Brookings: Topics - The 2013 State of the Union

Flow Oil and Gas Revenues to Cleantech R&D: Common Ground on Energy?

Mark Muro — Mon, 18 Mar 2013 00:00:00 -0400

Can Congress pass any sort of energy legislation? I’m not holding my breath. For too long now meaningful action through compromise has been a chimera. Even the most plausible deals have been dissipated by ideological tribalism.

Still, there remain potential convergence points.

Last month the Bipartisan Policy Center advanced more than 50 middle-of-the-road energy policy recommendations developed by its Strategic Energy Policy Initiative, co-chaired by former Sen. Byron L. Dorgan (D-ND) and former Senate Majority Leader Trent Lott (R-MS). And for that matter, interesting discussions surround energy efficiency issues, thoughtful subsidy reform, and steps like opening master limited partnership status to renewable energy projects.

Now comes President Obama’s modest proposal to capitalize an Energy Security Trust fund to support research into de-carbonizing the vehicle sector.

To be funded with $2 billion over 10 years drawn from royalties the government receives from offshore drilling on the Outer Shelf, the new proposal—first aired in Obama’s State of the Union address last month—represents an important check point on the potential for constructive action through compromise in Congress.

To be sure, the proposed research fund is tiny, given the scale of the nation’s cleantech research needs. And yes, it’s focused only on the transportation sector. And yes, the proposal is quite vague and so hard to gauge.

But even so, the energy trust concept represents a significant bid to test the potential for advancing energy policy.

Research on clean energy technologies remains a critical priority. Locating funding for it remains a critical challenge. And the president’s proposal probes an area of genuine potential for convergence.

For one thing a modest bargain on energy research and oil and gas royalties has always had a sound intellectual grounding. Through such an architecture the costs of investment would be internalized across the energy sector, and the revenues of “dirty” exploitation would be used to fund clean innovation. That just makes sense.

Beyond that there is the fact that the concept has some authentic bipartisan lineage and maybe traction. Some of that comes from the support for the idea by a group of retired military and business leaders, including some Republicans, called Securing America’s Future Energy. More importantly, Sen. Lisa Murkowski (R-Alaska), the top Republican on the Senate Energy Committee, has proposed a similar idea (albeit one focused on drilling on lands now off-limits, such as the Arctic National Wildlife Refuge in Alaska). This convergence might well mean there is room to negotiate a deal that pleases both sides, especially with royalty growth likely in the coming years.

Or, maybe not. Perhaps the Energy Security Trust is just another illusion of plausible potential compromise, soon to evaporate.

Yet, there is encouragement in something called the American Energy Act, the 2009 energy plan introduced by House Republicans under the leadership of Rep. John Boehner, now speaker of the House. At the center of that plan was a proposed bargain that would have paired expanded oil and gas drilling and nuclear development with new investments in renewable and alternative energy. To fund the latter the bill proposed putting hundreds of billions of anticipated new oil and gas royalties into a trust fund to accelerate clean energy innovation. Sound familiar?

That proposal may have been mostly a rhetorical counter to the big Democratic push on cap-and-trade legislation, but it was discussed widely by GOP leadership and represents a useful precedent for a new deal now.

So, we’ll have to see. Whether it’s called an Advanced Energy Trust Fund a la Sen. Murkowski or an Energy Security Trust as per the White House, a clean energy R&D fund for the transportation sector remains a meaningful test of whether there is any room at all for significant energy legislation in Congress.

Again, I’m not holding my breath. But I’m happy to be proven wrong.

Authors

Mark Muro

Obama’s Preschool Plan

Grover J. "Russ" Whitehurst — Wed, 20 Feb 2013 10:57:00 -0500

When I began writing reports on preschool a month ago, first with a piece on Head Start and then another on Universal Pre-K, I had an inkling that the Obama administration was considering initiatives in this area. I had no idea that preschool policy would be a centerpiece of the president’s state of the union address. I’ve been popular since. Thank you, Mr. President, for drawing attention to my work, no matter how inadvertently.

The president’s preschool plan deserves serious consideration and analysis, and I’ll attempt that here. But the plan I’ll address is the one described in the fact sheet released by the White House, not the one the president has been talking about. In his state of the union address the president said, “I propose working with states to make high-quality preschool available to every child in America” [emphasis added here and in the next two quotes]. Two days later at a preschool in Decatur, Georgia, he repeated that call, “Let’s make it a national priority to give every child access to a high-quality early education.” And he added a populist appeal to middle class parents, “Michelle and I remember how tough it can be to find good childcare. I remember how expensive it can be, too.” He singled out Georgia and Oklahoma for praise because they “have worked to make a preschool slot available for nearly every parent.”

Bait-and-switch. I’m sure there are a lot of parents who can resonate to the new entitlement the president seems to be offering: taxpayer-funded preschool for all. But whereas the president has been selling his preschool plan to the middle-class parents as universal, i.e., available to them, the White House fact sheet makes it clear that the administration is proposing to work with states to fund expansion of taxpayer-funded pre-K for lower income families. Specifically, the administration’s plan is to share the costs with states that are willing to expand public preschool to reach all four-year olds from families at or below 200% of the poverty line[1] and that expand their half-day kindergarten programs to full day for the same families. So let’s be clear, the president’s plan may have the effect of expanding the middle-class in the future to the extent that early education enhances school readiness and improves the chances for upward mobility of children reared in low income families. But he is not proposing federal funding of public pre-K for the current middle class even though that is what you might think from listening to him. In fact, the Obama administration’s preschool plan is consistent with the federal role in education and human services since the Lyndon Johnson administration: targeted assistance for services to the economically disadvantaged.

Once we get beyond the president’s rhetoric to his actual plan, there are several things I applaud, particularly if I’m allowed to read between the lines.

Targeting. I’ve previously described evidence that suggests a much greater return on public investment for targeted pre-K as compared to universal pre-K, so the administration’s focus on providing financial support for expansion of pre-K access for 4-year-olds from lower income families is consistent with the evidence on both where the need exists for enhancing children’s school readiness and on how to maximize bang for the buck.
Data and assessment systems. If we have learned anything from more than a decade of rigorous research on K-12 public education it is that quality varies widely by classroom and school. For instance, variations in classroom quality in kindergarten are significantly related to college attendance rates and labor market earnings.[2] Although the research is not as causally rigorous, we also have evidence that variation in the quality of adult-child interactions in child care settings for preschoolers is associated with differences in cognitive/academic development that persist at least through adolescence.[3] If we don’t collect data and carry out assessments that yield information on the quality of the out-of-home settings in which young children are being cared for, neither states, the federal government, nor more importantly parents will be able to take the actions that are necessary to avoid low-quality services. It remains to be seen what types of data and assessment systems the Obama administration has in mind. It will be important to include observational measures of classroom interactions, assessments of child outcomes (yes, 4-year-olds can be tested without stress to them and with reliable results), and surveys of parental satisfaction.
Curriculum. There is good evidence that children’s pre-academic skills including vocabulary, letter recognition, and phonemic awareness are strongly associated with academic outcomes during elementary school and that children from low-income families are far behind their more economically advantaged peers on these skills at school entry.[4] There is also strong evidence that the curriculum used in classrooms for 4-year-olds from low-income families has a significant impact on the development of these pre-academic skills.[5] Thus, the administration’s commitment to linking federal funding to the requirement that preschool programs have a “rigorous curriculum” is important and evidence-based.
Curtains for Head Start (as we know it). A casual reader of the administration’s preschool fact sheet might think that Head Start is a winner. After all, there is a bulleted, bolded heading: “Under the President’s proposal, investment in the federal Head Start program will continue to grow”. But a closer reading suggests that the administration’s plan to support the expansion of state pre-K programs for 4-year-olds will be at the expense of Head Start, which serves the same population. The administration’s plan is to expand Head Start services for children from birth to age 3, and to do this through a “partnership program” with states and communities. Traditional Head Start is not administered in a partnership with states and communities, does not serve children from birth to three, and it does not work in terms of getting low-income children ready for school. The administration knows that Head Start isn’t getting the job done and is proposing a bold move in a new direction. Hurray if they can push this through in the face of what will likely be fierce opposition from the Head Start lobby.

