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TESTIMONY: Moving the needle from degradation to defeat - New state-level estimates of the economic burden of the opioid epidemic - AEI

Wed, 01/17/2018 - 15:30

Chairman DeSantis, Ranking Member Lynch, honorable members of the Subcommittee on National Security, I am honored by the opportunity to testify before you today as you examine our nation’s efforts to defeat the Islamic State. My testimony will show that while the Obama administration’s approach incrementally degraded the Islamic State’s grip on swaths of Iraq and Syria, the Trump administration’s timely reforms have accelerated America’s gains against the Islamic State. I caution that these gains should not obscure the amount of work left to do to defeat ISIS and jihadist terrorist groups more generally. Doing so will require additional adjustments to our strategy, a few of which I will discuss today.

In response to the rise of the Islamic State, President Obama took a measured and cautious approach to re-establishing Iraq’s internal security. He relied primarily on conducting limited airstrikes and deploying a small cadre of special operators to build the capacity of the fledgling Iraqi military. A similar, though more restrictive, approach characterized our efforts against ISIS in Syria. In both cases, partner forces did eventually grow more adept at fighting ISIS, but only after the latter had weakened significantly.

The White House’s decision-making style impeded rapid progress against the Islamic State. Their risk aversion, inefficient target nominations process, and, above all, involvement in day-to-day operational and tactical decision-making added unnecessary friction to the decision-making process. These policies made for a time-consuming approach to a problem that required rapid responses.



A work requirement for Medicaid isn’t ‘cruel’ - New state-level estimates of the economic burden of the opioid epidemic - AEI

Wed, 01/17/2018 - 15:19
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“The Trump administration’s action today is cruel,” said Democratic Congressman Frank Pallone Jr. of New Jersey. The new policy is “the latest salvo of the Trump administration’s war on health care,” according to a health-care advocacy group. “The pain is the point” of the policy, wrote columnist and economist Paul Krugman.

They were attacking the Trump administration’s decision last week to allow states to impose work requirements on Medicaid beneficiaries. But far from being a “cruel” action designed to inflict “pain” on the vulnerable, the administration’s decision is completely reasonable.

Let’s start with the facts. First, the work requirements are targeted for able-bodied adults of working age. They do not apply to the elderly, to pregnant women or to the disabled. In addition, “work” is construed broadly to include community service, education, job training, volunteer service and treatment for substance abuse, among other potential forms of community engagement or self-betterment.

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Take the case of Kentucky, whose proposal was just approved. As part of a five-year demonstration project, Kentucky’s work requirement exempts the groups mentioned above, as well as primary caregivers of a dependent, the medically frail or those with an acute medical condition that prohibits work, and full-time students. Beneficiaries subject to the requirement must complete 80 hours of work activities a month to remain eligible for Medicaid. Community service and job training qualify as work.

Does it Take a shrink to evaluate Trump? - New state-level estimates of the economic burden of the opioid epidemic - AEI

Wed, 01/17/2018 - 15:05

One of my fellow Yale psychiatrists thinks President Trump ought to have his head examined—by force if necessary. Bandy X. Lee is calling for an “emergency evaluation” of Mr. Trump’s mental state. “In an emergency, neither consent nor confidentiality requirements hold,” she told Vox. “Safety comes first. What we do in the case of danger is we contain the person, we remove them from access to weapons.”

Is she serious? Democratic members of Congress seem to think so. In early December, she spent two days on Capitol Hill privately briefing a dozen of them about Mr. Trump’s purported dangerousness. “He’s going to unravel,” she told Politico, in summing up her message to lawmakers. “Trump is going to get worse and will become uncontainable with the pressures of the presidency.” Reps. Rosa DeLauro of Connecticut and Jamie Raskin of Maryland plan to host her at future events.

I wish Dr. Lee would stop making House calls. Her actions risk discrediting our profession.

To read the full article click here. The article will be posted here in full on January 22, 2018. 

The status of US Navy readiness: too small, too old, and too tired - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 22:52

Seventeen sailors have been killed this year in accidents involving two destroyers, the USS John S. McCain and USS Fitzgerald. The McCain incident spurred Admiral John Richardson to order a one-day, fleet-wide “operational pause” to search for the root causes of the collisions, but the Chief of Naval Operations did not need to look outside Washington for answers: the nation’s demands on his service have not diminished since the end of the Cold War, but the nation’s investments—in ships, aircraft, equipment maintenance, and sailors and their training—have sunk to unfathomed depths.

While admitting that he sounded like a “broken record” in testimony to Congress, the Navy’s number two leader succinctly explained the service’s dilemma: “Our Navy faces increased demand without the size and resources required to properly maintain and train for our future.” The Navy’s “battle fleet” is currently a bit more than half the size it was a generation ago. At the same time, America’s maritime commitments have grown, particularly in the Pacific and Indian Oceans and the Persian Gulf. Moreover, the reductions in forward-stationed land-based ground and air forces—and the reluctance to commit them to long-term irregular warfare campaigns in the Middle East—has exacerbated the pressure upon the Navy to project power ashore. For example, from their first use in the 1991 Gulf War through the Trump Administration’s strikes on Syria in April, the Navy has shot more than 2,100 Tomahawk missiles, while Navy carrier-based aircraft have flown hundreds of thousands of sorties in support of operations in Iraq, Afghanistan, and Syria. That is a historically unprecedented capability, but a very expensive way to provide fire support to an isolated combat outpost or to kill a terrorist leader.

