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Watch out for Campbell’s Law when cheering college completion - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Thu, 08/16/2018 - 19:29

Our valued colleague Angela Rachidi yesterday penned an AEIdeas post highlighting a new MDRC study which suggests that some community college programs have successfully boosted college-readiness and graduation rates. Having just finished a major project on the astonishing dropout rate that plagues American higher education (which included a look at the specific programs examined by MDRC), we’re gratified to see a colleague tackling this subject. Yet, for all that, Rachidi’s enthusiastic post left us nervous about the lessons she drew from the analysis. In AEI’s spirit of a genial, collegial competition of ideas, we thought it worth sharing a brief response.

Campbell’s Law in brief: “When a measure becomes a target, it ceases to be a good measure.” It applies to college completion rates, too. Image via Twenty20.

The MDRC study does report some impressive results for City University of New York (CUNY) students randomly assigned into the programs in question. After one semester, students in CUNY’s “Start” program were 8 to 25 percent more likely to be college ready in at least one subject-area. Unclear, however, is how CUNY schools define “college-ready,” how that definition may have changed over time, or whether faculty have been easing coursework requirements.

CUNY’s Accelerated Study in Associate Programs (“ASAP”) provides intensive advising, tutoring, and financial support to students. All good, but one key ASAP requirement is that students remain enrolled full-time. Well, full-time students typically complete at much higher rates than part-time students (who may struggle with family or work obligations). As MDRC notes, ASAP thus selects for students who are more likely to make it through. Indeed, program requirements geared to such students could well wind up narrowing the opportunities available to students who can’t afford to take time out of the workforce or enroll full-time.

Rather than huzzahs, what’s needed is careful scrutiny of just how these programs work and how readily results may translate to other institutions and students. Yet, both the MDRC analysis and Rachidi’s commentary exhibit scant attention to distinguishing between productive increases in completion rates from statistical manipulation and mere gamesmanship. As more colleges seek to emulate programs like CUNY’s, they’ll do well to appreciate that enhanced financial aid, advising centers, and tutoring efforts are not cheap — and that trying to make them all work together is challenging.

If we have learned anything from No Child Left Behind and the more recent high school graduation rate scandals in K-12, it’s that Campbell’s Law applies with a vengeance when it comes to education. If educators know they’re supposed to move completion rates, they’ll find ways (good and bad) to move them.

That means caution is warranted. These programs may prompt institutions to lower academic standards, find ways to pass students along by pretending they’re learning (what K-12 types call “social promotion”), or wind up enrolling students they view as more likely to complete. We’ll be best served if we tackle the college completion problem with our eyes wide open, and avoid the temptations to celebrate promised elixirs until we know more about potential side-effects.

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High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 18:24

There is a deep chasm separating the millions of Americans with limited access to college degrees from professional life. Gerald Chertavian, founder and CEO of Year Up, describes how his organization steps into this void, erecting ladders of opportunity to well-paying jobs while supplying leading businesses like Microsoft and JP Morgan with talent that would otherwise go overlooked. Where will one of their graduates end up this fall? No spoilers here.

This podcast was originally published by Harvard Business School.

AEI’s Sally Satel on the CDC’s new drug overdose estimates - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 17:52

In 2017, President Trump declared the opioid crisis a national public health emergency and implemented a $1 billion grant program to help fight the epidemic. New preliminary estimates from the Center for Disease Control indicate that about 72,000 Americans died from drug overdoses in 2017, a record 10 percent increase from the previous year.

AEI Resident Scholar Sally Satel, M.D., a practicing psychiatrist who specializes in drug addiction, has published research and analysis examining the underlying causes for the crisis and the best path forward to help combat it.

Satel identifies the need to find a demand-side solution to combat the larger crisis in her piece “The Myth of What’s Driving the Opioid Crisis.”

  • “What we need is a demand-side policy. Interventions that seek to reduce the desire to use drugs, be they painkillers or illicit opioids, deserve vastly more political will and federal funding than they have received. Two of the most necessary steps, in my view, are making better use of anti-addiction medications and building a better addiction treatment infrastructure.”

She also writes that rehabilitation drugs and enhanced access to treatment are essential in fighting the opioid epidemic in “Naloxone, Yes, But 3 Other Drugs Are Essential to Fight the Opioid Epidemic.”

  • “For many opioid users, the efforts to get them into treatment and engage them in recovery begin with resuscitation from overdose. Naloxone brings drug abusers back to life. Methadone, buprenorphine, and naltrexone can help keep them there.”

In 2018, AEI economists Alex Brill and Scott Ganz published a per-capita cost of the opioid epidemic by state and by county. Find their maps here.

To arrange an interview with Sally Satel, M.D., please contact Victoria Bellucci at victoria.bellucci@aei.org or 202.862.7155. AEI’s 24/7 media contact is mediaservices@aei.org or 202.862.5829.

‘The Blob’: Should Fannie Mae and Freddie Mac be shrinking or expanding their activities? - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 17:52

On this episode of the AEI Events Podcast, panelists discuss whether Fannie Mae and Freddie Mac should be shrinking or expanding their activities.

AEI’s Edward J. Pinto likened government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to the 1958 cult classic “The Blob” due to their continued expansion of the credit box.

