What Does Obama Really Stand For: Community or Small Government?

Sep 10, 2012Jeff Madrick

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

Obama hesitated to sound such a theme in the past. He seemed to run from potential charges of class warfare or favoring big government. He failed to boast about his stimulus plan and some of his investment programs. He hardly talked about his health care program. The conversation in America has changed, of course, partly because of the vice presidential nomination of an extremist, Paul Ryan, who wants to cut government spending to 16 percent of GDP. That’s about the 1950s level. 

But Obama has been moving in this direction for quite a while now. He still avoids the word "government," preferring "community." But he also nicely introduced the word "citizenship." Among Ronald Reagan’s most damaging legacies was, I think, that he undermined the meaning of being a citizen in America. To him, we did not belong to a nation. We belonged only to ourselves. It would be nice to bring the concept of citizen back.

I can’t overemphasize how useful it was for Obama to lay out this old but now new vision. Bill Clinton, who had proudly proclaimed the end of big government in 1996, also said similar things. There is now a distinct us versus them as the election season begins. “Us” is those who want to work together. "Them” is those who treat community as a drug we'll become dependent on. It is probably no accident that the Republican ticket is composed of men descended from rich parents. Lots of rich kids become effective leaders, but many don’t understand how tough it can be to have no one to lean on, to borrow from (as Mitt now famously suggested), or even to be taught by.

But having listened closely to the Obama speech, I am still hungry for more candor. Even a few days later, I have no idea what Obama plans to do over the next four years. We know he will care, and we know he will not take a pound of flesh from the poor or strivers to the middle class if he can help it, but what do we know about his future programs?

He was about as careful as Romney and Ryan were in Tampa to avoid any specifics. Will he propose a new stimulus if the economy teeters, or will he remain dedicated to a narrow deficit-cutting plan even during a weak economy? Does he think there is anything truly commendable about the Simpson-Bowles deficit-cutting plan he had sponsored (if then mostly ignored)? The plan disastrously aims to limit federal spending to 21 percent of GDP, its 40 year- average, even as the population ages, health costs rise, and we know pre-K education is urgently needed. It would cut Social Security sharply. But Obama mentioned it in his speech, and it has become the widely cited “bipartisan” model for fiscal responsibility. The public relations program in its favor is a stunner. It is not really bipartisan at all, of course. Both the Democrat Bowles and the Republican Simpson are devoted and extreme deficit hawks.

What line will Obama hold on Social Security? Will he significantly upgrade his proposals to invest in infrastructure? How about a higher minimum wage? Better labor laws? Is there a potential jobs program in the works? Serious education reform? Will he encourage a lower dollar to help manufacturing and propose ways to create a more level playing field in global trade? Will he propose a serious tax increase to pay for needed public investment and buttress entitlements programs once the economy is righted?

I can’t say it’s bad politics to ignore the details for now. The best case for Obama is that as his health reform law helps more people, he will build American confidence in government. Mitt Romney has already conceded as much, saying he will retain some of Obamacare. With some proof that governmnet helps under his belt, perhaps Obama can move forward. He can add to his health care program with a true public option and perhaps expansion of Medicaid reimbursements to providers, which are too low. He can also adopt more rigid cost controls, drug negotiating procedures, and firmer preventive medicine incentives. A more positive attitude toward government might awaken fresh ideas about educational reform. Perhaps we can put art and music programs back into schools and tackle universal access to the web. Maybe we can even build a universal pre-K system that is cheap and good, one of our most important needs.

I know Romney has only one major idea in his head: tax cuts. If at first they don’t succeed, try again. But of course, tax cuts did succeed for the wealthy, just not for the “community” of America.

What’s really in Obama’s head? Is he a limited government man at bottom, just another Third Way New Democrat? Or is he really a community government man? I don’t know, and that bugs me. Moreover, I am not sure we will find out before Election Day.

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

 

Barack Obama image via Shutterstock.com.

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The New New Deal and the Little-Known Transformation of American Government

Aug 31, 2012Mark Schmitt

The New New Deal isn't just another book about the White House or Congress. It tells the story of what happens when laws are passed and governing begins.

The New New Deal isn't just another book about the White House or Congress. It tells the story of what happens when laws are passed and governing begins.

What's the best book about the Obama administration, particularly on domestic policy? A few months ago, I would have recommended Noam Scheiber's The Escape Artists, but The New New Deal, by Michael Grunwald of Time, is not only the best book about the administration and its immediate challenges, but perhaps the only one that will (and should) continue to be read long after 2016. This post isn't a full review of the book (for that, I recommend Michael Cohen in The Guardian, but others are forthcoming) – rather, I want to highlight two aspects of the book that both made me feel a little guilty and got me thinking.

The narrative takes place in three locations: at the White House, in Congress as it interacts with the White House over the stimulus, and deep in the executive branch of government. Grunwald is very good on the drama in the White House, as economic advisors including Larry Summers, Christina Romer, and Jared Bernstein struggled to find a formula to contain the economic disaster that was also politically viable in an environment where neither politicians nor the public fully appreciated the depth of the crisis or the logic of Keynesian stimulus. If his book has none of the contrived Oval Office melodrama of Ron Suskind's Confidence Men, it's because Grunwald understands the subject, and thus knows that the range of options – and the range of real disagreement -- was not that wide.

