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6/30/15

Chart of the day: US oil output increased to a 44-year high in April, just slightly below November 1970 peak

USOIL

The Energy Information Administration released monthly oil production today for April and here are some of the highlights of that report:

1. Despite low oil prices that averaged $54.45 per barrel in April, US oil production topped 9.7 million barrels per day (bpd) in April and reached the highest level of domestic crude oil output in 44 years, going back to April 1971 (see chart above).

2. US monthly oil output has been higher than April’s daily average of 9.701 million barrels in only seven other months, all in late 1970 and early 1971, placing April of this year as the 8th highest month of oil production in US history.

3. The all-time peak monthly US oil production took place in November 1970, when output averaged 10.044 million barrels per day. April’s daily production average of slightly more than 9.7 million barrels is just 343,000 barrels (and 3.4%) below US peak oil production.

4. Note in the chart that there was a gradual, four-decade decline in US crude oil that took place between the early 1970s and about 2009, and during that time domestic production fell roughly in half, from 10 million bpd in 1971 to only about  5 million bpd in 2009. Thanks to the shale revolution, America’s oil production is now almost back to the 1970 peak level of 10 million bpd, and it only took a little more than six years for the bonanza of shale oil to almost completely reverse the 40-year decline!

Bottom Line: The dramatic rebound in America’s oil production since 2009 to a near 44-year high in April of this year has to be one of the most remarkable energy success stories in US history. Despite an anticipated potential temporary slowdown in US oil production due to falling crude prices, that slowdown hasn’t yet shown up in US production statistics from the EIA. And even if we get flat oil production over the summer, we can expect future production increases later this year as oil prices rebound to above $60 per barrel by late 2015 and top $62 in 2016, according to oil futures prices on the CME. There also ongoing advances in drilling and extraction technologies that are part of a new era known as Shale 2.0, which are sure to lead to greater efficiencies, increased recovery factors, and significantly lower costs. America’s emergence as the world’s largest producer of petroleum products and its new status as an energy superpower will continue for a long time.



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If workers use government to get above-market wages, shouldn’t employers be able to do the same for lower wages?

There is general support among the public for legislated, government-mandated minimum wages for unskilled, low-skilled, and limited-experience workers. Further, it is considered perfectly acceptable for these workers (and their supporters like labor unions) to use the coercive power of the government to enact minimum wage legislation to attain above-market wages, which they are unable to get on their own in the marketplace.

It’s an economic reality that sellers (employees) always want higher prices (wages), and buyers (employers) always want lower prices (wages), so why isn’t it considered acceptable for buyers (employers) of unskilled labor services to use the coercive power of the government to achieve lower wages through maximum wage legislation?

After all, there are actually many more small businesses in America (28.2 million in 2011, according to the Small Business Administration) than there are minimum wage workers (about 3 million), and many of those small businesses employ unskilled or low-skilled workers. So it would seem natural that those small business owners, the SBA, the Chamber of Commerce, and the National Restaurant Association could organize a powerful lobbying group to advocate for a maximum wage law to enhance the profitability of America’s small businesses, restaurants and retailers, no?

Sounds crazy, right? Well, it actually happens all the time in many other ways – industry groups are always organizing and lobbying to use the political process to lower their costs or taxes, or receive taxpayer subsidies. For example:

Renewable energy firms seek taxpayer subsidies, favorable tax treatment, and loan guarantees to lower their costs.

The film industry lobbies for tax credits and film subsidies in states across the country to lower their production costs.

America’s chemical and steel companies are lobbying against US natural gas exports because they claim it would raise their energy costs.

Some of America’s gasoline refiners oppose crude oil exports because they say it will raise the costs of their main input.

The National Association of Realtors and the National Association of Home Builders aggressively protect tax deductions for homeowners, because those tax subsidies lower the cost of home ownership and help them sell more homes.

Many American businesses support the taxpayer-funded Export-Import Bank because it lowers their costs of selling products overseas.

So if it’s acceptable for US companies and industries to use the political process to lower their costs and taxes, why shouldn’t it be acceptable for them to advocate for a maximum wage legislation to lower their labor costs for unskilled workers? Should it only be acceptable for workers to advocate for higher wages, but not for employers to advocate for lower wages? That doesn’t seem fair and equitable.

For example, I’ve edited President Obama’s statement below advocating a $10.10 per hour minimum wage as an example of how support for a maximum wage of $5.05 per hour might be argued as a way to benefit the thousands of employers and small businesses who hire unskilled workers.

Weekly Address: Time to Lift Lower the Minimum Maximum Wage for Entry Level Workers and Give America’s Small Businesses, Restaurants and Retailers a Raise

In this week’s address, President Obama says this is a year of action, and he will do everything he can to restore opportunity for all, especially for America’s 25 million small business owners including restaurants and retailers. The President already lifted the wages for federal contract workers, and he calls on the American people to tell Congress to finish the job by boosting limit the federal minimum maximum wage for all unskilled, limited-experienced, entry-level workers to $10.10 $5.50 per hour and give small businesses, restaurants and retailers in America a raise.

Remarks of President Barack Obama
Weekly Address
The White House
February 22, 2014 (updated below to reflect the recent announcement that “The Gap” is closing 175 stores)

Hi, everybody.

Restoring the idea of opportunity for all requires a year of action from all of us. Wherever I can act on my own, I will – and whenever I can ask more Americans to help, I’ll do that too.

In my State of the Union Address, for example, I asked more business leaders to take action to raise their employees’ wages and start more small businesses. Because even though our economy is growing, and our businesses have created about eight and a half million new jobs over the past four years, average wages have barely budged. for unskilled workers are so high that they are preventing new small businesses from emerging and existing ones from expanding.

So it’s good news that, To see what threatens America’s retailers and small businesses, consider that earlier this week last year, one of America’s largest retailers, The Gap, decided to raise wages for its employees beginning this year. Their decision will was an honorable, but misguided attempt to benefit about 65,000 workers in the U.S., That means mistakenly assuming that more families will be able to raise their kids, finish their studies, or keep up on their bills with a little less financial stress and strain.

Gap’s misguided CEO explained their faulty decision simply – he said, “It’s right for our brands, good for our people, and beneficial to our customers.” And he’s rightwas wrong — raising Americans’ wages isn’t just a good deed; it’s not good business and it’s not good for our economy. It might helps reduce turnover temporarily, it might boosts productivity, and it might gives folks some more money to spend at local businesses in the short run. But now The Gap is experiencing financial stress partly from excessively high labor costs, and it will have to close 175 stores in North America and lay off thousands of workers – who now won’t have money to pay their bills, raise their families and finish their studies. That’s what can happen without a maximum wage to protect America’s retailers and small businesses from excessive competition for unskilled workers and greedy employees asking for higher wages. And a maximum wage law also helps to guarantee that workers won’t lose their jobs – like the thousands of now unemployed workers who lost their jobs at The Gap because of excessively high wages.

And as a chief executive myself, that’s why I took action last week to lift more workers’ wages by requiring federal contractors to pay their employees a fair wage of at least $10.10 an hour. I want to curb higher wages for unskilled, limited-experience workers with maximum wage legislation, and ensure that every unskilled worker who wants a job will find one.

In the year since I first asked Congress to raise lower the minimum maximum wage for limited-experience workers, six states have passed laws to raise lower theirs, and more states are working on it as we speak. But only Congress can finish the job and lift America’s ns’ wages small business and retailers across the country into greater profitability.

Right now, there’s a bill before Congress that would boost limit America’s minimum maximum wage to $10.10 $5.05 an hour for unskilled workers. That’s easy to remember – “ten-ten” “five-five.” That bill would lift wages increase profitability for more than 16 28 million Americans small businesses without requiring a single dollar in new taxes or spending. But even though a majority of Democrats, Independents, and Republicans across the country support raising lowering the minimum maximum wage, Republicans Democrats in Congress don’t want to give it a vote.

Hardworking business owners of Americans small businesses deserve better than “no.” Let’s tell Congress to say “yes.” Pass that bill. Give America’s small businesses, restaurants, non-profits and retailers a raise. Because here in America, no one small business owner who works hard should have to live in poverty because his or her wage costs are too high – and everyone entrepreneur who works hard, takes risks and hires unskilled workers should have a chance to get ahead.

Thanks, and have a great weekend.

Bottom Line: What seems to get lost in the minimum wage debate are the significant burdens imposed on America’s struggling small businesses when their labor costs for unskilled workers are increased by 40% or more – Obama totally ignored that issue in his original address. The benefits of “ten-ten” or $15 per hour for employees always get most of the attention by Obama and others, while the significant costs and financial burdens imposed on employers, restaurants, and small businesses are frequently ignored. To be consistent and fair, if it’s acceptable for workers to lobby for higher wages, and acceptable for businesses and industries to lobby for lower costs, taxpayer subsidies and lower taxes, then I say it should be acceptable for businesses to lobby for lower labor costs by advocating maximum wage legislation. I’m just asking for fairness.