Recently, we at the American Enterprise Institute convened a group of retired flag officers to conduct a series of “force-generation” exercises to quantify the Navy’s capacity to respond to deployment demands ranging from steady-state presence missions to simultaneous—but small-scale—crises. The consensus conclusion, also ratified by the many civilian role-players in the game, was that the combination of constant commitments and diminishing resources of the past two decades had “broken the camel’s back,” leaving the Navy too small, too old, and too tired yet operating frenetically to fulfill an expanding number of missions.

This article was originally published by Strategika. 

Maryland’s all-payer health reform — a promising work in progress - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 22:00

In January 2014, the State of Maryland and the Centers for Medicare and Medicaid Services (CMS) came to terms on an ambitious approach to improve care for Marylanders and to slow the growth of health care costs. The state shifted from its historic approach of limiting price growth by setting hospital rates for all payers to limiting overall hospital expenditures by establishing global hospital budgets.1 A second phase that broadens the policy scope to the total cost of care, including hospital and nonhospital spending, is expected to begin in 2019.

‘Viewpoint’: Chris Arnade on America’s forgotten communities - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 21:44

On this episode of Viewpoint, AEI’s Katharine Stevens sits down with photographer Chris Arnade. Arnade has a PhD in physics and was a Wall Street trader. After a crisis of conscience following the 2008 financial crash [3:02], Chris abandoned his banking job to travel the country and chronicle the lives of America’s forgotten masses. But more compelling than the photos were the real conversations that Chris had with real people across the United States [5:23]. He discusses analyzing the “front row and back row” of educational classes [13:56].

This interview originally was published on AEI’s YouTube channel.

Subscribe to the AEI Podcast Channel on Apple Podcasts for more Viewpoint.

Prodigies and Parenting - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 20:44

In a recent conversation with an administrator who spent years at one of Manhattan’s most prestigious prep schools, I brought up the subject of gifted education. “I don’t know what you mean,” she responded without a trace of irony. “Every child is gifted in his or her own way.” In a culture where every parent thinks he is raising a genius, teachers and principals (particularly those whose salaries depend on tuition dollars) have been taught never to say otherwise.

But for parents who really are raising geniuses, there seems to be little in the way of support or guidance. In their 2012 book on gifted education Chester Finn and Jessica Hockett argue that we have spent so much energy trying to get lower-performing students to catch up that we have neglected those in the upper tiers. Fortunately, for kids at the very top, like those profiled in Ann Hulbert’s new book, Off the Charts, schooling may be largely irrelevant.

The children Hulbert describes—from the famous ones like Shirley Temple and Bobby Fischer to the lesser known Billy Sidis and Norbert Wiener—demonstrated extraordinary talents at young ages and it was their parents, not their schools, that were tasked with determining how best to let these capacities flourish. Hulbert approaches her subject historically, beginning with “the wonder boys of Harvard,” Wiener and Sidis. As she writes,

The milestones began with mastery of the alphabet before two and full literacy by three or four. . . . Avid reading ensued, mostly of nonfiction. The boys then speedily amassed languages (Latin, Greek, German, French, and Russian for both, and some Hebrew, Turkish, and Armenian for Billy). Their intense scientific interests (anatomy and astronomy for Billy, chemistry and naturalist zeal for Norbert) inspired unusual strides before school age as well.

Their parents, though, took distinctly different approaches to the boys. Norbert went to high school at 9 and then college three years later. But rather than send him to Harvard right away, which was the obvious choice, his parents moved to be near Tufts and sent him there to keep him out of the spotlight for a bit longer. Billy, by contrast, “was on his own as he entered adolescence, and more of an outsider than ever on campus. Under suspicion . . . of being mentally unbalanced, he was prey to continued press hounding.”

And rather than protect him from such exposure, his relationship with his parents only made things worse. As a cousin observed, Billy’s parents were “not cruel” but they “had no truly paternal or maternal feeling: they could educate a child but not rear him, which is a different thing.”

This distinction between education and rearing is useful for all parents, not just those of prodigies. But for children who are particularly high achievers, it seems easy for parents to forget that their charges are still children and that their psychological development cannot be ignored in favor of the development of their talents. So many of the men and women profiled by Hulbert entered a period of major crisis in adolescence, and a surprising number seemed never to find their way out.

Billy Sidis became an eccentric, his life story shrouded in mysteries and lies. Norbert Wiener became a mathematician at MIT and the founder of the briefly influential field of cybernetics.

Henry Cowell’s parents seemed somewhat more attuned to the question of their son’s overall development and actually apologized for his early reading: “Both his father and I disapprove of beginning formal education when a child is very young, but when a baby points to a letter or word and fairly demands to be told the name of it, what’s to be done?”

