issue: Regulatory Reform

Democratic Devolution: How America’s Colleges and Universities Can Strengthen Their Communities

Posted on by The Progressive Policy Institute

In the face of a deepening economic and political crisis, the U.S. political and governing system is deadlocked. We need a new way forward. The old and tired government versus markets debate is just that—old and tired. It’s time for a broader mobilization of America’s civic resources, including the nonprofit sector and especially our colleges and universities.

We see government as a catalyst that stimulates new forms of interaction and partnerships between all sectors of society. Based on our experience at the University of Pennsylvania, we believe government should challenge all institutions of higher education (public and private; community colleges, colleges, and universities) to contribute systematically to improving the quality of life and learning in their local communities.

When called to service (e.g., Peace Corps, AmeriCorps) young people have answered the call. Each year, more than 75,000 citizens serve through AmeriCorps alone. But it is not enough to simply call upon college students to serve. Rather, government should challenge institutions of higher education, as well as students, to make a greater contribution to the public good.

America’s colleges and universities represent immense concentrations of human and economic capital (with nearly four million employees, 20 million enrolled students, $400 billion in endowments, and $1 trillion in annual economic activity). As “anchor institutions,” they have the potential to be sources of stability and permanence in civic partnerships with government and the private sector to revitalize local communities. For colleges and universities to fulfill their great potential and more effectively contribute to positive change in their communities, cities, and metropolitan areas, however, they will have to critically examine and change their organizational cultures and structures and embed civic engagementacross all components of the institution. Through more effectively targeting existing resources, as well as utilizing both modest financial incentives and the bully pulpit, the federal government can stimulate colleges and universities to realize their stated—but not fully realized—mission of service to society.

To realize this potential, we recommend a five-part strategy:

First, Congress should create a new federal commission—comprised of local, state, and national government officials along with leaders from the private sector and higher education—to forge civic partnerships with the nation’s institutions of higher education;

Second, the commission should develop innovative strategies for integrating federal programs and funding streams, as well as aligning federal efforts with these new local civic partnerships that involve colleges and universities;

Third, the commission should promote regional consortia of higher educational institutions to significantly and effectively improve schooling and community life;

Fourth, the federal government should create prestigious Presidential Awards for outstanding Higher Education-Civic Partnerships, and;

Fifth, government should provide support to colleges and universities based on the “Noah Principle”—funding given only for building arks (producing real change), not for predicting rain (describing the problems that exist and will develop if actions are not taken).

Download the memo.

FCC: A Broadband Assessment without Mobile is Incomplete

Posted on by The Progressive Policy Institute

This week the FCC concluded that “broadband is not being deployed to all Americans in a reasonable and timely fashion” in its eighth annual “Broadband Progress Report.”  It found 19 million Americans are still without fixed broadband access.

But note the word ‘fixed’ – this conclusion doesn’t include mobile access. The FCC didn’t forget wireless broadband; they explicitly chose not to include it. In fact, the FCC is operating under the mandate that all Americans should have access to fixed and mobile broadband. They use this as a justification for excluding mobile in their determination – that it should be assessed separately, even though no such assessment has been made. So someone who has a smartphone but no access to a wireline connection still counts as not having access.

That’s just silly – by excluding mobile access, the FCC is missing the fastest growing segment of the broadband market. And at this point it may take longer for all Americans to have access to fixed broadband than to mobile. The Telecommunications Industry Association estimates investment on mobile broadband infrastructure could total $100 billion through 2015. The FCC’s own data suggests that if access to either fixed or mobile were counted, the number of Americans without broadband access could be as low as 5.5 million.

Such an obvious exclusion makes the report’s findings hard to use in a meaningful way. It’s like judging a book by its cover – you’re missing a vital part of the story. Yet important regulatory decisions are being derived from this report. The only conclusion I derived from this report is that the FCC needs to adapt its mandates in a way that keeps pace with the fast-changing broadband landscape.

Should the FTC Make Innovation a Bigger Priority?

Posted on by The Progressive Policy Institute

The FTC’s recent settlements with Google and Facebook raise an interesting question about how such regulatory run-ins can affect future innovation.

The FTC fined Google $22.5 million for misrepresenting privacy assurances to users of Apple’s internet browser. And the FTC is requiring that Facebook obtain consumers’ express consent before sharing their information, maintain a comprehensive privacy program, and get independent biennial privacy audits after Facebook allegedly shared consumer information when they claimed it was being kept private.

