issue: Politics

Giving up on economic growth?

Posted on by The Progressive Policy Institute

Growth should be at the centre of the social democratic agenda. Raising levels of economic security and equality are important goals, but it’s economic growth and innovation that allow high living standards and generous welfare states to be a reality

The “5-75-20” essay covers a lot of territory and offers centre-left parties many sensible governing ideas. In the end, though, this pudding lacks a theme – a convincing idea for how progressives can capture the high ground of prosperity.

The essay does prescribe something called “predistributive reform and multi-level governance,” but it’s hard to imagine rallying actual voters behind such turgid abstractions. I doubt Orwell would have approved of a word like “predistribution,” which clearly has an ideological agenda, even if the agenda itself isn’t so clear.

The term seems to promise a political response to inequality that doesn’t involve more top-down redistribution, which makes middle class taxpayers queasy. What it means in practice, however, is vague. Beyond essential public investments, do governments really know how to manipulate markets to produce more equal outcomes?

Before we go down this murky trail, let’s ask ourselves: Are we responding to the right problem? As Europe and America emerge slowly from a painful economic crisis, what is the main demand our publics are making on progressive parties? In the United States, anyway, the answer is: create jobs and resuscitate the economy. Since 2008, voters have consistently ranked growth as their overriding priority.

I can’t speak for Europeans; perhaps they are more concerned about inequality or sovereign debt or immigration or climate change. There’s no doubt, however, that Europe’s recent economic performance has been even worse than America’s. Both suffer from what the economists call “secular stagnation” – slow growth in plain language.

According to the OECD, average GDP growth across the EU was a scant 0.1 percent last year, compared to 1.8 percent in the United States. Unemployment averaged nearly 12 percent in the eurozone, versus 7.3 percent here (it’s now down to 6.3 percent, though U.S. work participation rates have plummeted). For young people, the job outlook is catastrophic: 16 percent of young Americans were out of work; 24 percent in France, 35 percent in Italy, and 53 percent in Spain. Only Germany (8.1 percent) among the major countries is doing a decent job of making room in its economy for young workers.

Progressives have yet to furnish compelling answers to anemic growth, vanishing middle-income jobs, meagre income gains for all but the top five percent, and social immobility for everyone else. Such conditions have radicalised politics on both sides of the Atlantic, sparking the tea party revolt in America and helping populist and nationalist parties make unprecedented gains in the recent EU elections. Populist anger over unfettered immigration, globalisation, and the centralising schemes of elites in Washington and Brussels has surely been magnified by pervasive economic anxiety.

The essay argues plausibly that the “new landscape of distributional conflicts and deepening insecurity” gives progressives a chance to channel voters’ frustrations in more constructive directions. It calls for new welfare state policies to win over the “new insecure,” the 75 percent who are neither the clear winners or losers of globalisation. But it says surprising little – and not until the last bullet ‒ about how progressives can boost productive investment, encourage innovation and put the spurs to economic growth.

This is emblematic of the centre-left’s dilemma. Our heart tells us to stoke public outrage against growing disparities of income and wealth and rail against a new plutocracy. Our head tells us that social justice is a hollow promise without a healthy economy, and that a message of class grievance offers little to the aspiring middle class.

What progressives need now is a politics that fuses head and heart, growth and equity, in a new blueprint for shared prosperity. But some influential voices are telling us, in effect, to give up on economic growth.

Lugging a 700-page tome called Capital in the Twenty-First Century, the French economist Thomas Piketty has taken the US left by storm. In advanced countries, he says, “there is ample reason to believe that the growth rate will not exceed 1-1.5 percent in the long run, no matter what economic policies are adopted.” What’s more, growing inequality is baked into the structure of post-industrial capitalism, and is likewise impervious to policy.

Some progressive US economists, such as Stephen Rose and Gary Burtless, have challenged the empirical basis of Piketty’s gloomy prognostications. According to Capital, middle-class incomes in the United States grew only three percent between 1979 and 2010. But the Congressional Budget Office, using data sets that take into account, as Piketty does not, the effects of progressive taxation and government transfers, found that family incomes rose by 35 percent during this period. That’s not a trivial difference.

Still, no one on the centre-left denies that economic inequality has grown worse in America, and that it demands a vigorous response. But progressives ought to be wary of deterministic claims that the United States and Europe have reached the “end of affluence” and must content themselves with sluggish growth in perpetuity.

Nor can anyone be certain that a return to more robust rates of growth would merely reinforce today’s widening income gaps. That’s not what happened the last time America enjoyed a sustained bout of healthy growth, on President Clinton’s watch. Let’s take a look back at what happened in the bad, old neoliberal ‘90s.

During Clinton’s two terms, the US economy created nearly 23 million new jobs. Over the latter part of the decade, GDP growth averaged four percent a year. Tight labour markets sucked in workers at all skill levels. Unemployment fell from 14.2 percent to 7.6 percent, and jobless rates for blacks and Hispanics reached all-time lows. The welfare rolls (public assistance for the very poor) were cut nearly in half, while about 7.7 million people climbed out of poverty. Military spending declined, the federal bureaucracy shrank, the IT and Internet revolution took off, trade expanded and Washington even managed to run budget surpluses.

Not too shabby, but how were the fruits of growth divided? The rich did very well, but few seemed to mind because everyone else made progress too. Median income grew by 17 percent in the Clinton years. Average real family income rose across-the-board, and actually rose faster for the bottom than the top 20 percent (23.6 vs. 20.4 percent.) This was genuine, broadly shared prosperity, and it’s not ancient history.

Now, it may well be that a new growth spurt won’t immediately narrow wealth and income gaps. But a sustained economic expansion would make it easier to finance strategic public investments in modern transport and energy infrastructure, in science and technological innovation, and in education and career skills. It would help progressives avoid drastic cuts in social welfare and maintain decent health and retirement benefits for our ageing populations. And, it would allow for a gradual winding down of oppressive public debts.