OK, maybe I’m being a little facetious, but I’m just suggesting a more balanced debate about the minimum wage that considers both the benefits to unskilled workers and the costs to employers, so that we get both sides of the story! And if you don’t think that employers should use the coercive power of the government to pay below-market wages with a maximum wage law, why do you think that employees should use the coercive power of the government to force employers to pay above-market wages with minimum wage laws?

Comments welcome.



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The euro is a straitjacket for Greece

Editor’s note: The following is Desmond Lachman’s response to the New York Times Room for Debate question: Should Greece abandon the euro?

Albert Einstein famously remarked that a sure sign of insanity was to keep repeating exactly the same experiment and to expect a different result. Yet that is what the International Monetary Fund and the European Union have been doing with Greece over the past five years. It is also what they have continued to do in the latest round of loan negotiations. Greece would be well advised not to continue along the failed path of the past but rather to seek a new road that might offer reason for hope.

A principal cause of the Greek economic depression of the past six years, which is now on a scale of that of the United States in the 1930s, has been the pursuit of excessive budget austerity within a euro straitjacket. That straitjacket has denied Greece the ability to adjust its currency exchange rate to offset the harm of massive budget belt-tightening. The net result has been a 25 percent decline in the Greek economy and a rise in Greek unemployment to over 25 percent. It has also brought in its wake the fragmentation of Greek politics and the destruction of its middle class.

Undeterred by the disastrous results wrought by its past policy prescriptions, the I.M.F. and the European Union have persisted in asking of Greece further large scale budget cuts and painful structural reform. They do so without explaining why such policies, which have failed so miserably in the past, would now somehow lead to Greek economic growth.

Greece now has a clear choice. It can stick with the failed policies of the past that would almost certainly keep the Greek economy in a state of depression for many years to come and that would risk creating a failed Greek state. Alternately, it could abandon the euro and give itself the chance to promote economic growth that is so necessary to address its economy’s imbalances and to arrest its political rot.

This is not to suggest that opting for its own currency is without its risks and will not require careful economic management and far-reaching structural economic reform to modernize its economy. Rather, it is to say that if managed well and if supported by the I.M.F. and the international community, the introduction of its own currency would offer Greece the chance of resuming economic growth that has been denied it to date by being forced to address its economic imbalances with the euro.

If the I.M.F. and the European Union truly want Greece to succeed and not to become a failed state, they would do well to support an orderly Greek exit out of the euro.



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Neurobehavioral deficits, diseases, and associated costs of exposure to Endocrine-disrupting chemicals in the European Union

Bellanger et al (1) recently reported on the estimated costs of endocrine-disrupting chemicals (EDCs) causing neurobehavioral deficits in the European Union (EU), as part of a larger effort estimating the overall costs of EDC exposure in the EU (2). Although EDCs may well have adverse health effects, we question the authors’ high economic cost estimates. Because over 90% of the full estimated cost (€146 billion out of €157 billion) derives from the effects of organophosphates (OPs) on IQ alone, our comments here focus on that specific component.

To reach their €146 billion cost estimate, the authors combine toxicological data documenting adverse effects of certain chemicals in a controlled and observed setting with longitudinal, epidemiological data to produce a “probability of causation” of a specific effect of OPs on IQ in humans. They arrive at an estimated probability of 70–100%, or near certainty, although both methodologies have their own inherent problems, including, but not limited to, sample selection, sample variation, outcome selection, and confounding bias.

But is assessing EDC-associated costs, even conditional on demonstrated causality, straightforward? First, only two studies were selected to establish the exposure-response relationship between OPs and IQ: one involving Spanishspeaking women who were born in Mexico, lived in farmworker households, did not complete high school, and had a family income below the US poverty threshold (3); and another showing an association between OP exposure and IQ in certain ethnic groups, but not among whites (4), raising significant external validity and precision concerns. Second, a possible toxicological effect of OPs on thyroid hormone action has not consistently been measured in the human observational studies used to establish exposure-response relationships between OPs and IQ. Finally, due to the nature of these observational studies, excluding all possible confounders, such as other EDCs, is most likely impossible.

Producing cost estimates to shape policy may be helpful in promoting certain causes, but it should be done with caution. The current range of annual cost estimates spans two orders of magnitude (€2.5 billion to 239 billion) and underscores the high levels of uncertainty that arise around each of the decision points in the analysis. The authors’ median cost estimate of €157 billion (over 1% of EU gross domestic product) annually seems implausibly high if it is indeed just the “tip of the iceberg” (5).

References
1. Bellanger M, Demeneix B, Grandjean P, Zoeller RT, Trasande L. Neurobehavioral deficits, diseases, and associated costs of exposure to endocrine-disrupting chemicals in the European union. J Clin Endocrinol Metab. 2015;100(4):1256–1266.

2. Trasande L, Zoeller RT, Hass U, et al. Estimating burden and disease costs of exposure to endocrine-disrupting chemicals in the European union. J Clin Endocrinol Metab. 2015;100(4):1245–1255.

3. Bouchard MF, Chevrier J, Harley KG, et al. Prenatal exposure to organophosphate pesticides and IQ in 7-year-old children. Environ Health Perspect. 2011;119(8):1189–1195.

4. Engel SM, Wetmur J, Chen J, et al. Prenatal exposure to organophosphates, paraoxonase 1, and cognitive development in childhood. Environ Health Perspect. 2011;119(8):1182–1188.

5. Woodruff TJ. Making it real–the environmental burden of disease. What does it take to make people pay attention to the environment and health? J Clin Endocrinol Metab. 2015;100(4):1241–1244.



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Income inequality is rising again. What should we think about that?

Emannuel Saez

Emannuel Saez

Is this good news, bad news, or a bit of both? From the Associated Press and CNBC:

Incomes for the bottom 99 percent of American families rose 3.3 percent last year to $47,213, the biggest annual gain in the past 15 years, according to data compiled by economist Emmanuel Saez and released Monday by the Washington Center for Equitable Growth. “For the bottom 99 percent of income earners, this marks the first year of real recovery from the income losses sparked by the Great Recession,” Saez, a professor at the University of California-Berkeley, said in a summary of his findings. … Still, income inequality worsened in 2014. The richest 1 percent of Americans posted a much bigger increase in pay: their incomes soared an average of 10.8 percent to $1.3 million. The wealthiest 1 percent also captured 21.2 percent of all income in 2014, up from 20.1 percent the previous year.

Saez is that other French economist and inequality researcher (though he works with Thomas Piketty, author of “Capital on the Twenty-First Century). A few thoughts here:

1.) It’s always worth pointing out what Saez means by “income.” It’s basically income from the private economy, but not including the safety net or employer benefits such health insurance or retirement contributions.

Now that’s a lot, but it obviously isn’t everything. For example, using a more inclusive, after-tax income measure finds median incomes up about 40% over the past three decades versus flattish “market income” gains. The point here is that when you factor in total compensation plus the safety net, middle class incomes and consumption power are doing much better than Saez’s data would suggest. As the Manhattan Institute’s Scott Winship noted back in late 2013, “By 2011, the safety net had returned middle-class and poor households’ incomes to the highest levels ever seen. Since then, the situation has likely improved. Disposable income among the poor and middle class is probably at an all-time high.” Yay, safety net.

2.) Of course, I would prefer more of those income gains come from “market income” than the government or healthcare benefits. As Saez notes, “By 2014, bottom 99% families have recovered slightly less than 40% of the 2007- 2009 Great Recession losses.” (Again, not counting all that other stuff.) Faster growth would help a lot, though there are also reasons to worry a “rising tide” isn’t lifting and won’t lift all boats as in the past without (a) more economic dynamism and innovation, (b) more capable workers, and (c) expanded income supports.

3.) But when prosperity is broadly shared and upward mobility is robust, there is less reason to fret about rising inequality — especially if it comes from market capitalism rather than crony capitalism. See the below chart from Saez:

063015saez

Hey, incomes rose a lot during the much-revered Clinton expansion. And income growth for the 1% was five time as great as for the 99%. Overall, income going to the top 1% rose to 21.5% in 2000 from 14.2% in 1993. (And for the richest of the rich, the top 0.01%, the top income share rose to 5.1% in 2000 from 2.3% in 1993.) A rising tide wasn’t lifting all boats equally, but they were all getting a pretty good lift nonetheless. During the Obama expansion, however, top incomes are again rising about five times as fast as for everyone else, but people seem to care a lot more since their income growth is tepid at best.

4.) Is high-end inequality just going to get more and more extreme? Here is a chart showing what it’s done each year since 1993 through 2014.

063015saez2

 

We’ll see.

