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Episode 69: Midterminal - Banter #337: Karlyn Bowman and Norm Ornstein on the 2018 midterm election results - AEI

Thu, 11/08/2018 - 14:00

Did Beto blow it? Will the Republican Party survive Trump? Is Jonah dyspeptic? The 69th Remnant, with National Review senior political correspondent Jim Geraghty, attempts to answer these and other pressing questions.

You can subscribe to The Remnant with Jonah Goldberg on iTunesGoogle PlayStitcher, and TuneIn. You can also download this episode here.

This podcast was originally published by National Review.

Europe’s conservatives need a leader not an apparatchik - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/08/2018 - 13:49

It is a common strategic mistake for armies to prepare for the previous war instead of the one that is coming. In 1939, the French were ready for a redo of World War I — but not for the Nazi Blitzkrieg.

Today, the center-right European People’s Party (EPP) is gearing up to fight an ordinary European Parliament election next year, followed by more business as usual — behind-closed-doors deals, technocratic kludges and bargaining between member countries. And there’s no arguing the party’s pick to lead the European Commission, Manfred Weber, would adeptly navigate that environment.

But that vision of European politics looks increasingly outdated. Europe is a far more disruptive, polarized political landscape than it was four years ago. Whether it’s dealing with fiscal mismanagement in Italy, questions of asylum and border protection or the building of a genuine single market, the bloc’s challenges have one thing in common: They are political, not technical in nature. They require solutions that transcend national borders and enjoy popular legitimacy.

Like it or not, a common European political force is already emerging — especially on the far right. The dream of U.S. President Donald Trump’s former campaign strategist Steve Bannon of a united front of nationalists may be unrealistic, but Euroskeptics are poised to make large gains in the European Parliament.

By refusing to face reality and endorsing a political grandee like Weber to lead the party in the European election, the EPP is missing a major opportunity to show it’s been listening to Europe’s voters.

This has nothing to do with Weber as a person. His track record in the European Parliament is respectable. He is not a polarizing figure, and has proven he can engage with the entire EPP family, from Sweden’s Moderates to Viktor Orbán’s Fidesz. There’s no doubt that having a German as Commission president would add weight to the institution.

But at a time when liberal democracies and international institutions across the Western world face an unprecedented crisis of legitimacy, picking Weber as Spitzenkandidat amounts to endorsing a tired status quo.

Long-standing coalitions of centrist parties are crumbling across the bloc, with European voters increasingly unwilling to settle for more of the same. This decade has been particularly unkind to social democratic parties, but the center right is next — unless it can change its habits.

In countries where centrist forces have pushed back successfully, it has been thanks to a bold reinvention of centrist politics and — most importantly — fresh, new faces not associated with the failures of the past.

In Austria, 31-year old Sebastian Kurz has given the People’s Party a new lease on life. In France, where the established parties failed to go through a similar transformation, French President Emmanuel Macron’s movement was the one to turn the existing party system upside down and save the country from a Marine Le Pen presidency.

The same logic applies to the European election in May. Given voters turn out in lower numbers at EU elections than national polls, the outcome will be decided by the difference in levels of energy and excitement between different groups of voters. The angry and the discontented are likely to show up. The challenge will be to mobilize the silent majority who do not want the European project to go up in flames.

The EPP has to show where it parts ways with Europe’s right-wing populists — and with the Continent’s liberals and progressives. There is nothing wrong with emphasizing themes of subsidiarity and Europe’s Christian heritage. But the EPP cannot remain indifferent — as Weber has shown himself to be by heartily accepting Fidesz’s endorsement — to the egregious abuses of power taking place in Hungary.

If it wants to stay relevant, the EPP will have to pursue a similar strategy and nominate a fresh, credible, ideas-driven leader who can speak to voters across the EU — not the lowest common denominator offered by Weber.

Others in the political center have realized that already. A pact in the works between Emmanuel Macron and Mark Rutte’s VVD on the common platform for the election, bypassing the increasingly tiresome Belgian Liberal leader Guy Verhofstadt, is a step in the right direction.

If the EPP has a future, it surely looks more like Alex Stubb — and his minimalist yet refreshingly pan-European and policy-driven campaign — than Weber, with his blandness and lack of a substantive agenda. And one could easily find a dozen other compelling heavy-hitters within the party, each with much greater name recognition outside of the Brussels bubble than Weber.

The key lesson from the rise of authoritarian populism, Brexit and Trump is that the West is dealing with a new political reality — and that its centrist politicians need to adapt.

The more the EPP tries to bury its head in the sand and continue with business-as-usual, the more painful the beating it could get in May 2019 will be — and deservedly so.

The dual goals of the Trump administration’s new attack on Chinese intellectual property theft - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/08/2018 - 11:00

Last week, Attorney General Jeff Sessions announced a new, high-profile attack on Chinese theft of intellectual property (IP) from US high-tech firms. It involved the indictment of several officials from a Chinese and a Taiwanese company for allegedly stealing trade secrets from the US chipmaker Micron. In announcing the action, Sessions stated: “Chinese economic espionage against the United States has been increasing . . . rapidly. . . . Enough is enough. We’re not going to take it anymore.” A Department of Justice (DOJ) official affirmed that this is “just the beginning” and that the government would be going after a number of Chinese companies going forward.

U.S. Attorney General Jeff Sessions announces a new Department of Justice initiative focusing on “China’s continued economic criminal activity” during a news conference at the Justice Department in Washington, U.S., November 1, 2018. Via REUTERS.

In assessing the background and implications of this and other recent moves to combat Chinese IP theft by the Trump administration, distinguishing two impelling “dual purpose” goals is important. The first is to confront and punish a long history of Chinese denial and duplicity regarding purloined trade secrets and violated IP obligations, abetted or directed by Chinese intelligence agents. Second, the new DOJ initiative, along with other moves by US trade and intelligence agencies, are key components of a larger effort to challenge the mercantilist web of Chinese rules and practices that have systemically protected and lavishly subsidized Chinese companies and entire sectors (particularly technologies prioritized by China’s “Made in China 2025” plan).

