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From the archives: Compassionate conservatism - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 17:30

In 1977, Jeane Kirkpatrick, then a professor at Georgetown University, joined AEI as a resident scholar. A few years later, Kirkpatrick, then a Democrat, wrote an essay for a small influential journal published by the Republican National Committee called Common Sense. The title of her essay was “Why We Don’t Become Republicans.” There were several reasons, Kirkpatrick said. First:

Party identification is a real identification. One’s party — and the people, symbols, beliefs it comprises — are actually incorporated into the self, so that one isn’t only part of one’s party, but more crucially, one’s party is part of one’s self . . . Changing parties is thus like denying part of one’s self and one’s heritage.

Hence, it was not to be given up lightly. Second, she said, Democrats and many independents harbored concerns about the GOP, “doubt[ing] that Republicans care enough about the whole, including those who are, for one reason or another, unable to look out for themselves.” Kirkpatrick continued: “Since the New Deal, it has almost always been the Democrats who moved first to provide economic aid, social status, and political rights to the deprived members of the society. As always, it has been the Republicans who complained.”

Kirkpatrick eventually switched her partisan allegiance, but the concern she raised remained and in the late 1980s and early 1990s, George W. Bush and Newt Gingrich sought to address the Republican deficit with a new approach, compassionate conservatism.

Dr. Kirkpatrick’s argument was about politics. AEI’s long interest in providing for the “whole” — about what is truly compassionate for the “deprived member of society” — extends back decades and continues to this day. Last week at an event at AEI titled “What Happened to compassionate conservatism — and can it return?” Dr. Marvin Olasky, author of “The Tragedy of American Compassion,” and a panel including AEI’s Ryan Streeter and Angela Rachidi revisited some of AEI’s work.

Streeter mentioned the important 1976 AEI Press volume by Richard John Neuhaus and Peter Berger “To Empower People: The Role of Mediating Structures in Public Policy.” Many urban communities, Streeter said, had started “taking ownership for solving problems in distinct ways,” using the core mediating institutions of families, neighborhoods, and communities that Berger and Neuhaus had discussed. Streeter noted Amazon’s description of the book: It “anticipated the major worldwide project of the 1990s, the renewal of civil society.”

Olasky and the panel discussed the politics and programmatic approaches of compassionate conservatism. In 1996 AEI published an expanded volume of the original Berger/Neuhaus book with commentary. At the event introducing the revised edition, Neuhaus said, “The New Deal proposition of the 1930s — that society has an obligation to help those in need — was a great advance in our understanding of social association. The great mistake was to assume that this obligation requires a governmental response.” Government will be involved of course, but to successfully combat poverty, improve our schools, and help families and children, you can’t do it without the “little platoons,” Edmund Burke’s phrase for the work of mediating structures.

Trump can help American workers. His trade war won’t. - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 15:44
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Chinese President Xi Jinping gave a major address Tuesday that answered some of the Trump administration’s major criticisms. Xi pledged to improve the protection of intellectual property, along with increasing imports and offering a better environment for foreign investment.

So have the trade hawks in the Trump administration won?

Not so fast. Much of this has been offered before. But given the context of the speech, I am allowing a small bit of optimism about the Trump administration’s trade strategy. And it’s important to keep in mind that on two goals in particular, President Donald Trump is right on target.

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The first critically important issue — mentioned specifically by Xi — is the forced transfer of technology from U.S. firms to Chinese partners as a condition of doing business in China. Over the past decade, the Chinese government has repeatedly committed to eliminating these requirements, but has not done so. And so Chinese companies continue to acquire U.S. technology, giving themselves a competitive advantage.

Trade-policy folly: 5 ways President Trump’s efforts to placate the farm lobby are misguided - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 14:32

Trade wars are costly and, sooner or later, end up increasing unemployment in all of the countries engaged in the conflict. The consequences of the trade war President Trump is starting with China could be particularly severe for U.S. farmers. But compensating them for losses, as the president has suggested might happen, would be wrong.

China is the No. 1 market for U.S. agricultural producers, accounting for over one-fifth of all farming exports. Soybeans are the top export crop, averaging over $12.3 billion in annual shipments to China. Soybeans grown on one out of every four U.S. acres are shipped to China. If China raises tariffs on U.S. soybeans in response to tariffs the U.S. imposes on Chinese goods, U.S. farmers will have to find new buyers and offer them lower market prices.

@crystalmariesing via Twenty20

The effects of China’s tariffs on U.S. soybeans aren’t likely to be felt immediately. Traditionally, China looks south to Brazil and Argentina to meet its needs for soybeans between March and October. But instead of turning to U.S. supplies when farmers here are harvesting their crops in the fall, the higher tariffs would make Brazilian and Argentine crops more attractive, and China would continue to buy from farmers there.

While some U.S. soybean producers may be able to sell to markets from which Brazil and Argentina have diverted exports to meet China needs, Brazil has the capacity to ramp up soybean production to meet all, if not most, of China’s needs. U.S. soybean producers would then risk losing a large share of the global export market.

While it is easy to sympathize with U.S. farmers who are likely to be damaged by the administration’s trade proposals, and dangling the possibility of aid might placate the farm lobby, compensating farm businesses through subsidy programs for losses imposed on them as a result of a trade policy folly is not the way to go.

First, almost all U.S. soybean farmers are already protected against unexpected drops in revenue through a heavily subsidized federal crop insurance program. They are covered also by additional direct price and income support systems that provide additional protection against lower prices and revenues. Declines in prices will likely increase taxpayer costs for these programs—at a time when fiscal pressures are compelling Congress to find savings and not increase expenditures.

Second, ad hoc assistance may temporarily aid farmers but does nothing to address the potential long-run damage to trading relationships caused by trade wars. Farmers still remember the impacts of the Nixon soybean embargo (which helped launch the growth of the Brazilian soybean industry) or the Carter grain embargo against the former Soviet Union (which disrupted U.S. grain exports).

Brazil has the capacity to ramp up soybean production to meet all, if not most, of China’s needs.

Third, increasing support to U.S. farmers will increase the level of trade-distorting domestic support that the U.S. must report to the World Trade Organization, thus exposing U.S. farmers to potential adverse trade actions such as the successful challenge of the U.S. cotton program by Brazil more than 10 years ago.

In addition, should the compensation be included in the new proposed farm bill, the result will be a long-term increase in farm subsidies. Those subsides are likely to be funneled through programs that distort production incentives away from market signals.

Finally, and perhaps one of the most worrying concerns, is the real possibility that by “buying off” one group with compensation, the administration will open the door to trade wars with other countries. Up to now and with good reasons, U.S. farmers have been a vocal and effective voice for free trade. Compensating them (and possibly other sectors) for their losses in the administration’s trade war with China, could silence their free trade voices. This could encourage the White House to pursue other unilateral trade actions.

Trade wars are costly and, as the lessons of the past have demonstrated, can spread quickly as they did in the 1930s following the imposition of the Hawley-Smoot tariffs. Since that time world leaders have worked hard to avoid them. Over the past 24 years, disputes have been largely resolved using the multilateral rules-based system established by the World Trade Organization.

Today, the adverse effects of a trade war should not be made worse by the administration’s attempt to buy off affected parties through government-funded compensation schemes. While the schemes may ease the trade war pain for a few politically influential groups in the short run, it would be at a considerable cost to taxpayers, and do little or nothing to ameliorate the painful effects on the U.S. economy as a whole. Such policies set a dangerous trade relations precedent for the future.

Joseph W. Glauber, a former chief economist at the U.S. Agriculture Department, is a visiting scholar at the American Enterprise Institute; he is also a senior research fellow at the International Food Policy Research Institute. Vincent H. Smith is an AEI visiting scholar and a professor of economics at Montana State University.

SCOTUS should balance Main Street and online - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 13:25

For more than 50 years, the Supreme Court has prevented states from requiring out-of-state sellers to collect sales tax unless the seller has a physical presence, such as a local store or warehouse, in the state in which the sale occurs. Although the out-of-state sellers’ customers are supposed to remit tax on such sales, very few of them do so. As online retail sales continue to grow, states’ annual revenue loss has been estimated to be as much as $33.9 billion in 2018.

