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Congressional Republicans are astonishingly unpopular, and they deserve to be astonishingly unpopular. Remarkably, three-fifths of self-identified Republicans disapprove of the job congressional Republicans are doing, which tells you something. The good news is that a small number of elected conservatives, led by Utah Sen. Mike Lee and Florida Sen. Marco Rubio, have been pointing the way towards a GOP worth supporting. Both men have been making the case for a domestic policy agenda that explicitly, and creatively, advances middle-class economic interests. Most recently, in the Wall Street Journal, Lee and Rubio have outlined a new tax proposal that is a much bigger deal than it appears to be at first glance.

Drawing on Lee’s recent call for overhauling the personal income tax, Lee and Rubio create a two-rate structure (15 and 35 percent) that eliminates and revamps various tax expenditures while also adding an expanded child credit. Like Robert Stein, the father of family-friendly tax reform, Lee and Rubio justify this new child credit on the grounds that it represents a corrective to the tax bias against working parents. The political case for an expanded child credit has always struck me as strong, and so this aspect of their plan is very welcome.

Yet it is Lee and Rubio’s approach to overhauling corporate taxes that deserves particularly close attention. The recent controversy over high-profile corporate inversions has given the corporate tax reform conversation new life, and Lee and Rubio are right to weigh in. In the...

In this space, I’ve been following the evolution of the digital currency bitcoin, which has gotten big enough to merit an academic paper on it from two economists affiliated with the Federal Reserve Bank of Boston, essentially asking whether bitcoin has viability or usefulness as a currency. 

In order to answer that question, they lay out what it means to be a viable form of money. There are three purposes of money, as economists generally see it: as a medium of exchange, as a unit of account, and as a store of value.

Bitcoin essentially fails on the last two of these: For one, its price has been and probably will continue to be so volatile that it’s not a good way to hold value (“store of value”) or measure how much value you have (“unit of account”). That’s partly because, as the paper notes, currencies have generally not been viable over very large areas (bitcoin being accepted globally, if only in limited places) and when they depend on some external factors to determine their value (in bitcoin’s example, the actions of digital “miners”), rather than the actions of a central bank. The last objection might be taken by a lot of libertarians and the Paulites who’ve enthused over bitcoin as begging the question — they like bitcoin because it’s not tied to a central bank. But as the Fed economists point out, in both theory and practice, there are good economic reasons, in the modern wealthy world, to prefer...

Something very unusual is happening in Los Angeles. Instead of fighting innovative new businesses in service to deep-pocketed incumbents, local taxi regulators are very tentatively moving towards deregulation. No, they’re not putting themselves out of business outright, but they’re trying to help traditional cab companies change how they do business. Though taxi service is only one small slice of L.A.’s sclerotic economy, the fact that local regulators are adjusting their tactics at all offers lessons for how we might revitalize urban America.

The rise of ride-sharing companies like Uber, Lyft, and Sidecar has greatly improved the quality of local taxi service in L.A. Before the emergence of these smartphone-enabled services, it was often extremely difficult to get a cab, not to mention expensive. Like most large cities, L.A. tightly restricts the number of licensed taxi cabs, and this artificial scarcity shielded incumbent cab companies from competition. But now riders have a wide range of options from services that have effectively lifted the cab on drivers able to accept money in exchange for rides, and they’ve come to find the incumbents wanting.

So why have the traditional cab companies allowed this to happen? One quirk of California’s taxi regulations, as Laura J. Nelson of the Los Angeles Times reports, is that while a local Board of Taxicab Commissioners regulates the traditional licensed cab companies, Uber, Lyft, and Sidecar are regulated by the statewide California Public Utility Commission. The political influence of the cab companies thus counts for less than it might...

Medicaid is a mess, and a very expensive one at that — the health-insurance program for low-income Americans is administered by states but has dozens of federal mandates and rules that drive up Medicaid costs. In response, the states cook up creative financing techniques to shift more costs back to the feds. The end result, among other things, is higher taxes for everyone and poorer care for Medicaid patients.

