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Underwater: Home Values in 2012 Battleground States

Thursday, January 19th, 2012
Jason Gold


Jason Gold is the director of the Progressive Policy Institute’s “Rethinking U.S. Housing Policy Project” and senior fellow for financial services policy.

Anne Kim


Anne Kim is the managing director for policy and strategy at the Progressive Policy Institute.

by Jason Gold and Anne Kim

As the 2012 election approaches, the nation’s unemployment rate will continue to drive the political debate and, in turn, the fortunes of President Obama and his GOP rivals.

Despite the central focus on unemployment, however, another number deserves equal attention as a barometer of the nation’s overall economic health: housing values.

As catastrophic as it is to lose a job, the percentage of Americans who are unemployed is actually exceeded by the percentage of Americans who have either lost significant wealth from their homes or are currently “underwater”—owing more on their mortgages than their homes are worth. Since 2006, Americans have lost a total of $7 trillion in housing wealth—a figure that, according to the Federal Reserve, is more than half of the nation’s aggregate home equity.

In recent days, the Obama Administration has telegraphed its intention to devote more energy to housing—and with a focus on foreclosures and defaults. While this is laudable, the Administration should not neglect a second front: the tremendous loss of housing wealth.

In this report, we make our case by analyzing home values in the 16 battleground states that will serve as the proving ground for 2012. In 15 of these states, home values have fallen by an average of 16% since October 2008. We also offer up suggestions for tackling this issue.

No doubt, every contender for the White House will have a jobs plan. But no economic plan can be complete without an equally robust plan to rebuild housing—and in particular, to rebuild housing wealth. Policies that address this loss of wealth, even for those not at immediate risk of losing their homes, makes sense both politically and economically

Negative equity: A new crisis in middle-class wealth

In a reversal of the optimism that is typical of Americans, 41% of people in a January 2012 poll—including a majority of seniors—said they feel less financially secure than last year, while just 14% said they feel more secure.

The loss of wealth—and housing wealth in particular—might help explain why.

According to the Federal Reserve’s Survey of Consumer Finances, 62.5% of families suffered a loss of wealth from 2007 to 2009. Moreover, says the Fed, “declines in home equity were an important driver of decreases in wealth.”

  • Homes made up 47.6% of the total non-financial assets held by Americans in 2009. Between 2007 and 2009, American homeowners saw their equity drop by a median of 11.8% (or $18,700).
  • From its peak in 2006, the Case-Shiller housing index (the “Dow” of home values) has fallen 32.93%, including an 11.33% decline from October 2008. Median home prices have fallen from $196,600 to $164,100.
  • As many as 12 million Americans are now “underwater” with mortgages that are more than their homes are worth.

The loss of home equity has broad implications for the nation’s economy beyond mere sentiments of economic confidence. For example, underwater homeowners can’t qualify to refinance their homes, which means they can’t take advantage of one of the Administration’s most successful monetary policies: low interest rates. A 1% lower interest rate on a $200,000 mortgage can mean $168 less in interest payments per month—money that could be spent in the broader economy on other things.

Underwater borrowers are also stuck in their homes, unable to trade up or move out (a problem that also limits job mobility). Negative equity also means no nest egg for homeowners nearing retirement, and fewer resources to draw on for households seeking to finance a new business, help a child through college or weather out a spell of unemployment or ill health.

Download the report.

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Crowd Control: The Need for a Spectrum Management Mitigation Fund

Monday, December 19th, 2011
Anne Kim


Anne Kim is the managing director for policy and strategy at the Progressive Policy Institute.

by Anne Kim

Whether it’s 4G cell phones, light-as-a-feather laptops or the latest tablet, Americans are enjoying a wireless revolution. In 2010, Americans typed, tapped, texted, and called on an estimated 300 million mobile devices.

But all this increased connectivity is taking a toll on the nation’s increasingly crowded airwaves. The Federal Communications Commission (FCC) warns of a “spectrum crunch” that could hit as early as 2013, given how quickly wireless traffic is growing.