Nonetheless, many US progressives seem preoccupied instead by questions of distributional justice, economic security and climate change. They want to raise the minimum wage, tax the rich, close the gender pay gap, stop trade agreements, revive collective bargaining, slow down disruptive economic innovation, and keep America’s shale oil and gas bonanza “in the ground” to avert global warming. This agenda is catnip to liberals, green billionaires and Democratic client groups, but it won’t snap America out of its slow-growth funk. It energises true believers, but won’t help progressives appeal to moderate voters, who hold the balance of power in America’s sharply polarised politics.

Increasing economic security and equality are important goals, but it’s economic innovation and growth that makes high living standards and generous welfare states possible. Without them, the progressive project grows static and reactionary, rather than dynamic and hopeful. Progressives, after all, ought to embrace progress.

This articles forms part of a series of responses to the Policy Network essay The Politics of the 5-75-20 Society.

 

The Easiest Fix for Dark Money: Disclose Less Often

Posted on by The Progressive Policy Institute

“Politics has got so expensive that it takes lots of money to even get beat with nowadays.” —Will Rogers

Super PACs are unquestionably a scandal: The lightly regulated committees mean wealthy donors can funnel unlimited amounts of money into elections anonymously. But one of the remedies being proposed—early and frequent disclosure of super-PAC donors and expenses—would very likely make things worse.

Senate Democrats have proposed a bill, the DISCLOSE Act, that would require super PACs to publicly file lists of their donors and spending every 90 days during an election cycle. This sounds good—who is against transparency?—but it ignores the real-word dynamics of fundraising. In fact, ill-conceived disclosure requirements have already stimulated a campaign-spending arms race and made U.S. elections more expensive.

Let’s be clear: Transparency is vital to our democracy. Americans are rightly concerned about the cascade of “dark money” into U.S. elections. The question is not whether to disclose, but when and how. What the last decade shows is that early and frequent reporting of donations creates a perverse incentive to start the money chase earlier—and to raise more cash to pay for perpetual fundraising.

The most productive reform that could pass the House and Senate right now would be to mandate less frequent disclosure. Counterintuitively, it would great reduce the influence of money on the political system. It would condense the campaign season and allow members, candidates, and donors the freedom not to raise money and not to give money.

In Citizen United and more recently in April’s McCutcheon v. FEC decision, the Supreme Court has affirmed its belief that political money is free speech and the influence of money in politics does not cross the threshold of bribery. The Court’s view is a reaction to the flawed 2002 Bipartisan Campaign Reform Act, otherwise known as McCain-Feingold. The well-intentioned but poorly written campaign-reform law suffocated the party committees and created new, less-regulated vehicles for money like super PACs.

Continue reading at the Atlantic.

National Journal: Half of America

Posted on by The Progressive Policy Institute

In Ronald Brownstein’s piece, “Half of America,” he explores the increasing polarization of American politics, and how the distinct makeup of voter coalitions in both parties will continue to exacerbate the stalemate in Washington. PPI President Will Marshall lends his expertise to the issue:

Clinton pursued agreements across party lines more consistently than either Bush or Obama. But this persistent polarization likely owes less to the three men’s specific choices than to structural forces that are increasingly preventing any leader, no matter how well-intentioned, from functioning as more than “the president of half of America.”

That phrase, coined by Will Marshall, president of the centrist Progressive Policy Institute, aptly describes an environment in which presidents now find it almost impossible to sustain public or legislative support beyond their core coalition.

You can read the rest of the article here, at National Journal.

Politico: Searching for Hillary Clinton’s big idea

Posted on by The Progressive Policy Institute

In his piece, “Searching for Hillary Clinton’s big idea,” David Nather examines Hillary Clinton’s possible run for the presidency in 2016, and how her vision for the country is forming. PPI President Will Marshall offers insight into Hillary’s previous White House experience, specifically on the economy:

She had a ringside seat to what a growth agenda can do. It can narrow wage and income gaps, and it will mitigate inequality,” said Will Marshall of the centrist Progressive Policy Institute, a longtime adviser to Bill Clinton who helped develop the “new Democrat” ideas that shaped his presidency.

“You can’t go back and re-create the policies 20 years later. You need an update. But she knows what prosperity looks like,” Marshall said.”


You can read the rest of article here, at Politico.

Iraq: It’s Not About Us

Posted on by The Progressive Policy Institute

The debate over how to keep Iraq from falling apart reveals a peculiarly American kind of self-centeredness. When things blow up abroad, we often spend more time arguing about the U.S. reaction to the crisis than what triggered it in the first place.

So it is with the stunning rise of the Islamic State of Iraq and Syria (ISIS), which styles itself as a resurrected “caliphate” to which all Muslims owe allegiance. Instead of focusing on how to protect Americans and our regional partners from a new jihadist malignancy, much of Washington’s political class is consumed by recriminations over who is to blame for resurgent Sunni terrorism in the Middle East.

Is it George W. Bush’s fault for invading Iraq in 2003 and cluelessly stirring up a sectarian hornet’s nest? Or did Barack Obama squander America’s costly success in stabilizing Iraq in his haste to “end” an unpopular war?

Continue reading at CNN.

Does Ex-Im Bank Need a ‘Third Option’?

Posted on by The Progressive Policy Institute

Long dogged by claims of corporate welfare, the Export-Import Bank (Ex-Im) finds itself once again fighting for its survival. At 80 years old, Ex-Im has always won the fight. But this time, a “third option” of reform might just be what it needs — one that focuses on making the agency better, not closing its doors.

The Export-Import Bank is a government agency with a mission to support U.S. jobs through exports. The bank provides loans, guarantees and insurance to help U.S. exporters level the playing field against foreign competitors, in a world where 59 other countries provide export financing assistance. As a “lender of last resort,” each transaction must demonstrate “additionality,” where the export would not go forward absent Ex-Im Bank.