For the most part, Henry, who was born in 1897 to parents of very modest means in Menlo Park, California, was given free range to pursue the subjects that he enjoyed. As his mother, who kept detailed notes on her son’s development—particularly his musical talents—wrote, “The child must be delighted with his work. . . . He must study the thing he wants while he wants to know it. . . . It is not the way of wisdom to hold Geometry before the face of a dreamer while he is at his dreams. First let him wake to the presence, if not the beauty, of angles in the world.”

Cowell, who went on to become a prominent modernist composer, was discovered at the age of 12 or so by Lewis Terman, a psychologist interested in the study of prodigies. He included Cowell in his Genetic Studies of Genius, a major longitudinal study that Hulbert dubs “the first youthful-talent search.”

With an IQ of 131, Cowell was not on the highest end of Terman’s group. But as Hulbert notes, “precocity, especially as measured on a scale like Terman’s, doesn’t turn out to be a very reliable precursor of outstanding mature performance . . . particularly of a mold-breaking variety.” Throughout Off the Charts Hulbert returns to the difficult transition from childhood prodigy to adult genius. Cowell’s life was hardly simple or neat, but Hulbert argues that, because of his upbringing, he was one of the few who made it.

Hulbert summarizes in her own words some of the findings from the Terman study’s 25-year follow-up: Within the study’s sample, “extra [IQ] points did not account for more accomplishment. What made the clearest difference [among the study’s subjects] was, not surprisingly, family background.” Cowell’s mother had helped him develop the kind of calm and self-assurance that served him well as he grew older. Cowell described how a theme might present “itself to me in a flash. . . . But it must be given in material form, and I may work long hours to get the scheme down in a form which adequately represents it.”

Indeed it is these long hours of work that seem to make difference between the child prodigy and the adult genius. As Hulbert notes, “Parents and mentors presumed that momentum would propel a young marvel onward through adolescence. They tended to gloss over the fact that immature absorption in a pursuit has to give way to newly committed, self-aware exploration.”

And this is one of the parts of Hulbert’s work that seems very much applicable to parents of average children, not just prodigies. Finding a way to move them from something with which they are briefly obsessed to having them push through some difficulties to achieve something larger is a deep challenge of modern parenting. How do you get a child who likes playing the piano when it’s easy to play to working through difficult passages for long periods of time? Whether it’s reading or math or constructing complex Lego structures, it is tempting to let children slide when things become difficult. (This is a challenge Amy Chua famously addresses in Battle Hymn of the Tiger Mother.) As Hulbert summarizes the tenets: “Start the talent-building process very early; assume the child is sturdy and full of energy; expect feats of mastery; value family loyalty above youthful autonomy or popularity with peers.”

In a world filled with parents who hover over their children and protect them from any bad grade, poor performance, or other disappointment, there is no doubt that a dose of grit will probably help strengthen young people for their journeys to adulthood. But there is a difference between providing them with regular challenges and treating them as shorter versions of adults. As Hulbert concludes: “The last thing prodigies, or any other children, need is to feel that the clock is ticking on their talents.”

Naomi Schaefer Riley, a visiting fellow at the American Enterprise Institute, is the author of Be the Parent, Please: Stop Banning Seesaws and Start Banning Snapchat.

Finding the right balance on college regulation - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 19:57

Republicans in Congress have no shortage of criticisms for the web of regulations that ostensibly hold the nation’s colleges and universities to account. Now, with full GOP control of the federal government, many lawmakers want to act. A higher-education reform bill, the PROSPER Act, passed by Republicans on the House Education and Workforce Committee last month, would end several major regulations and modify others. While there’s a case to be made for slimming down some of these rules (multiple regulations are meant to enforce the same thing) the PROSPER Act does not propose an adequate replacement.

Conservatives rightly see flaws in existing accountability regulations for colleges and universities that receive federal subsidies. But they also struggle to strike the right balance with these policies. Some want strict, central-planning-like regulations. Others want none, seeing them as intrusive federal overreach. The right balance would establish a floor to guard against fraud and waste.

The ideal accountability system should not, however, attempt to establish ratings for colleges as the Obama administration once proposed. Nor should it aim to make fine-grained judgements about value. No supporter of free markets should want a system under which lawmakers and bureaucrats use government money and standards to pick winners and losers in higher education. That critique also applies to the temptation to exempt broad swaths of institutions or carve out set-asides for a favored school or profession.

This article first appeared in U.S. News & World Report on January 16, 2018. Read the full article here.

Suppose you live in America’s most liberal state. Now suppose you live in the state known as “poverty capital of America.” But I repeat myself. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 19:22

The table above shows US states ranked for two different measures of poverty: a) the official measure of poverty and b) the Census Bureau’s recently introduced (2011) Supplemental Poverty Measure (SPM), which accounts for each state’s cost-of-living, housing costs, utilities, medical costs and taxes. It also considers non-cash government assistance as a form of income and is therefore considered a more accurate measure of poverty than the official rate. For the country as a whole, the percent of Americans in poverty using the SPM of 14.7% for the years 2014-2016 (averaged) is one percentage point higher than the percent of Americans in poverty (13.7%) using the official poverty measure.