Nothing is perfect – and certainly not the president’s preschool plan. Areas in which the administration has it wrong or has left out something very important include:

Teacher credentials and pay. The president proposes that all states would staff their pre-K programs have “well-trained teachers, who are paid comparably to K-12 staff”. There is no way politically to pay pre-K teachers on the same scale as K-12 teachers unless they have comparable credentials, so what the president is really proposing is that pre-K teachers be required to have a 4-year college degree and jump through the same credentialing hoops as K-12 teachers. But we know that the degree and the traditional requirements for being credentialed as a teacher have little or nothing to do with the quality of interactions in preschool classrooms.[6] Neither does teacher salaries.[7] Thus requiring states to credential and pay pre-K teachers as they credential and pay K-12 teachers assures only two things: high costs and supportive teacher unions.
Local school districts in charge. Under the administration’s plan federal dollars would flow to states based on their share of four-year olds from lower income families and “funds would be distributed to local school districts and other partner providers”. We’ll have to wait and see what “other partner providers” means, but my reading is that the intent of the president’s proposal is that money would flow to states and that states would fund school districts to expand their school-based programs downward in age to include pre-K for 4-year-olds. In far too many cases these would be the same school districts that are responsible for the terrible public schools that will fail to educate the very children the president’s preschool proposal is intended to benefit. Further, research shows no association between the quality of classroom interactions and whether a classroom is physically part of a public school, although teachers in classrooms within public schools are predictably paid more.[8] When combined with the administration’s proposals on teacher credentials and pay, this looks like a policy designed to appeal to those who benefit from the status quo in American public education. I would urge an administration that clearly understands the value of charter schools in breaking up the monopoly of failing traditional public schools to think again about a plan for preschool that would make school districts the principal or sole provider of federally subsidized pre-K services.
Choice. The administration’s plan is silent on whether and how parents will be able to exercise choice in where they send their child to pre-K. Choice is important for many reasons, including its importance to parents, who are used to exercising it for preschool. It also impacts program performance and innovation because it allows for variety in programs and competition among providers. There are also equity issues in that it is typically the poorest parents who can’t escape the destiny of their zip code when it comes to their children’s schooling. This is as true of state pre-K as it is of K-12: classrooms that serve children from the most disadvantaged homes have less experienced teachers and lower quality instruction than classrooms that serve more advantaged students.[9] The only way to prevent this is to give parents the right to vote with their feet and send their child to the preschool they prefer rather than the preschool to which they are assigned. The nation is likely to see much better outcomes over the long term if the federal government provides significant incentives for states that accept the federal pre-K subsidy to allow a variety of organizations to provide pre-K programs and permit parents to choose among them. The requirements for data, assessment, and program evaluation that are part of the administration’s plan should enable parents to shop wisely if that information is made available to them, and allow state-level program overseers to disqualify weak providers from participating in the program.
Lack of integration with other federal funding streams. The federal government funds many programs that are intended to improve the education of young children. Among the largest are Head Start, the Child Care and Development Fund, Temporary Assistance for Needy Families, Title I of the Elementary and Secondary Education Act (which permits expenditures on pre-K programs), and Individuals with Disabilities Education Act programs for infants and toddlers as well as preschoolers. There is 15 to 20 billion dollars in annual expenditure on early education through these programs. This is more than the federal government spends through Title I, Part A of the Elementary and Secondary Education Act to support the education of the disadvantaged in all of K-12. At the very least, the administration should push for common data, assessment, and program evaluation approaches, and a unified system for providing information to parents on center quality across these funding streams. A bolder direction would be to combine these funds into a single state block grant to support the early education of vulnerable young children.
Do no harm. Some children need publicly supported out-of-home care to be prepared for school and life. But the supposition that all children need or benefit from these services is not supported by research. For example, the federal Child Care and Development Fund, which provides relatively low levels of financial subsidy to young mothers on welfare to purchase formal child care when they obtain employment, appears to negatively impact the academic outcomes of the children of participating mothers.[10] The provision of universal child care services in one province of Canada appears to have encouraged mothers who would otherwise have cared for their children at home to move those children into organized child care settings, again with negative impacts on child outcomes.[11] Further, a large body of research demonstrates negative relationships between hours spent in non-relative care during early childhood and undesirable social outcomes. For instance, adolescents who experience more hours of non-relative child care across their first 4½ years report significantly more risk taking and impulsivity at age 15.[12] It is important for policy makers, include those in the Obama administration, to be mindful that not every preschool-aged child needs to be in an organized preschool setting to be ready for school and that there are risks for some young children in spending considerable time away from their parents in those settings.

Research on small scale high intensity programs such as Perry and Abecedarian has shown us the great potential of early education to improve the lives of children, whereas research on contemporary large scale pre-K interventions, including Head Start and the Georgia universal pre-K program, has introduced a needed dose of realism into expectations for what publicly funded pre-K programs can achieve. There is no question that gaps in school readiness between children from advantaged vs. at-risk backgrounds are far too large and need to be reduced if the nation is to achieve the education excellence it needs to serve its citizens and to compete in the world economy. If the Obama administration is willing to offer a preschool plan that keeps parents in the driver’s seat in terms of choosing where to send their child, puts states in charge of administering the program and provides them with general guidelines rather than detailed prescriptions, and redirects existing resources rather than calling for large new expenditures there is a significant possibility of bipartisan support in Congress. This is an exciting time for preschool education.

[1] The 2013 federal poverty line for a household of three people living in the contiguous 48 states is $19,530.

[2] http://obs.rc.fas.harvard.edu/chetty/STAR.pdf

[3] http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2938040/

[4] http://lincs.ed.gov/publications/pdf/NELPReport09.pdf

[5] http://ies.ed.gov/ncer/pubs/20082009/pdf/20082009_rev.pdf

[6] http://psycnet.apa.org/psycinfo/2007-02875-002

[7]http://www.leg.state.vt.us/PreKEducationStudyCommittee/Documents/impact%20of%20teacher%20and%20classroom%20quality.pdf

[8] Ibid

[9] Ibid

[10] http://www.chrisherbst.net/files/Download/C._Herbst_Subsidies_Child_Development.pdf

[11] http://www.nber.org/papers/w18785

[12] http://nieer.org/pdf/Effects_of_Early_Child_Care_Extend_to_Age_15.pdf

Authors

Grover J. "Russ" Whitehurst

Image Source: © Jason Reed / Reuters

Assessing Universal Pre-K Programs in Oklahoma

Ted Gayer — Fri, 15 Feb 2013 17:39:00 -0500

As President Obama continues to roll out his proposal for universal preschool as outlined in his State of the Union address, it is worth looking at results of these types of programs in states that already run such programs.

