal.  Continuing her effort to cast herself as a “conservative reformer” taking on the corrupt “good ol’ boys” of the Republican establishment, Handel has continued to attack Deal’s ethics record and Washington associations. Deal, probably hoping for a very low turnout dominated by ideologues, has pounded Handel for alleged “liberal” heresy on abortion and gay rights.  Both campaigns are in danger of being overshadowed by their supporters, with Sarah Palin making a very conspicuous last-day appearance alongside Handel in Atlanta (Mitt Romney is also doing robocalls for Handel), while Newt Gingrich and Mike Huckabee have campaigned for Deal.  Deal also has a massive endorsement list of Republican state legislators owing to Handel’s many attacks on their integrity as a group.

The runoff has become so nasty that Republicans are already planning “unity” events; Democrat Roy Barnes waits in the wings, raising money.

There are two Republican congressional runoffs that will affect turnout patterns; one is for Deal’s old seat in North Georgia, where special election runoff winner Tom Graves will face former state legislator Lee Hawkins for the fourth time in three months.  The other is in Handel’s base area, in north metro Atlanta, where longtime conservative congressman John Linder (R) is retiring.  His former chief of staff, Rob Woodall, is expected to defeat Jody Hice, a Southern Baptist minister and radio gabber whose billboards feature a reference to the president with a hammer-and-sickle replacing the “c” in the word “change.”  Nice.

Connecticut

In Connecticut, both parties have competitive gubernatorial primaries involving self-funded candidates facing challengers who are receiving pretty generous public financing under the state’s Clean Elections system (which is under attack in the courts in the aftermath of the Citizens United decision).  Among Democrats, wealthy cable station owner Ned Lamont, famous for his left-bent challenge to Joe Lieberman in 2006, has run a surprisingly “centrist” campaign focused on the state’s many fiscal and economic problems.  His challenger, former Stamford mayor Dan Malloy, who narrowly lost the gubernatorial nomination four years ago, has been pounding him in a populist vein, while fending off allegations that he helped give a company that did work on his home a no-bid contract as mayor (not something you’d want to do in this state, since that’s what brought down former Gov. John Rowland). Malloy has closed the gap with Lamont in the stretch run, and either candidate could win.

The Republican self-funder is former Ambassador to Ireland Tom Foley, and the publicly-financed challenger is Lt. Gov. Michael Fedele.  This race has also featured personal attacks, mainly involving Foley’s ownership interest in a Georgia textile plant that closed, throwing workers out of jobs.  Late polls show exceptional instability in this race, but indicate that Fedele is rapidly gaining on Foley.

Meanwhile, former wrestling exec Linda McMahon, who beat former congressman Rob Simmons at the state GOP convention for the official party endorsement, will face Simmons (who reentered the race after dropping out for a while) and Tea Party activist Peter Schiff, but isn’t expected to have much trouble winning.

Minnesota

In Minnesota, the DFL (Minnesota’s unique version of the Democratic Party) gubernatorial primary features the official party candidate (as selected in a state convention that some candidates skipped), state House Speaker Mary Anderson Kelliher, and two wealthy self-funders, former U.S. Senator Mark Dayton and former state legislator Matt Entenza, both of whom have put about $3 million into the race.  Dayton has held a steady if not spectacular lead over Kelliher, who hopes to pull a ground-game-driven upset in what could be a very low turnout election.  All three Democrats lead certain Republican nominee Tom Emmer in general election polls, partly because the likely candidate of the Independence Party (still around more than a decade after Jesse Ventura’s election), Tom Horner, is pulling a lot of Republican votes. The DFL hasn’t won a governor’s race since 1986, but this could be the year the drought ends.

If you want more details, I’ve done previews of Colorado, Georgia and Connecticut/Minnesota over at FiveThirtyEight.

Ed Kilgore’s PPI Political Memo runs every Tuesday and Friday.

Is the Google-Verizon Proposal a Killer App in the Broadband Debate?

Posted on by The Progressive Policy Institute

Google and Verizon have finally released the details of the policy proposal they have been negotiating for nearly a year now, and the news has generated enormous chatter around Washington and across the blogosphere, with bloggers panning it andwatchdog groups warning of the end of the internet as we know it.

Obviously, advocacy groups on both sides are focused on the substance of the agreement. But I am more interested in what this means for the policy process, and how effective it will be in nudging Congress and the FCC to clarify the rules of the game for broadband internet service.What these two companies have provided is helpful: a concrete policy proposal that Congress and the FCC can consider, and that imposes a framework for targeted comments from the industry and watchdog groups.

In fact, given the weight of these two companies and the collapse last week of the FCC’s attempts at talks, the roll-out for this proposal may make it a “killer app” in the broadband debate (and not simply an internet killer, as some are calling it).Now that Google and Verizon have put a policy proposal on paper, it becomes the baseline that everyone else has to support or oppose to some degree, including FCC commissioners and members of Congress.Pressuring leaders to make decisions is an appropriate goal, and that’s what this proposal does.

As for the proposal itself, it should be judged as a work in progress.Many of the principles themselves are worthy goals: giving consumers freedom to choose content, applications, and devices; requiring more product transparency from service providers, and prohibiting paid fast lanes for internet traffic. The recommendation that the FCC have real teeth to enforce violations of the proposed rules on a case-by-case basis is a good one.

If the kind of self-regulation proposed for the broadband internet industry is going to be successful, there also needs to be enough competition in the market to empower consumers to punish service providers for violating the principles that Google and Verizon have laid out.That means that in addition to policing the market for bad apples, the FCC needs to be vigilant in monitoring the health and competitiveness of the market for broadband internet access.If there are enough companies offering similar services, and the FCC and watchdog groups hold companies publicly accountable for their behavior by informing consumers of violations, consumers can play a valuable role in policing the market by switching providers when they feel their content or services are being unfairly restricted.

