Conservatives and Progressives Agree: Congress Should Not Cut Unemployment Benefits

Dec 10, 2013Nell Abernathy

Extremists who think government support for the unemployed is holding the economy back don't have the facts on their side.

Extremists who think government support for the unemployed is holding the economy back don't have the facts on their side.

It’s a rare day indeed when Next New Deal bloggers support economic arguments with links to the Weekly Standard, the American Enterprise Institute, and Goldman Sachs. But at this moment, in this economy, we are all singing the same tune about the absolute necessity of extending unemployment insurance and providing additional support to the long-term unemployed. So, consider our current alignment a sign of extraordinary times.

Extraordinary because six years after the recession, there are still at least 4.1 million long-term unemployed Americans who have been looking for a job for more than six months and have yet to find work. Extraordinary because despite agreement from both progressive and conservative economists on the need for government action, the congressional flank led by Paul Ryan and Rand Paul is so far outside the mainstream that they are arguing to cut benefits for the long-term unemployed. Extraordinary because the 113th Congress is so dysfunctional that these extremists just might succeed in their goal.

Protecting unemployment insurance is a “disservice” to the unemployed, Rand Paul told the morning shows Sunday. The clear logic being that those folks looking for work for the last six months have been all-too-coddled by their $300-a-week government check, when what they need is some real motivation to pound the pavement even harder.

Unfortunately for Mr. Paul and his friends, there are a few flaws in this latest version of the up-by-your-bootstraps logic. But, don’t take our word for it. For a full outline of the arguments in support of extending unemployment insurance, we turn to the conservative intelligentsia and financial establishment.

Who are the long-term unemployed? Lazy hangers-on?

According to a report from the Urban Institute, in 2012, two-thirds of the long-term unemployed were ages 26-55, one-third had children, one-half had at least some college, and one in ten were college graduates.

Michael Strain in the Weekly Standard:

“A large share of the long-term unemployed are people with relatively high earnings potential and personal responsibilities that extend beyond themselves. It is hard to imagine an educated worker in her prime working years with a kid at home having allowed a $300-a-week check to stand between her and a strenuous job search for over half a year.”

Well, then why aren’t they getting jobs?

A growing body of empirical evidence indicates that the long-term unemployed experience “scarring” simply for being unemployed.

Congressional Testimony of American Enterprise Institute fellow Kevin Hassett:

“There is an evident shift in the curve [the Beveridge curve which serves as a measure of how quickly the labor market matches workers with job openings] for workers who have been unemployed for 27 weeks or more, unemployed workers of shorter durations have experienced no outward shift in the Beveridge curve. They conclude that being unemployed for a longer amount of time has an effect on the chances that a worker will become employed, suggesting that being long-term unemployed is in itself a cause of the persistence in unemployment.”

While I feel bad for them, it’s not my problem. Isn’t unemployment insurance just a big waste of my taxpayer dollars?

With a GDP multiplier of 1.6, unemployment insurance is one of the most efficient fiscal stimulus tools. Every dollar spent on unemployment insurance contributes $1.60 to GDP. In contrast, a lump sum tax rebate or a dividend and capital gain tax cut would provide GDP multipliers of only 1.2 or 0.4, respectively.

Congressional testimony of Mark Zandi of Moodys Analytics:

“Emergency UI provides an especially large economic boost, as financially stressed unemployed workers spend any benefits they receive quickly. With few other resources, UI benefits are spent and not saved.”

Moreover, a recent report from the Fed indicates that the declining skills of the long-term unemployed have degraded our potential for GDP growth in the future.

Goldman Sachs Global Economics, Commodities and Strategy Research analysis of Fed report:

“They estimate that real potential GDP growth has only averaged 1.3% since 2007, the output gap is currently about 3% of GDP, and the structural unemployment rate had risen to 5.75% by 2012 (although it is now again on a slight downward trend). They then use a modified version of FRB/US with an added role for ‘hysteresis; in labor markets--that is, a gradual transformation of cyclical unemployment into structural unemployment and/or labor force withdrawal --to analyze the sources of this deterioration, using a simulation in which the model economy is hit by a major financial crisis that is calibrated to match the size of the 2007-2009 episode. In a nutshell, they find that the post-crisis period ‘features a noticeable deterioration in the economy's productive capacity’ and that about 80% of the deterioration ‘…represents an endogenous response to the persistently weak state of aggregate demand.’”

Well what are we supposed to do – just pay them forever not to work?

Well, we can discuss a minimum income later. For now, let’s invest in programs to get workers back in the workforce. Here are a few steps we can take:

1. The government can fund direct employment for the long-term unemployed.

AEI’s Kevin Hassett testifying before Congress:

“The stigma of long term unemployment may be ameliorated by a short run jobs program that recruits the long term unemployed to assist with normal functions of government. This may allow individuals to look for a new job while employed, a change that may have a large impact on placement.”

