issue: Small Business & Entrepreneurship

NYT: Net Neutrality Debate: Internet Access and Costs Are Top Issues

Posted on by The Progressive Policy Institute

A policy report by PPI Senior Fellow Hal Singer and Brookings Non-resident Fellow Bob Litan was cited in a New York Times article suggesting that the regulation of broadband Internet with restraint can be achieved through lighter means that does not put at risk other crucial objectives — like broadening access to the Internet and tackling the nation’s very real digital divide.

A report published this year by Robert Litan of the Brookings Institution and Hal Singer of the Progressive Policy Institute recommends “pick the policy that maximizes total investment across the entire Internet ecosystem.”

Read the entire article at The New York Times.

NYT: Obama’s Call for Net Neutrality Sets Up Fight Over Rules

Posted on by The Progressive Policy Institute

PPI Chief Economic Strategist was interviewed by the New York Times in a story detailing President Obama’s recent endorsement of Title II regulation of broadband Internet and the implications of that endorsement.

But critics of the proposal say regulating Internet service like a utility, without subjecting it to the same aggressive oversight of industries like electricity or water, will be a tough balancing act for the commission.

“Forbearance is a fig leaf here, especially when it comes to big issues like rate regulation,” said Michael Mandel, chief economic strategist at the Progressive Policy Institute, which dislikes the prospect of treating broadband like a utility. “The F.C.C. can forbear easily from day-to-day rate decisions. But I don’t see how they can stay out of that when there are big innovative leaps.”

Mr. Mandel pointed to the introduction of the iPhone as an example. When that device was released, AT&T needed to develop a new type of data service package to charge consumers who wanted to use the iPhone’s ability to connect to the Internet.

Read the entire article at The New York Times.

WJLA Channel 7: Websites protest FCC ‘fast lanes’ with Internet Slowdown Day

Posted on by The Progressive Policy Institute

PPI Senior Fellow Hal Singer was quoted in a story by WJLA Channel 7 regarding yesterday’s Internet Slowdown Day, a protest organized by net neutrality advocates unhappy with new Open Internet rules being proposed by the Federal Communications Commission:

Hal Singer, senior fellow at the Progressive Policy Institute, supports the FCC proposal. He says, “Fast lanes is a loaded term. What I prefer to say is ‘just say no to slow lanes.’”

He continued, “It’s a political campaign. These guys on the other side are very effective at this game. They would like all of these priority delivery offerings to be available for free. Well, that’s very convenient for them. I say, on the other hand, if you don’t want the priority delivery offering, it’s a free country. You can always decline it.”

Singer says – for the average small business or Internet start-up – there’s no demand for such high-speeds. Meanwhile, major telecom firms point out video traffic consumes enormous bandwidth and costs more. And they warn that treating broadband like a utility would harm innovation.

“We’re going to freeze the current technology in place,” Singer said. “And that’s not good for anyone, particularly Internet consumers, because we’re going to keep coming up with new fancy applications that we want and who knows what kind of speeds are required to support those applications.”

Read more on WJLA Channel 7.

Forbes: Want To Keep Telecom Investment Going Strong? Avoid Rate Regulation Under Title II

Posted on by The Progressive Policy Institute

Quants have been studying the million-plus comments submitted to the FCC during the Open Internet proceeding, and unsurprisingly, the vast majority favor net neutrality. But what does that mean?

Those pressing for heavy-handed regulations would like it to mean “support for Title II,” but the myriad comments that mentioned Title II were most likely form letters generated by advocacy groups: It is doubtful that ordinary citizens understand the legal nuances that distinguish the FCC’s authority to regulate Internet service providers (ISPs) under section 706 and Title II.

To understand which regulatory path to take, we need to clearly define what sort of conduct cannot be tolerated on the Internet. Consider the following offer (“Offer A”) by an ISP to a content provider: “If you don’t take my priority-delivery offering, I will degrade your connection speeds on my network.” Such repugnant conduct would diminish the absolute performance of any content provider who declined the offer.

Now consider a slightly different offer by an ISP (“Offer B”): “If you don’t take my priority-delivery offering, you will continue to receive the same connection speeds that you previously enjoyed. If you take it, however, your connection will be even faster.” In contrast to Offer A, this offer would not threaten the absolute performance of the content provider; the only impact for those who decline it would be a diminution in their performance relative to those who elected priority delivery.

A broad consensus has formed around the need for regulation to prevent the type of conduct associated with Offer A. There is also wide acceptance of rules that would bar ISPs from favoring affiliated websites over independents by, for example, slowing or blocking access to the competing content. Importantly, none of these regulations would require the FCC to engage in rate regulation. All would be achievable under the “light-touch” approach of section 706.