Both CEOs acknowledge that “no two companies should be so presumptuous as to think they can solve this challenge alone,” and no one should see this as an end to the debate.Verizon and Google have given everyone involved a chance to speed up the process by narrowing the conversation to actual yes-or-no decision making.I commend these companies for at least trying to move the ball forward with a good-faith proposal.

Photo Credit:  Peter Huys’s Photostream

Unflattening Taxes on the Rich

Posted on by The Progressive Policy Institute

As Congress prepares for a big debate on the fate of the Bush tax cuts, there’s an internal debate breaking out in progressive circles on how to deal with tax rates on the very wealthy, not just those currently in the top income tax bracket.

This debate-within-the-debate is being driven by two external data points: First, the fact that income inequality in the United States during the last two (or arguably, the last four) decades has especially manifested itself in the concentration of wealth at the very top of the income ladder; and second, the fact that higher taxes for “millionaires” consistently polls well.

James Suroweicki explains the first point nicely in a recent column in The New Yorker:

Between 2002 and 2007…the bottom ninety-nine per cent of incomes grew 1.3 per cent a year in real terms–while the incomes of the top one per cent grew ten per cent a year. That one per cent accounted for two-thirds of all income growth in those years. People in the ninety-fifth to the ninety-ninth percentiles of income have represented a fairly constant share of the national income for twenty-five years now. But in that period the top one per cent has seen its share of national income double; in 2007, it captured twenty-three per cent of the nation’s total income. Even within the top one per cent, income is getting more concentrated: the top 0.1 per cent of earners have seen their share of national income triple over the same period. All by themselves, they now earn as much as the bottom hundred and twenty million people. So at the same time that the rich have been pulling away from the middle class, the very rich have been pulling away from the pretty rich, and the very, very rich have been pulling away from the very rich.

The current debate over taxes takes none of this into account.

Thus, framing the tax progressivity question as mainly involving rates for those with incomes well below super-rich levels misses the mark, and, as both Surowiecki and (for months now) Jonathan Chait have pointed out, misses a political opportunity associated with a widespread popular conviction that the very wealthy don’t pay their fair share of taxes.

In terms of the stakes involved in proposing something like a “millionaire’s tax” (essentially a new and higher top rate on very high incomes), Nate Silver has shown at FiveThirtyEight that it could indeed raise some pretty serious federal revenues.

But the political bonus of a “millionaire’s tax” proposal goes beyond the numbers: it would help expose the really dramatic gap between the two parties on the whole concept of progressive taxation.

After all, even as Democrats debate making federal income taxes more progressive, a growing and increasingly dominant segment of Republicans favor “flattening” tax rates to eliminate progressivity, exempting capital and corporate income from taxation, and/or shifting taxation away from income altogether and focusing it on consumption. And even for those Republicans who don’t embrace radical tax proposals, the “thinking” behind them is the rationale for the vague support for high-end or business tax cuts that’s almost universal in today’s GOP, in growing contradiction with conservative demands for debt-and-deficit reduction.

Anything that makes this contrast more vivid, on terms supported by big majorities of the American public, is a pretty good idea for Democrats. So I’d strongly recommend that in the debate over extending or eliminating Bush’s tax cuts for the top bracket, proposals to crate a new bracket for the “super-rich” ought to become an essential ingredient.

This item is cross-posted at The Democratic Strategist

The Tennessee Primary Waltz

Posted on by The Progressive Policy Institute

It’s been a very busy week on the primary front, with a block of midwestern states — Kansas, Michigan and Missouri — on Tuesday and Tennessee on Thursday.  In all four states, a heavy menu of Republican primaries dominated the landscape, with a few notable Democratic tilts.

I did a reasonably thorough summary of the Midwestern primary results for P-Fix on Wednesday, so I’ll focus today on Tennessee.

With Mike McWherter — son of popular former Gov. Ned McWherter — being unopposed for the Democratic gubernatorial nomination, the GOP contest drew the most attention.  As expected, Knoxville Mayor Bill Haslam, scion of the Pilot Oil fortune, used a big financial advantage and a low-key “competence” message to soundly defeat two opponents, Chattanooga Rep. Zach Wamp and Lt. Gov. Ron Ramsey, who both tried to outflank Haslam on the Right.  Haslam drew 48 percent of the vote (Tennessee does not have runoffs), with Christian Right favorite Wamp finishing second with 29 percent and Ramsey third with 20 percent.  Haslam carried most of the state outside Wamp’s district and a few northeast counties in Ramsey’s base.

The real fireworks in Tennessee involved four highly competitive Republican U.S. House primaries.  In Wamp’s 3rd district, which is heavily Republican, self-funded radio talk show host Chuck Fleischmann (backed by Mike Huckabee, whose 2008 campaign manager, Chip Saltsman, ran Fleischmann’s campaign) edged Robin Smith — a former state party chair — who was backed by a host of DC-based conservative groups, most notably the Club for Growth (which was embarrassed when a “for more information” phone number in an anti-Fleischmann mailer turned out to connect callers to a phone sex service).

Two other competitive GOP races were in potential pick-up districts where Blue Dog Democrats are retiring.  In Bart Gordon’s 6th district, State Senator Diane Black won a very nasty three-way contest against fellow state senator Jim Tracy and conservative activist Lou Ann Zelenik.  Zelenik heated up this race with repeated ethics allegations against front-runner Black, but made national news by opposing construction of an Islamic mosque in the college town of Murfreesboro (she claimed it would be a base for the imposition of Sharia law in Tennessee, believe it or not).  In the end, it came down to geography, with Black heavily winning her state senate district while Tracy and Zelenik split the vote in their base county of Rutherford.   There was also a competitive Democratic primary in the 6th, won by decorated war veteran Brett Carter, who edged the underfunded but evocatively named Henry Clay Barry.

In John Tanner’s West Tennessee 8th district, where veteran state legislator Roy Herron easily won the Democratic nomination, Republican put on what is reported to be the most expensive House primary in the country.  Nationally-recruited farmer and gospel singer Stephen Fincher battled two massively self-funded opponents, broadcast entrepreneur George Flinn and physician Ron Kirkland in a race where total expenditures ranged up towards $8 million, with $3 million spent by Flinn alone.  Despite concerted attacks on Fincher for receiving millions in farm subsidies, he won easily with half the vote, dominated his opponents in the areas of the district most remote from Memphis.