 



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The future is now for school choice

Although 2015 is only halfway over, it has already been a banner year for private school choice programs across the country. No longer are vouchers or tax credits simply boutique options dotting the periphery of the education system. In states like Indiana, Florida and now Nevada, they are becoming central components. Most notably, Nevada passed a huge Education Savings Account program that will potentially allow tens of thousands of families to use flexible spending accounts to pay for a fully customized educational program for their children.

As private school choice moves into this new era, there are three unresolved tensions that I think will shape the next five to 10 years. Understanding them will be key to understanding the landscape of private school choice going forward.

Old vs. new. I have written for years that private school choice programs have three mechanisms by which they can improve options for students. They can (1) give students access to empty seats in existing high quality schools, (2) encourage the growth and expansion of high quality schools, and (3) spur the creation of new high quality schools. As we move from number one to number three, risk increases.

Simply moving students into existing quality schools is about as low-risk of a venture as we have in education. The schools are proven; they are established. Provided that students can be integrated into the culture and fabric of the school and teachers are prepared to teach the new students, it is a recipe for success.

Growth and new creation are much riskier.

Many of the people who support private school choice as an exercise in matching low-income students to existing high-quality private schools get nervous when you talk about starting fresh. However, there is simply not enough capacity in existing private schools to educate all of the children that need a better education. New schools will have to emerge.

Freedom vs. protection. “Parents should have the right to choose the school that best fits their child’s needs” was the mantra of the school choice movement for its first 20 years. Allow parents to pick schools for their children, and they will find the best options. Hard-won experience, though, has caused many supporters of school choice to make a slight amendment to their unifying creed. Today, they want parents to have access to good schools. But how we define “good” is a sticky wicket, and becomes a challenge when advocates’ conception of what makes a good school clashes with the expressed wishes of parents.

A troublingly large number of school choice supporters are quick to diagnose low-income families with false consciousness. Maybe they don’t value reading and math scores as much as we do, or maybe they prefer a school that has worse academic performance but doesn’t require their child to sit on a bus for over an hour every day. That is their decision to make. What’s more, the ability of individuals to make these decisions is a feature of school choice systems, not a bug. If we want education reform to be something that is done with affected communities, not to them, a good place to start is by respecting their decisions.

Disruption vs. stability. By and large, private schools are big proponents of school voucher and tax credit programs, but ask a current private school principal about educational savings accounts and they start to get leery.

On one level, they have a straightforward concern that voucher dollars are already not enough to keep pace with what it costs to educate a child and accounts risk chipping away at that even more. A $5,100 voucher is below what the school spends to educate a child, but it can make do. If the school only gets 75 or 50 percent of that allotment, it runs into serious trouble. But even with a higher allotment, some might still hold out.

This is because educational savings accounts are designed to disrupt the traditional delivery model of education by allowing families to divide their subsidy among multiple providers. But, private schools don’t want to split the money with other providers, because most private schools use the very model of delivery savings accounts are trying to disrupt. This could be a problem.

Maybe the discomfort of private schools doesn’t bother you, but, if you think private schools are on to something (or, in more mercenary terms, if you need private schools’ political support to get your choice bill passed), there is cause for concern.

School choice programs simply establish the conditions for a market to emerge. That market relies on both demand- and supply-side responses. If parents cannot access the schools that they want their children to attend, they won’t support the program. If new schools or new providers don’t enter the market, either due to regulation or because the funding mechanism doesn’t offer them what they want, there won’t be enough seats. The better advocates understand this complex dance of supply and demand, the better they can design programs that will meet the desperate needs of so many American families.



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Discussing the Iran nuclear deal: Bolton on Fox News’ ‘America’s Newsroom’

Senior fellow John Bolton discusses the Iran nuclear deal on Fox News' 'America's Newsroom'

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Mr. Corker Goes to Caracas

Senate Foreign Relations Committee Chairman Bob Corker (R-TN) has begun a visit to Venezuela, amidst an economic and political crisis that is compounded by alleged drug trafficking by senior members of the regime of President Nicolás Maduro. Corker’s visit has raised hopes among members of the Venezuelan democratic opposition, who believe their plight has been ignored for too long by their US and Latin American neighbors.

In accepting the invitation from opposition members to visit the South American country, Senator Corker becomes the most senior member of Congress in many months who will be able to witness firsthand the crisis affecting Venezuela. In addition to meeting opposition leaders who are besieged by an increasingly authoritarian regime, Corker will also have an opportunity to confront President Nicolás Maduro to seek the release of political prisoners, press for democratic elections, and discuss the troubling allegations of drug trafficking and money laundering by leaders of the regime.

Unlike the ill-conceived and controversial June 13th meeting between the State Department’s Counselor, Ambassador Thomas Shannon, with accused drug kingpin Diosdado Cabello, Senator Corker’s visit could send a positive signal that the US Congress will defend democracy, freedom of expression, and economic liberty, rather than seek to normalize ties with a criminal regime that is abusing the Venezuelan people.

Nevertheless, Corker must be very careful not to be manipulated by Venezuelan officials and their Cuban handlers, who have been running circles around US diplomats for decades. It is likely that the Tennessee Republican is well-briefed on the prodigious corruption within the regime, leading him to be skeptical and tough in insisting on greater freedom leading up to December 6th parliamentary elections. Because Maduro and the criminals around him can ill afford election results that might expose their corruption, they are resisting the opposition’s calls for neutral international election observers and a more level playing field. Corker’s visit and continuing attention by the US Congress may be the best hope for free and fair elections and political change.

Senator Corker has been known to push back against secretive and unaccountable foreign policy. As chairman of the Senate Foreign Relations Committee, he is in a unique position to represent the views of his colleagues and ensure that US diplomats are advocating for democracy and the rule of law in Venezuela rather than favoring a soft-landing for a corrupt and repressive regime.

Outspoken Venezuelan opposition leader María Corina Machado—who was stripped of her congressional seat by Cabello—was among the first to welcome Corker’s visit. “US Senators will come to Venezuela and learn firsthand the reality, without anyone telling them stories,” Machado commented on her Twitter account. “We hope that US Senators that come to Venezuela will demand the release of all political prisoners and ask for electoral guarantees,” she added.

The impending meltdown in Venezuela is very dangerous for the stability of the region. Nearly 20 years of populist authoritarian rule has spawned an economic, political, security, and social disaster. Although it is defensible to seek to avert the country’s collapse, doing so in a way that saves the current regime for the sake of “stability” will prolong the suffering of the Venezuelan people and heighten the prospects of a more violent outcome.

Senator Corker and several other democratic leaders who have visited Venezuela in recent months understand that it is irresponsible to turn a blind eye and hope that the crisis there will not affect their countries. By exercising firm leadership, they can help the Venezuelan people liberate themselves and rebuild mutually beneficial partnerships with their neighbors.



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The debt is still a major threat

Federal budget deficits and the growing national debt are less in the news these days for a couple of reasons. For starters, annual deficits are expected to be lower for the next several years compared with the recent past. The Congressional Budget Office projects that the 2015 federal deficit will be $486 billion — a lot of borrowed money for sure, but far less than the $1.3 trillion average deficit from 2009 to 2012. CBO expects the annual deficit to remain essentially the same through 2018. Further, deficit spending and what to do about it is an unpopular topic for politicians, so if they can avoid talking about it, they do. And journalists and the public care only if there’s an immediate crisis that cannot be ignored.

But just because the issue isn’t in the news every day doesn’t mean the problem has gone away. Indeed, CBO’s recent report on the long-term budget outlook makes it clear that mounting federal debt remains the most serious non-military threat to our continued strength and prosperity.

The size and scope of the problem were made much worse by the financial crash of 2008 and its aftermath. From 2009 to 2012, the federal government ran a cumulative deficit of $5 trillion, almost doubling the national debt. This put the government in a very deep financial hole even before the retirement of the Baby Boom generation. Federal debt now stands at 74 percent of GDP, far above the post-war norm of around 35 to 40 percent. This means the country is entering a very challenging period of fiscal stress, driven by the aging of the population and rising health expenses, from a position of considerable weakness.

CBO’s long-term forecast shows federal debt will never again return to the post-war norm. Instead, the national debt will rise inexorably and exceed 100 percent of GDP in 2040. The primary cause of unending federal deficits is rapidly rising entitlement spending. In 1970, spending on Social Security, Medicare, and Medicaid totaled about 3.7 percent of GDP. By 2040, CBO expects spending on these programs, plus the subsidies made available by the Affordable Care Act (ACA), will total 14.2 percent of GDP. That’s an immense shift of resources toward consumption-oriented entitlement spending.

As bad as that CBO’s projection looks, it is almost certainly too optimistic. It assumes spending on everything outside of the big entitlements — everything from welfare programs, to highway funds, to defense spending — will fall from 9.1 percent of GDP today to 6.8 percent in 2040. For that to happen, the U.S. military would have to become a shell of what it has been for a century, even as spending on the National Institutes of Health and much else also got cut. That’s never going to happen.