@macfawlty via Twenty20

In 2016, the South Dakota legislature launched a challenge to the Supreme Court’s holdings by passing Senate Bill 106, which  requires any large seller of tangible personal property that does not have a physical presence in the state to collect and remit sales tax. Wayfair and other online sellers challenged the law. On April 17, the Court will hear oral argument in South Dakota v. Wayfair.

The fundamental issue is the impact of state and local sales taxes on the competition between online sellers and traditional brick-and-mortar retailers. In order to uphold the South Dakota law, the Court must find that (1) the law does not discriminate against interstate commerce and (2) the law’s tax collection obligations do not impose undue burdens on interstate commerce.

South Dakota and many of its supporters argue that the physical-presence requirement sharply reduces state revenue collections, seriously harms competing brick-and-mortar businesses, and causes out-of-state sellers to take costly steps to avoid establishing a physical presence. The physical-presence requirement, they argue, effectively forces states to favor out-of-state sellers without a physical presence over local sellers.

Wayfair and its supporters argue that eliminating the physical-presence requirement would impose undue burdens on out-of-state sellers, especially small and mid-size companies. They emphasize the heavy costs businesses will incur trying to comply with as many as 16,000 inconsistent and changing state and local sales tax regimes across the country and the legal risks they could face when they make mistakes.

It may seem that the Supreme Court will be forced to simply pick a side in a tug of war between two parties. Luckily, there is an established legal framework that recognizes and protects the legitimate economic interests of both camps. In a 1970 case called Pike v. Bruce Church, Inc., the Court established a balancing test that weighs the burdens on interstate commerce against the benefits to the state from the regulation. In our view, applying Pike balancing is the right approach for the Court to take in reviewing tax collection obligations, which are ultimately a type of regulation. If the Court applies that balancing test in South Dakota v. Wayfair, two factors should make it easy to conclude that any burden placed on out-of-state sellers is minimal relative to South Dakota’s interest in collecting sales taxes.

First, the regulatory burden on out-of-state retailers of complying with South Dakota’s sales tax regime is negligible. South Dakota, along with 22 other states, is a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), under which the member states’ sales taxes are standardized to minimize the administration and recordkeeping burden on sellers. The SSUTA provides for a centralized online registration system through which retailers can register and agree to collect and remit sales and use taxes for all taxable sales to customers in the member states. And importantly, the SSUTA also allows out-of-state retailers to use approved service providers – paid for by the state, not the retailers – to collect and remit taxes to the state. By standardizing and harmonizing many aspects of their sales taxes and by providing compliance software and other assistance, the states that have signed on to the SSTUA have reduced the cost to out-of-state sellers of complying with sales tax in other states almost to zero.

Second, the South Dakota law contains clear rules that protect small or infrequent out-of-state sellers. An out-of-state seller with no physical presence in South Dakota has no obligation to collect or remit taxes if it makes fewer than 200 sales of tangible personal property, with a total value of no more than $100,000, per year in the state.

As we explained in an amicus brief that we filed in this case, Pike balancing makes more sense than the rigid, obsolete, and inefficient physical-presence requirement. Under Pike balancing, states could require out-of-state sellers to collect and remit sales tax, but only if the states take steps (as South Dakota has done) to reduce the potential harms emphasized by Wayfair and its supporters. While balancing tests can sometimes be difficult to implement, Wayfair is an easy case to resolve. The South Dakota law should be upheld because it has been carefully structured to avoid placing undue burdens on interstate commerce.

Work, welfare, and Trump - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 13:23

Though President Trump spoke in his inaugural address about replacing welfare with work, his efforts in pursuing that goal have been mixed at best. The administration has relied far more on the strength of the job-producing economy to increase employment and reduce poverty than on any changes to benefit programs themselves. But the economy can only do so much — especially after an extended period of benefits-first policy, in which increased enrollment was the only goal.

President Donald Trump waves as he arrives to speak during a visit to White Sulphur Springs in West Virginia, April 5, 2018. Reuters

This week, the Trump team tried to restart their efforts with an executive order directing federal benefit programs to make it a priority to help non-working recipients become employed. It remains to be seen whether this will do the trick. The question is whether the resulting reforms will address the underlying problem of welfare enrollment leading to too little work and too much poverty.

What, specifically, needs to be addressed? Too many healthy, working-age American adults are not working but receiving significant government-funded help. The programs providing that assistance have done little to help these individuals spring out of poverty, and their funding is often structured to create incentives to add more people to their rolls. In such situations, antipoverty programs wind up inadvertently inhibiting work and upward mobility.

For example, in Medicaid and SNAP (food stamps), the number of working-age adults receiving benefits but reporting zero earnings is at least 9.5 million each. That’s a minority of the total number of recipients on these programs — which include seniors, children, and the disabled — but a large number nonetheless.

Labor force participation tells the same troubling story. Our country is nine years into an economic recovery, with unemployment at 4.1 percent, yet we are still well below the pre-recession rate of working-age Americans in the workforce. Availability of financial assistance from government programs that do not care about work — principally SNAP, Medicaid, and housing assistance — has made it easier for non-workers to remain on the sideline.

The gulf between today’s welfare policy and work was starkly visible when I crisscrossed the country as a member of the Congressionally appointed National Commission on Hunger. At one point, a food stamp recipient, a healthy man in his thirties, blurted out: “That program [SNAP] is great at getting me an EBT [food stamp] card to buy food, but it does nothing to get me a job.” If welfare programs are not actively helping the poor gain employment, they cannot truly fulfill their mission to end poverty.

Helping people on Medicaid, SNAP, and housing assistance get to work is the best way to help them attain incomes above the poverty level. It will also help such people improve their health and gain a sense of dignity, ultimately making their communities stronger. Asking large and omnipresent government programs to reiterate that work is expected for non-disabled working-age adults is a good step toward bringing about such a change.

Until Tuesday’s announcement of the executive order, the most significant Trump administration effort has been the approval of three waivers from state Medicaid programs seeking to make work a focus of their programs. Seema Verma, the CMS administrator responsible for this effort, has bravely pushed the notion that states should have the option to enact activity requirements, in spite of the usual howls of protest from those who oppose introducing any component of personal responsibility into a benefit program. Unfortunately, her guidance has elicited change in only a few states so far.

A major disappointment has been over at the Department of Agriculture (USDA), which runs SNAP. It seems as though this administration has been unable to recruit anyone for the important job of running the program. Meanwhile, those managing the shop have been reluctant to assert their leadership on the state officials who implement food stamp programs on the ground. (The Housing and Urban Development (HUD) low-income housing programs are equally far behind.)

The order the president signed yesterday is a reasonable and productive place to start. Critically, it directs federal departments such as Agriculture and Housing to review the guidance documents that relate to work, and to follow the CMS administrator’s lead in using whatever authority they have to fight poverty more effectively through work requirements. The document is focused on outcomes, though it provides flexibility for states. It also ensures that program administrators around the country are accountable for achieving desired goals by requiring them to report results to overseeing agencies.

In announcing the executive order, White House officials said they believed there was a lot the federal agencies could do to promote work through administrative actions. Moreover, they signaled their hope that the order would lead to greater acceptance of the idea that employment and increased earnings are the best measures of success for benefit programs. The administration’s rhetoric is right, and it should help, especially given how plentiful jobs are. The large federal departments that oversee these programs — USDA in the case of SNAP, Health and Human Services for Medicaid, and HUD for housing — must now do their part to help more Americans replace welfare with work.