And in the Nashville-based 5th district, eleven Republicans competed for the right to wage an uphill battle against Rep. Jim Cooper in a district comfortably won by Barack Obama in 2008.  The best-financed candidate, David Hall, defeated Huckabee-backed home-school activist Jeff Hartline and Sarah Palin’s latest “Mama Grizzly,” entertainment attorney CeCe Heil.

Finally, it wasn’t really a competitive primary, but it got attention: 9th district Democratic Rep. Steve Cohen drew a second consecutive opponent who claimed the district required African-American representation.  But former Memphis Mayor Will Herenton was widely regarded as an embarrassment, and after Cohen was endorsed by President Obama, former 9th district congressman Harold Ford, Sr., and the Congressional Black Caucus, Cohen breezed to a 79-21 win.

Next Tuesday primaries are being held in Colorado, Connecticut and Minnesota, along with a runoff in Georgia.  Colorado features very competitive Senate primaries in both parties (Bennet v. Romanoff among Democrats, Buck v. Norton among Republicans), and a strange GOP gubernatorial primary overshadowed by the meltdown of front-runner Scott McInnis and the third-party candidacy of Tom Tancredo.  Connecticut has a close Democratic gubernatorial contest between 2006 Senate nominee Ned Lamont and Stamford mayor Dan Malloy, along with a multi-candidate challenge to Republican Senate front-runner and former wrestling executive Linda McMahon.  Minnesota has a very competitive Democratic gubernatorial primary, in which the best-known candidate is former U.S. Senator Mark Dayton.  And Georgia’s Republican gubernatorial runoff has become a vicious cage match, with first-place primary finisher, Karen Handel, backed by Sarah Palin, battling former congressman Nathan Deal, backed by Newt Gingrich and a big majority of Georgia Republican congressmen and state legislators.

I’ll have previews of all these events next Tuesday.

Mitt Romney Shudders

Posted on by The Progressive Policy Institute

Yesterday J.P. Green did a post on the Missouri “ObamaCare referendum,” noting its rather tilted character and echoing Jon Chait’s endorsement of a progressive way around the unpopularity of an individual mandate for the purchase of health insurance, as designed by Paul Starr.

But there’s another aspect of the Missouri vote that ought to be mentioned: the individual mandate that was the target of the the state law ratified by Proposition C wasn’t just a feature of “ObamaCare.” It was also a central element in RomneyCare, Massachusetts’ pioneer health reform effort. And amidst all the rationalizations that Romney has offered in an effort to distinguish RomneyCare from ObamaCare, he hasn’t repudiated his support for an individual mandate.

Even if you don’t think the Missouri vote was a fair representation of overall public opinion in the Show-Me State (and it’s dubious on that front, given the low turnout and the 2-1 Republican tilt among priimary voters), it was sure a good measure of how politically active Republicans feel. And a shudder had to shake Romney when he heard about it, since it’s very unlikely the 2012 Caucus-goers in next-door Iowa are going to feel any warmer towards the individual mandate seventeen months from now, when they once again pass judgment on Mitt’s presidential ambitions.

This item is cross-posted at The Democratic Strategist

Photo Credit: nmfbihop’s Photostream

Stop Playing Favorites in the Biofuels Market!

Posted on by The Progressive Policy Institute

In discussions of the energy bill this summer, talk focused on a price for carbon. This is a vital component in any legislation that would force companies to reduce emissions, either by becoming more efficient or substituting cleaner fuels. But that’s only realistic if cleaner alternatives, like biofuels, are available to replace dirty fossil fuels. Whether or not cap-and-trade passes this year, biofuels should play a key role in our new energy economy, but we need to reassess federal support to allow for more diverse and higher performing biofuels.

The biofuels industry today continues to rely on significant federal assistance to encourage investment and innovation. In the recent past, federal support has focused on pre-approved types of fuel, most prominently corn ethanol. This policy has aided the boom and bust cycle in today’s biofuels market. The government paid all its subsidies and tax credits to corn ethanol, causing the industry to expand at a faster rate than the market could accommodate. Choosing corn as the favorite resulted in a crash in ethanol prices once it became clear that supply had been propped up by federal support (rather than realistic market demand). These government policies that focus solely on corn ethanol have created both a bias in the market and a situation where investors are not willing to support alternative fuels because of federal support in favor of corn ethanol.

The biofuels market began with alternative fuel mandates in the Energy Policy Act of 1992, but these were mostly filled by conventional biofuels (ethanol derived from cornstarch). Since they were the most developed form of biofuel at the time, they received the bulk of individual tax credits (like the Volumetric Ethanol Excise Tax). Since then, Congress has adopted mandates for advanced biofuels (fuels other than cornstarch ethanol, derived from renewable biomass) and tax credits for cellulosic biofuels (a type of advanced biofuel derived from grasses, woodchips and other non-food sources). But other potential advanced biofuels (such as algae biofuel) still receive no support beyond general R&D funding. Corn ethanol’s stranglehold of the market through congressional subsidies can be seen in what would happen if current tax credits were extended through 2014: ethanol would receive more than 75 percent of the credits, while cellulosic biofuels would get less than 11 percent.

Corn ethanol production in the United States has more than tripled in the last five years, a boom that has caused other problems: diversion of corn away from food production, increased erosion, higher inputs of chemicals and water, and changes in cropping patterns and land use. Worse, these have serious repercussions, including the exhaustion of groundwater supplies, the destruction of native prairies, and the expansion of the Dead Zone in the Gulf of Mexico.