He amply demonstrates that the great alternative-universe fantasy -- in which the stimulus could have been much, much larger and only political malpractice held it back – is exactly that, a fantasy. The miracle is that the economic stimulus, even if inadequate to fully restore the economy's lost output, was as large as it was, and managed to contain such a multitude of new ideas. Nonetheless, Grunwald acknowledges and digs deeply into the errors that the White House made, such as asking Romer and Bernstein to put forth a projection of unemployment rates with and without the stimulus – which may have been accurate in estimating the difference between the two, but not the overall employment picture.

The New New Deal also shines in its accounting of the legislative response, particularly the Republican opposition to the stimulus -- or, more correctly, to Obama. Grunwald offers a good model for journalists that it's possible to do more than just transcribe something like, “Senator X said he opposed the stimulus because it didn't contain enough tax cuts and infrastructure spending.” When a politician's stated positions make no sense and are glaringly inconsistent, a real journalist can say just that. His parsing of Senator Judd Gregg's shifting logic on the stimulus as he flirted with becoming Obama's Secretary of Commerce is masterful, as is his interview with former Delaware Rep. Mike Castle, a moderate Republican whose amiable rationales make even less sense than those of conservatives.

But The New New Deal made me feel guilty in two big ways. First, I've on occasion made the argument that progressives don't really have an adequate set of new ideas, especially about the future of the economy. But as Grunwald shows, not only are there ideas, but many of them are being put into place as we speak, from the Race to the Top education reforms to the birth of an American solar energy and battery industries to the mundane work of weatherization of millions of homes and businesses to save energy. I didn't fully appreciate the scope of the changes to the Unemployment Insurance system, for example. It's far from sufficient to offset the lost potential from the recession; there's a lot more to be done to rebuild the foundations of a broad and secure middle class, and some of it can't be done by government. But the germ of the ideas that will build the future are there.

Why has it been so easy to overlook that? That's the second point on which I feel guilty. Like most writers about public affairs, I tend to focus somewhat on electoral politics and on legislative politics and policy. Most media coverage is grossly overweighted toward electoral politics – that's why there are 15,000 reporters in Tampa to cover a fully scripted non-event. But even those of us who try to focus more on policy and legislation often overlook the big third dimension, which is government. Virtually nothing is written about the actual implementation of policy in the executive branch or in the states. Newspaper coverage is limited to a watchdog role that seeks out stories like the failed loan to Solyndra, which is how that one failure (which Grunwald shows was already underway in the last days of the Bush administration, under an existing loan program) could become the proxy for the entire stimulus, or as they call it in Tampa, the “failed stimulus.” Most federal agencies have no journalists at all covering them on a daily basis, other than reporters for specialized publications and industry newsletters.

While there are books comparable to Grunwald's about legislation (The Bill, by Steve Waldman, about the early Clinton public service and education initiatives, Showdown at Gucci Gulch, about the 1986 tax reform, and the classroom classic, The Dance of Legislation, by Eric Redman, which is about the 1970s), very few continue to look at what happened in government after the legislation passed. The richest sections of Grunwald's book open up the internal politics of government: one great set piece tells the story of the Department of Energy's office responsible for administering weatherization assistance for low-income families, one that had been a “turkey farm” (a term commonly used in public administration to refer to an unimportant office to which useless employees are assigned) and couldn't even get funds out the door. Given an impossible assignment in the stimulus – to weatherize 600,000 homes – an entepreneurial young leader, Claire Broido Johnson, turned the office around and exceeded the goal.

Such stories, along with accounts of the ARPA-E clean-energy research program and the Race to the Top education program, show that the Obama administration is changing government in ways that go much further than the “Reinventing Government” initiatives of the Clinton-Gore era, which focused mainly on government's relation to citizens, who would be treated more like customers. Creative, ambitious leadership is encouraged, and real competitions, like Race to the Top, are replacing the formula- or earmark-funded programs of the past. It took a while to get started (which is why some of it was ineffective as short-term Keynesian stimulus), but its long-term effects on both government and the economy are likely to be profound.

To restore confidence in government, it is necessary to do all these things – to make government more responsive, imaginative, tough on failure but supportive of promising ideas. But it won't do any good if people don't know about it, and the phrase “failed stimulus” goes unchallenged. The New New Deal is not only one of the two best books ever written about government (the other is Cadillac Desert by Marc Reisner), but an acute reminder to every journalist, political writer and political analyst to pay more attention to real stuff of government, which doesn't happen at either end of Pennsylvania Avenue.

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

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Yesterday's Wind? Paul Ryan's Speech Was Full of Hot Air.

Aug 30, 2012Jeff Madrick

Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

Honest? Intellectual? Neither quality was on display last night when Paul Ryan gave his first major national speech to America and provided red meat to his fellow Republican conventioneers. Profoundly sarcastic about Barack Obama, taking one rhetorical swing after another about how the administration failed, he promised in soaring language that Mitt Romney and he would do far better, put America back to work, and save Medicare. How? Not a word. No mention of a plan, not even in broad strokes.