In the past, trade promotion by leveling the playing field has been argument enough for reauthorization. But now, the battle over Ex-Im Bank is about more than corporate welfare — it’s a face-off between the establishment Republicans and Tea Party conservatives.

Continue reading at The Hill.

Has McDaniel Outplayed Cochran in Mississippi?

Posted on by The Progressive Policy Institute

Election season is in full swing as states across the country hold primary runoffs today. The nation will be keeping an especially close eye on the heated GOP Senate runoff in Mississippi between incumbent Thad Cochran and challenger Chris McDaniel. Cochran, who has represented the Magnolia State for 36 years, faces an uphill battle. In typical incumbent fashion, Cochran appeared to be running a rather relaxed campaign until two weeks ago when he failed to secure 50 percent of the Republican primary vote. Ever since, he has been playing a desperate game of catch-up. Is it too late?

Cochran’s late arrival to the campaign gave McDaniel the valuable opportunity to successfully establish himself as a competitive opponent, mobilizing voters and growing his base before Cochran even hit the trail. Realizing this, and with only two weeks to appeal to voter groups outside of his base, Cochran has desperately attempted to court black voters from both parties in this open runoff and portray himself as the more moderate and proven candidate. His unconvincing voting record in the Senate, however, is unlikely to bring out many more black voters than those of whom already supported him in the primary. From voting no on raising the minimum wage to opposing the Affordable Care Act, Cochran has not exactly been the ideal candidate for representing black interests in Mississippi. Additionally, Cochran’s effort to court black voters could backfire by giving McDaniel supporters another reason to come out and vote, as race is still an incredibly divisive factor in Mississippi elections.

Compounding the problem for Cochran is thehistorically low voter turnout for runoff elections that most often favors the challenging candidate. In 37 out of 40 elections since 1980 there has been a decrease in voter turnout in Senate runoffs in comparison to the primaries. Because many people lose interest after the primary until the general election, it isdifficult for incumbents to turn the tide and increase their turnout of voters in the runoff. This could potentially minimize any gains Cochran may have made with black voters these past two weeks. Therefore, even if Cochran manages to appeal to black voters in time, there is no guarantee that they will show up in force to change the course of the race.

Also working against Cochran is the strong constituency of Tea Party supporting PACs and celebrities whom have thrown their weight behind McDaniel. Although Cochran still maintains the support from the Republican “establishment” both within Washington and with business minded voters on the ground, their enthusiasm for him has not matched that of McDaniel’s supporters. The recent debate over the Export-Import Bank’s charter reauthorization could have been Cochran’s saving grace in this respect. Mississippi has a thriving manufacturing industry that exports internationally with help in the form of Ex-Im bank subsidies, and PACs supporting McDaniel have openly opposed renewing the bank’s charter. Unfortunately for Cochran, this issue only garnered national attention days before the runoff, nullifying the potential benefits of pro-business groups’ donations and organizing efforts.

Lastly, a McDaniel victory today would have obvious national implications for the Republican Party. The upset in Virginia just two weeks ago when Tea Party challenger Dave Brat unexpectedly defeated prominent House majority leader Eric Cantor shook the GOP establishment and sent a glaring message to Washington: The public’s disapproval of Congress should serve as a warning to Republican incumbents across the country, and you should not dismiss these two races as outliers.

With the popular discontent facing Congress today, Republican incumbents should heed the mistakes made by both Cantor and Cochran and not take their reelection campaigns lightly. Their failure to do so will ensure the same undesirable fate their colleagues have met and give Democrats an even wider playing field with which to attract moderate voters in coming elections.

Just what is it that makes Hillary such a formidable front-runner?

Posted on by The Progressive Policy Institute

The release of Hillary Rodham Clinton’s new book once again underscores the unending interest in her as a 2016 candidate. But just what is it that makes her such a formidable front-runner? One important answer is that although Hillary is not the first presidential candidate to be perceived as an heir apparent, as a standard-bearer, as a presumptive nominee, or even as a political icon, she is the only person to have simultaneously occupied all four niches. It’s the political equivalent of a four-run grand slam in the first inning — and it’s the major reason she has such unprecedented momentum.

Hillary as heir apparent: In recent decades, it’s been common for presidential administrations to have an heir apparent. Both George H.W. Bush and Al Gore parlayed vice presidential incumbency into party nominations and popular-vote majorities. But neither candidate possessed a distinctive political identity or generated much electricity among the electorate, as evidenced by Gore’s Electoral College shortfall and Bush’s failed reelection bid. Hillary has not only locked down the campaign machinery that won four of the last six presidential elections, but has continued to mesmerize the electorate in a way that neither Gore nor the elder Bush (nor Joe Biden) ever managed to achieve.

Hillary as standard-bearer: Few non-incumbent presidential candidates have entered the field with as strong a personal and ideological constituency as does Hillary. On this front, her candidacy most closely resembles that of Robert F. Kennedy in 1968: recognized leader of a large party faction, close relative of a popular former president, high-profile Cabinet secretary and even U.S. senator from New York. Yet while RFK may have been the legitimate inheritor of the Kennedy “Camelot” years, he was far from an heir apparent and in fact had to fight tooth and nail against the incumbent administration of his own party for the nomination. Hillary provides unquestioned political and policy continuity with prior Democratic administrations alongside a vast base of supporters that she has won over in her own right.

Hillary as presumptive nominee: Not since Ronald Reagan in 1980 has a party had so clear a consensus candidate who wasn’t already an incumbent president or vice president. Echoing the clout gained by Hillary from 2008, Reagan’s strong support among Republicans in 1980 came partly from his fierce challenge to — and then staunch support of — Gerald Ford in the 1976 Republican primaries. The lingering fame of Reagan’s days in Hollywood also endowed him with exceptionally high name-recognition and the aura of celebrity, both of which advantages Hillary enjoys today at least as much as Reagan did in 1980.