Regarding the specific IP history, recall that in September 2015, upon threat of retaliation, Chinese President Xi Jinping promised President Barack Obama that, henceforth, the Chinese government would not conduct economic espionage to pass IP and trade secrets along to Chinese companies. Although Chinese economic espionage decreased in the following months, over the past two years it has picked up again, at a rapid pace (as stated by Sessions) — with government or government-directed groups using increasingly sophisticated cyberespionage techniques.

Some months ago, I called for a series of “show trials,” not least because despite staggering estimates of the annual cost of IP theft (upward of $600 million), largely by Chinese hackers, the US government had not produced sustained evidence, citing chapter and verse of individual incidents. (This was a key failing as the Chinese government adamantly denied complicity and taunted the US to show proof.)

This brings us to the DOJ’s specific charge against 10 Chinese intelligence officials connected directly to the Ministry of State Security. The DOJ asserts that the Chinese participated in a five-year campaign (2010–15) against US aerospace and turbine manufacturers. In pursuit of their espionage goals, they “conducted sustained computer intrusions into 13 companies” to find technical information that would allow a state-owned Chinese aerospace firm to design its own jetliner and an accompanying turbofan engine. The indictment came just weeks after the US government had won a groundbreaking extradition from Belgium of another Chinese security official, also for attempting to steal secret information concerning jet engine development.

I have two points about these aerospace-related indictments. First, they demonstrate that US intelligence agencies are now willing to acknowledge their own cyber prowess, even alerting foes about their technical abilities. Second, they accentuate the necessity for follow-on indictments. These alleged actions took place before the 2015 Obama-Xi agreement. Although private cybersecurity companies have provided a good deal of evidence concerning recent attacks, the DOJ needs to provide evidence of these recent Chinese cyberattacks.

The simultaneous indictments related to semiconductor IP theft have much broader goals and implications. Here, the DOJ piggybacked on an ongoing private action by Idaho-based Micron Technology, the world’s leading manufacturer of semiconductor chips. Again, Micron has been locked in court battles with the Chinese semiconductor company, Fujian Jinhua Integrated Circuit Co. Ltd., over Micron’s charge that Jinhua had engineered the theft of trade secrets involving dynamic random-access memory (DRAM) technology that are central to data storage for computers, mobile devices, and other electronics. Jinhua is a state-owned semiconductor company that was created for the express purpose of allowing China to catch up in DRAM technology. It has received over $5 billion in state subsidies and plans to open a $5.7 billion plant in Fuijian Province.

Micron has sued in a US court, and Jinhua has countersued in a Chinese court (which had blocked the sale of Micron chips temporarily in China).

Last week the DOJ intervened, charging in an indictment that Jinhua, the Taiwanese semiconductor company United Microelectronics, and three Taiwanese citizens had conspired to steal vital core IP from Micron, with an estimated worth of almost $9 billion.

But the US government greatly raised the stakes when it also banned US companies from selling parts and components to Jinhua. Because Jinhua, like other Chinese semiconductor companies, is highly dependent on US parts and components, the move could potentially cripple the company and thwart Beijing’s drive to make it a leading chip supplier for other Chinese high-tech companies.

The Trump administration also set a new precedent by explicitly tying the future of the US semiconductor industry to US national security. In explaining the US action, the Commerce Department said in a statement:

Jinhua poses a significant risk of becoming involved in activities that are contrary to the national security interests of the United States. [By exploiting US-origin IP, it also] threatens the long-term economic viability of US suppliers of these essential components of US military systems.

To conclude, a question and two recommendations. The question is: How far is the Trump administration willing to go in following the implications of its action against Jinhua? Beijing is grooming and heavily subsidizing several other companies to reduce its dependency on foreign chipmakers. If the goal is to delay or even forestall this effort, will the administration also place a ban on the sale of components to these companies?

Whatever the decision regarding a sales ban, the administration should also bring cases against the Chinese semiconductor subsidies at the World Trade Organization. Beijing has outed itself by publicly announcing plans to provide $50 billion to domestic semiconductor companies — a clear violation of World Trade Organization subsidy rules (as is the specific subsidy for Jinhua).

Finally, at the upcoming G20 meeting with President Xi, President Trump should set out US evidence for Chinese economic espionage and demand that Xi reaffirm China’s 2015 commitment to desist from government-sponsored economic espionage. Given the duplicitous track record thus far, the president should also warn Xi that in the future Chinese companies that benefit from IP theft will be banned from the US market.

The DOJ initiative represents an important turning point, but only sustained pressure and a willingness to retaliate forcefully will achieve results.

Learn more:

How to honor Jamal Khashoggi - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 11/08/2018 - 01:03
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In the wake of the headlines about the brazen murder of Jamal Khashoggi inside the Saudi Arabian consulate in Istanbul, we initiated in our private capacity an online petition that calls for renaming the street immediately in front of the Saudi Arabian embassy in Washington the “Jamal Khashoggi Way.” At the moment, the petition has been electronically signed by nearly 2,500 individuals. As the introduction to the petition indicates, there are two principled reasons behind our idea to publicly set this forward.

First, it is important for the Saudi government and its leadership to be reminded, and our American government to assert, that such behavior is unacceptable. It is unacceptable under international law and, even more fundamentally, it is a gross violation of basic human norms. Requiring Saudi officials to come to work every day at “Jamal Khashoggi Way” is one simple way to get this point across in a daily and concrete fashion.

Second, Khashoggi was an opinion contributor to the Washington Post. The point of our petition is not to suggest we agreed with everything he wrote. We leave that discussion to experts more knowledgeable about Saudi affairs than we. That said, our critical point is that a journalist associated with a major American newspaper was murdered because his writings apparently offended the current Saudi leadership. His murder is an assault on the core American principle of freedom of the press.

We are not so naive as to think that renaming a street will cause a sea change in Washington policymaking circles when it comes to Saudi Arabia. But we do think that this step would be both a lasting and important reminder to the Saudi government that Americans think such behavior is beyond the pale and, no less important, a reminder to the Washington community that “strategic partnerships” with autocratic states will rarely, if never, be without compromises to our liberal values.