In his new health-care plan, Avik Roy, a fellow at the Manhattan Institute, proposes changes to the Medicaid system that would end the state-federal finance battle, give each entity clear cut responsibilities, and improve Medicaid patients’ access to quality care.

So how did Medicaid become a mess in the first place? In large part, state-federal Medicaid cost sharing.

The federal government pays around 60 percent of states’ traditional Medicaid costs (richer states get a bit less, poorer states a bit more). This creates all kinds of problems, but here’s just one example Avik provides of how this can be distortionary: If a state levies a new tax on Medicaid premiums or providers, which is then passed on in Medicaid payments, the federal government pays 60 percent of the amount of the tax to the state, which pays just 40 percent, essentially to itself. Roy lays out an example of how states can profit from these taxes in his plan:

A $15,000 Medicaid plan, thereby subject to $1,200 in sales and premium taxes, might be 60 percent subsidized by the federal government, leading to...

On Monday, Jonathan Martin of the New York Times reported on how Democratic and Republican candidates have been adapting to a changing cultural landscape. Rising support for same-sex marriage, for example, has transformed what had been a wedge issue for social conservatives on the right into a wedge issue for social liberals on the left. And on a wide range of issues relating to women in the workforce, including the contraception mandate and pay equity, Democrats have exploited GOP flat-footedness to build upon their traditional advantage among women, and in particular unmarried women. Drawing on the work of Ruy Teixeira and Alan Abramowitz, I assume, Martin observes that while white voters without a college degree represented 65 percent of the electorate as recently as 1980, they represented 36 percent as of 2012, and their share continues to shrink. And so, Martin maintains, “a growing presence of liberal millennials, minorities, and a secular, unmarried and educated white voting bloc will most likely force Republicans to recalibrate.”

Ramesh Ponnuru, addressing a similar set of issues in Bloomberg View, sees matters differently. While he recognizes that public attitudes on same-sex marriage and legalized marijuana have changed, and that conservatives will talk less about them as a result, he makes a strong case that abortion is a different matter: first, public opinion has not shifted to the left on abortion; and second, talking less about abortion won’t do conservatives much good. Rather, he argues that conservatives need to identify areas where social...

The Wall Street Journal has published an outstanding editorial on the success of Tesla, the boutique manufacturer of high-end electric automobiles, in extracting $1.3 billion in tax subsidies from Nevada for its new $5 billion ”Gigafactory,” to be built in Reno. Much of the editorial simply details the various provisions of the deal, which will leave crony capitalists everywhere salivating. It is worth noting that, as Kevin Bullis warned in MIT Technology Review last year, there are reasons to doubt the economic viability of Tesla’s new battery factory, not least because sluggish sales for electric vehicles have led to a glut of battery manufacturing capacity. Though I’m sure Tesla will do its best to drum up interests in its vehicles, despite the fact that they’ve been plagued by serious questions about their reliability, and though Tesla is indeed planning to release a mass-market product at a lower price point than its luxury sedans, larger changes in how Americans live and work might be challenging for Tesla’s business model, as they have been for all automobile manufacturers. If Tesla were operating according to the old-fashioned rules of free enterprise, I wouldn’t care in the slightest if the Gigafactory were a boondoggle in the making. Indeed, I might celebrate the company for its daring. But federal subsidies have been crucial to keeping the hothouse flower that is Tesla alive since its inception, which makes the gargantuan scale of the project seem like something other than a triumph of the entrepreneurial spirit. Had Nevada eliminated property and sales...

Politico reports that Senator Elizabeth Warren’s student-loan “refinancing” bill, which suffered death-by-filibuster back in June, will be resurrected in the Senate as early as this week. The legislation would drop the interest rate students are paying on older loans from around 7 percent to about 4 percent, which is the rate the government charges for newer loans.

That’s a transfer payment from taxpayers to people who have attended college. But Senator Warren insists her bill merely levels the playing field by granting students the right to refinance. “With interest rates near historic lows, homeowners, businesses and even local governments have refinanced their debts,” she wrote in an op-ed on Tuesday. “But a graduate who took out an unsubsidized loan before July 1 of last year is locked into an interest rate of nearly 7 percent.”