Some advocates for clean energy have pointed to these problems as reasons to stop supporting biofuel development. However, these negative consequences and the recent public backlash against ethanol mean we need a second generation of biofuels that is more diverse and market-based. Business Insights found that biofuels are estimated to account for 5-10 percent of global fuel production by 2017. It is unrealistic to think that our reliance on fuels for combustion engines will decrease anytime soon. Even if electric cars become economically feasible in the near future, it will take time to phase out existing cars. Concerns about energy security, rising oil prices and climate change will increasingly force us to change the energy mix to rely on cleaner fuels. For biofuels, this translates into a very real and growing market demand for at least the next several decades.

That’s why instead of continuing to use biofuel credits to help political constituencies like corn farmers, Congress needs to focus on forms of support that will increase performance and long-term viability for all types of biofuels. A good step toward diversifying the biofuels market is the Advanced Biofuel Investment Act of 2010, proposed by Representative Stephanie Herseth Sandlin (D-SD), which would create a new 30 percent Investment Tax Credit for investing in advanced biorefineries. This would build on existing tax credits, continuing America’s commitment to the biofuels industry.

Futhermore, if we really want to move beyond a market dominated by ethanol, Congress should approve a tax credit like the Biofuels Performance Tax Credit proposed by the Union of Concerned Scientists. All types of biofuels would be eligible for this tax credit and would receive support in proportion to their emissions reduction, rewarding performance, and fostering competition and innovation. The maximum tax credit would be $1.15 for every gallon of gasoline replaced, but to qualify for the full credit, the biofuel must have zero emissions over its lifetime. Thus, the tax credit incentivizes performance both for replacing oil and reducing global warming pollution. It would build on the current Renewable Fuel Standard by supporting producers that go beyond the Standard’s requirement of emissions reductions of at least 20 percent. This would keep incentives technology and feedstock neutral, so we wouldn’t fall into the same trap of placing overwhelming support on one fuel. It is also critical that any tax credit encourage innovation by setting a high standard for emissions reductions and allowing all companies to compete. This should lead to greater innovation and ultimately cleaner fuels.

Adopting the tax credit would be an important step towards a more even distribution of federal subsidies in the biofuels market. This would allow advanced biofuels to receive significantly more than the paltry 11 percent of tax credits that they are currently getting, which would be crucial in building a new energy economy.

The federal government has played a role in creating the ethanol market and it now it must play a stronger role in convincing investors of the potential of the biofuels market. Considerable federal support is needed to get the biofuels industry off the ground. It is essential to create policies that do not limit the market but instead allow for new developments and innovations.

Photo Credit: Kiwi Shooter’s Photostream

Tea Bags, Wind Bags and Moneybags

Posted on by The Progressive Policy Institute

So let’s say you’re a Republican politician who’s been working the far right side of the political highway for years, getting little national attention other than the occasional shout-out in Human Events. Or let’s say you’re a sketchy business buccaneer with a few million smackers burning a hole in your pocket, and you’ve decided that you’d like to live in the governor’s mansion for a while, but you can’t get the local GOP to see you as anything more than a walking checkbook who funds other people’s dreams.

What do you do? That’s easy: Get yourself in front of the loudest parade in town by becoming a Tea Party Activist!

There has been incessant discussion over the last year about the size, character, and intentions of the Tea Party rank-and-file. But, by and large, the political discussion has passed over another defining phenomenon: The beatific capacity of Tea Party membership, which enables virtually anyone with ambition to whitewash his hackishness—and transform from a has-been or huckster into an idealist on a crusade.

After all, to become a “Tea Party favorite” or a “Tea Party loyalist,” all a politician has to do is say that he or she is one—and maybe grab an endorsement from one of many hundreds of local groups around the country. It’s even possible to become indentified as the “Tea Party” candidate simply by entering a primary against a Republican who voted for TARP, the Medicare Prescription Drug bill, or No Child Left Behind. It’s not like there’s much upside to distancing oneself from the movement. Most Republican pols are as friendly as can be to the Tea Party; and it’s a rare, self-destructive elephant who would emulate Lindsey Graham’s dismissal of it all as a passing fad (in public at least).

Here, we’ll take a look at two specific types of politicians who have been especially eager to embrace the Tea Party movement: the fringier of conservative ideologues, for one, and also the self-funded ego freaks who can easily pose as “outsiders,” because no “insiders” would take them seriously. Let’s call these, respectively, the windbags and the moneybags.

By “fringier” conservative ideologues, I mean those who have argued, year in and year out, sometimes for decades, that even the conservative Republican Party simply is not conservative enough. Many of these politicians would be considered washed-up and isolated, or at least eccentric, in an era when “Party Wrecking” was still treated as a cardinal GOP sin. But now it’s as if they’ve been granted a license to kill. One classic example of this type is South Carolina Senator Jim DeMint, who was considered such a crank in the Senate that he was often stuck eating lunch alone as recently as 2008. His views, for example that Social Security and public schools are symbols of the seduction of Americans by socialism, were not long ago considered far outside the GOP mainstream. Now, in no small part because of his identification with the Tea Party Movement, DeMint has become an avenging angel roaming across the country to smite RINOs in Republican primaries, his imprimatur sought by candidates far from the Palmetto State.

Then there’s the new House Tea Party Caucus, chaired by Michele Bachmann of Minnesota, best known for suggesting that House Democrats be investigated for treason. Its members include a rich assortment of long-time conservative cranks, including Steve (“Racial profiling is an important part of law enforcement”) King, Joe (“You lie!”) Wilson, Paul (“We’ve elected a Marxist to be President of the United States”) Broun, Dan (Vince Foster Was Murdered!) Burton, and Phil (National Journal’s Most Conservative House Member in 2007) Gingrey. The key here is that these are not freshly minted “outsiders”: Burton has been in Congress for 28 years, Wilson for ten, King and Gingrey for eight. The oldest member of the House, Ralph Hall of Texas, who has been around for 30 years, is also a member of the caucus.

