Rediscovering Government

To Paul Ryan, Faith is Fact

Aug 13, 2012Jeff Madrick

Paul Ryan is a true believer in right-wing economics, but his reputation as a courageous truth-teller doesn't stand up to scrutiny.

Paul Ryan is a true believer in right-wing economics, but his reputation as a courageous truth-teller doesn't stand up to scrutiny.

Mitt Romney’s choice of Rep. Paul Ryan as a vice presidential candidate has raised the decibel level of the anti-government movement dramatically. We started Rediscovering Government at the Roosevelt Institute to balance such ahistorical and destructive views, and Ryan’s is among the most extreme. If we are to think the best of Ryan, it is this: He believes in what he says. But what he says is a matter of faith, not of evidence.

Ryan’s budget proposal, which propelled him to the headlines a couple of years ago, would return government spending to 16 percent of GDP, the same the size it was in 1950, before Medicare or Medicaid were created or Social Security expanded enough to lift the majority of the elderly out of poverty. He would basically privatize Medicare, providing an inadequate subsidy to enable the elderly to purchase plans on the open market. He once proposed to change Social Security in a similar way, but that is now apparently on the back burner. He will deeply gut Medicaid and would almost entirely cut out all other government spending in coming decades, except for defense, which he seems to adore. This includes students loans, veteran programs, infrastructure spending, R&D, and so on.

Despite all this, he would not balance the budget, because the tax cuts he proposes are so extreme that even his social spending cuts won’t pay for them for a generation. Indeed, the size of his tax cuts seems to get lost in some analyses. They are bigger than Romney’s, really whoppers. There was a casual promise that they would be partly financed by closing tax loopholes, but as with Romney, we have yet to see details. 

Most Democrats seem to be rejoicing. They are probably right. Romney’s choice shows just how lost he really is. Unable to ignite his campaign merely by citing the unemployment numbers against Obama while hiding all kinds of secrets about his own life, he threw up his hands and chose Ryan, who one presumes he thinks will energize the base. Now that the race is about Medicare and tax cuts—and not jobs so much anymore—the Democrats believe they’ve got Romney.

But it’s worth thinking about why Ryan is so popular with many Republicans. He is thought of as honest, willing to tell difficult truths, and courageous. These are qualities few politicians exhibit today. He is genial. He promises major change, not just incremental change. Could this perception create a groundswell of support? I think there is reason to be wary of overconfidence.

But there's reason to question Ryan's supposed honesty. Sharply lower tax rates will not create renewed prosperity and jobs. Under George W. Bush, America experienced the slowest rate of job creation in the postwar period. Under Ronald Reagan, whom the conservatives revere as a great success, unemployment and deficits remained high, and wages stopped growing for the next 20 years. George H.W. Bush had to live with Reagan’s broken promises for his difficult four years in office. Republicans are promoting a myth, and Ryan pretends with the best of them.

His honesty is suspect for other reasons than that it is so destructively naive. Ryan has to know how easy it is rile up some people by playing to their prejudices. His tax cuts, which will help the rich more than the rest, will be paid for by the poor through cuts to such programs as food stamps and Medicaid. These are Ronald Reagan’s famous takers, not givers. It is code for people of color, for lazy good-for-nothings, for the welfare recipients who supposedly almost singlehandedly brought down America in the 1980s and much of the 1990s. Ryan appeals to the angry, the bitter, and the vindictive. Is this honest?

Finally, he is taking the easy road, not the hard road. Is it courageous to give huge tax cuts to the well-off? Is it honest to claim that tax cuts will reignite prosperity in America? He is promising painless growth. Sound familiar? Shades of the 1980s and Reagonomics? He leaves the tough stuff for the gym, where he apparently works out religiously.

Like Ayn Rand, his philosophical idol who believed in the individualist superman, Ryan believes faith is fact. Philosophy is easier when it doesn’t come down to earth and stays among the fictitious supermen. Ryan isn’t even close to earth. He cites Jefferson, of course, but Jefferson was an arch regulator of land sales by the government, a guarantor of education, a violator of the Constitution when he (thankfully) bought the Louisiana Territories, and a skeptic of manufacturing. He used government to end the British leftovers of primogeniture, which entailed that estates could not be broken up and the eldest heir would inherit all. His party members at the state level built the canals and developed free primary education, all before 1850. Jefferson believed in ordinary people, which is why he wanted them to have their own parcel of land at affordable prices. Land for Jefferon is Amartya Sen’s capability guarantee in our modern world. Today that means education, a minimum wage, and a minimum amount of health care.

Not so for Ryan. He wants to let the poor fend for themselves, trusting that the rich will create jobs for them. Forced responsibility will save the day. Can such nasty over-simplification work? I don’t think so, but I worry. How does one effectively respond to airy promises based on bitter feelings and easy scapegoats? He is promising faith, not facts. Let’s as a people at least demand some evidence and expose that fantasy as a lie.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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America's Future in an Enduring Recession

Aug 9, 2012Herbert J. Gans

Americans have been taught to hope for the best, but to avoid a bleak future, we need to push for policies that support job creation.

Americans have been taught to hope for the best, but to avoid a bleak future, we need to push for policies that support job creation.

America's national optimism is so pervasive that not much public thought has yet been given to the possibility that the Great Recession could endure for many years. Even if GDP, the Dow Jones, and other standard economic indicators suggest that the overall economy is healthy once more, labor markets may not recover. Thus, all employment-related indicators could remain low to the end of the decade and beyond, justifying a guess about the social and political effects of an enduring recession. (Guess must be underlined because many unexpected happenings can always wreck predictions.)