As I noted last spring, students already have the right to refinance their loans. They can go to any private lender and ask for a lower rate, just as homeowners and business can. The reason that few students do, of course, is that they are getting a great deal — a generous government subsidy — on their existing federal-direct or federally guaranteed loans. Private lenders are rarely in a position to offer better terms.

The Warren bill would allow students to refinance with the federal government, but why should taxpayers agree to accept lower interest payments? In the private sector, lenders will allow refinancing only if they fear losing loans to their...

Though Louisiana is generally considered a Republican state for purposes of presidential elections, its politics are famously idiosyncratic, with power alternating between candidates who identify as reformers or populists, tendencies which can be found in both parties in Louisiana. Rep. Bill Cassidy, the Republican candidate, first served in the Louisiana state Legislature before being elected to the U.S. House of Representatives in 2008. Incumbent Sen. Mary Landrieu, the Democratic candidate, held two state government offices before joining the U.S. Senate in 1996. Sen. Landrieu is the chair of the Committee on Energy and Natural Resources. She is also a member of a political dynasty with deep roots in Louisiana, and a strong connection to the state’s African-American population. 


Rep. Bill Cassidy (R) v. Mary Landrieu (D)


Abortion has become a key issue in the race with Gov. Bobby Jindal singed new abortion legislation into law in June. Cassidy will likely use Landrieu’s pro-choice position against her since Louisianans tend to lean right on abortion issues. Landrieu is running on her experience in the Senate and fight against he President to protect energy industry jobs, a large source of employment in the state. Landrieu’s conservative critics have recently attacked Landrieu’s many efforts on behalf of the District of Columbia, the argument being that Landrieu has become a creature of Washington.

Though Landrieu began with a significant lead, the two candidates switched positions at the start of 2014 and the race has been very close since. Now, it is a near perfect tie with both Landrieu and...

Though Georgia is considered a relatively solid Republican state in presidential elections, its changing demographic composition has made it an increasingly attractive target for Democrats. 

The Republican candidate, David Perdue, has been working as a businessman for 40 years, including roles as CEO at both Reebok and Dollar General. He also chaired the National Committee on Workforce and Development. The Democratic candidate, Michelle Nunn is the CEO of Points of Light, a volunteer coordination organization, and was appointed to the President’s Council on Service and Civic Participation under Bush. She considered running for U.S. Senate in 2004, but ultimately decided against it.                                                                                                       

David Perdue (R)      v.     Michelle Nunn (D)


The candidates’ histories in the private sector have driven the debate so far. Nunn has attacked Purdue for job layoffs as the result of mergers he oversaw as a CEO and for outsourcing jobs to exploit foreign labor. You can also expect to hear about Nunn’s salary of $225,000 as the CEO of Points of Light and about the layoffs that occurred when she took over the organization. Nunn’s team also leaked campaign memo outlining Nunn’s weaknesses as a candidate, calling her...

That, of course, won’t be an unfamiliar lesson for many right-of-center policy types, or conservatives in general, but it’s always one worth bearing in mind nonetheless, because sometimes there are things we can do about it. It came to mind when I read this piece in Governing magazine, entitled “Ohio’s Bad Idea for Boosting Welfare-to-Work.” It caught my eye because I was interested in learning why a welfare-reform program with work requirements failed. Here was the program:

[In 2013] Ohio — for the first time in 18 years — started to see [its welfare] rolls climb, a function most likely of the effects of the Great Recession. The reversal got the attention of Republican Senate President Keith Faber, who late in the 2014 session added a provision to the state budget that would give welfare caseworkers bonuses for moving clients from welfare to work. Under the Faber plan, five counties will be chosen to participate (currently it’s not clear how they will be selected).

On its face, this seems like a good, old-fashioned and sensible run-government-like-a-business notion. Not only will it incentivize caseworkers to hustle, but it may illuminate some particularly successful tactics in finding folks jobs. It’s also not an unheard of notion. There are numerous welfare-to-work programs run by nonprofits that operate on a pay-for-performance basis. Providers get a certain amount upon evaluating a client’s skills and needs, a certain amount upon training, some more upon placement, and even further payments for clients who stay in their jobs...