Fannie Mae and Freddie Mac will soon “celebrate” their 10th anniversary of being in government conservatorship. They are under the total control of the Federal Housing Finance Agency, have virtually zero capital, and are utterly dependent on the guaranty of the US Treasury, which is the de facto owner.

Should they be shrinking their activities or expanding them? How can private companies compete with their infinite leverage, broad regulatory exclusions and benefits, and government backing? What kind of regulatory approvals should be required before Fannie and Freddie exploit these powers in new lines of business? Can a future capital regime address the market distortions Fannie and Freddie otherwise create?

This event took place on July 12, 2018.

Watch the full event here.

Subscribe to the AEI Events Podcast on Apple Podcasts.

The Taliban declares war on humanitarian aid - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 16:59

The Taliban proved that it continues to be a ruthless and effective fighting force after a brutal assault last week on the city of Ghazni. But its renewed war against humanitarian aid workers poses just as real a threat to the people of Afghanistan and the broader international humanitarian system.

An Afghan security forces convoy patrol after a Taliban attack in Ghazni city, Afghanistan August 14, 2018. REUTERS/Mustafa Andaleb

On August 14, the Taliban publicly withdrew its security commitment to the International Committee of the Red Cross (commonly known as the Red Cross) for safe passage and operations in Afghanistan. Ostensibly, the Taliban disapproved of the Red Cross’s decision to provide lifesaving medical assistance to those wounded in the assault on Ghazni and chastised the organization for failing to provide sufficient support to hunger-striking Taliban and al Qaeda prisoners.

In announcing its decision (days before #WorldHumanitarianDay), the Taliban put the entire humanitarian aid system on notice:

Other international organizations working in Afghanistan should also take notice and understand that if they indulge in trivial or other irrelevant activities instead of focusing on the main needs of the oppressed people, the Islamic Emirate will treat them in a similar fashion as the decision taken against the Red Cross.

Humanitarianism under fire

The Taliban is well positioned to make good on this threat. Its forces control or contest most of the country, and even before the latest declaration, the Taliban did not exactly make Afghanistan hospitable to humanitarian assistance. Despite the billions of dollars in foreign aid pumped into the country every year, Afghanistan remains one of the most dangerous countries for aid workers. In 2017 alone, aid workers there were attacked 15 times. Overall, Afghanistan has seen 525 attacks on aid workers during the past two decades.

The Red Cross, which currently has about 1,600 staff members in Afghanistan, has been a major target of these attacks. In May 2013, multiple suicide bombers heinously attacked a Red Cross compound in Jalalabad. Six Red Cross workers were killed and two kidnapped in February 2017. In September of that year, a Spanish Red Cross doctor was killed by a patient. While these attacks were not claimed by the Taliban, they demonstrate that the Taliban’s commitment to protecting the Red Cross was already weak at best. The withdrawal of its security commitment will make humanitarian work in Afghanistan more perilous than ever.

Resisting pressure, preserving impartiality

In active conflict zones, like Syria and Yemen, both armed groups and governments attempt to strategically control the flow of foreign aid and humanitarian relief to influence battlefield outcomes and civilian support. But as I previously discussed, the responsibility of ensuring humanitarian access, the protection of civilians, and the humane treatment of detainees is a responsibility held by states, not by humanitarian organizations and certainly not by terrorist groups like the Taliban.

The repercussions of the Taliban’s decision — and the ensuing response by humanitarian organizations — could be far-reaching. Groups like the Red Cross are able to operate in conflict zones because they are seen as impartial and apolitical, refusing to take sides in a conflict. The Taliban has directly challenged this by demanding humanitarian organizations’ solidarity with its fighters instead of their attention to the country’s most pressing humanitarian needs. But if aid organizations yield to Taliban pressure, then the perceived impartiality of the humanitarian aid system will be put at risk. For true humanitarians, the appropriate response is clear: it’s better to pull out than to cave in.

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Episode 6: Idea diversity on campus - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 15:19

This episode explores the experiences of conservative professors on campus, and why ‘viewpoint diversity’ matters in academia. We hear from Josh Dunn, Professor of Political Science at the University of Colorado and John Shields, Associate Professor of Government at Claremont McKenna College, who co-authored a book on conservative academics. Zack Beauchamp from vox.com joins Arthur in a discussion about de-platforming and freedom of speech on campus, and Professor Robert George talks about his experience at Princeton.

References and further reading:

Passing on the Right: Conservative Professors in the Progressive University | Jon A. Shields and Joshua M. Dunn

Data shows a surprising campus free speech problem: left-wingers being fired for their opinions | Zack Beauchamp

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You can subscribe on Apple Podcasts, Google Podcasts, Stitcher, Spotify, TuneIn, and ART19. The Arthur Brooks Show is published by The Vox Media Podcast Network.

A late summer budgetary nightmare - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 14:27

The Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) released new budget forecasts this summer that show the nation falling into an ever deeper financial hole. Unfortunately, very few Americans are aware this is happening. The media is distracted and hasn’t covered the federal budget outlook the way it has in prior years. Meanwhile, policymakers are acting as if the budget problem doesn’t exist because they don’t want to take responsibility for solving it.

The Trump administration’s new forecast, called the “mid-session review,” shows a sharp deterioration in the 10-year budget outlook compared to the projection released by OMB earlier this year. In February, OMB estimated that the federal government would run a cumulative “baseline” deficit over the period 2019 to 2028 of $10.8 trillion, assuming current laws and polices remain unchanged during this period. OMB’s new estimates, released in July, show a baseline deficit over the same period of $11.8 trillion, or $1 trillion more than was projected just six months ago.