Further, CBO’s baseline scenario assumes revenues will rise, from 17.7 percent of GDP today to 19.4 percent by 2040. That’s a more realistic possibility, but it still presumes a tolerance for federal taxes that is well outside of the historical norm.

CBO acknowledges that this baseline — built around current law and policy — will seem infeasible to many observers, and thus constructs an “extended alternative fiscal scenario” with differing assumptions. In this scenario, spending outside of the main entitlements is slightly higher in 2040 than it is today, and federal revenue is held close to its historical average throughout the projection period. If actual policy matched these assumptions, the result would be absolute fiscal calamity. Debt would soar and exceed 100 percent of GDP by 2030 and 150 percent of GDP by 2040.

And even these projections are likely to be too optimistic. That’s because the projections for Medicare assume implausible restraint on payments to hospitals and physicians. The ACA imposed a “productivity adjustment factor” on future payments to hospitals, which, in practical terms, means the normal inflation adjustment added to hospital reimbursement rates every year will be reduced by an average of 1.1 percentage points. And this isn’t a one-time event. The adjustment occurs every year, indefinitely. Similarly, physicians are now looking at getting no more than a 0.75 percentage-point annual increase in their fees for taking care of Medicare patients. The actuaries who do the projections of Medicare finances believe both of these restraints on payments are unsustainable and will eventually have to be overridden with new legislation. And when that occurs, Medicare’s future spending path will be well above the levels in CBO’s current forecast.

The United States is not Greece, but it is still instructive to observe what has occurred there and elsewhere when debt levels have soared. At some point, countries with high levels of public debt pass a threshold above which continued borrowing to cover expenses is prohibitively expensive or infeasible. When they reach that point, the only available path forward is painful and immediate austerity.

There’s no reason the U.S. should stumble into such a disastrous future. But avoiding it will require making serious and fundamental changes in fiscal policy, beginning sooner rather than later.

In practical terms, that means reforming the major entitlement programs so that they do not consume such an immense proportion of projected federal revenues. The key themes of a serious reform effort should be: encouraging longer working lives, e.g. by raising retirement ages and lowering explicit and implicit taxes on wages; altering programs to require middle- and upper-middle-class households to finance more of their own retirement and health-care needs out of their personal resources; improved efficiency in the health system through strong price competition and consumer choice; and more state flexibility and responsibility in running programs within fixed budgets.

It goes without saying that implementing reforms of this kind will not be easy. But, if policymakers begin the process now, they can protect current beneficiaries from any changes and implement these policies for future program participants in ways that allow benefits to grow in generosity, just not as fast as projected in current law.

The alternative is to simply ignore the problem and hope it somehow goes away. That’s effectively what policymakers are doing today. But CBO’s latest report is another reminder that pretending the problem doesn’t exist is really an invitation to be hit with a fiscal and economic crisis of such severity that everyone, politicians included, will regret not taking action to head it off.



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Brazil’s President Rousseff in Washington amidst trouble back home

President Obama welcomes his Brazilian counterpart Dilma Rousseff to Washington in the wake of bad news back home, wrought by statist policies that have smothered the country’s potential: projected inflation of 9% and a forecast economic recession of about -1.5% this year. Rousseff also is facing a political crisis generating doubts about her ability to govern, mere months into her second four-year term. Her approval rating in a recent poll was at 10%, and her allies in an unruly Congress are bucking her leadership.

Rousseff’s ruling Workers’ Party (PT) is at the center of a kickback scandal involving the state-run oil company Petrobras and other Brazilian multinationals. The investigation has yet to directly implicate Rousseff or her predecessor, Luis Inácio “Lula” da Silva. However, the arrest of the PT’s treasurer along with the recent detention of one of the country’s most powerful corporate executives (head of the construction giant, Odebrecht), suggest that the investigation is aggressive and independent.

Presidential-level engagement has been missing since Lula and his US counterpart, George W. Bush, left office. And it appears that President Obama is seeking to jump-start a dialogue at an awkward time for Rousseff.

My recent paper reviewing conditions in Latin America makes the following key points on Brazil:  Read the full report.

  • Brazil is suffering from economic malaise and a governance crisis that undermines the region’s prospects. This predicament is the legacy of leaders who relied on costly statist policies and protectionism and refused to retool their economy to make it more competitive and attractive to investment.
  • Even before her narrow victory last October, most Brazilians questioned whether Rousseff’s policies could jump-start economic growth and address the nation’s social and economic challenges. According to a poll taken in March, 62% of those interviewed rated Rousseff’s government as “bad” or “terrible,” while only 13% considered the government “great” or “good.”
  • Jump-starting economic growth and the productivity of Petrobras will take time and considerable effort. With Brazil’s vast natural resources, a regimen of overdue reforms should eventually get the economy growing again. However, scandal-ridden politics, a fractious Congress, and the president’s plummeting approval ratings may make it difficult for her new team to get traction in a second term.
  • Nothing is more important to both countries than a healthy private sector–led dialogue, which can shape a practical agenda for jump-starting reforms to make them more globally competitive through cooperation with one another. Both countries (among others in the region) stand to benefit from an industry dialogue on what it will take to develop more productive energy sectors and attract essential capital and technology.


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The student experience: How competency-based education providers serve students

Key Points

  • Competency-based education (CBE) programs tend to serve students with previous professional or academic experience. This audience affects how the programs are structured and designed.
  • CBE inverts the structure and choice of traditional higher education. The most clearly defined components of traditional higher education programs are much less structured in CBE programs, and the components of traditional higher education programs that are typically the most flexible and able to be personalized are often fixed in CBE programs.
  • Striking differences exist between CBE and traditional higher education programs in how students are recruited, admissions and credit transfer policies, how credits are earned, and interactions with peers and faculty.
  • The differences between CBE programs and more traditional higher education have important implications for student success and scalability. We need more information about how students experience these programs.

Read the PDF.

Executive Summary

The rise of competency-based education (CBE) has redefined what college looks like for a growing number of students. The basic idea underlying CBE is simple: programs award credit based on demonstrated student competencies rather than on the amount of time a student has spent in a given course. Recent advances in technology, including online courses, computer adaptive education, interactive tutoring and mentoring, and the analysis of big data, have only added to CBE’s potential. But CBE models have dramatic implications for how schools serve students, and those changes can affect student success and scalability. Unfortunately, we still do not clearly understand how students actually experience education in a CBE model—that is, the day-to-day process of learning, assessment, and progression.

In this paper, I describe how some of the most prominent CBE providers have designed their programs to meet students’ needs. I examine CBE models in comparison to the familiar phases of the traditional college experience at four-year institutions: recruiting students, starting a program, earning credits, and interacting with others.

This paper highlights how CBE programs invert the structure and choice of traditional higher education. The most clearly defined components of traditional higher education programs (like schedule and timing of classes, time to degree, course materials, course requirements, and the number of credits that must be earned at the institution) are much less structured in CBE programs. In contrast, the components of traditional higher education programs that are typically the most flexible and able to be personalized (like choice of major, choice of classes within majors, and learning objectives within individual courses) are often fixed in CBE programs.

These differences are important for a few reasons. First, recent research has convincingly shown that the structure of academic programs can have large effects on students’ performance and success. More intensive examination of how these factors affect student success is necessary as CBE programs expand. Second, the unique structures of these programs mean that they can reach traditionally disenfranchised groups of students. We need to examine how successful these programs are at reaching new markets. Finally, these programs can increase efficiency in the sector by providing credit for prior learning. This paper provides an in-depth look at the promising features of these programs and the potential shortcomings of this new form of higher education.

 

Introduction

Almost every American is familiar with what a “typical” college or university looks like, from attending college, observing a close friend or relative who has, or even just watching enough movies set in the college years. In this traditional model, most students take four or five semesterlong courses on a physical campus each fall and spring until they have collected enough credits (usually, two or four years’ worth) to graduate. The traditional rhythm of the college experience—the start of classes, midterms, reading period, and final exams followed by winter or summer break—is often taken for granted, and the emphasis on fixed periods of time is even enshrined in federal and state policy.

But not all colleges fit within this traditional mold now. Specifically, the rise of competency-based education (CBE) has redefined what college looks like for a growing number of students. The basic idea underlying CBE is simple: programs award credit based on demonstrated student competencies rather than the amount of time a student has spent in a course. Instead of having each student march through the same 15-week course and awarding credit at the end (with grades that supposedly capture mastery of course material), CBE models award credit as soon as students can prove that they have mastered a particular set of content and skills. Students move at their own pace toward clear learning goals through a series of assessments designed to measure competence. These assessments are often linked to employer-identified competencies, ideally providing students with a clear link to the labor market.