In 2010, Richard Arum and Josipa Roksa revealed in their book Academically Adrift that of the 2,300 undergraduates they had studied at a wide array of four-year colleges and universities, as many as a third demonstrated almost no progress at all in developing their critical thinking, complex reasoning, and writing skills, and even those who did demonstrate some improvement demonstrated very little. Some critics dismissed their findings, arguing that because the standardized test they used to gauge student learning (the Collegiate Learning Assessment) had no real stakes attached to it, it should come as no surprise that most students performed poorly. 

Now, however, Arum and Roksa have released a follow-up study tracking these students as they entered the brutal mid-2009 labor market, which Kevin Carey summarizes in The Upshot.

Even after statistically controlling for students’ sociodemographic characteristics, college majors and college selectivity, those who finished school with high C.L.A. scores were significantly less likely to be unemployed than those who had low C.L.A. scores. The difference was even larger when it came to success in the workplace. Low-C.L.A. graduates were twice as likely as high-C.L.A. graduates to lose their jobs between 2010 and 2011, suggesting that employers can tell who got a good college education and who didn’t. Low-C.L.A. graduates were also 50 percent more likely to end up in an unskilled occupation, and were less likely to be satisfied with their jobs.

Yet the vast majority of students were convinced that their higher education experiences were worthwhile, including those who’d been essentially weeded out of the labor market by employers. “Through diplomas,...

There’s a lot of speculation about the chances of Republicans taking the Senate in the November 4 midterm elections. In The New Yorker, John Cassidy recently lamented:

Just in case you haven’t you haven’t had enough bad news, here’s a bit more from the domestic-politics desk. With less than a hundred days until the midterm elections, the Republicans now have a very realistic chance of retaking the Senate, which would leave them in over-all control of Capitol Hill for the next two years.

Forecasts indicate that that Cassidy may have good reason to worry – The Upshot puts the chance of a Republican takeover at 64 percent:

The Washington Post echoes this prediction, reporting a 63 percent chance that the Republicans will be in the majority after the November elections.

The GOP needs six seats to win the Senate, and there are seven currently Democratic seats up for grabs in states that Romney won in 2012. Historically, midterms go poorly for the incumbent party, and President Obama’s rock bottom approval ratings certainly aren’t helping the Democrats. Even so, there are quite a few races that are shaping up to be close.

Over the next several days, The Agenda will provide information and analysis on the candidates and key issues as well as recent polling data for these close races. 


Rick Perlstein’s The Invisible Bridge, a sweeping account of the American political scene from Richard Nixon’s 1972 reelection to the presidential campaign of 1976, when Ronald Reagan emerged as the Republican heir apparent, has occasioned two excellent reviews.

The first, by Geoffrey Kabaservice in The National Interest, author of Rule and Ruin, an account of the transformation of the GOP from an ideologically diverse to an ideologically unified party, surprised me. Having scathingly criticized the conservative movement that came to dominate the Republican Party, I had expected Kabaservice to sympathize with Perlstein’s jaundiced take on charlatanism of the modern Republican right. Instead, Kabaservice teases apart what he sees as Perlstein’s too-neat division of American society into those who had grown suspicious of patriotic shibboleths in the wake of Watergate, with whom the author very clearly identifies, and the innocents who clung bitterly to the idea of America as “God’s chosen nation,” and who came to resent liberal critics of mainstream American mores. This neat framework overlooks the “complicated and somewhat contradictory views” held by conservatives and liberals alike, almost all of whom are “both innocents and skeptics in various measures.” According to Kabaservice, “today’s conservatives are simultaneously critics and boosters of America, fearful of its big government and deeply suspicious of its politics and culture while in the same breath maintaining that it is still the envy of the world.” To single them out as uniquely ingenuous is to fail to do them justice, and to give their political rivals more credit than they deserve.

And having closely studied...

It’s all too common: The backers of a broad-based political movement claim their cause is steeped in evidence, but a perusal of the research reveals more hope than substance. The Common Core education standards are a good example. As I noted last week, George Washington University’s compendium of 60+ research papers on Common Core included just two focused on the standards’ impact on student achievement, and the results were mixed at best.