Innovative companies are devising new ways to maximize spectrum efficiency so more users can take up less space. But while these advances deserve strong support, they’re also not cost-free. In some cases, existing “legacy” users must retrofit older and less efficient technologies to adjust to these new uses.

This brief proposes a “spectrum management mitigation fund” to help legacy users defray the inadvertent costs of adapting to innovations in the marketplace. This fund would involve no new federal money and instead would be financed from a portion of revenues from “voluntary incentive auctions”—a mechanism endorsed by the FCC to encourage more efficient spectrum allocation between current and prospective licensees.

Creating the fund would reconcile two goals: it would both encourage much-needed innovation while also acknowledging the legitimate concerns of users with older technologies. Moreover, it would obviate the politicization of spectrum management issues currently occurring in part due to the absence of a mitigation mechanism. For example, this fund could help re-solve the current controversy between the legacy GPS community and the wireless broadband start-up LightSquared—it could partially compensate legacy GPS users for the cost of retrofitting existing devices, thereby clearing the path for LightSquared to deploy its network.

With the benefits of spectrum innovation too great pass up, this fund could be an important next step to ensure Americans enjoy the next generation and beyond of new wireless technologies.

Read the entire report.

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The Credit Gap: Easing the Squeeze on the Smallest Businesses

Thursday, December 15th, 2011
Brian Martin


Brian Martin is an independent policy analyst and researcher with 21 years of Capitol Hill experience on economic policy, health care, disaster recovery, and federal budget issues.

by Brian Martin

Among the many casualties of the 2007-2008 financial meltdown were small businesses. As the financial system virtually shut down, millions of small business owners across America found themselves unable to get the credit they desperately needed to run their businesses, let alone expand. As a result, thousands of otherwise flourishing firms were forced into bankruptcy or closure, with thousands of American jobs lost.

While this credit freeze has begun to thaw, one critical group of small businesses—firms with fewer than 50 workers—are still at risk of being left behind. These smallest of small businesses provide as much as 30 percent of all private-sector employment. Yet because of their small size, they are much less likely to benefit from government small business loan programs, and they are less likely to win loans from big commercial banks. For this group, the credit crunch is a serious impediment to their success. Many of these businesses relied on personal assets, such as home equity, for financing. But with the crash in home prices, those resources have evaporated. Instead, many smaller businesses rely almost exclusively on risky and expensive credit cards to finance their firms, if they can get credit at all.

Smaller businesses clearly need more options for getting credit, and credit unions, which already help many small borrowers finance their self-employment and small business ventures with personal loans, lines of credit, and limited business loans, could be an ideal source of credit for these underserved entrepreneurs. However, credit unions are blocked from offering as much help as they could because of an arbitrary and outdated cap on the amount of small business lending that credit unions can do. Bipartisan proposals to increase this limit—such as the ones offered by Sens. Mark Udall and Susan Collins and Reps. Ed Royce and Carolyn McCarthy—would help credit unions fill the “credit gap” that these smaller businesses face. It would also be a sensible and cost-effective way to jumpstart the job creation our country urgently needs.

Read the entire brief.

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501 Shareholders: Redefining “Public” Companies to Help Emerging Firms

Tuesday, December 13th, 2011
Anne Kim


Anne Kim is the managing director for policy and strategy at the Progressive Policy Institute.

by Anne Kim

In 2004, Google made headlines by “going public,” raising $1.7 billion in what was then the biggest initial stock offering since the heady days of the tech boom. Next spring, Facebook is expected to make its debut with a $10 billion initial public offering (“IPO”)—one of the largest ever.

Dreams of a splashy IPO may spur many entrepreneurs, but in reality, fewer and fewer companies are going public. While the stock exchange has long been the fastest and easiest way for companies to finance their growth, reaching the public market is getting tougher for emerging companies.