In a paper with Wiliam Gormley (Journal of Human Resources, 2005 (pdf)) and another with Gormley, Phillips, and Dawson (Developmental Psychology, 2005(pdf)), we studied the impact of Oklahoma's universal pre-K program on children's readiness for kindergarten. In the JHR study, which relied on the results of a school-readiness assessment developed by Tulsa Public Schools, We found that attending pre-school boosted school readiness for Hispanic and black students but not for whites. We also found that pre-school had a bigger effect on school readiness among students who qualified for free lunch at school, than those who did not. In the other study, which relied on a standardized and widely-used assessment of school readiness, we found that attending pre-school improved school readiness for students across all racial and income groups.

Authors

Ted Gayer

The Benefits of a "Fix it First" Approach to America’s Ailing Infrastructure

Adam Looney — Thu, 14 Feb 2013 09:29:00 -0500

In his recent State of the Union address, President Obama proposed a “Fix-it-First” approach to investing in our nation’s ailing infrastructure. This approach recognizes the value of the well-traveled network of roads and bridges that make up our nation’s existing highway system, and prioritizes the maintenance and rehabilitation of our deteriorating system.

In “Fix It First, Expand It Second, Reward It Third: A New Strategy for America’s Highways," a paper commissioned by The Hamilton Project at Brookings, authors Matthew Kahn and David Levinson argue that the repair, maintenance, rehabilitation, reconstruction, and enhancement of our existing roads and bridges is the best way to maximize the benefits of infrastructure spending. When first constructed decades ago, the interstate highway system led to economic gains by connecting people and businesses. The full benefits of that system has eroded as roads and bridges have deteriorated, contributing to congestion, longer travel times, increased wear and tear on vehicles, and even accidents. A fix-it-first approach would recoup the value we’re missing from using our current system inefficiently. To read the full paper, click here.

Authors

Adam Looney

Beyond the State of the Union, A Plan for Nuclear Arms Control

Steven Pifer — Wed, 13 Feb 2013 00:00:00 -0500

In his State of the Union Address, President Obama pledged to engage Russia in talks that would ultimately lead both countries to further reduce their nuclear arsenals. Senior Fellow Steven Pifer, director of the Arms Control Initiative at Brookings, agrees that such a move is the right course of action for these two world powers. Pifer says the U.S. and Russia should work toward a new strategic arms reduction agreement.

Video

Beyond the State of the Union, A Plan for Nuclear Arms Control

Authors

Steven Pifer

Establishing a Task Force for Expanding Preschool Programs

Ron Haskins — Wed, 13 Feb 2013 17:39:00 -0500

In a single paragraph, President Obama’s State of the Union address opened the door to implementing important changes in the nation’s multitude of preschool programs and to increasing the number of children participating in quality programs.

Of all the opportunities to promote the development of poor children and to increase opportunity in America, none is as promising as high-quality preschool programs. Although there are still disagreements about the strength of evidence on these programs, the literature on preschool’s impacts on a host of short-term and long-term child outcomes is strong, and there are several excellent benefit-cost studies as well.

Research leads to the conclusion that if poor children attended high-quality preschool, they would be better prepared to achieve and behave well in public schools. There could also be longer-term outcomes including higher graduation rates, less delinquency, less teen pregnancy, and higher rates of employment and income. But these benefits and their corresponding budget savings will not be achieved unless the preschool education is high-quality, provided by highly effective teachers. Today, most preschool facilities do not meet that standard.

As would be expected in a State of the Union address, the president gave only a hint of what he had in mind for preschool. His goal was to “make high-quality preschool available to every child in America.” If the Obama administration is serious about expanding early childhood programs, here is one way to proceed.

The first order of business should be to figure out how to get the most out of the programs we now have and the money we now spend. The president should appoint a small group within the administration that includes one senior official from the Departments of Education, Health and Human Services, and Labor, as well as the White House and Office of Management and Budget, and charge them with presenting a bold plan for coordinating these programs. The president’s task force should consult widely, especially with the states, for how these programs can be better coordinated at the state and local level.

Second, the president should abandon his idea of providing high-quality preschool for “every child in America.” Rather, his task force should assume that only children from poor and near-poor families would be eligible for federal subsidies. Especially in this time of budget crisis, it is likely to be decades before the combined financing of the federal and state governments can afford the additional billions of dollars that would be required to provide free, universal preschool programs.

Third, the task force plan should include strategies for providing the poorest children and families, as well as those at risk of abuse and neglect, with home visiting and other support services. For this relatively small group, the services should begin in the prenatal period and extend throughout the preschool years.

Fourth, we will eventually need additional dollars to make sure every poor and near-poor child can receive services. Thus, the group should make an estimate of the costs of their system and propose several alternatives for sharing the burden between the states and the federal government.

The nation should stop setting preschool policy by merely creating more programs and adding money to existing ones in accord with political feasibility. Instead, we need a vision of the comprehensive system we should build and estimates of the long-term costs of the system. As President Obama said several times during his State of the Union address, “we can do this.”

Authors

Ron Haskins

Publication: Spotlight on Poverty

Obama Versus Rubio on Immigration Reform

Neil G. Ruiz — Wed, 13 Feb 2013 15:00:00 -0500

What was clear last night from President Obama’s State of the Union Address and Senator Rubio’s Republican response was that Washington agrees that immigration reform makes economic sense. Immigrants were framed as important contributors to economic growth in both speeches, with Obama highlighting the need to “attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy,” and Rubio’s immigration story of inheriting “the real opportunity to accomplish [his] dreams” from his parents’ journey.

Both Obama and Rubio mentioned the same three basic elements of comprehensive immigration reform in their speeches: (1) strong border security, (2) dealing with undocumented workers, and (3) fixing the legal immigration system. But there were subtle differences that reflect potential clashes between the parties:

No mention of “comprehensive” reform by Rubio, whereas Obama used the word for immigration reform, tax reform, and trans-Pacific and trans-Atlantic trade and investment partnerships
Rubio did not mention “earned citizenship” for unauthorized immigrants

Obama is continuing to signal that he wants a holistic overhaul of all elements of immigration policy together in one bill and a path to earned citizenship for all immigrants. On the other hand, Rubio is open to a more piecemeal approach and is avoiding the controversy within his own party of whether or not unauthorized immigrants should be allowed only legal residency without a path to citizenship. Dodging these terms might be an indication that Rubio has yet to resolve these issues with his party.

As immigration reform moves forward, both Obama and Rubio will eventually have to convince Americans that reform does not mean more spending. As Obama clearly stated at the beginning of his speech, “nothing I’m proposing tonight should increase our deficit by a single dime.” This means that immigration reform must build mechanisms to ensure that reform is funded by a pool of visa fees, penalty fees, and any other fee paid by immigrants or employers.

View more State of the Union 2013 responses »
See also our immigration resources page »

Authors

Neil G. Ruiz

Manufacturing Hubs: What and Why?

Mark Muro and Kenan Fikri — Wed, 13 Feb 2013 00:00:00 -0500

Last night President Obama proposed the launch of "a network of manufacturing hubs" through which industry, universities, community colleges, and governments will work together to develop and deploy new manufacturing technologies. That line in the State of the Union address probably had a lot of folks scratching their heads, wondering where it came from. After all, we as a nation have gotten out of the habit of thinking much about manufacturing, how innovation works, and the work of inventing things.

So what is it all about?

As it happens, and as I wrote last summer, Obama’s manufacturing hubs proposal is not a one-off idea out of nowhere but in fact is one very smart and plausible idea that Congress and the nation really should embrace.