Perhaps Ryan was told to leave the plan to Romney during his acceptance speech. But of course, neither Romney nor Ryan has told us much about their plan at all. They will cut taxes, but will they close the deficit they so deplore and blame on Obama? The CBO says Ryan’s plan won’t do that for decades, and even that forecast relies on spending cuts and the closing of tax loopholes neither Ryan nor Romney will specify. This is honesty?

At the very least, Ryan could have told us why he believes in small government, not simply that he believes in it. He could have tried to present some evidence, theory, or even conjecture about how it limits growth. He could have sought a historical example or two of a better America. Of course, this would have been difficult. The facts don’t back him up.

Ryan said Obama was trying to sail on “yesterday’s wind.” The Republican chant about making the poor personally responsible for their own good is truly “yesterday’s wind.” Before Social Security, when workers were largely “responsible” for their own retirement, about half the elderly lived below the poverty rate. American policymakers paid too little attention to poverty until Michael Harrington wrote his book, The Other America, documenting how many poor there were. In the 1950s, before Lyndon Johnson’s War on Poverty, the poor had to get by on their own, as Republicans would have it today. The poverty rate then was 22 or 23 percent, but now America’s official poverty line is lower compared to median incomes than in most other rich countries.

If Ryan is what passes for intellectual in Republican circles, the party is in serious trouble. He is an ideologue. He espouses faith in a small government dogma, not theory or evidence. And we have heard this chorus for a century or two. Good thing the nation ignored it and built a set of social programs that were central to the development of a middle class -- civil rights for black people and women, free education, major transportation systems, and protection from workplace abuses, old age, and the scourge of being born into poverty.

As Ryan said about Obama, his facts are merely true because he states them. Last night, Ryan took two big cheap shots. He had the audacity to suggest Obama was to blame for an auto plant that GM closed before he took office, when in fact Romney was opposed to the Obama bailout of GM. And of course there was Obama's $700 billion “raid” on Medicare in order to provide coverage for others, mainly the poor and the young. Obama is cutting back reimbursements to providers and a subsidy for Medicare advantage. It won’t affect senior benefits. But the honest and intellectual Ryan did not explain this to us.

The Ryan charade is about to end. Ryan showed himself last night to be a politician willing to distort the facts and cynical enough about his audience’s intellectual capacity to provide no evidence, theory, or history to support his points even if he had them at his disposal. The Republicans’ rising star turned out to be a breath of stale air. 

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

 

Paul Ryan image via Shutterstock.com.

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Memo to RNC Delegates: You Didn't Build It, But Feel Free to Pay Up

Aug 28, 2012Jordan FraadeSarah Pfeifer VandekerckhoveJeff Madrick

“We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point.

“We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point. To be clear, Obama was saying that “there are some things (like fighting fires or building infrastructure) that we (the government and its people) do better together,” such as constructing a multi-million dollar professional sports facility in downtown Tampa or, say, rebuilding the infrastructure and restoring public services to an entire city in the wake of a (relatively small) hurricane to the tune of millions of dollars. But if the 50,000-plus people visiting Tampa for the RNC this week really want to take credit for these enormous feats of collectively funded and supported work, we have helped them figure out just how big a check they’ll need to write.

As Media Matters pointed out last week, the Tampa Bay Times Forum was built in 1996 by the Tampa Bay Sports Authority, a public entity. Of the $139 million construction cost, 62 percent, or $84 million, was paid with public money – bonds backed by the City of Tampa and Hillsborough County, paid back through sales taxes, tourist development taxes, and ticket surcharges. More recently,  the Republican National Committee, which received over $18 million from the federally supported Presidential Election Campaign Fund, shared costs of over $500,000 with the Tampa Bay Lightning just to upgrade the arena’s sound system.

Additional preparation for the RNC cost the City of Tampa upwards of $2.7 million in beautification projects and infrastructure upgrades, like improving highways, redesigning signage, planting palm trees, and bringing a locally loved fountain back into use. Commuting from up to 90 miles away, RNC delegates will surely find these upgrades to be pleasant as they are introduced to the hallowed Tampa tradition of long, grinding commutes. Some delegates may even be transported around by a fleet of 400 city-chartered buses. Those same delegates who, like Florida Governor Rick Scott, are adamant about blocking any further government expenditures on mass transit are more than welcome to walk to the Forum (although a 2007 survey of cities found that Tampa has no walkable destinations, and 50 percent of the urban core is set aside for parking).

Downtown Tampa offers delegates benefits that come as a result of public investment in the city’s urban core (unless, of course, they choose to avert their eyes out of principled opposition to wasteful government spending on things like public art and higher education). The Riverwalk, a two-mile green space along the Hillsborough River, has already enticed the Tampa Museum of Art to relocate and freed up space for public events. The city received $11 million from the Obama administration to put the finishing touches on the project, and is spending $3 million to turn downtown’s Zack Street into a pedestrian thoroughfare with benches, landscaping, and street art. Finally, along the downtown riverfront, the University of South Florida’s new Center for Advanced Medical Learning and Simulation is the world’s largest medical facility that allows medical students to practice surgery without a patient. The center was built at a cost of $38 million and was partially paid for by Build America Bonds, an Obama administration program that provides capital for infrastructure projects and issued over $100 billion in bonds in its first year of operation. More wasteful government spending!