On an individual state basis, the biggest changes in a state’s poverty rate between the two measures in each direction are: a) California’s official poverty rate of 14.5% ranked it No. 16 but the state moved up to No. 1 at 20.4% (highest state poverty rate in the US) using the SPM ( a difference of +5.9%) and b) Mississippi’s poverty rate ranked it No. 1 at 20.8% using the official measure but No. 5 at 16.9% using the SPM (a difference of -3.9%). Overall, 18 states, including California showed a greater percentage of people in poverty using the SPM, 30 states, including Mississippi, showed a lower percentage of people in poverty and two states showed no change (North Dakota and Utah).

Obviously, the reason for the increase in California’s (and 17 other states) poverty rate using the SPM is because of the state’s high cost-of-living including sky-high housing costs (median home price of $519,100) and because of high taxes and energy costs. And the decrease in Mississippi’s SPM poverty rate (and 29 other states) is because of that state’s low cost-of-living, including low housing costs (median home price of $114,400).

A recent LA Times op-ed by Kerry Jackson, Pacific Research Institute fellow in California studies, uses the SPM measure of poverty to answer the question “Why is liberal California the poverty capital of America?” Here’s an excerpt:

Guess which state has the highest poverty rate in the country? Not Mississippi, New Mexico, or West Virginia, but California, where nearly one out of five residents is poor. That’s according to the Census Bureau’s Supplemental Poverty Measure, which factors in the cost of housing, food, utilities and clothing, and which includes non-cash government assistance as a form of income. Given robust job growth and the prosperity generated by several industries, it’s worth asking why California has fallen behind, especially when the state’s per-capita GDP increased approximately twice as much as the U.S. average over the five years ending in 2016 (12.5%, compared with 6.27%).

It’s not as though California policymakers have neglected to wage war on poverty. Sacramento and local governments have spent massive amounts in the cause. Several state and municipal benefit programs overlap with one another; in some cases, individuals with incomes 200% above the poverty line receive benefits. California state and local governments spent nearly $958 billion from 1992 through 2015 on public welfare programs, including cash-assistance payments, vendor payments and “other public welfare,” according to the Census Bureau. California, with 12% of the American population, is home today to about one in three of the nation’s welfare recipients.

Kerry Jackson identifies several specific factors that collectively contribute to making California the “poverty capital of America.”

1. Welfare State Bureaucracy and Lack of Pro-Work Welfare Reform. The state and local bureaucracies that implement California’s antipoverty programs have resisted pro-work reforms. In fact, California recipients of state aid receive a disproportionately large share of it in no-strings-attached cash disbursements. It’s as though welfare reform passed California by, leaving a dependency trap in place. Immigrants are falling into it: 55% of immigrant families in the state get some kind of means-tested benefits, compared with just 30% of natives.

Self-interest in the social-services community may be at fault. To keep growing its budget, and hence its power, a welfare bureaucracy has an incentive to expand its “customer” base. With 883,000 full-time-equivalent state and local employees in 2014, California has an enormous bureaucracy. Many work in social services, and many would lose their jobs if the typical welfare client were to move off the welfare rolls.

2. High Housing Costs. Further contributing to the poverty problem is California’s housing crisis. More than four in 10 households spent more than 30% of their income on housing in 2015. A shortage of available units has driven prices ever higher, far above income increases. And that shortage is a direct outgrowth of misguided policies …. including restrictive land-use regulations that drive up the price of land and dwellings.

3. High Energy Costs. Extensive state environmental regulations aimed at reducing CO2 emissions make energy more expensive, also hurting the poor. By some estimates, California energy costs are as much as 50% higher than the national average. According to a 2015 Manhattan Institute study nearly 1 million California households face energy expenditures exceeding 10% of household income. In certain California counties, the rate of energy poverty was as high as 15% of all households.

4. $15 an Hour Minimum Wage. Looking to help poor and low-income residents, California lawmakers recently passed a measure raising the minimum wage from $10 an hour to $15 an hour by 2022 — but a higher minimum wage will do nothing for the 60% of Californians who live in poverty and don’t have jobs. And research indicates that it could cause many who do have jobs to lose them. “Estimates suggest that a one-dollar increase in the minimum wage leads to a 14% increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating),” according to a Harvard University study. These restaurants are a significant source of employment for low-skilled and entry-level workers.

And here is the pessimistic conclusion of Jackson’s op-ed:

With a permanent majority in the state Senate and the Assembly, a prolonged dominance in the executive branch and a weak opposition, California Democrats have long been free to indulge blue-state ideology while paying little or no political price. The state’s poverty problem is unlikely to improve while policymakers remain unwilling to unleash the engines of economic prosperity that drove California to its golden years.

Related: As I reported several weeks ago on CD, California ranked last year as America’s No. 4 Outbound State based on household moves (60% outbound vs. 40% inbound) according to North American Van Lines’ 2017 US Migration Report. It was also noteworthy that 2017 was the first year that California ever ranked in the Top Five outbound US states and that out-migration might be partly explained by the Golden State’s new status as the “poverty capital of America.”

Is this Europe’s federalizing moment? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 18:46

Will the German coalition agreement mark a breakthrough in the EU’s transformation into a genuine federation? That is too early to say. The Social Democrats (SPD) still need to give the green light at their party congress this weekend. But even if they do, some of the deal’s proposals for EU policies are bound to be controversial and deepen the already-existing divides between EU members.