Basically, the manufacturing hubs idea reflects an emerging consensus among a large number of industry leaders, technology analysts, and economic development professionals that regions are the place to work on technology-based development and that regions need to be anchored by hubs of collaborative R&D where industry can work with academia and government to solve tough problems and foment technology gains.

Creating such hubs was the idea behind our companion proposals at Brookings for the creation of a network of regional energy discovery-innovation institutes and the establishment of a program to aid and abet nascent clusters with competitive grants. And it is also the point of the Department of Energy’s Energy Innovation Hubs program as well as the several regional innovation cluster programs now running, including at the Department of Commerce’s Economic Development Administration, that have moved along these lines. More recently, my colleague Devashree Saha and I proposed creating a similar network of advanced industries hubs in both energy and manufacturing.

The ultimate point: Industries and the regions in which they are located profit from the presence of structured centers of excellence in which industry led consortia of firms, universities, community colleges, state and local governments, and other actors collaborate to solve innovation and technology deployment challenges of critical interest to advanced industries. That’s the point of innovation hubs.

So it is welcome to see the Obama administration moving to publicize and build out a potential network of regional manufacturing institutes aimed at tackling tough problems in advanced manufacturing.

Piloted last year with the launch of a new public-private institute for “3-D printing” in Youngstown, OH, the proposed new National Network for Manufacturing Innovation would launch 15 innovation centers akin to those boosting national competitiveness in leading innovation and manufacturing nations, such as Germany to Taiwan, as noted by David Hart, Stephen Ezell, and Robert Atkinson of the Information Technology & Innovation Foundation.

The centers will seek to accelerate technology deployment, operate demonstration facilities and test beds, support education and training, and perform applied research on new manufacturing processes—all unlikely activities for private industry on its own.

Nor will they do this just anywhere. Selected and designated through a competitive process, the hub consortiums will reflect not just technical excellence but regional excellence and regional concentrations of expertise and opportunity. In that sense, the theory and practice behind the hubs is compelling and sensible, as I wrote last year with my colleague Jessica Lee, and reflects a critical aspect of innovation and technology development:

Innovation, and its deployment, does not happen just anywhere. It happens in places and, most notably, within metropolitan regions where firms and workers tend to cluster in close geographic proximity, whether to tap local supplier networks, draw on a pool of skilled workers, or profit from formal and informal knowledge transfer.
If properly channeled, these “co-location synergies,” as economist Greg Tassey has dubbed them, will ensure that value added through innovation spreads through and remains within the domestic manufacturing supply chain. Nor is this only a “soft” benefit. Such local synergies—accumulated region by region—can foster greater efficiency within and across manufacturing supply chains and add to the nation’s competitiveness.

In sum, the proposed new manufacturing hub network is far from random, or sudden. In fact, it’s not only smart and necessary for rebuilding U.S. manufacturing competitiveness, it also draws on some of the most fundamental wellsprings of economic exchange known.

Authors

Mark Muro
Kenan Fikri

Image Source: © Ho New / Reuters

President Obama's Pragmatically Progressive SOTU Speech

Isabel V. Sawhill — Wed, 13 Feb 2013 09:04:00 -0500

In his State of the Union address, President Obama made a passionate appeal to Congress to endorse an agenda that should have warmed the hearts of those who voted for him but which has little chance of being enacted, given the composition of the Congress. Raising the minimum wage, providing a high quality preschool experience to every child, enabling more families to refinance their mortgages, providing assistance to struggling communities, or creating new jobs are all worthy ideas. But it's not clear how to pay for them or enact them in the current environment.

On fiscal issues, the president made a strong pitch for replacing the arbitrary cuts called for by the sequester with a balanced package including new revenues from tax reform and some modest cuts to Medicare, for example by means-testing benefits. He got some of his biggest applause when he said it was time to put the nation's interest above that of one's party.

As expected, the president spoke of climate change, immigration reform and gun violence. I was more surprised by the promise to bring the troops home from Afghanistan sooner than expected and to appoint a commission on voting rights. He also challenged Congress to put his proposals to a vote, suggesting that it is only in partnership with Congress that anything can be accomplished, and implicitly criticizing those who have blocked action in the past.

My sense was that what we heard was the president's own values driving a pragmatically progressive agenda with much more confidence and backbone than we heard in the first term.

Authors

Isabel V. Sawhill

Image Source: © Kevin Lamarque / Reuters

Fairness: How President Obama Found His Voice

Darrell M. West — Wed, 13 Feb 2013 09:18:00 -0500

It was his first term and President Obama was struggling. Unemployment remained high and many voters didn't like his health care program, auto bailout, or economic stimulus package. Seventeen percent thought he was a Muslim and many others were unsure of his vision. Congressional Republicans were voting against his proposals en masse. A year before the general election, his political prospects did not look very strong.

Yet Obama cruised to re-election and now has a job approval rating in the mid-50s. The crucial turning point came in December, 2011 when the president realized he needed a clearer message and had to identify a way to distinguish his vision from that of the GOP. In a speech to voters in Osawatomie, Kansas, Obama spoke of the importance of fairness and fighting for the middle class. The problem with the economy, he said, was that voters felt the system was rigged against them and too many of the fiscal benefits were going to those at the very top.

Since that time, Obama has found his voice by emphasizing economic and political fairness. In this year’s State of the Union address, he continued this narrative. He spoke of billionaires with “high-powered accountants” and the need to invest in education and research. He complained about long voting lines and called for a commission to improve the voting process. He argued that a growing economy represented a better way to reduce the deficit than austerity politics based on slashing government programs. He called for Congress to raise the minimum wage, invest in advanced manufacturing, and reform the tax code.

On issues such as immigration, gun violence, and renewable energy, he threw down the gauntlet and dared Republicans to vote no. If they block popular proposals, he made it clear he would seek to turn the 2014 midterms into a referendum on middle class fairness. If people were wondering which Obama we would see in the second term, we now know the answer. In both his Inaugural Address and the State of the Union, he is presenting a clear choice. He is asking Republicans to work with him and if they don’t, he will go to the public and ask for a Democratic Congress.

The question facing the GOP is how they respond to this plan. On issues such as immigration reform, a number of leading Republicans have come forward with pragmatic solutions and bipartisan proposals. On problems such as gun violence, most Republicans are holding their ground and not pushing for substantial changes. If the economy continues to recover over the next year and national unemployment drops below seven percent, Obama may be on strong ground to force an electoral confrontation.

Authors

Darrell M. West

Image Source: © Larry Downing / Reuters

Obama's SOTU Should Promote a Continued Path to Financial Reform

Michael Barr — Tue, 12 Feb 2013 11:10:00 -0500

In tonight's State of the Union, President Obama should take the opportunity to remind the country of the need to stay on the path of financial reform. A collective amnesia appears to be descending on Washington-and on major financial capitals around the world-about the causes and consequences of the financial crisis. The financial crisis of 2008 crushed the American economy, cost millions of Americans their jobs and their homes, shuttered American businesses, and wiped out family savings. We're still suffering from those effects.

The President's financial reform law, enacted in 2010 against massive opposition from Wall Street and most Republicans, laid a firm foundation for a more resilient financial sector, one that works for American families, instead of exposing us all to needless risk and cost.

A new Consumer Financial Protection Bureau has been built from scratch. New rules governing derivatives transactions have largely been proposed. A resolution authority and improvements to supervision have been put in place. The largest firms have to hold a lot more equity capital. The U.S. financial system is more resilient than it was four years ago.