2. The government can increase transportation infrastructure to ensure all workers can get to work and create jobs.

Michael Strain in the Weekly Standard:

“One way to advance these goals would be to improve transportation networks within cities and their outlying areas in order to shorten commute times from low-income neighborhoods to employment centers…. In its cheapest incarnation, this would involve extra buses that run nonstop from low-income neighborhoods to employment centers, both in city centers and in suburbs. And of course, more money for better roads, bridges, and tunnels would shorten commute times for everyone, including the working poor.”

3. The government can expand work-sharing programs.

Michael Strain in the Weekly Standard:

“To help make sure that we aren’t adding any new workers to the rolls of the long-term unemployed, states without worksharing UI programs — about half of them at the moment — should start them. Under worksharing, a worker who has his hours reduced by his employer in response to a temporary lull in demand can receive a prorated UI benefit. This makes it easier for firms to reduce employees’ hours by, say, 20 percent, rather than laying off 20 percent of their workforce. Government shouldn’t tilt the scales towards layoffs by prohibiting workers who have their hours reduced from receiving prorated UI benefits.”

What now?

I’ve just listed a few of the many government solutions to our current economic woes on which progressives and conservatives agree. Extending unemployment insurance is not a partisan issue. The government providing a helping hand to those who most need it has not, historically, been a partisan issue. This is not about left and right. It is about pragmatic versus extremist.

For the sake of current GDP, future GDP growth, and the long-term unemployed, congressional Republicans cannot let the extremists win this time.

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

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How Can We Help America's Opportunity Youth? Five Lessons Learned in New Orleans

Nov 20, 2013Nell Abernathy

Young people who aren't in school or working aren't beyond hope, but we need to invest more in the programs that will help them.

Young people who aren't in school or working aren't beyond hope, but we need to invest more in the programs that will help them.

The great recession has hit younger, less educated workers hardest, leaving 6.7 million young people between the ages of 16-24 out of work and out of school. These “Opportunity Youth” are more likely than their peers to experience unemployment, low wages, and poverty as adults, and more likely to end up incarcerated or in need of government assistance.

The Roosevelt Institute’s Bernard L. Schwartz Rediscovering Government Initiative went to the heart of the crisis, New Orleans, where 23 percent of young people between the ages of 18-24 are out of work and out of school, compared to a national average of 16 percent.

We asked expert academics and practitioners how we, as a country, can tackle this pressing challenge.

Here’s what we learned:

I. Opportunity Youth remain hopeful and we should too.

The vast majority of Opportunity Youth remain motivated and optimistic. One of our panelists, Amy Barad, Director Strategic Initiatives at the Cowen Institute for Public Education Initiatives, summed it up well: “What makes me hopeful is the kids themselves, they really want to get and education, get a job and contribute to society. Based on responses to a national survey, nearly three-quarters of Opportunity Youth are very confident or hopeful that they will be able to achieve their goals. Over three-quarters of respondents believe that getting a good education and job is their own responsibility and depends on their own effort.”

According to a survey conducted on behalf of Civic Enterprises and America’s Promise Alliance, 77 percent of those surveyed believe that getting a good education and a good job is their own responsibility and whether they succeed depends on their own effort, and 73 percent of Opportunity Youth are confident or hopeful in their ability to achieve their life goals. Here are those results in chart form:

II. However, the obstacles to reconnection are enormous and costs of disconnection are huge.

Disconnected Youth are more likely to grow up in poverty than their peers and were hit hardest by the recent recession. They are unlikely to have role models with degrees, the qualifications they need, transportation options for travelling to a job, or access to good jobs in their neighborhoods.

“The challenge is what urban planners call a wicked problem. The factors affecting disconnected youth are numerous, messy, and inter-related," Lauren Bierbaum, Executive Director of the Partnership for Youth Development, said. The obstacles to addressing disconnection are structural and rooted in communities.

For more, see the graphs below from Sarah Burd-Sharps and Kristen Lewis's report One in Seven: Ranking Youth Disconnection in the 25 Largest Metro Areas.

III. Some programs are successfully tackling these challenges, and the Opportunity Youth are eager to receive the help.

Two much-heralded programs designed to support these young people include Project U-Turn in Philadelphia, which recently won $499,000 in funding from the Aspen Institute as part of a plan to identify and replicate a national model, and YouthBuild, a nationwide Department of Labor program for high school dropouts.

Because the long-term societal costs of disconnected youth who don’t get help include lost taxes, more government transfers, higher prison budgets, and more, upfront investment in these programs is much cheaper than doing nothing.

And kids really want this help. “I’m excited to see the youth that are out there and that really want these programs,” Cherie LaCour-Duckworth, from the Urban League of Greater New Orleans, told us. “They are screaming for them. But funding has been cut drastically.”