Germany’s Chancellor Angela Merkel and French President Emmanuel Macron attend a bilateral meeting during a European Union leaders summit in Brussels, Belgium, December 14, 2017. REUTERS/Ludovic Marin/Pool

But first, the good news. There is growing recognition that the EU’s democratic deficit has amplified the bloc’s recent crises, as politically charged, Europe-wide decisions were taken without proper democratic accountability. The draft German coalition agreement promises to strengthen the European Parliament, including its control of the European Stability Mechanism (ESM), the ad hoc bailout fund created to respond to fiscal crises at the Eurozone’s periphery. The ESM would be transformed into a “parliamentary-controlled European Monetary Fund, which should be enshrined in Union law.”

Yet, there is a more fundamental problem. European leaders have a limited understanding of federalism. The term is commonly used as a shorthand for transferring competencies to Brussels in an open-ended way. The coalition agreement thus calls for bigger contributions by Germany to European budgets, in order to fund “economic stabilization and social convergence and support for structural reforms in the euro area, which could be the starting point for a future Eurozone investment budget.”

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A federalization project worthy of its name would start by identifying those public goods that need to be provided at the EU’s, or the Eurozone’s, level: defense, foreign, and trade policies, pan-European infrastructure projects, and perhaps a minimal social safety net to facilitate free movement of labor. And it would have to go hand-in-hand with the identification of policy and spending areas that are to remain outside of Brussels’ reach. Alas, the coalition agreement — as well as most such conversations in Europe — turns the logic upside down by positing the transfer of competencies and spending power as a process, typically saying nothing about how the additional funds are to be used.

Here is the most worrying aspect of it all. Not even staunchly pro-European politicians are articulating a positive vision for the EU’s future — the why of the European project — that would differ markedly from Emmanuel Macron’s “Europe That Protects.” While  the German coalition agreement rejects protectionism and pays lip service to economic dynamism and innovation, its scant practical proposals — disproportionately focused on fighting “tax dumping, tax fraud, and tax avoidance” — are unlikely to make the EU a better place to do business.

The document goes on to single out the US tech giants Google, Apple, Facebook, and Amazon as examples of companies “playing EU member states off each other” in order to minimize their tax liability. The EU’s response should be the completion of a common corporate tax base — to which there is arguably some economic merit — and the imposition of minimum corporate rates, thus cracking down on supposedly harmful tax competition from countries such as Ireland, Slovakia, and Estonia.

Except that it is difficult to see such competition as unequivocally harmful. Base-broadening, rate-cutting tax reforms have had pro-growth effects in countries that adopted them — in some cases quite dramatic ones. Across the EU, meanwhile, there is little evidence of a race to the bottom: although statutory rates on corporate income decreased, tax revenues remained stable. But even if such processes were underway, a shift away from the taxation of capital toward other bases would be consistent with economic efficiency, which urges to tax more “elastic” (e.g. mobile) bases less heavily.

Whatever its substantive merits, a Franco-German push for corporate tax harmonization is going to strengthen centrifugal forces in smaller EU countries, some of them governed by authoritarian populist governments, already alienated from Brussels over questions concerning refugees and rule of law. Regardless of what one thinks of the emerging Franco-German consensus, to deepen such divides unnecessarily at this time would do the European project a major disservice.

Learn more:

Sexual harassment: What do the polls say? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:39

How many women have been sexually harassed at work? Twenty-two percent of employed women in a late summer 2017 Pew Research Center poll said they had personally experienced sexual harassment at work. Thirty percent of women told Economist/YouGov online pollsters in October that they had been a victim of sexual harassment at work. And in a November NPR/PBS NewsHour/Marist survey of registered voters, 35 percent of women said they had personally experienced sexual harassment or abuse from someone in their workplace. In an October ABC News/Washington Post poll, 30 percent of women said they had experienced unwanted sexual advances from a man who worked at the same company as they did, and 23 percent said they had experienced this from a man who had influence over their work situation.

There are also differences in women’s responses in recent polls about whether they have ever been harassed, though the share of women who report harassment is generally higher than in questions that focus on the workplace. In Gallup’s late October poll, 42 percent of women said they had been a victim of sexual harassment. Sixty percent of women in a November Quinnipiac poll of registered voters said they had experienced it, while 46 percent in a December Economist/YouGov online survey also responded in the affirmative. Question wording, the timing of the surveys (the story got more attention late in the year and may have affected responses), and question order or placement probably explain some of the variation in responses. So, too, is the possibility that some women don’t feel comfortable talking to strangers or answering online questions about these experiences.

It is difficult to measure individual experiences with sexual harassment, but there is more consistency in responses on broader questions about the significance of the problem and what recent high-profile allegations represent. Two-thirds nationally in a Pew poll from late November–early December said recent allegations of sexual harassment and assault against prominent men mainly reflect widespread problems in society, compared to 28 percent who said they are mainly isolated incidents of individual misconduct. Sixty-four percent in the October ABC News/Washington Post survey said sexual harassment of women in the workplace is a serious problem in this country. In the new Gallup poll, 69 percent said sexual harassment in the workplace was a major problem these days.