What section 706 cannot prevent, however, is the type of conduct associated with Offer B. The D.C. Circuit has said as much, ruling that any attempt to prevent ISPs and content providers from negotiating for priority delivery smacks of common-carriage regulation. In other words, if rates for priority delivery were set by regulatory fiat, then there would be no need for ISPs and content providers to negotiate over the rate.

Will FCC Chairman Tom Wheeler give a "thumbs up" to Title II?

Title II would not bar priority-delivery offerings out of the gate: Even under Title II, ISPs would be free to offer such services, so long as they did so in a non-discriminatory way—that is, each package would have to be available to all similarly situated websites. But Title II could empower the FCC to begin a rate proceeding for priority delivery, at which point interested parties could petition the agency for zero rates, which would effectively eliminate priority delivery from the marketplace.

Would it be a good thing to unleash rate regulation on ISPs to prevent the formation of priority delivery? Not if investment is the metric. In a new study released by the Progressive Policy Institute (PPI), Bob Litan and I analyzed the impact of rate regulation pursuant to Title II on the investment of incumbent telcos, entrants, and cable providers in the 1990s and early 2000s. The results should give regulators pause before dabbling in rate regulation again.

Telco entrants: The 1996 Telecom Act required the incumbent Regional Bell Operating Companies—the localized telephone monopolies that were part of the integrated AT&T before it was broken up by court order in 1984—to share or “unbundle” the pieces of their local exchange networks to telco entrants at regulated rates to allow the latter to begin breaking down the local monopolies. With two co-authors (including your fearless blogger), Bob Crandall of Brookings used cross-state variation in the price of constructing local phone lines relative to leasing unbundled loops at regulated rates to identify the sensitivity of the entrants’ investment in local lines to these regulated rates. The researchers found that facilities investment by telco entrants was actually greater in states with higher unbundling rates; in other words, the more generous the subsidy, the less facilities-based investment occurred by telco entrants.

Cable companies: Cable television providers were best positioned to challenge the telcos’ hegemony in voice and Internet services in the mid-1990s. But to enter, cable operators first had to upgrade their networks to support IP-based transmissions. Yet cable companies were reluctant to make such investments so long as regulators were providing a less expensive entry path to their competitors (the telco entrants). High margins in local telephony and Internet access were the signal for cable entry, but the FCC’s unbundling experiment was injecting unnecessary noise. It took a series of court orders that unwound the unbundling regime by 1999 for the cable operators to see the market signal through the noise. Using data from NCTA, we found that the average annual capital expenditure for cable operators during the three years following the 1996 Act was $6 billion. In comparison, the cable industry’s average annual capital expenditure during the three-year period after the unbundling rules were unwound was $15.1 billion.

Incumbent telcos: Perhaps the most pivotal regulatory decision concerning the fate of broadband occurred in 2003. In its Triennial Review Order, which became effective in October 2003, the FCC determined that there would be no unbundling requirement for fiber-to-the-home loops. Once the telcos understood that they were free of the obligation to lease their fiber-based networks to competitors at regulated rates, they entered into a race with their cable counterparts to begin building the broadband networks that are now transforming the telecom landscape. In the span of just five years, from the FCC’s adoption of a policy of regulatory forbearance for fiber and IP networks in 2003, the miles of optical fiber doubled from five to ten million. Annual wireline broadband investment by the telcos jumped to $15.5 billion by 2008.

Why should the FCC focus on investment when promulgating new Internet regulations? First, Congress instructed the agency to do so in section 706 of the Act. Second, and perhaps even more important, investment in the communications sector continues to play a pivotal roll in driving the U.S. economy.

This week, PPI released its third annual report on “U.S. Investment Heroes,”  authored by Diana Carew and Michael Mandel, which analyzes publicly available information to rank non-financial companies by their capital spending in the United States. Once again, AT&T and Verizon ranked first and second, respectively, with $21 and $15 billion in domestic investment in 2013. Comcast, Google, and Time Warner also made PPI’s top 25 list, each investing over $3 billion. The authors credit investment in the core of the network with sparking the rise of the “data-driven economy.”

In light of the results from prior experiments in rate regulation, the FCC should eschew calls to regulate ISPs under Title II. The incremental benefits (potentially barring fast lanes) are dubious, but the incremental costs (less investment at the core of the network) would be economically significant. Given its size and contribution to the U.S. economy in terms of jobs and productivity, even a small decline in core investment in response to rate regulation would impose social costs beyond the immediate harm to broadband consumers from an atrophying network.