Hillary as political icon: Reagan, Franklin Roosevelt and John Kennedy all achieved the status of political icon, but only after they had been served as president. The only other modern presidential contender who was truly iconic before assuming office was Dwight Eisenhower, based on his leadership of Allied Forces in Europe in their victory over the Axis. Hillary may not have won World War II, but over the past 20 years she has richly earned her status as a feminist icon, which makes her uniquely appealing to the female voters who make up a majority of the electorate. While Eisenhower was a war hero and household name in 1952, he was also a political neophyte who previously had no clear party affiliation and had never run for public office. By contrast, Hillary combines her standing as a feminist icon with the manifold advantages of being the heir apparent of the last two Democratic presidencies, the standard bearer of a great swath of the electorate and the presumptive nominee of the Democratic Party.

Yes, every silver lining has a cloud, and Hillary does have some electoral vulnerabilities. Being an heir apparent isn’t necessarily so appealing when the electorate wants change, as discovered by sitting Vice Presidents Richard Nixon in 1960 and Hubert Humphrey in 1968. Being a presumptive nominee can also veer perilously close to being seen a presumptuous nominee, a lesson Hillary learned all too well in 2008. Some unknowable percentage of the electorate remains unwilling to vote for any female presidential candidate, and especially for one considered a feminist icon. And being perceived a liberal standard bearer proved to be a huge liability to a generation of Democratic presidential aspirants from Sen. George McGovern (S.D.) through Vice President Walter Mondale to Gov. Michael Dukakis (Mass.).

Nonetheless, starting out a game with a four-run grand slam is an advantage any team would wish for — even if it galvanizes the other team and can’t, in itself, guarantee that the larger game will be won.

This op-ed was originally published by The Hill, find the article on their website here.

 

Eric Cantor’s downfall tests GOP

Posted on by The Progressive Policy Institute

Who now will challenge the rising tide of right-wing populism?

House Majority Leader Eric Canton’s shocking defeat sends two important messages to the Republican establishment, neither of which is chiefly about immigration.

First, today’s rightwing populism is just as hostile to Big Money as it is to Big Government. Lest we forget, the tea party was spawned during the late economic crisis, during which millions of Americans not only lost their jobs, but also saw the value of their houses and retirement funds take a sickening plunge. Despite several years of “recovery,” the specter of downward mobility still haunts the conservative base.

The race’s improbable victor, college professor Dave Brat, excoriated Cantor as a creature of Wall Street, K Street, and big business lobbies in Washington. He called the outcome a victory for ordinary people over monied interests. “Dollars don’t vote,” he told delirious supporters last night. Cantor poured about $5 million into his campaign, while Brat had just two paid staffers and spent a measly $77,000.

It’s true that Brat frequently assailed Canton as squishy on “amnesty” for illegal aliens. And it’s likely the Majority Leader’s downfall will scare many Republicans away from efforts to reform immigration this year. But as John Judis points out, Brat actually accused Cantor of siding with big businesses’ quest for “cheap labor” at the expense of “cheap wages” for native residents of Virginia’s Seventh District.

In short, Republican attempts to deflect populist rage from powerful economic actors to big, bad government aren’t working. The intra-party feud between a populist and libertarian grass roots and a plutocrat-friendly establishment is nowhere near over – it’s intensifying.

Here’s the second message from Cantor’s upset: GOP leaders will have to confront the populists on ideological, not just electoral, grounds.

As has been the case with other tea party primary victories, Brat’s win puts what should be a safe Republican District in play. That’s why the GOP establishment is working hard to deny populist upstarts money and endorsements. Brat’s success suggests that’s not enough. At some point, party leaders will have to challenge the hard right’s attempts to impose ideological litmus tests on GOP candidates.

The question is, who is to define the Republican agenda? Will it be elected leaders who actually govern in the party’s name? Or will it be a tacit alliance of populists abetted opportunistically by professional fund-raisers with an agenda – the Club for Growth, the Senate Conservative Fund, etc.?  The latter are intensely oppositional and have little interest in compromise or governing. And that’s a big problem for Republicans.

In our two-party democracy, neither can afford doctrinal purity. They have to assemble broad, heterogeneous coalitions to win elections. The populists’ demands are alienating minorities, women and the young and narrowing the GOP coalition. This has created a huge structural disadvantage in presidential elections, and could eventually trickle down-ballot and cost Republicans control of their Congressional bastion.

Cantor seems to have understood that. With an eye on succeeding John Boehner as House Speaker, he was encouraging efforts by “reform conservatives” to develop a positive governing agenda for the GOP. That probably was his undoing.

If someone as intrinsically conservative as Eric Cantor can be cast as a closet compromiser and traitor to the cause, then Republicans really are in danger of being engulfed, and politically marginalized, by the extremists in their midst.

Will any GOP leader stand up to them?

This blog post is cross-posted from Republic 3.0.

The Hill: Panel to cut red tape gains Dem support

Posted on by The Progressive Policy Institute

On Tuesday, May 20 Will Marshall, PPI President, joined a bipartisan group of House members to announce a proposal for a Regulatory Improvement Commission that would weed out accumulated rules and modernize outdated federal regulations in an effort to spur growth and innovation. PPI was noted for its work on the proposed legislation in Benjamin Goad’s article for The Hill. Goad also quoted statements made by Marshall during Tuesday’s press conference.

Thus far, the push has attracted support from two dozen members of the House and Senate, including 10 Democrats. The Progressive Policy Institute (PPI) is also pressing the idea.

Officials from the group noted that every president from Jimmy Carter to President Obama has directed his administration to root out overly burdensome rules, though they said none has made sufficient progress toward addressing the accumulation of new rules, continuously layered upon the old ones.

“It’s not because we hate regulations,” PPI President Will Marshall said. “It’s because we love economic growth and innovation.”

Read the full article on The Hill’s website here.