Recent advances in technology, including online courses, adaptive learning, interactive tutoring and mentoring, and the analysis of big data, have only added to CBE’s potential. But CBE models have dramatic implications for how schools serve students, and those changes can affect student success and scalability. Unfortunately, how students actually experience education in a CBE model—that is, the day-to-day process of learning, assessment, and progression—is still not particularly well-understood. But basic research on how students actually navigate these new models will be important as reformers and practitioners seek to take them to scale.

In an effort to shed some light on the student experience, this paper describes how some of the most prominent CBE providers have designed their programs to meet students’ needs. I focus on the way that CBE providers have catered to students. In contrast to traditional colleges, which can often rely on students’ general understanding of the structure of the college experience, CBE programs must market and sell their product to prospective students who may not be familiar with it, and to current nonconsumers who were not aware that more flexible options are available to them. This raises some rather fascinating questions about how some of the first movers and biggest providers have attracted students to their programs.

In that spirit, I examine CBE models in comparison to the familiar phases of the traditional college experience at four-year institutions:

  1. Learning about Programs. What types of potential students do providers target and market to? How do programs provide information to students?
  2. Starting a Program. How are admissions, enrollment, and orientation structured? How do students obtain credit for prior learning?
  3. Earning Credits. What do course plans, course materials, and resources look like, and how are they delivered? What kind of schedule are students on, if any? And how do students pace themselves through the modules and assessments?
  4. Interacting with Others. How do students interact with faculty and staff? What about peers who are also in the program?

The analysis is based on interviews with administrators at four of the largest CBE programs in the country: Excelsior College, Western Governors University (WGU), Colorado State University’s (CSU) Global College, and Capella University’s FlexPath program. In addition to these in-depth interviews, I also examined institutional documents and other resources that are publicly available. These four programs were chosen because they are well established and offer a range of student experiences. While some of these schools offer programs that are not competency-based, I will focus exclusively on their CBE programs.

One more important note: the paper is designed to describe the way institutions have endeavored to design the student experience, not necessarily the students’ actual experience, which may differ dramatically. However, in keeping with most existing research, which has focused on the design and implementation of educational programs, I focus here on the different student-facing elements of CBE programs. Future research should interview or survey alumni of CBE programs to examine how students actually experience different types of programs.

Read the full PDF.



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Ad blockers can also prevent publishers from collecting reader data

You might have heard: Driven by younger generations, ad blockers are growing in popularity, and the next version of Safari will allow iPhone and iPad users to block ads as well

But did you know: The common concern with the rise of ad blockers is the hit it can serve to advertising revenue, but it can also hurt publishers’ ability to collect data about their readers. Most ad blockers prevent sites from loading elements from certain domains and subdomains, which blocks the advertisements but also the tracking cookies from ad networks. The information gathered is valuable for both advertisers and publishers, who hope to charge higher CPMs by collecting and packaging that data.

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Washington Post’s Greg Barber: Know when to abandon an idea in favor of a better one

Greg Barber, director of digital news projects at The Washington Post, says it’s important in a newsroom to know when you need to hold a line on an idea. But Barber says it’s also important to know when to put your ego aside and be ready to tweak or abandon an idea entirely. Barber says: “If you’re not pushing past what’s available and asking what else is possible, you’ll stagnate pretty quickly.”

The post Washington Post’s Greg Barber: Know when to abandon an idea in favor of a better one appeared first on American Press Institute.



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How two projects are taking on immigration in Europe through crowdsourcing and data journalism

Two projects in Europe are covering the influx of African migrants into Italy, one through crowdsourcing and one through data journalism. Italy’s Migranti collects and publishes “positive stories of integration and solidarity,” and anyone can submit articles, photos or videos to the project. The Migrants Files, a pan-European project, is taking a data-driven approach by tracking migrants’ deaths along continental borders over the last 15 years. All of the data collected by The Migrants Files are released in an open format and are designed to let journalists and other interested parties explore and re-use the data.

The post How two projects are taking on immigration in Europe through crowdsourcing and data journalism appeared first on American Press Institute.



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How an ‘Americorps for Journalism’ could support local journalism

Amy Vernon, co-founder of Predictable.ly, says an idea like Report for America, a corps of early or mid-career journalists who will cover important local news that’s being missed, could help support quality local journalism. Vernon says local news is becoming harder for readers to find, but readers care more about local news and it’s more important to their daily lives. An Americorps-style program for journalism would not be as dependent on advertising dollars for funding, leaving the journalists free to focus on the stories.

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The problem with Huffington Post’s platform strategy: It’s trying to do the same thing everyone else is

With The Huffington Post’s plan to add 900,000 contributors through a self-publishing platform with little or no editing, Mathew Ingram says Huffington Post has the same issue it has with its video strategy: Everyone else is trying to achieve the same thing, and taking similar measures to do so. Ingram says when Huffington Post launches, there were few alternatives that could offer the same reach and distribution that it did, but the landscape is crowded now. Ingram says: “It may have 200 million unique monthly visitors, but it is no longer top of mind when it comes to platforms or publishers.”

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To get more women in media, elect more women

Barbara Lee says the issue of getting more women in media is somewhat of a chicken-and-egg problem: If there are more women writing, will they seek out stories and sources that concern women, or are more women newsmakers needed to spur change? Lee says the solution is electing more women, and covering more issues that women are worried about, which will lead to more women in media. Lee says: “The more we have women at the center of political and policy conversations, the more we will see them in news.”

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Need to Know: June 30, 2015

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

OFF THE TOP

You might have heard: Driven by younger generations, ad blockers are growing in popularity, and the next version of Safari will allow iPhone and iPad users to block ads as well

But did you know: Ad blockers can also prevent publishers from collecting reader data (Digiday)
The common concern with the rise of ad blockers is the hit it can serve to advertising revenue, but it can also hurt publishers’ ability to collect data about their readers. Most ad blockers prevent sites from loading elements from certain domains and subdomains, which blocks the advertisements but also the tracking cookies from ad networks. The information gathered is valuable for both advertisers and publishers, who hope to charge higher CPMs by collecting and packaging that data.

+ Noted: AOL will take over the majority of Microsoft’s advertising business, and will sell display, mobile and video ads on Microsoft properties in the U.S. and eight other markets (Wall Street Journal); MediaShift officially spins off from PBS, and looks to a future with more collaborations with other organizations (MediaShift); Southern Education Desk, a collaboration between public media outlets, gets a second chance with funding from Corporation for Public Broadcasting, and will narrow its focus within education (Nieman Lab); Poynter, Dallas Morning News, L.A. Times and other organizations will partner with the Pulitzer Prizes to hold events for its centennial anniversary (Poynter)

TRY THIS AT HOME

Washington Post’s Greg Barber: Know when to abandon an idea in favor of a better one (Journalism.co.uk)
Greg Barber, director of digital news projects at The Washington Post, says it’s important in a newsroom to know when you need to hold a line on an idea. But Barber says it’s also important to know when to put your ego aside and be ready to tweak or abandon an idea entirely. Barber says: “If you’re not pushing past what’s available and asking what else is possible, you’ll stagnate pretty quickly.”

+ Why journalists should care more about media’s business models: Revenue models are constantly evolving, and understanding the change will help you find new opportunities and influence your organization (TheMediaBriefing)

OFFSHORE

How two projects are taking on immigration in Europe through crowdsourcing and data journalism (Journalism.co.uk)
Two projects in Europe are covering the influx of African migrants into Italy, one through crowdsourcing and one through data journalism. Italy’s Migranti collects and publishes “positive stories of integration and solidarity,” and anyone can submit articles, photos or videos to the project. The Migrants Files, a pan-European project, is taking a data-driven approach by tracking migrants’ deaths along continental borders over the last 15 years. All of the data collected by The Migrants Files are released in an open format and are designed to let journalists and other interested parties explore and re-use the data.

OFFBEAT

How an ‘Americorps for Journalism’ could support local journalism (Inc.)
Amy Vernon, co-founder of Predictable.ly, says an idea like Report for America, a corps of early or mid-career journalists who will cover important local news that’s being missed, could help support quality local journalism. Vernon says local news is becoming harder for readers to find, but readers care more about local news and it’s more important to their daily lives. An Americorps-style program for journalism would not be as dependent on advertising dollars for funding, leaving the journalists free to focus on the stories.

UP FOR DEBATE

The problem with Huffington Post’s platform strategy: It’s trying to do the same thing everyone else is (Fortune)
With The Huffington Post’s plan to add 900,000 contributors through a self-publishing platform with little or no editing, Mathew Ingram says Huffington Post has the same issue it has with its video strategy: Everyone else is trying to achieve the same thing, and taking similar measures to do so. Ingram says when Huffington Post launches, there were few alternatives that could offer the same reach and distribution that it did, but the landscape is crowded now. Ingram says: “It may have 200 million unique monthly visitors, but it is no longer top of mind when it comes to platforms or publishers.”