But nearly three years later, there's still much work to do to turn that law into reality.

And the financial sector did not leave the battlefield after their defeats in 2010. Far from it. The brutal fight over financial reform wages on, and there is a serious risk that financial sector lobbying and lawsuits will further weaken the resolve for reform. Aggressive lawsuits are being used to try to unseat the consumer bureau director, block shareholder rights, roll back protections against abuse in the derivatives market, and slow down reform. Many Republicans in Congress have blocked nominees to key posts or used the appropriations process to undermine enforcement of financial laws.

To be clear: the financial system is safer, consumers and investors better protected, and taxpayers more insulated, than they were four years ago-by a lot. But that is not enough.

In the next four years, it will be critical to stay on the path of reform.

Authors

Michael Barr

Publication: Real Clear Markets

Image Source: © Chip East / Reuters

The U.S. Must ‘Race to the Shop’ to Spur Economic Growth

Bruce Katz and Peter Hamp — Tue, 12 Feb 2013 00:00:00 -0500

Editor's Note: Bruce Katz and Peter Hamp outline investment opportunities for the U.S. economy as President Obama embarks on his annual State of the Union address. This article was originally published for Ideas Laboratory on February 12, 2013.

At the State of the Union, President Obama should move past fiscal gridlock and refocus attention on job creation and economic growth.

We all know the major challenges facing our country: sluggish GDP growth, a jobs deficit of 10.3 million, and a growing opportunity gap, with the number of people that are poor or near poor in America rising from 81 million in 2000 to 107 million in 2011.

We should all know the solution: invest in a smart, targeted way in growing the productive and innovative sectors of our economy, such as advanced manufacturing.

A confluence of highly disruptive dynamics – rising wages in China, America’s emerging energy independence, the shifting location of production facilities and supply chains, the continued evolution and application of information technology, and new breakthroughs in production technology like 3D imaging and digital fabrication – is fueling a resurgence in advanced manufacturing and raising confidence about America’s economic future.

After thirty years of being told that the U.S. was resigned to be a post-industrial economy, we are suddenly realizing that our future lies in the interplay of production and innovation and of domestic markets and global demand. Manufacturing is an important source of quality, well-paying jobs that offer a significant wage premium – nearly 20 percent higher average weekly earnings that non-manufacturing jobs – and are more likely to provide health care and retirement benefits. Manufacturing also accounts for the lion’s share of the country’s R&D and innovation activity. While the sector comprises only 9 percent of all U.S. jobs and 11 percent of total GDP, it employs 35 percent of engineers, represents 68 percent of private-sector R&D spending, and produces 90 percent of all patents generated in the United States. Further, it generates about 65 percent of all U.S. trade (both imports and exports), making manufacturing a critical component of any strategy to reduce America’s growing trade deficit. In short, a strong manufacturing sector is crucial for America’s ability to compete in the global economy.

Despite the resurgence of manufacturing activity post-recession, the U.S. faces a number of challenges that must be addressed in order for this sector to be a viable engine of long-term growth. Among the most important is the inadequate supply of young workers with the necessary skills for advanced production jobs.

An October 2012 study by the Boston Consulting Group (BCG) found that the current gap between high-skilled manufacturing job openings (e.g., machinists, technicians, etc) and workers with skills necessary to fill them is only about 80,000 to 100,000 unfilled positions – less than 1 percent of the total U.S. manufacturing workforce. Yet, with the average age of high-skilled production workers in the U.S. being 56 years old, BCG estimates that this gap could rise to 875,000 by 2020 as a growing share of the “baby 1 boomer” generation reaches retirement age.

The problem, of course, is that the U.S. education system is not producing enough graduates with the credentials and skills required for many advanced manufacturing jobs. In recent decades, the federal government and many state governments have de-emphasized and under-funded vocational education, sending a clear signal that it is an unequal alternative to the path towards a four-year college degree.

In FY 2011, the federal government spent only $1.1 billion on career and technical education – just 1.7 percent of the Department of Education’s total discretionary budget authority that year and less than 0.2 percent of total non-defense discretionary spending in FY 2011. Further, the money that Washington does invest in career and technical education and workforce development is often too prescriptive and inflexible to meet the disparate demands of state and regional labor markets.

To address these challenges and drive long-term growth, the federal government should initiate a Race to the Shop competition to reform workforce education and skills training support for advanced manufacturing. Similar in many ways to the Obama Administration’s Race to the Top program in the education arena, a $150 million per year Race to the Shop competition would challenge states and metropolitan areas to develop long-term plans, investment strategies, and regulatory and administrative reforms to better address the workforce and training needs their top advanced manufacturing sectors.

An inter-agency Race to the Shop Partnership, composed of representatives from the Departments of Commerce, Labor, Education, Defense, and the National Science Foundation, would review submissions and award annual implementation grants (averaging around $15 million over three years) to the five states and five metropolitan areas with the strongest and most comprehensive plans. In addition to receiving federal grant money, each winning state and metropolitan area would be given increased
flexibility to invest existing federal resources (e.g. Workforce Investment Act or career and technical education funding) in the areas most likely to strengthen their top advanced manufacturing sectors; perhaps, for example, by creating a network of manufacturing high schools or by aligning local community college curricula to fit the varying skill demands of their labor markets.

Even at a time of fiscal austerity, the annual cost of a Race to the Shop initiative is only $150 million. How to pay for it: “cut to invest” by reducing spending on federal programs that are outdated and non-performing.

The return on this relatively small federal investment?

More and better jobs at home, and a higher-skilled workforce to boost American competitiveness in the global economy. That’s something both sides of the aisle can stand and applaud.

Authors

Publication: Ideas Laboratory

Image Source: © Jeff Tuttle / Reuters

Reaction and Analysis to President Obama's 2013 State of the Union

William A. Galston — Tue, 12 Feb 2013 22:21:00 -0500

President Obama’s victory in the 2012 election left Republicans in control of the House of Representatives. That left the administration with a fundamental strategic choice: to reach out to the opposition, or to use the lever of public opinion to move House Republicans in their direction. The negotiations over the fiscal cliff suggested that the White House had chosen the latter course. The president’s 2013 State of the Union address—his single best opportunity to set the agenda for his second term—offers further evidence of that choice, on which he is betting the future of his presidency.

In a wide-ranging speech focused on strengthening the middle class, Obama gave little ground to his adversaries. While he did not back away from the social policy initiatives—on immigration, gun safety, and climate change—that took center-stage in his second inaugural address, he clearly shifted his emphasis to the economy and jobs, which recent surveys have placed at the top of the public’s concerns. He advanced a vision of an activist government that would raise wages and incomes, boost education and skills, and improve the climate for job creation. While insisting that, “Nothing I’m proposing tonight should increase the deficit by a single dime,” he did not spell out how much these initiatives would add to federal spending or how their cost would be offset. He proposed no significant cuts in existing programs. And he ducked the structural problems that dominate the long-term fiscal horizon.

Speaking in advance of the speech, White House press secretary Jay Carney characterized the president’s second inaugural address and the 2013 State of the Union as “two acts in the same play.” Clearly, the FY2014 budget proposal will be the third act that clarifies the meaning of the second. And then comes the denouement – the partisan conflict that will determine the outcome of what the president has set in motion.