Given public views of the severity of the problem, it is comforting to know that most people think their own workplaces take sexual harassment seriously. Eighty-seven percent in the NPR/NewsHour/PBS survey, for example feel their current workplace provides enough protection against harassment and abuse, and almost seven in ten in another question said their workplace takes it very seriously. Ten percent of employed people said it was a big problem in their workplaces in the Pew poll this summer while a quarter said it was a small problem and 64 percent not a problem.

In most of the new polls, men and women agree about what constitutes harassment, but, in almost all cases, men were less likely to see the action or behavior as such. Here are a few items from the Barna Group’s late October poll: In their late poll, 96 percent of women and 86 percent of men said “touching or groping” counted as harassment. Eighty-six percent of women said “making sexual comments about looks or body” constituted harassment; 70 percent of men gave that response. Eighty-three percent of women, but 69 percent of men said sexually explicit emails or texts constituted harassment. Fifty-eight percent of women compared to 47 percent of men said persistence in asking someone out on a date after being told no was harassment. In this poll, fewer than a third of men or women felt whistling, staring, or winking was harassment.

In a November Economist/YouGov poll that asked whether various behaviors would be sexual harassment if a man, who was not a romantic or sexual partner or friend, did them to a woman, 60 percent of women but 50 percent of men thought “wolf whistling at a woman” was always or usually harassment. Large majorities of men (95 percent) and women (96 percent) said a man exposing himself or flashing constituted harassment. There was a big gap on one question: 55 percent of women, but only 38 percent of men thought looking a woman’s breasts was harassment. In this poll, winking didn’t constitute harassment for most men or women, nor did a man asking a woman out on a date. Twenty-nine percent of women and a quarter of men said a man commenting on a woman’s attractiveness directly to her was harassment.

Lewd, aggressive, or threatening behavior is clearly seen as harassment, flirtatious actions less so. It’s important to take care in interpreting early poll data when an issue catches fire, but the data collected thus far present a fairly consistent picture of attitudes about harassment.

Federalism and federal criminal justice reform policies - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:38

In the latest AEI Economic Perspectives paper, Fordham Law School professor John Pfaff lays out some of the challenges associated with criminal justice reform, in particular the relative small direct role the federal government (or any individual government entity) plays. He suggests a number of federal policy changes that could make a meaningful dent in the number of incarcerated persons in the United States, without unnecessarily jeopardizing public safety. Most but not all of them target the incentives facing state and local governments, or areas where limited funding changes can have relatively large effects.

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One example of the latter type of policy is to provide federal grants for indigent defense spending. While about 80% of all defendants who face prison or jail time are entitled to a state-provided defense lawyer, only about 2% of state and local criminal justice spending goes toward such spending. This is an area where federal grants could make a more significant difference to policy outcomes than similar amounts of federal funds directed at law enforcement capabilities or prison construction, where they would likely end up being of inframarginal importance. This is just one example of promising federal criminal reform policy; click here to read about many more.

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New state-level estimates of the economic burden of the opioid epidemic - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:32

No one disputes that opioid abuse has caused an epidemic in our country, one that costs tens of billions, if not hundreds of billions, of dollars per year. Less well known, but of vital importance to policymakers, is how these costs are distributed. Opioid abuse rates and deaths vary considerably from state to state, as do the costs associated with this epidemic. But researchers have generally focused on the economic impact of the crisis in the aggregate, at the US level. In a new analysis, I estimate the cost at the state level and find substantial variation across the country. Here, I offer a preview of my findings, which will be released in full next month.

As policymakers consider how to address the opioid epidemic, it is important that they begin with an understanding of how this burden is distributed.

My analysis begins with two recent estimates of the societal cost of the opioid crisis. The first is from researchers at the Centers for Disease Control and Prevention (Florence et al. 2016), and the second from the White House Council of Economic Advisers (CEA 2017). The study by Florence and coauthors aggregates nonfatal costs — that is, spending on health care and substance abuse treatment, criminal justice costs, and lost productivity — associated with abuse and misuse of opioids. CEA builds from that estimate and adds the societal burden of fatalities from opioid overdoses, estimating the nonfatal costs of the opioid epidemic in 2015 to be $72.3 billion and the fatal costs to be $431.7 billion for a total cost of $504 billion.

To distribute these estimates across the fifty states and the District of Columbia, I consider the state-by-state variation in opioid overdose deaths, opioid abuse disorders, health care costs, criminal justice costs, and worker productivity. To control for variations in the size of each state, I present results on a per-capita basis.

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My analysis shows that the nonfatal per-capita economic burden of the opioid crisis is highest in the District of Columbia ($352 per resident) and lowest in South Dakota ($162 per resident). Adding fatalities, as CEA did, gives West Virginia the highest per-capita burden ($4,793 per resident) and Nebraska the lowest ($465 per resident). A table that provides a state-by-state breakdown of total costs, per-capita costs, and costs as a share of state GDP is available here.

The two maps below illustrate the share of the total estimated cost borne by each state. The first map illustrates the per-capita cost of the epidemic based only on health care, criminal justice, and productivity effects. The second map includes the additional costs associated with the loss of life, estimated at over 33,000 in 2015 alone.