My purpose is not to say whether these settlements were justified or not. The problem I’m referring to is not just one or two regulatory actions, but the fear that the government is going to keep regulating until these companies are scared into becoming more cautious. The analogy is yelling at a child every time he or she colors outside the line. Eventually the child will stop coloring.

In effect the FTC is drawing the lines within which these companies must operate and expand. The Googles and Facebooks of the world will have to watch their every move, and anticipate in advance how potential innovations may be scrutinized. Continue reading “Should the FTC Make Innovation a Bigger Priority?” →

Why Romney’s Medicare Taxes Are So Low

Posted on by The Progressive Policy Institute

As the presidential candidates debate the fate of Medicare, it’s worth noting a very simple fact: Mitt Romney paid only 0.07% of his income in Medicare taxes in 2010. By comparison, the typical American worker paid 1.45% of his or her income in Medicare taxes plus an equal amount paid by the employer. In other words, Romney’s Medicare tax rate was about one-fortieth of the norm.

How did he manage this trick? The key is that investment income, which made up 97% of Romney’s total income in 2010, is not subject to payroll taxes that pay for Medicare or Social Security. That means he only paid Medicare taxes on his speaking and directing fees. If Romney had paid the full Medicare tax rate on all of his income, he would have paid about $628,000. Instead he paid $15,908.

Oddly enough, despite his relatively meager contribution, Mitt is also likely eligible for free Medicare coverage. Current Medicare rules stipulate that as long as he paid into the system for 10 years, he can still receive full coverage.

Because Romney is self-employed, he is paying both the employer and employee shares of the Medicare tax. We therefore compared his tax rate to the combined employer-employee rate for wage and salary workers (2.9% for Medicare taxes). And because he is self-employed Romney got to deduct a portion of his Medicare taxes to calculate his adjusted total income for tax purposes.

A new 3.8% Medicare tax on investment income for high income Americans, scheduled to go into effect in 2013 as part of healthcare reform, would dramatically boost the Medicare taxes paid by people with Romney-like returns. However, there are efforts underway in Congress to get it repealed.

Some Good News That Obama Should Be Touting

Posted on by The Progressive Policy Institute

Will Marshall compiled four positive economic stories for Real Clear Politics that President Obama should be making better use of in his campaign for re-election. From farming to exports there are positive signs in the economy according to Marshall.

Despite a string of doleful job and sales reports, there are signs that America is starting to get its productive mojo working again. The good news can’t come fast enough for President Obama, who needs some economic success stories he can point to.

So, at the risk of diverting readers from the cosmically important question of when, exactly, Mitt Romney stopped running Bain Capital, let’s examine four pinpricks of light that have begun to penetrate the economic gloom:

First, check out America’s phenomenally productive farmers; Monday’s Washington Post notes that the agriculture sector last year sold $136 billion worth of goods abroad, boosting farm income to a record $98 billion. When it comes to high quality and affordable food, America is still number one in the world.

But, in a perfect example of the disjuncture between what’s happening in the real world and Washington’s thralldom to entrenched interests, Congress is cooking up new justifications for costly federal subsidies for the thriving agricultural sector. The culprits include supposedly fiscally conservative Republicans, who added callousness to hypocrisy by also voting to slash food stamps for poor families.

Read the entire article HERE

Libor Scandal and Public Data Manipulation

Posted on by The Progressive Policy Institute

Editor’s Note: This item is cross-posted from Innovation and Growth.

I found myself reacting to the Libor scandal more strongly than a lot of the earlier revelations of financial institutions misdeeds. First, the banks were just blatant out-and-out lying about a simple number.

Second, their lying led to a distortion of a crucial piece of publicly available data–the Libor rate. In a market economy, intentional misrepresentation of a market price is not a victimless crime –in fact, the victims are everyone who relied on that price to make decisions.  That includes regulators who presumably watched Libor as one of their guides to the amount of stress in the global banking system. Here’s a chart of Libor across the key period (downloaded fromhttps://www.fedprimerate.com ).

Continue reading “Libor Scandal and Public Data Manipulation” →

Investment Heroes: Who’s Betting on America’s Future?

Posted on by The Progressive Policy Institute

American voters are finding it hard to get excited about this year’s presidential election. Job growth is slow. Economic growth is slow. Real wages have been essentially stagnant since 2009. It’s the same old story as when the recovery began three years ago. We are in an atmosphere of economic uncertainty. Voters—swing voters especially—are looking for news that will boost their confidence from all the economic doom and gloom going around. We are a country that needs to hear more (if not have more) economic successes.