Through Project U-Turn, the City of Philadelphia launched a collaborative effort to provide at-risk youth with needed services and raised the city’s high school graduation rates from 52 percent in 2005 to 64 percent in 2012. The following graph provided by Project U-Turn demonstrates the program's success so far:

According to a 2010 survey, 50 percent of YouthBuild participants received a high school degree or GED at the end of the program and 60 percent either went on to college or found full-time living wage jobs. Here is a chart illustrating the progam's impact:

Taxpayers are going to pay one way or another, either for fixing the problem upfront or for the costs of negligence later. The following charts from Civic Enterprises' reports on its National Roadmap for Opportunity Youth and The Economic Value of Opportunity Youth show this clearly:

According to the Civic Enterprises Survey, the kids are eager and ready for this help:

IV. But here is the rub: despite the long-term societal and fiscal benefits, we are under-investing in these intervention programs.

Most programs successfully serving disconnected youth are over-subscribed, and due to austerity measures, funding is further reduced. Youth opportunity grants authorized through the Workforce Investment Act reached 90,000 young people and reduced the overall number of out-of-work, out-of-school teens. But the program has not been funded since 2005, and sequestration has reduced overall workforce training funds by an additional $1.5 billion.

AmeriCorps-funded programs, which offer young people from diverse backgrounds the opportunity to serve in communities across the country, have been found to improve graduation and employment rates. The 2009 Serve America Act passed by Congress committed to increasing the number of AmeriCorps positions from 75,000 to 250,000 by 2017. The Act has not been implemented, however, and 85 percent of the more than 500,000 applicants were turned down in 2012. 

Here's a pair of charts highlighting this problem, from the National Skills Coalition and Service Nation

V. So what now?

“The only way we’re going to be able to have an impact is if government at all levels tackles these issues,” Jerome Jupiter, from the Youth Empowerment Project, told us in New Orleans, “This is no one person’s issue. We need all hands on deck – key stakeholders at the federal, state, and local levels, as well as institutions such as higher education all must work collaboratively to address youth unemployment.” 

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

 

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Given the Myth of Ownership, is the Idea of Redistribution Coherent?

Nov 14, 2013Mike Konczal

Given that all property rights are a creation of the state, is it possible to refer to “redistribution” without reifying a notion of “everyday libertarianism”? I believe so.

However, Matt Bruenig, over at our neighbors Demos, disagrees, and is slowly picking off liberal wonks on this topic. Given that I’m likely on the kill list, I might as well play offense. This post is probably not of interest to general readers.

Given that all property rights are a creation of the state, is it possible to refer to “redistribution” without reifying a notion of “everyday libertarianism”? I believe so.

However, Matt Bruenig, over at our neighbors Demos, disagrees, and is slowly picking off liberal wonks on this topic. Given that I’m likely on the kill list, I might as well play offense. This post is probably not of interest to general readers.

Bruenig argues that instead of redistribution, we “have in front of us a huge variety of potential economic institutional sets that we must pick from. Each set of economic institutions generates its own unique distributive outcome.” Pulling from a previous post, he states that “every single institutional choice that is made surrounding the economy sets the stage for the distribution that results...The cocktail of institutional choices you make dictates the distribution that follows.”

As I read him, Bruenig is meant not to be dealing with matters of justice (i.e. “this distribution of income is unjust”) but instead arguing that there’s no other way for this to be (i.e. “it’s impossible for the state not to create the distribution of income”). This argument, following the Myth of Ownership, is often deployed against the topic of horizontal equity in taxation, arguing that the goal of preserving pre-tax income is a fundamentally incoherent idea. (People in favor of funding all higher-education through income-based repayments from students often rely heavily on such claims to horizontal equity.)

Though relevant for tax policy, this argument becomes more problematic for social insurance. Because even though the distribution of income is created by the state through property rights [1], social insurance itself is then created through said distribution.

It also blurs different ways in which we mean the state to be creating the distribution. It might be better to start this argument not by talking about property, which can put people at the edge of their seats, but instead sports. We’ll use basketball, but you can fill in your own. There are two ways in which the referees determine the distribution of points.

The first is in the creation of the rules themselves. If the three point line became a six point line it would benefit players and teams with better outside shooting relative to those who play close to the net. If the length of the game was doubled it would benefit endurance players versus those who can score quickly. If fouls were called more or less aggressively that would benefit those playing certain strategies against others. And so on.

It quickly becomes clear that the rules of the game are not neutral, and they can have significant impact on the distribution of points, making winners into losers with just minor twists. This is where much of the liberal policy conversation takes place, with people like Ed Miliband saying things like “Markets don’t just drop down from outer space, perfectly formed.”

Here it is completely clear we can speak of “redistribution” of points. Because referees set the rules doesn’t mean they pick the score. One sees a tension in this argument - from the Bruenig quote, above sometimes the state “sets the stage for the distribution” while other times it “dictates the distribution that follows.” So even after setting the rules, we may want to wall off certain distributional outcomes. We can say that the leader should never be more than 20 points ahead of the loser at any time, for instance.

