China is gambling Obama doesn’t have will to respond to its massive land grab

You may not have noticed, as ISIS expands its reach across Iraq and Russia fuels conflict in Ukraine, but the odds of an armed confrontation between the United States and China just dramatically increased.
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After years of ignoring China’s growing assertiveness in Asia, the Obama administration has been taken unaware by a major land and power grab by Beijing.

Over the past several years, China has steadily expanded its territorial ambitions, including a claim that the entire South China Sea is under its dominion.

The sea is one of the world’s most strategic bodies of water. It contains crucial sea lanes, such as the Malacca Strait, through which nearly 70,000 ships transit each year.

In the middle of the South China Sea is a loose chain of islets, shoals and reefs called the Spratly Islands. They are claimed by almost every nation in the region, including Taiwan, Vietnam, the Philippines, Malaysia and, of course, China.

The rich fishing waters surrounding the Spratlys have been in contention for decades. The Philippines often have complained to the US — in vain — that powerful Chinese maritime patrol vessels have chased away their boats. Nor is this the only area in which China has thrown around its weight, having challenged Japanese control over the Senkaku Islands in the East China Sea.

Now the situation has escalated.

China has engaged in a massive reclamation project, dredging up sand and creating islands on shallow reefs. The US government estimates that up to 2,000 acres of new land has been built. On these “fantasy” islands, China is building airstrips and ports, erecting barracks and establishing radar systems. Guns and fighter jets are next.

Beijing is militarizing its new land and then claiming it as sovereign territory, demanding that other countries stay out of what was once international waters.

For years, Washington ignored treaty allies like the Philippines, which called it “a creeping invasion,” Instead, the Obama administration, like others before it, has bent over backward to try and improve relations with China, even inviting it to our biggest naval exercises.

Much like the supposed Russian “reset,” that goodwill has been spurned.

Secretary of Defense Ash Carter last week publicly rebuked Beijing, demanding that it stop its reclamation activities and warning China that is isolating itself in the eyes of the world community. More concretely, Carter and other officials have stated that the US will ignore China’s claims and will fly military planes over the islands’ airspace and will sail within the 12-mile limit claimed by China.

Though no US ships have yet ventured inside that ring, the line has been drawn.

For its part, Beijing is not backing down. Indeed, not only have Chinese officials criticized Washington’s response, a state run newspaper, The Global Times, warned that a “US-China war is inevitable,” if Washington tries to force China to halt its activities. Official Chinese military doctrine is also ominously changing to reflect the new reality, stating that Beijing’s forces will no longer focus solely on territorial defense, but will project power far beyond its borders.

All it would take is one hotheaded action by a Chinese fighter pilot to ignite an armed confrontation between the two sides. Unlike during the Cold War days, when Moscow and Washington established important crisis-management mechanisms, there are almost no working relations of trust between China and the United States. It is not assured that an accident or encounter could be prevented from spiraling out of control.

Yet neither side seems willing to back down. The US is being challenged again as a paper tiger, and if it fails to follow through on its promise to sail through the Spratlys, its Asian allies will wonder how strong America’s security commitments really are.

For Beijing, the stakes are just as high. Failing to assert its control over the waters it now claims will expose it as a geopolitical fraud. This will embolden other nations to similarly challenge China’s claims, and ironically possibly increase the likelihood of some type of military clash in Asia.

East Asia now stands close to a precipice. China figures the US is too distracted or uninterested to care about its expansion. They may be right.

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Pentagon’s aviation plan headed for a dead stick landing

It is time for Congress to end the charade and throw out the Pentagon’s annual aviation report—or demand that it be fixed. Otherwise, the plan will remain an expensive waste of time for both its readers and its writers. It has changed over time, making comparisons from year to year near impossible and rendering the document indecipherable.

The report remains a messy and near-useless product that spurns the demand of Congress for a reliable assessment and outlook of America’s military aviation fleets. Further, these shortcomings are likely obscuring the extent of the problems of a smaller, older Air Force that faces currently insurmountable budgetary challenges in the next decade.

Even through the fog of inadequate data, policymakers can tell that the Air Force is in a far worse position than previous plans estimated it would be in at this point in time. Saving America’s Air Force should be the focus of Congress, as that is the only true way to turn its aviation health (and reporting) around.

Navy’s 30-year shipbuilding plan as a model

Five years ago, Congress required the US Department of Defense to submit a report on aviation across the services—similar to the Navy’s annual long-range shipbuilding plan. The value in the Navy’s document is that it takes a longer view toward modernization, capturing three decades of planning. While estimates for future years can be downright speculative, it is still a helpful planning tool that alerts Congress to the potential for problems years in advance. Just as the shipbuilding plan has given policymakers insight into the now-canceled cruiser replacement effort and the now-modified Littoral Combat Ship program, already the aviation plan has allowed Congress to peer into the Navy’s sixth-generation fighter, the F/A-XX, and the KC-46A tanker programs in earlier years.

Truly useful long-term planning documents can help Congress help the Pentagon. For instance, Navy leaders have convincingly leveraged the long-term shipbuilding plan in their increasingly successful plea to Congress to fund the Ohio-class nuclear submarine program outside of the Navy’s shipbuilding account before the service’s acquisition bill comes due early in the next decade. Presumably, the aviation plan would illuminate similar opportunities for the US Air Force, which faces an even worse budget outlook for its major modernization programs coming online in the mid-2020s.

Creating a relevant aviation plan is not difficult. The Marine Corps already does so. But before turning to what makes that report so instructive, it is necessary to catalog the shortcomings of the Pentagon’s aviation plan and identify what a successful one must include.

Inconsistent aviation plans have stalled out in usefulness

Broadly speaking, Department of Defense aviation reports can be broken into two periods of history. The first two reports—fiscal years (FY) 2011 and 2012—are wholly different products from those in 2013, 2014, and 2016. The Pentagon also managed to skip sending Congress a report at all for fiscal year 2015, thus defeating the purpose of a yearly effort and the comparative analysis that affords.

A major flaw among the submissions is that categorization is not systematic within and among the long-term aviation plans. The first two years of reports exclude rotary-wing aircraft, while the latter years add these in, albeit incoherently. For instance, the aircraft/cargo/utility category after FY13 is so broad as to be impractical. The platform list includes more than four dozen aircraft platform types. Thus, a C-5 strategic transporter is counted the same as a UH-60 utility helicopter—as a single cargo/utility aircraft. This is a step backward for the aviation plan, since the original version at least split these categories into intratheater lift and strategic lift. One gets the sense that the Pentagon is not really attempting to make a useful contribution to the debate over the size and composition of the US military aviation fleet.

For instance, someone looking at the provision of antisubmarine warfare (ASW) aircraft might think that the military is fairly well provisioned, as the overall numbers stay fairly close between plans for 2013, 2014, and 2016—generally around 640 aircraft. Yet the anti-sub/anti-surface warfare category includes not only the dedicated Sikorsky MH-60R Romeo ASW helicopter and the Boeing P-8A Poseidon fixed-wing ASW platform, but also the Sikorsky MH-60S multirole helicopter, which spends much of its time carrying out combat search and rescue, fleet replenishment, and mine-hunting missions. The MH-60S could credibly be classified as antisurface warfare or cargo/utility, but adding the platform to ASW totals obscures broader negative trends in the antisubmarine warfare aircraft fleet.

Additionally, almost all of the Navy’s MH-60 helicopters have been delivered—so while the year-to-year percentage change does not look worrying in the plan, in reality, the percentage change in number is likely borne by reduced P-8A buys, which results in a far greater percentage change in total fleet ASW capacity. This example might be chalked up as an honest mistake. Or not. Surely Congress does not know the answer. By contrast, the choice to add in RQ-7 Shadow drones to the 2016 Army intelligence and surveillance aircraft count without explicitly listing the addition is blatant obfuscation and deception.

In one year, the S-3 Viking shows up in the attack aircraft category—it is an ASW platform—and then is gone the next year. It was retired from frontline fleets in FY 2009. In the 2013 plan, the UH-1Y is in the attack helicopter category and utility helicopter category, but by FY 2016, it is found only in the utility aircraft category. Such changes increase uncertainty to an unacceptable degree.

Worst of all, because Pentagon leaders did not use consistent metrics over time, understanding and comparing aviation plans for the past half-decade proves exceedingly difficult and renders the information unusable. Only tankers and bombers can be tracked over time, and the report provides little else interesting about either fleet, such as operational readiness, annual maintenance time, or modernization rates.

The real story emerging from aviation plan is dire state of US Air Force

Even with such little information of value and most of it obscured, it is clear from the Pentagon’s long-term aviation plan the Air Force continues to suffer, shrink, and age. Table 1 summarizes the decline in what DoD’s internally planned force looks like at the end of the 10-year period (FY22/23/25). Keep in mind that the FY13 expected fleet size was devised after the Budget Control Act became law.