Of course, no event in Florida in August would be possible without hurricane season preparation. In anticipation of Tropical Storm Isaac’s imminent development into a hurricane, the RNC cancelled Monday’s convention activities. Though it’s not clear yet what cleanup the storm will require, similar strength storms generally cost FEMA millions in statewide recovery. When Tropical Storm Debby hit Florida earlier this summer, FEMA spent over $15 million on individual assistance.

For the 2,286 RNC delegates eager to claim they “built this” – whether it’s the Tampa Bay area infrastructure or social services, Tropical Storm recovery included, provided by the host town – we’ve done some math to help them determine just how much money they would have to personally shell out to validate such a claim. Diffusing a $15 million cleanup cost among 2,286 delegates would lead to a total of about $6,562 per delegate—a small price to pay to make sure the party can actually nominate a candidate for president. If we ask everyone visiting Tampa for the convention to pitch in—roughly 50,000 people, according to the RNC website (and yes, 15,000 members of the press, that includes you too)—each person would pay $300 to help clean up. Natural disasters aren’t cheap. Without coordinated government efforts to manage and clean them up, they would be even less so. To cover the roughly $100 million in Tampa Bay area beautification and service and infrastructure improvements, including the construction and upgrades of the Tampa Bay Times Forum, each delegate would need to pitch in an extra $43,745, or an extra $2,000 per visitor, and that doesn’t include myriad other costs going into this week’s events, including the nearly $50 million federal grant covering RNC security.

With this $15 million tucked away and set aside for hurricane cleanup and over $100 million secured for RNC-related infrastructure and beautification, Tampa and Florida taxpayers could go back to taking care of day-to-day expenses, like improving Medicare coverage in a city and state where the need for it is acute. Florida’s health care costs are well above the national average—it ranks 18th in per-capita health spending overall—but the state rockets to second place nationwide in Medicare spending with $11,893 spent per enrollee. The state also ranks second behind California in gross Medicare spending, with just over $39 million spent on the program. And while the Tampa and St. Petersburg hospital referral regions do not contain Florida’s highest per-enrollee Medicare expenditures, nor are the cities among Florida’s most elderly, the city’s age 50-64 population grew by 40 percent between 2000 and 2010. A city whose largest-growing age group is on the cusp of Medicare eligibility is hosting the convention of a party that has dedicated itself to ending the program as we know it.

There’s a larger-than-usual chance that your average Republican delegate will be a Medicare recipient, too. While the convention does not officially release information on the age of its delegates, several states do. North Carolina, Texas, and Connecticut, for example, are all sending delegations whose median age is 57 or 58. Any delegates who require medical care during the convention, hurricane or no, will have the option of visiting Tampa General Hospital, a downtown hospital affiliated with the public University of South Florida—but not, alas, with the for-profit hospital chain managed by Florida Governor Rick Scott in the 1990s and later found guilty of Medicare fraud. Tampa General is the city’s largest hospital, with an operating revenue of $1.1 billion in fiscal year 2011—a year before it was voted the best hospital in Florida by U.S. News and World Report. No doubt at least one Republican delegate, for some reason or another, will find a reason to visit the hospital and help contribute to this nonprofit, government-funded success story.

As for the delegates who stay healthy, we hope you’ll enjoy your stay and that your cheers of “we built this!” are worth the $50,307 you’ll have to refund the government for all the work it did to prepare the city on your behalf. And remember to set a little extra aside for tourist activities!

Jordan Fraade is a former member of the Roosevelt Institute | Campus Network.

Sarah Pfeifer is Manager of Programs for the Roosevelt Institute.

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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Super PACs Aren't Just Swinging Elections -- They're Changing the Way We View Government

Aug 28, 2012Alan Smith

The wealthy donors behind right-wing ads want more than victory in November. They're trying to permanently reshape the political landscape.

The wealthy donors behind right-wing ads want more than victory in November. They're trying to permanently reshape the political landscape.

We’ve all seen the numbers; we know Super PAC politics is a slow-motion disaster unfolding before our eyes, and that a handful of rich people have the ability to dramatically swing elections. But beyond influencing individual races and shifting the way national campaigns must be run, Super PACs and the messages they are promoting may have a dramatic long-term effect on how we as a society view our government. 

Super PAC spending has already hit $200 million this cycle, and with the big players reporting plenty in their reserves, the top of this mountain of cash is not yet in sight. We’re not talking about an even layer of money covering the political landscape, either. This money is going to support conservative causes at a disproportionately high rate. Not only does Open Secrets identify three-quarters of the Super PAC funds as being raised and spent by conservative groups, but ProPublica has tracked media buys and reported that “conservative social-welfare groups” have already spent some $70 million on television ads, compared to $1.6 million spent by liberal groups.