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We are of course gratified that so many have signed the petition and do hope that it leads to the District of Columbia Council taking the proposal up. But, as The Hill and other media outlets have suggested, we are not activists. We are policy scholars at two distinct Washington think tanks. Our jobs are tied to putting forward the best policy proposals that we can rather than lobbying for them. That is for others to do and why we were careful not to put our institutional affiliations next to our names.

Where was the liberal outrage when Democratic presidents sent troops to the border? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 22:36

When the president announced that he was sending the US military to help secure our southern border, he received bipartisan praise from members of Congress. The Post reported that the move was seen as “smart politics.” The year was 2011, and the president was Barack Obama. The National Guard troops Obama sent to the border as part of Operation Phalanx helped apprehend nearly 18,000 illegal immigrants and seized more than 56,000 pounds of illegal drugs.

He was not the only president to deploy troops to the southern border. In 2006, President George W. Bush launched Operation Jump Start, in which National Guard troops assisted in 176,000 immigrant apprehensions, as well as the seizure of almost $900 million in illegal drugs. Before that, in 1994, President Bill Clinton launched Operation Gatekeeper, deploying military personnel to help regain “control” of the San Diego-Tijuana border. Before that, in 1989, President George H.W. Bush established Joint Task Force-Six, deploying the US military to the southwest border region.

But now, when President Trump announces that he is doing precisely what four of his Republican and Democratic predecessors did — sending troops to help secure the southern border — the liberal outrage machines crank into action, as 108 House Democrats sent a letter to Defense Secretary Jim Mattis declaring that “this effort is nothing short of a militarization of the southern border to score political points and stoke misleading fears among Americans regarding immigrants.”

Funny, they didn’t say that about Obama, Clinton or either Bush.

Trump’s critics say pointing out this history is simply “whataboutism.” Sorry, if there were not so much rank hypocrisy among those castigating Trump, there would be no need to say “what about?”

Similarly, when Trump’s critics declare he is an anti-Semite because he criticizes liberal billionaire financier George Soros (who happens to be Jewish), it is perfectly legitimate to point out that they had no problem with Democrats’ attacks on GOP financier Sheldon Adelson (who also happens to be Jewish). Bernie Sanders castigated “billionaires like Sheldon Adelson buying elections,” and Elizabeth Warren declared “Sheldon Adelson can’t buy us off.” Are they anti-Semites? How about when Obama and Senate Democratic leader Harry M. Reid castigated conservative billionaire financiers the Koch brothers? Reid referred to them as “shadowy” and called their political contributions “un-American.” Can you imagine if Trump said that about Soros? Why is Soros immune to criticism because he is Jewish, but the Kochs are fair game because they are not?

And it is perfectly fair to point out that these critics were silent a few weeks ago when former president Clinton shared a stage with Nation of Islam leader Louis Farrakhan, who has declared “Hitler was a very great man,” and warned Jews, “Don’t you forget, when it’s God who puts you in the ovens, it’s forever,” and most recently compared Jews to “termites.” Some even defended Clinton by saying he was simply attending Aretha Franklin’s funeral and could not control the guest list. Would Trump’s critics have had the same reaction if Trump had attended a funeral where he shared the stage with David Duke? And where was the outrage when Obama took a smiling photograph with Farrakhan, reportedly joking that “he is much better-looking than I am”?

Democrats have no problem attending and supporting the Women’s March, whose leaders include Linda Sarsour, who declared American Muslims should not “humanize” Israelis, and Tamika Mallory, who has called Farrakhan “the GOAT” (Greatest of All Time). Yet they have the temerity to accuse Trump of anti-Semitism.

The list of liberal hypocrisies goes on. Pointing these things out does not absolve Trump of anything. We can debate whether sending troops to the border is the right thing to do. And the fact that Democrats condone anti-Semites in their own ranks does not release Trump from his responsibility to condemn the bigots in the alt-right.

But if Trump’s critics want to be taken seriously, they might want to show some intellectual consistency and hold their own side to the same high moral standards they demand of the president. Otherwise, Americans may get the impression that they are simply using accusations of racism and anti-Semitism as a weapon to silence their political opponents.

The Report Card with Nat Malkus special edition: The Midterm Elections and Education Policy with Lanae Erickson, Frederick Hess, and Jason Delisle - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 20:35

Last night, millions of voters went to the polls and gave both parties mixed victories. In this special edition of “The Report Card with Nat Malkus,” on the AEI Education Podcast, Frederick Hess, Jason Delisle, and Lanae Erickson join to discuss  what the 2018 midterm election results mean for education policy, what we can learn from this election on education, and what issues that will likely be addressed in coming months.

What Will the 2018 Midterm Elections Mean for Education? | AEI Event Video

Subscribe to The Report Card with Nat Malkus on the Podcast Channel on Apple Podcasts.

Italy’s parallel currency temptation - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 17:02

As the Italian economy stalls yet again and as the budget standoff with its European partners intensifies, the idea of a parallel currency for Italy is again being floated. The basic idea would be to have the Italian government increase public expenditure to kick start the economy and to finance that increased spending by issuing government IOUs that could be used to pay future taxes.

Forza Italia leader Silvio Berlusconi speaks at the Quirinale palace in Rome, Italy, April 12, 2018. REUTERS/Max Rossi

It is claimed that taking this approach would allow the Italian government to support the economy by increasing public spending without flouting the Eurozone’s rules on unduly increasing public debt. While debt issued by the Italian government falls under the Eurozone’s public debt definition, it is claimed that government IOUs that can be used for future tax payments do not.

Even if the European Commission were to accept an Italian claim that tax-related IOUs should not be included as public debt, there are at least three reasons to think that it would be a singularly bad idea for Italy to go down the parallel currency route.

The most compelling reason is that the issuance of a parallel currency would almost certainly be viewed by the markets as a weakening of the Italian government’s commitment to remain in the Euro. That would lead to a further significant widening in Italian bond spreads from their present level of around 300 basis points. It would do so since investors would need to be compensated for the increased risk that Italy might at some future date indeed exit the Euro.

The net result would very likely be that any support that the Italian economy might receive from increased government spending would be more than offset by the higher interest rates that Italian companies and households might be required to pay.