While longitudinal data on notional aircraft by service are not included in the report, real total inventory aircraft are included from 2012 to 2015. The actual Air Force fighter fleet has shrunk by 49 aircraft, while the Navy and Marine Corps fighter inventory has grown by 42 aircraft. Similarly, the Air Force’s cargo, airlift, and utility fleet has shrunk by 79 aircraft to 793 in fiscal year 2015, while its aerial refueling fleet has lost 5 aircraft—despite the Air Force’s belief that it would gain 14 notional tankers over the same time period.

As Chief of Staff of the Air Force General Mark Welsh testified to the Senate Armed Services Committee in January of 2015, “[A return to sequestration level funding] will make it impossible for us to meet the operational requirements of the Defense Strategic Guidance.” As a refresher, the 2012 Defense Strategic Guidance mandated only that the US military be able to decisively defeat one adversary while “denying the objectives” or “imposing unacceptable costs on” an adversary in a second theater. Additionally, the guidance did not aggressively and clearly specify force structure levels for all the nonkinetic missions that the military conducts.

The fact that General Welsh believes that the Air Force cannot meet these modest requirements speaks to the true state of aviation fleet. The DoD aviation fleet is not well-postured to meet its stated or likely operational and campaign requirements. The current plan ramps down to 140 bombers by the middle of next decade—and that number is based on early deliveries of the Long-Range Strike Bomber program, which is already suffering schedule slippage. Further, while the force structure calls for 1,200 mission primary aircraft, the Air Force currently has only 1,141 and will continue to shrink, as the F-35A will not replace legacy planes on a one-to-one basis. Too few aircraft are coming online too slowly to replace an incredibly old aviation fleet, as seen below in Table 2.

The plan also omits consideration of personnel adequacy; for instance, the Government Accountability Office continues to warn the Defense Department that its method and pace of training pilots for unmanned aerial systems is inadequate. Recently, leaders announced that the Air Force will cut five of its 65 Combat Air Patrols (CAPs) since drone pilots are overtaxed. One CAP is generally comprised of four MQ-1s or MQ-9s; therefore, the Air Force will now have at least 20 aircraft sitting idle because of a lack of pilots. Conversely, the Army is experiencing a shortfall in MQ-1C Grey Eagle drones ostensibly available for partnering with Apaches to replace the Kiowa Warriors as part of the Aviation Restructure Initiative.

These are the key trends and programmatic pitfalls that policymakers would need to see vividly depicted or at least accessibly present consistently in the aviation reports.

Improve aviation plan, or throw it out

What would a more useful long-term military aviation plan look like? The Marine Corps’ aviation plan is well-designed and could easily help make the defense-wide report more valuable. It includes detailed categorization, program information, retirement timelines, delivery dates, and fleet upgrade information. A true defense-wide aviation analysis would also include average age and flying hours per aircraft. This is data Congress knows the Pentagon already has since officials regularly cite such metrics in testimony.

The plan would also measure current inventory against stated force structure requirements in a clear manner that avoids hiding decreases in squadron consolidations or the redesignation of what constitutes an air wing, for example. A true aviation plan would provide lawmakers and their staff with an independent ability to assess the state of military aviation and areas in need of increased appropriations.

Fleet ages and states of modernization should be required in any future correspondence with Capitol Hill. For instance, the DoD recently announced that it would upgrade 20 Air National Guard F-16s in response to a Joint Urgent Operational Need request from Northern Command’s Admiral Bill Gortney. These select homeland-defense F-16s will be provided with new radars that will make them far more capable the average F-16. The aviation plan also leaves out per-platform proposed retirement schedules and data on how reduced depot maintenance is affecting those schedules. While such data are complicated, the number of platforms could be credibly shrunk to cover the core platforms of the military to compensate.

The data that Congress would find most compelling—comparison of pre– and post–Budget Control Act aircraft fleets and composition—are virtually impossible to identify in current documents. The only logical conclusion is that defense officials are deliberately, or by apathy, muddying the data over time to minimize the perception of major problems. Congress must strongly reassert its oversight role and call out the Pentagon for its flawed analysis and demand that all previous reports be redrafted with the same data sets, as well as that future plans be consistent as directed.

Congress designed the aviation plan to be a long-term accountability mechanism for the Pentagon, but its leaders refuse to provide any meaningful analysis. Such obfuscation is not only insubordinate to the spirit of the law requiring the report but also unhelpful, as Congress might be more willing to grant top-line boosts to base defense budgets if it could step back and see the dire state of the military aviation fleet as a whole.

 

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The incredible shrinking tax refund

April may or may not be the cruelest month, but this year April was particularly cruel for Affordable Care Act subsidy recipients. A recent H&R Block analysis says that 61 percent of tax filers will have to repay part of the premium subsidies they received to buy health insurance on the law’s exchanges.

The average repayment amount was $729, or about a third of the average refund of $2,195 that taxpayers received. The likely result of this April surprise is that fewer people will sign up for health insurance and the remaining purchasers will pay higher premiums.

The Affordable Care Act guarantees that anyone who wants to buy insurance can (guaranteed issue) and that everyone will pay roughly the same premium, adjusted for age, regardless of their health (community rating). Normally this would be a recipe for disaster since people will delay buying insurance until they become sick and need health care. The law gets around this through the individual mandate that requires everyone to have health insurance coverage or pay a penalty.

Opponents of the law have long argued that the individual mandate will not work because the penalties for not purchasing insurance are so low compared to insurance premiums that many people would forego insurance and risk the penalty. Since the penalties rise with income, the disparity between the fixed premiums and the penalties, and the resulting incentive to forego insurance, will be greatest for poorer people.

Obamacare mitigates this problem by providing subsidies to anyone earning 100-400 percent of the federal poverty level – between $24,000 and $96,000 for a family of four – to purchase health insurance on an insurance exchange. (Whether subsidies are available on the federally run exchanges being used in 36 states will soon be decided in the Supreme Court case King v. Burwell.) The subsidies are highest for the poorest enrollees and decrease up to the limit.

The availability of subsidies has successfully attracted poorer people onto the exchanges; more than 7.5 million people have signed up on exchanges and 87 percent of enrollees are receiving subsidies. The problem is that exchange enrollees received subsidies based on the income they expected to earn in the coming year. But income can fluctuate over the course of a year; hourly workers increase the number of hours they work, salaries or bonuses increase, people change jobs, additional family members obtain employment and family size changes. Now that they have filed returns, subsidy recipients have to reconcile their apparently not very accurate projections with their actual incomes.

The possibility that large numbers of people would underestimate their incomes and find themselves liable for subsidy repayments has been known since the Affordable care Act was enacted. A Kaiser Family Foundation publication warned about the problem four years ago. But neither Obamacare advocates nor the IRS did much to publicize it.

Many subsidy recipients are now expressing surprise. If their incomes rose substantially they could be liable for thousands of dollars of repayment. Undoubtedly, they will think twice about enrolling again. As the Kaiser Family Foundation observed, “The effect of the reconciliation process may be to suppress participation in the Exchanges and limit the number of people obtaining coverage.”

This effect will be greatest among healthier patients who do not currently need medical care. Their exit from the market will make the remaining health insurance pool sicker, resulting in higher, less affordable premiums for everyone. If this effect is large enough it will drive additional people out of the market as the disparity between rising premiums and penalties increases.

From the start, a complex design, poor execution and lack of communication have dogged the Affordable Care Act. Now a predictable but poorly publicized problem has added to its woes. Substituting a fixed, refundable tax credit that is age adjusted but unrelated to income for the current system that requires exchange enrollees to guess their future income would go a long way toward simplifying administration and making the true cost of insurance predictable and transparent to the American people. Extending the credit to everyone buying individual health insurance, both on and off the exchanges, would increase choice, make insurance affordable for more people, and eliminate the disparate tax treatment between employer provided and individually purchased insurance.

Buying health insurance and paying taxes are two unpleasant aspects of modern life – the least we can do is make them surprise free.

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How liberal are we?

Friday morning, Gallup released the results of a survey showing that more Americans call themselves pro-choice than pro-life by 50 to 44 percent. Gallup noted that this time was the first time since 2008 that the pro-choice label had a statistically significant lead over the pro-life one. Several other recent Gallup releases show significant movement in a more liberal direction over the past few years on the moral acceptability of certain kinds of behaviors. Other recent polls show that around 60 percent of Americans support gay marriage, an all-time high. And a slew of polls show growing support for legalization of marijuana. In addition, the mid-May release of the Pew Religious Landscape survey showed the number of “unaffiliated” growing sharply. Has the tide turned in favor of traditionally liberal stances on social issues and religious beliefs? Is there more to the story?