If the country faces a continuing labor market recession, short- and long-term unemployment are likely to rise. So will underemployment, such as involuntary part-time work and shorter work weeks for full-time workers. Discouraged workers will continue to drop out of the labor market, older ones will head for involuntary retirement, and some young people may not obtain a steady job during the entire period. The total number of labor market victims will rise well above the current official estimate of close to 15 percent of the labor force. And this estimate leaves out other victims of the recession -- people brought down by foreclosures, humongous debt, and lost pensions, as well as poor people driven into more severe poverty. 

If the numbers rise sufficiently, the social effects of the enduring recession, which are now still mostly hidden, will become apparent. High levels of depression and other emotional illnesses and related physical ones will multiply, as will family conflict and breakup, interpersonal and criminal violence, and other kinds of self and social destruction. Militant extremists threatening bodily destruction of immigrant and other vulnerable populations may increase in number as well. The medical community and the media are likely to be talking about post-traumatic economic stress disorder. America will be full of very unhappy people.

Of course, November 6, 2012 could bring a Democratic victory of sufficient proportions so that the advocates of serious government action to revive the economy could get their way. If the Democratic majority in the Senate is filibuster-proof and the president is prepared to be transformative, only the conservative House Republicans can effectively sabotage their agenda. If all went well, a new, large, and targeted stimulus, complemented by tax reforms and related policies, would enable the federal government to help create decent jobs and provide sufficient income support for the still-jobless victims of the recession. In the process, consumer demand would be stimulated and the consumer economy would be revived.

But in the event that government continues to be polarized and dysfunctional, politics could worsen economic victimization. In hard economic times, even the economically secure citizens tend to become less generous toward victims, worrying that government funds for the suffering would be taken out of their income and wealth. Some will fear that they will become economic victims too. The greater the shrinkage in public generosity, the greater also the readiness to demonize the economy's victims. The better off and even some not so well off are already describing the needy as moochers or takers and the jobless as too lazy to work. The recession's victims will be described as undeserving of help. Since the better off are more likely to be white and the economic victims disproportionally nonwhite, the latter will probably also experience more intense racial antagonism.

Since many Americans still see no difference between family and governmental budgets, and since recessionary times require familial belt-tightening, many people even outside the GOP base might support additional governmental belt-tightening as well. As a result, elected officials who are required to cut their budgets can further reduce the welfare state and welfare programs without suffering political consequences. And despite what people tell the pollsters about the desirability of higher taxes on the rich, the citizens that matter politically do not seem to contest the GOP argument that the wealthy need further tax reductions so that they can be "job creators."

So far, my long range guessing has emphasized the dark side of the future, but some corrective measures could take place, too. Three such developments seem most likely.

The first is new economic growth. All recessions and depressions, great or small, must end some day, and presumably so will the present one. They could end as a result of the pent up demand that is unfulfilled during deflationary times; for example, as people's necessities wear out and the population increases.

Demand may also return as a result of unpredictable new economic growth resulting from technological and other innovations. New products resulting from cyberspace breakthroughs, including robots as standard equipment at work and at home, are possible examples. So are new industries and businesses to help people survive 105 degree summers.

To be sure, American innovations that can be copied by lower wage economies are eventually copied, and even correlations that once existed between a high GDP and a healthy labor market can no longer be guaranteed. If global competition and an expensive dollar, high U.S. worker productivity, employer reductions in wages and working conditions, and other current impediments to job security and a "middle class" income remain in place, America's standard of living will not return to past levels.

The Great Depression was ended by World War II, which eventually brought about full employment at high wages. Although possible future wars are presumably on the Pentagon's drawing boards, they will not be labor-intensive and can no longer rescue a crippled labor market.

The second possibility is business community protest. Despite the business community's never-ending demand for reductions in taxes and "onerous" regulations, one could imagine that eventually at least the big corporations that earn their profits from consumer demand will begin to hurt. As a result, they might support the public pressure on government to stimulate that demand. They might even do so while continuing to ask for lower taxes and less regulation; giving up such a once profitable ideology will take time. However, some might be ready to trade, supporting stimuli, infrastructure projects, and anything else that provides purchasing power to the people they need to buy their goods and services.

If the business community's economic pain is sufficient, it might support a revival of the moderate Republican wing. Under such conditions, the rest of the party may agree to direct stimulation of the country's purchasing power. Conceivably, such a GOP might even initiate some of the economic policies they have long prevented Democrats from implementing. One must remember that nearly half a century ago, President Nixon was able to persuade his party to let him initiate relations with Communist China.

The third possibility is popular protest. Although the Left has traditionally believed that eventually the general public will demand economic relief, America's voters have only rarely pressed for such change. Right now, they seem to be angered more by social and related issues than economic ones. Or maybe they suspect that demonstrating for economic change is unlikely to be successful.

Moreover, mainstream America has become more diverse, more spread out, and harder to organize than in the past, and the radical unions that mobilized workers during the Great Depression no longer exist. New sociopolitical movements that fit the times are conceivable, but so far only some of the remaining Occupy groups are working toward economic goals, and none yet look as if they could turn into national movements. The victims of the current economy remain politically passive, if only because they must devote themselves to surviving economically and emotionally. In addition, they may feel (rightly) that they have nowhere to turn. Trust in government is at an all-time low, and other political organizations of the needed magnitude do not exist. Liberals and the left stand ready to offer help, but they have not shown that they can transcend the class and ideological differences that separate them from the economy's victims.