Because so much of this cash is hard to track, we don’t know exactly where dollars are going, but those estimates still paint a clear image of a democracy radically remaking itself. David Axelrod summed up the blight nicely (even accounting for the sour grapes that come from being on the wrong side of the ledger) in a recent New Yorker article:

If your party serves the powerful and well-funded interests, and there’s no limit to what you can spend, you have a permanent, structural advantage. We’re averaging fifty-dollar checks in our campaign, and trying to ward off these seven- or even eight-figure checks on the other side. That disparity is pretty striking, and so are the implications. In many ways, we’re back in the Gilded Age. We have robber barons buying the government.

It’s been clear from the beginning that many on the right have been tepid about Mitt Romney as a candidate. I would argue that this ambivalence shows up in donors’ spending habits as well: when it comes to the actual campaign apparatus, President Obama is running sizably ahead of Romney in fundraising. This raises an interesting question: legal limits aside, what other reasons do big-ticket donors have to avoid going straight to the party apparatus? Super PACS give these donors a way to swing elections, but more importantly, they provide a way to control their messaging directly in ways that donating to Romney’s camp would not. Lost in the election-focused discussion of ground game versus ad game is the potential long-term result of the one-sided messaging that is currently blaring from our television sets and computer screens.

Through funding these Super PACs, 30 or so billionaires are running a nation-wide advertising campaign. While the focus is on attacking Obama, this brain trust is playing a simultaneous long game. The reality of issue advertising is that there are subliminal long-term effects on the audience and their associations with political stances and phrases. That’s how advertising works with Lexus or Gatorade, and that’s how it is working here. Sure, it helps Mitt Romney in November if “Obama” is associated with “bureaucracy” and “taxes” and “waste,” but what about the fact that the ads are also connecting “government” with “bureaucracy,” “tax burden,” and “waste,” independent of the candidate?

Check out this ad, brought to you by Americans for Prosperity, one of many targeting a specific candidate in a swing state: 

The point of the ad is clear: Donnelly, and through him “sitting government,” are bureaucratic spenders, and they sure don’t have your best interest at heart. It's not a new message. But the scope of these targeted issue ads is new. Even if this is not a calculated right-wing attempt at moving the needle on how citizens view the role of government, that will surely be a side effect. 

Regardless of whether you favor Democrats or Republicans, the larger concern is with the way we conduct democracy in this country. The root problem here is that a small cabal of wealthy people can fundamentally affect our view of government and how it functions. This new front in the war of ideas will not end with a single battle in November; Super PACs are a giant new tool designed to drive a wedge between the people and their government even more effectively than the right’s “welfare queen” rhetoric of yesteryear. Their messaging makes the case that government is something foreign, alien, and other. On the other side, there are no ads making the case for Medicare, public education, or government as a vehicle for social change. 

One could make the argument that Super PAC supporters see attacking the roots of government as a lucky side benefit to helping the Romney campaign, but that seems naïve. And considering the past 30 years of intentional Frank Luntz-style messaging from the right, I find it impossible to believe that this barrage is merely a philosophical case for greater “freedom.” Rather, it is a calculated attempt to further erode Americans’ sense of government as a positive actor and, with that, the chance for a publicly held good in our society. While it is true that our relationship with government is a complex and evolving one, it must not be defined by such a black-and-white campaign against government in all forms. 

Alan Smith is National Policy & Program Director for the Roosevelt Institute | Campus Network.

 

Finance law image via Shutterstock.com.

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Misleading Advertising is On the Rise: Four Ways the FTC Can Fight Back

Aug 22, 2012Asha M. Fereydouni

Consumers need regulators to step up yet again to protect them from risks in the marketplace.

Consumers need regulators to step up yet again to protect them from risks in the marketplace.

Last year, President Obama created the Consumer Finance Protection Bureau, a new agency to protect American consumers with the explicit purpose of preventing some of the risky practices that led to the crisis of 2008. It took one of the greatest financial disasters in history to initiate regulatory change. But there were a number of small failures leading up to the disaster that indicated things were going poorly. Had the CFPB existed at any one of these smaller junctures, much of the disaster could have been averted.

Today, the United States is at a similar juncture: consumers need additional protection, misleading advertising is on the rise, and the current agency responsible for regulation—the Federal Trade Commission (FTC)—is not doing enough.

In May 2012, POM Wonderful lost a lawsuit to the FTC for misleading advertising. Two days later, the company released an ad campaign selectively quoting from the judge’s ruling. The advertisements read, "Competent and reliable scientific evidence supports the conclusion that the consumption of pomegranate juice and pomegranate extract supports prostate health." But in the very next line of the ruling (which POM did not advertise) the judge states that while it might want to think that its product has the advertised health benefits, "the greater weight of the persuasive expert testimony shows that the evidence relied upon by [POM Wonderful] is not adequate to substantiate claims that the POM products treat, prevent or reduce the risk of prostate cancer."

The FTC tried its best, but it was unable to do a thing—the ads are still running, and POM has not paid a cent in fines.