Office of Management and Budget (OMB) Director Mick Mulvaney gives a presentation on proposals to consolidate executive agencies as President Donald Trump holds a cabinet meeting at the White House in Washington, June 21, 2018. Reuters

OMB’s estimates of deficits based on the president’s proposals show a similar erosion. In February, the agency estimated that the president’s budget would produce a cumulative deficit of $7.1 trillion over the period 2019 to 2028. In the mid-session review, the estimated 10-year deficit for the president’s budget is $8.0 trillion.

Trump officials have had very little to say about rising deficits and debt, beyond a vague promise from National Economic Council Director Larry Kudlow that the administration will be tougher on federal spending in the future. The president never brings the subject up in public.

This month, CBO released a set of possible scenarios for long-term budget deficits and debt covering the next 30 years. The results are even more startling than OMB’s 10-year forecast. These new scenarios are built on different assumptions from CBO’s base-case projection, the “extended baseline,” which the agency released in June. That projection assumes current laws and policies remain in effect indefinitely, which means revenue rises rather sharply beginning in 2026 because many of the individual income tax cuts enacted in 2017 are scheduled to expire at the end of 2025. Even with this assumption in place, the extended baseline shows federal debt rising from 78 percent of GDP this year to 118 percent in 2038 and to 152 percent in 2048.

As alarming as this scenario is, it is clearly too optimistic. Republicans are committed to permanently extending the tax cuts they passed last year, and history shows that Democrats are not particularly effective at reversing tax cuts once they have gone into effect. Further, the extended baseline scenario assumes Congress will keep appropriation spending in 2020 and 2021 within the caps that were enacted in the Budget Control Act of 2011. That’s not going to happen. Congress and the president just blew through the caps for 2018 and 2019 by a combined $300 billion.

CBO identifies one of its new forecasts as the “extended alternative fiscal scenario.” In this scenario, all of the 2017 tax cuts are extended permanently, the tax on high-cost employer-based insurance plans (enacted in the Affordable Care Act) is repealed (it has already been delayed from 2018 until 2022), and spending on annual appropriations grows with inflation. With these assumptions, which are plausible, the federal government will run a budget deficit of 7.1 percent of GDP in 2028, up from 3.9 percent this year, and cumulative federal debt will climb to 105 percent of GDP in 2028, to 148 percent in 2038, and to 210 percent in 2048.

Americans should worry about running such large budget deficits on a sustained basis because they will slow economic growth and lower their incomes. As CBO notes, large budget deficits and growing debt crowd out private investment, and thus lower future productivity and income growth. Large deficits also push up interest rates, and thus raise federal borrowing costs. CBO estimates that, under the extended alternative fiscal scenario, real Gross National Product would be lower by between 0.2 and 2.5 percent in 2038 compared to the extended baseline, which already incorporates a slowdown in growth due to rising levels of federal debt.

The other two scenarios from CBO’s latest report show even sharper increases in federal debt than the extended alternative fiscal scenario because they assume lower levels of revenue based on historical experience.

Not too long ago, Republicans talked about balancing the budget in 10 years. That was never achievable, and it was the wrong goal anyway. Congress and the president should agree on targets for reducing debt as a percentage of GDP over the next three decades, and then begin to work on the reforms needed to hit those targets.

The budgetary hole is deep, but a handful of reforms would make a big difference. The ages of eligibility for Social Security and Medicare need to be recalibrated to reflect the longer lifespans of retirees. Medicare premiums should be higher for retirees with higher lifetime earnings. Medicare should also be converted into a premium support program, with the beneficiaries paying more for higher cost coverage and less for plans with lower premiums. Similarly, the tax break for employer-sponsored health insurance should be capped, which would provide an incentive for firms and workers to seek out lower cost options for insurance and medical care. Finally, Republicans would be smart to consider endorsing a carbon tax, both for the revenue it would raise and the effect it would have on climate change.

Enacting all of these policies at once would not be enough to solve the entire budget problem, but it would be a big step in the right direction. Of course, it won’t happen anytime soon since these reforms would mean lowering benefits and raising taxes for various voting groups. A deficit reduction plan would ideally include measures to strengthen, rather than weaken, the safety net, with higher benefits and lower taxes where appropriate. But including such provisions, wise as they may be, won’t make it much easier for politicians to support a large deficit reduction plan that, as a general matter, lowers benefits and increases taxes.

Given its complexity and the potential political costs, the budget problem is too big for either party to tackle on its own. At the moment, the deep partisan divide makes it hard to see how a deal might come together. Still, it’s a job that will have to be done at some point, even if it means some political careers come to a premature end.

Discussing populist movements: Rohac on Fox News’ ‘Tucker Carlson Tonight’ - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 13:08
Research Fellow Dalibor Rohac discusses the repercussions of populist movements, both domestically and abroad.

‘Aloha Poke’ dispute lies at intersection of intellectual property and culture - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Thu, 08/16/2018 - 10:00

KAILUA-KONA, HAWAII — What happens when intellectual property law and cultural appropriation clash? Nothing good, as we are finding out in the dispute over the trademark on “Aloha Poke” held by a Chicago-based restaurant chain that finds itself ensnared in an incendiary controversy largely of its own making.