Thanks to a combination of legislative, regulatory, and technological changes, going public is more expensive, more burdensome, and less appealing than in the past—especially for younger, smaller, and less sexy companies that aren’t expected to become Google-sized blockbusters. One recent study puts the average cost of going public at $2.5 million, plus ongoing annual costs of $1.5 million a year to keep up with paperwork and regulatory requirements.

The result has been a drought in IPOs and a crisis in access to capital for young companies seeking to grow. From 1991 to 2000, the U.S. stock markets saw an average of 530 IPOs every year. Since then, the average annual number of newly-minted public companies has plummeted to about one-fourth that number. In 2009, just 61 companies went public. Moreover, the number of public companies listed on U.S. stock exchanges shrank from 8,000 in 1995 to 5,000 in 2010.

But at the same time that going public has become tougher for younger companies, outdated rules are forcing some firms to either go public prematurely—or else radically curtail their growth to stay private. The problem is an outdated cap on the number of shareholders that a company can have before it’s essentially required to go public. The so-called “500 shareholder rule”—first promulgated in 1964 to define the “public” companies in need of regulatory oversight—now poses a significant hurdle to growth for many companies. These firms may not be ready or don’t want to go public but have few other options for raising capital because they can’t expand their investor pool. Thus, some companies nearing the 500-shareholder threshold may face an unpalatable choice: either bear the financial and regulatory costs of going public or forego opportunities for growth.

By raising the shareholder threshold to 1,000 or 2,000, as policymakers such as Sens. Tom Carper and Pat Toomey and Rep. David Schweikert have proposed, younger companies will have more room to grow, invest and create jobs, as well as more flexibility before making the plunge into going public. Coupled with other efforts to fix the broken IPO market, an amendment to this rule could give younger and smaller companies a much-needed boost toward growth.

Amending this rule would also be an important step in modernizing and reorienting the nation’s overall regulatory scheme toward promoting innovation—an effort that is crucial to America’s future economic renewal.

Read the entire brief.

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Innovation by Acquisition: New Dynamics of High-tech Competition

Wednesday, November 30th, 2011
Michael Mandel


Michael Mandel is the chief economic strategist at the Progressive Policy Institute and the founder of Visible Economy LLC, a New York-based news and education company.

Diana G Carew


Diana G. Carew is an Economist at the Progressive Policy Institute.

by Michael Mandel and Diana G Carew

Right now policymakers are grappling with the implications of slow economic growth in the United States and the rest of the industrialized world. One response is austerity—cutting back on spending, accepting reduced living standards, and slowly digging out from the mess.

A better option, though, is innovation, which accelerates growth, creates new jobs, and makes U.S. products and services more competitive world-wide.  Innovation has the potential for raising incomes, an especially important task given that real median household incomes have fallen more than 10 percent since the beginning of the recession.

While innovation can come from any industry, the technology sector is particularly important, as it has been the main source of growth and innovation in the economy for the past 35 years.  The locus of innovation started with the personal computer in the late 1970s and 1980s; shifted to software and the internet in the 1990s; and now has moved to mobile, search, and more broadly communications, where U.S. companies are world leaders. Today’s technological advances have facilitated the emergence of innovation “ecosystems,” or platforms on which many different companies can build products or provide services.

The growth of tech companies stems from a combination of organic growth and business acquisitions, driven by the rapidity of innovation. It’s a virtuous circle, where successful technology companies pay large sums for small startups, which in turn induces the formation of more startups. For that reason, technology acquisitions need not diminish competitiveness, even as they accelerate innovation and job growth.  Indeed, as we will see later in this paper, periods of high levels of acquisition have also been periods of rapid job growth.

One question is whether there is anything that government policy can do to encourage technology innovation in the short run.  The answer is probably not—while the government does have plenty of long-term levers, such as spending on basic research and investment in science and engineering education, there are few ways to speed up innovation over the next year.  On the other hand, government policy is actually quite capable of discouraging innovation in the short-run, through outdated regulation and restrictive antitrust policy that does not take the importance and uniqueness of the technology sector into consideration.