In social policy, Obama renewed his call for comprehensive immigration reform, including an earned path to citizenship for immigrants now residing in the United States illegally, and for gun legislation that bans assault weapons and high-capacity magazines as well as closing loopholes in background checks. Rather than proposing new legislation to slow climate change, he focused on executive actions his administration would take in the event of congressional inaction on a “market-based solution,” and he restated his commitment to natural gas, renewable energy sources, and increased efficiency

Concerning the economy, Obama’s emphasis on restoring manufacturing jobs was notable. Among other initiatives, he proposed reforms that would lower the corporate tax rate and make the research and development tax credit permanent while providing preferential treatment for manufacturers and others who invest in the U.S. economy. Rejecting calls to institute a “territorial” tax system, which he fears would set off a race to the bottom in corporate tax rates, he called instead for a new minimum tax on offshore earnings.

Obama proposed to attack the problem of low wages and stagnant household earnings on two fronts. In education and training, he emphasized (as he has before) the crucial role of community colleges in providing marketable skills. And he endorsed a new partnership between the federal government and the states to provide access to high-quality preschool for every child, a goal that many education experts endorse. But the president was not content to rely on these long-term strategies for boosting wages. Not only did he renew his call for a “Paycheck Fairness Act” to close the gap between men and women, he also proposed an increase in the minimum wage from $7.25 to $9.00 per hour, indexed for inflation.

On the public’s other major priority—reducing the federal budget deficit—Obama broke little new ground. In the face of looming legislative deadlines—the sequester at the end of February, the expiration of the continuing resolution at the end of March, and another encounter with the debt ceiling in late spring, the president urged agreements that would avert these events but offered nothing beyond what he had already put on the table.

While the president did offer an outline of a long-term approach, it is unlikely to satisfy the many Americans who regard the budget deficit as a grave threat to the country’s future. Rather than proposing a “grand bargain,” as many budget experts and bipartisan commissions have urged, he reiterated his target of $1.5 trillion in additional deficit reduction over the next decade. While this would be just enough to stabilize the ratio of debt to the Gross Domestic Product during that period, it would do little to address the long-term imbalance between the commitments we have made to programs such as Medicare, Medicaid, and Social Security and the revenues now available to fund them. Well before the end of the decade, his approach would allow the deficit to begin rising again, with no end in sight. Obama appears to have decided that there is no possibility of resolving the larger fiscal issues on terms that he and his party would find acceptable. So he will hand these issues off to the next president, who will no longer enjoy the luxury of delay.

Although the State of the Union was less about progressive principles than was the second inaugural, its tone and substance extended few olive branches to the Republicans. For a while, anyway, Obama is committed to an outside-in strategy: he will take his case to the country to build support for his program and ratchet up pressure on the opposition party to go along.

This represents a high-stakes gamble. If the strategy succeeds, the president will end up with an impressive roster of legislative accomplishments. But if it leaves Republicans unmoved, he will face an unpleasant choice between negotiating with a weakened hand and accepting gridlock.

Authors

William A. Galston

The Strategy For Afghanistan

Michael E. O'Hanlon — Mon, 11 Feb 2013 00:00:00 -0500

As he prepares to give his fourth State of the Union address, President Barack Obama is expected to focus on numerous matters of domestic policy. Whatever brief mention he may make of foreign affairs will probably focus largely on celebrating a gradual end to the nation’s wars. Taking this narrative further, many now speculate that the president may use his speech to announce an accelerated troop drawdown from Afghanistan and a plan for a minimalist presence after the current NATO mission there ends next year.

This storyline is partly right but also partly wrong. It forgets how presidents tend to view foreign policy, especially in their second terms as they start to look to the history books. It also forgets just how much the Afghanistan campaign is now Obama’s. Robert Gates, Adm. Mike Mullen, David Petraeus, Stanley McChrystal, Gen. John Allen, Hillary Clinton, Ryan Crocker, Richard Holbrooke — all these figures have come and gone, with Leon Panetta likely to do so soon too. Yes, Osama bin Laden is now dead, and the remaining global terrorist threat has migrated somewhat back toward the Middle East and North Africa as well. But Afghanistan remains Al Qaeda’s original preferred sanctuary, and South Asia more generally remains one of the most terrorist-prone and nuclear-armed parts of the planet. The president has been intent on avoiding a quagmire in Afghanistan. But those who would go to the other extreme and argue that it no longer really matters almost surely do not have the president’s ear.

Beginning with the State of the Union address, and then continuing through a major policy review with his new secretaries of state and defense and new field commander, as well as the U.S. ambassador to Afghanistan and international partners, Obama needs to lay out a clear strategy for Afghanistan for the months and years ahead. The current debate is far too fixated on the narrow military question of figuring out what America’s long-term presence should be in Afghanistan after 2014. The president needs to broaden his administration’s prism on the problem. Four particular ideas should influence him in the process.

1. This year’s force levels should stay near current levels of about 65,000 Americans through the 2013 fighting season. It is already getting late to plan a big drawdown for this winter — and it is pointless to do the drawdown in spring or summer during the peak of the fighting season. Having pulled more than 30,000 U.S. forces out of the country starting in late 2011, the president should now be patient with what happens over the next eight months. By fall, substantial U.S. troop reductions will be feasible, as Afghan forces will have assumed primary security responsibility throughout the country. But in the meantime, we should go slow, and give the new Afghanistan field commander, Gen. Joe Dunford, time to deepen and consolidate progress in the country’s crucial eastern regions in particular.

2. After 2014, when the International Security Assistance Force mission ends in Afghanistan, we should plan on a bridging mission to the U.S. forces. Reportedly, former ISAF commander Gen. John Allen favored keeping up to 20,000 Americans in the country after 2014 while the White House pushed for fewer than 10,000. The right answer is a compromise — starting closer to Allen’s 20,000 in 2015 but moving toward 10,000 over the next two to three years, as Afghans acquire the logistics, air power, helicopters, artillery fires and other key secondary capabilities that will take a few more years to develop.

3. Obama should ask Congress to become more of a full partner in the Afghanistan mission. The key point here is that Afghanistan needs stronger checks and balances, stronger political parties and less dominance by the president of the country. When members of Congress visit Afghanistan, they should therefore ask for more meetings with Afghan parliamentarians and governors. Congress should also channel more funds to Afghan political parties and encourage Afghanistan’s parliament to create research organizations modeled after the Congressional Budget Office and the Congressional Research Service that can provide it greater heft in developing legislation.

4. Working with Afghans and Pakistanis, we need to develop a clearer sense of what reconciliation with elements of the Taliban could involve. For too long, we have oscillated between signaling that a peace deal is our only way out of the war with honor — essentially telling our enemy that we are desperate for his help — and getting bogged down over the technicalities of small prisoner exchanges designed to kick-start a negotiation process that has remained dead in the water.

One way to give a new boost to reconciliation is to seek out insurgent commanders who are willing to stop fighting in exchange for positions in district-level or provincial-level government. Associated insurgent militias could be allowed to keep their light weapons if they stopped fighting and swore allegiance to the government. Such arrangements would be fine on a small scale, as long as the individual militias were small, and as long as they had to give up any heavier weaponry like mortars they might possess. That way, they could always be disciplined by Kabul (with its increasingly capable 350,000-strong security forces) in an extreme case. Funds for local economic activities could be used as leverage as well. This pocketbook approach to enforcing respect for central authority is of course a time-honored Afghan method. Such militias would have to be registered with the state, and biometric indicators used to register individual members, so that their behavior could be tracked. Over time, these militias should be increasingly integrated within normal state security forces.