+ WPP founder Sir Martin Sorrell: Traditional media is too “stuffy” for younger audiences, because they look at different sources and trust them in different ways (Guardian)

SHAREABLE

To get more women in media, elect more women (Huffington Post)
Barbara Lee says the issue of getting more women in media is somewhat of a chicken-and-egg problem: If there are more women writing, will they seek out stories and sources that concern women, or are more women newsmakers needed to spur change? Lee says the solution is electing more women, and covering more issues that women are worried about, which will lead to more women in media. Lee says: “The more we have women at the center of political and policy conversations, the more we will see them in news.”

+ Facebook is making changes to how it shows videos to users: It will be measuring how people interact with the video in ways such as un-muting a video or expanding to full screen, rather than just likes, play counts or shares (Digiday)

The post Need to Know: June 30, 2015 appeared first on American Press Institute.



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China crosses Obama’s cyber ‘red line’

Remember how President Obama failed to enforce his “red line” in Syria? Well, it’s happening again — this time in cyberspace.

On April 1, Obama drew a cyber “red line” in the sand when he signed an executive order authorizing sanctions against individuals or entities who carry out cyberattacks or cyberespionage against the United States. “Starting today,” Obama declared, “we’re giving notice to those who pose significant threats to our security or economy by damaging our critical infrastructure, disrupting or hijacking our computer networks, or stealing the trade secrets of American companies or the personal information of American citizens for profit.”

A senior administration official told The Post that the new order would put our enemies in cyberspace on notice that “if you think you can just hide behind borders . . . that’s just not going to be the case. . . . [W]e can hit where it hurts in terms of a financial impact.” The order authorizes the treasury secretary to freeze financial assets, bar commercial transactions and impose a visa ban on those involved in significant cyberattacks.

“As of today, the United States has a new tool to protect our nation, our companies, and our citizens ,” Obama declared, “and in the days and years ahead, we will use it.”

Except he’s not using it. In the days after he spoke those words, the United States discovered that Chinese government hackers had broken into the computer networks of the Office of Personnel Management — stealing the personnel records of as many as 18 million Americans.

Experts told me it was the most devastating cyberattack in the history of our country. One retired four-star general and cybersecurity expert described the OPM hack as a “Cyber 9/11.”

So how has the Obama administration responded? Did it follow through on Obama’s threat and impose sanctions on those responsible? Not even close. For weeks, the administration would not even acknowledge that China was behind the attack. Then, last Thursday, Director of National Intelligence James Clapper finally admitted China was to blame, telling an intelligence conference “You have to kind of salute the Chinese for what they did.”

Salute them? No, you don’t. You have to sanction the Chinese for what they did.

The OPM breach is catastrophic, both for our national security and for the individuals whose information has been compromised. China has stolen the personal data on countless Americans with top-secret security clearances. The regime in Beijing now possesses their Social Security and passport numbers; the names and addresses of relatives; every place they have ever lived, worked or went to school; details of their military service (including whether they worked in intelligence); all the people they “know well,” including their “foreign contacts,” and details on their “foreign activities” and “foreign travel”; all the details of their “psychological and emotional health,” including any mental health treatment; any police records “regardless of whether the record . . . has been sealed, expunged, or otherwise stricken from the court record, or dismissed”; details of any “illegal use of drugs and drug activity” and “use of alcohol”; as well as detailed financial records, including any past bankruptcies and “non-criminal court actions.” In other words, Beijing now possesses everything a foreign intelligence service could possibly need to blackmail those holding some of the United States’ most sensitive secrets.

Not only can this information be used to undermine national security, it can also be used to retaliate against those who criticized China — for example, people working for U.S. government “freedom radio” stations, such as Radio Free Asia, who use aliases to protect themselves and their relatives back home. Beijing now may have the real identities of those broadcasters and those of their family members in China.

Stolen OPM data reportedly has been found for sale on the “dark net ” — the online network used by criminals and terrorists across the globe. This is unsurprising, considering that the Obama administration discovered the breach in April but did not announce it until June 4 — giving cybercriminals a running head start to exploit stolen data while keeping those affected in the dark. And what is the administration doing now to protect those whose personal information they failed to protect? They are offering — get this — 18 months of “free” credit monitoring service and identity theft insurance. Eighteen months? The loss of personal information lasts a lifetime — and sometimes longer for family members and others whose personal information was included in the stolen data.

The failure to protect this information is appalling. But the failure to respond to an attack of this magnitude is inexcusable. In April, Obama warned that “from now on” his administration would “go after bad actors” who carry out cyberattacks on the United States. China responded by launching the most audacious attack in history.

 So, Mr. President, what are you going to do about it?


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6/29/15

Monday evening links

homeprice

1. Chart of the Day I (above). The median sales price of an existing home in May at $228,700 was just $1,700 (and 0.74%) below the all-time peak price of $230,400 in July 2006.

oilimports

2. Chart of the Day II (above). Based on new data from the EIA, US net petroleum imports fell to 26.2% this year through May, which was the lowest dependence on foreign sources of petroleum since 1971 when the country’s net imports were 24.3%.  Carpe oleum.

3. Hedge Funds vs. Blindfolded Monkeys. “The average hedge fund has produced a worse investment performance in the first half of this year than a portfolio consisting of a savings account at your local bank and a random collection of stocks picked by a blindfolded monkey,” according to Brett Arends writing for MarketWatch (“How hedge-fund geniuses got beaten by monkeys — again“).

4. Take the U.S. Citizenship Test: Get 15 or more correct answers out of 25 to pass this basic US citizen test.

GayMarriage

5. Map of the Day (above). Including the US, there are now 23 countries in the world where gay marriage is legal nationwide.

samesex

6. History of same-sex marriage in the United States in one animated GIF map (above).

7. Landmark Win For Economic Liberty: The Texas Supreme Court struck down the state’s useless eyebrow threading licensing requirements (6-3), thanks to the Institute for Justice (the nation’s only libertarian, civil liberties, public interest law firm) which helped five eyebrow threaders successfully sue the Texas Department of Licensing and Regulation for violating the state constitution by attempting to lock the entrepreneurs out of their jobs with expensive and irrelevant state licensing requirements designed specifically for cosmetologists (and not eyebrow threaders). Thanks IJ for another successful victory defending the economic liberty of entrepreneurs and small businesses in America, we’ll all a little more free today thanks to your tenacious legal advocacy.

8. Another Victory for Freedom: Effective July 1, adult possession of weeds and home cultivation of weeds will be legal in the state of Oregon. The voter-approved initiative permits adults 21 and older in Oregon to grow up to four weed plants and keep up to eight ounces of weeds at home, and possess one ounce of weeds in public.

9. Quotation of the Day on the Drug War, from Don Winslow writing for CNN (“America’s war on drugs is empowering Mexico’s drug cartels“):

So we’re winning the war on marijuana along the Mexican border — costing the violent sociopaths of the cartels millions of dollars — by legalizing it. That’s the good news.

The bad news is that the cartels have responded to this loss by shipping more coke, meth and especially heroin. The heroin epidemic in the Northeast is mostly supplied by the Sinaloa cartel, by far the dominant drug trafficking organization in Mexico today. Addicts who were using prescription opiates are turning to Mexican heroin because it’s cheaper.

So after four decades of the war on drugs, we’ve cut marijuana imports almost in half within the last two years by legalizing it, while the heroin, coke and meth just keep coming. In essence, when we stop fighting, we win. When we keep fighting, the cartels win.

10. Diversity at Facebook. Everybody is now reporting that Facebook’s latest employee diversity report reveals that it has made “very little, or no progress” over the last year, see a bunch of those reports here. Let me translate what I think the mainstream media means by no diversity “progress” at Facebook: The company hasn’t been engaging in the politically correct amount of discrimination against Asians, especially Asian men, in favor of giving preferential hiring treatment for blacks, Hispanics and women.



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Medicaid provider taxes: Closing a loophole

Brill explains how federally sanctioned state Medicaid provider taxes operate and affect federal Medicaid spending. He proposes that Congress prohibit these taxes and either put the federal savings back into Medicaid or use them to reduce federal healthcare taxes.

This article will be posted on Monday, July 13. Tax Notes subscribers can access the article here.



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Iran Talks: The final countdown?

The deadline for a nuclear deal with Iran is fast approaching while rumors swirl of a possible extension. At the same time, Iran has made clear its anti-American agenda and its designs for the Middle East. It has neither stopped its support of terrorist proxies such as Hezbollah, nor has it shown any sign of curtailing its nuclear ambitions. What will be the impact of a nuclear agreement with Iran? AEI experts are available to comment on the effects of such a deal.