The people who developed and validated the Common Core have themselves acknowledged its weak evidence base. That’s clear from an article in the November 2013 issue of the American Journal of Education. Written by two UC Santa Barbara professors, Lorraine M. McDonnell and M. Stephen Weatherford, the article features anonymous interviews with Common Core’s leading designers. The article’s purpose is academic — to analyze whether Common Core’s development fits the social-science model for how research affects policy — but it contains a lot of practical information that should inform the ongoing standards debate.

McDonnell and Weatherford are clear that research evidence did play a role in Common Core’s development, but almost all of the evidence was used either to identify problems (such as America’s poor ranking on international tests) or to generate hypotheses (for example, that higher achieving countries have superior standards). When it came time to actually write the standards, the developers could not draw from a large store of empirical evidence on what works and what doesn’t. They had little to go on...

Robert J. Gordon offers yet another pessimistic assessment of America’s future growth prospects in his latest NBER working paper. While the CBO projects that U.S. GDP will grow at an average annual rate of 2.2 percent over the next decade, Gordon estimates that the economy will instead grow at a rate of 1.6 percent:

Forecasts for the two or three years after mid-2014 have converged on growth rates of real GDP in the range of 3.0 to 3.5 percent, a major stepwise increase from realized growth of 2.1 percent between mid-2009 and mid-2014. However, these forecasts are based on the demand for goods and services. Less attention has been paid to how the accelerated growth of real GDP will be supplied. Will the unemployment rate, which has declined at roughly one percent per year, decline even faster from 6.1 percent in June, 2014 to 3.0 percent or below in 2017? Will the supply-side support for the demand-side optimism be provided instead by a major rebound of productivity growth from the average of 1.2 percent over the past decade and 0.6 percent for the last four years, or perhaps by a reversal of the minus 0.8 percent growth rate since 2007 of the labor-force participation rate?

The paper develops a new and surprisingly simple method of calculating the growth rate of potential GDP over the next decade and concludes that projections of potential output growth for the same decade in the most recent reports of the Congressional Budget Office (CBO) are...

Though I often disagree with Justin Fox, I’m a fan of his writing. And so I was surprised by his recent discussion of Jake Rosenfeld’s new lament for organized labor’s decline, What Unions No Longer Do. I have yet to read Rosenfeld’s book, and it’s possible that there is a great deal that’s been lost in the translation from the book to Fox’s discussion of it. Just to be clear, I’m reacting to Fox’s brief remarks and not to the book itself. 

The decline of unions in the U.S. has often been painted as inevitable, or at least necessary for American businesses to remain internationally competitive. There are definitely industries where this account seems accurate. Globally, though, the link between unionization and competitiveness is actually pretty tenuous. The most heavily unionized countries in the developed world — Denmark, Finland, and Sweden, where more than 65% of the population belongs to unions — also perennially score high on global competiveness rankings. The U.S. does, too. But France, where only 7.9% of workers now belong to unions (yes, France is less unionized than the U.S.), is a perennial competitiveness laggard.

This is weak tea. While it is true that France is less unionized than the U.S., it is also true, as Richard Yeselson observes in his conversation with Jonathan Cohn in the The New Republic, that “France actually has smaller percentage of union members than the US, but union contracts cover almost the entire workforce.” Given that the critique of...

Though the title of Gregory Clark’s new Foreign Affairs essay (“The American Dream Is an Illusion“) is regrettable — my guess is that it was written by an editor hostile to Clark’s argument — the essay itself is compelling and important. Those who are familiar with Clark’s The Son Also Rises and A Farewell to Alms will quickly grasp the premise. Drawing on a wide range of data sources, Clark has chronicled the pace of social mobility over centuries across a number of different countries, and his central finding is that “social mobility rates are extremely low” and that “seven to ten generations are required before the descendants of high and low status families achieve average status,” both in egalitarian countries like Sweden and in more laissez-faire countries like the United States. 