Antitrust policy, as applied to the technology sector in its current form, can impede the virtuous circle of nurturing innovation through startups and acquisitions. By slowing down or blocking acquisitions, antitrust policy can limit the exit routes for startups, potentially reducing their value and making it less attractive for investors to put their money into the next round of innovative new companies.

This paper will explore the role of technology acquisitions in encouraging innovation, facilitating economic growth, stimulating jobs, and enhancing our quality of life. First, this paper examines past trends in technology acquisitions, establishing that waves of industry acquisitions have been an integral part of the rapid innovation in tech since the 1980s.  We focus in particular on the post-2005 acquisitions by major tech firms.

Second, we examine the question of whether technology acquisitions facilitate innovation, and in particular high-impact innovations. In fact, the benefits to the rest of the economy are connected to the speed at which potential innovations are moved to market and scaled up. This is because the value created from rapid technological innovation is distributed across all users of the new technology.

Further, this paper will show that periods with high levels of acquisitions generally also tend to be periods of rapid employment growth. This is not meant to be an assertion of causality, but to rather argue that tech acquisitions are part of the same innovative process as employment growth.

To summarize: (1) when done correctly, acquisitions in the technology sector can and have encouraged innovation by bringing new products to market faster and more effectively; and (2) acquisitions and innovation in the technology sector are positively associated with economic growth and job creation. What’s more, mainstream economic theory associates sustainable economic growth in the long-term with constant innovation and technological progress. Looking at technology acquisitions from this perspective provides a different framework from which to assess the potential implications of excessive antitrust regulations, and current antitrust policy.

Read the entire memo.

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Regulators: Listen to Workers

Tuesday, November 29th, 2011
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

CWAAT&T is a big company, which perhaps explains why federal regulators are ganging up to block its proposed merger with T-Mobile. Big must be bad, right?

That’s certainly the view of consumer advocacy groups, which routinely oppose business mergers as threats to competition. They seem to have the ear of the Federal Communications Commission, which announced last week that it would join the Justice Department in opposing the deal, citing concerns about job losses and higher consumer prices.

But there’s another important group of stakeholders that regulators should be listening to: AT&T’s workers. They are urging the government to take a broader view of the merger’s potential impact on U.S. investment and competitiveness.

At a time of shrinking private sector union membership, it’s worth noting that the company’s 42,000 wireless workers are represented by the Communications Workers of America (CWA). The union issued a report this month strongly supporting the company’s acquisition of T-Mobile as a spur to innovation and a job-creator.

Such arguments merit attention, if only because it’s not often that you find a successful U.S. company in synch with its unionized workforce. Beyond that, however, there are compelling economic reasons for regulators to start looking at proposed mergers through the eyes of America’s producers, not just its consumers.

President Obama, fresh from a tour of the Asia-Pacific, articulated them in a recent radio address. “Over the last decade, we became a country that relied too much on what we bought and consumed,” he said. “We racked up a lot of debt, but we didn’t create many jobs at all.” Reviving U.S. competitiveness, he said, will require Americans to focus more on building things than buying them. Obama also called for “restoring America’s manufacturing might, which is what helped us build the largest middle-class in history.”

Opponents say CWA backs the merger because it has its eyes on T-Mobile’s workers, who aren’t organized. But the union’s analysis of the $39 billion deal emphasizes AT&T’s plans to boost capital investment in the wireless broadband sector. It cites think tank estimates that such investment could produce up to 96,000 new jobs, not including another 5,000 jobs the company promises to bring back to the United States from overseas.

AT&T has said it will merge its networks with those of T-Mobile, and invest an additional $8 billion to expand its 4G LTE wireless broadband infrastructure. It also has pledged to retain T-Mobile’s non-managerial workers. The CWA report asserts that, absent the merger, T-Mobile is headed toward extinction. Having been cut loose by its parent company, Deutsch Telecom, it lacks the capital to acquire spectrum and build its own 4G network.