There is also the real risk that introduction of a parallel currency would lead to a full-blown Italian credit crunch. This would seem to be especially the case in the context of an Italian banking system that is saddled with non-performing loans and that holds around 10 percent of its balance sheet in Italian government bonds. As Italian government bond prices fall, the Italian banking system’s capital base would be further eroded. Such a process has already been in evidence since the March 2018 Italian elections.

A second reason to think that government IOU-financed public spending increases are a bad idea is that they are bound to raise serious questions about Italy’s public debt sustainability. Even if the markets were to accept the argument that such IOUs should not be considered as public debt, they do constitute a claim on future government tax revenues. As such, they must be viewed as weakening the government’s future ability to meets its public debt service payments by reducing the future tax revenue stream at the government’s disposal.

Yet a third reason to question the desirability of an IOU-financed public spending boost is that it runs the danger of creating the equivalent of a fiscal cliff. In the same way that the economy might be boosted by the increased IOU-financed public spending, so too will it be adversely affected by a reversion of public spending to its former level. For this not to happen, one would have to assume that the Italian government would continue boosting the economy indefinitely with ever increasing amounts of IOU-financed public spending.

With the Italian economy again on the cusp of an economic recession, it is understandable that the Italian government would like to boost the country’s economy. However, it would be ill-advised to go down the parallel currency route to do so. By inviting a further widening in Italian bond spreads, the government would risk tipping the economy into a deflationary spiral that would only exacerbate its public debt and banking sector problems.

Learn more:

AEI’s Michael Strain on why raising rates could harm low-skilled workers - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 16:00

The strength of the economy is reflected in the job market, which has continued to expand. As the Fed decides whether to raise interest rates again when they meet in December, they should keep in mind that today’s measures of inflation are not necessarily troubling, and that raising interest rates over the coming months could damage prospects for America’s most vulnerable workers.

As AEI Director of Economic Policy Studies Michael Strain explains in his most recent piece, because employers become more flexible as the labor market gets tighter, today’s strong economy has done more good for low-wage workers with relatively fewer skills (and without a high school degree) than it has done for other groups, and it has helped those with disabilities. Wages in the bottom of the distribution have also been growing faster than those at the top.

The data:

  • In the past 25 years: average unemployment for workers who did not complete high school was about 9%. In 2018, it’s 5.5% (or 60% of the long-term average).

  • During the middle of the Great Recession: 1 out of 6 workers without a high school degree was trying unsuccessfully to find a job. In 2018: 1 in 18 is in that situation.

  • In terms of earnings, Q3 2018 earnings were $556 for workers who did not finish high school, up 6.5% from the year before. In Q3 2017, weekly earnings for workers who did not finish high school grew at 3.6 % from the previous year.

  • Workers with disabilities are also doing better: In 2014, 16 out of 100 had a job. In 2018, close to 20 out of 100 have a job.

To read the full piece: Protect the Gains Made by Low-Skilled Workers

The religious right bucks just a bit at the trumpy GOP - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 14:59

Democrats took control of the U.S. House of Representatives by taking upper-middle-class suburban districts from Republicans. But the most interesting result might have been a narrow Republican win in a district the incumbent had previously carried by 20 points.

Rep. Steve King, R-Iowa, almost lost on Tuesday, posting barely 50 percent as of early Wednesday morning.

More interesting is where he lost votes. Namely, the rural Religious Right went lukewarm on King — still preferring him, but with lower turnout and plenty of defections to the Democrat. The result was a race far tighter than anyone expected.

But it wasn’t totally unforeseeable. If you looked closely at the different types of rural precincts in Iowa, and how they responded to Donald Trump’s takeover of the GOP, you could have anticipated King’s troubles. The same counties that rejected Trump in the caucuses, and that slightly blanched at him in the general, were the Republican counties that cooled on King.

Rural voters in Iowa in 2008 and 2012 caucuses were described as the “evangelical vote,” as they caucused for the likes of Mike Huckabee and Rick Santorum over Mitt Romney. It turned out that under the surface, there were two different species of “rural vote” — the populist vote, and the Religious Right vote.

This distinction became clear in the 2016 caucuses. Compare rural counties like Fremont in the Southwest corner of the state, where Trump exceeded 40 percent to just-as-rural counties like Sioux, near the northwest corner, where Trump barely hit 10 percent in the caucuses.

What’s the difference? Mostly, it’s about church. In Fremont, a desert of social capital, Memorial Baptist Church closed in 2013, Locust Grove Methodist announced in 2014 it was shutting down, and in 2016 Norwich United Methodist Church would follow suit.

Meanwhile, Sioux County seems overflowing with churches. “There are nineteen of them in this town,” Sioux County transplant Jordan Helming told me of Sioux Center, “a town of seven thousand has nineteen churches.” All in all, about 85 percent of the county are active Christians, according to the Association of Research Data Archives, compared to 50 percent of the nation adhering to any religion.

When I visited Sioux County before the 2016 caucuses, I found warm attitudes towards refugees and upturned noses towards Trump. Helming said the folks of Sioux County “vote Right and live Left.” What he really meant was that the Christianity of this Dutch Reformed place translated into a communitarianism.

This might explain why Democrat J.D. Scholten, with his Dutch ancestry and his explicitly Christian campaign message, came within 5,000 votes statewide of a 8-term incumbent who typically posts margins 10 times that size. Scholten surged after King’s decision to associate with a white nationalist in Canada and the Freedom Party in Austria, and otherwise expressed what sounded a lot like racist sentiments.

In Sioux County, for instance, King lost 2,400 net votes—about 16 percentage points—compared to the last midterm election in 2014. King underperformed Republican governor Kim Reynolds (who barely won statewide) by 13 points, or 2,000 votes, in Sioux County.

Neighboring Lyon County, the second-Dutchest county in the state saw Scholten more than double the vote total of his 2014 Democratic counterpart, and outperform the Democratic gubernatorial candidate by 10 points.