There’s a second, deeper, sense here, and that is that all the points are created and justified by the referees. If someone does a slam dunk, they may say “that was easily worth four points.” Their opponents might retort “no way, it’s only worth one point.” The referee is the one that everyone looks to for the correct score, where he’d say “it’s two points.” However, if the referee calls a penalty on that slam dunk, then those points simply do not appear. At any given moment we can’t refer to the score without justifying it based on what the referee is saying it is.

However, there are two reasons redistribution is still a coherent concept here. That it is absolutely true that any specific distribution of points are created by referees does not mean that that the referees pick whatever distribution they want. Thus they can think of a distribution they create, and have institution responses to move from one distribution to another that operate in a second-order manner. This second-order is what puts the “re” in “redistribution.”

And to move back to the world of public policy and property, this is especially true as the social insurance state dialectically creates itself through engagement with a market distribution and set of prices that was already being created by the government. Various goals like “prevent sudden drops in income” or “provide a certain replacement level of income in old age” or “ensure that food costs are less than a quarter of a family’s budget” or “have the government pay the costs of health insurance and public education” all require a set of market distributions and prices already present to carry out.

To take two specific examples, something like “a universal basic income that prevents poverty” requires a definition of poverty that will need to be drawn from an already existing distribution of market prices. The example that started this discussion, Social Security, is predicated on a replacement rate of market incomes, making any reference to social insurance here impossible without referencing a market distribution.

So yes, when discussing social insurance one needs to have some set of distribution already in play in order to shift it around. That the pre-tax distribution of income is arbitrary and could be done differently doesn’t preclude its existence, and that a set of institutions is put into place to change said income shouldn’t just be folded under the term “distribution.”

 

 

[1] It’s worth noting that we have been talking about property rights, instead of property claims. Taking a point from Jeffrey Winters’ Oligarchy, we should distinguish between property claims and property rights. Like all property, both are secured by violence and coercion. However, property claims are secured personally against the community; property rights are enforced impersonally by (or in the name of) the community.

Because the strong form of the argument that all property is ultimately created by and enforced by the state is wrong. We can imagine a situation much like our world - let’s call this distribution A. Someone named Adam in our world A decides he’ll go out and purchase some illegal drugs, hire a person to perform illegal acts of an adult nature, purchase one of those illegal DVDs of new movies recorded on a handheld cam you always see people selling in cities, and, to top it off, hire someone off-the-books to clean his house for less than minimum wage. Let’s refer to this new distribution as A’.

Perhaps you hope Adam will repent and fix his life, or perhaps you want to party with him. But either way, the new difference in distribution between A’ and A can’t be defended by claims to the state. (It’s not only not constructed by the state, but the state seeks to crush those claims.) If something goes wrong, if Adam is robbed for instance, he can’t rely on an impartial state to adjudicate these disputes. He has to rely on personalized claims to property in a world where the violence in property isn’t centralized in an abstraction and the rules aren’t codified in advance.

And, as economists of the commons like Elinor Ostrom have found, if we don’t put private property rights into everything we don’t descend into chaos. Norms adjust, though it’s hard imagining a capitalist economy running on such things. (Property rights are far more important when wealth is held outside of land and natural resource claims, and instead in capitalist ownership abstractions like “corporations.”) One could turn around and call this new set of customs for adjudicating property claims “the state,” which is fine as far as it goes, but it doesn’t have the same type of elements that modern property rights have.

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Progressivism in America: Are We Opening a New Chapter in Our Book of Self-Government?

Nov 7, 2013David B. Woolner

As Americans reject the extreme right wing at the polls, FDR's vision of self-government may be on the rise again. Note: On Nov. 8-9, David Woolner and other leading thinkers will explore the past, present, and future of progressivism at a conference hosted by the Roosevelt Institute and the Clinton Institute for American Studies at University College Dublin. Click here for details and livestream.

As Americans reject the extreme right wing at the polls, FDR's vision of self-government may be on the rise again. Note: On Nov. 8-9, David Woolner and other leading thinkers will explore the past, present, and future of progressivism at a conference hosted by the Roosevelt Institute and the Clinton Institute for American Studies at University College Dublin. Click here for details and livestream.

The results of this week’s elections have led to a good deal of speculation in the press about the repudiation of the hard right among the American electorate. Democrat Terry McAuliffe’s victory over Tea Party-backed Ken Cuccinelli in the Virginia gubernatorial race and Republican Governor Chris Christie’s impressive reelection win in heavily Democratic New Jersey have both been interpreted as evidence of the broader appeal of moderates in both parties. If true, this would be a welcome development, particularly on the Republican side of the ledger, where the obstructionist winner-take-all attitude of the extreme right has rendered the United States virtually ungovernable and nearly brought the country to ruin on two occasions within the past two years.

President Obama and other political leaders on both sides have frequently cited the economic damage that this “crisis governing” has wrought to our economy. But equally significant—particularly for those of us who favor more activist social and economic policies—is the damage done to government itself, and by extension, to our democracy.