Opponents of the merger—including AT&T’s competitors as well as consumer groups—say the merger would give the telecom giant too much market power and lead to higher prices. Regulators ought to carefully weigh such claims. But as a forthcoming PPI report argues, mergers and acquisitions among dynamic, high-tech companies often have the effect of spurring more innovation. In the fiercely competitive telecommunications sector, prices for wireless services—voice, text, and data—have been trending downward, even as quality of these services has improved dramatically.

Even so, low consumer prices aren’t the only public interest at stake here. More important is expanding investment—in technological innovation, a highly skilled workforce and world-class infrastructure. This is the only way to make U.S. companies and workers more competitive in global markets that does not entail lowering our standard of living.

As the Progressive Policy Institute has documented here, the telecom sector is leading a dynamic wave of innovation in mobile telephony and broadband that is creating good jobs in the United States. That’s no mean achievement at a time when unemployment is stuck at 9 percent—and about twice that if you take into account people who have given up looking for jobs.

While other corporations chase cheap labor by moving production offshore, we have dubbed communications companies like AT&T, Verizon and Comcast “Investment Heroes” because they are making huge bets on the American economy. Surely that’s something government regulators ought to factor into their decisions.

Our country needs a new model for economic growth that emphasizes production over consumption, saving over borrowing, and exports over imports. Such a shift is essential not only to rebuild the great American job machine, but also to rebalance a global economy that has become overly dependent on U.S. consumers.

It’s time once again for America to be a global center for production—and we need federal regulators to get with the program too.

Photo credit: Kat Gloor

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Policy Brief: How a Competitiveness Audit Can Help Create Jobs

Friday, November 18th, 2011
Michael Mandel


Michael Mandel is the chief economic strategist at the Progressive Policy Institute and the founder of Visible Economy LLC, a New York-based news and education company.

Diana G Carew


Diana G. Carew is an Economist at the Progressive Policy Institute.

by Michael Mandel and Diana G Carew

America is deep in a jobs crisis. The unemployment rate is stuck around 9 percent nationally, with states such as Florida, Nevada and South Carolina in double digits. Real wages for educated workers are still plunging, while new college graduates are squeezed between rising student loans and the toughest labor market in recent memory.

Against this backdrop, the global economy looms large as both threat and promise. There’s a justifiable fear that America has lost its competitiveness, that our jobs are being siphoned to China and India, that the wages of our young people are being depressed by a global education glut. At the same time, the rapidly growing markets of the developing world could be a potent target for U.S. exports of goods, services, and intellectual capital, creating good jobs here.

In this global economy, we need to know which industries are internationally competitive, which ones aren’t, and whether the gaps are closing or widening. Unfortunately, the reality is this data currently does not exist. And what we don’t know hurts us, because it prevents us from pursuing effective strategies for boosting US jobs.

Although the government collects reams of economic data, it doesn’t measure what’s most vital to our ability to reverse America’s jobs decline: how our goods and services stack up against those of China and other competitors in terms of price.

You can’t fix what you can’t measure. We need a new national jobs strategy that begins with an accurate way of measuring America’s competitive prowess, on an industry-by-industry basis.

This policy brief proposes that the Bureau of Labor Statistics undertake a “Competitiveness Audit.” The Competitiveness Audit will compare the price of selected imports with the comparable domestically produced goods and services. That will tell us the size of the ‘price gap’ between imports and domestic production.

Read the entire brief.

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Policy Brief: All of the Above: What to do about Housing—Now

Friday, October 21st, 2011
Anne Kim


Anne Kim is the managing director for policy and strategy at the Progressive Policy Institute.

Jason Gold


Jason Gold is the director of the Progressive Policy Institute’s “Rethinking U.S. Housing Policy Project” and senior fellow for financial services policy.

by Anne Kim and Jason Gold

In the immediate aftermath of the financial crisis in 2008, housing was at the top of policymakers’ priorities. Congress saw a flurry of proposals to deal with the mounting wave of defaults and foreclosures, and the collapse of Fannie and Freddie led first to intensive federal intervention and then to one round of full-fledged debate on what the future of these agencies should be.