Even some of the younger Tea Party firebrands didn’t exactly emerge from their living rooms on April 15, 2009, to battle the stimulus legislation and Obamacare. Marco Rubio of Florida, after all, was first elected to the state legislature ten years ago and served as House Speaker under the protective wing of his political godfather, Jeb Bush. Sharron Angle first ran for office 20 years ago, and was elected to the Nevada legislature twelve years back. And of course the Pauls, father and son, are hardly political neophytes—they have just begun to look relevant again because the Tea Party movement has shifted the GOP in their direction.

And, in addition to the hard-right pols who’ve emerged into the sunshine of GOP respectability, the “outsider” meme surrounding the Tea Party movement has also created running room for well-funded opportunists—the “moneybags.”

These are epitomized by Rick Scott of Florida, who probably would not have passed the most rudimentary smell test in a “normal” election year. While there are always self-funding egomaniacs running for office—California’s Meg Whitman comes to mind along with Connecticut’s Linda McMahon—the former hospital executive presents a unique test case for the whitewashing power of Tea Party identification. He has managed to overcome a deeply embarrassing embroilment in the largest Medicare fraud case in history by taking his golden parachute from Columbia-HCA and becoming a right-wing crusader against health care reform, helping to make that a central cause for the Tea Party movement. (Scott was forced out of his position as head of the for-profit hospital chain, which he tried to build into the “McDonald’s of health care,” and the organization was fined $1.7 billion for overcharging the federal government.)

Pushed out of his job after the fraud decision, Scott decided to found the Conservatives for Patients’ Rights (CPR) group that exploded onto the national scene early in 2009 with a series of inflammatory TV ads attacking health reform, employing the same firm that crafted the Swiftboat Veterans for Truth spots against John Kerry in 2004. CPR also played a major role in organizing the town hall meeting protests in the summer of 2009, which marked the Tea Party movement’s transition from a focus on TARP and the economic stimulus bill to a broader conservative agenda.

So when Scott (a Missouri native who moved to Florida in 2003) suddenly jumped into the Florda governor’s race early in 2010, the cleansing power of tea had already transformed his image among conservatives, making his improbable campaign possible.

On the wrong side of this dynamic was Florida Attorney General Bill McCollum, a former congressman and sturdy, if conventional, conservative who had paid his dues by twice running unsuccessfully for the Senate. McCollum had apparently all but locked up the nomination when Scott, in mid-April, leapt into the ring with ads calling himself a “conservative outsider” who would “run our state like a business,” while tarring McCollum as the candidate of “Tallahassee insiders” responsible for “the failed policies of the past.” Then came a torrent of advertising from Scott ($22 million by mid-July, more than anyone’s ever spent in Florida in an entire primary/general-election cycle) blasting McCollum for alleged corruption, for insufficient hostility toward illegal immigration, for being soft on abortion providers. The assault voided a lifetime of McCollum’s toil in the party vineyards, vaulting the previously unknown Scott into the lead in polls by early June. Worse yet, from a Republican point of view, Scott drove up McCollum’s negatives, and increasingly his own, to toxic levels, handing Democrat Alex Sink the lead in a July general election poll. And now McCollum, fighting for his life, is striking back, drawing as much publicity as he can to Scott’s questionable past, especially the Medicare fraud case against Columbia-HCA.

So the question is: Would Rick Scott have been in a position to carry out what is beginning to look like a murder-suicide pact on the GOP’s gubernatorial prospects if he hadn’t been able to identify himself as an “outsider conservative” with close ties to the Tea Party? That’s not likely, but it’s no less likely than the remarkable epiphanies that have made career pols of marginal relevance such as Jim DeMint and Sharron Angle into apostles of an exciting new citizens’ movement. So the next time you hear a candidate posturing on behalf of the Tea Party, squint and try to imagine what they were like in their former lives. Many of them have only found respectability through the healing power of tea.

This item is cross-posted at The New Republic.

Photo Credit: Hatters!’s Photostream

Midwestern Primary Gleanings

Posted on by The Progressive Policy Institute

Yesterday’s primaries in Kansas, Michigan and Missouri didn’t get a whole lot of national attention, but they produced some interesting results.

As I mentioned yesterday, MI gubernatorial candidate Rick Snyder ran a campaign very much at odds with the CW that the only way to win a GOP primary is to loudly and repeatedly proclaim one’s fidelity to conservative principles and policy positions. The self-proclaimed “nerd” won handily, with 36% of the vote as compared to 27% for congressman Pete Hoekstra and a very disappointing 23% for Attorney General Mike Cox.

Since Snyder explicitly appealed for crossover votes, political detectives (myself included) will try to figure out if that was a big factor in his victory. It was rather interesting that turnout tilted 2-1 Republican in a state that hasn’t gone Republican in a presidential contest since 1988. Certainly the idea that Democrats got involved in a Republican primary will be a source of consolation to conservatives who are none too happy with the results.

Meanwhile, the Democratic gubernatorial candidate known for “centrism,” House Speaker Andy Dillon, didn’t do so well, losing to labor-backed Lansing mayor Virg Bernero by a 59-41 margin. Bernero edged Dillon in his Detroit-area base and then waxed him in heavily unionized areas elsewhere.

The other big Democratic news from Michigan was the defeat of Rep. Carolyn Cheeks Kilpatrick by state senator Hansen Clarke, a development generally attributed to the disastrous decline and fall of her son, former Detroit mayor and current prison inmate Kwame Kilpatrick.

Elsewhere Republicans made the most news and the CW pretty much held. In KS, in a contest dominated by conflicting claims of superior conservatism, Rep. Jerry Moran defeated Rep. Todd Tiahrt by a 50-45 margin, mainly by running up a bigger vote in his own House district. In terms of national endorsements, it was a win for Jim DeMint and a loss for Sarah Palin and Tom Tancredo.

In House races, the big winner on the night was probably the Club for Growth, whichbacked winning candidates in three crowded GOP primaries (MI-3, KS-1 and KS-4). In MI-1, Bart Stupak’s district, where a competitive race is expected in November, add another data point to the Every Vote Counts argument, as exactly one vote separated the two leading Republican candidates (a recount is pending).