Poke, for those who haven’t yet tasted it (and I feel great sympathy for such people), is a traditional Hawaiian delicacy comprising a mélange of cubed fresh seafood or meat (often raw tuna, especially the ahi variety), seaweed or other greens, sesame seeds, spices, sauces, and vegetables, often served over rice. So ubiquitous is the dish that it’s on offer not only at roadside shacks and high-end eateries but even at the local Safeway:

The succulent dish has gained popularity in recent years around the US and globally (there are three poke spots in Tel Aviv alone), and in 2016 Aloha Poke Holdings LLC opened its first store in a Chicago transit station. It now boasts nine locations in Greater Chicago, as well as outposts in Milwaukee; Minneapolis; Washington, DC; Denver; and Los Angeles.

According to its filings with the US Patent and Trademark Office, the restaurant chain first used the term “Aloha Poke” in commerce in March 2016. Its first trademark on the name alone was granted in August 2016, and its mark on the design was issued in January 2017:

But the plot thickened last month when the company, relying on its trademarks, began sending cease-and-desist letters to various businesses around the country that used the terms “aloha” in connection with selling poke. One such business — the Aloha Poke Stop in Anchorage, Alaska, owned by native Hawaiian Tasha Kahele and in operation since 2014, two years before the Chicago-based chain opened its first stall — changed its name to Lei’s Poke Stop rather than face legal uncertainty.

The term “aloha” famously means both “hello” and “goodbye” in Hawaiian. But as I learned here, the word transcends mere quotidian greetings: “Ha” means spirit or life force while “alo” denotes presence or consciousness, so “aloha” connotes something like the consciousness of spirit. Native Hawaiians therefore expressed a certain justifiable outrage at the prospect of a legal impediment to their use of a term and a dish central to their culture.

Protests decrying cultural appropriation erupted in Chicago across from Aloha Poke Co.’s headquarters. “‘Aloha’ is something we’ve shared with the world,” said Kuhio Lewis, head of the Council for Native Hawaiian Advancement, “and in this case, Aloha Poke Co. is trying to take the word away from us.” A Change.org counterpetition quickly accumulated over 100,000 signatures urging the chain to “Remove ‘aloha’ and ‘poke’ from your name.”

For its part, the restaurant chain vehemently denied at least some of the activists’ claims in a Facebook post. The Chicago Tribune, editorializing largely in support of the hometown establishment, noted that “if aloha is not for sale, someone needs to tell Hawaiians. If you check the Honolulu online telephone directory, you’ll find dozens of businesses that have decided to make commercial use of the term, including Aloha Upholstery and Aloha State Refrigeration.”

The Tribune slightly misses the point, however, as neither business it cites sought or received a US trademark over their particular use of “aloha,” but it is true that over 1,000 trademark applications use the word “aloha” and several hundred registered marks use the term (for example, “Handcrafted Ales & Lagers Brewed with Aloha,” registered to the Maui Brewing Company).

Native Hawaiian activists, of course, would differentiate between islanders using “aloha” to their pecuniary advantage and non-Hawaiian mainlanders seeking to do so. Perhaps they would not object, or would object less vigorously, to the Aloha Poke Co.’s attempts to prevent non-Hawaiian stores from using their intellectual property.

But US trademark law is unsuited for such fine distinctions. Instead, it offers people or companies using distinctive trade names to sell goods or services exclusivity in those names, and nothing more. For better or for worse, our trademark regime wasn’t designed to resolve hot-button cultural issues, and, unfortunately, the “aloha wars” aren’t likely to come to an end anytime soon.

Learn more:

Discussing tensions with Turkey: Goldberg on Fox News’ ‘Special Report with Bret Baier’ - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Wed, 08/15/2018 - 22:45
AEI Fellow and Asness Chair in Applied Liberty Jonah Goldberg discusses US-Turkey trade relations and Pastor Brunson on Fox News' 'Special Report with Bret Baier.'

Discussing the security clearance debate: Goldberg on Fox News’ ‘Special Report with Bret Baier’ - High school to JP Morgan in seven seconds: How businesses gain an edge by providing ladders of opportunity - AEI

Wed, 08/15/2018 - 22:40
AEI Fellow and Asness Chair in Applied Liberty Jonah Goldberg discusses security clearances on Fox News' 'Special Report with Bret Baier.'

Trump’s failure to condemn the bigots of the alt-right tars his presidency - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 22:15

How can a president as successful as Donald Trump be so unpopular?

Fueled by his historic tax reform and an unprecedented regulatory rollback, the economy grew by an annualized rate of 4.1 percent in the second quarter. The unemployment rate is just 3.9 percent — near the lowest it has been in nearly two decades — and the New York Times reports, “ Job growth is on a record streak [and] American factories . . . are hiring at their fastest rate in two decades.” The African American and Hispanic unemployment rates are at nearrecord lows. And the unemployment rate for women is the lowest it has been since 1953.

Virtually everyone is doing better thanks to the Trump economic boom. And yet the president’s approval rating is stuck at 42 percent. Even worse, his disapproval rating has risen 11 points since his inauguration. When asked if Trump is doing an “excellent,” “pretty good,” “fair” or “poor” job as president, a stunning 45 percent say Trump is doing a “poor” job.