Indeed, the American people’s faith in government, especially Congress, is at an all-time low. Of all the issues confronting liberals or progressives today it is this issue, faith in government, that is perhaps the most important. For without the support of the broad electorate it will be impossible for Congress and the executive to move forward on a whole range of issues.

Eighty years ago, in the midst of an even worse economic crisis, Franklin Roosevelt won the support of the American people by asking them “to find through government the instrument of our united purpose to solve for the individual the ever-rising problems of a complex civilization.” Moreover, he insisted that the failed non-governmental attempts to meet the crisis brought on by the financial collapse of 1929-1932 left the American people “baffled and bewildered,” without the means to fashion “practical controls over blind economic forces and blindly selfish men.”

But in the wake of the many programs that Congress and the president put in place to meet the crisis from 1933 on, the people began to sense the truth “that democratic government has innate capacity to protect its people against disasters once considered inevitable, to solve problems once considered unsolvable. We would not admit”, he continued, “that we could not find a way to master economic epidemics just as, after centuries of fatalistic suffering, we had found a way to master epidemics of disease.”

In making this argument, FDR insisted that the American people were not discovering a wholly new truth, but were simply “writing a new chapter in our book of self-government.”

Our history, then, tells us that it is possible for us to meet the challenges before us—but only if we are willing, as FDR advised, “to find through government the instrument of our united purpose."

On November 8-9, the Roosevelt Institute and the Clinton Institute for American Studies at University College Dublin will hold a major international conference entitled Progressivism in America: Past, Present and Future. Featuring such noted figures as Nobel Laureate and Roosevelt Institute Chief Economist Joseph Stiglitz, journalists like E.J. Dionne and Jonathan Alter, and historians such as Alan Brinkley and Ellen Chesler, the conference seeks to address today’s policy challenges with solutions grounded in and inspired by the legacy of Franklin and Eleanor Roosevelt—including the all-important realization, as FDR remarked years ago—that “government is competent when all who compose it work as trustees for the whole people.” This event will be livestreamed. Click here for more details.

David B. Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. 

 

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The Solution Economy: Problem Solving Everyone Can Agree On

Oct 29, 2013Azi Hussain

The public-private partnerships of the solution economy could allow conservatives and liberals to agree on solutions to social problems, for once.

The public-private partnerships of the solution economy could allow conservatives and liberals to agree on solutions to social problems, for once.

There is a quiet transformation of our society going on that is redefining how we solve our most entrenched problems. A recently published book, The Solution Revolution by William Eggers and Paul Macmillan, tracks this transformation, the rise of the “solution economy.” The solution economy is a paradigm in which societal problems are addressed not only by the government, but also through multi-sector approaches. The public, social, and private sectors are all involved.

One fascinating example of the solution economy at work is Recyclebank. Recyclebank is a company founded in 2004 by two young people with a simple, but important environmental goal: increasing recycling rates. Instead of operating through government, they created a viable business model by partnering with recycling bin makers, waste hauling companies, and businesses to incentivize recycling. Households in neighborhoods in which Recyclebank operates have recycling bins that are equipped with a chip that weighs the goods in the bin. When the waste hauling companies come pick up the recycling, they take the data from the chip and send it to Recyclebank. Recyclebank then credits that households account with points that can be spent on discounts offered by the network of business that Recyclebank has partnered with. Recyclebank’s model has proven to be devastatingly effective, raising recycling rates in some neighborhoods from under 10% to over 90%. Governments have rightly supported Recyclebank by helping expansion and enrollment. Recyclebank exemplifies how a social mission can be achieved through the private sector and with government support. You can see some more examples of the solution economy at work here.

In the solution economy, markets are created around the very problems considered to be market failures. Participants leverage technology, use innovative business models, and trade in novel currencies such as reputation and social impact to create these markets. Traditionally, government’s role has been to address these market failures, but the solution economy shifts this burden to society-at-large.

So we are at a point where problems traditionally left to the government are increasingly being shouldered by the private and social sectors. It may seem that the solution economy is making government less and less relevant. On the contrary, government policy and partnerships are essential to fostering the solution economy. The question becomes: why should we support the solution economy?

Broadly speaking, the case for the solution economy is a progressive one. The solution economy is the next step in social organization. We are moving from institutions such as governments operating in silos, to creating entire ecosystems to solve problems. The problem-solving capacity of the solution economy is far greater than that of government’s alone. With governments, social organizations, businesses, and individuals all working toward a solution, the results are far more impressive. In fact, it would be nearly impossible to tackle some of our most complex challenges, such as human trafficking, without a multi-sector approach. We need to take the next step forward and fully embrace the solution economy if we want to resolve our deep-seated societal problems.

The case for the solution economy also fits both liberal and conservative ideologies. For liberals, the solution economy can address many of the social issues they care about, such as poverty and opportunity for immigrants, at a much lower cost. This can free up money for governments to concentrate on issues that need greater resources. Plus, when smaller or local programs funded by the solution economy are shown to be effective, governments can incorporate them into various levels of public policy to bring them to scale, introducing a whole new source for government innovation.