But it’s not just POM. From Sketchers to CVS, each has been subject to misleading advertisement suits in just the last six months. If things aren’t changed, and companies are able to follow POM’s example in getting away with repeated instances of false ads, consumers will pay the price. We face the risk of purchasing a product, thinking that it has certain benefits, then realizing that our money has gone to waste. We may not be able to trust what is right in front of our very eyes. 

So what can the FTC do to strengthen its efforts in combating misleading advertising? Here are four places it can start:

1. The FTC can impose monetary punishments on companies the second a judge rules them in violation. Currently, companies that are sued for misleading advertising only face a monetary penalty if three conditions are met. First, the company must continue false ads after the judge’s ruling; second, the FTC must get those ads admitted to the record; and finally, the judge must find it guilty of committing a “double violation.”

The punishment for a double violation is steep. The FTC fines companies $16,000 PER advertisement, PER day—that’s no joke, even for a multimillion dollar company. The penalty works great as a deterrent for double violations, but there needs to also be a deterrent for a single violation. Fines ought to apply for any advertisement that, after being tried in court and ruled by a judge, is found to be misleading the American people.

2. The FTC can institute more stringent requirements as to what kinds of clinical studies are required before health claims are made. With the POM case, the FTC tried to set a new precedent of requiring double-blind studies and FDA pre-approval before POM (and, potentially, other companies) could make claims about the health benefits of its products. While the FTC’s efforts must be commended, it was ultimately unsuccessful in adding the new requirements. Further, the FDA by no means has the capacity to pre-approve and substantiate the medical claims for every company that presents health-related advertisements.

A plausible compromise would be for the FTC to implement requirements for certain standards in clinical studies. Among other things, the FTC could require companies to present studies that have a control group (a non-trial, comparable group to ensure that the products are actually having an impact) and the repeated achievement of stated results in at least three instances. In doing so, the FTC can begin to rein in how companies substantiate the medical claims behind their products.

3. The FTC can request more transparency in how companies advertise the medical benefits of their products. Currently, there exist loose standards as to what companies must disclose to consumers. The FTC ought to require that companies disclose on some part of the advertisement the funding source and basic information about the clinical trial that occurred to substantiate the product’s health claims.

4. The FTC can be internally consistent when it comes to measures to improve existing regulations. In July of 2011, the FTC announced that it would review each and every existing regulation. The goal of this comprehensive review was to “promote greater efficiency, transparency, and public participation.” In conjunction with this internal review, the FTC also asked for public comment and publicized its criteria for evaluating the existing regulations. It asked for comments on the rule's economic impact, its necessity, whether it conflicts with local laws, and if it's outdated.

Notice that there is no question of efficacy. On initial glance, it would seem as if the FTC doesn’t care whether the regulations actually work. However, after taking a closer look at the briefs released for each specific regulation, it would seem that the FTC did in fact care about how the regulations were working. It also asked, “What modifications, if any, should the Commission make to the Rule to increase its benefits or reduce its costs to consumers?”

While the detailed brief shows that the FTC does in fact care about the efficacy of its regulations, this desire ought to have been a component of its initial press release. A comment made by the Heritage Foundation is most illustrative of this lack of clarity. Heritage lists the FTC’s four criteria that were released in the initial press release and structures its analysis based on those criteria. It had no idea that there were expanded requirements. By not clearly asking what it wanted to know, the FTC was unable to get complete answers and left itself short-changed.

The FTC can take these steps now to combat misleading advertising. In doing so, it can take a proactive position, stand up to large companies, and protect American consumers. 

Asha M. Fereydouni is a member of the Roosevelt Institute | Campus Network who is a senior at the University of California, Davis and is currently doing research on the FTC in Washington, DC.

Billboard image via Shutterstock

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A Brief History of the U.S. Government and the Economy

Aug 15, 2012

Check out this Prezi highlighting 16 of the most significant contributions government has made to the U.S. economy over the last 200 years:

http://prezi.com/srpyvqqn8bff/rediscovering-government/

Check out this Prezi highlighting 16 of the most significant contributions government has made to the U.S. economy over the last 200 years:

http://prezi.com/srpyvqqn8bff/rediscovering-government/


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Environmentalism Can't Succeed Without Good Citizens and Good Consumers

Aug 7, 2012Nick Santos

Individual action alone won't solve our environmental problems, but neither will giving up on responsible consumer habits.

Individual action alone won't solve our environmental problems, but neither will giving up on responsible consumer habits.

"Story of Stuff" creator Annie Leonard has posted a new video, titled "The Story of Change," in which she argues that it's not responsible consumers but good citizens – those who vote, participate, take action, and generally show up – who create environmental change. The video is quite good, but I disagree that one is better than the other. In fact, for us to get the changes we need, we’d do best to vote with both our dollars and our ballots. Leonard says as much, but the video and her recent piece in the New York Times’"Room for Debate" series send a mixed message that discourages individual-level action. The argument environmentalists should be making loud and clear is that we must have good individual consumption habits and civic participation if we hope to succeed.