And offsetting their bad news from the Michigan governor’s race, conservatives today are crowing about the results of a referendum in Missouri over a proposed state law aimed at blocking implementation of federal health reform legislation. Proposition C, which essentially challenges the U.S. Constitution’s Supremacy Clause by outlawing mandated health insurance, won by a 71-29 margin, which is very impressive until you realize that primary turnout in Missouri was 2-1 Republican. In any event, the referendum will have no practical effect, but that won’t keep conservatives from bragging about it.

This item is cross-posted at The Democratic Strategist

Photo Credit: Samantha Celera’s Photostream

A More Productive Path than Self-Immolation

Posted on by The Progressive Policy Institute

Everyone’s approvingly linking to this Edward Luce piece on “the crisis of middle-class America.” I want to set myself on fire.

Seriously, it’s discouraging to see so many people who should know better (because they’ve argued these points with me before) promoting this article.  I can’t think of another piece in the doomsday genre—and there are many—that gets it so consistently wrong. I’ll stipulate that none of the criticisms below are intended to minimize the struggles that many people are facing.  But it’s important to get this stuff right. Let me dive in, with Luce’s words in italics and my responses following:

Yet somehow things don’t feel so good any more. Last year the bank tried to repossess the Freemans’ home even though they were only three months in arrears.

The share of mortgages either in foreclosure or 3 or more months delinquent is 11.4 percent, which, because 30 percent of homeowners have paid off their mortgage, translates into 8 percent of homes. So the Freemans’ situation is typical of about one in twelve homeowners, or not quite 3 percent of households (since one-third rent).

Their son, Andy, was recently knocked off his mother’s health insurance and only painfully reinstated for a large fee.

Luce is arguing that there’s a new crisis facing the current generation. About 30 percent of those age 18 to 24 were uninsured in 2008 when the National Health Interview Survey contacted them.  I don’t have trends for that age group, but the share of Americans under age 65 without health insurance coverage was 14.7 percent in 2008, up from…14.5 percent in 1984.

And, much like the boarded-up houses that signal America’s epidemic of foreclosures, the drug dealings and shootings that were once remote from their neighbourhood are edging ever closer, a block at a time.

Well, the violent crime rate in 2008 was 19.3 per 1,000 people age 12 and up, down from 27.4 in 2000 and 45.2 in 1985.

Once upon a time this was called the American Dream. Nowadays it might be called America’s Fitful Reverie. Indeed, Mark spends large monthly sums renting a machine to treat his sleep apnea, which gives him insomnia. “If we lost our jobs, we would have about three weeks of savings to draw on before we hit the bone,” says Mark, who is sitting on his patio keeping an eye on the street and swigging from a bottle of Miller Lite. “We work day and night and try to save for our retirement. But we are never more than a pay check or two from the streets.”

The key question is, again, Is this worse than in the past? The risk of a large drop in household income has risen modestly, but people experiencing a drop end up much better off than in the past. For example, the risk of a 25 percent drop in income over 2 years has risen from 7 percent among married couples in the late 1960s to 14 percent in the mid-2000s (based on my computations from Panel Study of Income Dynamics data). But if you look at the average income of married-couple families after their 25 percent drop, it rose from $40,000 to $63,000 (in constant 2009 dollars).

Solid Democratic voters, the Freemans are evidently phlegmatic in their outlook. The visitor’s gaze is drawn to their fridge door, which is festooned with humorous magnets. One says: “I am sorry I missed Church, I was busy practicing witchcraft and becoming a lesbian.” Another says: “I would tell you to go to Hell but I work there and I don’t want to see you every day.” A third, “Jesus loves you but I think you’re an asshole.” Mark chuckles: “Laughter is the best medicine.”

Hmmm…just a typical American household…

The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.

Adjusting for household size and using the PCE deflator to adjust for inflation, median household income in the Current Population Survey rose from $29,800 in 1973 to $40,500 in 2008 (in 2009 dollars, again based on my compuatations).  Factoring in employer and government noncash benefits would show even more impressive growth.

 

In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start.

This is entirely a function of changes in the population composition (more Latinos) and in the share of employee compensation going to health insurance and retirement plans.

Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.

Nope. The evidence is ambiguous, but the best studies imply that intergenerational economic mobility hasn’t changed that much in the past few decades. Intra-generational earnings mobility has increased since the 1950s, though it has declined among men.

Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.

Tim Smeeding’s research based on the Luxembourg Income Study shows that in general Americans have higher incomes than their European counterparts as long as they are in the top 80 to 90 percent of the income distribution.  Below that, incomes are more comparable across countries, and the living standards of Americans look less impressive.  The US has comparable intergenerational earnings mobility to Europe, according to Markus Jantti’s research, except among men (but not women) who start out at the bottom.  In terms of occupational mobility, David Grusky’s research shows we’re as good or better as anywhere else, but this doesn’t translate into earnings mobility because we let people get rich or poor to a greater extent than other countries do. Jantti and Anders Bjorklund have estimated that Sweden would have the same mobility as the U.S. if the return to skill was as high there as it is here.  Finally, employer benefits further complicate how “bad” we look.

Combine those two deep-seated trends with a third – steeply rising inequality – and you get the slow-burning crisis of American capitalism. It is one thing to suffer grinding income stagnation. It is another to realise that you have a diminishing likelihood of escaping it – particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse. “Who killed the ­American Dream?” say the banners at leftwing protest marches. “Take America back,” shout the rightwing Tea Party demonstrators.

The rise in income inequality is mostly about the top 5 percent of the top 1 percent pulling away from everyone else, and existing estimates overstate inequality and its growth by ignoring employer and government noncash benefits and possibly by ignoring different rates of inflation in different parts of the income distribution.

Unsurprisingly, a growing majority of Americans have been telling pollsters that they expect their children to be worse off than they are.