There is no question that Americans are moving in a more liberal direction on some key social issues. Gallup’s release showed that since the early 2000s, when Gallup first asked many of the questions, Americans have moved in the direction of moral acceptability by more than 5 percentage points on 9 of the 16 issues examined: gay and lesbian relations (23 points), having a baby outside of marriage (16), sex between an unmarried man and woman (15), divorce (12 points), medical research using stem cells (12), polygamy (9), cloning humans (8), doctor assisted suicide (7), and suicide (6). Even though there has been movement in terms of the acceptability of polygamy, cloning humans, and suicide, these behaviors are supported by fewer than 20 percent of those surveyed. The poll also showed less acceptance of the death penalty and medical testing on animals, which reflects movement in a more liberal direction as well.

Let’s look at one issue in particular in this series to better understand the extent to which the needle is moving in the liberal direction. Gallup noted that most of the movement on out-of-wedlock birth came from self-described social liberals and moderates. Conservatives moved hardly at all. In its release last year, the organization reported significant movement among Democrats over time on out-of-wedlock birth, while Republicans remained pretty much in place. Other surveys show that Americans believe it is better for children to be raised in two-parent families. In an Associated Press survey from 2013, 64 percent said more single women having children without a partner to help was a bad thing for society. Fifty-one percent of never-married women with children gave that response, and a third said it made no difference. When asked by Pew in 2010 whether they agreed or disagreed with someone who says a child needs a home with both a father and a mother to grow up happily, 61 percent said they tended to agree, while 36 percent tended to disagree. When that question was asked for the first time in 1982, the responses were 62 and 35 percent, respectively. Americans are more accepting of out-of-wedlock birth, but they don’t believe it is an intrinsic good.

Public opinion on the perennial hot button of abortion is also more nuanced. While Gallup recorded sharp movement on many issues in its moral acceptability series, it saw little movement on abortion. In 2015, 45 percent said it was morally acceptable; in 2001, 42 percent gave that response, suggesting little movement in the liberal direction. Yet the pro-choice label in their latest poll gained ground. Although Americans remain reluctant to endorse abortion, their growing identification as pro-choice hints at the importance they also give to personal choice. Gallup notes that movement in the pro-choice direction has been driven by a Democratic surge since 2012.

Religious attitudes seem to be shifting in a more traditionally liberal direction as well. As Pew pointed out in its massive Religious Landscape study, the number of unaffiliated (presumably more liberal individuals) rose from 16.1 percent in 2007 to 22.8 percent in 2014. The unaffiliated are now second in size to evangelical Protestants among major religious groups. Yet the share of self-identified atheists among the unaffiliated remains small, having risen from only 1.6 percent to 3.1 percent, while agnostics have grown from 2.4 to 4.0 percent. By contrast, the evangelical share of the population decreased, though minimally, from a larger 26.3 percent of the population to 25.4.

Also interesting, although we have no recent updates in the Roper Center’s poll archive, are figures about self-described ideology. In Gallup’s October 2014 survey, 40 percent described themselves as conservative and 24 percent liberal. In 1992, 36 percent called themselves conservatives and 17 percent liberal. The results from a November 2014 CBS survey were 35 percent conservative and 28 percent liberal. In 1976, 28 percent described themselves as conservative and 23 percent as liberal. So, the share of both groups rose in both polls. While Gallup reported that liberals had caught up to conservatives when people are asked about their views on social issues (31 percent now identify as liberals and 31 percent as conservatives), the organization also reported that people are much more likely to identify as conservatives than liberals on economic issues (39 to 19 percent).

So the country is generally moving in a more liberal direction socially. But it remains to be seen whether this movement will carry over to economic issues or to overall identification. Neither liberals nor conservatives can claim victory yet.

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One pager: A US strategy for the South China Sea

Download the PDF.

Read more on diplomacy and tensions in the South China Sea.

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Review: Cage-busting teachers go after solutions

As a teacher, I can tell you that my job is comprised of three, distinct elements—passion, instructional practice, and…frustration. As an avid reader of anything and everything to do with education, I know that there is plenty written on the first two components, but not nearly enough on the latter. That’s why I was excited to pick up The Cage-Busting Teacher.

Author Frederick Hess points out that we don’t have to go far to find teachers who love what they do in the classroom, but whose time, energy, and passion are being slowly siphoned by the habits, routines, rules, and regulations that seem to be an inevitable part of the profession.

According to Hess, teachers are often better at navigating the sea of curriculum, instruction, and assessment than we are the oceans of adult leadership, school systems design, and education policy. As a result, educators may grumble a bit about how things could be changed, but ultimately we end up closing our classroom doors and taking refuge from outside distractions and annoyances.

In other words, we allow ourselves to be placed in a “cage.”

More hard cider than comforting soup

After only a few pages, readers understand clearly that this book is not designed to make teachers feel better about themselves or their profession. Reading it feels more like an appendectomy than it does Chicken Soup for the Teacher’s Soul.

The book details several painful but necessary steps that we must take in order to improve the health of our schools and boost our professional strength. This book is about agency, strategic action, and persistent problem-solving in education. It calls upon educators to bust out of the cage and affect change in the schools and systems where we work. As Rick Hess puts it…
“Cage-busting is concrete, precise, and practical. It asks what the problem is, seeks workable solutions, and figures out how to put those into practice. It asks precisely why schools are doing this and tallies the number of minutes wasted. Cage-busting teachers are less interested in what policy makers or district leaders ought to do than how teachers can make those things happen (p. 13).”

An army of educational expertise

Whether it’s his blog, his books or his work in policy, Rick Hess is known for having plenty to say on education reform. The real power of The Cage-Busting Teacher, however, doesn’t stem from his clever use of movie quotes or from his candid commentary on teacher unions, bad policy, sub-par professional development, and endless educational administrivia.

Instead, the book’s strength and usefulness results from the insight and suggestions shared by hundreds of cage-busting teachers, administrators, teacher advocates, union leaders, and others who collaborated with him on the project. Don’t get me wrong. Hess still does plenty of talking, but he’s also clearly listening. He backs up his usual, irreverent banter with dozens of examples of teachers enacting significant and lasting changes in their schools, districts, and beyond.

Award-winning teachers share tips and tactics for supporting failing students, streamlining data and assessments, and minimizing wasted time. Teacher leaders offer suggestions on working with difficult colleagues and on getting support from the school community and principal. Policy makers and administrators weigh-in on improving our professional networks and boosting the prestige of the profession. (Disclosure: In one chapter, Hess includes a tidbit from a conversation he and I had on the phone regarding schools that successfully customize professional development.)

The result is a useful handbook of cage-busting solutions for educators who want to build their own authority, problem solve, improve school culture, influence policy, and find other ways to extend their influence beyond the walls of the classroom.

Some of everything for just about everyone

I really appreciate the functional, a la carte structure of The Cage-Busting Teacher. With the exception of the required opening chapter that outlines the ‘cage’ analogy used throughout the book, you could really read or skip just about any chapter and be okay.

There’s a section on general problem solving and another on managing relationships with higher-ups in your building and district. The chapter on ‘Tackling Everyday Problems’ serves as a catch-all for issues in teacher leadership, collaboration, instructional technology, professional development, and a handful of other topics.

There are entire chapters on the good, bad, and ugly of politics, policy, teacher unions, and educators who leave the classroom. Hess repeatedly cautions against all-out enlistment in anyone else’s grand crusade. Instead, he asks would-be cage-busters to “examine the logic of each proposal, understand its practical frailties, embrace the good, and reject or address the bad” (Hess, 2015, p. 29).

By the end of the book, I felt like I had learned how to do judo, a page at a time. I had acquired the ability to identify opponents to my cause, then figured out ways to redirect their hostility and aggression to reinforce what I wanted to do.

Focus your frustration on positive action

Any teacher who reads The Cage-Busting Teacher will find plenty that they disagree with. But…they will also learn quite a bit about their potential and influence as an educator. My prediction: the book will sell pretty well. After all, there are plenty of disgruntled educators who would rather improve the profession than walk away from it. The Cage-Busting Teacher does what the title promises to do. It gives each of us permission—and tools—to start transforming education.

Dr. Curtis Chandler, the 2011 Kansas Teacher of the Year, is an education specialist and staff developer with the Kansas education support agency ESSDACK. “I am a middle school teacher through and through,” he says. “My teaching has been 90% grade 6-8.” Chandler’s work and ideas have been featured in Rick Hess’ The Cage-Busting Teacher, and Kristin Magette’s Embracing Social Media: A Practical Guide to Manage Risk and Leverage Opportunity. At his personal blog, Better Learning for Schools, he often writes about “capacity building tools for educators and administrators.”

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Why JPMorgan says the US economy is stuck in ‘the slow lane’

Earlier this week, Goldman Sachs published a modstly upbeat research note suggesting the US economy is doing better than we think because we are mismeasuring productivity. The bank argues that “potential biases in the GDP statistics resulting from the growth of software and digital content” means “we would be skeptical of confident pronouncements that the standard of living is growing much more slowly than in the past.”