A Politically and Technically Feasible Approach for Handling Regulatory Accumulation

Posted on by The Progressive Policy Institute

Regulatory accumulation threatens the pace of innovation and growth in America, yet previous attempts to address it have proven unsuccessful. That is why we propose a new approach through the creation of a Regulatory Improvement Commission, which we argue is both politically and technically feasible. This institutional innovation for paring down redundant and outdated rules is described more fully in a 2013 paper we co-authored, and it has now been introduced as very similar bills in both the Senate (by Senators Angus King (I-ME) and Roy Blunt (R-MO)) and the House (by Representatives Patrick Murphy (D-FL), Mick Mulvaney (R-SC), and 20 co-sponsors).

Each President since Jimmy Carter has ordered agencies to do a “retrospective review” of existing regulations in order to identify those that are duplicative, obsolete, or have failed to achieve their intended purpose. However, as a 2007 U.S. Government Accountability Office(GAO) study indicated, these retrospective reviews have fallen well short of identifying problematic regulations for a variety of reasons, including insufficient transparency and a lack of resources. It is extraordinarily expensive and time-consuming to properly evaluate the costs and benefits of any substantial part of any major regulation. Ultimately, an agency has no control over the original enabling legislation as written by Congress.

Rather than getting wrapped up in ideological issues such as big versus small government, we view the question of regulatory accumulation as a problem of institutional design. There is a well understood political and technical process for the creation of a regulation that involves both the executive and legislative branches of government. Presented in the simplest terms, the process starts with the approval of legislation by the House and Senate, which is then signed into law by the President. Next, the appropriate agency goes through a specified rulemaking procedure, which includes soliciting and answering public comments. For significant rules (those expected to have an annual impact on the economy of $100 million or more), agencies must also get approval from the Office of Management and Budget.

Although the process for new rulemaking is well specified under current law, our regulatory system offers no well-defined process for undoing or improving a specific regulation after it has been adopted. The only real option is to jump through the full set of political and procedural hoops described above that created the original regulation.

Our proposal for a Regulatory Improvement Commission (RIC, or the Commission) takes a more streamlined approach. Modeled after the Base Realignment and Closure (BRAC) Commission, the RIC would be approved by Congress for a limited period of time. The Commission would be staffed primarily with personnel “borrowed” from federal agencies, and RIC members would be appointed by the President and the congressional leaders of both parties. Further, the Commission would have clear objectives, be completely transparent, and follow a strict timeline.

The Commission would focus on a limited list of regulations – say, 15 or 20 – to be considered for repeal or improvement. It would base its proposals on suggestions submitted through public comment, coupled with public testimony and a quantitative and qualitative assessment of the rules in consideration. The RIC’s list of proposals would then go to Congress for an up or down vote with no amendments, and finally to the President for approval.

By including both the legislative and executive branches in reviewing regulations, the RIC can adopt a streamlined process for the consideration of regulatory changes. In addition, the Commission would not break or change the current process for creating regulations, nor would it raise any constitutional questions. All it would require is enabling legislation and some attention to internal congressional rules.

Our proposal acknowledges the importance of politics in the regulatory process. Ultimately the basis for regulation rests on enacted legislation, which is the result of a long and complicated political process. Cost-benefit analysis alone, no matter how persuasive, cannot overcome legislative action.

Perhaps most important in the current political climate, the proposed Regulatory Improvement Commission should be acceptable to both Republicans and Democrats because it gives Congress “two bites” at the apple. The first bite is when the original enabling legislation for the Commission is passed. Initially, Congress may opt to keep certain regulations that are particularly controversial off the table, such as environmental regulations.

The second bite comes when the proposed package of regulatory changes goes to Congress for approval. If the package does not appropriately balance the interests of both Democrats and Republicans, Congress can vote the package down.

Importantly, the RIC would help build trust in the retrospective regulatory review process. Like the BRAC Commission, the proposed Regulatory Improvement Commission is a one-shot deal that must be re-authorized by Congress. If the initial Commission is successful, Congress may be more willing to authorize it again.

The Regulatory Improvement Commission can be compared to something that sounds superficially similar: the SCRUB Act, which stands for the Searching for and Cutting Regulations that are Unnecessarily Burdensome Act and was recently discussed by a House subcommittee. The SCRUB Act would set up an independent commission to review regulations and forward proposed changes or repeals to Congress. However, under the SCRUB Act, the regulatory changes would go into effect unless Congress passed a resolution rejecting them.

We view the SCRUB Act commission as both politically and technically infeasible compared to the Regulatory Improvement Commission. Politically, it would be impossible for Democrats to approve any commission that possesses effectively unlimited powers to undo regulations. Additionally, the SCRUB Act raises certain constitutional issues, such as the delegation of legislative authority to a commission, that are difficult to surmount. For these reasons, we view the Regulatory Improvement Commission as far more likely to be effective than the independent commission proposed in the SCRUB Act.

Institutional innovation requires both a willingness to believe that things can be different and pragmatism about what is possible. It is clear that modern economies require some way of pruning down regulatory accumulation. The Regulatory Improvement Commission would be a first step in that direction.

This post was originally published on the University of Pennsylvania’s RegBlog, you can read it on their website here.  It is part of RegBlog’s five-part series, Debating the Independent Retrospective Review of Regulations.

PPI President Joins Bipartisan Group of U.S. Representatives to Unveil Regulatory Improvement Commission Proposal

Posted on by The Progressive Policy Institute

WASHINGTON—Progressive Policy Institute (PPI) President Will Marshall today joined Representatives Patrick Murphy (D-Fla.), Mick Mulvaney (R-S.C.) and a bipartisan group of House members to unveil major regulatory reform legislation based on a proposal by PPI to tackle regulatory accumulation, the harmful layering of new federal rules atop old rules year after year.