Hancock County was another conservative county that rejected Trump in the caucuses. There, King’s margin was nearly 1,600 votes in 2014, and Reynolds’ margin was 1,800 votes on Tuesday. But King couldn’t even post a 1,000-vote margin this year. Hancock is heavily Norwegian, packed to the gills with Evangelical Lutherans, and has the most associations and organizations per capita in the state, according to a Penn State analysis of social capital. Winnebago is even more Norwegian and more Evangelical-Lutheran. King won Winnebago by about 500 votes in 2014, and by about 50 votes this year, compared to Reynolds nearly 1,000-vote win.

Trumpiness, in other words, is an asset in many parts of rural America, but not the parts where churches are most packed.

This tells us something about the Trump-era realignment of politics. The populists are tacking to Trump. The elites are tacking to the Democrats. The conservative Christians who go to church are finding themselves in an awkward middle.

The dangers of giving excessive discretionary authority to administrative agencies - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 13:45

The lead editorial in yesterday’s Wall Street Journal was about the effort of the Obama administration to close down payday lenders by depriving them of banking services. This is not a new story; it is covered extensively in my book, “Judicial Fortitude: The Last Chance to Rein in the Administrative State.”

The underlying facts are gross examples of lawlessness by the Obama administration, pursuing a policy known as Operation Chokepoint. Bank regulators and the banks they supervised were the “chokepoint” of this policy, which — most shockingly — was initiated and run by the Justice Department. DOJ directed the bank regulators to stop the financing of payday lenders, an entirely legal business that was disfavored by the Obama administration.

A US flag flies at the headquarters of the Department of Justice in Washington, August 3, 2018. Reuters

The Journal’s editorial contains a lot of the material that was turned over by the banking agencies during the discovery process of the lawsuit eventually filed by some payday lenders. These disclosures  were bad enough, showing that bank regulatory officials tried to disguise their role, but the Journal missed the most important points of this whole sordid episode.

First, the Journal’s editorial expose, for some reason, refers only to bank regulators’ involvement in this illegal scheme, but leaves out the Obama DOJ’s key role. The Trump Justice Department announced in August 2017 that it was terminating the program.

Second, the scope and importance of Operation Chokepoint was finally brought into question when a District of Columbia federal judge, Gladys Kessler, rejected the Justice Department’s motion for summary judgment and concluded that there was evidence that the department had acted illegally. The fact that a federal judge has a lifetime appointment and can call out the Department of Justice when it is acting contrary to law is important. If the Obama administration had the power to replace federal judges, or judges act politically to support the administration in power, the outcome could well have been different.

Third, this was an excellent example of why the Framers of the Constitution insisted on separating legislative and executive power. The bank regulators have extraordinary discretionary authority, to make sure that banks operate under safe and sound principles. In this case, they used these discretionary powers illegally to induce banks to deny financing to payday lenders. This was not authorized by Congress. But the involvement of the Department of Justice, one of the most important agencies of the executive branch, shows that the Framers’ desire to separate legislative and executive authority was not misplaced. When Congress gives extraordinary levels of discretionary authority to an executive agency like bank regulators — something it is has done increasingly since the New Deal — there is a potential opportunity for misuse and a danger to liberty.

Not all administrations are, like the Obama administration, willing to abandon due process and legal restrictions to achieve certain policy ends. But we risk this kind of lawlessness in the future unless administrative power is limited by law.

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Election shows that US divisions are only growing wider - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 13:25

Divided government has been the American norm over the last 50 years. It has been our condition 70 percent of the time, and voters have ended every period of unified party control of both Congress and the White House after at most four years.

In that respect, we just had a very normal election. Voters experienced two years of of unchecked Republican dominance of Washington, and decided they had had enough of it — just as they decided that two years of Democratic control was enough after Bill Clinton’s first two years and Barack Obama’s first two years. But largely because so many of the Senate races were on Republican turf, Donald Trump’s party managed to gain seats in that body.

Voters cast their midterm election ballots at the Santa Ana Methodist Church in Santa Ana, California, November 6, 2018. Reuters

The principal consequences of these election outcomes are three. Republicans will be able to keep confirming the president’s nominees to the executive and the judicial branches. (They may be able to get slightly more conservative nominees through than they did before.) Democrats, however, will be able to use the subpoena power to conduct oversight of the administration or, as Republicans will probably soon be calling it, harassment. And legislative gridlock will continue. Republicans quit trying to advance major legislation a year ago, and now both parties will use legislation mostly to score political points rather than to actually get it enacted.

This last conclusion runs counter to some happy talk on election night about the possibility of bipartisan cooperation on infrastructure. But the parties don’t actually agree on much beyond their common liking of the word “infrastructure.” For action to take place, either one party would have to surrender or both would have to compromise on the policy questions.

Additionally, House Democrats would have to be willing to help the president score a bipartisan achievement. And all this would have to take place in the midst of legal battles between the White House and the House.

The split between the Senate and the House showed that our partisan divisions are deepening rather than being resolved. Differences between rural and urban voters, and between whites with and without college degrees, have continued to widen. The elections also showed some of the obstacles each party will face if it seeks to attain a governing majority in 2020.

The Republican coalition is not a majority, and is not holding. Trump won support from some white working-class voters who had previously backed Obama, but Republicans have not yet absorbed those voters into their party – and at the same time Trump has driven away college-educated suburbanites.

The Democrats may have a national majority, but if so it is a small one that is geographically distributed in a way that may put the Senate and the presidency out of reach. In the weeks before the election, Democrats boasted about their comeback in the Midwest. But that comeback was somewhat disappointing: They failed to win the governorships of swing states Ohio and Iowa.

The fact that a lot of great progressive hopes faltered in the election — Andrew Gillum in Florida, Stacey Abrams in Georgia, Beto O’Rourke in Texas, Kara Eastman in Nebraska and Randy Bryce in Wisconsin all lost — might keep Democrats from going down one blind alley. But they may have to make concessions, especially on cultural issues dear to many Democrats, to be more competitive on the outskirts of Trump country.

Nancy Pelosi concluded her victory speech by suggesting, sweetly if fancifully, that Americans had cast a vote for “unity.” What we can more realistically look forward to is two more years of social division, partisan rancor and governmental sclerosis — all of that, plus a presidential election that we can now consider underway.