But JPMorgan, in a new note from economist Michael Feroli, “Welcome to life in the slow lane,” seemingly takes the other side of the trade.  Feroli: “In mid-2013, we estimated that the economy’s potential GDP growth rate was a well-below-consensus 1.75%. We may have been too optimistic.”

And here is core of  the JPM argument, which centers around productivity:

Anatomy of mediocrity. Total economy productivity growth has been 0.3% per year over the last year, last three years, and last five years. This is the most remarkable, and disappointing, aspect of the current recovery. Our estimate of 1.75% potential GDP growth embeds an assumed 1.25% annual growth in total economy productivity.

Thus, for our view of trend growth to be anywhere close to correct, we will need to see a material stepup in productivity growth. The case for optimism rests on a view that a combination of one-time effects and bad luck has held back productivity growth. For example, caution induced by the European crisis and other global developments may have held back business capital spending, which is normally a key ingredient in faster productivity growth.

However, there are also good reasons to wonder whether this optimism is misplaced. There is little in the recent data to suggest that business capital spending is poised for an imminent and material acceleration. Moreover, for a number of reasons productivity growth tends to slow as expansions mature.

Thus, even if some forces are pushing up productivity growth, we are now in the phase of the expansion when acceleration is harder to come by. For all these reasons, we see the risk to our 1.75% potential growth estimate as biased to the downside.

And what can be done about this? Feroli outlines the macroeconomic explanations and solutions of the right (the Fed’s easy money is backstopping unproductive firms and inhibiting creative destruction) and of the left (boosting demand will create its own supply and lift labor-force participation, investment, and productivity) and finds their explanatory power lacking:

A major problem confronting both of these arguments for using macro policy to influence aggregate supply is timing. The slowdown in firm creation and destruction began before the Great Recession and before zero interest rate policy. Similarly, the slowdown in productivity itself predated the downturn. Research from the San Francisco Fed (using a Bai-Perron test) dated the beginning of the productivity slowdown in late 2003. Researchers from the NY Fed (using a regime-shift model) date the break in 2004. If weak demand in the wake of the recession is not to blame for the productivity slowdown, the case for stimulating demand to boost productivity growth becomes a tougher sell.  In short, while there are some arguments that demand management policies are relevant to the productivity slowdown, the traditional macro/demand vs. micro/supply policy distinction still seems salient.

So don’t blame the usual suspects: Obamanomics, Bernanke, the House GOP. If JPMorgan is correct, America’s “economic calcification” won’t fit into the usual and useless political framing:

Within the next several months, the economy is very likely to be near full-employment, and very likely to exhibit growth rates that are disappointingly slow. As this occurs, the terms of the debate surrounding the economy will increasingly focus on micro issues: how best to stimulate labor force growth and skills acquisition, how to encourage business formation, and how best to foster investment, both public and private, in tangible and intangible capital.

And, again, the good news is that such supply-side policies tend to be intrinsically good economic ideas. Whether Goldman is too optimistic or JPMorgan too gloomy is irrelevant. Democratic and Republicans policymakers looking for policies to boost America’s economic dynamism could so worse than focus on entrepreneurship, immigration, education, infrastructure, and basic research.

 

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China military buildup & Baghdad bombings: Bolton on Fox Business Network’s ‘Varney & Co.’

Senior Fellow John Bolton discusses recent events in China and Iraq on Fox Business Network's 'Varney &Co.'

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The bad middle-class math of the FairTax

Should we replace the income tax with a national sales tax? Some commonsense on the FairTax by the Tax Policy Center:

The tax is designed to protect low-income people from higher taxes via a large new cash transfer program called a “prebate.”  Every household would get a cash transfer equal to the amount of tax that a family at the poverty level would owe.  (Ironically, this would be the largest welfare program in history.)

The problem is that very high-income households spend only a fraction of their income, while low- and middle-income people spend all or most of what they make.   A sales tax, by design, exempts a large share of income at the top.  If it includes a prebate to protect people at the bottom and doesn’t add to the deficit, then it must raise taxes on people in the middle.

A decade ago, President George W. Bush’s Tax Reform Panel considered a sales tax as a revenue-neutral replacement for the income tax. It rejected the idea after concluding   that the rates would have to be much higher than promised by the FairTax people. It also calculated the tax would be very regressive as the [above chart] shows.

The Panel also found that the prebate would be extremely expensive, hard for taxpayers to manage, and complex for the IRS to administer.   In addition, the panel was concerned  a federal retail sales tax rate of 30 percent or more would result in widespread evasion and create real problems for states that rely heavily on their own sales taxes. FairTax advocates counter that their proposal would also replace regressive payroll and excise taxes (as well as highly progressive estate taxes), but the bottom line is that tax burdens on middle-income households would surely rise while high-income families would get a big tax cut.

This very much syncs with what AEI’s Alan Viard told me awhile back:

Pethokoukis: Whenever I write about tax reform, I always get people asking about the FairTax, which is kind of a national sales tax. What do you think about the FairTax as tax reform?

Viard: I think the supporters of the fair tax have their heart in the right place because they’re trying to find a consumption based tax system that avoids the penalty on saving and in investment that’s built into the income tax. The specific proposal they’ve put forward, though, really does have a number of problems. And many, many economists have pointed them out. First of all, a retail sales tax at that high of a rate is really likely to have a lot of enforcement and compliance problems. And countries that impose consumption taxes at that high of a rate, they tend to use a value added tax structure, which is really economically the same as a sales tax, but administratively is different because you collect it at multiple stages. And that just helps with the enforcement and the compliance.

So it would be a pretty modest change, actually, to say let’s do it in a value added tax administrative mode instead of a sales tax mode. But that’s I think the first change you need to make to their plan.

The rate is also not revenue neutral. They’re proposing a 30% sales tax rate and that’s not enough to replace revenue. And I think, given our deficit environment, obviously a tax reform is not going to be viable if it lowers revenue. So – and of course, there you could just raise the rate.

A bigger problem is that, there’s no progressivity in this and they – well, they have pre-bate that introduces some progressivity, but compared to the taxes they’re replacing, this would be a big shift in the tax burden, away from high-income groups towards middle-income and lower middle-income groups. And whatever you think about that politically, I think that’s just not viable.

So you really have to do something different. You either need to adopt a progressive consumption tax, which could be the Bradford X tax, or a personal expenditure tax, or you have to bring in a consumption tax to replace only part of the income tax and it’d probably be a value added tax in that case.

I really don’t think I ever need to write another blog post about the FairTax. I’ll just tweet a link to this one. Like many novelty tax plans bandied about on the right, the math of the FairTax is simply unfair to middle-income America and conflicts with fiscal reality.

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Taliban five could be free to travel within days: Bolton on Fow News’ ‘America’s Newsroom’

Senior Fellow John Bolton discusses national security on Fox News' 'America's Newsroom.'

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Lost victory

This review will be published in the June 8 edition of The Weekly Standard.

The Unraveling is a love story. Like many love stories, it starts with two seemingly irreconcilable personalities forming a bond they never anticipated. But, true to form, the ending is tragic. In this instance, the main character is author Emma Sky, the British, Oxford-educated, lefty international do-gooder who falls for the U.S. Army and its religious, flag-waving, America-the-Beautiful officer corps, and one officer in particular: General Ray Odierno, former commander of the Multi-National Force in Iraq and the current Army chief of staff. The tragedy, of course, is Iraq.

Sky’s story begins with her volunteering to join the Coalition Provisional Authority in 2003 as it set out to put post-Saddam Iraq back on its feet. Reflecting Washington’s lack of planning about what would follow Saddam’s demise, Sky finds herself within days named the “Governorate Coordinator of Kirkuk,” with no instructions and (as she admits) neither “the qualifications nor the experience for the job.”

While there, Sky comes to terms with her role in the occupation of Iraq as part of a war that she had opposed. After an initial false step or two, she also realizes that, to stave off the explosion of ethnic tensions in Kirkuk and the surrounding area into a civil war, she and the U.S. Army would have to become “one team.” But that grudging concession soon turns into a more fulsome appreciation of the American military’s “leadership and its resources,” as well as its capacity to be “flexible, adaptable and a quick learner.” Most important, she discovers that “the soldiers generally wanted to do the right thing.”

It’s also in Kirkuk that she first meets Odierno, then commander of the 4th Infantry Division, the occupying force for northern Iraq. Upon becoming deputy commander in Iraq in 2006, “Gen. O,” as Sky dubs him, asked her to become his political adviser. She remained in that position through the surge, until 2010, when Odierno departed Iraq after being promoted (in 2008) to succeed Gen. David Petraeus as the Multi-National Force commander.