Let’s not repeat the mistakes of the past. If we focus on what’s important—preventing an absolute decline in the welfare of content providers and preserving incentives to invest—we can nurture our precious Internet ecosystem at both the edge and the core.

PPI Mission to Australia: Jobs in the Australian App Economy

Posted on by The Progressive Policy Institute

Leaders from the Progressive Policy Institute recently returned from Australia, where they engaged top government officials, business leaders, tech entrepreneurs, and policy analysts in discussions about the rising contribution of digital innovation to the country’s economy.

At a public forum held in the Legislative Assembly Chamber of the New South Wales Parliament in Sydney (left), PPI released its newest report, Jobs in the Australian Economy. The event featured a keynote address from Australian Minister for Communications, Mr. Malcolm Turnbull MP, followed by remarks from PPI President Will Marshall and Chief Economic Strategist Michael Mandel. Authored by Mandel, the report is the first effort to measure the tens of thousands of tech-related jobs created in Australia since the introduction of the smartphone in 2007.

Based on a methodology Mandel developed to estimate app job growth in the United States and United Kingdom, the study identified 140,000 Australian jobs that are directly related to the building, maintaining, marketing, and support of applications for smart-devices. Additionally, the report shows that the growth rate of Australian App Economy jobs, as a share of all tech jobs created since 2007, has significantly outpaced both the United States and United Kingdom. Perhaps more interesting, according to Mandel, is that Sydney and Melbourne are roughly on par with New York and London in a comparison of app-related growth.

“I congratulate Dr. Mandel on his new paper, Jobs In Australia’s App Economy, which is perfectly timed in identifying apps as a major and growing component of the ICT sector and economy generally,” said Mr. Turnbull (right) in his address. “It tells a very positive story in that many Australians ‘get it’— that apps will be important for their business, whether they are small businesses connecting directly with consumers or providing services to larger multinationals.

“This emergence and growth of this industry is a direct result of the market reacting to demand. That suggests there is a limited role for government here and the best thing we can do is to get out of the way to let private sector innovation continue to flourish.”

Indeed, as Mandel clarifies in his report, “Now, it’s important for policymakers to strike the right balance between essential and excessive regulation, especially in areas such as data privacy. … A general principle is that the tighter the regulations, the more obstacles in the path of the growth of the rapidly innovating App Economy.”

By creating a regulatory environment that fosters robust innovation, established democracies around the world can allow their growing app economies to become an integral part of their economic future bringing with them thousands of jobs and a wealth of other positive economic and social benefits.

While in Sydney and Melbourne, PPI leaders also held meetings with the following Australian thought leaders: The Honorable Paul Fletcher MP, Parliamentary Secretary to the Minister for Communications; The Honorable Jason Clare MP, Shadow Minister for Communications; The Honorable Ed Husic MP; Keith Besgrove, Chair, National Standing Committee on Cloud Computing; Linda Caruso, Australian Communications and Media Authority; Niels Marquardt, CEO American Australian Chamber of Commerce; Suzanne Campbell, CEO Australian Information Industry Association; Brenda Aynsley, Australian Computer Society Inc.

Additionally, PPI’s release of Jobs in the Australian App Economy received extensive coverage in the Australian media, including in the Australian Associated Press, Australian Financial Review, The Australian, International Business Times,  iTWire, and Startup Smart.

To read more about PPI’s work in this area please also see: Bridging the Data Gap: How Digital Innovation Can Drive Growth and Create Jobs; Data, Trade and Growth; Can the Internet of Everything Bring Back the High-Growth Economy?; The Rise of the Data-Driven Economy: Implications for Growth and Policy; Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy

Jobs in the Australian App Economy

Posted on by The Progressive Policy Institute

Is Australia ready for the digital economy? This is obviously a subject of great debate, intertwined with decisions about investments in the National Broadband Network and public concerns about data privacy. It is clear that some parts of the Australian digital economy, notably mobile communications, are quite vibrant. Two recent reports from the Australian Communications and Media Authority show the strength of this sector.

  • The number of Australians using the Internet via their mobile phone rose 33% from June 2012 to June 2013.
  • The number of Australians with a smartphone rose by 29% from May 2012 to May 2013.
  • Mobile broadband boosted Australia’s economic activity in 2013 by an estimated $34 billion (AUD).