5 thoughts on the teacher strikes - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 12:00

The recent teacher walkouts in West Virginia, Oklahoma, and Kentucky have not only been remarkable for their scope and success, but have also rapidly reshuffled the educational debates. In the weeks before West Virginia’s teachers walked out, talk of teachers revolved around how badly the Supreme Court’s impending decision in Janus might hurt the unions. Now, at least temporarily, the narrative has totally flipped. What to make of all this? Well, as I’ve talked to various advocates, journalists, and officials, at least five thoughts keep coming to mind:

Oklahoma teachers rally outside the state Capitol in Oklahoma City, Oklahoma, April 2, 2018. Reuters

  1. Teachers are immensely sympathetic actors. For all the gibes, harsh rhetoric of the accountability era, and tsk-tsk’ing occasioned by polls in which people say they don’t want their kids to be teachers, the reality is that people really like teachers. In surveys, no matter how much talk there is about “failing” schools and problems with tenure, teachers are trusted and popular. For most parents, the primary source of information about their school is their child’s teacher. As we’re seeing, and as I noted back in The Cage-Busting Teacher, that reservoir of goodwill makes teachers pretty formidable actors—much more than some observers might imagine.
  2. The Trump era has made it tougher for GOP officials to plead “fiscal restraint.” Since Trump’s election, there’s been a lot of attention to the struggles of working- and middle-class Americans in places like West Virginia, Kentucky, and Oklahoma. Meanwhile, last year, Republicans in Washington passed a trillion-dollar tax cut for businesses. And, just a few weeks ago, Washington Republicans blew up the federal budget caps—largely so that they could boost funding for the Pentagon. Against this backdrop, it’s tough for Republican governors to insist, “Well, sure, our party’s leaders in Washington can find huge dollars for tax cuts and defense, but we can’t afford a pay raise for struggling, hard-working teachers.”
  3. Twenty-first century school reform has a big role in bringing us to this point. A mantra for reformers since No Child Left Behind has been the critical role of teachers. In pursuing this agenda, would-be reformers emphasized the need to overhaul teacher evaluation and tenure, retool teacher preparation, and place a substantial weight on reading and math scores in judging teacher effectiveness. This was all sensible enough (aside from an increasingly unhinged fascination with reading and math scores), but it was pursued with rhetoric that not infrequently veered into broad condemnations of the nation’s schools and teachers—and which failed to take serious the need to ensure that any changes were equally attentive to rewarding professionalism and honoring excellence. Along the way, teachers came to look and feel like targets, rather than beneficiaries, of “school reform,” which may be why bread-and-butter demands from teachers are ascending as the guts of Bush-Obama school reform are sinking to the bottom of the “discarded school reform” sea.
  4. Teachers have picked up tremendous momentum. The textbook case for deflating a public-sector strike may have been Ronald Reagan’s response to the 1981 air traffic controllers strike. Readers of a certain age will recall that, early in his presidency, Reagan was confronted with a strike by the nation’s air traffic controllers. It was presumed that they had Reagan over a barrel—and that their success would inspire imitators. Instead, shockingly, Reagan fired the striking controllers. The enormous cost to those who lost their jobs prompted a lot of second-guessing among public employees and deterred would-be imitators. Developments in West Virginia, and now Oklahoma, have taken a different path. In West Virginia, superintendents shuttered districts, ensuring that teachers wouldn’t run afoul of the state’s “no striking” law or lose salary. Oklahoma’s district leaders have acted similarly. Meanwhile, faced with popular support for the teachers, state officials have avoided harsh words and worked to meet their demands. The good press, lack of consequences, and big wins seem primed to inspire imitators.
  5. There’s a huge opportunity here . . . if teachers and state leaders can seize it. As I see it, good teachers are ridiculously underpaid—and I’d like to see teachers get a solid raise across the board. But there’s a problem with simply funneling those dollars into existing arrangements because school systems spend a lot of money in ways that don’t make a lot of sense. We have exceptionally expensive benefit systems that mean a big chunk of school funding is going to pay retirees rather than today’s teachers. Schools have added non-instructional staff at a pace that has massively outstripped student enrollment. In recent years, would-be reformers have goofed when imposing new teacher-evaluation systems while failing to identify or do right by all the teachers who play a critical role in their schools and classrooms. Now, we have another opportunity to tackle this challenge—to boost teacher pay and make substantial new investments in schooling while rethinking benefits systems, teacher compensation, and staffing. Doing so would be good for teachers and students, appealing for taxpayers, and make it easier to sustain bipartisan support for new spending. Now, admittedly, in recent years, we’ve not been great at seizing win-win opportunities when it comes to schooling—but here’s hoping.

It’s hard to know how these things will go. Ten weeks ago, hardly anyone saw West Virginia and Oklahoma coming. Will they trigger a national wave of imitators? Will the narrative shift again in the aftermath of a Janus decision that goes against the unions? Or might these simply be more glimpses of what’s ahead as the school-reform pendulum swings away from the Bush-Obama era? Time will tell.

This post originally appeared on Rick Hess Straight Up.

The future of corporate taxation in a digital world - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 10:00

It is relatively straightforward for governments to tax brick-and-mortar single-establishment retail stores or factories that mostly sell locally, because the value those businesses create and the profits they make are largely tied to a clear physical location. In those cases, production and sales processes take place where the company’s employees work, which is also where its consumers live. For other businesses, however, production, sales, and other elements of value creation are unbundled and cannot be assigned to a single location, which poses challenges to existing measures of corporate income and value added.

European Economic and Financial Affairs Commissioner Pierre Moscovici holds a news conference at the EU Commission’s headquarters in Brussels, Belgium, REUTERS.

These challenges may be most severe in the case of multinational corporations that rely heavily on intangible capital and draw their revenue from online activities. The European Commission recently proposed two directives to address the challenges of taxing the “digital economy.”

The first proposal, which is meant to provide a permanent framework, effectively expands the notion of a firm’s location to incorporate so-called digital presence. The policy is similar to South Dakota’s effort to collect sales tax from online retailers (the subject of the pending Supreme Court case South Dakota v. Wayfair, Inc.), but it extends beyond retailers to include any firm that derives sufficient online revenue from, or has sufficiently many users in, a member state. Skeptics worry that this framework would limit tax competition between different EU countries by effectively shifting from an origin-based tax system (with businesses taxed where they produce) to a destination-based tax system (with businesses taxed where their customers are located).

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The second proposal is more narrowly focused and is intended to be an interim solution that will be applied until the first proposal is fully implemented. This controversial proposal has generated headlines and triggered pushback on this side of the Atlantic. It imposes a 3 percent tax on the gross revenue — not the profits — of large firms that either sell online ads or operate social media networks in the member states. The professed rationale is that it is the users who create value in those lines of business.

How will these proposals work? Who will they help and harm? Conveniently for readers of this post, Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation, and Customs, will come to AEI on Thursday, April 19 to present and discuss the commission’s proposals. His appearance will be followed by an expert panel composed of Professor Itai Grinberg of Georgetown Law Center, Professor Joann Martens Weiner of George Washington University, William Morris, the deputy global tax policy leader at PwC, and Stephen Quest, the director general for Taxation and Customs Union at the European Commission. I am confident that these distinguished speakers will answer all of your — and my — questions on this important topic.

RSVP for the event here.

Learn more:

Episode 32: Blarney Tim Carney - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 04/11/2018 - 06:25

In the latest Remnant, Washington Examiner commentary editor Tim Carney joins Jonah to discuss the headlines of the day (the Cohen raid, Syria, the 2018 midterms) and to do a deeper dive on the nature of crony capitalism.

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.

Remembering Bob Malott - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 19:36

At AEI, we mourn the passing on April 4 of our dear friend Robert H. “Bob” Malott, a longtime trustee and generous supporter of the Institute.

Bob was a generous and steadfast supporter of AEI, dedicated to the Institute’s mission of maintaining free markets and upholding a strong national defense.

In 1976, Bob joined the Institute’s board of trustees. After his retirement in December 1993, he was elected an emeritus trustee and actively served in this role until his death.