A more odd-looking pair would be difficult to find: a relatively tiny, waifish English woman in her 30s and the bald, six-foot-six, massive former football player who (to her mind) was weirdly fond of Texas and its gun-toting, electric-chair-wielding yahoos. Although they appear to have routinely crossed swords on the wisdom of the decision to oust Saddam—with her dismissing it as part of some crazy neocon conspiracy—she admits she stood “in awe of him” and his capacity to lead such a complex effort effectively and charismatically.

As an insider’s account, The Unraveling is full of descriptions of meetings, events, and key personalities—both Iraqi and American. Of the latter, Sky is especially gifted in capturing, in just a few sentences, the quirks, flaws, and virtues of the individuals who worked in Iraq or who came through as visiting dignitaries. To her credit, she’s bipartisan in her skewering. Chris Hill, the American ambassador put in place by the Obama White House in early 2009, is described as having not wanted the job and uninterested in engaging with the Iraqis at a key transition point in the country’s post-Saddam era. “It was,” Sky writes, “frightening how a person could so poison a place. Hill brought with him a small cabal who were new to Iraq and marginalized all those with experience in the country.” Likewise, Sky aptly captures Donald Rumsfeld and his irritating let’s-be-clear-about-who’s-the-honcho-in-the-room routine in recalling his visit to Kirkuk. As Odierno tried to brief the defense secretary on the situation in northern Iraq, “Rumsfeld kept interrupting, shooting questions at him. How many soldiers in theater? How many killed? How many wounded?”—not for a moment wanting to hear what the commanding general for the area actually assessed the situation to be.

Given Sky’s role in Kirkuk, and later under Odierno, The Unraveling is especially useful in detailing just how complex the reconciliation process was within Iraq’s splintered society. As she notes, Iraq lost civility and a generation of potential leaders during Saddam’s two decades of brutal rule; and so, when his regime was removed, what remained was a Hobbesian free-for-all. As the subtitle makes clear, however, the United States and coalition forces were on the cusp of meeting the challenge of state- and nation-building in Iraq—or at least, with the success of the surge and the Anbar Awakening, they had begun to set the conditions for moving forward. Yet that potential could only be turned into reality if Washington stayed the course.

Sky saw from Baghdad that such a plan was the last thing the Obama administration had in mind when it came to office in 2009. Putting “Bush’s War” behind them meant ignoring the military’s suggestions on the number of American troops needed to train Iraqi forces and help maintain stability. It meant overlooking Prime Minister Nuri al-Maliki’s growing autocratic and sectarian behavior. It meant turning a blind eye to Iran’s increasing machinations in Iraq. And most crucially, according to Sky, it meant ignoring the opportunity provided by the surprise showing of the Iraqi National Movement (INM) in the elections of March 2010.

Campaigning on a nonsectarian platform, with Sunni and secular Shia candidates, the coalition won two more seats than did Maliki’s State of Law coalition. Maliki refused to stand down, however, or to concede to the INM the right to attempt to put together a governing coalition. Choosing not to weigh in, the Obama team eventually tired of the stalemate, conveniently concluding that Iraq needed a “Shia strongman,” convinced by elements within the government (presumably the CIA) that Maliki was “our man.” They sent Joseph Biden to deliver, in his ham-handed way, the message to the INM leadership. And with that, according to Sky, the chance for Iraqis “to break the Lebanon model of cementing sectarianism within institutions” went out the window.

What has happened since in Iraq, with the rise of ISIS and even more dangerous sectarianism, comes as no surprise to the author. But she writes in her preface that as difficult as the task was in Iraq, nothing was “preordained.” Coming from someone on the left—someone who is not even an American to boot—makes this an essential point not to be lost as we continue to play gotcha on the question of whether toppling Saddam Hussein was the right thing to do.

Gary Schmitt is director of the Marilyn Ware Center for Security Studies at the American Enterprise Institute.

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New estimate Of Obamacare’s fiscal impact on private doctor practices

Under Obamacare, doctors have been strained by costly new regulations, intricate payment “reforms” that tie their Medicare reimbursement to complex federal reporting requirements, and mandates that they install and make “meaningful” use of electronic health records.

Add a new burden to the mix: The proportion of patients they see are rapidly shifting away from commercial health plans and toward Medicaid, which sometimes pays doctors pennies on the dollar that they were previously reimbursed under private insurance.

The data comes from ACAview, a product of athenahealth that aims to measure the impact of Obamacare on medical practices. The project, jointly funded with the Robert Wood Johnson Foundation, is the first large-scale examination of data derived directly from outpatient medical practices belonging to more than 60,000 providers. It gives a unique insight into how the Affordable Care Act is impacting patients at the point of care.

The analysis was first released in February 2015, and this new data is an update on those initial results. It is being released today for the first time. It shows that in states taking Obamacare’s Medicaid expansion, Medicaid visits as a proportion of all visits to doctors increased from 15.6% in 2013 to 17.7% in 2014, and continues to climb, to 21.5% in 2015.

Meanwhile, in states that didn’t expand their Medicaid programs, the proportion of visits covered by Medicaid remained largely flat at 9.4% for 2013, 9.2% for 2014, and 8.9% for 2015. The results were based on a subset of 16,000 providers who have been on the athenahealth network prior to 2011 and tracked the longest.

But here’s the rub. The proportion of commercially insured patients, either through Obamacare’s exchanges or through workplace coverage, actually fell in states that expanded their Medicaid programs. In those states, commercially insured patients comprised 65.2% of all patients in 2013, 64.4% in 2014, and then fell to 62.8% in 2015. In states that didn’t expand their Medicaid programs, the percentage of commercially insured patients rose slightly, from 66.1% in 2013 and 2014, to 68.1% in 2015. It’s important to note that the number of uninsured patients fell across all states, as previously reported, from 4.6% to 2.4% in states that expanded Medicaid, and by slightly less in states that did not.

Nonetheless, this three-year trend is going to add fiscal strains to physician practices.

Obamacare is already paying close to Medicaid rates for many ambulatory procedures. Moreover, there is evidence that many of the people who are now “privately” insured under Obamacare were previously insured in the individual or group market, and got bumped off their prior commercial coverage and forced into the ACA’s exchanges. That alone is going to lower provider revenue right at the very moment when their practice costs are escalating.

Now, add to the mix the new trend unearthed by the athenahealth data. In states that expanded their Medicaid programs, the proportion of Medicaid patients visiting doctor offices as a percentage of physicians’ total patient volume is rising sharply, by almost 40% since 2013. Accepting that Medicaid pays much less than private coverage, this sharp change in payer mix will wreak havoc on doctors’ bottom lines. Even if Obamacare is reducing the number of uninsured, doctors’ total revenue is falling as a result of this mix shift.

Just how much revenue is this taking out of doctor practices? It’s hard to estimate, but here’s one admittedly crude calculation. Data shows that the average medical provider, across all specialties, generates about $1.45 million a year in total billing revenue. This is gross revenue, before any practice costs are netted against the doctor. Next, assume that Medicaid pays doctors, on average, 50% of what private insurance pays (which is consistent with prior estimates). Then assume that there are about 900,000 professionally active doctors in the United States. Finally, figure that Medicaid and commercial insurance together accounted for 80 percent of the patients that a doctor sees (roughly in line with the athenahealth estimates).

If you accept that Medicare pays close to commercial insurance rates (about 90% on average), then looking only across the insured patients who support a practice’s revenue, a shift in total average payor mix between Medicaid and commercial coverage — of the magnitude reported by the athenahealth survey between 2013 and 2015 — would already cost the “typical” doctor practice close to about $50,000 in top line revenue, even after factoring in that more of the previously uninsured are now covered (mostly by Medicaid). Figuring that 40% of practicing docs work in privately run medical offices, and the aggregate hit would come out to $18 billion in less total revenue going into private medical practices.

Now there’s no evidence that private doc practices have, on average, seen reductions in their average top-line revenue. Most data shows that revenue growth has remained flat. Moreover, that rough estimate is based on what would happen if every state experienced the kinds of mix shift that the expansion states saw. Many states didn’t take the Medicaid expansion money.

But there’s no question that in states that did expand Medicaid, as the payer mix has changed, medical practices have on average, seen a sharp reduction in their average paying-patient reimbursement. That change was too steep to be offset by the reduction in the number of uninsured patients. This suggests that doctors are (so far) making up the shortfall caused by a worsening mix of insurance types. Probably by expanding their volumes. Either they are increasing the total number of patients they see in an average day, or increasing the number of reimbursed tests and procedures that they perform. They may also be making up some of the deficit through higher out-of-pocket charges to privately insured patients. Keep in mind that none of these estimates factor in the additional revenue reductions seen as commercial patients shift out of group coverage and into the lower paying Obamacare plans.