The misuse and abuse of opioids in the United States imposes incredible hardship on those who are addicted, their families, communities, and the economy more broadly. As overdose deaths and costs associated with opioid abuse rise, policymakers are increasingly looking for ways to stem the epidemic. Hearings have been held in the Senate HELP and Finance Committees as well as the House Committee on Oversight and Government Reform and the House Energy and Commerce Committee. Tomorrow, the House Ways and Means Oversight Subcommittee will hold a hearing to examine the response to the opioid crisis by the Centers for Medicare and Medicaid Services. As policymakers consider how to address the opioid epidemic, it is important that they begin with an understanding of how this burden is distributed.

Unfortunately, measuring the problem is far easier than crafting solutions. The next steps will be more challenging.

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A Smarter Approach to Federal Assistance with State-Level Criminal Justice Reform - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:28


This brief explains how Congress and the president can best help reduce our country’s outsized reliance on imprisonment, a goal with rare, widespread bipartisan support. Successful interventions will need to target issues that previous efforts have overlooked or ignored, and they will need to take better account of the haphazard ways that costs, benefits, and responsibilities are fractured across city, county, state, and federal governments. If designed properly, however, federal efforts could play an important role in pushing our criminal justice system to adopt more efficient, as well as more humane, approaches to managing and reducing crime.

A Smarter Approach to Federal Assistance with State-Level Criminal Justice Reform

Look beneath the surface of World Bank’s rosy economic report - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:21

The World Bank’s report that the global economy is now operating at close to full capacity would seem to be a mixed blessing.

On the one hand, there is certainly reason to celebrate that we are now at last enjoying a synchronized global economic recovery and that the world economy is operating at near its potential.

On the other hand, there is reason to fear that approaching global full employment could very well be a precursor to aggressive monetary policy tightening by the world’s major central banks as they become forced to make efforts to avoid inflationary pressures.

That in turn could lead to the painful correction of financial market excesses and to the bursting of asset price bubbles around the globe that could very well derail the world economic recovery.

Almost a decade after the world’s worst economic recession in more than 70 years, the World Bank is now reporting that the world economy finally appears to be firing on all cylinders. At long last, the European and Japanese economies appear to be catching up with the long-standing U.S. economic recovery.

Meanwhile, it appears that emerging market economies like Brazil, China, India and Russia, are now regaining their earlier economic momentum. As a result, world employment is increasing and slack in the global economy has been all but used up.

Surprisingly, in its analysis of the current world economic recovery and of the present global economic outlook, the World Bank glosses over the artificial way in which the global economic recovery has been achieved. In particular, it pays no attention to the unduly heavy burden that has been placed on monetary policy to get the global economy moving.

By the same token, it makes no mention of the serious and dangerous distortions in global asset market prices that ultra-unorthodox monetary policy has created, which could very well have set up the global economy for a hard landing.

One measure of the undue burden that has been placed on monetary policy is the fact that the world’s major central banks have been forced to maintain their policy interest rates at close to zero for several years. Another is that these central banks have had to resort to government bond buying on a massive scale to generate an economic recovery.

As a result of that bond buying, it is estimated that since 2008, there has been a staggering $10 trillion increase in the combined balance sheets of the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan.

While very unorthodox monetary policy has succeeded in producing the synchronized global economic recovery to which the World Bank refers, it has done so at the cost of creating serious financial market risks.

Global equity valuations now are at lofty levels that have only been experienced three times in the last 100 years. Meanwhile, government bond yields have declined to record-low levels, risk premiums on high-yield and emerging market bonds have been substantially compressed, and bubbles now characterize the Australian, Canadian, Chinese and United Kingdom housing markets.

Past experience would suggest that asset price bubbles burst and financial market excesses get corrected when monetary policy starts to go into a serious interest rate increasing cycle.

For which reason, one would think that if the World Bank is right that the world economy is now at its potential and that inflationary pressures are on the horizon, we should be bracing ourselves for disruptive financial market corrections.

It is well to recall that the World Bank, along with the other multilateral lending institutions singularly failed to anticipate the 2008-2009 Great Recession. Judging by its latest Panglossian assessment of the global economy, it would seem that the World Bank will once again be flat-footed by the next major global economic downturn.

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

Helicopter money could reduce instability - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 16:16


Jason Cummins does us a service by noting that various financial market indicators are flashing red about financial stability risk (“Flashing red metrics should alert the Fed to take action”, January 10). However, if the asset market price bubble train has already left the station, one has to ask whether it is not too late for the Fed to do anything now by issuing warnings or by raising interest rates to avoid excessive market risk taking from having taken place.

It would also appear that Mr. Cummins is too pessimistic about the scope for monetary and fiscal policy to address the fallout from the bursting of financial asset market bubbles.

To be sure, the recent US tax cut has reduced the country’s fiscal space and there is no political appetite for yet another round of quantitative easing. However, there would seem to be nothing to stop the US from resorting to some form of Milton Friedman-style “helicopter money” that would involve the US Treasury sending each citizen a check that would be financed by the Federal Reserve on the easiest of terms.

One would think that helicopter money would be effective in providing the economy with needed stimulus in the event of a large asset price correction. It would also be politically very popular in that, unlike quantitative easing, it would not be seen as a policy that favored Wall Street over Main Street.