Today, with housing in at least as bad a shape as it was in 2008, housing is now the forgotten debate. The conversation over Fannie and Freddie has stalled, if not died altogether; the government’s efforts to stem foreclosures have been largely unsuccessful; and with a handful of bold exceptions, few policymakers are putting forward ideas to restore homeowner equity, cope with burgeoning inventory and spark new demand in the market.

But with the economy continuing to sputter, housing is a problem that policymakers can’t afford to ignore any longer.

While some may debate the chicken-and-egg issue of whether housing can lead the recovery or whether a recovery can stabilize housing, there’s no dispute that the health of the housing market and the broader economy are inextricably intertwined. Housing and its related industries account for roughly 19 percent of the American economy.1 Since the housing crash, housing—especially construction—has shed 2.9 million jobs2 since the start of the recession. Not coincidentally, the states with the highest unemployment rates—California, Nevada, Rhode Island, Michigan3—are among the states that have been hit hardest by the housing crisis. Moreover, Americans
have lost $7 trillion in equity,4 which is dampening consumer confidence as well as forcing many families to rethink their future plans and expectations of financial security.

Read the entire brief.

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Policy Brief: HomeK Accounts: A Down Payment on Homeownership and Retirement

Wednesday, October 19th, 2011
Anne Kim


Anne Kim is the managing director for policy and strategy at the Progressive Policy Institute.

Jason Gold


Jason Gold is the director of the Progressive Policy Institute’s “Rethinking U.S. Housing Policy Project” and senior fellow for financial services policy.

by Anne Kim and Jason Gold

Two years after the meltdown in the nation’s housing market, housing re- mains weak. Home prices fell to a new low in the first quarter of this year— confirming a feared “double-dip” in the market. Prices are now down nearly 33 percent from their high five years ago.

With housing and its related industries—construction, home retail, etc.— constituting almost 19 percent of the nation’s economy over the last 40 years,2 restoring the housing market will be essential to a sustained eco- nomic recovery. And key to this will be ensuring a robust market for first- time home sales.

Yet, even with home prices as low as they currently are, many potential homebuyers may face more—not fewer—obstacles in their path to home- ownership. In the aftermath of the crisis, credit is tighter, as are down pay- ment requirements. At the same time, the stresses of the economy have meant that potential homebuyers are in worse shape financially than they once were.

The creation of a new, tax-preferred mechanism for down payment sav- ings—a “HomeK”—could help first-time homebuyers navigate these new hurdles while also promoting more savings. And if structured as a carve-out from existing retirement planning mechanisms, not as a new type of ac- count, the HomeK would have the added benefit of promoting retirement savings and will not contribute to further tax code complexity.

Read the entire brief.

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Sperling on “Deferred Maintenance”

Friday, October 7th, 2011
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

Scott Thomasson


Scott Thomasson is the economic and domestic policy director for the Progressive Policy Institute. Follow @st_ppi

by Will Marshall and Scott Thomasson

Gene SperlingPresident Obama’s $447 billion jobs plan includes some constructive – literally – provisions for upgrading America’s economic infrastructure. These shouldn’t be controversial: Who could be against putting people to work rebuilding the rickety foundations of U.S. productivity and competitiveness?

Well, Republicans, that’s who. They have dismissed the president’s call for $50 billion in new infrastructure spending as nothing more than another jolt of fiscal “stimulus” masquerading as investment.

It’s hard to imagine a more myopic example of the right’s determination to impose premature austerity on our frail economy. From Lincoln to Teddy Roosevelt to Eisenhower, the Republicans were once a party dedicated to internal nation building. Today’s GOP is gripped by a raging anti-government fever which fails to draw elementary distinctions between consumption and investment, viewing all public spending as equally wasteful.