He was a generous and steadfast supporter of AEI, dedicated to the Institute’s mission of maintaining free markets and upholding a strong national defense. He said, “I am concerned that these fundamental objectives are being challenged, and we need to continue to look to AEI to actively resist these pressures.” Bob established the Christopher DeMuth Chair, named after AEI’s former president. The chair was held by AEI Resident Scholar and Director of the Critical Threats Project Frederick Kagan.

A graduate of Harvard Business School, Bob volunteered for the Navy during World War II before becoming president at the age of 45 of FMC Corporation, a Chicago-based maker of chemicals, machinery, and military systems. Throughout his life, Bob enriched his beloved Chicago through his support of institutions such as the University of Chicago, the Lyric Opera, and the Illinois Math and Science Academy.

Bob’s support, counsel, and generosity transformed AEI’s work and community. The Robert H. Malott Library at AEI’s headquarters serves as a reminder of his legacy and enduring impact on AEI. We will miss him and offer our condolences to his family and many friends.

The future of infrastructure policy under the Trump administration: Remarks from Department of Transportation Under Secretary Derek Kan - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 18:34

On this AEI Events Podcast, AEI hosts Derek Kan, Under Secretary for Policy at the Department of Transportation. Kan outlines the details of the Trump administration’s infrastructure plan. Following his remarks, AEI’s R. Richard Geddes leads a discussion among infrastructure policy experts to review the main elements of the proposal and the future of US infrastructure policy.

The Trump administration released its long-awaited infrastructure plan on February 12. The plan includes $200 billion in federal spending to incentivize $1.5 trillion in new infrastructure investment nationally. It would streamline environmental permitting, create incentives for state and local governments to raise more revenue, and support greater use of public-private partnerships and other mechanisms to facilitate private participation in infrastructure delivery.

Watch the full event here.

Subscribe to the AEI Events Podcast on Apple Podcasts.

This podcast features introductory remarks from R. Richard Geddes (1:01), following remarks from Under Secretary Derek Kan (7:57), audience Q&A (20:14), a panel discussion (35:08), and a final audience Q&A (1:14:29).

Panelists include Kevin DeGood from the Center for American Progress, Joung Lee from American Association of State Highway and Transportation Officials, Robert Poole from the Reason Foundation, and Matt Rose from the BNSF Railway Company.

This event took place on March 22, 2018.

It’s time to assassinate Assad - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 16:40

On April 8, after learning of the alleged Syrian regime’s use of chemical weapons against a civilian neighborhood, President Trump tweeted that Syrian President Bashar Assad would pay a “big price.” The last time the Syrian government so blatantly used chemical weapons, Trump ordered a barrage of Tomahawk cruise missiles to strike at the base responsible for the chemical weapons attack. In the wake of the latest incident, however, many analysts have pointed out that last year’s response neither deterred Assad nor undercut his momentum against the Syrian opposition and questioned whether a new missile barrage would be any different.

Russian President Vladimir Putin (R) shakes hands with Syrian President Bashar al-Assad during a meeting in the Black Sea resort of Sochi, Russia November 20, 2017. Reuters

Nor can Assad expect any serious repercussions at the United Nations given Russia’s willingness to protect him at all costs. “What’s the point of trying to shame such people?” U.S. Ambassador to the U.N. Nikki Haley said, “Pictures of dead children mean little to governments like Russia.”

What can Trump do? Former President Barack Obama’s unwillingness to enforce a red line on chemical weapons use hemorrhaged his credibility and convinced Assad and his Russian patrons that they could, quite literally, get away with murder. But if he is serious about restoring a deterrent to the use of chemical weapons, then he should not rely on some symbolic cruise missile response. That was his tactic last year, but its lasting impact was negligible. For that matter, that was Bill Clinton’s tactic of choice in 1998 after al Qaeda attacked U.S. embassies in Kenya and Tanzania, and a middle-of-the-night cruise missile strike into Afghanistan did nothing to convince al Qaeda and their Taliban protectors to cease their terrorist activities ahead of the Sept. 11 attacks.

Targeting Assad, however, would be the ultimate deterrent to dictators who might want to go down the same path. There is nothing absolute about the prohibition on targeting world leaders. President Gerald Ford issued Executive Order 11905, which declared that “no employee of the United States Government shall engage in, or conspire to engage in, political assassination,” but that is of only questionable application to targeting a commander in chief militarily. While President Abraham Lincoln administration had in 1863 instructed Union forces not to engage in assassination, the subsequent international agreements joined by the U.S. (the 1907 Hague Convention and the 1949 Geneva Conventions) were vague on the question of assassination.

Regardless, there is ample precedent which suggests that Assad could be a target. In 2010, the Iraqi government executed Ali Hassan Abd al-Majid al-Tikriti, better known as “Chemical Ali,” for his complicity in the use of chemical weapons against the Kurds and, of course, the United States supported the trial of Iraqi dictator Saddam Hussein for a series of outrages against civilian populations.

Want to use cruise missiles? As Assad leads Syria to ruin, there is no reason why his shiny and ostentatious palace should remain standing on a mountaintop above Damascus. And while Russia warns the United States not to retaliate in Syria, permanently removing Assad from the battle field would leave Moscow no choice but to begin serious negotiations on who comes next. Simultaneously, the Kremlin would think twice about allowing its other clients in the future to stray so far from the rules of war.

Certainly, a decision to target a foreign leader should not be taken lightly. Some critics will question whether such targeting would open enemies to try to assassinate U.S. leaders. Let’s put aside moral equivalence — the United States is not Syria.

Rather, enemies already do try to target the U.S. leadership and other world leaders. During the Cold War, the Soviets were complicit in an assassination attempt on Pope John Paul II. And President Bill Clinton ordered the bombing of Iraq after evidence emerged that Hussein had sought to assassinate President George H.W. Bush. The Islamic Republic of Iran sought in 2010 to kill the Saudi ambassador to the United States by using a car bomb at a popular Capitol Hill eatery frequented by U.S. senators.

Then there is a question about whether Assad, the devil we know, is better than the devil we don’t. Let’s put aside the fact that such a calculation largely went out the window once the devil began using sarin gas on women and children. It is true that the Syrian opposition, with the exception of the Syrian Kurds, has largely radicalized well beyond any definition of moderation. Their inability to work together makes it unlikely that they will be able to seize full control over Syria. More likely, a member of Assad’s inner circle will step in and take the reins and make it possible for all sides to save face and begin discussing a provisional government.

A cruise missile strike that kills Assad will not alone bring peace. But it will enable Syrians to begin a new discussion while simultaneously signaling other world leaders that they do not have immunity should they use weapons of mass destruction.

Making the 2020 census succeed - Hot Java? Google potentially on hook for billions after recent Oracle copyright infringement ruling

Tue, 04/10/2018 - 15:14

The 2020 decennial census is critically important. Businesses rely on official statistics to make key decisions, and those statistics must be accurate. Policymakers rely on official statistics as well, for decisions as important as setting interest rates throughout the economy. And the research community needs accurate data to evaluate the effects of public policies. Many are concerned about the 2020 census’ funding, the controversial decision to include a question on US citizenship, and response rates. How will these affect the accuracy of the 2020 census? And in turn, how will that ripple through the economy?

Please join AEI for a panel discussion on the importance of the 2020 census and what can be done to ensure its success.

Join the conversation on social media with @AEI on Twitter and Facebook.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Should big tech be regulated? | In 60 Seconds - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 14:15

The cries to regulate big tech have only grown louder over the last year, coming from voices as disparate as Fox News Host Tucker Carlson and Virginia Democratic Senator Mark Warner. Is it time for the US federal government to put a lid on Google, Facebook, and other tech firms? No, says AEI Visiting Scholar Mark Jamison, and he explains why.

What China gained from hosting Kim Jong Un - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 13:15

In late March, North Korean leader Kim Jong Un, who had not stepped foot outside the hermit kingdom since taking power in 2011, traveled to Beijing to meet with Chinese President Xi Jinping for the first time. The encounter came amid two decades of declining relations between North Korea and China, with its worst period yet under Xi—only six high-level bilateral exchanges had taken place over the past six years, compared to 54 during the presidency of his predecessor, Hu Jintao.