All of these are admittedly rough estimates with lots of assumptions baked in. But they give a very basic measure of just one fiscal strain that doctor practices are feeling. With medical practice costs rising under the ACA, and revenue falling, it’s no wonder so many doctors are choosing to sell their private practices and become salaried employees of hospitals.

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Robots rising: How humans can flourish in the age of brilliant machines

“The Great Decoupling: An Interview with Erik Brynjolfsson and Andrew McAfee” is a must-read Q&A from Harvard Business Review. I’ve written often about the two MIT academics and their work on labor markets and the impact of technological change. Two things from the HBR interview that I want to highlight. First, their explanation of the above “decoupling” chart is noteworthy in that they point out the macro-nature of the forces driving that chart. In other words, it’s not just or even mostly the lack of “worker voice” in the US:

HBR: Is the Great Decoupling happening only in the United States?

Brynjolfsson: No, similar trends are appearing in most developed countries. In Sweden, Finland, and Germany, for instance, income inequality has grown over the past 30 years, though not as high as it has in the United States. 

The fact that the middle class has been hollowing out in country after country indicates that the decoupling isn’t due solely to changes in the social contract. Germany, Sweden, and the United States all have different views about capitalism, about how people should be treated, and so on. We’re not saying that social choices have no effect, and for that matter, we’re not saying that globalization has no effect, either. However, there seems to be a common underlying force that’s affecting all these countries. We think that force is technology. 

Second, there’s a really great summing of what we need to do so human can flourish in this world of powerful digital technologies:

HBR: What kind of economic environment would make the best use of the new digital technologies?

McAfee: One that’s conducive to innovation, new business formation, and economic growth. To create it, we need to focus on five things:

The first is education. Primary and secondary education systems should be teaching relevant and valuable skills, which means things computers are not good at. These include creativity, interpersonal skills, and problem solving.

The second is infrastructure. World-class roads, airports, and networks are investments in the future and the foundations of growth.

Third, we need more entrepreneurship. Young businesses, especially fast-growing ones, are a prime source of new jobs. But most industries and regions are seeing fewer new companies than they did three decades ago.

A fourth focus is immigration. Many of the world’s most talented people come to America to build lives and careers, and there’s clear evidence that immigrant-founded companies have been great job-creation engines. The current policies in this area are far too restrictive, and our procedures are nightmarishly bureaucratic.

The fifth thing is basic research. Companies tend to concentrate on applied research, which means that the government has a role to play in supporting original early-stage research. Most of today’s tech marvels, from the internet to the smartphone, have a government program somewhere in their family tree. Funding for basic research in America, though, is on the decline: Both total and nondefense federal R&D spending, as percentages of GDP, have declined by more than a third since 1980. That must change.

Again, read the whole thing.

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Is the U.S. losing the war against ISIS? Thiessen on Fox News’ ‘The Kelly File’

Fellow Marc Thiessen discusses the United States fight against ISIS on Fox News' 'The Kelly File'

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India’s economic growth: Be wary

India just announced that growth in gross domestic product (GDP) stood at 7.3 percent during the fiscal year April 2014 – March 2015. This will be seized upon by some as world-beating, even ahead of China’s. It will be heralded as a sign of India’s global economic rise. In fact, it may be fairly meaningless.

The first reason for this has to do with India. The country recently altered its approach to GDP, leaving the previous totals for GDP almost unchanged yet somehow finding much higher growth over the last few years.

By itself, this seemed odd. GDP growth also clashed with almost every other indicator over the same period, leaving many observers doubting the accuracy of the revisions. For example, the manufacturing component of GDP shows strong growth, while the government’s own industry indicator does not.

Moreover, India’s economic statistics are often dubious. Striking revisions are not limited to GDP, and the reasons behind the changes can be remarkably amateurish.

The country releases multiple inflation rates every month but has no equivalent for unemployment, though unemployment and underemployment are vital challenges as young workers flood into the labor force. The new GDP series is said to be a long-overdue modernization. Much more work along these lines is needed.

The second problem is with GDP itself. It’s not just India’s numbers that provoke suspicion. Any GDP growth comparison to China is stacking one unreliable number up against another. Beijing is frqeuently unwilling to tell the truth about its economy and Delhi is frequently unable to.

Even in the U.S., the relevance of announced GDP growth is dubious. If GDP is used as the guide, the recession associated with the financial crisis ended in mid-2009 and the American economy has been expanding at an uneven but reasonable pace for almost six years.

But income and the job market tell a gloomier story, of a slow and still incomplete rebound. In America, India, and everywhere else, it’s how people are actually doing that matters, not how GDP says they should be doing.

In the Indian case, though we don’t know for sure, the supposedly rapid GDP gains do not seem to have created a large number of jobs or brought an increasing number of people out of poverty. They do not even seem to be helping curb the large budget deficit.

So when you hear that Indian GDP is showing powerful growth, the first question to ask is whether that’s really true. The second question may even be more telling: why, exactly, should anyone care?

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Please, don’t freak out over the negative first-quarter GDP report. Just worry

So the US economy went and did a very bad thing. Instead of growing during the first three months of this year — government’s first estimate was a 0.2% increase — it shrank. Now positive is sure better than negative, especially when many speculated/hoped/prayed/wished 2015 would see a marked acceleration in growth. But there’s a caveat in play here. A couple, actually.

First, something odd has been happening with first-quarter GDP reports for awhile. JPMorgan notes that over the past 20 years, 1Q  GDP growth has averaged 1.6 percentage points lower than in other quarters. Seasonal adjustments are supposed to smooth that out. Thus the San Francisco Fed finds the “anomalous pattern of generally weak first-quarter growth suggests that the BEA’s estimate of GDP growth for the first three months of 2015 may understate the true strength of the economy.” Although the Fed in Washington disagrees, the SF Fed thinks real GDP in 1Q was closer to 2%. Indeed, real gross domestic income was much stronger in this revised report, up 1.4%. Capital Economics says it “would view that as a much more accurate gauge of the economy’s true performance over the three months of this year.”

Second, there’s a plausible case that mismeasurement of productivity is also chronically understating US economic growth. Goldman Sachs, in a recent note:

Measured productivity growth has slowed sharply in recent years, and we have reduced our working assumption for the underlying trend to 1½%. … The proximate cause of the slowdown is a slump in the measured contribution from information technology. But is the weakness for real? We have our doubts. Profit margins have risen to record levels, inflation has mostly surprised on the downside, overall equity prices have surged, and technology stocks have performed even better than the broader market. None of this feels like a major IT-led productivity slowdown. One potential explanation that reconciles these observations is that structural changes in the US economy may have resulted in a statistical understatement of real GDP growth. There are several possible areas of concern, but the rapid growth of software and digital content—where quality-adjusted prices and real output are much harder to measure than in most other sectors—seems particularly important.

Along the same lines, here is economist Martin Feldstein in a recent column:

Today’s pessimists about the economy’s rate of growth are wrong because the official statistics understate the growth of real GDP, of productivity, and of real household incomes. … The measurement problem is particularly severe for new products. … The result is that the rise in real incomes is underestimated, and the common concern about what appears to be the slow growth of average household incomes is therefore misplaced. Official statistics portray a 10% decline in the real median household income since 2000, fueling economic pessimism. But these low growth estimates fail to reflect the remarkable innovations in everything from health care to Internet services to video entertainment that have made life better during these years, as well as the more modest year-to-year improvements in the quality of products and services.

For now Goldman says “it is better to focus on other indicators—especially employment—to gauge the cumulative progress of the recovery and the remaining amount of slack.” And this from Barlcays: “We believe growth in Q1 has systematically underperformed due to an incomplete seasonal adjustment process that leaves residual seasonality in many investment categories. As a result, we look to other indicators such as payroll growth, the unemployment rate, and the ISMs to get a complementary reading on near-term momentum.”

By the way, through April total job growth is down 15% from the first four months of 2014. There’s a new job report next week plus revisions to previous months. But overall it does look like a same-old, same-old year. Certainly a weak start. JPMorgan:

Even though 1Q may eventually get revised higher, it was clearly a weak quarter for growth. The modest upside surprise in the today’s headline figure was mainly related to inventories, and this is an unfavorable development for 2Q growth. Overall, it looks like growth in the first half of this year will be pretty weak partially because of a combination of some unusual special factors (bad weather, port strikes, issues with seasonal adjustment) as well as more fundamental drags coming from the stronger dollar and the drop in oil prices. …  Real gross domestic income increased 1.4% saar in 1Q, not as bad as the GDP figure for the quarter, but still a pretty soft gain.

“Soft.” Not a recession but also not nearly good enough. The continued inability of this economy to grow at much faster than 2% is what worries me.

 

 

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Is Puerto Rico America’s Greece?