In this study, we focus on one particular aspect of the mobile boom: The number of Australian jobs created in Australia’s ‘App Economy’. Australia has a large number of app developers—these are the people who design and create the apps distributed by small and large companies, nonprofits, and government agencies. Indeed, it’s astonishing how fast many companies have embraced the App Economy, hiring the workers needed to develop mobile applications at a rapid rate. We are seeing the creation of new specialties and new ways to interact with customers and employees.

But building a successful app is not a one-shot deal. Think of an app like a car—once built, it still needs to be repaired (in the case of bugs or security risks), updated, and maintained. And just as the automobile industry supports a large number of workers, from engineers to factory production workers to sales to service stations, so too does the App Economy support a significant number of workers.

An Australian company that does app development has to hire sales people, marketers, human resource specialists, accountants, and all the myriad of workers that inevitably make up the modern workforce. Finally, each app developer supports a certain number of local jobs. (The full definition of an App Economy job is found later in this study).

In this report we estimate that the Australian App Economy employed roughly 140,000 workers as of June 2014. The top state was New South Wales, with 77,000 App Economy jobs, but every state had some App Economy employment. Moreover, we note that Australia stacks up well against the United States and the United Kingdom when it comes to App Economy employment per capita.

Read the full memo – Jobs in the Australian App Economy

The Hill: Cutting through the regulatory thicket

Posted on by The Progressive Policy Institute

Representatives Patrick Murphy (D-Fla.) and Mick Mulvaney (R-S.C.) wrote an op-ed for The Hill published today on their Regulatory Improvement Commission (RIC) bill.  PPI’s RIC proposal, written by Michael Mandel and Diana Carew in May 2013, was brought to the Senate floor as a bill last year, followed by the recent bill in the House of Representatives, in both cases garnering significant bi-partisan support.  As the op-ed explains:

According to the Progressive Policy Institute, there were 169,301 pages in the Federal Code of Regulations in 2011, an increase of almost 4,000 pages from just a year earlier. Expecting businesses, large or small, to comply with such a bloated body of rules detracts from their core function of producing better goods and services while creating jobs.

You can read about the RIC, the bill in the House, and the rest of the op-ed on The Hill’s website, here.

Where are the Big Data Jobs?

Posted on by The Progressive Policy Institute

The recent White House report on big data has garnered a great deal of public attention, both for its strong support for big data as a “driver of progress” and for its highlighting of privacy concerns. The bottom line of the report: “Americans’ relationship with data should expand, not diminish, their opportunities and potential.”

However, the authors of the White House report paid little attention to one important economic topic: Big data as a jobs creator. Big data is creating a wide variety of jobs, from data analysts to software developers to the people who run the massive data warehouses that are essential to almost every large company these days. This jobs impact should be an important part of policy considerations about big data.

In this memo, we estimate the number of ‘big data’ jobs in the U.S. economy as of May 2014. We define a big data job as a computer and mathematical occupation that uses big data skills, such as data analytics or knowledge of big data programs such as Hadoop or Cassandra. We track these big data jobs using a want-ad methodology developed by South Mountain Economics LLC in a series of papers on App Economy employment and a forthcoming analysis of big data and medtech jobs in Great Britain.

We find that the United States now has about 500,000 “big data” jobs. Roughly 100,000 of these jobs are in California, and another 100,000 are in New York, Texas, and Washington. Table 1 lists the top ten states for big data jobs, as of May 2014.

Download the policy brief.

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.

Where Government is Working

Posted on by The Progressive Policy Institute

With the federal government in gridlock, cities step into the breach.

Welcome to New Orleans, city of the future.

Wait, New Orleans? The decadent old tourist trap that’s been trading on its fading cultural glories for decades? That’s right – the Crescent City has its mojo working again.

Since the ravages of Hurricane Katrina, the Big Easy has reinvented itself as a mecca for entrepreneurship and a magnet for young and highly educated workers. Forbes ranked New Orleans number one in IT job growth. Another ranking of America’s “cities of aspiration,” which blends economic performance, quality of life measures and demographics, lists New Orleans second behind Austin, Texas. New Orleans is also leading the transformation of urban education. An amazing 79 percent of its students attend charter schools, and — more amazing still — they are on track to become the first inner city students in the nation to outperform their counterparts in the rest of the state.

New Orleans also benefits from dynamic political leadership and a cooperative civic culture. Mayor Mitch Landrieu is a tough-minded progressive who has cut the city’s budget by a quarter, spun off inefficient public health clinics and forced the city’s regulators to dramatically speed up licensing and permitting. Voicing a pragmatism that’s all too rare in the ideological hothouse of Washington, Landrieu notes that “government can be too big and too small at the same time.” He has also launched the New Orleans Business Alliance, the city’s first public-private partnership for economic development, and has used the money freed by his “cut and invest” approach to upgrade municipal infrastructure and improve public safety (an astronomical murder rate is the city’s biggest problem).