As I previously argued in the January/February issue of Foreign Affairs, Beijing had grown wary of Kim’s provocations and was “no longer wedded to North Korea’s survival.” It was remarkable, then, that Xi had extended the invitation to Kim. Has there been a sudden thaw in diplomatic relations? And if so, what does this apparent reversal signify?

On the surface, Xi appears driven by a desire for improved Sino–North Korean relations. During the Xi-Kim meeting, the Chinese media portrayed their two countries as ideological comrades, emphasizing their common interest in finding a peaceful solution to the security challenges on the peninsula and publishing photos of the two leaders sharing a warm embrace. But although the summit signals Beijing’s interest in pursuing productive relations with Pyongyang, Xi’s decision to meet with Kim represents less of a strategic shift than appearances might suggest. China is still not wedded to North Korea’s survival, and the countries’ “alliance” continues to be only in name.

Read the full text of this article HERE.

Arthur Brooks: ‘I’m going to stay at it’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 13:00

Editor’s Note: Joseph Lawler’s interview with Arthur Brooks originally appeared in Washington Examiner on April 10, 2018.

Arthur Brooks is now contemplating a fourth career.

Before becoming the president of the American Enterprise Institute nine years ago, he’d already had two successful careers, first as a professional French horn player and then as a tenured professor.

Next summer, he’ll leave AEI, one of the most influential conservative institutions in the country. This was announced last month at an all-hands meeting.

His planned departure isn’t a huge surprise to colleagues familiar with his academic work. In his research as a professor of public administration, Brooks concluded that organizations work best when the head doesn’t stick around for longer than a decade.

Speaking to the Washington Examiner in his office in downtown Washington, Brooks says he hasn’t figured out his next step. It could be returning to academia, or going into business. It could be something as different as his first two careers were from his third, although he wants to stay in the world of ideas. “We’ll see what the market will bear,” he said. “I don’t know.”

His successor, he says, should be someone not exactly like him, because another pitfall for organizations is making the mistake of trying to recreate success — which he’s had.

Under Brooks, AEI has grown significantly and moved into a large new home on Massachusetts Avenue, a renovated 1917 Beaux Art building that was once the home of Andrew Mellon, the billionaire businessman of the early 20th century.

AEI has also risen to the top among think tanks, according to Brooks, on the metrics that he uses as proxies for influence, including op-eds published at major newspapers and the frequency at which its scholars are invited to testify before Congress.

He himself has risen to prominence on the Right. He’s a guru to movement conservatives, as well as to many high-ranking Republicans on Capitol Hill.

Brooks has written best-selling books that aspiring D.C. conservatives use as guides and the latest of which GOP presidential candidates, most of them at least, had no choice but to read.

He has one more, a 12th, in the works for before he leaves office. “Unity: A Manifesto” will come out early next year.

“The biggest problem that we have in America today is disunity,” Brooks said.

Partisans are blowing small ideological differences out of proportion, he says, and fixating on them at the expense of agreeing on common ground.

‘I’m going to stay at it’

Disunity and partisan anger, in a way, represents a failing by Brooks.

His ambitions for his and AEI’s work transcended the institution. He sought to change the country and the world. In his 2015 book, The Conservative Heart, he envisioned an American transformation. He called for conservatives and the Tea Party movement to move beyond angry opposition to President Barack Obama and to build a governing agenda that would bring the benefits of the free market to more people, and for liberals to see the empathy in conservatism and embrace it.

Listen to Arthur's podcast:

But the Republican Party chose a different vision that same year, coalescing behind Donald Trump and signing up for his program of nationalism, populism, and protectionism.

Far from showing conservative heart, Trump, during a presidential debate, claimed the “mantle of anger,” Brooks said.

In a Wall Street Journal op-ed in which he announced his planned resignation, Brooks expressed the fear that anger on both sides threatens to make dialogue impossible.

Read Arthur's WSJ op-ed:

Brooks acknowledges that his brand of free-market, pluralist, optimistic, and inviting conservatism didn’t win the “idea sweepstakes,” but he remains committed to it.

“The matrix of ideas, which rotates constantly, hasn’t turned to that yet,” he said.

“I’m going to stay at it,” he added. “I’m going to stay at it as long as I’m at AEI. And whatever I do next, I’m going to stay at it then, too.”

Brooks says the divisiveness and populism of the Trump era hasn’t sapped his energy for the job and is not part of his decision to leave. But he acknowledges that the current environment does not suit him well.

“Politics, when it’s not about ideas, when it’s only about tribes, is unbelievably boring,” he said. “That’s like watching a hockey game when you don’t like hockey and don’t know either team.”

Some of Brooks’ players are on the ice and in the game. One of AEI’s donors, Betsy DeVos, is President Trump’s education secretary. Trump’s top economic adviser, Kevin Hassett, was an AEI scholar, as was Food and Drug Administration Commissioner Scott Gottlieb. Last month, the Trump administration announced that the think tank’s media manager, Judy Mayka Stecker, will be joining the Department of Health and Human Services.

Yet, others in the institution are solidly “Never Trump,” or just liberal.

Brooks has tried to keep AEI above the fractionalization of right-of-center institutions in Washington.

Charles Murray, the famous AEI social scientist reviled by the Left and a declared Never-Trumper, praised Brooks for not attaching the think tank to one group or another, and particularly for not aligning with Trump as others have.

“There has been not an iota of growing respect for the ethos represented by Donald Trump,” Murray said. “Arthur has not accommodated himself to Trumpism in any way philosophically. That’s my view.”

In the interview, Brooks minimizes Trump talk. It’s not hard to guess his presumptions, though, based on his public statements and writings. For example, in 2016, he wrote in the New York Times that Trump has “an apparent cruel streak toward weaker people that goes beyond the rough-and-tumble of normal politics” and faulted him for “the policy-light, insult-comedy entertainment.”

Read the New York Times piece:

That is a contrast with Brooks’ self-description as a Matthew 25:40 conservative: “Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.”

Yet, Brooks claims he’s not distracted by the politics of the Trump era.

Instead, he compares himself to the head of the National Oceanic and Atmospheric Administration at a time when its scientists are being asked to go on TV to talk about the weather of the week when they should be modeling the climate.

“Weather is politics, climate is ideas,” he said. “My job is to keep us out of the weather.”

The climate, Brooks has concluded, is that part of the nation was left behind in the economic recovery and felt disrespected, and that Trump spoke to them.

He believes there is little overlap between the rise of the Tea Party and the ascent of Trump. The Tea Party was a response to perceived overreach by Obama. Trump is about a part of the country despairing.

In response to the rise of right-wing populism, AEI has launched a project on human dignity that features studies geared toward the needs of people who are suffering through economic stagnation, and involves work on career training, opioids, family structure, and other issues.

It’s a way to get back to the business Brooks was in when he published The Conservative Heart, which is promoting capitalism.

“There are days when I look at what’s going on in the conservative environment and I say, ‘Argh,’” he said. “But then again, the reason I wrote the book is not because I was already there but because we weren’t.”

In fact, Brooks was trying to stave off populism before it began, said Sen. Mike Lee of Utah, a friend. “He could see a natural trend in the other direction, and so he took steps to lay the framework for a more enlightened approach,” the Republican said.

The pain in Spain

One current that runs throughout Brooks’ work is the idea that he doesn’t want America to become like Europe. Instead, he wants to export American-style capitalism, and Americans’ unique, religiously-motivated charitable ways, to the rest of the world.

Specifically, he wants to keep the U.S. from becoming Spain.

Spain is Brooks’ adopted country. His wife is Spanish, and Spain is where he spent his formative years trying to win her over. He lectures there every spring. His family often speaks Spanish at home.

“Barcelona is beautiful, and the food is great, and the architecture is interesting, and the weather is nice, and the place is completely screwed up,” he said. “And it’s screwed up because of all the things we’re trying to do in America today. And that’s the problem.”