The central argument reflected in the video and by all the Times debaters is that individual actions are a tiny piece of the puzzle and that consumers who take individual action are more likely to feel an “illusion of progress” and think they have done their part without having any significant impact on the larger environmental problems we face. These are important considerations, but sending the message to consumers that their contributions “don’t add up” is dangerous both for our environmental impacts and for the viability of our civil participation. Consumers who take individual action are invested in the movement – an advantage that should not be overlooked. In addition, the environmental problems we face are ultimately linked to consumption, and we must address consumption in order to adequately fix them.

The first problem, as any climate change organizer can tell you, is that getting people to make the leap from individual economic and social impacts to grassroots organizing is no simple task. Leonard is right that making a connection to a larger movement is incredibly important, but the crux of organizing remains the individual – individuals who are so convinced of the problem that they take time out to show up and participate. To get to that stage, individual action is critical – it keeps us focused on the problem and raises awareness of the solution. Still, we can and should still tie these personal efforts to effective campaigns and political action. For an example of this done right, look no further than 350.org, whose organizational voice and message, as seen in the staging site and resources it provides for local organizers, strengthen the movement's foundation and inspire people to engage their community on the ground.

The second issue is cultural.  We have a serious consumption problem that legislation cannot eradicate, even while it can significantly reduce the damage of each bit of consumption. In reality, we have to buy less, not just buy smarter, if we want to do our part. So while taking action and demanding better government regulation tackles many of the problems associated with producing and disposing of products, environmentalists and consumers in general need to go much further in addressing the consumption problem itself.

This is where individual consumer purchasing adds up. In addition to reducing impacts, making real shifts in corporate behavior, and setting examples for other conscious consumers, individuals who make responsible purchasing decisions literally and figuratively invest in the sustainability movement. And we need that if we expect people to show up, vote, talk to their neighbors, or otherwise take civic action. Enough of us already profess to support issues like climate change, but when we don’t feel like it’s a part of our lives, it can drop off the radar. Participating in individual purchasing keeps these issues front and center in the public consciousness.

Some of these consumers are at risk of considering their purchasing to be their entire contribution to the movement, as the debaters contend. But if they do, then that’s our failing as environmentalists in not making the appropriate connection between civic and economic action. Leonard is trying to correct these problems, and I applaud her for it, but it won’t work if consumers get the impression that they should stop their personal investment in sustainability, as Leonard’s message often suggests. We need to help these two types of critical action work together if we want either of them to have a chance of success.

Nick Santos is a Roosevelt Institute | Pipeline Fellow working on climate change education. He runs Environmental Consumer, a nonprofit, and works with the UC Davis Center for Watershed Sciences.

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The Return of the "Hear-Nothing, See-Nothing, Do-Nothing" Congress

Aug 2, 2012David B. Woolner

As the 112th Congress prepares to go on recess, its record pales in comparison to what the 74th Congress achieved in the 1930s.

For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away... Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent. - Franklin D. Roosevelt, 1936

As the 112th Congress prepares to go on recess, its record pales in comparison to what the 74th Congress achieved in the 1930s.

For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away... Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent. - Franklin D. Roosevelt, 1936

A number of recent articles have pointed out that by most measures, the 112th Congress is not merely the most unpopular Congress in history; it is also the least productive. As both the New York Times and the Washington Post have pointed out of late, this Congress would much rather engage in political posturing and ideological brinkmanship than in passing laws that address the current economic crisis.

What a contrast the 112th Congress represents when its record is placed against the 74th, the Congress that was in session at the close of FDR’s first term. It was the 74th Congress that was largely responsible for what historians call the Second New Deal. This included the Emergency Relief Appropriation Act, which provided the funding needed to establish the Works Progress Administration (WPA) that would provide millions of Americans with skilled jobs building the nation’s economic infrastructure; the Soil Conservation and Domestic Allotment Act, which encouraged farmers to preserve one of our nation’s most precious resources, our topsoil, in the midst of one of the worst droughts in history; the Rural Electrification Act, which provided jobs to thousands and “wired” the country by bringing the benefits of electric power to millions of rural Americans; the Public Utility Act, which was designed to reduce the cost of electric power by regulating the utility industry and forcing the break-up of large-scale power monopolies; the National Labor Relations Act, which enshrined the right of workers to form unions and engage in collective bargaining and established the National Labor Relations Board, which helps us settle labor disputes to this day; and finally, the Social Security Act, which gave us not only Social Security but also unemployment insurance.

What many Americans may not be aware of is the long-term impact that these congressional acts have had on future generations. As I pointed out last week, the drought we are experiencing today would no doubt be much worse, and may have even resulted in the rise of a new Dust Bowl, had Congress and the government not moved so aggressively in the 1930s to reduce soil erosion and plant millions of trees. The jobs provided by the WPA helped preserve the critical skills of our workforce and vastly expanded the infrastructure needed to grow the U.S. economy. When the Rural Electrification Act was passed, roughly 90 percent of all the farms in the United States were without power; by the end of the New Deal that number was cut to 10 percent. The passage of the National Labor Relations Act had a profound impact on the level of union membership and wages in the years to come and helped establish the post-war middle class. And it boggles the mind to think of where we might be today, in the midst of the current economic crisis, had we not had Social Security or unemployment insurance. It is also important to remember that many of these acts were initiated by members of Congress in response to the crisis the country faced in the 1930s and that each of these laws received significant support from members of both political parties.