Conservatives can also applaud the cost savings introduced by the solution economy, as well as the market mechanisms at play. Not only does the solution economy solve problems, but it also generates tremendous economic value. But most importantly, the solution economy reduces the need for heavy-handed government policy by creating lightweight solutions. Let’s take a look again at Recyclebank. Governments could also impose penalties and slap fines on households with low recycling rates to try to incentivize recycling. The administrative costs would be huge and political support for such policies would be dismal. Recyclebank achieves the same outcome but without burdensome government intervention and much more efficiently. The solution economy can at times be a substitute for the big government policies that conservatives oppose. Supporting the solution economy might be the one thing that both of our political parties can agree on.

Azi Hussain is the Roosevelt Institute | Campus Network Senior Fellow for Economic Development. He is a junior in the School of Foreign Service at Georgetown University majoring in International Political Economy.

 

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What Are Three Steps to Solve the Jobs Emergency?

Oct 24, 2013

In a new installment of the Roosevelt Institute's "What's the Deal?" series, Roosevelt Institute Senior Fellow and Director of the Bernard L. Schwartz Rediscovering Government Initiative Jeff Madrick explains three steps the government could take to address the jobs emergency.

In a new installment of the Roosevelt Institute's "What's the Deal?" series, Roosevelt Institute Senior Fellow and Director of the Bernard L. Schwartz Rediscovering Government Initiative Jeff Madrick explains three steps the government could take to address the jobs emergency.

For more about the Bernard L. Schwartz Rediscovering Government Initiative, visit rediscoveringgovernment.org.

Learn more about "What's the Deal?" by watching our teaser:

rooseveltinstitute.org/videos/sneak-peek-whats-deal

Send us topic ideas, suggestions, and questions by using #RIExplains.

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The Larger Issue at Stake in the Shutdown: The Role of Government

Oct 14, 2013David B. Woolner

By choosing not to position himself as a defender of government, President Obama may have made his opposition stronger.

By choosing not to position himself as a defender of government, President Obama may have made his opposition stronger.

The recent news that there has been a shift in tone in the debate between congressional Republicans and the White House over the government shutdown has been greeted as a welcome development in much of the press and on Wall Street, where, in response to rumors of an impending deal, the DOW Jones Industrial Average shot up more than 300 points.

But there is a larger issue at stake in this debacle that President Obama has to a large extent ignored: the role of government in shaping a just and economically sustainable liberal capitalist democracy.

Today’s free-market fundamentalists continue to denounce any attempt by the federal government to regulate capitalism. They insist that the forces of the market could easily solve all of our nation’s woes if only government would get out of the way. Their faith stems from their unshakable belief that the free market system cannot fail, and the apostate in their vision is government.

The history of the free market system in the years between the October 1929 crash of the stock market and the steady deflationary slide into the Great Depression three years later teaches us something quite different. Capitalist economies can collapse; the free market system can fail; millions of people can be thrown out into the street, wondering not just where they might find work, but where they might get their next meal.

It was at the height of this crisis of capitalism that the American people elected Franklin D. Roosevelt as the 32nd President of the United States. FDR was no ideologue, he harbored no extreme views on the right or on the left, but he understood that capitalism was in deep trouble, that the transition of the United States from a largely agrarian state to a modern industrial society had left millions of Americans vulnerable to the fickle twists of the unregulated marketplace, and that the only institution strong enough to take on the forces of wealth and privilege that largely controlled the marketplace—those whose unbridled greed was chiefly responsible for its collapse—was government.

It was this message and this philosophy that led the American people to support the many measures FDR put in place under the banner of the New Deal. Measures like the separation of commercial and investment banking, the establishment of the Federal Deposit Insurance Corporation, the creation of the Securities and Exchange Commission, or the passage of the all-important Social Security Act, which gave us old-age pensions and unemployment insurance. At the time, critics of the New Deal charged that FDR was leading the country down the path to a dictatorship; that he was subverting the Constitution. The American Liberty League even went so far as to claim that the passage of the Social Security Act meant “the end of democracy.”

But Roosevelt scoffed at these “prophets of calamity,” and unlike President Obama, was willing on behalf of the American people both to acknowledge and attack the forces arrayed against them. Consider, for example, FDR’s repeated assaults on the “economic royalists” whose vast concentrations of wealth distorted the free-market system to such an extent that they made it virtually impossible for “small businessmen and merchants to make worthy use of the American system of initiative and profit.” In the face of such vast inequality, “the hours men and women worked, the wages they received, the conditions of their labor… had all passed beyond the control of the people,” he warned. “Private enterprise,” he said, “became too private. It became privileged enterprise, not free enterprise.” 