In The Conservative Heart, Brooks compares Spain unfavorably with an Indian slum he visited. In the slum, he notes, the residents all worked and gained meaning and optimism from their work even if they were destitute. In Spain, work is not a priority.

“This is like your brother in law,” he said of Spain. “You just love him. He’s just irresistible, and fun, and great. He’s great with your kids, right? But he’s a drunk!”

In his academic life, Brooks researched happiness and its determinants, including government policies that lead to happiness.

That research suggests to him that Americans have the answer. Earned success, gained through work, is critical to happiness. So is family. So is giving. A safety net to help the poor can also help, but not if the government can’t maintain it because it’s facing a fiscal crisis.

Dependency, on the other hand, brings misery. It could also be self-fulfilling. In his 2010 book, The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future, Brooks warned that the number of people who rely on government benefits could form too large a constituency for America’s system to survive. That’s what Mitt Romney was talking about so clumsily in the 2012 election when he was caught on audio dismissing 47 percent of voters.

“Freedom causes happiness,” Brooks wrote in his 2008 book Gross National Happiness.

The foreboding that America could slip into dependency and become terribly unhappy sits uncomfortably alongside Brooks’ recent campaign to make conservatism more inviting and friendly.

“There’s a tension there,” said E.J. Dionne, the liberal Washington Post columnist and Brookings Institution fellow who maintains a friendship with Brooks, a fellow parishioner at a Catholic church in Potomac, Md.

Dionne wishes that Brooks’ more recent writings, and his calls for conservative winsomeness, could be a part of a resuscitation of Bush-era moderate “compassionate conservatism.”

Learn more about AEI's work on restoring compassionate conservatism:

Brooks’ entire public career, from his academic studies tying happiness to conservative policies to his help editing Murray’s controversial work, has consistently made the case for free-market economics.

“He thinks and tried to prove through his research that most Americans care about others and do not need to be forced to take care of the poor and needy, but will do so willingly,” explained Nick Bailey, an assistant professor of management at the University of Northern Iowa who served as Brooks’ research assistant when he was a professor at Syracuse. “So, he is very driven by core Christian values.”

Personal story

Brooks, though, is nothing like the stereotype of a conservative Christian.

The most readily available details of Brooks’ life and public image run counter to expectations, starting with his oft-noted friendship and partnership with the Dalai Lama, who he’s visited in India this year.

Next, the fact that he began his adult life as a musician, putting off college to play the French horn in the U.S. and in Europe. And that he earned his college degree via correspondence course and went on to get a PhD from the Rand Corp., soon becoming a tenured professor.

He also is known for wearing unusually fashion-forward suits and maintaining a more defined sense of personal style than is typical for Washington.

Brooks’ unusual friendships, his style, his own reinventions and improbable successes — they’re not just his personality, but also the proposition he’s offering. He’s willing to draw on anyone to make the case for his worldview. And, in turn, his worldview is the reason that he’s cultivated those aspects of his personality.

His friendship with the Dalai Lama is based partly on their shared appreciation for the value of work, one of his core tenets. His sartorial display is partly to keep up with his wife, he says, but is also an example of being less bound to conventionalism. His shifting vocations reflect his belief in self-improvement and entrepreneurialism.

“You’re doing policy work when you’re explaining yourself,” he explained.

The Dalai Lama at AEI:

Explanation is Brooks’ role. His popular books and writings follow an explanatory template. There’s an anecdote, either from Brooks’ own travels or from someone he’s found who exemplifies some policy issue, an anti-homelessness crusader in New York, for example. There’s a quick explication of a related social science study that casts the episode as part of a broader point. Less frequently, there’s a reference to evolutionary psychology, history, or philosophy. Add a dash of self-deprecating humor, and then, it’s on to easily digestible, carefully-phrased conclusions, often but not always relevant for federal policy. At the last second, it might be wrapped into an explanation for why conservatives think the way they do.

It’s easy to read. It’s also the way Brooks speaks, complete with frequent extemporaneous research citations. Conservative Republicans love it.

“Arthur Brooks was, and is, one of the most compelling storytellers this movement has,” said Sen. Ben Sasse, a Nebraska Republican who is close with Brooks.

Not only does Brooks believe what he says about the message of conservatism, Sasse said, but he is also “willing to get in the grill of lawmakers, who are just crappy storytellers.”

Brooks’ message, fundamentally, is that the case for free enterprise is a moral one, and that conservatives should make it in those terms. Free-market policies that generate growth and jobs also create happiness, and it would be wrong to deprive people of those.

It’s not a surprise that conservatives and Republicans would appreciate that message.

But liberals also give him credit. Obama chose Brooks to appear on a poverty panel with him in 2015. “He’s very gifted, Arthur, at winning over liberal audiences,” Dionne said.

If it’s just smooth talk from Brooks, though, it’s a long con. Everything he says is consistent with his research. And that, in turn, is consistent with his management of AEI.

After all, half of the job is fundraising. And who better to do that than the researcher who studied administration and found evidence that charitable giving makes you happier?

“The thing that made Arthur such a perfect fit was that a chunk of his academic work was studying fundraising. So, it was kind of like letting Bill James run a baseball team,” said Hassett, Trump’s economic adviser, referencing the father of sabermetrics, the empirical analysis of baseball, who now advises the Boston Red Sox.

“The medium and the message and the marketing and the ideology itself, even the policy itself, can’t be de-linked,” Brooks said. That is why he is, for the next year at least, the evangelist for free markets.

At a recent lunch with GOP senators, Lee said, the group agreed that “if we ever wanted to form a cult, we’d want Arthur Brooks to be the guy we’d follow.”

“Every time we hear Arthur Brooks’ speeches, he says something incredibly profound,” he said. “So profound, that he has a very loyal following.”

Equal Pay Day celebrates a tiresome myth that just won’t die - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 12:04

Equal Pay Day falls on April 10 this year, and supposedly represents how far into 2018 women must continue working to earn what their male counterparts earned last year. The National Center for Pay Equity promotes Equal Pay Day annually to bring attention to the so-called “gender pay gap,” which claims that women receive 20% lower pay on average for doing the same work as men. But the 20% gender wage gap is actually a tiresome statistical myth that persists in the face of overwhelming evidence to the contrary.

@criene via Twenty20

The reality is that men and women make very different career and work choices, and frequently play very different family roles, especially for families with children. While gender discrimination undoubtedly occurs, it is individuals’ choice – not discrimination – which accounts for the vast majority of gender differences in earnings.

Labor economists have conducted numerous studies over many decades to explain differences in earnings among all types of workers. Economists believe that two main factors influence the earnings received by a given worker.

The most important factor is the skills and productivity that an employee brings to the job. This can include both formal education, skills learned on the job through work experience and the sheer amount of time that a person works. Data show that male employees tend to have more years of work experience than females, and also work more hours per week on average than women.

Men also tend to gravitate toward college majors with greater market value than women. For instance, roughly 80% of engineering and computer science majors are male while two-thirds of liberal arts, drama, dance, education and fine arts majors are female. There is nothing wrong with these choices, but it’s also reasonable to expect these choices to translate into wide variations in earnings after graduation, since market forces in the labor market determine salaries for different educational specialties.

But there’s a second component of earnings, which labor economists call “compensating wage differentials” that also explains gender variation in salaries. Compensating wage differentials are differences in pay that are designed to attract employees to jobs that otherwise would be undesirable. As Adam Smith said in The Wealth of Nations, “The wages of labor vary with the ease and hardship … of the occupation.”

The undesirable aspects of certain jobs can range from the mundane to the gruesome. For instance, men have longer average commute times to their jobs than women. In the U.S., the average male spends 33 more hours commuting to work each year. How much extra pay would you demand to spend the equivalent of four additional eight-hour days sitting in traffic or on a bus riding to work?