What’s happening in New Orleans, however, is hardly unique. It’s emblematic of a larger story: A renaissance in local governance as Washington sinks deeper into paralysis.

While Congress becomes both more ideologically polarized and less productive than ever, local governments are innovating, collaborating and equipping their citizens and communities with tools for successful problem-solving.

This “metropolitan revolution”, as Bruce Katz and Jenifer Bradley of the Brookings Institution have dubbed it, illustrates the genius of American federalism. Its subtle dynamics seem to ensure that not every level of our government can be broken at the same time.

It’s also a dramatic role reversal from a couple decades ago, when the nation’s big cities were synonymous with failure and decline. From New York to Detroit, Cleveland to Los Angeles, U.S. urban centers were beset by deindustrialization and toxic waste, rising poverty, soaring crime rates, municipal corruption, racial friction and middle class flight to the suburbs.

Overwhelmed by these economic and social maladies, many urban leaders took refuge in victimhood and looked to Washington for salvation. As I’ve noted elsewhere, many cities seemed to develop a cargo cult mentality, waiting like Pacific islanders during World War II for pallets of federal aid to drop miraculously from the sky – which never came.

What came instead was a new wave of reform-minded mayors preaching self-reliance and homegrown solutions to local problems. These included pragmatic progressives like John Norquist in Milwaukee, Ed Rendell in Philadephia, Cory Booker in Newark and Martin O’Malley in Baltimore, as well as moderate Republicans Rudy Guiliani and Michael Bloomberg in New York. They used innovations like data-driven analysis and community policing to drive crime rates down. They experimented with ways to reduce welfare dependency and demolished public housing complexes that concentrated and isolated the poor. A few brave souls took over abysmal inner city school systems, cutting swollen bureaucracies, launching innovative charter schools, and holding principals and teachers accountable for student performance.

Metros on Top

Today, America’s cities and metro regions are the star performers of our federal system. They are America’s main hubs of economic innovation and dynamism and are reviving the U.S. economy from the ground up.

Houston, for example, as Derek Thompson of The Atlantic notes, has added more than two jobs for every one it lost in the Great Recession. Katz and Bradley report that cities like Portland and Tampa are concentrating on boosting exports into global markets. In Northeast Ohio, Cleveland and other cities are collaborating on joint strategies to become a hub of advanced manufacturing, targeting 3-D printing in particular. After the recession/financial crisis, Bloomberg launched an imaginative competition to attract engineering and applied science campuses to New York, to lessen the city’s economic dependence on Wall Street.

To Katz and Bradley, it all adds up to “an inversion of the hierarchy of power in the United States.”

The urbanologist Alan Ehrenhalt sees another kind of inversion at work in America’s metropolitan regions. As he explained in an interview with Smartplanet.com:

The demographic inversion simply means that, contrary to where we were a generation ago, with the inner city meaning “the place where poor people live” and the exurbs being where the affluent flee to; in the future, the center of the city is going to be where affluent people choose life. Not necessarily by tens of millions, but in significant numbers. Suburbs are going to be the place where immigrants and the poor congregate.

What’s behind this change? The disappearance of heavy manufacturing from many cities, says Ehrenhalt, has made them more attractive places to live. So has the steady decline in crime rates over the past several decades. And millennials in particular seem to find urban life more exciting than the placid suburbs most of them grew up in.

O Come Emanuel

If there’s a poster child for the metro revolution it’s probably Chicago Mayor Rahm Emanuel. A former adviser to President Clinton and Member of Congress, the acerbic Emanuel left his job as President Obama’s Chief of Staff to run for Mayor after longtime Mayor Richard Daley decided to call it quits. “Washington is dysfunctional politically, and it’s not just a momentary thing,” he explained to the New York Times’ Tom Friedman.

We’ve always said that there’d be a day when all that the federal government does is debt service, entitlement payments and defense. Well, folks, that day is here. So, federal support for after-school programs has shrunk. We added to ours, but I had to figure out where to get the money. The federal government is debating what to do with community colleges. We’ve already converted ours to focus on skills development and career-based education. I worked for two great presidents, but this is the best job I’ve had in public service.