Historians still do not agree about the political effects of the popular protests that occurred during the Great Depression. The ghetto uprisings that took place in the 1960s, some simultaneously all across the country, did not produce immediate economic results. Since then, the de facto national incarceration policy has helped to keep the ghettos "quiet," and in recent years, the poor young men not (yet) in jail seem to have more often taken their discontents out on each other.

Perhaps effective political responses to the recession will emerge when more affluent sectors of the population are seriously hurt by the economy, notably the professional and managerial classes that have flourished economically in recent decades. They are politically skillful and know how to make themselves heard. Even Republicans might pick up their ears if the Tea Party and related groups, as well as the evangelicals who have previously concerned themselves only with "social" issues, indicate they now also need economic help. What if they hinted strongly that they will now have to vote their pocket books? Then it is even possible to imagine an election that unites many of the economically victimized and brings them together with liberals and liberally inclined independents, at least temporarily. If they can coalesce with others who stand to gain from a healthier labor market, they might be able to persuade the incumbent president to turn into a contemporary FDR or LBJ.

One would think that if a recessionary or deflationary economy endures, eventually something has to give. Although a dystopian welfare state in which the economy's many victims will live at bare subsistence level is conceivable, perhaps America will instead elect a government devoted above all to saving and creating jobs. However, such ideas are credible only in a country in which ordinary people exercise more political clout than entrepreneurs and speculators.

Herbert J Gans is the Robert S. Lynd Professor Emeritus of Sociology at Columbia University. His most recent book is Imagining America in 2033 (2008).

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The Republicans’ Medicaid Cruelty

Jul 30, 2012Jeff Madrick

This piece originally appeared in The New York Review of Books.

“The essential American soul,” claimed D.H. Lawrence, “is hard, isolate, stoic, and a killer.” While the rejection by five state governments of the Affordable Care Act’s Medicaid expansion may not precisely illustrate Lawrence’s heated observation, it does suggest a contemporary vein of cruelty in America that is deeply disturbing.

This piece originally appeared in The New York Review of Books.

“The essential American soul,” claimed D.H. Lawrence, “is hard, isolate, stoic, and a killer.” While the rejection by five state governments of the Affordable Care Act’s Medicaid expansion may not precisely illustrate Lawrence’s heated observation, it does suggest a contemporary vein of cruelty in America that is deeply disturbing.

A new study published in The New England Journal of Medicine shows that providing greater medical insurance coverage for the poor has saved lives. Moreover, the ACA’s expansion of Medicaid requires little state money, since the federal government will pick up more than 90 percent of the costs over time, and 100 percent of the costs for the first few years. Yet Texas, Florida, Louisiana, South Carolina, and Mississippi—which together account for more than a sixth of the overall US population—have already rejected the plan, and as many as twenty other states, including New Jersey, Missouri, Iowa, Nebraska, and Nevada, have indicated they may follow suit.

Furthermore, these states already have among the highest numbers of citizens with no health insurance. Twenty-five percent of non-elderly Texans have no health insurance, for example, compared to the national average of about 18 percent. If the Obama Medicaid reforms were fully implemented, 15 to 17 million of the nation’s 50 million without health insurance would be covered. In a report just issued in late July, however, the non-partisan Congressional Budget Office estimates that the Medicaid expansion will only cover some ten million more, or a full third fewer than anticipated, because of the rejection of the plan by large states like Florida and Texas and others who have not yet formally announced their intentions.

This is particularly troubling in view of how important the Medicaid expansion is to low-income Americans. The two Harvard economists who authored the NEJMstudy have found that there are 6 percent fewer deaths in several states that had expanded Medicaid in earlier years compared to nearly contiguous states that did not. Fortunately, according to the recent CBO report, three million of those who will not be covered in states that reject the Medicaid expansion will qualify for and probably buy insurance through another provision in the ACA—a program that provides subsidies to buy insurance for those who earn between 100 and 400 percent of the federal poverty level, which is $22,350 for a family of four.

What has enabled states to reject the expansion is the curveball thrown by the Supreme Court in its decision in June to uphold President Obama’s Affordable Care Act: not only did the court argue that the states need not participate in the new expansion, which the Obama administration had intended to be mandatory; it also said that the federal government could not withhold Medicaid payments for states that decide not to participate. Thus, the court created a way to undermine one of the most admirable achievements of the ACA, a sweeping expansion of a medical safety net for the neediest.

Read the full article here. 

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A Big Banker’s Belated Apology

Jul 30, 2012Jeff Madrick

This op-ed originally appeared at NYTimes.com.

This op-ed originally appeared at NYTimes.com.

Last week, in a CNBC interview, Sanford I. Weill, the former chairman of Citigroup, said that America should separate investment banking from commercial banking. This separation, of course, was the prime purpose of the Glass-Steagall Act of 1933, a piece of legislation that Mr. Weill and other bankers had successfully watered down, with Alan Greenspan’s support, before Mr. Weill helped engineer its official demise in 1999. Now, Mr. Weill, the creator of what was once the largest financial conglomerate in the world, suggests that Citigroup and others should be broken up. Banks can no longer “be too big to fail,” he told CNBC.

But what was most eye-catching was Mr. Weill’s claim that the conglomerate model “was right for that time.” Nothing could be further from the truth.