Discussing the midterms’ effect on the economy: Pethokoukis on CNBC’s ‘Squawk Box’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 11:41
DeWitt Wallace Fellow James Pethokoukis discusses possible issues and proposals that might arise from a newly elected Democratic majority in the House.

The hollowing out of American political parties - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 11/07/2018 - 11:30

It is perhaps the central irony of our politics today: We live in an incredibly polarized and partisan moment, but our political parties have never been weaker.

As odd as it sounds, political parties in democracies have an important anti-democratic function. Traditionally, the parties shaped the choices put to voters. Long before voters decided anything in the primary or general elections, party bosses worked to groom good candidates, weed out bad ones, organize interests, and frame issues.

In the modern era, the story of party decline usually begins in the aftermath of the 1968 presidential election. The move toward primaries and the democratic selection of delegates took power away from the bosses.

Senate Minority Leader Chuck Schumer (D-NY) and Senate Majority Leader Mitch McConnell (R-KY) walk to the Senate chamber on Capitol Hill in Washington, February 7, 2018. Reuters

After Watergate, there were more reforms, curbing the ability of the parties to raise and spend money freely. This led to the rise of political-action committees, which raise cash independent of the formal party structure. As Senator Mitch McConnell (R., Ky.) said during the floor debate over the McCain-Feingold campaign-finance bill in 2001: “We haven’t taken a penny of money out of politics. We’ve only taken the parties out of politics.”

Outside groups — the National Rifle Association, Planned Parenthood, unions, etc. — often do more to effectively organize voters around single issues or personalities than the parties do. The Kochs, Tom Steyer, George Soros, and Sheldon Adelson serve as party bosses, only outside the parties.

Technology is another, less obvious force siphoning power from the parties. For instance, as political historian Michael Barone has noted, the telephone dealt a grievous blow to political conventions, where insiders have outsize power.

“Until the 1960s, the national convention was a communications medium,” Barone writes. “Political leaders in the various states seldom met each other, outside of sessions of Congress, during the four years between presidential elections.”

The telephone eliminated the need for the face-to-face negotiations. Today, political conventions are little more than infomercials for presidential candidates.

The Internet and cable TV have accelerated the eclipsing of parties. Opinion websites and TV and radio hosts now do more to shape issues and select candidates than the parties do. It’s a bit like comic books. Readership of comics has been in steady decline, but movie studios and toy manufacturers still feed off the brands created generations ago.

The weird thing is that the American people didn’t seem to notice. The largest voting bloc in America today call themselves independents, but most of them tend to be as partisan as everybody else, while “pure independents” are less likely to vote at all.

And yet, Americans keep talking about partisan politics as if the parties are in charge, and base voters on the left and the right keep railing against the party establishments like mobs unaware that they’re kicking dead horses.

Among the many problems with the rotting out of the parties is that the rot spreads. The parties are supposed to be where politics happens. McConnell’s point about money in politics is analogous to the larger trend. When you take political power out of the parties, other actors seize it.

When wielded by people who aren’t supposed to be in the politics business, that power corrupts. This is why every Academy Awards ceremony is peppered with asinine political jeremiads, and why late-night-comedy hosts serve as de facto Democratic-party organizers.

It’s why people such as Jerry Falwell Jr., the president of Liberty University, act like social-gospel ward heelers. It’s why the cable-news networks spend so much of their time rallying voters in one direction or another. And it’s why countless pundits and allegedly objective reporters serve as unofficial political consultants.

It’s also why Donald Trump could leverage his celebrity to seize the GOP nomination, and why someone like Oprah Winfrey could be next.

There are other, larger forces at work. The decline of strong independent institutions — religious, civic, and familial — has people searching for other outlets to find a sense of meaning and belonging. Identity politics, populism, and nationalism are filling that void.

That’s happened before, but when it did, the parties were there to filter, constrain, and channel those passions in a healthy direction. The Potemkin parties can’t, or won’t, do that anymore. The result is a nation of partisans decrying partisanship.

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Would new privacy laws help consumers? - Would new privacy laws help consumers?

Wed, 11/07/2018 - 11:00

Probably not. Indeed, they are more likely to benefit internet-based companies than consumers.

Why? Markets work to compensate consumers for the money or effort they expend for protecting their privacy. And the costs are restricted to only those consumers who want to protect their own privacy. In contrast, the costs of laws are spread to everyone through taxes, fees, etc., and markets don’t have to compensate consumers for government-imposed costs.

via Twenty20.

Why should a provider such as Amazon compensate its customers for allowing their information to be collected and used?

It is required by the economic incentives of the company and its customers.

Suppose that customers think it is creepy that Amazon gathers information on them when they buy books. (I’ll call this the creepiness factor, but it could be any reason for disliking Amazon watching and learning about the customer.) Then in order for these customers to be willing to buy from Amazon, the company has to provide a price that compensates them for the creepy feeling. Otherwise, the customers either would not buy or might to go Barnes and Noble, for example, and pay cash. If on the other hand customers think it is great that Amazon gathers information and uses it to make product recommendations, for example, then Amazon can reflect that premium feeling in the prices it charges. Either way, Amazon’s prices reflect how customers feel about Amazon and what they know about Amazon’s data practices.

But what about companies such as Facebook that don’t charge consumers?

A similar thing happens. Once Facebook users learn the company’s data practices, they consider the creepiness factor in deciding whether to be on the platform, how often to use it, and for what purposes. If the creepiness factor is high, Facebook has to make sure that using Facebook is sufficiently valuable to consumers that they feel compensated for the creepiness. Otherwise, their use of Facebook would be limited, and perhaps non-existent.

What if users actually value Facebook’s data collection and use? They can enjoy the benefits of Facebook’s services that rely on the company’s big data and the benefits of the company’s efforts to take care of customers who experience creepiness.

When is it better for privacy to be a consumer choice rather than a government imposition?

Almost always. Consider the Amazon and Facebook examples. In both situations the companies had to work to make up for consumers’ feelings of creepiness, if that was how consumers felt. If customers didn’t feel this way, then they would happily engage.