In his new essay, Clark applies this insight to immigration policy. Specifically, he posits that the apparent success of immigrant assimilation in earlier eras largely reflects the fact that “immigrants who quickly assimilated to their new society in countries such as the United States were often positively selected from the sending populations.” The poor immigrants who made their way to the U.S. from Scandinavia and central and eastern Europe were generally literate women and men well-equipped for life in a modernizing society. Of course, not all immigrants fell into this category. Clark discusses Americans of French origin, including those descended from French settlers in Louisiana and from more recent French Canadian immigrants. While Irish and Italian...

In an interview with The New Republic’s Jonathan Cohn, Richard Yeselson, a veteran of the labor movement and well-regarded policy intellectual, offers a mostly sanguine take on the role of public sector unions in American society. Public sector unions outnumber members of private sector unions by a considerable margin, and there is a good reason they’ve become such a lightning rod. Suffice it to say, I don’t agree with Yeselson’s interpretation, but he does offer one observation that I’d like to unpack:

[T]he strongest critique I hear from the right (and some centrist Democrats too) about public sector unions is that their first priority needs to be the excellent provision of services, rather than the job security of public sector workers. And you know what? I agree! Who isn’t in favor of excellent provision of public services? But given how little revenue we raise and how little we spend on public services, relative to other countries, it is easy to imagine public policies that would boost public sector services and end up creating more employees, too.

First, let me stipulate that there are indeed many conservatives for whom the chief problem with public sector unions is that they favor increasing public employment levels. It is not clear to me, however, that this is in fact their main drawback, nor do I think the strongest conservative arguments against public sector unions center on their role in increasing public employment as such. 

In “Government Crowded Out,” Daniel DiSalvo of the Manhattan Institute warns that as...

The Congressional Budget Office released their update to the Budget and Economic Outlook for the next decade Wednesday. Damian Paletta has a summary for the Wall Street Journal, but here are are three big takeaways for thinking about policy choices in the coming years:

1. Deficits are returning to normal levels, but not for long.

According to the CBO, this year’s deficit will fall to 2.9 percent of GDP – smaller than the historical average – and the deficit will shrink again in 2015, too. This reflects the natural fall in spending and increase in revenues one can expect coming out of a major recession, and when considering that mandatory spending (for entitlements like Social Security and Medicare) is up 4 percent this year to $79 billion, the fact that the immediate budget is improving is impressive (though some of the cuts we’re seeing, to the Pentagon, are controversial).

The problem, of course, doesn’t lie in 2014 or 2015, but further down the road when Social Security and health-insurance programs drive our deficits and debt to unsustainable levels. This CBO report shows that climb is set to begin in the next decade, with deficits rising from 2.9 percent of GDP to 4 percent of GDP in 2024, with 85 percent of the increase in outlays coming from Social Security, Medicare and the medical programs, and interest payments on the debt.

2. The CBO projects the labor market to recover, but has its doubts about long-run GDP growth. Obamacare has something to do with it.

One of the most important...

Should tax dollars go to training doctors?

At the Upshot, prominent health-care academic Uwe E. Reinhardt argues that, as an economic matter, new doctors shouldn’t be trained at the expense of taxpayers. The rational for publicly funded medical degrees is that medical training, or individuals with medical training rather, are a public good — an economic concept referring to something everyone can use, without impeding on others’ ability to use it.

But as Reinhardt points out, since medical professionals decide if, when, and where they work, they aren’t equally accessible to everyone:

Medical education and training represents human capital that is fully owned by the trainees. They can deploy it as they wish — on patient care, or even in the financial markets, where quite a few physicians now work. In principle, therefore, the owners of that valuable, purely private human capital should pay themselves for its production.

But according to the American Association of Medical Colleges, the U.S. is already facing a serious doctor shortage that will only get worse:

Even taking the industry’s claims with a few grains of salt, the constrained supply of doctors does suggest that their training needs some form of public support. 

Millions will see their Obamacare subsidies reduced automatically. 

The Associated Press reports that millions of Americans who received subsidies to buy health insurance will receive a smaller amount than they planned on. Since subsidies are linked to income, if individuals make more money in 2014 than they anticipated, their subsidy...