As we approach the 77th anniversary of the passage of the Social Security Act on August 14, perhaps instead of going on recess, the members of Congress should call themselves back into session. With the economy sputtering and millions of Americans still suffering the agony of unemployment, why not take a chance and pass President Obama’s jobs bill, or at the very least establish the long-term funding needed to rebuild and expand our nation’s crumbling economic infrastructure?

After all, more than three-quarters of a century ago while running for office in the midst of a similar crisis, Franklin Roosevelt was bold enough to recognize that in the face of such an economic calamity the country was ready to try “bold, persistent experimentation.” That it was perfectly acceptable to “take a method and try it: if it fails, admit it frankly and try another. But above all try something” for the “millions who are in want will not stand by silently forever while the things to satisfy their needs are in easy reach.”

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

 

Congress image via Shutterstock.com.

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Trust in Government as an Ad Pitch: Lessons From a 1969 Corporate Logo

Jul 25, 2012Mark Schmitt

It takes language that plugs into the national consciousness to change our attitudes toward the government.

It takes language that plugs into the national consciousness to change our attitudes toward the government.

A fascinating short film from 1969 popped up yesterday on a number of quirky non-political websites. It was made by the designer and filmmaker Saul Bass to persuade the Bell System to adopt a new logo, as well as new designs for its trucks, uniforms, and phone booths. If you're a Mad Men fan or are into design, or both, it's worth the 27 minutes to watch it.

But what I found most interesting in it was a clue to the question we often ask, especially in the Roosevelt Institute's Rediscovering Government initiative: When and why did Americans lose the faith in government that characterized the era that began with the New Deal and continued through the postwar decades?

In trying to convince the Bell System (the phone company before it was broken up into regional companies, such as what became Verizon, in 1984) to embrace a modern, high-tech (by 1969 standards) look, the voice-over puts it in the context of a narrative of the United States in the middle part of the twentieth century. Starting at about 2:10, over images of Vietnam, racial discord and harmony, the world from space, crowded highways, smokestacks, and symbols of late-'60s consumerism, the voice-over tells us:

We’re fighting a war. Making a peace. Integrating. Segregating. Getting richer. Getting poorer. It’s quite a time to be alive....

Then, after a little section about how it's tough for business because consumers of 1969 have such high expectations, the images switch to those of the Great Depression, with the voice of Franklin Roosevelt – “The only thing we have to fear is fear itself” – in the background.

Many of us here today remember when it was quite different. The pursuit of happiness had ground to a halt. Survival was the goal — just to have a job, but to have a job with security: That was the prize in 1933. How long a product lasted was more important than how well it looked. Wall Street had forgotten blue sky and was now talking blue chip. Down-to-earth, safe — that was the place to be.

“Just to have a telephone was a marvel” at that time, the voice says. Back then, it was enough to offer products that were “safe, durable,” but now “times have changed, looks have changed... When young people are looking for challenge, we seem to offer only security.”

And throughout, government is used as a symbol for the safe, staid post-Depression world. Over an image of the Bell System's motley fleet of old trucks, the film asks, “Is this the world's most advanced communications organization? Or the motor pool of the Quartermaster Corps?” At another point, making the case for snazzy new uniforms, the film declares that the old outfits looked “government-issue.”

One of the great challenges of history is understanding how people in the past thought about their own past and what their history taught them. Nothing before Mad Men had made me fully appreciate that for people in the prosperous, fast-moving 1960s, the Great Depression was a real, living memory. The worst year of the Depression, 1937, was by 1969 only 32 years in the past – that's the same distance as between our time and the election of Ronald Reagan. But a typical 40-year-old in 1969 would be living in a very different world than that of her childhood – vastly more so than someone born in 1972 living today.

And that difference had a direct bearing on thinking about the role of government. The security that government provided in the era of “fear itself” was by 1969 seen as antiquated, a reminder of a time that people wanted to forget.

When we talk about declining trust in government, we often tend to focus primarily on political arguments and claims, the language of the California tax revolt, of Reagan, Newt Gingrich, and more recently the rhetorical argument between Mitt Romney and Barack Obama/Elizabeth Warren, the latter who both dared to point out the essential role of government and collective action in building the foundations for individual economic success. But the political language of a Reagan can only take hold when it connects to people's cultural assumptions and predispositions, when it connects to our sense of national narrative. Because it has nothing to do with politics – it's a corporate pitch, much like Don Draper's for the Kodak Carousel. Bass's Bell System film is a fascinating reminder of how deep that sense of national narrative that government was staid and outdated went.

Today our narrative is very different. “Just to have a job with security” is again a sufficient goal for millions of us. The economic promise of 1969 gave way within a decade to a long period of stagnation, radical inequality, and economic insecurity. At the same time, we're still the children of that promise, resistant to things that are “government issue,” safe and durable, eager for “challenge” as well as security. Rediscovering government requires more than just a political argument – it calls on us to rethink how government defines itself and presents itself and connects to our deepest sense of where we've been and where we're going, much as Saul Bass asked the Bell System to do in 1969. 

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

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