Not all of these ideas need to be in the State of the Union, of course. But the Afghanistan War is too important--to this country's security, to the president's legacy, to the memories and honor of those fellow Americans who have sacrificed so much there--for us to just limp out of the place over the next two years. We can and must do better.

Authors

Michael E. O'Hanlon

Publication: Politico

Neocons Versus Realists Is So 2008

Thomas Wright — Mon, 11 Feb 2013 00:00:00 -0500

President Obama may not say so explicitly in his State of the Union address, but his administration's foreign policy is poised to shift significantly in his second term. The shift is the result of an ongoing debate between two camps that I call "restrainers" and "shapers." Restrainers and shapers sharply disagree about the threats to the United States and this leads to very different views about how to engage the world -- and it may well lead to a division within the Democratic Party.

Restrainers see a crumbling infrastructure, the budget deficit, a subpar education system, and a sluggish economy as much more threatening than events elsewhere in the world. Democrats of this stripe call for "nation-building at home," to use President Obama's phrase, and want to prioritize these tasks at the expense of international commitments, which they see as a drain or a distraction. Republicans have their restrainers too. They eschew the notion of an activist government but also want to concentrate on the domestic tasks of reducing the deficit and restoring growth.

The shapers have a starkly different view. They agree that domestic challenges are important -- and should be the subject of a strong domestic policy agenda -- but they don't believe international difficulties are on the wane. The U.S. economy is in a slump largely because of a crisis prone international economic order. A new foreign economic policy that advances new free trade agreements and a more stable international structure is crucial but thus far lacking. On security, the United States is a global power and detrimental developments in the Middle East, East Asia, or Europe will severely damage U.S. interests. For instance, war between China and Japan would likely spark a new economic crisis and create the conditions for decades of instability in a crucial region. Any notion that the United States can take a sabbatical to tend to the home front is mistaken, the shapers argue.

Read the full article »

Authors

Thomas Wright

Publication: Foreign Policy

A Suggestion for President Obama’s State of the Union Address

Bill Frenzel — Mon, 11 Feb 2013 00:00:00 -0500

The president’s State of the Union (SOTU) message next Tuesday will tell America much about the next four years.

After his successful 2 year battle over Obamacare, the past two years have seen the legislative process develop into a stalemated cat fight between the president, aided by his party’s majority in the Senate, and the Republican House. The absence of cooperation has prolonged the fiscal crisis and slowed the recovery. The American people were the losers.

The president’s popularity has rebounded nicely from the pre-election lows. He enters his second term in a strong position to lead the Congress out of its warfare mode into a solution-searching mode. The Republican House lacks his popularity, but remains adamantly opposed to many of his programs, especially his budget policies.

The SOTU is not the be-all, nor the end-all, for the president and his programs. It will, however, provide pretty good clues as to how he plans to proceed for the next four years.

If he decides to offer cooperation with the Congress, and a pledge to provide the badly needed persistent presidential leadership on the thorny problems that confront the country today, there is a chance to move the legislative process towards solutions instead of stalemate. Even partial, temporary solutions are better than gridlock.

On the other hand, if he decides to stay on the campaign bus, there will be more trouble ahead. If he directly challenges the House, and demands his programs or none, the public can expect more dreary years of stalemate.

The Republican House is as convinced of the soundness of its positions as is the president of his own. It reacts badly when it thinks it being bullied. If challenged, it has powerful enough weaponry to prolong the current stalemate for at least two, and probably four more years.

Therefore the president would be well advised to be nice to the Congress in the SOTU. He does not have to abandon any of his positions, nor capitulate to the House. He should, instead, offer to work with both houses of Congress to jointly solve the country’s problems. He should start with the easier stuff where the parties have some similarities in position, like immigration, energy, and national security. The hard stuff, like budget policy must be included, but that fight does not have to be the centerpiece of the SOTU.

One area in which little progress has been made in the 1^st term is trade. It is of enormous interest to the House. The President now seems to want both a Trans-Pacific Partnership (TPP) and a Trans-Atlantic Free Trade Agreement (TAFTA). Emphasis on the two proposed trade agreements would be a relatively easy way to attract the House’s attention. It could build a sense of cooperation, and, eventually, win new friends for the President.

Making nice won’t suddenly turn the Capitol into a quivering bowl of comity, but, especially in difficult times, nothing good happens without presidential leadership. Leadership includes more than just a vision of the country’s future. Leadership also includes finding all the ways, however inelegant, of moving toward the goal.

President Reagan was not a centrist type, but he knew how to lead, when to fight, and when to concede. The same may be said for President Clinton. President Obama can choose the hard way and fight all the way through the second term, or he can try a little Reagan-Clinton charm, beginning with the SOTU.

Authors

Bill Frenzel

Publication: Forbes

Strengthen Federalism: Establish a Regional Export Accelerator Challenge (REACH) Grant Program to Boost U.S. Exports and Trade Capacity

Amy Liu, Brad McDearman and Marek Gootman — Mon, 11 Feb 2013 00:00:00 -0500

The Metropolitan Policy Program at Brookings proposes the creation of a Regional Export Accelerator Challenge (REACH) grant program to support the development and start-up implementation of metro export plans. This new, temporary competitive grant program will operate most effectively alongside a reauthorized STEP or a similar program dedicated to increasing state capacity in the trade system. See also Amy Liu's related op-ed, Don't Ease Up on Exports (from TheHill.com).

To increase U.S. exports—particularly by the small and mid-size companies that drive domestic job creation—the federal government should initiate a short-term competitive Regional Export Accelerator Challenge (REACH) grant program to support public-private partnerships working to launch customized regional export plans. Metropolitan export strategies address a major need in the current export support system by leveraging the knowledge and connections of local economic development leaders to proactively identify firms and sectors with greatest export potential, coordinate fragmented export assistance providers, and focus limited resources for maximum benefit. This outreach to new and under-exporters is a necessary component of any broader effort to reorganize or restructure the federal trade system. By making a small investment at the metro level, the federal government can empower a network of regional leaders, working in conjunction with their states, to bring the benefits of global engagement to firms and workers in many regions of the United States. The REACH program would be a modest $25 million grant program executed over three grant-making cycles. As Congress and the Obama administration work together to put the United States on a sound fiscal and economic course, they must also ensure that the nation remains a strong force in the global marketplace

Background

New global dynamics, including the emergence of new markets, the rise of the global middle class, expansion of global supply chains, and increased international connectivity, present tangible opportunities for U.S. economic growth through exports and trade. The importance of trade in the global economy will only deepen as world markets become more integrated. The level of global trade between countries has tripled since 1950, and more recently, grew from $15.5 trillion in 2009 to nearly $18 trillion by 2011.

Boosting U.S. exports would directly benefit firms, workers, and the national economy overall. The small and medium-sized enterprises (SMEs) that export generally experience greater revenue growth than non-exporters and weathered the recession better than non-exporters. One study found that SME manufacturing exporters grew revenues between 2005 and 2009 by 37 percent while non-exporting manufacturers experienced a 7 percent decline in revenues during the same time period.

In addition, suppliers to exporting firms benefit from trade as well. Research shows that on average, U.S.-based multinational firms purchase $3 billion in goods and services from 6,000 small businesses each year. One net result: the production of exported goods and services preserves and creates jobs, both directly and indirectly in the supply chain, on the order of 5,400 jobs for every $1 billion in additional goods exports. Furthermore, export sector jobs pay well, with workers earning 10 to 20 percent higher wages than those in comparable non-exporting jobs for every $10 billion in sales in a metropolitan export industry.