Such successes begin at home with investment—business investment, government investment, and household investment. Government has to invest in infrastructure, education, and research. Households have to invest in their own human capital. And businesses have to invest in buildings, equipment, and software. All are essential—but in this report we will focus on business investment. Domestic business investment generates growth, raises productivity, increases wages and creates jobs for Americans. It can span the gamut from new office buildings to improved production lines to faster communications equipment to deeper natural gas wells.

Unfortunately, U.S. business investment tanked during the Great Recession, and has yet to recover. The graph below shows the extent of the drop-off—in 2011, non-residential investment remained more than 7% below 2007 levels, adjusting for prices. By comparison, personal consumption in real terms was higher in 2011 compared to 2007. We find ourselves in an investment drought, not a consumption drought.

Equally as important, before the recession companies were expanding their domestic investment at a rapid pace. In fact, we estimate there would have been a total of $1.4 trillion more in non-residential business investment over 2008-2011, in 2005 dollars, had business investment continued to grow at the same average annual rate in the ten years before the recession (4.8% over 1997-2007). That extra investment could have gone a long way creating jobs, boosting productivity, and enhancing U.S. competitiveness.

The decline and lackluster recovery in business investment has a wide range of causes, including globalization, regulatory barriers, and weak demand. Many companies are investing overseas rather than in the United States. Multiple layers of regulation, even if well-intentioned, have the impact of discouraging capital investment and innovation. And the continued weakness in demand at home makes it difficult to justify building new factories. But no matter what the reason, this weakness is having an adverse effect on economic growth and is one of the main reasons behind the job drought.

That’s why PPI wants to highlight those companies that are still investing domestically in buildings, equipment, and software. Using publicly available financial reports, PPI constructed a list of the top 25 nonfinancial U.S.-based companies ranked by their U.S. capital spending in 2011. In many cases this required detailed calculations and assumptions, since companies often report global capital spending without breaking it down by country. Financial companies were excluded because they do not publicly report their capital expenditures. (A more detailed explanation of our methodology can be found later in this memo.)

PPI calls these companies “Investment Heroes” to make a key point: the U.S. economy is at its best—in terms of growth and job creation—when companies and workers are partners with the same objectives. Half of the leading companies are telecom and energy, but the list also includes tech, retail, automotive, and entertainment companies.

Download the entire report.

End Seniority to Help Depolarize Congress

Posted on by The Progressive Policy Institute

PPI Senior Fellow Anne Kim explains how to de-polarize Congress over at Roll Call:

In the last several months, the Washington policy world has begun a necessary and constructive debate over how to “de-polarize” the nation’s politics. Scholars Thomas Mann and Norman Ornstein, for example, have made a compelling case for a suite of structural improvements to the political system, including redistricting and campaign finance reform.

But while most proposals have looked to fix the political system in the big picture, another place to look to reform might be Congress’ internal workings as well. In particular, Congress should consider scrapping seniority as the basis for deciding committee chairmanships, especially in the House where individual members have much less power than in the Senate.

Aside from leadership, committee chairs are among the most powerful members of Congress. They decide the legislative agenda, broker deals over major bills and shepherd them through Congress. They wield enormous influence over their colleagues and command prodigious fundraising ability.

Read the entire article HERE.

Start-up 2.0: Another Welcome Boost for Entrepreneurs

Posted on by The Progressive Policy Institute

Last month, Congress and the president passed major legislation (the Jumpstart Our Business Startups (JOBS) Act) aimed at making it easier for start-ups and small businesses to gain better access to capital. It was one of the few bills passed in the last year that wasn’t born out of crisis or in the shadow of a looming government shutdown.

This week, a bipartisan group of Senators has introduced a summer sequel worth watching in what they’ve dubbed “Startup Act 2.0.” This legislation would take one more big step in giving young businesses three crucial ingredients for success: talent, time and money.

Talent. Perhaps the most ambitious and creative proposal put forward by this group—Sens. Jerry Moran (R-Kan.), Mark Warner (D-VA.), Marco Rubio (R-Fla.) and Chris Coons (D-Del.)—is the creation of “STEM visas” for foreign students who come to America and earn advanced degrees in math or science, and “entrepreneur visas” for legal immigrants who start their own companies.