While a long commute is an inconvenience, men are also much more likely to be injured or killed on the job. Economists have long found that, all else equal, more dangerous jobs pay higher average wages than safer jobs. And the 20 jobs with the highest occupational fatality rates are on average 94% male and 92.5% of workplace fatalities overall are men. Relatively safe occupations such as office and administrative support and education, training, and library occupations are roughly three-quarters female. If you think it’s reasonable for dangerous jobs to pay higher salaries, then you should also conclude that men on average should earn more than women.

But there are positive factors as well. For instance, employees might willingly accept a lower salary if their job is rewarding or focuses on issues the employees believe in, be it helping children, protecting the environment, or fighting cancer. This is the realm of non-profits, and 7-in-10 employees of non-profit organizations are female. The typical claim that women are underpaid relative to men accounts for none of these factors.

Proponents of the gender pay gap myth would have you believe that any difference in earnings between men and women is the result of gender pay discrimination. The reality is that men and women are different – they gravitate to different college majors, they have different levels of work experiences, they play different family roles, and they often work in very different types of jobs.

It is bizarre to imagine that men and women would earn precisely the same on average despite those differences. It would also be completely unrealistic to suggest that the 20% difference in annual earnings is exclusively or even largely the result of gender discrimination. But to celebrate Equal Pay Day, those are some of the statistical fairy tales that you have to accept.

More on the Equal Pay Day myth:

Andrew G. Biggs and Mark J. Perry are scholars at the American Enterprise institute, and Perry is also a professor of economics at the University of Michigan’s Flint campus.

Bundles of trouble in the AT&T–Time Warner merger? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 10:00

As the hearing on the Department of Justice’s challenge to the proposed merger between AT&T and Time Warner grinds on, it is timely to revisit the remarkably similar New Zealand Commerce Commission case decided just over a year ago, when major telecom company Vodafone and dominant pay television provider Sky Television were denied permission to merge.


Strategic foreclosure in vertical mergers

While there are many differences between the US and New Zealand legal environments, the key question in both cases is whether a vertical merger between a major content provider and a distributor will sufficiently reduce competition in at least one relevant market so that consumer welfare will be materially harmed. Normally, mergers between firms providing products in adjacent markets that are not actually competing with each other ex ante (termed “vertical mergers”) are relatively uncontroversial. The merger typically allows cost savings to accrue without reducing the number of firms supplying products in each of the relevant markets. The merged firm can sell the two products to end consumers in bundles at lower prices without harming its own profits. Consumers and total welfare therefore benefit from the merger proceeding.

But when one of the merging firms supplies products in one market (content) to firms selling services in the other market (internet access), and those products are resold to consumers, there is a risk that the merged firm can act strategically by raising its prices for the resold products. As rivals’ costs are raised by such strategic behavior, they can be foreclosed from competing in the relevant market. Competition and ultimately end consumers are harmed. The potential for such an outcome sits at the core of the Department of Justice’s case against AT&T.

What are the relevant markets?

A crucial consideration for such mergers is defining the relevant market(s) where competition could be harmed. With the AT&T–Time Warner merger, the Department of Justice has proposed HBO programming as an essential product that rivals must have access to in order to compete; in New Zealand, it was live Sky Sport content. Post-merger, prices for these types of content could be increased, making it more expensive for rivals to offer bundles of content and internet access in competition with those of the merged firm.

However, both cases presume the relevant content will continue to be available in the future only in the traditional manner. That is, the relevant market(s) are defined as bundles of programs (channels) sold together in pay television packages, which in turn may be tied to the provision of a particular distribution method (cable or satellite).

A changing market

In practice, the market for video content is undergoing phenomenal change. Digitalization (the internet) has broken the monopoly held by a specific television distribution technology. “Cable” content can be distributed using any internet technology (cellular, wireless and DSL, as well as satellite and cable/fiber). The owners of content rights are no longer constrained to using a traditional television content bundle distribution model dominated by large aggregators to get their content to consumers. Channels and even individual programs can be “unbundled” and sold using a variety of different models. While selling bundles of classical television content was important in increasing the number of people with internet access, now that internet access is near ubiquitous, the relationship between content and distribution technology is changing.

Increasingly, consumers are eschewing the traditional pay television bundle and accessing their video entertainment content from multiple sources (Netflix, YouTube, Spotify, etc.). Rather than paying one large fee for access to content curated by a single operator, consumers appear to prefer paying several smaller (or even no) fees to a wide range of content providers to curate their own personalized content bundles. As consumers’ preferences for content are inherently heterogeneous, the bundles of content actually purchased vary greatly.

There will always be some content preferred by larger numbers of consumers than others. But as long as those types of content are sold in mixed bundles — where consumers can pick and choose according to their own preferences and are not forced to buy “tied” content they don’t value or purchase their internet access from a specific provider to access a specific content — then a merger between content and internet providers need not pose a competitive threat. So long as content is able to be accessed via multiple technologies, it is not in the interests of providers to limit its access to one technology (e.g., cable) or provider, where substantial numbers of potential consumers obtain their internet access from other sources. And if the price of internet access is increased to make an access and content package more attractive to some consumers, the firm risks losing a significant number of other internet access consumers who have no desire to buy that content in the first place.

Antitrust lessons

The implications for antitrust from this change in consumer demand is material. The relevant markets looking forward are not the pay television products or the internet access plans of the past, determined by producer preferences, but the new personalized bundles of the future, constructed by consumers. It is to be hoped that the US case will give due consideration to this matter.

Learn more:

Facebook Hearing Shows Need To Update Internet Policy So That All Play By The Same Rules - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Tue, 04/10/2018 - 08:26

The fallout from Facebook’s data breach of 87 million users’ personal information should not surprise anyone. Partisan politics has – for more than a decade – prioritized the corporate interests of the darlings of Silicon Valley over the needs of American consumers and resulted in the egregious data breaches and abuses of power we’re witnessing today. Hearings today in the Senate and tomorrow in the House put Facebook Mark Zuckerberg in the hot seat, but other Silicon Valley power brokers are culpable as well.

In the wake of a windfall of data breaches (the latest victimizing fitness tracking app MyFitnessPaloperated by Under Armour), policymakers are now faced with a decision: Continue to senselessly carve out big tech companies from internet policy debates and regulations, or take a rational and holistic view of today’s internet ecosystem and develop a transparent, binding national privacy legislation that protects consumers’ online information once and for all.

The previous administration rewarded Silicon Valley’s cries for internet regulation by placing a host of new rules on internet access providers only, ultimately giving the largest Silicon Valley tech companies free rides on the internet highways at consumers’ expense. Examples include requirements for pay TV and cable operators to share their contractual and proprietary data with Google, and measures creating road blocks for telecom providers to offer free and reduced priced broadband while Silicon Valley got to offer any kind of advertising product it wanted without permission.

The current Congress and administration are taking steps to correct course on many of these harmful policies. But, that hasn’t stopped certain policymakers from continuing to pursue the tech industry’s agenda, this time aimed at restoring the harmful Obama era internet regulations through the Congressional Review Act that would strike down America’s successful bipartisan light-touch internet policy framework established under President Clinton in 1996. Other efforts at the state level threaten to turn the internet into a fragmented, balkanized mess. Every second spent pursuing these policies is a wasted one that should be spent crafting internet rules to protect today’s consumers online.

The internet is an essential part of our lives and modern commerce and access to data will drive future digital innovations that will benefit humanity in incredible ways. But, all this change also brings a host of new challenges and risks – both known and unknown. The internet continues to evolve, but the laws guiding it have not kept pace to properly protect consumers. Identifying a clear, lasting solution to this escalating issue is critical.

It’s time for national privacy legislation.

Consumers are confused by different state privacy laws, sector-specific policies and complicated terms of service conditions. It’s virtually impossible to know what is protected and what isn’t, and there is no central place to go to for help. Consumers deserve one clear set of national rules that applies to everyone operating online.

Taking action will signal that reclaiming U.S. leadership in privacy is a priority.

Given the kowtowing to Silicon Valley in the past, the U.S. missed an opportunity to set the global standards in privacy. Meanwhile the European Union (EU) has taken up the task and pushed comprehensive rules, which will take effect in May 2018, that are now considered the new standard for the rest of the globe. 