Mr. Weill’s original business concept — the justification of financial conglomeration — was to provide one-stop shopping to any and all customers. This could now include clients for investment banking, stock research, brokerage and insurance. Then, with the 1998 merger of his Travelers Group with Citicorp, it could include savers, business borrowers and credit card users, too. But few, even among his own executives, ever believed the strategy would work.

Rather, conglomeration bred conflicts of interest in Mr. Weill’s firms, and others — the very conflicts that the original Glass-Steagall Act was designed to prevent. This inevitably led to investment in and promotion of risky, poorly run and, in some cases, deceitful companies that brought us the high-technology and telecommunications bubble of the late 1990s.

Indeed, Mr. Weill’s Citigroup was a primary underwriter of and one of the two largest lenders to the oil and futures trading firm Enron, whose accounting charade resulted in what was in 2001 the biggest bankruptcy of its time. Citigroup was a major underwriter for the telecommunications giants Global Crossing and WorldCom, which would later go bankrupt as a result of flagrant accounting deceptions. There were many other, if less visible, debacles.

Read the full article here.

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Searching for an Honest Debate on Economics

Jul 18, 2012Jeff Madrick

Glen Hubbard's column in today's Financial Times detracts from meaningful academic debate by ignoring counter-arguments and citing discredited research (when he cites evidence at all). 

Glen Hubbard's column in today's Financial Times detracts from meaningful academic debate by ignoring counter-arguments and citing discredited research (when he cites evidence at all). 

Glenn Hubbard, an economic adviser to Mitt Romney, and more relevant to this commentary, dean of the Columbia Business School, has published a column in today’s Financial Times so devoid of basic academic credibility that it is fair to call it disingenuous.  Hubbard claims research shows that reducing debt levels will create more rapid growth. Any such research is highly controversial. You wouldn’t know it to read Hubbard.  He does not deal with counter-arguments at all.

He cites Harvard economist Alberto Alesina who claims that the way to get debt-to-GDP ratios down is to reduce social transfer spending.  He does not note how profoundly the Alesina research has been discredited by researchers at the decidedly neo-classical IMF. Austerity has rarely - if ever - worked to generate growth. 

He cites work by the conservative Hoover Institution that reducing federal spending to GDP to pre-crisis rates would increase GDP.  The crisis was caused by a collapse in tax revenues - not by too much spending. Few would agree that reducing such spending so drastically in the near- or medium-term would generate growth. Again, austerity.  And the economy performed poorly at those debt levels anway, failing to create adequate jobs or raise wages.

He claims that the tax system discourages work. One would have liked more detail here, but he wants reduced marginal tax rates.  The evidence is abundantly clear that there is no serious academic evidence to support his claim.

On our website, you can find work by Peter Lindert and Jon Bakija, which thoroughly refute these claims. But more to the point, Lindert and Bakija, both serious academics, look at the research of others, they just don’t ignore it, as does Hubbard in this FT piece.  They confront it and  show where the research fails. 

Is this the job of academics? Is this what Hubbard teaches his students?  Small-government economists might counter that public economists must be given more leeway.  But in truth, Pauk Krugman, the focus of so much right wing criticism,  usually deals explicitly with counter-arguments in his blog and often in his column; he does not simply does cite evidence to support his case without a broader context.

We intend our web site to offer broad, honest argument, to enrich the public discussion, not to narrow it.

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Euro - The Risks of a Taboo

Jul 18, 2012Luiz Carlos Bresser-Pereira

The discontinuation of the euro for all of the Eurozone countries is a taboo topic for the moment but governments must recognize the viability of such an option sooner rather than later. 

Folha de S. Paulo, July 16, 2012

It would be better for all the European countries if they decided in mutual agreement to discontinue the euro.

The discontinuation of the euro for all of the Eurozone countries is a taboo topic for the moment but governments must recognize the viability of such an option sooner rather than later. 

Folha de S. Paulo, July 16, 2012

It would be better for all the European countries if they decided in mutual agreement to discontinue the euro.

I have spent two weeks in Spain, taking part in two academic conferences and exploring the country's beautiful northern region. I found a rich, sunny, but sad Spain, with few people in the streets and restaurants. A very different Spain from that happy and optimistic country that I had found in the visits made in the last 10 years. During all those days I read El País, the great Spanish newspaper, and the climate of its news and of the opinions expressed in it is even more somber. I see Spain in the middle of the euro crisis, a Spain at a dead end.

In the last elections, Spaniards rejected the social democratic government of José Luís Zapatero, because it accepted the “austerity” imposed by the Germans and by the Troika (European Commission, European Central Bank, IMF). They elected a conservative Prime minister, Mariano Rajoy, who promised a more independent management of the country, but in his first six months of governement the banking crisis worsened, Spain was forced to ask for help, and now the Troika imposes greater spending cuts, increased taxes, and the elimination of citizens' rights.

In view of this situation, I am telling my Spanish friends that austerity will not solve their problems (with which many of them agree), and that it would be better for all the European countries if they decided in mutual agreement to discontinue the euro, in order to thus avoid a greater crisis and guarantee the European Union. But they do not reply to this remark. For them, the survival of the euro is a taboo.