Former long-time Senate Committee on Foreign Relations senior professional staff member and AEI Senior Vice President of Foreign & Defense Policy Studies Danielle Pletka:

For many who watch the Iranian nuclear weapons program and the ongoing negotiations, there has been no recovery from the jaw dropping moments of recent weeks when the United States conceded every single substantive demand that has been made of the Iranian regime. Possible military dimensions of the program? No worries. Inspections? No problem. Cooperation with the IAEA? Whatever. The reality is that there are no negotiations going on with Iran. We are simply arguing over the terms of our surrender.

Iran and rogue regime expert Michael Rubin:

Simply put, once administrations begin high-profile diplomacy, they too often will concede anything to keep hope alive. Tehran, like Pyongyang and Kandahar before it, senses desperation and understands the American political calendar. It knows if it digs in its heels, the White House will take a bad agreement over no agreement, regardless of Congressional unease. In effect, Obama and Kerry have become gamblers willing to risk everything just for one more pull of the slot machine lever. Unfortunately, when desperation trumps dispassion, the house—in the Islamic Republic of Iran—will always win.

Read Rubin’s full piece, “America’s ‘insane’ Iran approach.”

Former DoD analyst Matthew McInnis:

Expect the United States, its international partners and Iran to continuing haggling over a nuclear deal’s terms and implementation for months and years to come, even if some kind of comprehensive agreement is announced this month (or later in 2015). Congress must play a crucial role in helping to enforce the agreement and to prepare sufficient penalties for violations.

There are no indications Iran will restrain its proxies, allies and terrorist organizations – or stem its human rights abuses at home – if we get a nuclear deal. On the contrary, I expect more repression at home and more aggressive actions by Iran in the region, at least at first.

To arrange an interview with AEI Iran expert, or for other media inquiries, please contact AEI Media Services at mediaservices@aei.org or 202.862.5829.



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Improving mobility for our kids: Starting early is key

Intergenerational mobility provides a measure of how well children are faring relative to their parents. What are the chances that a child born to parents in the bottom quintile will move to the top of the income distribution? Is the child in a higher income quintile relative to the parents, or other peers? These comparisons are typically done around the age of 30 because income at 30 is a strong predictor of earnings for the rest of one’s life. However, a growing body of evidence suggests that the trajectory of a child’s life may be determined to a large extent at much younger ages, perhaps at five years old or even younger. Lifetime success may be influenced by factors beyond children’s control, such as whether they are brought up in a two-parent or single parent household, whether their parents have high incomes or low incomes, whether their home life was stable or stressful, and which neighborhoods they grew up in. It turns out that all of these factors matter tremendously in how they will fare at age 30.

Robert Putnam’s book “Our Kids” highlights the stark contrast in life experiences between children growing up in wealthy households with two highly-educated parents and children growing up in poorer households that often have only one less-educated parent. Putnam’s book collects anecdotal evidence through interviews and surveys of people around the country. While there is no one statistical database that would capture all of these effects, it is clear that what matters for children’s mobility is parent’s income, family structure and geography. Here are the numbers.

Parental Input: Money

Let’s look first at child poverty. According to 2013 data from the Census Bureau, twenty percent of children under the age of six live in poverty. For children living with single mothers, the poverty rate was 55 percent, markedly higher than the 10 percent rate for children living in married-couple households. Children growing up with single mothers have access to far fewer resources and opportunities than children living with high income, married-couple parents. A 2014 report from the USDA shows that a typical husband-wife family spends 50 percent more on child-related expenditures compared to a single parent family. Moreover, this gap holds among children of all ages. As an example, for children 5 years of age, a husband-wife couple with one child spends an average of $16,210 on child-related expenses whereas a single parent household spends only $11,620. The gap is wider for larger family sizes.

Parental Input: Education and Time

Women are the primary caregivers for children, on average. The American Time Use Survey shows that women spend almost twice as much time on childcare activities compared to men. This is particularly true when children are under the age of six. These involve physical care activities, education, reading to, playing with and traveling with children. All parental inputs matter for children, but the time use data suggest that the mother’s educational background and the amount of time she devotes to her children could be even more important for children’s development.

This is a particularly relevant finding in light of America’s changing family structures and the rise in homes headed by single mothers. As mentioned before, the poverty rate for single mother households is more than five times that for families headed by a married parent and the rise in single mothers explains much of the rise in poverty in recent decades. However, aside from income, another area of concern is often the lack of education and time spent with children. As I have written earlier, single mothers typically have low levels of education. Studies show that if a single mother is poor and has no college education, the children are disadvantaged when it comes to readiness for starting school. Further, single mothers are more likely to work non-standard schedules. This likely leaves them little time to provide the same investments in their children as married mothers do. This is documented by Sara McLanahan, who shows that children born to more educated women are gaining resources while those born to the least-educated are losing them.

Neighborhoods

Aside from parental inputs, geography matters as well. Individuals who live in high-poverty areas experience much worse outcomes than those who live in lower-poverty neighborhoods. Communities with greater residential segregation, poor quality schools, and high teenage pregnancy and high school drop-out rates offer reduced upward mobility. The longer the time children spend in such areas, the less likely they are to complete high school and the worse their long-term outcomes will likely be.

Impact on Mobility via Test Scores and College Attendance

All these factors impact children’s achievement in school and over their lifetimes. A recent study shows that the difference in test scores between children from high and low income families is roughly 30 to 40 percent larger among children born in 2001 than among those born in 1976. This gap exists immediately when the children begin kindergarten and persists as children get older. As per the study’s authors, this gap is likely driven by increasing parental investment in children’s cognitive development, rather than income inequality per se, since the same income difference now corresponds to a 30 to 60 percent larger gap in achievement than it did in the 1970s.

Susan Dynarski writes that a child born into a poor family has only a 9 percent chance of getting a college degree but the odds are 54 percent for a child in a high income family. Moreover, boys in single parent households were significantly less likely to go to college. Chetty et al. document that high income households are significantly more likely to have kids going to college than low-income kids. This obviously matters for lifetime earnings since National Center for Education Statistics estimate that workers without a bachelor’s degree earn about $20,000 less on average than those with a bachelor’s degree.

The evidence is clear. To improve economic mobility for future generations, we need to start early. Adding resources to poor households by expanding programs like the EITC that encourage work would not only help the parents but also the children. Research finds that the EITC expansion in the Tax Reform Act of 1986 significantly increased labor force participation, especially among less-educated single mothers. Using data from the National Longitudinal Survey of Youth, Dahl and Lochner found that a $1,000 increase in income as a result of the EITC raises children’s combined math and reading test scores in the short-run. In addition, I have written earlier about considering ways to fund maternity leave through using existing child related tax credits. This would encourage labor force participation for women and allow them to invest in their long-term career. Finally, experimenting with measures to allow families to move to neighborhoods with better opportunities and environments is critical as well. Research shows that when families move from high-poverty areas into lower-poverty areas using housing vouchers, this significantly improves children’s college attendance rates and lifetime earnings, provided this happens early in life.

If we want our young adults to realize the American Dream, we need to start the hard work now when they are kids.



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Infographic: Polls on patriotism

As we prepare to celebrate Independence Day with songs of national celebration, flags waving in the breeze, parades, and family gatherings, polls reveal Americans’ strong love of country.

For more polls on patriotism, see the AEI Public Opinion Study.

Bowman_Patriotism-Infographic-2015

Infographic by Olivier Ballou and Eleanor O’Neil.



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AEI Public Opinion Study: Polls on patriotism

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How proud are Americans of their country? As Independence Day approaches, this AEI Public Opinion Study focuses on patriotism in the United States, examining Americans’ self-professed patriotism, how people describe others’ patriotism, and reasons people are proud of the US. This study also looks at how patriotism in the United States compares to patriotism in other countries.

  • Most are patriotic: A majority of Americans consistently say they are patriotic. In a February 2014 Pew Research Center that asked people how well the term “a patriotic person” described them on a scale of 1 to 10—with 10 being absolutely perfect and 1 totally wrong—65 percent said 8 to 10. In National Opinion Research Center’s 2014 General Social Survey, 67 percent said they were very proud of being American.
  • Points of pride: Sixty-six percent said they were very proud of America’s armed forces in the 2014 General Social Survey, the top response of the 10 categories included in the question. Fifty-three percent said they were very proud of America’s history, and 46 percent said they were very proud of its scientific and technological achievements.
  • Love (and criticism) of country: In a May 2015 CBS News/New York Times survey, 63 percent said things in this country have pretty seriously gotten off track. Despite this criticism, 85 percent said they loved America in a February 2015 Economist/YouGov online survey, and, in a March 2015 Fox News survey, 83 percent said the United States is the best country in the world to live in.
  • US patriotism in context: In the most recent multicountry World Values Survey, Qatar ranked highest in self-expressed patriotism, with 98 percent of its citizens saying they were “very” proud to be citizens of that country. In comparison, 56 percent of Americans said they were very proud to be American citizens, locating our country more than midway down in this category.