The public wants the government to do more for privacy.

A recent survey shows that Americans increasingly believe our government does not do enough to regulate large tech companies. Regulation is not always the answer, but Silicon Valley needs to play by the same rules as everybody else.

Protecting Americans’ privacy is a goal that transcends party lines, and national privacy legislation is a winning proposition for all parties. While many in Silicon Valley have fought legislation for some time, as it would require them to abide by the same standards as the rest of the internet ecosystem, they can’t maintain this stance any longer. The casualty will continue being your online information.

The Facebook revelations create an opportunity to rethink internet polices for today’s world. It’s time for Congress to step up to the task.

‘Equal Pay Day’ this year is April 10 — the next ‘Equal Occupational Fatality Day’ is on May 30, 2029 - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Mon, 04/09/2018 - 23:12

Every year the National Committee on Pay Equity (NCPE) publicizes “Equal Pay Day” to bring public attention to the gender earnings gap. According to the NCPE, “Equal Pay Day” falls this year on April 10 based on a 19.5% difference in unadjusted, raw median annual earnings in 2016 according to Census Bureau data, and therefore allegedly represents how far into 2018 women will have to continue working to earn the same income that the men earned in 2017, supposedly for doing the same job. Inspired by Equal Pay Day, I introduced “Equal Occupational Fatality Day” in 2010 to bring public attention to the huge gender disparity in work-related deaths every year in the United States. “Equal Occupational Fatality Day” tells us how many years and days into the future women will be able to continue to work before they will experience the same number of occupational fatalities that occurred for men in the previous year.

Note: Actually, if you do the math, a 19.5% gender difference in unadjusted median annual earnings would place Equal Pay Day sometime during the last week of March and not the second week of April. But since the NCPE’s entire campaign is based on questionable and faulty statistics at its core, being mathematically inaccurate about the exact date of Equal Pay Day probably isn’t too surprising.

Last December, the Bureau of Labor Statistics (BLS) released data on workplace fatalities for 2016, and a new “Equal Occupational Fatality Day” can now be calculated. As in previous years, the graphic above shows the significant gender disparity in workplace fatalities in 2016: 4,803 men died on the job (92.5% of the total) compared to only 387 women (7.5% of the total). The “gender occupational fatality gap” in 2016 was again considerable — more than 12 men died on the job in 2016 for every woman who died while working.

Based on the BLS data for 2016 for workplace fatalities by gender (and assuming similar fatality data for 2017), the next “Equal Occupational Fatality Day” will occur more than 11 years from now ­­– on May 30, 2029. That date symbolizes how far into the future women will be able to continue working before they experience the same loss of life that men experienced in 2016 from work-related deaths. Because women tend to work in safer occupations than men on average, they have the advantage of being able to work for more than years longer than men before they experience the same number of male occupational fatalities in a single year.

Economic theory tells us that the “gender occupational fatality gap” explains part of the “gender earnings gap” because a disproportionate number of men work in higher-risk, but higher-paid occupations like coal mining (almost 100% male), commercial fishing (99.9% male), police officers (85.9% male), logging (94.9% male), truck drivers (94.0%), roofers (98.3% male), and construction (97.3% male); see BLS data here. The table above shows that for the 20 most dangerous US occupations based on fatality rates per 100,000 workers by industry and occupation in 2016 men represented more than 90% of the workers in 14 of those 20 occupations and more than 85% of the workers in 18 of the 20 occupations.

On the other hand, women far outnumber men in relatively low-risk industries, often with lower pay to partially compensate for the safer, more comfortable indoor office environments in occupations like office and administrative support (72.1% female), education, training, and library occupations (73.1% female), and healthcare (75.6% female). The higher concentrations of men in riskier occupations with greater occurrences of workplace injuries and fatalities suggest that more men than women are willing to expose themselves to work-related injury or death in exchange for higher wages. In contrast, women, more than men, prefer lower risk occupations with greater workplace safety and are frequently willing to accept lower wages for the reduced probability of work-related injury or death. The reality is that men and women demonstrate clear gender differences when they voluntarily select the careers, occupations, and industries that suit them best, and those voluntary choices contribute to differences in pay that have nothing to do with gender discrimination.

Bottom Line: Groups like the NCPE use “Equal Pay Day” to promote a goal of perfect gender pay equity, probably not realizing that they are simultaneously advocating an increase in the number of women working in higher-paying, but higher-risk occupations like logging, roofing, construction, farming, and coal mining. The reality is that a reduction in the gender pay gap would come at a huge cost: several thousand more women will be killed each year working in dangerous occupations.

Further, the proponents of “Equal Pay Day” are promoting a statistical falsehood by suggesting that women working side-by-side with men in the same occupation for the same company are making something like 25% less than their male counterparts, which causes them to have to work an additional 65 days (and 14.5 weeks) to achieve “equal pay.” The NCPE’s statement that “because women earn less, on average, than men, they must work [25%] longer for the same amount of pay,” implies that gender wage discrimination is behind the gender pay gap. Of course, that would imply that some corrective action by government is necessary to address the gender pay gap, even though most studies find that there is no gender earnings gap after factors like hours worked, child-birth and child care, career interruptions, and individual choices about industry and occupation are considered. For example, a 2009 study by the Department of Labor concluded:

This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.

Conclusion: I hereby suggest, that after adjusting for all factors that contribute to gender differences, Equal Pay/Earnings Day actually fell on about December 31 last year. Or maybe the first week of January…. but NOT the second week of April. Women should be embarrassed by the statistical falsehood that is annually promoted by NCPE’s Equal Pay Day that suggests that gender discrimination in the labor market burdens them with 14.5 additional weeks of work to earn the same as their male counterparts – when that’s not even remotely true.

Finally, here’s a question I pose for the NCPE every year: Closing the “gender earnings gap” can really only be achieved by closing the “occupational fatality gap.” Would achieving the goal of perfect pay equity really be worth the loss of life for thousands of additional women each year who would die in work-related accidents?

Related: Here’s a quote from Camile Paglia in 2013 writing in TIME (“It’s a Man’s World and It Always Will Be“) about men’s important, but mostly underappreciated role in the labor market and the importance of their willingness to do the dangerous work that makes us all better off:

Indeed, men are absolutely indispensable right now, invisible as it is to most feminists, who seem blind to the infrastructure that makes their own work lives possible. It is overwhelmingly men who do the dirty, dangerous work of building roads, pouring concrete, laying bricks, tarring roofs, hanging electric wires, excavating natural gas and sewage lines, cutting and clearing trees, and bulldozing the landscape for housing developments. It is men who heft and weld the giant steel beams that frame our office buildings, and it is men who do the hair-raising work of insetting and sealing the finely tempered plate-glass windows of skyscrapers 50 stories tall.

Every day along the Delaware River in Philadelphia, one can watch the passage of vast oil tankers and towering cargo ships arriving from all over the world. These stately colossi are loaded, steered and off-loaded by men. The modern economy, with its vast production and distribution network, is a male epic, in which women have found a productive role — but women were not its author. Surely, modern women are strong enough now to give credit where credit is due!

Related: See my recent CD posts “To bring attention to the 31% gender commute time gap, ‘Equal Commute Day’ for US women will occur on June 6” and “For Equal Pay Day: Evidence of employers paying women 19.5% less than men for the same work is as elusive as Bigfoot sightings.”

Building resilience at the local level: A conversation with New Orleans Mayor Mitch Landrieu - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Mon, 04/09/2018 - 19:15

When Mitch Landrieu became mayor of New Orleans in 2010, he inherited a city struggling with stalled post-disaster recovery and persistent economic and social problems. At this event, Mayor Landrieu will reflect on how his city has worked to rebuild physically and economically, to reform local government institutions, and to address police-community relations, high crime rates, and long-standing class and racial fissures. He will discuss the challenges that remain for New Orleans and the lessons New Orleans’ comeback story offers for other cities around the country about resilience and making government work.

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