Part of the disapproval is driven by the intensity of the Democratic “resistance,” and the ongoing investigation by special counsel Robert S. Mueller III has certainly taken its toll. Others are put off by his tweetstorms and the chaotic nature of an administration that produces self-inflicted wounds such as family separations at the border.

But ultimately, what makes it impossible for many Americans who approve of Trump’s policies to also approve of Trump’s presidency is his failure to definitively reject and ostracize the bigots who inhabit the fever swamps of the alt-right. A year after Charlottesville, Trump has still not explicitly condemned them. “Riots in Charlottesville a year ago resulted in senseless death and division,” Trump tweeted Saturday morning. “We must come together as a nation. I condemn all types of racism and acts of violence. Peace to ALL Americans!”

Sorry, that’s not good enough. Not all types of racists were marching in his name in Charlottesville. Not all types of racists held a rally after his election in which they shouted, “Hail Trump!” Not all types of racists continue to claim to be a part of Trump’s coalition.

The fact that the Unite the Right rally in front of the White House on Sunday fizzled does not let Trump off the hook. His defenders will argue that there are always protesters outside the White House and none of his Republican or Democratic predecessors were expected to comment on them. Why should Trump have to do so? The answer is simple: because the ethno-nationalists of the alt-right have embraced him, and Trump has failed to make clear he does not accept their support.

This is not hard. After some white nationalists praised a recent monologue she delivered, Fox News host Laura Ingraham went on the air and blasted them, declaring to “all white nationalists . . . you don’t represent my views, and you are antithetical to the beliefs I hold dear.”

Why can’t Trump bring himself to say the same thing?

Trump’s failure to reject the bigots of the alt-right not only tars his presidency, it also tars his supporters. The overwhelming majority of people who voted for Trump are not racists. They are good, decent, patriotic Americans who were sick and tired of being ignored by the political establishments of both parties in Washington. They had legitimate grievances that were not being addressed, from the opioid crisis to an economy that was not giving them the chance to work and pursue lives of dignity. Trump’s election finally gave them a voice. But his failure to condemn the alt-right allows his critics to dismiss his supporters’ valid concerns and lump them in with the tiny minority of bigots who have embraced the president.

His failure to condemn the alt-right has also prevented him from expanding his support beyond his core supporters. With his record, he should be winning over millions of Americans who did not vote for him in 2016 but whose circumstances have markedly improved under his presidency. Instead, his support is stagnant and his disapproval numbers are growing. He would gain far more supporters by rejecting alt-right bigots than he would lose.

The fact is, many Americans support Trump’s policies — from his outstanding Supreme Court picks to his bold economic reforms — but don’t support him for one simple reason: They don’t want to be associated with a man who seems to have so much trouble telling the white nationalists of the alt-right that they don’t represent his views and are antithetical to the beliefs he holds dear.

Ep. 110: Clashing over commerce, then and now - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 20:33

“If stability despite conflict is a lesson from past experience,” wrote economist and trade historian Douglas Irwin last year, “one can easily be led to conclude that the future will look much like the past and that the reciprocity period will continue for some time to come.”

But with President Trump’s trade war so far refusing to relent, is this vision of a free-trading future far too sanguine? Irwin himself joined me to discuss this question, as well as some American economic history, the most pervasive myths people believe about trade policy, and much more on the most recent episode of my podcast.

Douglas Irwin is a professor of economics at Dartmouth College, a research associate at the National Bureau of Economic Research, and the author of “Clashing over Commerce: A History of US Trade Policy.” You can download the episode by clicking the link above, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.

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Trump vs. Kasich, the rematch - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 19:42

Ohio Governor John Kasich and President Donald Trump celebrated a fellow Republican’s electoral victory by resuming their feud. Both of them backed Troy Balderson, who appears to have won a nail-biter last week in a special election for the U.S. House. Trump claimed, on Twitter naturally, that the race was close because Kasich is so unpopular. (Kasich has a net approval rating of 15 percent in Ohio, while Trump is at -1.) Kasich retaliated with a clip of Vladimir Putin laughing.

Will their rivalry move from Twitter to the presidential primary? Kasich has fans who would like to see him take on Trump (again) in 2020. But there are three facts working against Kasich’s ability to make it a real race.

First, and most obvious: Trump has the support of 82 percent of Republicans. Yes, some of that support is soft, and yes, the numbers could drop. That would happen if Trump crossed conservatives on an issue millions of them care about, like guns or abortion. He has given no sign of being willing to take that risk. Significant economic deterioration could pry some soft supporters out of his coalition, too. Otherwise he is probably safe.

In an era of party polarization, partisans are less likely to tolerate internal challenges. The last time an incumbent president even got a black eye in a primary was 26 years ago, when Pat Buchanan made a decent showing in the New Hampshire primary against President George H. W. Bush. Backing a challenger runs the risk of weakening the incumbent and thus handing power to the other party. That was arguably the effect of Buchanan’s run in 1992.

A vote for Kasich, Trump supporters would say, is a vote for Kamala Harris (or Elizabeth Warren, or whatever Democrat looks most formidable at that time). It’s an argument that would hit home with a lot of Republicans.

That judgment might change if Republicans thought that Trump had no hope of winning re-election. Which brings us to a second issue: Trump’s 2016 victories radically reduced the power of electability arguments against him. “Trump’s Republican critics almost uniformly agree that they cannot attract a large audience for their case against the president until Republican elected officials and voters see evidence that his approach is endangering the party’s electoral prospects,” CNN’s Ronald Brownstein wrote recently.