The Regulatory Improvement Act of 2014 (H.R. 4646) would establish an independent advisory body authorized by Congress—the Regulatory Improvement Commission (RIC)—to review, remove or improve existing outdated, duplicative or inefficient regulations as submitted by the public. The legislation is identical to a Senate companion bill (S. 1390) introduced by Senators Angus King (I-Maine) and Roy Blunt (R-Mo.).

“Regulatory overload is suffocating economic growth and stifling innovation in the United States,” said Michael Mandel, PPI Chief Economic Strategist. “Regulations are essential for a well-functioning economy, but the federal government needs a systematic mechanism for improving or removing regulations that have outlived their usefulness. The RIC would effectively ‘scrape the barnacles off the bottom of the boat’ and allow our nation’s businesses to move forward on innovating and hiring workers.”

Originally conceived by PPI economists Michael Mandel and Diana Carew, the RIC is modeled after the highly successful military base-closing commission. It would consist of nine members appointed by Congressional leadership and the President to consider a single sector or area of regulations and report regulations in need or improvement, consolidation, or repeal.

Both Houses of Congress would then consider the Commission’s report under expedited legislative procedures, which allow relevant Congressional Committees to review the Commission’s report but not amend the recommendations. The bill would then be placed on the calendar of each chamber for a straight up-or-down vote.

Following its report, the RIC would be dissolved and must be re-authorized each time Congress would like to repeat this process to avoid the creation of a new government bureaucracy.

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A Fresh Approach to International Investment Rules

Posted on by The Progressive Policy Institute

Money makes the world go round. Although money flows are global, the rules governing investment are bilateral and regional. Cross-border investment is governed by a patchwork of over 3,000 bilateral investment treaties (BITs), regional and bilateral trade agreements (FTAs) with investment chapters, as well as the trade-related investment provisions of the World Trade Organization. While many states have signed international investment agreements (IIAs), they do not cover all states, investors, or categories of investments. Taken in sum, these IIAs have many problems, including:

  • The 3,000-plus IIAs vary significantly and do not offer clear and uniform guidelines to protect international investment.
  • Tribunals have no effective means of enforcing their decisions.
  • Some investors and states take advantage of the hodgepodge of rules to “game the system” through forum-shopping and other strategies.
  • Investors are increasingly challenging government regulatory or budgetary policies that reduce the value of their investments as “indirect expropriations.”
  • Citizens in the United States, EU, and other countries are increasingly critical of the balkanized, uneven investor-state arbitration process.

We believe it is time for a fresh approach to international investment agreements: one that builds a more universal, consistent, and accountable system. In this policy brief, we put forward three concrete steps that can promote and protect foreign investment, advance the rule of law, preserve the ability of governments to regulate, and link trade and investment.

Step 1: At the behest of the G-20, the WTO and international organizations with investment competence should establish a committee of experts to develop a code of norms and best practices. G-20 members should use this code as a template for future investment agreements and encourage all WTO member states to sign up.

Step 2: WTO members should set up an Investment Appellate Body to review and if necessary, override controversial arbitrations where the rights of investors or governments were inadequately protected. The Investment Appellate Body will stand beside the WTO’s Trade Appellate Body.

Step 3: To give the Investment Appellate Body teeth, one or more WTO member states should ask the WTO Secretariat to explore the feasibility of using trade policy to retaliate against states that fail to comply with its decisions.

Download the complete report.

The Case for Pro-growth Progressivism

Posted on by The Progressive Policy Institute

The many unanticipated events seen over the past 20 years should leave us with some humility about our ability to identify coming political and economic challenges. Will the next two decades be marked by surplus labour due to joberoding technological change, or by labour shortages in countries with stagnant and ageing populations? Will wealth be concentrated in fewer and fewer hands, or will economic success become dispersed as smart people around the world take advantage of the Internet to create new businesses? Will the global economy stay volatile or return to the moderation that predated the financial crisis?

Here is what we do know: the developed, richer countries are undergoing a collective crisis of faith, rooted around slow growth. The major advanced countries have seen their real per-capita GDP rise at a depressingly low 0.8% rate over the past ten years. By comparison, the annual rate of growth was 1.8% in the ten years ending 2007 and 2.6% in the 1980s. A slow, halting recovery has left many citizens pessimistic about their country’s economic prospects and their government’s ability to be effective. And that pessimism, in turn, has helped nurture an ugly bestiary of political and policy dysfunction, from Washington to Brussels to Tokyo. The result is a loss of political flexibility and adaptability, a painful ossification that emphasises protecting the status quo rather than embracing innovation. This painful ossification leaves us more vulnerable to the next crisis or challenge, whether political, technological, or biological.

1. Pro-growth progressivism
Economics and politics are intertwined in a mutually reinforcing crisis of confidence. Tackling this deficit of trust is job one for the world’s political leaders. Rather than just hope the global economy picks up, progressives should coalesce behind an ambitious plan to accelerate growth, boost innovation and revive upward mobility. The goal is to produce a flexible, dynamic economy that can deal with whatever challenges arise. We deserve better than a choice between the right’s anti-government populism and the left’s anti-business populism. That’s why we need ‘pro-growth progressivism.’ Pro-growth progressivism will take on varied forms in different countries, but it typically has these features.

2. Focus on growth, rather than redistribution
The slow-growth figure cited above was for GDP, which includes not just wages but returns to capital as well. That means even before we get to the question of distribution, the whole economic pie is growing at an extremely slow rate. Absent more robust growth, the politics of redistribution becomes an empty exercise in moral posturing. Moreover, a narrow focus on ‘fairness’ may misdirect resources that otherwise could be used to enlarge the nation’s productive base. It also fosters an ‘us versus them’ mentality that, by reinforcing polarisation, can only make it harder to build consensus around economic initiatives that benefit everyone.