Last week, in view of the adjustment of 65 billion euros imposed to Spain, the Argentinian president Cristina Kirchner could not help showing her indignation and remembering her own country. Because Argentina's situation in 2000 and 2001 was very similar to that of the indebted Eurozone countries. The Argentinian Plan de Convertibilidad had transformed the Argentinian peso into a foreign currency, as the euro is a foreign currency for the Europeans: a currency they cannot issue nor devaluate. And no one had the courage to revolt against it and propose to abandon the peso's legal parity with the dollar, because that parity had become a taboo. Whoever spoke against it would be “betraying” Argentina. It is precisely the same thing that is happening today in the Eurozone: to propose to depreciate the currencies of the indebted countries is treason.

The Argentinians were not able to prevent the collapse of their economy and the hyperinflation. It was only after both things had happened, after the most terrible financial crisis that I have known had hit its people, that the government was changed, and the problem was faced – with courage. Will the Eurozone also have to wait for a violent crisis in order to react? Or will it be able to take enough measures of bank centralization and fiscal union in order to prevent this violent crisis? European governments are betting on this second alternative, even if it has a much higher cost than the cost of taking a step back and descontinuing the euro in a concerted manner. And the Spaniards I have found are paralyzed, because they know that they cannot put pressure on their government to unilaterally abandon the euro. They can, however, stop making the issue a taboo subject and start to discuss it. To prohibit the debate is risky. It may cost dearly for them and for all the Europeans. 



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Luiz Carlos Bresser-Pereira is a Brazilian lawyer, economist and political scientist who served as a finance minister during the government of José Sarney and as a Minister of Federal Administration and State Reform during Fernando Henrique Cardoso's first term in office. 

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A Shameful Few Weeks Begs the Question: Where’s Government?

Jul 17, 2012Jeff Madrick

With the recent crises in the financial world, it's clearer than ever that we need government to step up and address our problems.

With the recent crises in the financial world, it's clearer than ever that we need government to step up and address our problems.

There are certain periods in our history during which one can only sit back and wonder what the limits of astonishment really are. A couple of years since Dodd-Frank first passed, we have come through a period of such disrepute for business that one wonders why the working class has not risen as one — except, of course, because it is exhausted with efforts at reform that seem so futile. We have uncovered many disreputable and perhaps fraudulent business activities, but they essentially represent a failure of government. 

Facebook's initial public offering collapsed in price, leaving small investors holding the bag. Brokers took care of their big customers far better than their small ones. Where was the SEC?

New insider trading convictions, most recently of the widely respected Goldman Sachs director Rajan Gupta, show how rampant trading on insider information really is. The $6 billion losses at JPMorgan Chase by a department that was supposed to neutralize risk showed that trading risk is too profitable to be foregone voluntarily.

And now we find out that LIBOR is incontrovertibly rigged. Some may not realize that Barclays, which agreed to pay a $450 million fine, signed a Statement of Facts that admitted its traders rigged this key rate to make profits on positions, and collaborated with bankers/traders at other banks. Now we find out that Treasury Secretary Tim Geithner, while president of the New York Fed, was worried and even wrote British regulators about this. That’s nice. But why didn't government — and Tim Geithner himself — actually do something about it? Are government regulators that feckless?

Of course, there was a certain political advantage in a LIBOR that could be fudged. LIBOR is the rate at which banks lend to each other. It should be nearly riskless, and is therefore used as such in many transactions. LIBOR was the basis, in fact, for up to 100 percent of subprime mortgages. It is often a key input into complex pricing models for securities like derivatives and collateralized debt obligations.     

It could be that the Bank of England looked the other way when some bankers, including Barclays's, lied and said they were paying a lower interest rate than they were in order to make it seem their credit was good. Especially in the fall of 2008, after Lehman’s collapse, governments wanted to calm the waters. Did the Fed also tolerate fudging the numbers?

Why wouldn’t they? The Treasury puts a better face on matters all the time, as does the White House, no matter who is president. PR is an integral part of government. Has the practice in this age of greed slid off onto regulatory agencies? Surely Ben Bernanke was overly optimistic about controlling any impending subprime wreckage in 2007 because he knew it was better to err on the side of Pollyanish hopes that risk precipitating a crisis. What better way to underplay a crisis than to let the banks do it for you?

But for all these remarkable events — and government failures — most disturbing is the ongoing demands for austerity that even President Obama himself makes. The president wants to extend tax cuts for all except those who make $250,000 or more. But he cannot make the case without saying we have to get our fiscal house in order. The nation is likely to need stimulus. But Obama bought into the budget balancing process so early on by appointing Bowles and Simpson to come up with a solution that there is no effective opposition to impending obtuse budget policies in late 2012 and 2013. The classic case is made by the CEO of Honeywell on the front page of the Financial Times. Seeking to blame Republicans and Democrats alike, the esteemed chairman and member of the Bowles-Simpson Commission claims that business has no confidence until this is resolved.

The truth is more simple. Uncertainly surrounds the possibility that the Republicans will hold up the government again, claiming they demand budget cutting. And Mitt Romney promises to do far more damage. There is no contest between the two, and let’s keep in mind that Obamacare, and even Dodd-Frank, contain very good measures that Romney would try to overturn.  

As we end a bad few weeks and start a period of remedying the damage, let’s keep in mind that America’s fiscal problems in the near run are highly exaggerated. But even down the road, the problem is not what we spend, but the tax cuts we have been giving ourselves for 30 years. I will begin to believe the sincerity of arch deficit hawks when they argue for tax hikes, not only cuts in Medicare and Social Security. And so should the chairman of Honeywell and others of influence like him.