If a law imposed restrictions, the companies would no longer have to try to overcome the consumers’ negative creepiness feelings. And consumers who viewed the companies’ data gathering and analysis as positive would lose those experiences. And then there are the costs of the regulations, which would be recovered through taxes or fines, some of which would come to consumers even if they don’t use the services.

This sounds like it’s more about economics than privacy rights.

That’s right. There is little agreement on the definition of privacy. For example, speakers at a recent Federal Trade Commission hearing spoke of privacy as an issue of information property rights that the government could assign to someone, such as a consumer. Larry Lessig describes privacy as protecting personal space. Speakers at a recent University of Chicago symposium on privacy largely framed privacy as being about personal data. The EU’s General Data Protection Regulation (GDPR) places restrictions on companies for acquiring, retaining, and using data on EU citizens. The GDPR falls short of truly defining this as privacy or digital rights because the EU failed to place similar requirements on EU governments. So the GDPR is more about controlling companies than protecting privacy.

It seems more natural to think of privacy as a refusal by someone to provide information about him or herself, sort of like a company refusing to sell a product. The person can do this by choosing to not engage in an activity that generates information (such as internet search) or by restricting who can see the information that is generated (such as by using DuckDuckGo rather than Bing). This is about information generation and who can learn from it. The person generating the information is in control, making decisions that determine what information is generated and who can observe the information, even if the person isn’t fully aware of the implications of his or her decisions.

Once information is generated, it becomes what is called a stock, i.e., something in the inventory of the people or organizations that the information generator has allowed to observe and remember things about them. In exchange for allowing observers to watch and remember, the person generating information may set conditions on them, such as how long they can retain data, what it can be used for, and whether and how it can be transferred to others. So the information generator is in control by determining who can watch and remember, and under what conditions. The conditional rights are conferred when the information is generated.

In this framework, privacy is part of a larger issue of information generation and control, in which people that generate information extend rights to others prior the creation of the information. The only thing special about “privacy” is that it would refer to information about the person.

What should privacy laws do?

Privacy laws should facilitate consumers making well-informed decisions and enforce agreements. Laws such as the GDPR might look nice to consumers who do not realize that it has effects on services, prices, government costs, and who pays the costs, but it is hard to make consumers better off with broad privacy restrictions unless the costs of individual actions are very high relative to the costs of developing, implementing, and enforcing privacy laws.

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Cuba: When diplomacy turns to organized crime - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 11/06/2018 - 18:52

Cuba’s President Miguel Díaz-Canel is making his first diplomatic tour abroad, visiting China, North Korea, Russia, Vietnam, and Laos, among other countries. Previously, Díaz-Canel made a brief visit to Venezuela, Cuba’s vassal state in the region, to ensure ties and its continued role in Venezuela’s domestic security apparatus. Despite the Cuban Foreign Minister, Bruno Rodriguez, stating this diplomatic tour was a direct result of a US “path of confrontation,” sojourns in capitals such as Beijing, Pyongyang, and Moscow are nothing novel for Cuba.

Cuban President Miguel Diaz-Canel is seen with North Korean leader Kim Jong Un as they attend the grand gymnastics and artistic performance “The Glorious Country” in Pyongyang in this undated photo released by North Korea’s Central News Agency (KCNA) on November 6, 2018. KCNA via REUTERS

As the Trump administration reverses the détente of the Obama years and ratchets up the pressure on Cuba, Díaz-Canel is seeking to solidify relations with an unsavory cast of characters who all have one thing in common — all are heads of state subject to some form of US sanctions. Indeed, the Cuban president’s only stated business on this trip is expanding “strategic relations” (read: sanctions busting). In its efforts to curtail the extent of US sanctions evasion, Cuba’s bilateral relations with Russia, China, and North Korea should be a top concern of the Trump administration.

One of Cuba’s most enduring allies during the Cold War, Russia under Putin has attempted to regain much of the clout it enjoyed before having to pare back its support after the fall of the USSR. Recently, Russia lent $50 million in state loans to help the Cubans purchase and repair military equipment. The unsolved and bizarre microwave attacks on US diplomats at the embassy in Havana, which some strongly suspect of Russian involvement, point to more covert forms of cooperation between old allies.

Much like Russia, China has bailed out Cuba’s underperforming economy multiple times, and as a result, holds the right to many of their oil reserves in the Gulf of Mexico. It has operated intelligence stations in Cuba since at least 1999, from which it engages in an increasing frenzy of cyber espionage, signals intelligence, and potentially offensive operations. With its increasing militarization of islands in the South China Sea, China may view Cuba as a prime candidate to follow this blueprint, in order to expand its intelligence operations and deepen its influence in the Western Hemisphere.

Perhaps most concerning of all, however, is the deepening strategic relationship between Cuba and North Korea. What began as ideological affinity between socialist allies — upon visiting the country in 1960, Che Guevara proclaimed it an inspiring model for Cuba — eventually morphed into joint covert support for guerilla insurgencies in countries like Congo, Angola, and Eritrea. Biting US sanctions on both countries have led to the most recent stage of Cuba-North Korea relations: a shared interest in skirting sanctions by developing fronts for illicit finance, organized crime, and weapons proliferation. North Korea’s embassies are thin veneers for all types of illicit activities as its diplomats repeatedly abuse their immunity. In 2013, Panamanian authorities seized a North Korean ship seeking to transit the Panama Canal Zone with 240 metric tons of Cuban weapons (including anti-aircraft missiles) hidden underneath heaps of sugar. This follows a deep history of Cuba-North Korea weapons smuggling.

Cuba’s bilateral meetings with Russia, China, and North Korea, combined with its strategic location 90 miles off the US coast, ought to concern the Trump administration. Díaz-Canel’s diplomatic tour affects everything from sanctions on Russia and efforts to contain China’s rising military influence to the “maximum pressure” campaign against the North Koreans. In an era when revolutionary zeal is no longer the glue that binds them, the Trump administration must work tirelessly to ensure that greater cooperation between Cuba and its allies doesn’t result in sanctions evasion and weapons proliferation, or in the constitution of a staging ground for cyberattacks and espionage efforts that hurt the US and its allies in the Western Hemisphere.