Tolstoy famously remarked that all happy families are alike but each unhappy family is unhappy in its own way. The same might be said of the unhappy state of the Greek and Puerto Rican economies. But while both those economies are struggling with very high debt burdens within a monetary union, there are very big differences between the two that makes it difficult to tar them with the same brush. Indeed, on closer inspection, it would seem that though the Puerto Rican economic crisis might be serious, it is of a very much lesser dimension than that in Greece.

Both Greece and Puerto Rico have very high public debt levels in relation to that of their peers. However, the scale of Greece’s indebtedness dwarfs that of Puerto Rico. Whereas Greece’s public debt has now reached around $350 billion, or 180 percent of its gross domestic product (GDP), that of Puerto Rico totals $72 billion, or around 70 percent of its GDP. Another basic difference between the two economies is that whereas Greece’s debt is now mainly in official hands, Puerto Rico’s debt is mainly held by private-sector asset managers. In principle, this makes Puerto Rico’s debt more susceptible to restructuring than that in the Greek case.

Both Greece and Puerto Rico constitute a very small part of the monetary union to which they belong. Indeed, the Greek economy constitutes less than 2 percent of the overall eurozone’s economy, while that of Puerto Rico constitutes a very much smaller part of the overall U.S. economy. However, while Greece might constitute a small part of the European economy, it has the potential to cause contagion to much larger economies in the European economic periphery, like Italy and Spain. By contrast, Puerto Rico would seem to have little potential to cause contagion to the United States.

Full text of this article can be found at TheHill.com.

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Does the media hold anyone to a lower ethical standard than the Clintons?

Let’s say, just for kicks, you murdered your husband (or wife). Your neighbors have been suspicious ever since your nightly arguments suddenly stopped, right around the time you put something large in your trunk and drove off in the middle of the night. Now they see you driving his car and putting his suits and golf clubs up for sale on eBay. The police find your explanations implausible and contradictory, and then you tell the cops to direct all future questions to your lawyer.

The good news is that you have fans. Some neighbors think you’re the cat’s pajamas. They come to you and say they want to defend you against this terrible accusation. What should you tell them to say on your behalf?

Frankly, I don’t know what you should say, but I do have a good sense of what you shouldn’t say: “Tell them there’s no smoking gun.”

You see, when people suspect you’ve committed a crime, insisting that there’s “no smoking gun” is almost, but not quite, an admission of guilt. It is certainly very, very far from a declaration of innocence.

“I didn’t do it!” — that’s a declaration of innocence.

“There’s no smoking gun!” — that’s closer to, “You’ll never prove it, nyah, nyah.”

The origin of the phrase “smoking gun” comes from a Sherlock Holmes story, “The Adventure of the Gloria Scott.” In Arthur Conan Doyle’s tale, an imposter posing as a ship’s chaplain commits murder. “We rushed on into the captain’s cabin . . . there he lay with his brains smeared over the chart of the Atlantic . . . while the chaplain stood with a smoking pistol in his hand at his elbow.”

Figuratively, when you have a smoking gun, there’s no need for an investigation; you know for sure the culprit is guilty. But if the chaplain had thrown the gun out the porthole just in time, Holmes would not say, “Well, there’s no smoking gun. This shall have to remain a mystery for all time. Oh, and let’s give the chaplain here the benefit of the doubt.”

I bring this up because every time there’s a new revelation about the unseemly practices of the Clintons, every time a new trough of documents or fresh disclosures come to light, scads of news outlets and Clinton spinners insist that “there’s no smoking gun” proving beyond all doubt that Hillary Clinton and the Clinton Foundation did anything wrong.

The guy who set the bar so low that it’s basically stuck in the mud was ABC News’ George Stephanopoulos. In a now-infamous interview with Peter Schweizer, author of the investigatory exposé Clinton Cash, Stephanopoulos grilled Schweizer about his partisan conflicts of interest.

Despite Stephanopoulos’s hostile tone, it was perfectly proper to note that Schweizer worked for George W. Bush as a speechwriter for a few months. The irony, of course, was that Stephanopoulos worked in a far higher position, for far longer, for the Clintons — which Stephanopoulos did not mention. Nor did he disclose the fact that he was a donor to the very Clinton Foundation that was the focus of Schweizer’s book.

Since that story broke, thanks to the Washington Free Beacon, Stephanopoulos has apologized at least three times for his actions.

What he hasn’t apologized for is his yeoman’s work making a smoking gun the new burden of proof.

When the State Department released a sliver of a fraction of the e-mails Hillary Clinton hadn’t already deleted from her private stealth server, the Daily Beast ran a story with the headline “Sorry, GOP, There’s No Smoking Gun In Hillary Clinton’s Benghazi Emails.” Ah yes, because the relevant news is whatever’s bad for Republicans.

This week, the International Business Times reported that then–Secretary of State Hillary Clinton approved a huge spike in arms sales to repressive countries that donated to the Clinton Foundation, and that weapons contractors paid Bill Clinton huge sums for speeches at around the same time the State Department was approving their arms deals. Slate noted that “the IBT piece doesn’t reveal any smoking-gun evidence of a corrupt quid-pro-quo transaction.”

Now, obviously, if there is no smoking-gun proof of wrongdoing, the press should report that. But it might also note that many politicians and public figures have been prosecuted — and convicted — without the benefit of a smoking gun. Just ask former Virginia governor Bob McDonnell or, for that matter, Martha Stewart. The lack of a smoking gun in Chris Christie’s “Bridgegate” scandal hardly deterred the media mob.

Only in the Clintonverse could the lack of a smoking gun be touted as proof of innocence.

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Rick Santorum’s crucial message for the right

Rick Santorum is running for president, and every conservative and Republican should listen to him.

I can see readers’ eyes rolling now. Many conservatives, libertarians, and moderate Republicans dislike Santorum. They may think he’s a horrible messenger. They may find him terribly wrong on some issues. They may think he has no chance of winning the nomination, or that he would be a disaster in the general election.

These conclusions flow from some combination of reality, petty identity politics, disappointing experiences from the rudderless Bush era of the GOP, and clear-eyed political analysis. But Santorum haters and Santorum dismissers should be able to set aside their personal feelings about the man, and to listen for a moment to his message.

His most important message for the GOP, for libertarians, and for conservatives: We need to care about the working class, about people who are struggling, and about the poor. Republicans need to listen to these people — even if they occupy the 47 percent Mitt Romney so easily discarded — and talk to them, too.

The Santorum-Romney contrast became clear the night they tied for first place in the Iowa caucuses. Both men spoke about the problems with federal welfare programs. Romney castigated welfare recipients as the takers in an “entitlement society,” which is at odds with a “merit society.” This view plagues the American Right — that those who aren’t successful are necessarily that way through some personal perfidy.

Santorum, that same night in Iowa, also took aim at the welfare state. But instead of casting the poor as the bad guys, he made it clear that the poor are the victims of government programs that “increas[e] dependency.”

Rather than blame and write off the working class and the poor, Santorum’s message is to court them, to show them you are on their side, and that you are fighting for them.

Following Iowa in 2012, Santorum ran a respectable second place in the primaries. Partly, he was the default anti-Romney vote for anti-establishment conservatives. But also he connected with blue-collar voters who weren’t your typical William F. Buckley disciples, and who felt excluded by the Romney wing, and the K Street wing of the GOP.

Santorum says his strong second-place showing, as well as his multiple wins in Democratic-leaning Pennsylvania, were “not just because I stood for something. It’s because I stood for someone — the American worker.”

The importance of these voters to the GOP became clear when the votes were counted in Romney’s November 2012 loss to Obama. About 5 million to 7 million fewer white voters showed up than expected, according to political analyst Sean Trende, and “These voters were largely downscale, Northern, rural whites.” In other words, Santorum Republicans stayed home.

How to turn them out? Part of it is tapping into the perception that the game is rigged in the American economy today, with big business and big government doing the rigging.

Santorum sounded those notes in his campaign announcement May 27: “Working families don’t need another President tied to big government or big money,” he said.

When discussing the economic devastation of the rust belt, Santorum blamed the “excesses and indifference of big labor, big government, and yes, big business.”

Of “Hillary Clinton and big business,” Santorum said “their priorities are profits and power. My priority is you — the American worker.”

Santorum, on the policy front, often takes the Pat Buchanan, Ross Perot route, calling for less immigration and protection of U.S. manufacturers. The danger with big-government populism is (a) it usually corrupts over time into big-government corporatism, and (b) Democrats can always go bigger on the big-government front.

A free-market populist agenda could include a war on corporate welfare, tax simplification, a payroll tax cut, clearing away regulatory burdens to sole practitioners and small businesses, and reforming safety net programs so that they ensnare fewer and empower more.

But when Santorum talks about helping the working class and looking out for those who are struggling, he makes a point that’s crucial: “I almost feel uncomfortable talking about, ‘Well, we need to do that to win.’ ” Santorum told me at the recent Southern Republican Leadership Conference. “We need to do that because it’s the right thing for America.”