Continue reading “Start-up 2.0: Another Welcome Boost for Entrepreneurs” →

Election Watch: The Growing Impact of Super-PACS

Posted on by The Progressive Policy Institute

This week’s major down-ballot contest was in Nebraska’s Republican Senate primary, where State Senator Deb Fischer came from far behind to beat the long-time front-runner, Attorney General Jon Bruning, along with “movement conservative” favorite, State Treasurer Don Stenberg.

Despite some media treatment of the outcome as another “conservative insurgent” victory over an “establishment moderate,” it’s not at all clear that ideology had much to do with Fischer’s victory. A late PPP survey (which very accurately predicted the outcome) showed Fischer drawing support from all ideological elements of the GOP, and benefitting from a loud and expensive Bruning-Stenberg slugfest that mainly focused on Bruning’s ethics and possible vulnerability against Democrat Bob Kerrey.

Continue reading “Election Watch: The Growing Impact of Super-PACS” →

PPI Battleground Home Values Index: Home Values Tick Upward

Posted on by The Progressive Policy Institute

We have had a bevy of economic and political “events” in the last six months that have focused on stabilizing home prices. The President’s efforts on refinancing are starting to pay dividends, and the major settlement between the attorneys general with five of the biggest mortgage servicers offered some order to a market process that previously bordered on chaos. Money from the settlement has started to flow to the states, even though there is a looming concern that some of those funds are being used to close budgetary holes instead of helping families.

This past week, the National Association of Realtors held their Mid-Year Legislative Meetings and on Tuesday, PPI helped to assemble a panel of experts to discuss on-the-ground issues and upcoming housing issues.

The government’s role in the future of housing and current regulatory uncertainty was the most discussed topic. All panelists agreed that Fannie Mae and Freddie Mac aren’t going anywhere anytime soon and their future existence, in whatever version they take, would be necessary for a 30-year fixed rate mortgage, which is currently 95% of all loans being made.

Continue reading “PPI Battleground Home Values Index: Home Values Tick Upward” →

Election Watch: Obama Makes History

Posted on by The Progressive Policy Institute

It’s been a turbulent last few days on the campaign trail. On Tuesday, Indiana Republicans drove six-term Sen. Richard Lugar from office in favor of hard-core conservative state treasurer Richard Mourdock. While Lugar’s loss seemed inevitable well before primary day, the margin of his defeat—61-39—was shocking given his relatively conservative voting record over decades, and his staunch orthodoxy over the usual hot-button issues like abortion and taxes. Mourdock’s many out-of-state backers, including the Club for Growth, Jim DeMint’s Senate Conservative Fund, and virtually every right-wing blogger on the planet, made it abundantly clear that getting rid of Lugar was intended to teach the national Republican Party a lesson about the price involved in disrespecting the Tea Party Movement (Lugar had never even attempted to pander to them) and sticking to the outmoded traditions of Senate bipartisanship.

The day after the primary Mourdock reinforced the “lesson” by calmly telling Chuck Todd that he defined “bipartisanship” as “Democrats coming to the Republican point of view.”

While Indiana’s current pro-GOP tilt makes Mourdock a slight favorite in a general election contest with Rep. Joe Donnelly, the unexpected vulnerability of the seat has scrambled many early assumptions about the 2012 Senate election landscape, particularly when combined with Olympia Snowe’s recent surprise retirement. Today the Washington Post’s Paul Kane published an overview of Senate races quoting several leading handicappers as giving Democrats a slight edge in their battle to hang onto control of the chamber; it all may come down to the vice president’s tie-breaking vote.

Continue reading “Election Watch: Obama Makes History” →

The Fine Art of Cabinet-Making: Five Ways to Build a Stronger Executive Team

Posted on by The Progressive Policy Institute

The job of the presidency has grown so large, so overwhelming in its power and responsibility, that no one human being can excel in all its many dimensions, from the ceremonial to the political, from making policy to managing a vast bureaucracy. In an atmosphere of bitter partisan division and a 24-hour news environment, presidents more than ever need help at the highest levels possible. Fortunately, there is a well-established yet greatly underutilized institution readily available to lend a hand: the presidential cabinet.

Although the cabinet and its role in government are not formally established in the Constitution, presidents since George Washington have convened a collective body of the heads of the executive departments. Washington used cabinet meetings to tap into the wisdom of such luminaries as Secretary of State Thomas Jefferson and Secretary of the Treasury Alexander Hamilton. In her 2005 book Team of Rivals, Historian Doris Kearns Goodwin demonstrated how the strong and diverse cabinet assembled by Abraham Lincoln girded the nation at its time of greatest peril. FDR convened his cabinet the day after the Pearl Harbor attacks, while JFK famously relied on a subset of his cabinet during the Cuban Missile Crisis.