The myths of austerity economics are paralyzing the government and keeping the nation from getting its house in order. How may times can one say it? Not often enough, apparently.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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The Missing Piece - Foreign Language

Jul 13, 2012Frederica Hill

Renewed focus on teaching foreign languages could go a long way towards improving America’s educational system.

Should we be learning from China or learning Chinese?

Debate surrounds the model of education exemplified by China and Singapore:  heavy emphasis on math, science and technology, reliance on memorization and constant testing. Some maintain this approach discourages creativity and critical thinking; others praise its rigor and perceived pragmatism.

Renewed focus on teaching foreign languages could go a long way towards improving America’s educational system.

Should we be learning from China or learning Chinese?

Debate surrounds the model of education exemplified by China and Singapore:  heavy emphasis on math, science and technology, reliance on memorization and constant testing. Some maintain this approach discourages creativity and critical thinking; others praise its rigor and perceived pragmatism.

There’s no doubt that by many measures it succeeds. The last Program for International Student Assessment report shows the US lagging far behind China and Singapore. The efficiency and tangible results of this pedagogy appeal to those who see the American educational system as flabby and lenient.

In a speech given in 2009 to the Hispanic Chamber of Commerce, “Remarks on a Complete and Competitive American Education,” Obama explicitly referenced Singapore, calling for a focus on tested accountability and practical skill acquisition. It’s an extension of the trend begun by No Child Left Behind, which promoted an empirical understanding of success.

While Obama’s Race to the Top shifts responsibility from the federal to the state level, the emphasis on testing remains. It’s an unsound tendency. Sensational stories emerge from China of students who buy 5,000 dollar cameras to fit on their pencils or receive an IV drip so that eating won’t interrupt their studying. While the American examples are less extreme, when test scores determine the future of a school, it’s no wonder that administration and teachers resort to dishonest or unbalanced means to achieve high scores.

Obama wants to restore America as a “world leader in science and technology.” Because of this, nearly every plan  issued by states applying for Race to the Top grants stress the development of STEM – Science, Technology, Engineering and Math. STEM reports themselves have the tagline “For America’s Future.” We’ve identified the instruments of progress. The latest educational policies are meant to release our nation’s inner tiger mom, data based and test-focused, aggressively invested in the “practical” fields of science and technology.

The pace of technological change demands improvement in these areas.  But a solution to our communal failings will come from holistic analysis rather than a short-sighted realignment of the curriculum based on an imperfect model. After all "more science!" has been a kneejerk call to arms since the early fifties. Less at the forefront of discussion is our lack of foreign language education.

We have the dubious distinction of being the developed country with the least percentage of students studying a language other than their own. From 1997 to 2008, the percent of elementary schools offering any world language instruction fell from 31 percent to 25 percent, while the percent of middle schools offering languages fell from 75% to 58%. In a Center for Applied Linguistics survey including teachers, principals and administration, about one-third of respondents stated that No Child Left Behind had negatively affected language instruction. NCLB cut back on areas outside of the basics – mathematics and reading comprehension. The prevailing atmosphere of austerity inevitably means stripping away programs that aren’t seen as directly productive. When proficiency in languages won’t get funding, it makes sense to drastically de-prioritize it.

Foreign language instruction may also be tainted by connotations of the two traditionally offered options, neither of which are “critical” languages. French’s one-time role as the dominant international language reminds us that English’s privilege is equally insecure. Spanish, more damningly, evokes fears of an America overtaken by immigrants. In 2008, Obama acknowledged the importance of immigrants learning English but also stressed that we should work towards raising children who spoke a language other than English. Obama’s comments prompted some jingoist zealots to call him a “sick” and “scary” man.

This vitriolic response suggests monolingualism has become an expression of patriotism, of devotion to the American worldview. Of course, there is truth in the idea that learning another language casts doubt upon the validity of an absolute perspective. An increase in language education probably won’t result in a communistic revolution in the heartland, but studies have shown that language education increases openness to other cultures, especially in the immersion programs which are most viable in the early school years.

Furthermore, language is measurably needed, in intelligence, diplomacy, and business.. Politicians occasionally recognize this necessity. A revitalization of language learning in the form of Title VI of the Higher Education Act of 1965 did emerge from the foreign-relations anxiety of the Cold War, but most funding was for higher education: targeting and benefitting only those who had already succeeded in early education rather than applying the benefits of language instruction universally.

A National Security Language Initiative established in 2006 allocated funds from the Defense budget towards language instruction in critical languages. But the program did not specifically propose any curricular changes in elementary education, with most of the money going towards grants for high school and undergraduate students. Six years later, in a report issued by the Council on Foreign Relations, lack of critical languages is still one of the country's  largest security risks.

Despite the obvious benefits to the government, overly politicizing language instruction puts its funding at the mercy of the tide of political fears and priorities. The idea of “critical languages” is flawed, reliant on an arrogant certainty in our accuracy in predicting future political relations. We ought to take the obsolescence of French as a warning. Earlier critical language programs focused intensely on Japanese and Russian, while newly critical languages include Korean and Punjabi.

It’s not just about international relations. Studying language is vital to all.  To learn another language, “critical” or not, prepares the mind to better absorb knowledge. A recent editorial in the New York Times discussed the benefits of language education. Perceiving an environment simultaneously through two systems encourages flexible thought and quicker adaptation to new information. Despite arguments that learning two languages at once is confusing, children in immersion programs actually perform better on those omnipresent standardized tests.