As a result, “the political equality we once had won” had become “meaningless in the face of economic inequality,” leading to the inescapable conclusion that “against economic tyranny such as this, the American citizen could only appeal to the organized power of government.”

Throughout his tenure as president, Barack Obama has been reluctant to present himself as the voice of the average working American, to position himself and his administration as leading a government effort to attack the immense inequality that has re-emerged in our society over the past 30 years, and to seek the people’s support for this effort. Instead, he has engaged in a somewhat admirable attempt to find solutions to such problems as health care reform through compromise with his conservative opposition, often by the establishment of programs—such as the Affordable Care Act—designed to appeal more to those who harbor a greater faith in the free market than they do in government.

But as recent events make clear, the president’s decision to seek market-friendly solutions to our most pressing problems has not won him any credit among the archconservatives who have hijacked the Republican Party. Their overriding focus is to discredit government, not work with it; to destroy the social safety net, not save it; and it would appear that they are quite willing to go to extreme lengths to achieve their ideological goals, including the possibility of driving the U.S. Government into default.

One can certainly understand the political calculations behind President Obama’s oft-repeated willingness to meet his opposition halfway, but it now appears that his past readiness to compromise and acknowledge his other points of view has won him few converts and may have only strengthened the hand of those who seek to destroy his agenda.

A far better tack may be to steal a page or two from FDR, who called upon the American people to recognize “the need to find through government the instrument of our united purpose to solve for the individual the ever-rising problems of a complex civilization,” and above all else, to never forget that “government is ourselves and not an alien power over us.”

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. 

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How Will Millennials Reform Government?

Oct 8, 2013

In the first installment of the Roosevelt Institute's new "What's the Deal?" series, Roosevelt Institute | Campus Network National Field Strategist Joelle Gamble explains how young people are creating change in their local communities through the Campus Network and are designing a more effective government.

Learn more about the Campus Network by visiting:

http://www.rooseveltcampusnetwork.org

Read about the Campus Network's vision for 21st century government:

http://www.rooseveltcampusnetwork.org/govbyandfor

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The Government Shutdown Could Be the Last Gasp of the Reagan-Friedman Agenda

Oct 2, 2013Jeff Madrick

This latest outrage is just another symptom of an extreme anti-government ideology with roots dating back to the 1970s.

The shutdown of the U.S. government is an outrageous act of ignorance, foolishness, and vindictiveness. History suggests that choosing destruction is usually tragic, but it’s hard to believe the Republican hardliners have any sense of history.

This latest outrage is just another symptom of an extreme anti-government ideology with roots dating back to the 1970s.

The shutdown of the U.S. government is an outrageous act of ignorance, foolishness, and vindictiveness. History suggests that choosing destruction is usually tragic, but it’s hard to believe the Republican hardliners have any sense of history.

The anti-government agenda in the U.S. has had many contributors. The end of the progressive uses of government more or less began in the 1970s, and was given impetus by Ronald Reagan’s scapegoating of government. It was also given impetus by Chicago-style economics, led by Milton Friedman. His book Capitalism and Freedom is basically a political pamphlet calling for governance to be reduced to a function of the Invisible Hand. Many Democratic economists came under his sway. 

Shutting down the government now is just a variation on Reagan and Friedman's "starve the beast" strategy of undermining government by denying it funding.

Friedman and Reagan have now reached the height of their influence, but many joined this march of foolishness. President Obama has consistently paid deference to the party line that reducing the federal deficit is the main economic priority. The Bowles-Simpson fiscal commission captured the self-destructive America temperament of the time by insisting federal revenues not rise above 21 percent of GDP. When Reinhart-Rogoff’s 90 percent bright line of debt-to-GDP was shown to be an artifact of poor research and arithmetic, Erskine Bowles said it was still just common sense.

Lots of moderate Republicans have made budget-cutting their main domestic priority, as have many Democrats. Sequestration is undermining what could have been a strong recovery by now.

The media, in their embrace of the safe middle-way, have done their share to promote general antagonism against government as well. It’s an American journalistic tragedy.

And so here we are. Just enough people feel government is meaningless to allow this crazy betrayal of a democratic nation to occur. How else can you so despise Obamacare that you would go to such destructive lengths? It is a useful program designed to help some 32 million Americans who suffer—yes, suffer—without health insurance.

If the old pre-Obamacare system was better, it would have worked. It didn’t. Health care delivery in America is appalling by any modern standard, and without reform, our society will become not just less prosperous but far less decent. Have these people no shame?

Democrats had also better rethink government. It’s not just a matter of plugging holes due to market failures, a misleading over-simplification of mainstream economic theory.

Government’s duty is to be a vibrant protector of rights and contributor to full lives. The myths about government are endless. Ask the proverbial man or woman on the street who does the most technological, economically vital R&D in the U.S. and they, under the influence of the misled media and economic orthodoxy, will almost always say the private sector and the venture capitalists. But it just ain’t so. Yes, venture capital is important, but government R&D is even more so. Government is the main contributor, even to Silicon Valley, but under sequestration, non-defense R&D is being cut back sharply. This is but one example of the effects of anti-government thinking.