They’re being too optimistic. Trump polled very badly through most of the general election against Hillary Clinton, and most Republican politicians were afraid of a bloodbath. It didn’t happen. Even if Trump’s reelection numbers look dismal in the fall of 2019, Republican voters are going to need a lot of convincing to drop him as a sure loser.

Losing the House this fall will not cause Republicans to make that reassessment. His supporters will make many excuses if that happens, and some of them will even be correct. The president’s party usually loses seats in a midterm, they’ll say, accurately. Because Republicans in swing districts are more likely to be critical of Trump, it’s the critics who will disproportionately lose seats. Trump’s supporters in the media will spin that to mean that sticking with him is the smart course. And a face-off between Trump and a Democratic House will tend to make party loyalty among Republicans — and thus loyalty to Trump — even stronger.

The third reason a Kasich run could fizzle out is that some Republicans who have reservations about Trump have reservations about him, too. The common denominator among Republicans who dislike Trump is revulsion against his character. On policy issues, Trump’s critics diverge.

Kasich, who has been a strong supporter of Medicaid expansion and has urged people to “just take a chill pill” when discussing abortion, appeals to anti-Trump Republicans whose policy views are relatively moderate. But he alienates many of those who are more conservative — the kind of voters who favored Senator Ted Cruz rather than Kasich over Trump in 2016.

Someone like Kasich would probably do better in a primary challenge to Trump than someone like Cruz, because anti-Trump Republicans these days tend to be college-educated suburbanites who are themselves relatively moderate. But Kasich could not count on all anti-Trump Republicans to back him.

A primary challenge to Trump in 2020 might still serve a purpose, even if Trump retains the support of most Republicans. But that purpose will be to register a protest — to stand for a conservatism that is better than Trump — not to elect a new president.

Democracy in crisis? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 19:09

In recent months, there has been a chorus of concern about the health of democracy in the United States and around the globe. Yascha Mounk’s book The People vs. Democracy and Steven Levitsky and Daniel Ziblatt’s How Democracies Die are recent entries in a substantial literature on the “crisis.” Pollsters’ findings have been an important part of the discussion of democracy’s health. Recently, Democratic pollsters Jeremy Rosner and Brian Paler wrote about findings from a new bipartisan poll, arguing that our democracy “may be heading toward a cliff.”

Harvard professor Mounk’s book includes troubling public opinion findings about declining support for democracy in the US, particularly among millennials. Others, using the same World Values Survey data that Mounk uses, reach different conclusions. Erik Voeten of Georgetown University, responding to a 2016 article by Mounk, argues, that “trends in overall support for democracy and non-democratic alternatives have been flat for the past two decades,” and that “there is no threat to consolidated democracies” such as the United States.

Recent polls underscore the public’s broad concerns. An October 2017 survey by the Washington Post and the University of Maryland found “an erosion of pride in the way democracy works.” In the poll, 63 percent were proud of the way democracy works in America. When the identical question was first asked in 1996 in NORC’s General Social Survey, 79 percent were proud. In April this year, the Pew Research Center found that Americans generally agree on democratic ideals and values, but that the country is “falling well short in living up to these ideals.” In Pew’s report, 58 percent said that democracy was working well, although only 18 percent said it was working very well. The 2018 survey about which Rosner and Paler wrote was a bipartisan effort, conducted jointly by their Democratic polling firm Greenberg Quinlan Rosner with Whit Ayres’ Republican polling firm North Star Opinion Research for the Democracy Project, a join initiative of Freedom House, the George W. Bush Institute, and the Penn Biden Center for Diplomacy and Global Engagement. In the Democracy Project poll, a clear majority felt that US democracy was getting weaker.

It is important to be clear about what the public is saying. Rosner and Paler put it well when they wrote “[a]lthough there has been no fall-off in recent years in the public’s overwhelming support for the idea of democracy, the level of dissatisfaction with our democracy’s performance is alarming.” In the Democracy Project survey, 84 percent put themselves at points 6–10 on a 10-point scale where 10 indicated that it is “absolutely important” to them to live in a country that is governed democratically. In the poll, however, less than half, 48 percent, were satisfied with the way democracy was working in this country.

In a 2017 poll, Pew found that a substantial 86 percent agreed that “a democratic system where representatives elected by citizens decide what becomes law” is a good way of governing a country. But in the same survey, far fewer, 46 percent, were satisfied with the way democracy was working in the United States.

Rosner and Paler note that the democratic ills people talked about in their focus groups “almost entirely pre-date President Trump,” and other polls confirm that observation. Many pollsters’ questions show that Americans are deeply concerned about intense partisan polarization, a lack of bipartisan cooperation, a civility deficit, the role of money in our politics, outside interference in our elections, media bias, and low citizen participation. Many people believe Trump’s rhetoric and actions have exacerbated divisions and weakened our democracy’s health.

The concerns identified by the public and the pollsters are real, but Americans aren’t turning away from democracy as a system of government. Instead, they have growing concerns with the way our democratic government is working in practice and with the ways individuals, groups, and institutions are performing. The “crisis” rhetoric many are using is designed to get headlines. It does little to address the actual anxieties people have.