None of this means Washington is at risk of becoming irrelevant – sorry, conservatives. But it does argue the merits of a serious push for a systematic decentralization of decisions and resources to state and local governments. It’s time to revisit former Congressional Budget Office chief Alice Rivlin’s ideas for devolving large responsibilities from Washington. And even during the present political stalemate, there are things Congress and the White House can do to enable local leaders to succeed. One is a generous waiver policy to allow for greater state and local experimentation. Combining lots of small programs – the federal government has 82 for teacher training alone – into broad, performance-based grants would also promote both local flexibility and efficiency.

Most important, progressives should get out of the habit of treating Washington as the line of first resort when some urgent problem demands a governmental response. Congress, the National Journal reports, is more ideologically polarized than ever. Not coincidentally, the previous Congress was the least productive in modern times. The current one – already effectively closed for serious business until November’s midterm elections — could turn out to be even more barren of legislative achievement.

And since no one seems to know how to throw the engines of polarization and hyper-partisanship into reverse, Washington is likely to remain mired in impotence and inertia for quite a while.

But don’t give up on democracy in America just yet. As conservatives try to undermine public confidence in government yet further, progressives should look outside Washington to local governments that are proving to be effective instruments for advancing the common good.

The piece is cross-posted from Republic 3.0.

Can Tech Help Inner City Poverty?

Posted on by The Progressive Policy Institute

Tech/information companies these days flock to high-density urban areas such as New York and San Francisco. Fewer and fewer entrepreneurs want to put their startup out somewhere in a suburban office park.  Instead, they place their new firm in places which are attractive to young tech workers.

As a result, the tech/information boom is generating jobs in downtown areas that are more accessible to inner city workers, who are typically less likely to have cars. What’s more, there’s a social element: If tech/information companies are located in dense downtown areas, they are more likely to want to help local schools.

The question is: Who is going to get those jobs? As has been repeatedly reported,  tech has a major diversity problem, especially in the startup community (see, for example, this recent article).  Organizations such as All Star Code, Black Girls Code,  and CoderDojo NYC are helping connect inner city youth with tech opportunities, but it’s a slow process.

However, despite the diversity problems, there are reasons for optimism in the broader tech/information industry, going beyond startups. In fact, we’ve just gotten a round of new data from 2013 which shows how tech growth is helping black and Hispanics. This new data enables us to update previous results that we reported.  Take a look at the chart below.

 

From 2009 to 2013, employment of blacks and African-Americans in computer and mathematical occupations grew by 41%,  compared to 7.5% growth for black workers in all occupations. Over the same period, the employment of Hispanics in computer and mathematical occupations rose by 33%, compared to 15% for Hispanic workers in all occupations.

What kind of tech jobs are we talking about? The data doesn’t give a clear picture, although it looks like blacks and Hispanics are getting a wide range of tech jobs, from software developers to customer support. But here’s a couple of charts that give more insight.

This chart shows that  black workers are getting a rising share of  computer and mathematical jobs, while their share of  in managerial and professional occupations, a much broader classification.  That suggest that educated black workers are shifting over to tech.

The situation is somewhat different for Hispanic workers, who have gained ground both in tech jobs and in the broader managerial/professional occupations at roughly the same rate.  In this case the rise in the Hispanic share of tech jobs is part of a broader set of gains in high-skill jobs.

America’s Digital Policy Pioneers

Posted on by The Progressive Policy Institute

On Wednesday, we honored Larry Irving, Ambassador Bill Kennard, Ambassador Karen Kornbluh, Ira Magaziner, and Michael Powell as digital policy pioneers at our event “Enabling the Internet: A Conversation with America’s Digital Policy Pioneers.” Each of these individuals made important contributions to that led to the exponential growth and the Internet’s rapid emergence as a tool for communication, information access, global commerce and social networking. PPI brought them together on one stage to continue our ongoing conversation about how government can collaborate with private enterprise to take advantage of technology as a major engine of the U.S. economy.

These leading architects of U.S. digital policy, looked back to the early debates and key decisions over Internet regulation, and forward to the modern challenges of data security and privacy, international governance, the advent of the “Internet of Everything,” and national firewalls abroad. Larry Downes, the panel’s moderator, guided the conversation by asking the panelists to describe the challenges they faced in the first days of the “information superhighway” and extrapolate how those lessons might be applied to the decisions facing policy makers today at home and abroad. A consensus was built around the principles of bipartisanship and the idea that legislation of new technologies should always lead with “do no harm.”