Without growth, the developed countries can’t generate sufficient national income to simultaneously finance public investment in world-class infrastructure, science and skills; and, meet the soaring health and retirement costs of an ageing society. What’s more, we don’t have the resources to deal with unexpected crisis or challenges. That’s why restoring economic dynamism must be progressives’ top priority. Putting the cart of redistribution before the horse of economic growth turns politics into a zero-sum fight over a shrinking pie. This approach might win an election here or there, but it is not a durable foundation on which to build and sustain progressive majorities.

3. Put a priority on investment, rather than consumption
An essential ingredient for encouraging growth is investment in physical, human, and knowledge capital. Investment is spending on the future. By contrast, consumption, almost by definition, is about the resources devoted to today’s needs and pleasures. But these are just the economic definitions – investment and consumption also represent different attitudes towards the future and towards the next generation. Right now the developed countries are ageing in a way that has more and more older citizens being supported by a slow-growing or even shrinking working-age population. To make that work, the younger generation needs updated infrastructure, the newest equipment, the best education and training, and the most innovative technologies – and all these require resources.

4. Encourage innovation and entrepreneurship, rather than business as usual
In addition to investment, true growth needs innovative ideas and technology and the entrepreneurs to put them into practice. And it needs government to encourage innovation, or at least not get in the way with excessive regulations. One good example: The Internet of Things – the idea that in the future, all objects will be interconnected and have the ability to automatically transfer data without requiring human-to-human or human-to-computer interaction. The Internet transformed digital industries, which represent about 20% of the economy. But the Internet of Things has the potential to transform physical industries, such as manufacturing, transportation, public service and healthcare, which represent the other 80% of the economy. The Internet of Things could make an enormous difference in growth and job creation – but only if excess government regulations don’t make it too expensive or time-consuming to put into place.

5. Mobility flows from innovation and growth
One of the great advantages of growth and innovation is that they create more opportunities for true mobility. That’s certainly true in the United States, where growth in the tech/info sector has drawn more minorities into well-paying jobs. From 2006 to 2013, the number of Hispanics in computer and mathematical occupations rose by 58% and the number of blacks rose by 41%.

6. Foster innovation in government
Government has an essential role to play in pro-growth progressivism, providing the necessary safety net and the regulatory structure that makes the economy work. At the same time, progressives must focus on making government work better, so that it’s felt as a positive force in people’s lives. One aspect of innovation in government is an emphasis on flexibility, rather than strict rules. In the United States, PPI has proposed a Regulatory Improvement Commission, which would focus on making regulations better and more flexible, rather than doing away with them altogether.

 

This article was originally published by Policy Network, please find the original article here.

FCC’s Wheeler Plays Hand Courts Dealt Him

Posted on by The Progressive Policy Institute

FCC Chairman Tom Wheeler’s determination that he can allow Internet Service Providers to offer differentiated service options to websites and content providers – an ability that “net neutrality” advocates regard as decidedly non-neutral – surprised many people.  But perhaps it shouldn’t have.

Wheeler’s announcement resolved a mystery created by a recent court decision that the FCC lacked the power to regulate the way broadband providers manage their networks.  Specifically, in a case brought by Verizon, the Court denied Wheeler and the FCC authority to specify that there must be only one tier of service on the Internet, the essence of the neutrality program.  But the Court also recognized his authority to regulate broadband as part of the FCC’s larger obligation to promote the Internet.

Predicting that it was time for Wheeler to lead the FCC past the neutrality debate and modernize the regulation of the Internet was not necessarily an act of clairvoyance – it was simply the product of a level-headed reading of the situation.  I participated in a Progressive Policy Institute forum last month in which a variety of experts, including some advocates of net neutrality, came to a surprising degree of consensus about Chairman Wheeler’s response to the U.S. District Court’s decision. Basically, we thought he had three options for regulating the Internet, and two of them weren’t going to work.

The first, and most radical, would be to declare that the Internet was really “just a telephone network” and therefore subject to the most intrusive regulations the FCC can muster.  That would have been a radical step from several perspectives.  First, and most obviously, saying that the Internet is really “just like” the Ma Bell phone system is like saying a Maserati is “just like” a Model T and should be subject to the same speed limits. But it should also be recalled (particularly by those who think the Internet should be a state-owned “public utility”) that the FCC’s regulation of phones was premised on a sanctioned monopoly in which companies invested without significant risk.  In contrast, the modern Internet was built by over a trillion at-risk, private dollars pouring into competing technological platforms.  On these and a variety of other bases, “reclassifying” Internet as telephony would have a very hard time passing the laugh test in court.

(Nor, in fact, might that resolve the problem – read the original 1934 Telecommunications act and you’ll be surprised  to see that it’s quite comfortable with differentiated services, so long as they’re made available to all.  Which is, of course, exactly Wheeler’s position eighty years later.)

A second option was to go to the Congress for explicit legislative authority to regulate conduct on the Internet.   I’m not a professional political analyst but…good luck with that.

To be fair, there may be an emerging middle ground in the Congress for an Internet policy perspective that might not be far from where Wheeler is today; in the past few weeks, for example, over 70 House Democrats signed a letter calling for open and unrestricted spectrum auctions, a sharp departure from the view held by some of their colleagues that the winners of those auctions should be prejudged by the FCC.  That’s a vote of confidence in competition.   But some in Congress advocate not just for net neutrality, but for extended public ownership and control of the Internet, while many on the other side doubt that we need any regulatory protections whatsoever, let alone an effort to extend the Internet’s role in such areas as health and education, or addressing the “digital divide.”  So there’s no obvious consensus on any issues of Internet regulation, let alone imposing neutrality through regulation.