Wages, benefits, and skills: What corporate America can do for employees - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 18:30

This episode of the AEI Events Podcast features representatives from Walmart, JPMorgan Chase, FedEx, and AEI discussing the future of work and its benefits for the American worker. American corporations provide valuable goods and services to the public. But such corporations also hold immense potential to improve the lives of their own employees. And in the wake of recent corporate tax cuts, the potential for corporations to improve their employees’ lives — through competitive wages, good benefits, skills training, and more — is even greater.

What do employees of large companies gain from their employment? In what areas can employers improve? And what does the future hold for the relationship between the American employee and the large employer?

Join AEI for presentations from representatives of several leading American corporations, an overview of the landscape of these issues from AEI’s Michael R. Strain, and a panel discussion led by AEI’s Robert Doar.


This event took place on July 13, 2018.

Watch the full event here.

Subscribe to the AEI Events Podcast on Apple Podcasts.

A new study shows what’s possible for improving 2-year college outcomes - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 15:23

Almost everyone agrees that increasing education levels among low-income Americans is vital to their economic success, as well as a vibrant economy. But too often, policymakers simply call for more education or more financial aid without acknowledging that many potential students are ill-prepared for college. As a result, only 30 percent of new entrants to community college graduate within 3 years.

Via Twenty20.

A new study conducted by MDRC shows that with the right approach, community college students can be more successful. CUNY Start offers intensive developmental education before matriculation. In the first year of the study, the share of students who were college-ready in at least one subject almost tripled, with 38 percent in the CUNY Start group vs. 13 percent in the control group being ready. The gains were particularly large for math:

The effects in math are especially striking, since developmental math is a barrier that prevents many students from earning a degree. CUNY Start’s short-term success is also striking given that the program targets students with substantial developmental course requirements, in contrast to many other reforms.

CUNY Start builds upon CUNY ASAP, which provides intensive support to matriculated students who needed developmental education. CUNY ASAP doubled graduation rates when compared to a control group, 42 percent vs. 22 percent after 3 years — similarly impressive.

Three important lessons are learned. First, typical community college programs, especially when considering students with developmental needs, cannot be a major tool to address poverty unless more students successfully complete. Making these programs more accessible to low-income students, either through free tuition or more financial aid, fails to recognize the difficulties many students have in finishing these programs — difficulties that are often more than simply financial.

Second, a more intensive approach like CUNY Start and CUNY ASAP can increase the effectiveness of community college programs while still being cost-effective. According to the authors of the CUNY ASAP study,

Despite ASAP’s higher total cost (about $16,300, or 63 percent more than CUNY spent per student on usual college services), the cost per degree was lower because ASAP generated so many more graduates over the three-year follow-up period than did the usual college services.

Finally, more programs targeting low-income people need to be rigorously evaluated using random assignment. Prior analysis of data from CUNY ASAP suggested that students were benefitting, but no one was sure whether these gains were due to the program or something else. Similar concerns would exist had CUNY Start not been rigorously evaluated.

Policymakers are correct that education is necessary to increase economic security for many Americans who find themselves at the bottom of the income ladder. But they must also recognize that for many students the existing community college approach is not working. Reforms modeled after CUNY Start and CUNY ASAP could help change that.

Learn more:

Discussing Turkey’s economic crisis: Rubin on CNBC’s ‘Squawk Box’ - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 13:41
Resident Scholar Michael Rubin discusses the causes and implications of Turkey's economic crisis.

Have public employee pensions become more generous, or less? - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 13:38

There’s a debate going on about public employee pensions. One study finds that government pensions have become more generous over the years. But a prominent academic replies that public sector retirement benefits have remained steady in generosity and taxpayer costs have actually fallen because public employees are paying more for their pensions.

Who’s right? Me, that’s who.

Twenty20 License

It’s an important debate: retirement benefits are needed to attract public employees but excessive benefits can squeeze out other important parts of state and local budgets. But both sides of this argument have something wrong.

The website Wirepoints published a study of state pension liabilities that’s gained a great deal of publicity. The Wirepoints study shows, based on pension actuarial data gathered by the Pew Charitable Trusts, that total pension liabilities have grown faster than the economy of every state in the country. Based on this, publications such as the Wall Street Journal have inferred that pension benefits must have become more generous.

But Boston College economist Alicia Munnell has pushed back, in an article published by Market Watch. Munnell points out that pension liabilities are based on pension benefits promised to employees in the past.

But the generosity of the pensions being earned by government employees today is measured by something called the “normal cost” of the pension. Munnel, who runs the Center for Retirement Research at Boston College, cites figures showing that the average normal cost of pensions is the same today as in 2001. And since employee pension contributions have risen, this means the cost of new pension benefits to the taxpayer — the so-called “employer normal cost” — has actually gone down.

So Munnell is right, right? No, because Munnell’s own preferred measure of pension generosity has flaws of its own.

Public pensions measure the normal cost of their plans while assuming a return that the pension can earn on its investments. Back in 2001 this assumed return averaged 8.1%, while by 2016 it had fallen slightly to about 7.5%. But normal cost figures measured in this way aren’t a good measure of the generosity of public pensions.

The reason is that a pension can only earn 7-8% investment returns by taking on a great deal of investment risk. The typical public pension today holds about 75% of its investments in risky assets such as stocks, hedge funds or private equity. But – and this is the important part – it’s the government, not employees and retirees, who bear that investment risk. For most pension participants, benefits are virtually guaranteed while the taxpayer is left holding the bag if investment returns fall short.