See the infographic on polls on patriotism:

Polls on Patriotism



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‘Our Kids': Will the next generation of Americans enjoy the American Dream


At AEI’s recent event, “The American dream in crisis,” Robert Putnam, Charles Murray, and William Julius Wilson discussed problems brought to light in Putnam’s new book, “Our Kids: The American Dream in Crisis.” The book expounds upon several alarming trends – the widening income gap, growing class segregation, and the disappearance of working-class communities – and investigates their implications for America’s children.

Putnam’s presentation highlighted several startling class-based disparities in children’s upbringings, cited historical trends in income inequality and other potentially-related variables, and suggested ways to revitalize the American dream.

“Increasingly the most important decision a child will make is choosing their parents, and that is fundamentally un-American,” Putnam observed. Class disparities in children’s environments, communities, and opportunities are present at birth and take effect during childhood. Possibly the most dire consequence of these disparities, according to Putnam, is the fact that poor children have no safety nets. By contrast, potentially life-shattering blunders become harmless learning experiences for wealthy kids, thanks to their highly-invested support networks.

In Putnam’s view, America is in a second Gilded Age, and today’s upper class, like that of the 1890s, must experience a “civic reawakening.” To illustrate this point, he presented a chart showing that after the first Gilded Age, social capital, philanthropy, economic equality, and political consensus increased until the mid-1960s. According to Putnam, the establishment of public high schools sparked these upward trends by diminishing educational inequalities and jumpstarting economic productivity.

In hopes of reviving those positive trends, Putnam proposed what he calls “purple policies,” which combine conservative and liberal ideas. With the goal of reviving equal opportunity, Putnam advocates for the careful development and reform of programs such as early childhood education, apprenticeships, tutoring, community colleges, and parent coaching.

While Murray agreed with Putnam’s observations, he questioned the efficacy of “purple policies.” Citing a study in Nature, Murray said that factors such as family income, parenting style, and education account for a limited amount of variance in outcomes like cognitive ability. Genes predict these outcomes more accurately.

According to Murray, declines in inter-class marriage are creating an ability gap that exacerbates the opportunity gap. Children’s emotional intelligence, IQ, and overall success, Murray said, are highly correlated with each other and with parental IQ. The complication of “assorted mating” suggests that Putnam’s solutions may not suffice. “I hope for a better outcome,” said Murray. “I do not expect it.”

Wilson drew attention to another complication: race. According to his 1980 book, “The Declining Significance of Race,” economic class predicts life trajectory with greater accuracy than race. This statement is even truer today, said Wilson, and according to a study that compared intra-racial income gaps, the divide between rich and poor is widest among African Americans.

Putnam concluded, “There’s a core of things we could all agree on that would make things better.” We may not know what caused the American dream’s malaise. We may disagree as to the proper cure. But we can agree that an alive-and-well American dream guarantees our kids an equal chance at success.



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Gay marriage: Too soon or at last

Congratulations to the gay-rights community for its victory in Obergefell v. Hodges. Anyone familiar with liberty’s history in our country knew that the American people, sooner or later, would reach this point. But with unprecedented speed (President Obama campaigned in 2008 against gay marriage), gays won a sweeping right to marriage equality thanks to a 5-4 majority of the Supreme Court.

While many will welcome the ends, we may all come to regret the means. Taken together with this term’s other blockbuster case, King v. Burwell, which upheld Obamacare’s health-insurance subsidies, Obergefell only accelerates the loss of democratic self-government to a slim majority of the nine unelected justices of the Supreme Court.

No one can seriously claim that the framers of our Constitution or of the 14th Amendment, which guarantees both due process and the equal protection of the laws, understood gays to have a right to marriage. Our Constitution sets out certain core rights necessary for self government – free speech, criminal justice rules, for example – and requires all officials of the three branches of government, and indeed states as well, to devote their fullest efforts to protection of these rights.

But for everything else, our Constitution relies on the political process for decisions. For select national issues such as defense or interstate commerce, we turn to our elected representatives in Washington. Our federal system reserves most other questions in life, such as crime, family law, property, contracts, and accidents, to the states.

Elected officials do not just set tax rates, establish militaries, or build roads. They also create rights and establish entitlements. Some of our nation’s most central rights, such as Social Security or the ban on workplace discrimination, did not come as gifts from the Supreme Court. Instead, these policies came after years of rough-and-tumble politics and represented a broad social consensus.

Obergefell short-circuits the political process. Instead of campaigning to persuade majorities in each of the 50 states, as they had done in some states, gay-marriage advocates only had to persuade five justices to impose a single rule on the nation. While many may welcome Obergefell’s result, its method takes a fundamental question away from the realm of democratic self-government and transfers it into the hands of five men and women who never stand for election and hold their jobs for life.

Indeed, the political nature of Obergefell becomes readily apparent in the contradictory, vague logic of the majority opinion by Justice Anthony M. Kennedy. The holding fits within none of the established precedents governing the due-process and equal-protection clauses. Kennedy says marriage is a fundamental right, but he concedes that American society had long understood that right to be only between a man and a woman. He suggests the right to equality may require gay marriage, but gays do not receive the heightened constitutional protection reserved for racial and religious minorities.

Kennedy could have recognized that gays should receive the same protections against discrimination as gender, but he could not, because recognizing sexual orientation as a protected class might open up a Pandora’s box of new constitutional claims by every self-defined group.

Some will respond that society was moving in the direction of gay marriage anyway and that the court was following the popular will. If that is the case, then the court should allow the political process to work. Justices have no special expertise in divining the wishes of the American people. Indeed, as Justice Antonin Scalia noted in dissent, the justices are a strange bunch. They mostly hail from the same regions of the country, went to the same schools, hold similar religious beliefs, and have the same professional backgrounds. An isolated, expert Supreme Court makes perfect sense when the Constitution defends minority rights against the oppressions of the majority, but it makes no sense when settling policy reserved for democratic politics.

In fact, judicial seizure of an issue from the political process may make the consensus in favor of gay marriage less settled. Take abortion, for example. In the years leading to Roe v. Wade, states had been liberalizing their abortion laws. Roe prevents political resolution of the abortion issue and leads to constant efforts to narrow or reverse abortion rights through litigation, not political persuasion.

Gay marriage will remain subject in the future to the whim of a fifth justice who might choose to side with Chief Justice John G. Roberts Jr. and Justices Scalia, Clarence Thomas, and Samuel A. Alito Jr. If gay marriage had resulted from the decisions of the majorities in each of the 50 states, it would be far more difficult, if not virtually impossible, to reverse. While the end of segregation by Brown v. Board of Education provides an all-important counterexample, legal historians today are coming to believe that racial equality accelerated far faster thanks to Congress’ passage of the Civil Rights Act of 1964 and the Voting Rights Act of 1965.

Unfortunately, the court does not limit its dismissal of democracy to gay rights, but even extends it into less momentous questions of the running of the welfare state.

In King v. Burwell, which involved issues of political significance, but of no constitutional moment, the justices again displayed their suspicion of politics. In King, plaintiffs challenged the Obama administration’s nationwide grant of subsidies for the purchase of health insurance. According to its plain text, the Affordable Care Act extended the tax credit only to those who purchase a policy on an “exchange established by the state.” Even though the act defined state to include only the 50 states and the District of Columbia, but not the federal government, the Obama administration granted tax credits to buyers in states with no exchanges. Thirty-six states refused to set up insurance marketplaces, leaving only an exchange run by the Obama administration as an option.

The ACA’s plain meaning may well have stalled Obamacare by making health insurance unaffordable in the states without tax credits, but still requiring that everyone purchase it (an unconstitutional use of federal power upheld, unfortunately, three years ago by Roberts’ fifth vote). This tough result emerged from the political process in Congress. It may have been a mistake, a wrong decision, or a ham-handed move to force states into signing up with Obamacare. If Congress made a poor choice, it was up to Congress to fix it, or for the voters to replace their representatives in Washington.

But instead of allowing the political process to run its normal course, the Supreme Court decided to rewrite Obamacare. On behalf of a six-justice majority, Roberts concluded that Congress could not possibly have intended such a draconian limit on tax credits. It must have meant to give the subsidy to everyone, because that would have made for a more effective overhaul of the health-care system. In other words, the court ignored the plain text of the law passed by Congress to write a better one. The justices may have better legal talents than the average legislator, but our Constitution does not give them the responsibility to make the compromises and judgments reserved to the legislative process.

Sadly, Roberts penned the central dissent in Obergefell on the ground that the majority was rewriting the Constitution. “Under the Constitution,” he wrote, “judges have power to say what the law is, not what it should be.” But if he wonders where his colleagues got the idea to assume the power of a supra-legislature, he need only look at his own opinion in King v. Burwell. This fault, however, is not his own, or in his stars, but is common to a court that is slowly, but surely, taking away the right of our democracy to govern itself.



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