Which leaves Wheeler with a third option – to play the hand the Court dealt him.  And he appears to be doing so smartly, by allowing ISPs to offer websites and content providers (often called “edge providers”) prioritization for those services that want it (perhaps high-definition video conferencing or real-time, interactive services such as health, teaching, or gaming and entertainment) while letting the rest of Internet traffic – your e-mail sharing a video of a cat playing the xylophone – to move as it always has, unabated.  He also made it clear that allowing some content to move on “express lane” terms is not the same as blocking other content, and that he would reserve the right to make sure that any prioritization deals were “commercially reasonable.”  Hopefully, this will mean a case-by-case review of actual transactions that have inflicted actual harm on an actual someone, not making judgments that reflect nothing more than the sensibilities of bureaucrats.  In fact, the PPI panel was also in broad agreement on this point – that it was time to embrace a new regulatory perspective that allowed “experimentation” in the way service is provided and that adjudicated contentious issues after the fact and after demonstrated harm has occurred, rather than through blanket, a priori, regulatory pre-emptions.

Wheeler seems to have embraced this approach. He’s getting us off “Square Zero” by recognizing that tiered service has its place, and putting to rest the neutrality debate that my colleague Hal Singer said last month “is sucking all the oxygen out of the room.”  In that sense, Wheeler’s most important accomplishment in announcing his view might be to make clear that opponents have mischaracterized “prioritization” as being the same as “blocking competing content,” “permitted innovation,” threatening the “open Internet,” and other slogans.

These catchphrases are commonly accepted by many media outlets, but now have been put to shame, and hopefully, rest.  Prioritization doesn’t change the reality that everyone who wants to bring content to the Internet can do so without impediment; in fact, the ISPs desperately want them to do so, since that’s the value proposition of what they’re selling.  Making that clear only ratifies what the market has already decided.  Nor does it mean that the ISPs will decide who can innovate and who can’t any more than the post office decides who can send a letter and who can’t when it offers First Class Mail and then Priority Express.  Wheeler has, to his credit, made clear what the real issues are.

And he appears to be disregarding the complaint that prioritization would be unfair to “the little guy.”  If that were the standard, every sector of the economy would come under regulation.  The little guy has to pony up to put his product on supermarket shelves or to buy a $5 million Super Bowl spot.  The Internet will remain a more competitive sector than virtually any other in the economy.  In fact, the Internet is already tilted against the small, start-up website; Big Websites already have speed advantages over the “little guy” due to pervasive caching of content.  Prioritization may make it easier for the “little guy” to catch up.

Let me make two predictions.  First, “prioritization” will change the Internet less than many think.  Network speeds in the US are increasing rapidly, and we have gone from 22nd in the world to 8th in a very short time (once the courts removed regulatory impediments to sustained investment).  And, we are one of the few nations on Earth that have competing platforms bringing broadband to the consumer – phone companies, cable companies, wireless (where we lead the world), and satellite, as opposed to the nations that staked their bets on a national phone company and are coming to regret it.  So our prospects for leadership are excellent.  I’m not sure how many sites will jump at the chance to improve their stream given how good the system as a whole is becoming.

And the second prediction is that Wheeler has now broken the ice and will lead the FCC into a series of decisions in which a ‘sensible center” finally holds sway. This would include accelerated auctions of spectrum now held by the government and broadcasters, open auctions for new spectrum, allowing the market for “peering” and other backbone transactions to evolve as any other competitive market would, and – one hopes – a revitalized National Broadband Plan to realize the Internet’s social potential.  In all of these cases, the FCC Chairman can reproduce the successful strategy he employed to move the “neutrality” debate forward – seizing the only realistic option in front of him and running with it.

Everett Ehrlich is the president of ESC Company, and a senior fellow at the Progressive Policy Institute.

Axelrod has something Miliband needs: an understanding of swing voters

Posted on by The Progressive Policy Institute

It’s not unusual for Britain, ahead of a national election, to be swarming with American political consultants. What is odd is seeing top members of President Obama’s political team deploy to opposite sides in the coming battle.

David Axelrod, Obama’s chief consigliere, has just signed on to help Labour craft its strategy for next year’s election. But in what many Democrats regard as a dumbfounding act of apostasy, Jim Messina, who ran Obama’s 2012, has hired out to David Cameron’s Tories.

Perhaps the two high-priced operatives, who know each other well, will simply cancel each other out. But in truth they bring very different skills to their respective campaigns. Messina is a master organiser who oversaw Obama’s state-of-the-art voter mobilisation effort in 2012.

Axelrod is a strategist who helped Obama wrest the Democratic nomination from Hillary Clinton and go from first-term Senator to first black President in 2008.

It’s hard to say how Axelrod’s talents will translate into the British context. The impact of campaign consultants – who always have a 50-50 chance of winding up on the winning side – is routinely exaggerated by political reporters and insiders.

Consultants are rarely better than the candidates they serve and, let’s face it, Axelrod is likely to find in Ed Miliband a somewhat less charismatic commodity than Barack Obama.

But Axelrod does have something Miliband needs, and it’s not a passion for grappling with inequality, as some media reports have said. The Chicago-based Axelrod is a man of middle America, not a creature of Washington. He has an intuitive grasp of the pragmatic nature of US voters, especially those without strong partisan attachments.

In short, where Messina is a whizz at energising true believers, Axelrod knows how to talk to swing voters.

What those voters want is a plan for reviving economic dynamism and opportunity, not a “populist” narrative that casts them as helpless victims of an all-powerful plutocracy. Their answer to inequality is not to pull down the mighty, but to create more jobs with decent pay, get wages growing again along with productivity, and rebuild middle class prosperity.

In America at least, this difference between a politics centred on economic aspiration and one centred on class grievance is crucial. Like Bill Clinton before them, Obama and Axelrod fashioned successful presidential campaigns by stressing the former.

Axelrod deftly read the public mood in 2008. There was a powerful revulsion to politics as usual in Washington. Axelrod presented Obama as the ultimate outsider, turning his relative lack of political experience into a key selling point. This experience may prove useful for Milliband and Labour, who likewise must craft a powerful argument for political change even as the UK economy improves.

In any event, Axelrod’s feel for the kind of ideas that move persuadable voters will likely prove an asset.

This article was originally published by the London Times here.