Saving Civil Society From Itself - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 14:51

For Alexis de Tocqueville, bottom-up cooperation in pursuit of political and non-political ends was necessary to sustain the life of a free, democratic society. “[If men living in democratic countries] never acquired the habit of forming associations in ordinary life,” he wrote, “civilization itself would be endangered.”

Yet, could it be that an important part of our problem today is that people tend to cooperate too much? Namely, that it has become easier than ever to form communities that filter communication, suppress internal dissent, and consider their own standards above any outside criticism? According to the economic historian Timur Kuran, such “intolerant communities lay the foundations for tyranny by creating constituencies prepared to suspend the rule of law for some higher purpose.”

If it is indeed underway, such a balkanization of the public space into intolerant communities vying for power might count among the most important threat facing free societies at this time. Its consequences go far beyond the question of who the White House’s current occupant is, or what immigration and trade policies Western democracies ought to pursue. What is at stake is our ability to live in self-governing societies and to sort out political and social problems through civil association and democratic competition.

Keep reading at The American Interest.


North Korea and South Korea talks: What do they mean? | In 60 seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 14:41

While the image of North and South Korea meeting to talk implies that perhaps there could be peace between the two nations, AEI’s Oriana Skylar Mastro advises that there could be more nefarious intentions behind Kim Jong Un’s sudden diplomacy.

The general public thinks the average company makes a 36% profit margin, which is about 5X too high, Part II - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 01/16/2018 - 00:13

This is an update of a CD post from a few years ago, with some new data and supplemented by a video below created by Richard Rider.

When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC International polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.

How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials (see chart above). Interestingly, for nearly 100 industries analyzed by NYU Stern, there’s only one industry that had a profit margin as high as 36% – and that was tobacco at 43.3%. The next highest profit margin was 26.4% for financial services, but more than 72% of industry profit margins were single-digits and the median industry profit margin is 6%. 

“Big Oil” companies make a lot of profits, right? Well, that industry (Integrated Oil/Gas) had a below-average profit margin of 5.6% in the most recent period analyzed, and separately, the Production and Exploration Oil/Gas industry is losing money, reflected in a -6.6% profit margin. For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%. And evil Walmart only made a 2.1% profit margin in 2017 (first three quarters) which is less than the industry average for general retail, possibly because grocery sales now make up more half of Walmart’s revenue and profit margins are lower on food than general retail. Interestingly, Walmart’s profit margin of 2.1% is actually less than one-third of the 6.5% the average state/local government takes of each dollar of Walmart’s retail sales for sales taxes. Think about it – for every $100 in sales for Walmart, the state/local governments get an average of $6.50 in sales taxes (and as much $10.12 in Louisianna and $9.45 in Tennessee, see data here), while Walmart gets only $2.10 in after-tax profits!

Bottom Line: The public’s complete overestimation of how much companies earn in profits as a share of sales explains a lot. If $36 of every $100 in sales at a company like Walmart, McDonald’s, Home Depot, Ford Motor Company or a local dry cleaner or restaurant really did turn into profits, then of course those companies could afford to pay unrealistic minimum/living wages of $15 per hour, accept unreasonable demands from labor unions, provide all sorts of generous fringe benefits including weeks of paid holidays, long paid maternity leaves, and gold-plated pension programs, etc. The general public that believes in the fantasy-world of unrealistically, sky-high 36% profit margins would naturally think companies are just being greedy and stingy when they don’t pay higher “living wages” and have to be forced to do so through minimum wage legislation.

If the average person could realize that a 36% profit margin isn’t even close to reality and that the typical, median firm has a profit margin of only less than 8% or almost 30 percentage points below what the public thinks is a normal profit margin, then hopefully the average person would become a little more realistic about how the business world operates. Companies aren’t being stingy when they pay competitive wages, they’re just trying to survive on what are sometimes razor-thin profit margins, in a competitive environment where there’s not a large margin of error. If they’re not operating efficiently and watching costs very carefully, it’s pretty easy for a business to go from a 7-8% profit margin (and only 1-2% for retailers) to a 0% break-even situation, and then from there to losses and bankruptcy — just look at the more than half a million businesses that fail every year.

Bonus: Below is the video mentioned above from Richard Rider — “Corporate Profits Explained (Bernie Sanders CEO of Walmart??)” — who provide some commentary here.

Beyond the Iran Nuclear Deal - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Mon, 01/15/2018 - 19:22

President Trump seemingly served notice Friday that the days are dwindling for Barack Obama’s Iran agreement. Although deal proponents also gained time to pursue “fixes,” this is a forlorn option. No fix will remedy the diplomatic Waterloo Mr. Obama negotiated. Democrats will reject anything that endangers his prized international contrivance, and the Europeans are more interested in trade with Tehran than a stronger agreement.

There is an even more fundamental obstacle: Iran. Negotiating with Congress and Europe will not modify the actual deal’s terms, which Iran (buttressed by Russia and China) has no interest in changing. Increased inspections, for example, is a nonstarter for Tehran. Mr. Obama gave the ayatollahs what they wanted; they will not give it back.

Most important, there is no evidence Iran’s intention to obtain deliverable nuclear weapons has wavered. None of the proposed “fixes” change this basic, unanswerable reality.

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