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The worst choice for ‘Greatest Slovak’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 11/06/2018 - 18:30

The BBC mini-series and poll Great Britons (2002) is one of the success stories of British television, with spin-offs all around the world—most recently in Slovakia. In the UK, the title was earned by Winston Churchill, in Germany, the former Chancellor Konrad Adenauer was named “our best,” and in the US version, produced by Discovery Channel, President Ronald Reagan topped the list.

Unfortunately, Slovakia’s iteration of the show, launched on November 1 by the country’s public broadcasting corporation, the RTVS, has acquired a bitter anti-Semitic flavor. The television channel advertised Jozef Tiso (1887-1947), president of the wartime ‘Slovak State’, as one of the contenders for the title of the ‘Greatest Slovak.’

Nazi Germany leader Adolf Hitler greets Father Jozef Tiso who governed the Slovak Republic from 1939-1945 before being executed for war crimes against humanity in 1947. National Archives

To be sure, it is often a mistake to judge past historical figures by standards of the present, with Churchill being a prime example. But the case of Tiso is not a difficult one. A Catholic priest-turned nationalist politician, Tiso advocated Slovakia’s secession from Czechoslovakia just as Adolf Hitler was turning up the heat in the Sudetenland. When Nazis annexed the Czech part of the country and turned it into a ‘protectorate’, Tiso became the president of a one-party client state of the German Reich, which then acted as its reliable ally throughout the duration of the war.

Most significantly, Tiso was responsible for the deportations of Slovak Jews to German-occupied Poland, which started in 1942. Out of the 58 thousand people deported in the first wave (mostly young, unmarried women), only 282 returned. Overall, at least 70 thousand Slovak Jews perished in the Holocaust, out of an initial population of around 89 thousand.

At a time when some in Central Europe are seeking to minimize the involvement of local populations in the Holocaust, it bears stressing that the deportations from Slovakia were not a German imposition but resulted from the initiative of Slovakia’s government – and were, in fact, stopped in 1943 after considerable international pressure, including from the Holy See. The Slovak government also reimbursed Berlin 500 Reichsmark for each deported person (around $200, expressed in 1940 US dollars). President Tiso, who was arrested after the war and sentenced to death in 1947 for treason, war crimes, and crimes against humanity, was not timid about his motives:

“I am asking: Is it Christian that the Slovak nation is seeking to get rid of its eternal enemy, the Jew? Is it Christian? The love of self is God’s imperative. That love urges me to purify myself of everything that harms me and threatens my life. And I believe nobody needs convincing that the Jewish element has threatened Slovak life.”

Following public outrage, RTVS decided to exclude Tiso from the poll and to withdraw the promotional materials about him. The show is now also being investigated by the country’s National Criminal Agency for instigating extremism. Yet, the initial inclusion of the wartime politician and the prominence given to Tiso by the show’s producers, are not a fluke but part of larger and worrying project of Slovakia’s nationalists.

The country is currently governed by an eclectic, mostly pro-Western, and fragile coalition of the populist center-left ‘Smer’ party; a small center-right Hungarian party, ‘Most-Híd’; and of the Slovak National Party (SNS), led by the ambitious speaker of Slovak Parliament Andrej Danko. A nominee of SNS, Jaroslav Rezník was elected last year as the new head of RTVS, heralding a politicization of public broadcasting. Many of RTVS’ leading journalists resigned in protest and the new leadership has been since tightening control over RTVS’ news and other content.

Rezník was elected to his current role with the help of votes of the openly neo-Nazi “Kotleba” Party. Previously, he served as the head of Slovakia public radio during the years of the authoritarian Prime Minister Vladimír Mečiar. Later, as head of the country’s public-service news agency, TASR, he concluded a content-sharing agreement with Russia’s Sputnik. His political backers in SNS are vocal about their ambitions to remodel Slovakia’s government in the image of Viktor Orbán’s Hungary, through “a tough centralization of power,” as Danko (himself a frequent guest of Putin’s regime) put it.

In Orbán’s Hungary, the process of sanitizing the nation’s wartime history and its complicity in the Holocaust, undertaken under the government’s auspices by the revisionist historian Mária Schmidt, has been integral to the regime’s narrative about the special role of the Hungarian nation in history. It is not surprising that SNS are deploying the same technique in a country which, too, has a long history of casual anti-Semitism extending back to the era of Romantic nationalism of the 19th century.

The key difference is that in Slovakia such revisionist voices do not yet control all levers of power. Danko’s ambitions might be slowly growing, yet unlike in Orbán’s case, they do not seem to be matched by the ruthless, calculating intellect an aspiring authoritarian needs. Instead, SNS’s leader often attracts ridicule for his gaffes and attempts to add grandeur to his office. As a result, it is much easier for outside actors, including the EU and the United States, to pressure Danko’s coalition partners to make sure he is put in his place. On many subjects, such as his displays of affection for second-tier officials of Putin’s regime, that might not be worth the effort. However, when it comes Danko’s quest to revive the worst demons of Central Europe’s past, being silent is not an option.

Bridging the employer-educator divide - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 11/06/2018 - 15:59

America’s skills ecosystem is broken. Employers are confounded by workforce development institutions. Middle skills employees can’t get the training they need. Educators aren’t held accountable for outcomes. Now, innovative providers are aligning stakeholders around a common cause: creating a pipeline of workers with 21st century skills. Joe quizzes Frank Britt, CEO of Penn Foster, one of the oldest non-traditional educators in the U.S., on how the new skills ecosystem must be radically redesigned.

This podcast was originally published by Harvard Business School

The Femsplainers Podcast: Think you’re angry & have problems? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 11/06/2018 - 15:17

The Republican Women for Progress faces the thankless task of trying to bring moderate female voters back to the GOP. Christina and Danielle talk girl politics and more in this special mid-term election podcast.

The Indian Child Welfare Act does not help children | In 60 Seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 11/06/2018 - 15:14

AEI’s Naomi Schaefer Riley argues that the Indian Child Welfare Act of 1978 has adversely impacted Native American children by putting the interests of tribes ahead of kids.

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