Totally wrong.  The key here is to only look at polling questions that ask people about their own kids, not kids in general.  Here are the relevant survey results I could find:

General Social Survey (1994)—45 percent said their children’s standard of living will be better (vs. 20 percent worse)
General Social Survey (1996)—47 percent
General Social Survey (1998)—55 percent
General Social Survey (2000)—59 percent
General Social Survey (2002)—61 percent said their children’s standard of living will be better (vs. 10% worse)
General Social Survey (2004)—53 percent
General Social Survey (2006)—57 percent
General Social Survey (2008)—53 percent
Economic Mobility Project (2009)—62 percent said their children’s standard of living will be better (vs. 10 percent worse)    (unlike GSS and PRC, asked only of those with kids under 18)
Pew Research Center (2010)—45 percent said their children’s standard of living will be better (vs. 26 percent worse)

BusinessWeek (1989)—59 percent said their children will have a better life than they had (and 25 percent said about as good)
BusinessWeek (1992)—34 percent said their children will have a better life than they had (and 33 percent said about as good)
BusinessWeek (1995)—46 percent said their children will have a better life than they have had (and 27 percent said about as good)
BusinessWeek (1996)—50 percent expected their children would have a better life than they have had (and 26 percent said about as good)
Harris Poll (2002)—41 percent expected children will have a better life than they have had (and 29 percent said about as good)

Harris Poll (1997)—48 percent felt good about their children’s future
Harris Poll (1998)—65 percent felt good about their children’s future (17 percent N.A.)
Harris Poll (1999)—60 percent felt good about their children’s future (15 percent N.A.)
Harris Poll (2000)—63 percent felt good about their children’s future (17 percent N.A.)
Harris Poll (2001)—56 percent felt good about their children’s future
Harris Poll (2002)—59 percent felt good about their children’s future
Harris Poll (2003)—59 percent felt good about their children’s future
Harris Poll (2004)—63 percent felt good about their children’s future

Pew Research Center (1997)—51 percent said their children will be better off than them when they grow up
Pew Research Center (1999)—67 percent said their children will be better off than them when they grow up

Bendixen & Schroth (1989)—68 percent said their children will be better off than they are
Princeton Religion Research Center (1997)—62 percent of men said their sons will have a better chance of succeeding than they did; 85 percent of women said their daughters will have a better chance
Angus Reid Group (1998)—78 percent said children will be better off than them
Washington Post/Kaiser Family Foundation/Harvard (2000)—46 percent said they were confident that life for their children will be better than it has been for them
Economic Mobility Project (2009)—43 percent said it would be easier for their children to move up the income ladder
Economic Mobility Project (2009)—45 percent said it would be easier for their children to attain the American Dream

Also, polls consistently show that Americans say they have higher living standards than their parents.

And although the golden years were driven by the rise of mass higher education, you did not need to have graduated from high school to make ends meet. Like her husband, Connie Freeman was raised in a “working-class” home in the Iron Range of northern Minnesota near the Canadian border. Her father, who left school aged 14 following the Great Depression of the 1930s, worked in the iron mines all his life. Towards the end of his working life he was earning $15 an hour – more than $40 in today’s prices.

Thirty years later, Connie, who is far better qualified than her father, having graduated from high school and done one year of further education, makes $17 an hour.

It’s not valid to compare her pay mid-career to her father’s at the end of his career—and also, how much work experience does she have relative to him?  Did she take time off to raise kids?

The pace of life has also changed: “We used to sit around the dinner table every evening when I was growing up,” says Connie, who speaks with prolonged vowels of the Midwest. “Nowadays that’s sooooo rare.”

Time-use surveys show that while parents spend more time working (because of mothers) than in the past, they do not spend less time with children.  They spend less time doing things by themselves.

Then there are those, such as Paul Krugman, The New York Times columnist and Nobel prize winner, who blame it on politics, notably the conservative backlash which began when Ronald Reagan came to power in 1980, and which sped up the decline of unions and reversed the most progressive features of the US tax system.

Fewer than a tenth of American private sector workers now belong to a union. People in Europe and Canada are subjected to the same forces of globalization and technology. But they belong to unions in larger numbers and their health care is publicly funded.

Though unionization has declined markedly in most of these countries, and their health care policies are increasingly becoming too costly.  Also, most of the decline in unionization in the U.S. occurred before Reagan took office.

More than half of household bankruptcies in the US are caused by a serious illness or accident.

This is bad Elizabeth Warren research—she counts a bankruptcy as being “caused” by illness or accident if one was reported, but the household could have been in serious debt before these occurred.  At any rate, bankruptcies are exceedingly rare (under 1 percent of households—see Figure 13).

Pride of place in Shareen Miller’s home goes to a grainy photograph of her chatting with Barack Obama at a White House ceremony last year to inaugurate a new law that mandates equal pay for women.

As an organizer for Virginia’s 8,000 personal care assistants – people who look after the old and disabled in their own homes – Shareen, 42, was invited along with several dozen others to witness the signing.

Ah…another representative household…

More and more young Americans are put off by the thought of long-term debt.

Evidence?

Had enough?  I have speculated that to the extent economic insecurity has increased, it reflects the impact of a negativistic media (amplified by gloom-and-doom liberalism).

Picture
Pieces like Luce’s—and the blog posts it generates—affect consumer sentiment. Ben Bernanke and Tim Geithner aren’t the only people who can inadvertently talk down the economy.

This item is cross-posted at ScottWinshipWeb.

A Week of Decisive Primaries

Posted on by The Progressive Policy Institute

This week’s political menu features four state primaries, today in Kansas, Michigan and Missouri, and on Thursday in Tennessee. Since none of these states have 50 percent requirements for party nominations, the primaries will be decisive, and in many cases involving large fields of candidates and low turnout rates, nominees will head towards November without a whole lot in the way of demonstrated public appeal.

Speaking of low turnout, estimates are that about 20 percent of Kansans (a closed primary state) will vote today, with perhaps 25 percent in Michigan and Missouri (open primary states).