Recognizing this global moment, government, business, and civic leaders in states and metro areas across the country are adapting their job creation and economic growth strategies to take advantage of the benefits of global trade.

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A Program to Boost U.S. Exports and Trade Capacity

Authors

A Window for U.S. Action on Climate Change

Nathan Hultman — Mon, 11 Feb 2013 17:09:00 -0500

While the U.S. policy discussion on climate change has been subdued for the past two years, a confluence of several factors has opened a window on possible U.S. and international policy action in 2013. These factors have partially reoriented the politics behind climate change and have provided some pressures and opportunities for the U.S. to reexamine the issue this year.

First and most visibly, the political profile of climate change has been broadened and raised by recent weather events. Hurricane and subsequent Superstorm Sandy wrought visible and painful destruction in the U.S. Northeast coastal regions. The damage wrought by this storm, which was only a low-level hurricane, highlighted the vulnerability of much of our coastal built infrastructure to rising sea levels and extreme weather events. While the institutional preparations and response to Sandy were for the most part handled admirably, the obvious future risks to security prompted several prominent politicians—including Republicans Chris Christie and Michael Bloomberg—to call for aggressive domestic action on climate change. In addition, the unusual statistics on both global and U.S. weather anomalies continue to be surprising.

The recent release of the National Climate Assessment from the Federal Advisory Committee warned that the most recent decade was the nation’s hottest on record, and temperatures will continue to rise. The next few decades are projected to see another 3°C to 7°C of warming in most areas, and the chances of record-breaking temperature extremes continue to increase as the climate continues to change. Certain types of weather events have become more frequent and/or intense, including heat waves, heavy downpours, and, in some regions, floods, droughts, and larger and more frequent wildfires. There is strong evidence to indicate that human influence on the climate has already roughly doubled the probability of extreme heat events like the record-breaking summer of 2011 in Texas and Oklahoma. Climate change will also have a severe impact on human health in the United States, with new threats emerging from increasingly frequent and intense extreme heat, which causes heat-related illnesses and deaths and over time, worsens drought and wildfire risks, and intensifies air pollution; increasingly frequent extreme precipitation and associated flooding that can lead to injuries and increases in marine and freshwater-borne disease; and rising sea levels that intensify coastal flooding and storm surge.

In parallel to this visible evidence of climate vulnerability, several recent scientific studies underscore that the uncertainties in the science are, at this stage, relatively minor and that the primary catalyst to affect future climate risks is our policy response in the next decade. There is growing support for action on climate change by Congress and by the president. A large majority of Americans (77 percent) say global warming should be a “very high” (18 percent), “high” (25 percent), or “medium” priority (34 percent). One in four (23 percent) say it should be a low priority. A large majority of Americans (88 percent) say the U.S. should make an effort to reduce global warming, even if it has economic costs, and six in 10 Americans (61 percent) say the U.S. should reduce its own greenhouse gas emissions regardless of what other countries do.

Second, the cost of alternative energy supply has dropped substantially in the past five years. Prices for photovoltaic modules have dropped over 60 percent in the past three years, which is partially the result of a rapid technology transition from a niche manufacturing application to a global, high-volume manufactured commodity. The recent renewal of the U.S. Production Tax Credit will likely spur additional expansion of American wind energy, which is already competitive in some areas. Additionally, the relatively recent advent of large supplies of low-cost natural gas through hydraulic fracturing has provided the opportunity to start replacing aging, inefficient, and very polluting coal fired power plants. Finally, energy efficiency measures have become mainstream corporate strategy, as they often provide a very low-risk, high-return on invested capital.

Third, continuing budget battles have increased interest in finding new sources of tax reform and revenue, prompting some discussion of carbon taxes on both sides of the aisle. As long as we have a need to raise revenue, some economists will agree that taxing things we generally don’t want to encourage (such as smoking or pollution) is preferable to taxing things we do want to encourage (such as income). One thing is certain: the correct price for greenhouse gas emissions is greater than zero. Moreover, in a world where pollution is free, capital is misallocated toward inefficient uses – occasionally grossly so. Pricing these emissions, even with a small but increasing amount, is possibly very useful not only for climate protection but also for a healthy restructuring of our tax code and our excruciatingly complex set of suboptimal energy policies. Although targeted legislative action on carbon taxes is unlikely, it remains a potentially useful option if ever a “grand bargain” on tax reform becomes palatable. For example, Brookings analysis estimates that a U.S. carbon tax of $20 per ton, increasing at 4 percent per year, would raise an estimated $150 billion per year in federal revenues over the next decade.

President Obama has repeatedly voiced his interest in developing a plan for both energy and climate. In the 2008 election, both Obama and John McCain agreed on the need for action and disagreed only in the details of how rapidly to expand a carbon pricing system. After meeting substantial obstacles to several of his first term priorities, Obama pursued this climate agenda largely through executive actions, as both U.S. legislation and international negotiations stalled. In addition to supporting clean technologies through the Department of Energy and other programs, the first Obama administration enacted some new and significant regulations. These included new automobile fuel economy standards, which mandate an average fuel economy of 54.5 miles per gallon for the 2025 model year (up from the current Corporate Average Fuel Economy, or CAFE, standard of 29 miles per gallon, with gradual increases to 35.5 mpg by 2016). The new standard is expected to reduce American oil consumption by 12 billion barrels, saving Americans $1.7 trillion in fuel costs and resulting in an average savings of more than $8,000 per vehicle by 2025. It would also cut greenhouse gas emissions in half by 2025, eliminating 6 billion tons over the course of the program. For a second term, such executive actions on energy can and probably will be expanded in the near term. The Environmental Protection Agency will be considering carbon intensity regulations that would preclude new coal plant construction and will likely investigate options for reviewing existing sources. The Keystone XL oil pipeline discussion will be reopened. Energy technology research and development will also continue. Even in the 2012 election, both Obama and Mitt Romney agreed on continued funding for advanced, potentially high-impact energy technology investment through the relatively new Advanced Research Projects Agency–Energy (ARPA-E) technology innovation program.

In parallel, international discussions have begun to consider a possible 2015 negotiated agreement that would seek to keep the world on an emissions trajectory below a 2°C temperature increase and would allow verification of emissions reductions commitments in China and other advanced emerging economies, a key concern of the U.S. Conversely, U.S. domestic action could be a key element of a sufficiently ambitious international framework to enable the large emitters (the OECD as well as China and India) to start a phased and coordinated transition into a lower-emissions economy. Finally, the U.S. may be able to lead on a number of targeted international emissions reduction opportunities that focus on narrow, high-impact and low-cost technological agreements and that could lead to meaningful global reductions beyond carbon dioxide. Agreements on reducing soot, for example, or certain high-warming refrigerants, could draw substantial international cooperation and achieve high greenhouse benefits for low economic cost.

As the president and Congress look at their options for addressing climate change in 2013, the parameters have shifted considerably even since last October. Concern about climate and a bipartisan interest in a pragmatic approach to climate risk mitigation has risen. Simultaneously, the technological options are strong and the prospect of carbon pricing could even help with the bigger fiscal issues facing the country’s budget challenges. While legislation will likely wait until after immigration and gun control debates, the Obama administration can, in the near term, pursue a suite of executive and funding options to encourage targeted improvements in technology and international cooperation on the transition to a low-carbon economy.

Authors

Nathan Hultman