If benefits are guaranteed, the way to value them is by calculating the normal cost of the pension while assuming a riskless rate of return. This is how the Congressional Budget Office has measured the generosity of pension benefits in it’s own analysis of federal employee compensation, as well as how I’ve done it in various papers on state and local government employee and public school teacher compensation. This method produces a much higher normal cost, since it account for the fact that the government bears all the investment risk.

Moreover, the normal cost of newly-accruing pension benefits rises when the return on safe investments falls. And this makes sense: it’s more expensive to provide a guaranteed benefit when interest rates are low than when they’re high, and a guaranteed benefit is more valuable to participants under low interest rate conditions. That matters, because from 2001 to 2016 the yield on safe 10-year U.S. Treasury bonds fell from 5.6% to only 2.2%.

The chart below shows the employer normal cost of state and local pensions in two ways. First, using Munnell’s preferred measure, is based on the assumed returns on pension investments, but nets out rising employee contributions. This shows a slightly declining employer cost of new pension benefits earned by public employees, from 7% to 5% of employee wages.

Pension normal costs. Data: Public Plans Database

But the more accurate Treasury-bond based measure tells a different story. In 2001, the normal cost of public pensions measured using the lower Treasury yield totaled just under 16% of employee wages. For context, that’s five times higher than the typical private sector employer contribution to employee 401(k)s of 3% of wages. Moreover, due to declining safe interest rates, by 2016 the employer normal cost of the average state/local pension plan had risen to 39% of employee wages, despite an increase in employee contribution rates. The reality is the pensions for a full-career public employee are usually pretty generous in dollar terms, they generally adjusted for inflation after retirement and, most of all, those benefits don’t get cut if the stock market falls.

So the answer is, yes, public sector pensions have become more generous and more expensive, because it costs more to provide a guaranteed benefit when the interest rates available on guaranteed benefits are low. So far, most public pension reforms have been relatively modest: employee contributions have risen by about 2 percent of pay, but most reforms to benefits affect only newly-hired workers. As a result, the pension benefits being earned by state and local government employees today are roughly 10 times more generous than the employer 401(k) match that a typical private sector worker receives. As elected officials think about how to fix public sector pensions, that’s worth knowing.

Most student borrowers fix their defaults — except this group - AEI - American Enterprise Institute: Freedom, Opportunity, Enterprise

Wed, 08/15/2018 - 11:15

The federal student loan program has a default problem. Roughly eight million borrowers are in default, which is defined as failing to make a payment on a loan for 270 days. Default causes grief for both borrowers, who can be subject to wage garnishment, and taxpayers, who must eat the losses if the federal government cannot recover the unpaid loan.

Plenty of research has attempted to discern what causes a borrower to enter default. But equally important is figuring out what predicts getting out of that status. A new American Enterprise Institute report authored by Jason Delisle, Cody Christensen, and myself seeks to answer the latter question.

Five years after first defaulting on a federal student loan, 70% of borrowers have gotten out of default. Borrowers who exit default can get out either by fully paying off the defaulted loan or undergoing a paperwork-intensive resolution process to bring the loan back into to good standing. Under the second option, the borrower still owes the outstanding balance, but the loan is no longer in default.

Source: AEI

Borrowers who initially fail to pay their loans tend to share a number of traits. Most student loan defaulters did not complete their college degrees. As a result, most have small balances, since dropouts attend college for fewer years than graduates. For-profit colleges and community colleges, with their lower completion rates and less valuable degrees, also produce many borrowers who go on to default. Recent research has shown that African-American borrowers also default at higher rates.

Multiple studies have established that borrowers with these characteristics are more likely to enter default. But these traits tell us hardly anything about who’s likely to get out.

For instance, college completion—generally considered one of the strongest predictors of default — has virtually no relationship to default exit rates. Both graduates and dropouts leave default at a rate of 70% after five years.

While for-profit and community colleges produce a majority of defaulters, borrowers who attended these types of schools are slightly more likely to get out of default than their counterparts who went to traditional four-year colleges. And though African-American students exit default at a slightly lower rate (65%) than whites (73%) and Hispanics (70%), the gap is not overwhelming.

A borrower’s outstanding loan balance predicts both entering and exiting default, but in opposite ways. Borrowers with smaller balances, who typically attended college for just a couple semesters, enter default at higher rates. However, borrowers with balances below $5,000 also exit default at the high rate of 74%, compared to 59% for those who default on more than $20,000.

Why do borrowers with lower balances exit default at higher rates? Simply put, it’s easier to pay down a small loan balance, especially considering that the federal government can garnish wages or seize income tax refunds to pay a defaulted loan. While this may cause financial hardship, at least these borrowers are paying off their loans.

The same cannot be said for borrowers who default on large balances. When these borrowers leave default, it’s likely to be through a resolution process rather than a full payoff. As a result, most defaulters who owe more than $10,000 see their balances increase after default. Moreover, many end up defaulting again after a few years.

To sum up: most defaulters owe relatively little on their loans, and most defaulters who owe little pay off their loans relatively quickly. However, the minority of defaulters with large balances typically do not pay down their loans at all. As high-balance borrowers come to account for a larger and larger share of outstanding student loans, the implications for taxpayers are disquieting. A small group of borrowers could represent a very expensive problem.