The marquee events in Michigan are competitive gubernatorial primaries in both parties (Democratic Gov. Jennifer Granholm is term-limited). On the Democratic side, House Speaker Andy Dillon, generally regarded as a moderate, held the lead for months, but seems to have lost it to a late surge by labor-backed Lansing mayor Virg Bernero. According to a survey last week from Michigan-based EPIC-MRA, Bernero leads Dillon 40-32, though the undecided vote remains high. On the margins, the Democratic turnout could be influenced by the high-profile efforts of one Republican candidate, former Gateway executive Rick Snyder, to encourage a crossover vote (Michigan allows voters to choose which primary they will participate in after they enter the voting booth).

That same EPIC-MRA poll shows Snyder, who has outspent his opponents using personal wealth, in a very close three-way race for the GOP nomination against Attorney General Mike Cox and Rep. Peter Hoekstra. Lingering back in the pack is Oakland County Sheriff Mike Bouchard, the favorite candidate of Michigan-bred Guitar-Idol-turned-Right-Wing-Activist Ted Nugent. As is often the case in this year’s GOP primaries, Hoekstra and Cox are engaged in a more-conservative-than-thou competition.  But unusually, Snyder is content to be labeled a “moderate,” and has accepted an endorsement from longtime Republican Gov. Bill Milliken, who in turn endorsed the last two Democratic presidential nominees. Former Congressman Joe Schwarz, widely reviled as a RINO by Michigan conservatives, is heading up an outreach program for Snyder among Democratic and independents. If this works, the iron control of the GOP nationally by the conservative movement will relax the slightest bit, and if it fails, it will be an object lesson to would-be Republican moderates everywhere.

There are a host of competitive congressional primaries in Michigan today, mostly on the Republican side, where candidates will battle for nominations for three open seats (two now held by Republicans, including gubernatorial candidate Hoekstra and fellow-West-Michigander Vern Ehlers, and one now held by retiring Democrat Rep. Bart Stupak), and for the right to take on theoretically vulnerable Democratic freshmen Mark Schauer and Gary Peters. Among Democrats, the big races involve challenges to long-time incumbents, with Detroit Congresswoman Carolyn Cheeks Kilpatrick in very big trouble (in no small part because of the sins of her son, former mayor Kwame Kilpatrick). Having won re-nomination two years ago against a divided field, Kilpatrick is now in danger of losing to State Senator Hansen Clarke.  The incumbent has fought back with endorsements and campaign appearances from Jesse Jackson, Sr., and Jim Clyburne, but nobody will be surprised if she becomes the fourth House incumbent to lose in a primary so far this year. Another incumbent unlikely to meet that fate is Sandy Levin, who is burying challenger State Senator Mike Switalski in heavy spending and active campaigning (securing fundraising help from Bill Clinton).

In Missouri, the race to succeed retiring Republican Sen. Kit Bond will be formalized today, with Democrat Robin Carnahan facing only token opposition, and Rep. Roy Blunt likely defeating Tea Party favorite, State Senator Chuck Purgason. Blunt did a good job of recruiting national conservative support, most notably the chair of the new House Tea Party Caucus, Michele Bachmann of Minnesota. The Carnahan-Blunt race will match representatives of Missouri’s two most prominent political dynasties; Roy is the father of former Gov. Matt Blunt, while Robin is the daughter of Mel (governor) and Jean (senator) Carnahan.

The hottest House race in MO is the Republican contest to choose an opponent for House Armed Services Committee Chairman Rep. Ike Skelton, who represents an increasingly conservative district that routinely goes Republican in presidential elections. State Senator Bill Stouffer appears to be the GOP establishment’s choice, while Vickie Hartzler is a longtime Christian Right activist. With a ton of minor candidates on the ballot, these two stand out, and Skelton hopes to drown the winner financially.  He does have a long record of winning big in this district, dating back to 1976,

Over in Kansas, the marquee race is the Republican nomination to succeed Sen. Sam Brownback, who’s running for governor. Two incumbent Republican House members, Todd Tiahrt and Jerry Moran, are locked in a relatively close contest dominated by Tiahrt’s efforts to play the “true conservative” card against front-runner Moran. While Tiahrt has been endorsed by Sarah Palin and Tom Tancredo, Moran has countered with his own endorsement from Jim DeMint, and by becoming a charter member (along with Tiahrt) of the House Tea Party Caucus. Geography may matter a lot in this race; Moran’s expected to do well in his central-west Kansas district, and Tiahrt in his Wichita-based district. The key could be performance in the 3rd district that includes socially moderate Kansas City suburbs, where Moran’s reputation for grinding his teeth a bit less than Tiahrt on issues like abortion could actually help him.

There are competitive Republican primaries in both the Moran and Tiahrt districts, with the latter featuring a long-shot Democratic chance at a pickup thanks to a strong, well-financed candidate, Raj Goyle. In the state’s one current Democratic district, Stephene Moore is trying to succeed her husband, retiring Rep. Dennis Moore, and in the Republican primary, establishment favorite Kevin Yoder, with a big financial advantage, is trying to hold off former State Rep. Patricia Lightner, a favorite of anti-abortion activists.

On Thursday in Tennessee, the big race is the Republican contest for governor (Democratic incumbent Phil Bredeson is term-limited), with the deep pockets of Knoxville Mayor Bill Halsam helping him maintain a lead over Chattanooga-based Rep. Zach Wamp and Lt. Gov. Ron Ramsey.

With all three of the leading candidates hailing from East Tennessee, Haslam’s heavy spending could vault him to a big lead in the middle and western sections of the state. The other two candidates appear to be willing to do just about anything to get free media and seize the coveted “true conservative” mantle.  Wamp had to backtrack a bit after suggesting that he’d be willing to push secession of his state if health reform isn’t repealed. And Ramsey weighed in against construction of an Islamic community center in Mufreesboro, suggesting that the First Amendment might not apply to Muslims on grounds that Islam is “a cult.” Yee-haw.

Democratic candidate Mike McWherter, son of former Democratic governor Ned McWherter, awaits the winner of the GOP nomination.

Ed Kilgore’s PPI Political Memo runs every Tuesday and Friday.