“Foreign” aside, studying language involves deciphering and reconciling different, complex systems for organizing the world. While linguistic study is arduous and technical later in life, learning language is natural for young children - starting young is key.

The skills acquired are particularly important in navigating the world of the Internet. Children who speak two languages are more adept at filtering out unnecessary information. The Internet immerses us in a disorganized, paratactic stream of facts and news. The ability to find meaningful signals and patterns in the radio noise is essential.  

Programming itself is language-learning: translating scraps of seemingly meaningless numbers into programs that let us compare hotel prices, construct 3D images of famous statues and send cat videos to our European cousins. Languages are codes, codes are language. With recent fear-mongering about cyber-attacks, we ought to have as many capable code-breakers as we can.

Foreign language instruction, rather than distracting from STEM programs, will reinforce and enhance them. We must equip our students to be global citizens and active learners. If nothing else, reprioritizing language education would be a symbolic rebuttal of American exceptionalism, a chance to crack open the provincial patriotism that is frighteningly widespread and move towards an atmosphere of genuine cross-cultural exchange.

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Frederica Hill is a rising senior at Kenyon College. 

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Rediscovering Government

Investing In and Invigorating Head Start

Jul 11, 2012Amy Baral

Head Start is a good start to revitalizing national education but there is still room for improvement. 

Head Start is a 8 billion dollar federal grant program that provides preschool and other early childhood learning opportunities to about 1 million 3 and 4-year-old children that meet federal poverty guidelines.  When Head Start was first created, as part of President Johnson’s War on Poverty, the program was designed to help improve the child development and developmental needs of disadvantaged children.

Head Start is a good start to revitalizing national education but there is still room for improvement. 

Head Start is a 8 billion dollar federal grant program that provides preschool and other early childhood learning opportunities to about 1 million 3 and 4-year-old children that meet federal poverty guidelines.  When Head Start was first created, as part of President Johnson’s War on Poverty, the program was designed to help improve the child development and developmental needs of disadvantaged children.

While Head Start has grown slowly since its inception in the 1960s, critics have never been far behind to challenge the programs successes and budget.  Most recently, TIME’s Joe Klein challenged Head Start as a failing to “yield results” and called for the end of the program.  Klein opined that because some studies show that children in Head Start do not see sustained academic and developmental growth after they have finished the program, that the program itself was a failure and a waste of money.  Klein raises some interesting points. First, is $8 billion a year for poor preschoolers a valuable use of the federal government’s money?  Second, does Head Start actually improve academic outcomes long-term? And finally, is there a way to improve the Head Start program or should it just be scrapped as wasteful government spending?

First, is the federal government justified in spending $8 billion a year on preschool education for American’s poorest children?

America provides a system of free public education, usually Kindergarten through Grade 12.  However, most young children often attend a series of private preschool programs before starting Kindergarten.  In contrast, most European countries provide about 2 years of pre-school or early childhood development programs for all young children before the kids begin primary school.  Instead, in America, mostly all preschools are privately run, with average costs of about $3,000 - $12,000 per child per year. 

America does provide limited subsidized preschools at the state and federal levels, usually based on poverty level, and Head Start is one of these programs. But, Head Start only serves about 1 million children a year and in 2010, there were 6.3 million children in poverty.  So maybe the question is not whether the federal government is justified in spending $8 billion a year on preschool programs for poor children, but whether $8 billion is enough to serve the needs of these children.  With potentially 5.3 million children going without adequate access to preschool services every year, it is clear that America’s early childhood education programs benefit those that have the means to access these private programs and harm those without similar access.

But, America is in a recession and the federal government is struggling to allocate money for even well supported government programs, like subsidized student loans.  Before one advocates for expanding a program such as Head Start, it is important to ensure that the program actually works.  This leads to the second question, is Head Start achieving educational and development success among the children it serves?

Head Start’s successes in early childhood development and long-term academic and social outcomes for poor children are disputed.  While there are some studies that highlight the successes of Head Start in terms of keeping people out of prison and leading to higher education rates, other studies, like the Head Start Impact Study show only minimal long-term effects.

Still, many of these minimal long-term effects can be attributed to the weak schools that Head Start graduates will attend upon program completion.  Faced with failing schools, a lack of resources, overcrowded classrooms, and even bad teachers, it is of no surprise that the students targeted for Head Start programs cannot maintain their academic improvements over time because the odds are simply against them.

It’s clear that America has many poor children who go without access to quality preschool programs due to their poverty level and the limited reach of the Head Start program.  Further, poor children who do have access to Head Start often do not see sustained academic outcomes throughout their time in public education. Maybe the true issue is that early childhood education through Head Start is only one part of the process to improve educational and life outcomes for poor children in the United States.  This leads into the third question, can Head Start be improved to ensure effective program performance and long-term benefits or should the program just be scrapped?

Obviously, Head Start should not be scrapped unless the federal government and the states figure out a better way to provide access to high-quality preschool programs for our nation’s poorest preschoolers.  There are too many preschoolers in this country who go without access to early childhood development programs, and while Head Start is just one option, it’s an option that is helping 1 million of these preschoolers.

Still, as with any government program, it is necessary to ensure that federal money is being spent correctly.  In 2007, Congress passed “Improving Head Start for School Readiness,” an act that allows the government to take a stronger federal oversight role of Head Start programs and requires teachers in Head Start programs to hold associates and bachelors degrees.  The Obama Administration has already used its power under this bill to close unsuccessful Head Start programs and provide more funding for programs that were succeeding.  To ensure that federal money is being spent correctly and that children are receiving high-quality preschool education, it is essential that federal oversight of Head Start programs continue.