But as the White House’s Gene Sperling said yesterday, Republicans can’t claim credit for fiscal discipline by blocking long overdue repairs of in the nation’s transport, energy and water systems. There’s nothing fiscally responsible about “deferring maintenance” on the U.S. economy.

Sperling, chairman of the president’s National Economic Council, spoke at a PPI forum on Capitol Hill on “Infrastructure and Jobs: A Productive Foundation for Economic Growth.” Other featured speakers included Sen. Mark Warner, Rep. Rosa DeLauro, Dan DiMicco, CEO of Nucor Corporation, Daryl Dulaney, CEO of Siemens Industry and Ed Smith, CEO of Ullico Inc., a consortium of union pension funds.

Fiscal prudence means foregoing consumption of things you’d like but could do without if you can’t afford them – a cable TV package, in Sperling’s example. But if a water pipe breaks in your home, deferring maintenance can only lead to greater damage and higher repair costs down the road.

As speaker after speaker emphasized during yesterday’s forum, that’s precisely what’s happening to the U.S. economy. Thanks to a generation of underinvestment in roads, bridges, waterways, power grids, ports and railways, the United States faces a $2 trillion repair bill. Our inadequate, worn-out infrastructure costs us time and money, lowering the productivity of workers and firms, and discouraging capital investment in the U.S. economy.

Deficient infrastructure, Dulaney noted, has forced Siemens to build its own rail spurs to get goods to market. That’s something smaller companies can’t afford to do. They will go to countries – like China, India and Brazil – that are investing heavily in building world-class infrastructure.

As Nucor’s DiMicco noted, a large-scale U.S. infrastructure initiative would create lots of jobs while also abetting the revival of manufacturing in America. He urged the Obama administration to think bigger, noting that a $500 billion annual investment in infrastructure (much of the new money would come from private sources rather than government) could generate 15 million jobs.

The enormous opportunities to deploy more private capital were echoed from financial leaders in New York, including Jane Garvey, the North American chairman of Meridiam Infrastructure, a private equity fund specializing in infrastructure investment. Garvey warned that what investors need from government programs is more transparent and consistent decision making, based on clear, merit-based criteria, and noted that an independent national infrastructure bank would be the best way to achieve this. Bryan Grote, former head of the Department of Transportation’s TIFIA financing program, which many describe as a forerunner of the bank approach, added that having a dedicated staff of experts in an independent bank is the key to achieving the more rational, predictable project selection that investors need to see to view any government program as a credible partner.

Tom Osborne, the head of Americas Infrastructure at UBS Investment Bank, agreed that an independent infrastructure bank like the version proposed by Senators Kerry, Hutchison and Warner, would empower private investors to fund more projects. And contrary to arguments that a national bank would centralize more funding decisions in Washington, Osborne explained that states and local governments would also be more empowered by the bank to pursue new projects with flexible financing options, knowing that the bank will evaluate projects based on its economics, not on the politics of the next election cycle.

Adding urgency to the infrastructure push was Fed Chairman Ben Bernanke’s warning this week that the recovery is “close to faltering.” Unlike short-term stimulus spending, money invested in modernizing infrastructure would create lasting jobs by expanding our economy’s productive base.

Warning that America stands on the precipice of a “double dip” recession, Sperling said it would be “inexcusable” for Congress to fail to act on the president’s job plan. He cited estimates by independent economic experts that the plan would boost GDP growth in 2012 from 2.4 to 4.2 percent, and generate over three million more jobs.

The political battle over Obama’s jobs plan centers on how it’s paid for. Senate Democrats have proposed a surtax on millionaires. Unlike tax hikes in general, this idea is popular, and Democrats clearly hope to use it to crack the GOP’s monolithic opposition to raising taxes.

However that battle ends, Congress must salvage the plan’s infrastructure provisions, including its call for an independent infrastructure bank.