Caring for those who are struggling, stripping the insiders of their political privilege, and ending the government programs that hurt people — these are things we have a moral obligation to do. If it does nothing else, Santorum’s campaign will hopefully convince Republicans to take up this effort.

Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Sunday and Wednesday on washingtonexaminer.com.

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Vox is partnering with McClatchy to bring its explainers to local readers

You might have heard: Vox card stacks are now embeddable anywhere on the Web (Vox)

But did you know: As Vox makes its card stacks embeddable anywhere on the Web, Vox is working with McClatchy to bring their explainers to readers on McClatchy’s 29 local news sites. On Thursday, McClatchy began including card stacks in relevant national and world stories, which are then distributed to the company’s local and regional newspapers. Julie Moos, McClatchy’s director of shared news initiatives, says the card stacks will help add an additional layer of context to stories: “It’s a great opportunity to learn from a company that has been innovating in digital ways that are going to allow us to do things that we couldn’t otherwise do.”

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Why visual communication remains a vital skill for journalists

Zach Kitschke, Canva’s head of communications, says that as the Internet becomes a shouting match, it’s not about who shouts the loudest but who shouts the smartest. To make people stay on the page, share your article and remember what they read, Kitschke says visuals are essential. People only retain 20 percent of what they read, but if you put that information into an image, retention jumps to 80 percent.

The post Why visual communication remains a vital skill for journalists appeared first on American Press Institute.

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UK media banker predicts that newspapers ‘will not only survive, but prosper’

Media banker Lorna Tilbian believes that there’s cause for optimism in the newspaper industry as digital advertising revenues grow. While acknowledging the challenges that have hit the newspaper industry, Tilbian says the industry is headed toward a rebound in display advertising. Tilbian says: “I believe that the next decade will see newspapers move away from a free ad-funded model towards a diverse range of online business models appropriate to the publisher’s readership base.”

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How to break free from legacy technologies

New technologies hold potential for new ways to serve customers, but established companies can find it difficult to abandon the technologies they’ve used for so long. To spur the adoption of new technologies, Willy C. Shih says established organizations should encourage experimentation with new tools and methods. Shih also recommends designing systems so that they can be easily upgraded and can adapt to new opportunities.

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Whether or not the Apple Watch is a big hit, it will expose how little publishers know about their readers

The Apple Watch is representative of a new class of devices that demand customized experiences for their users, which Joshua Benton says will expose how little publishers know about their readers. While only a small share of news consumers will have a smartwatch in the near future, Benton notes that the first generation of news apps for the Apple Watch are shallow in content and clumsy to navigate, showing a lack of understanding of what works on wearables. Benton says: “The problem the watch outlines … is a very real one. It’s a problem for advertisers; it’s a problem for building audience; it’s a problem for customizing information that meets readers’ needs.”

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Eric Nuzum’s plans for Audible: Make it a place where people come to do their best work without worrying about paying for it

Eric Nuzum, NPR’s outgoing programming VP, has big plans for the future of Audible.com in his new role as its senior VP for original content. His ideas range from a documentary series to a game show, but he also wants Audible to help audio producers do groundbreaking work. Nuzum says he wants Audible to become, “the place where … top-shelf creative talent come to do the best work of their lives, and not have to worry about how to market it or pay for it.”

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Need to Know: May 29, 2015

Fresh useful insights for people advancing quality, innovative and sustainable journalism

OFF THE TOP

You might have heard: Vox card stacks are now embeddable anywhere on the Web (Vox)

But did you know: Vox is partnering with McClatchy to bring its explainers to local readers (Poynter)
As Vox makes its card stacks embeddable anywhere on the Web, Vox is working with McClatchy to bring their explainers to readers on McClatchy’s 29 local news sites. On Thursday, McClatchy began including card stacks in relevant national and world stories, which are then distributed to the company’s local and regional newspapers. Julie Moos, McClatchy’s director of shared news initiatives, says the card stacks will help add an additional layer of context to stories: “It’s a great opportunity to learn from a company that has been innovating in digital ways that are going to allow us to do things that we couldn’t otherwise do.”

The smart way to start your day

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+ Noted: BuzzFeed builds an in-house “opposition research” team, using a codified system to search archives, the Internet and tips for information on the 2016 candidates (Politico); Members of Gawker’s staff explain why they’re voting on unionization: “Working for this company is incredible … But we also exist in a bubble. When it bursts, I’d like us to have fair labor practices in place to protect everyone” (Gawker); Tulsa news startup The Frontier will feature local investigative reporting with a $30/month paywall (Nieman Lab); Path and Path Talk acquired by Daum Kakao (Medium); Fusion dissolves its DC office, hiring an MSNBC producer to lead new election unit from New York (Politico)

API UPDATE

The week in fact-checking
As part of our fact-checking journalism project, Jane Elizabeth highlights stories worth noting related to truth in politics and on the internet. This week’s round-up includes the history behind Jeb Bush’s nickname, fact-checking a beauty pageant, and an independent fact-checking website funded entirely by donations.

TRY THIS AT HOME

Why visual communication remains a vital skill for journalists (Huffington Post)
Zach Kitschke, Canva’s head of communications, says that as the Internet becomes a shouting match, it’s not about who shouts the loudest but who shouts the smartest. To make people stay on the page, share your article and remember what they read, Kitschke says visuals are essential. People only retain 20 percent of what they read, but if you put that information into an image, retention jumps to 80 percent.

+ Why journalism needs to move away from the “single story”: “By painting a fuller picture of what’s happening in a community or in a person’s life, our stories can more accurately reflect the beauty and range of diversity” (ivoh)

OFFSHORE

UK media banker predicts that newspapers ‘will not only survive, but prosper’ (Guardian)
Media banker Lorna Tilbian believes that there’s cause for optimism in the newspaper industry as digital advertising revenues grow. While acknowledging the challenges that have hit the newspaper industry, Tilbian says the industry is headed toward a rebound in display advertising. Tilbian says: “I believe that the next decade will see newspapers move away from a free ad-funded model towards a diverse range of online business models appropriate to the publisher’s readership base.”

+ To compete with traditional Spanish media, news startup El Español raises about $3.4 million through crowdfunding in less than two months and gives all donors a financial stake in the business (Columbia Journalism Review)

OFFBEAT

How to break free from legacy technologies (Harvard Business Review)
New technologies hold potential for new ways to serve customers, but established companies can find it difficult to abandon the technologies they’ve used for so long. To spur the adoption of new technologies, Willy C. Shih says established organizations should encourage experimentation with new tools and methods. Shih also recommends designing systems so that they can be easily upgraded and can adapt to new opportunities.

UP FOR DEBATE

Whether or not the Apple Watch is a big hit, it will expose how little publishers know about their readers (Nieman Lab)
The Apple Watch is representative of a new class of devices that demand customized experiences for their users, which Joshua Benton says will expose how little publishers know about their readers. While only a small share of news consumers will have a smartwatch in the near future, Benton notes that the first generation of news apps for the Apple Watch are shallow in content and clumsy to navigate, showing a lack of understanding of what works on wearables. Benton says: “The problem the watch outlines … is a very real one. It’s a problem for advertisers; it’s a problem for building audience; it’s a problem for customizing information that meets readers’ needs.”

+ Ken Doctor says Vox’s acquisition is another sign of more consolidation to come as big companies eat small ones (Nieman Lab), just as Tribune Publishing’s purchase of U-T San Diego was a sign as well

SHAREABLE

Eric Nuzum’s plans for Audible: Make it a place where people come to do their best work without worrying about paying for it (Current)
Eric Nuzum, NPR’s outgoing programming VP, has big plans for the future of Audible.com in his new role as its senior VP for original content. His ideas range from a documentary series to a game show, but he also wants Audible to help audio producers do groundbreaking work. Nuzum says he wants Audible to become, “the place where … top-shelf creative talent come to do the best work of their lives, and not have to worry about how to market it or pay for it.”

+ BuzzFeed may still be a bit player in news: Out of BuzzFeed’s 76.7 million multiplatform unique visitors in April, only 17 percent were coming for news (Digiday)

+ Quartz’s editor explains its strategy for its video unit (Quartz), taking cues from BuzzFeed’s platform-agnostic approach (Fortune)

FOR THE WEEKEND

+ Evan Spiegel plans to turn Snapchat into a “real business”: He believes his Millennial audience is on mobile, and they’re not being appropriately served by the big companies in Silicon Valley (Bloomberg)

+ Advice for students starting their summer internships: “Don’t let your inexperience, or your ego, or your insecurity rule. Instead, go in ready to be productive and maybe look silly” (Poynter)

+ A look at a new way political campaigns can respond to the news, from the creators of Rap Genius: Campaign operatives can annotate news stories, providing a platform for rapid responses to stories and “correcting the record” (National Journal)

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