Finally, the federal government should work to expand access to free and reduced preschool programs for poor children.  Preschool has a profound impact on the educational attainment and development of children.  Further, because most middle-class children have the ability to attend preschool, expanding access to preschool programs for poor children could help close socioeconomic achievement gaps.  Most importantly though, gains made in preschool need to be sustained overtime through strong primary and secondary public education for all students.  American needs to work towards improving its K-12 educational opportunities for all students to ensure that all children have access to high quality education from preschool to college.

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Amy Baral is a Roosevelt Institute Pipeline Fellow.

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Rediscovering Government

The Young and the Jobless

Jul 10, 2012Ilyssa Weingarden

By taking innovative steps, the government can help recent college graduates who are confronted by the most daunting job market in recent history. 

By taking innovative steps, the government can help recent college graduates who are confronted by the most daunting job market in recent history. 

As a college student, every new statistic and report on the increasing difficulty for college graduates to find a full time job terrifies me. Haven’t I done everything I was told? I worked hard in high school, applied and was accepted to a reputable university, and now I take the right classes, chose the right major, and get the right grades. I deserve my just reward: a well-paying upper middle class white-collar job in my chosen field. Right? Isn’t that what my parents and society have always promised?

Unfortunately it seems that having a college degree is no longer a guarantee for success in the way it once was. In 2000, 41% of recent college graduates were unemployed or underemployed. Today, we are at 53.6% of degree-holders under the age of 25.

Although certain fields like education and medicine have ever-increasing demand (currently 5.4% unemployment rate, not including underemployment), non-technical degrees in the arts or humanities face rates closer to the national average (11.1 and 9.4% respectively). It seems that the value of having a bachelor’s degree alone has become almost non-existent. It is only the specific skills, experience, and knowledge that a technical degree or prestigious internships provides that employers look for.

While having a bachelor’s degree does give you a statistical advantage, however slight, over those with only a high school education, it also often saddles you with overwhelming debt. The pressure to pay back student loans coupled with an increasingly depressed job market and expected wages for graduates paints a bleak future for current college students. This begs the questions: is getting a degree worthwhile? Is there a way to fix this? Can the government do anything? Should the government do anything?

It is my firm belief as a progressive that the government’s purpose is to respond to issues exactly like this one. Already the government has made strides toward making college a more realistic dream for bright kids across the country. Pell Grants and other need-based aid on the national level supplement state-specific scholarship opportunities. The next step is to focus this aid money as incentives for majors that will be viable in the current job market.

There are students at every university who choose a major solely on earning potential, and there are students that study what they love, regardless of the likelihood of getting a job post-graduation. Then there are those that are unsure, that decide on a major at the last possible moment, and these are the students who can be targeted.

Our country is in desperate need of teachers, nurses, and highly skilled engineers. We graduate thousands of virtually unemployable history and English majors every year. What if those students had monetary incentives to study what the country needs? Programs like this are already in place, like the National SMART Grant that offers money based on need to students majoring in sciences, technology, engineering, or critical foreign languages. What I propose is expanding and marketing these aid programs through the national and state levels. High school students might work more diligently in their math and science classes if they know they can have a more affordable college career by applying to engineering schools. Nursing programs that guarantee jobs after graduation have been around for over 20 years and should be promoted and expanded through government funding.

Funding for this project would involve little to no new funds, because the government could simply reappropriate money from general or merit-based scholarships to more specialized scholarships, or write new requirements into existing aid packages.

Each state should conduct research to find out which industries have the most unfilled positions and are growing the quickest, and issue grants to deserving students who study those subjects. Within a few years, the pool of recent graduates can be more streamlined and viable in the job market so students can flow seamlessly into the working world.

Other ways to make college graduates more attractive to possible employers is to encourage and possibly require greater work-study and internship opportunities at state schools. Employers are more likely to hire a candidate with real-world experience and professional skills. Policy changes on a state level would be helpful, and private institutions would likely jump onboard to keep their graduates competitive in the job market.

These solutions, while certainly helpful in the near future, will not help the current graduates who have already chosen their major and completed (or not completed) their internships. Jena McGregor suggests that a big part of the problem is employers, not the candidates. Many companies rely on software programs that rule out qualified candidates based on restrictive requirements. Candidates without experience in a very specific field can be thrown out despite being a good fit for the job.

Hiring recent college graduates or other young people without much experience can actually be beneficial for the company by exposing them to new and fresh ideas, as well as allowing them an opportunity to train the employees to the company’s specific standards. The government can incentivize hiring less experienced people and giving them on-the-job training by giving tax breaks to companies that hire employees right out of college. This would cost the government very little, and be balanced out (hopefully) by a lower unemployment rate for recent graduates.

The government and some private institutions already have some projects in place that make education more affordable. The next step is to prioritize education to be more applicable to the real world. Getting young educated people into well-paying jobs and off of unemployment has never been more relevant, and taking steps to turn these suggestions into realities should start with people like me; high school and college students who will be facing these issues in the not-too-distant future. The harder we work now, the easier it will be when it’s time for us to enter the real world.

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Ilyssa Weingarden is a Roosevelt Institute summer intern and a rising junior studying International Affairs at George Washington University. 

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