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Six Reasons the Supercommittee Will Succeed

Wednesday, September 7th, 2011
The Progressive Policy Institute




by The Progressive Policy Institute

PPI Senior Fellow Paul Weinstein finds six reasons to believe the Congressional Supercommittee will succeed:

Whatever you think of Standard and Poor’s decision to downgrade America’s credit, their justification was fairly plain. Political gridlock has managed to scuttle several successive efforts to get a handle on the federal debt. And few, if anyone, is sanguine that the new “supercommittee” in Congress will have any better luck.

But a closer look reveals that, despite the nation’s pessimism, there are several reasons to believe that the 12-member supercommittee may be able to implement a plan that sets the nation back on track. The setup has been rigged to force a deal. So, in an age where “shorting” the market has become a sort of dirty word, the smart money may be in betting that Washington will enact a responsible comprehensive budget framework by the end of the year.

First, the dynamics of the committee itself suggest that that building sufficient support in the room will be that much more palatable. Negotiators need only corral seven of the twelve members (50 percent plus one) to send any deal straight to the floor of both houses of Congress. By comparison, the Bowles-Simpson Fiscal Commission was required to receive a full 77 percent, and managed only 61. In essence, the fact that a decision by any single member could boost any proposal past the required threshold will compel every member of the commission to negotiate in a serious manner. That diminishes the likelihood that political shenanigans will scuttle this deal like they have undermined previous negotiations.

Read the other five by clicking here.

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Why America Needs a New Deal for Labor and Business

Tuesday, September 6th, 2011
The Progressive Policy Institute




by The Progressive Policy Institute

Just before Labor Day, PPI’s President Will Marshall had an opinion piece in The Atlantic, in which he proposed reorienting the relationship of organized labor. Rather than adversaries, they should be partners. Here’s an excerpt:

President Obama is cobbling together a new jobs package for September, but it won’t be enough to revive the economy. Instead of offering another grab-bag of micro-initiatives, the administration needs to embrace a different model for growth that stimulates production rather than consumption, saving rather than borrowing and exports rather than imports.

This strategy emphasizes investment in the nation’s physical, human and knowledge capital–infrastructure, skilled workers and new technology. That’s a better way to raise U.S. wages and living standards than a new jolt of fiscal stimulus.

Getting consumers spending again will boost demand, but much of it will leak overseas via rising imports, stimulating foreign rather than U.S. production. In a world awash with cheap labor, where technology gaps are narrowing rapidly, a wealthy society like ours can thrive only by speeding the pace of economic innovation and capturing its value in jobs that stay in America.

The shift from a consumer-oriented to a producer-centered society won’t happen without a new partnership between labor and business–and a shift in outlook among workers themselves. Organized or not, U.S. workers should think of themselves first and foremost as producers rather than consumers. They have a compelling interest in keeping the companies they work for competitive, and in supporting a new economic policy framework that enables investment, entrepreneurship and domestic production. This reality points to new relations between workers and companies, and new political alliances.

A GRAND BARGAIN FOR LABOR

In the post-war compact of the 1950s and 1960s, workers offered loyalty and labor offered peace to companies in return for stable jobs with decent pay and benefits. But the deal between labor and capital changed as globalization took hold. Workers gave up job security; in return, they got low consumer prices and access to easy credit. Despite access to cheap foreign goods, however, real incomes fell for most households, as real wages dropped and job growth in most parts of the private sector virtually disappeared. Easy credit was used to fund consumption rather than investment in human capital.

Now, at a time when America’s economic preeminence cannot be taken for granted, the interests of workers are converging with those of companies, foreign and domestic, that want to invest in the U.S. economy. In a new compact for competitiveness, workers would pay more attention to innovation, workplace flexibility and productivity gains. Companies would invest more in upgrading workers’ skills, help them balance the pressures of work and family, and pay them middle class wages and benefits.

Two unions are pointing the way toward such a bargain: the United Auto Workers (UAW) and the Communications Workers of America (CWA).

Read the rest by clicking here to find out how. Read Marshall’s full policy briefing on the subject by clicking here.

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