Over the past half-century, however, the rise and expansion of the White House staff has centralized deliberation and decision-making increasingly within the confines of 1600 Pennsylvania Avenue. Between this reliance on professional staffers and life in the ever-more restrictive “security bubble,” presidents have had less and less direct access to a range of views and opinions. Indeed, while the Kennedy and Johnson cabinets met monthly, the Obama cabinet has met less than one-third as often.

Today, cabinet meetings are often little more than occasional photo ops to bring together POTUS, the VP, the heads of the 15 executive departments and a few other “cabinet-rank” officials such as the heads of the Office of Management and Budget and the Environmental Protection Agency, the Ambassador for the United Nations, and the U.S. Trade Representative. Virtually the only time they are seen together by the public is in the front row at the annual State of the Union Address.

By contrast, many of America’s democratic allies benefit from the much more central role played by their cabinets, particularly in parliamentary systems where they are critical partners in the governance of their nations. In countries such as the United Kingdom, Canada, Australia, and Germany, the executive leadership comprises an entire team of senior politicians who meet weekly to lay out political alternatives and strategize about policy implementation. In many parliamentary systems, the cabinet is considered so central that the members are all considered to share “collective responsibility” for the work of government.

Under the U.S. Constitution, the American president will always remain paramount, but both the president and the nation could benefit greatly by enhancing the role and strengthening the position of the cabinet. Below are five ideas to maximize the reach and impact of the president’s hand-picked first-string team.

Read the entire memo here

Room for Regulatory Improvement

Posted on by The Progressive Policy Institute

A new survey released today by Thumbtack.com gives more evidence that reforming regulations for new and small businesses at the state and local level could lead to valuable economic gains.

The survey, which assessed how “friendly” states and local areas were to new and small businesses, finds that those states with the friendliest climates had fewer licensing regulations and other legal hurdles that hindered business registration. In fact, the survey found small businesses viewed licensing requirements as almost twice as important as tax rates in determining how friendly a state was to its businesses. And states deemed the most friendly to business, including Texas, Idaho, and Oklahoma, were also the states where respondents claimed starting a new business was easy.

The survey, which received over 6,000 responses from small businesses across the country, was conducted by Thumbtack.com in partnership with the Kauffman Foundation. It found Texas was the friendliest state in the nation for small businesses, while California was ranked as the least friendly.

Small businesses are a crucial backbone to the U.S. economy, employing almost half of all American workers. That’s why it’s important to implement business regulations and policies that make establishing a new business a relatively smooth process. States that have excessive or redundant regulatory processes could be discouraging an important source of economic growth, or lose out on business opportunities to a more friendly state. And with those lost business ventures comes lost spillover effects to the local economy that are an important source of state and local revenue.

PPI has long advocated for reducing unnecessary regulatory hurdles, to encourage the development of new innovations and facilitate getting those innovations to market quickly and efficiently. That’s why PPI proposed a Regulatory Improvement Commission, a congressionally authorized body designed to reduce and remove unnecessary Federal regulations as submitted by the public, as part of our Regulatory Reform Initiative.

Given how many states have “unfriendly” regulations, emulating such a Commission at the state level could certainly have a significant impact on creating friendlier business climates. And given the slow economic recovery, it’s as important as ever policymakers at all levels of government work to balance consumer safety and business legitimacy with creating a more conducive climate for small and new businesses.

Photo credit: marsmet526

Will Marshall on the French Presidential Election

Posted on by The Progressive Policy Institute

PPI President Will Marshall argues that the victory of Francois Hollande, a Socialist and the next president of France, will not likely have any significant impact on the American presidential election over at POLITICO’s Arena:

Americans look to France for many things – fine wine and food, romantic getaways, bullet trains – but rarely for political models. Some Republicans may try to draw parallels between President Obama and a real Socialist, Francoise Hollande, but swing voters don’t share the GOP’s Francophobia.

Besides, as Reds go, Hollande isn’t very menacing. For all his talk of putting growth before austerity, Hollande promised during the campaign to balance France’s budget just one year later than Sarkozy. And Hollande’s will be constrained from a massive public spending splurge by France’s need to borrow from capital markets to finance its enormous debt (90 percent of GDP).

Read the entire op-ed here