2013 Digital Policy Pioneers: Ira Magaziner, Ambassador Karen Kornbluh, Larry Iriving, Michael Powell and Ambassador Bill Kennard

NYT: If It Looks Like a Bubble and Floats Like a Bubble …

Posted on by The Progressive Policy Institute

Nick Bilton writing for the New York Times quoted PPI’s Michael Mandel, chief economic strategist, on why current investments do not constitute a tech bubble on the same scale as the 1990’s.  Mandel explained the differences between today’s environment and the the dot-com boom/bust:

“Bubbles that are not self-feeding are not a big problem, and I’m not seeing the kind of self-feeding that I saw in the ’90s,” Mr. Mandel said. “So if it turns out that the social media boom is overdone, or that any aspect of the tech economy is overdone, the only thing that will get lost is the money that was invested.”

Read the entire New York Times article here.

The PPI Tech/Info Job Ranking

Posted on by The Progressive Policy Institute

The last few years have been tough for many cities and localities. Most places have not yet fully recovered from the financial collapse, either in terms of jobs or revenues. High growth seems unattainable.

But some cities and localities—ranging from New York to New Orleans to Davis County, Utah—are doing unexpectedly well. What they have in common: Strong growth in the tech/information sector. This sector ranges from tech startups to Internet firms such as Google and Facebook to telecom providers such as AT&T and Verizon to content producers such as newspapers and movie studios (see definition below).

New analysis by the Progressive Policy Institute shows that places with strong tech/information growth have survived the recession much better than their counterparts. In particular, counties with a higher number of new tech/information sector jobs from 2007 to 2012 had enjoyed substantially faster growth in both overall private employment and non-tech jobs over the same period.

In order to quantify the link between the tech/information sector and overall growth, we have constructed the PPI Tech/Info Job Index. For each county, the Index measures the number of new tech/information jobs between 2007 and 2012, as a share of 2007 total private sector employment in that county. For example, an index of 1 means that new tech/info jobs equals 1% of total private employment.

On average, the top 25 counties, as measured by the Index, showed an average private sector job gain of 2.4% between 2007 and 2012. That doesn’t seem like much, but the remaining counties had a decline of 3.5%. In other words, a vibrant tech/info sector tended to make the difference between a local economy that had recovered by 2012, and one that was still in decline.

The implication is that policies to encourage tech/info growth are more likely to boost the overall economy. Innovation creates well-paying jobs. What’s more, the diversity of places on our list suggests a high-growth economy is not just for traditional tech powerhouses such as Silicon Valley, but has broader applicability.

Download the ranking.

Can the Internet of Everything Help Cities?

Posted on by The Progressive Policy Institute

Local governments are about delivering services and getting things done: Fixing highways, running buses, picking up trash, ensuring public safety, educating children. To do their job in an era of tight finances, what’s needed are technologies that make public services better and cheaper, and improve the quality of life for urban Americans without increasing costs.

So far the Internet and the shift to digital has boosted the efficiency of smart local governments, increased transparency, and made it easier to communicate with local residents. In many cities and towns it’s possible to look up property tax records online, for example; download essential forms and documents; or learn when the town dump is open. New York City is a leader in this area: its “OpenData” catalog contains more than one thousand data sets available to the public.

But the mere upload and download of data is not enough to get cities and towns out of their fiscal squeeze. That’s why, if we want to truly transform the delivery of public services, we need to look to the coming wave known as the  “Internet of Everything.”

What is the “Internet of Everything?” As I write in my new report, the Internet of Everything (IoE) is about:

…building up a new infrastructure that combines ubiquitous sensors and wireless connectivity in order to greatly expand the data collected about physical and economic activities; expanding ‘big data’ processing capabilities to make sense of all that new data; providing better ways for people to access that data in real-time; and creating new frameworks for real-time collaboration both within and across organizations.

In other words, IoE links things in the physical world with data, people, and processes, so that better decisions can be made in real-time.

On a national level, IoE can provide a tremendous boost to growth. We estimate that the Internet of Everything could raise the level of U.S. gross domestic product by 2%-5% by 2025. If this gain from the IoE is realized, it would boost the annual U.S. GDP growth rate by 0.2-0.4 percentage points over this period, bringing growth closer to 3% per year.

Part of these gains from the Internet of Everything would show up in the form of better and cheaper services provided by local governments. The key here is better decisions in real-time. One clear example comes out of the horrific flooding in Colorado. Having been hit by a devastating flood in 1997, the city of Fort Collins, CO, maintains a network of rainfall gauges and stream sensors which deliver real-time information on the potential for flooding both to a city website and to smartphones via an app. This connection with real time sensors enables both city officials and local residents to make better real-time decisions about when and whether to evacuate.