The hope is that this is the last gasp of the Reaganite-Friedmanite brigade. The hope is that the U.S. will awaken to the uses of government and the beauty of a functioning democracy. We started the Bernard L. Schwartz Rediscovering Government Initiative for this reason. We are going to keep at it, telling everyone we can what government can do well, what its purposes are, and how it can be reformed. Ideology, someone said, is a short cut for thinking. When it comes to Reaganite-Friedmanite extremism, that’s an understatement.

Jeff Madrick is a Senior Fellow at the Roosevelt Institute, Director of the Bernard L. Schwartz Rediscovering Government Initiative, and author of Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present.

 

Shutdown banner image via Shutterstock.com

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Inequality Broke the Economy. How Can We Fix It in New York City?

Sep 26, 2013Nell Abernathy

The Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative, Roosevelt Institute | Pipeline, and the Roosevelt House Public Policy Institute recently convened a panel of local policy experts to discuss inequality in New York and how the next mayor can address it. Watch the video below.

The Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative, Roosevelt Institute | Pipeline, and the Roosevelt House Public Policy Institute recently convened a panel of local policy experts to discuss inequality in New York and how the next mayor can address it. Watch the video below.

“The economy is broken and inequality broke it,” James Parrott, Chief Economist at the Fiscal Policy Institute, said Tuesday night at the Roosevelt Institute’s forum on Inequality in New York.

The divide between the rich and the poor in New York and across the nation is not an inevitable consequence of technology, globalization, or even human capital, each of the panelists reiterated. “This is the result of policy choices,” Parrott continued. Learn more about what the next mayor should do to tackle inequality and how he can pay for it by watching the video of the event below:

Maya Wiley, Founder and President of the Center for Social Inclusion, emphasized the role of government in creating opportunity. “Fundamentally what we’ve had is a narrative that government gets in the way, rather than recognizing that we created a middle class in this country beginning with the New Deal, continuing with the Fair Deal, based on a series of policies that brought it into being in the mid-20th century. By and large, the middle class as we know it today didn’t even exist until the middle of the 20th century. And we forget that. It wasn’t some natural occurrence.”

Tsedeye Gebreselassie, Staff Attorney at the National Employment Law Project, said a key driver of inequality in New York City has been the stagnation of wages for the working and middle class. New York’s current minimum wage of $7.25 an hour equates to an annual income of $15,000 a year. Our next mayor, she argued, should work with Albany and the City Council to increase the city’s minimum wage, following the example of other high-cost cities like San Francisco, which has a floor of $10.55 an hour.

“Depending on how high you raise that wage, you could impact nearly a million workers living in the city,” said Gebreselassie. “It’s a tremendous policy in terms of boosting the wage floor across the low-wage labor market and putting money in the hands of people who will spend it immediately at local business, giving a stimulative effect to our economy as a whole.”

Lawrence Aber, a professor of psychology and public policy at NYU, said the next mayor should focus public investment on poor children ages 0-5. “We now know that poverty literally gets under the skin and into the mind.” Under-nourishment during the first few years reduces human development and puts children at a lifelong disadvantage. Every dollar invested to beef up New York’s existing child health programs, he explained, goes much further than public money spent to correct developmental challenges further down the road.

When an audience member questioned panelists about how they planned to pay for their proposed programs, answers varied.

The next mayor could use budget policy to reshuffle priorities. For example, tax breaks for real estate development in New York grew 180 percent under Mayor Bloomberg’s administration, to a total of $3 billion a year, Wiley said. Given the booming nature of New York’s real estate market, that public money could be better spent. Aber said the next mayor could use the bully pulpit to advocate for a shift in national budget priorities.

While an increase in local revenue cannot fund all the panelists’ priorities, there is room to raise taxes on the city’s top income bracket, Parrott said. Critics of progressive policy often cite income tax data to emphasize the percentage of city taxes paid by the rich, but Parrott showed that when property taxes and sales taxes are included, the rich, in fact, pay only 25.2 percent of the city’s tax burden while taking home 33.8 percent of total income.

The breadth of the challenge can be daunting, but panel moderator David Jones, President and CEO of Community Service Society, sounded a message of optimism. "I don't know if a decade ago we could gather this many people together to talk about this as a critical issue," he told an audience that had filled both auditorium and overflow room. "This is obviously a pivotal moment where people are taking this seriously."

Join Jeff Madrick, Director of Rediscovering Government, at the Frances Perkins Center in Portland, ME on October 4 for "Rediscovering Government: Making People Matter." The Frances Perkins Center will present Ai-jen Poo with its Intelligence and Courage Award and Sally Greenberg with its Steadfast Award, and Madrick will moderate a panel discussion. More information here.

Nell Abernathy is the Program Manager for the Bernard L. Schwartz Rediscovering Government Initiative.

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