Cities can also use the Internet of Everything to help improve the mundane service of trash pickups. As my report notes:

The ‘smart’ trash and recycling stations from BigBelly Solar can sense how full or empty they are, and communicate wirelessly with the trash collection agency. Armed with this information, pickup trucks can go directly to the bins that are full, while skipping trash and recycling stations that are empty. The result: Cleaner streets, lower fuel usage, and fewer greenhouse gas emissions.

An essential service that is usually handled at the local level is transportation. Already more and more cities are using GPS systems to track buses and provide the information to passengers via apps. The next stage is to provide sensors that monitor waiting passengers, with the possibility of rerouting buses or having them skip stops in order to provide better service.

Or consider noise complaints, one of the most pervasive problems of big city living.  Noise can often be intermittent, making it very hard for local governments to adequately respond. However, smartphones are able to measure local noise levels, making it possible to build ‘noise complaint apps.’ Alternatively, low-cost sound sensors could help track troublesome noises in real time.

Finally, there is the most crucial local service of them all, education. Let’s focus on career/technical education. Businesses continue to complain about not getting enough skilled workers, but schools have been cutting back on CTE. Moreover, what they do offer is less directly relevant to today’s rapidly changing workplace, because it’s too expensive for most school districts—and CTE teachers–to keep up to date.

The Internet of Everything offers the possibility of lowering the cost of career/technical education by building sensors right into the equipment, which can offer immediate feedback to students. One offbeat example comes from Cisco, which built sensors into a basketball. In theory, that means someone trying to learn to play the game can automatically get corrections about how to shoot the basketball, enabling them to learn faster. The same principle can eventually be applied to career/technical education, lowering costs and speeding learning.

City officials face a historic challenge, and a historic opportunity.  With less resources, can they provide better services at lower cost? The Internet of Everything is no panacea, but it can assuredly help.

Continue reading at Techonomy.

How a Regulatory Improvement Commission Can Improve SBA’s Disaster Response

Posted on by The Progressive Policy Institute

Last week, New Jersey Governor Chris Christie blasted the Small Business Administration for being a “disaster” in providing disaster relief to New Jersey’s businesses after Hurricane Sandy.

At issue? According to the Governor, SBA’s disaster loan programs were too complicated for residents and business owners that needed a fast, simple funding stream to recover and rebuild. The Star Ledger article noted these words from Gov. Christie to a Jersey Shore crowd:

“Basically, the Small Business Administration is a disaster,” he [Gov. Christie] said to an appreciative crowd. “We should send FEMA to the Small Business Administration to clean up after the disaster that is the Small Business Administration and what they did to small business people in this state.”

“The good news is the Small Business Administration has left New Jersey and we are stationing troopers on every border to make sure they do not come back,” he added.

Does the Governor have a point – are there too many rules and regulations on SBA disaster programs hampering the effectiveness of the federal government’s disaster response?

An effective federal disaster relief system is essential to having economic continuity after a disaster hits. If the disaster loan application process is overly cumbersome, and not being utilized while residents and businesses flounder, it’s worth taking such claims seriously.

A quick look at SBA’s website shows 80 rules (consisting of 7 subparts of Title 13, Chapter 1, Part 123) in the Code of Federal Regulations that apply to their disaster loan programs, and SBA’s Standard Operating Procedure for disaster loans is an impressive 269 pages. Of course, federal loans backstopped by taxpayer money should enforce responsible lending and credit-checking criteria. But in times of disaster it may be sensible to simplify the process.

It’s examples like this why PPI proposed Congress authorize a “Regulatory Improvement Commission” (RIC), an independent Commission with the explicit purpose of reviewing outdated or duplicative federal regulations. The Commission, authorized only on an as-needed basis, could review the rules and regulations that govern SBA’s disaster loan programs and provide suggestions to improve or remove them. Their recommendations would then go to Congress for an up-or-down vote.

In the case of SBA’s disaster loan programs, the RIC could improve the speed at which disaster aid is distributed while still protecting taxpayers. For example, perhaps the number of required application forms – 6 for businesses – and corresponding financial documentation could be consolidated. In times of disaster, especially natural disasters like Hurricane Sandy, local business owners may not have immediate access to all of the required documentation which could impose major delays in aid. Likewise, some legal restrictions on disaster loan eligibility may not be feasible or practical and merit review. For example, requiring borrowers in designated “special flood hazard areas” to purchase flood insurance to be eligible for aid may be prohibitively expensive.

There is currently no effective process in place on the federal level to retrospectively review and improve such regulations. Yet the build-up of regulations over time is plaguing many U.S. businesses, and in cases like this, homeowners, which could have long-term economic affects. The RIC would address this problem, and as an independent body would do so in a politically viable way.