AEI » Latest Content American Enterprise Institute: Freedom, Opportunity, Enterprise Fri, 31 Oct 2014 21:18:04 +0000 en-US hourly 1 Reforming peacekeeping in a time of conflict: A conversation with US Ambassador to the United Nations Samantha Power Fri, 31 Oct 2014 16:47:09 +0000 Please note the time of this event has changed to 1:00 p.m.

United Nations (UN) peacekeepers are deployed all over the world, from Africa to the Middle East to South Asia. Whether protecting civilian populations, preventing ethnic conflict, or facing down terrorists, today’s peacekeepers face far more complex and dangerous challenges than ever before. The abduction of 45 UN peacekeepers by Jabhat al-Nusra, a Syrian al-Qaeda affiliate, this August in the Golan Heights region is just one stark example. As crisis after crisis unfolds globally, however, UN missions have struggled to quickly deploy a sufficient number of trained troops to protect endangered civilians over large expanses of difficult terrain.

Please join us at AEI as US Ambassador to the United Nations Samantha Power discusses how the United States can help reform UN peacekeeping operations around the world.

We welcome you to follow the speech and comment on Twitter with #PoweratAEI.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours. 

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AEI Internet, communications, and technology: Experts, highlights, and headlines Fri, 31 Oct 2014 21:15:45 +0000 ...]]]>

Internet, Communications, Technology, and Cyber policy scholars

Jeffrey Eisenach
Visiting Scholar
Research areas: Intellectual property, Innovation, Internet, Telecommunications, FCC,  Technology


Claude Barfield
Resident Scholar
Research areas: International trade policy, Science and technology policy


Shane Tews
Visiting Fellow
Research areas: Internet governance, Cybersecurity

Richard Bennett
Visiting Fellow
Research areas: Mobile communications, WiFi, Net neutrality, Intellectual property rights, Ethernet


James K. Glassman
Visiting Fellow
Research areas: Communications policy, Internet

Headlines and Highlights

No one is willing to compromise on Internet Rules
Bloomberg Businessweek
“Proposing to regulate half the Internet is like proposing to pollute half a river,” Jeff Eisenach says.

There’s nothing neutral about net neutrality
Jeffrey Eisenach, Inside Sources
Despite what you may have heard, net neutrality is not about protecting consumers from rapacious Internet Service Providers (ISPs). Net neutrality is crony capitalism pure and simple.

Who’s winning the broadband race?
Richard Bennett, Inside Sources
If America’s networks are first-rate, there’s no need to change the way they’re regulated. But if we’re lagging behind our competitors, we certainly can benefit from a close examination of the factors that have contributed to their success.

The Trans-Pacific Partnership and America’s strategic role in Asia
Claude Barfield, American Enterprise Institute
“The stakes for US trade policy have always reached beyond the economic realm… Trade is what most of international relations are about. For that reason trade policy is national security policy.

Striking the right balance after a cyberattack
Shane Tews, American Enterprise Institute
Our current regulatory process around cybersecurity breaches is limited because the problem is not static; it’s a dynamic challenge of cyber cops and robbers.

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CNBC: Jim Pethokoukis talks midterm elections Fri, 31 Oct 2014 20:07:57 +0000 On CNBC this morning, AEI’s Jim Pethokoukis discussed what chance the Republicans have of taking the Senate. According to him, the odds aren’t that bad, due to Obama’s low approval rating. Watch his appearance below:

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

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Was that surprisingly strong US GDP report caused by a statistical error? Fri, 31 Oct 2014 17:32:38 +0000 And from this a thousand conspiracy-themed blog posts will be born. Here is Capital Economics on the surprisingly strong (3.5% vs. 3.0% forecast) third-quarter US GDP report:

– The reported leap in third-quarter defence spending, which added 0.7 percentage points to annualised  GDP growth was, as far as we can tell, largely due to a failure of the BEA’s seasonal adjustment  process. As a result, we expect defence spending to plunge this quarter, subtracting a similar amount  from fourth-quarter GDP growth.

– All of the upside surprise in third-quarter GDP growth (the 3.5% outturn was well above the consensus  forecast of 3.0%) can be explained by the 4.6% increase in government spending, which added 0.8  percentage points (ppts) to overall growth. Moreover, nearly all of that boost was due to a 21% leap in Federal defence consumption. That’s the largest increase since the second Iraq war in  early 2003. Drilling down further, more than two-thirds of the rise was due to a 74% annualised leap in  defence spending on support services for installation, weapons and personnel. This is unusual given that  spending on such services typically makes up just 25% of total defence spending.

– Some of the rise in the third quarter could be due to the escalation in military action in the Middle  East, but most of it appears to be due to a failure of the seasonal adjustment process. Looking at the  averages over the past five years, defence support services spending has increased by 38% annualised in  the third quarter only to fall by an average of 34% annualised in the fourth quarter. (See Chart 2.) The BEA all-but confirmed this problem when in an email it told us that it is “trying to determine if any  methodology changes are necessary”.

Wow. Given that Bureau of Economic Analysis (part of the Commerce Department) email, it looks like there may be, if not a mistake committed, then at least sub-optimal methodology at play. Now I don’t think this was intentional or nefarious in any way. So relax. But given that this report came out just before the midterms, I am sure some will view it with great suspicion. By the way, here is what the White House had to say when the report was released:

Economic growth in the third quarter was strong, consistent with a broad range of other indicators showing improvement in the labor market, rising consumer sentiment, increasing domestic energy security, and continued low health cost growth. Since the financial crisis, the U.S. economy has bounced back more strongly than most others around the world, and the recent data highlight that the United States is continuing to lead the global recovery. Nevertheless, more must still be done to boost growth both in the United States and around the world by investing in infrastructure, manufacturing, and innovation; and to ensure that workers are feeling the benefits of that growth, by pushing to raise the minimum wage and supporting equal pay.

Of course, I thought the GDP report was overrated anyway.

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Whiskey and long-winded speeches: Davy Crockett’s election advice Fri, 31 Oct 2014 17:30:12 +0000 Tennessean Andrew Jackson might have been the president of the United States, but in the 1830’s it was his fellow statesman and US Representative Davy Crockett who was the already legendary politician and crowd favorite—even (or perhaps because of) telling his ex-constituents “they might go to hell, and [he] would go to Texas” when they didn’t return him to the Capitol.

A folk hero even before the Alamo, he was known for his story-telling prowess. And while there’s uncertainty that all the speeches and adventures recounted in his autobiographical “Colonel Crockett’s Exploits and Adventures in Texas actually occurred, (or even that he is the book’s true author), his decidedly frank “Speech on Electioneering” can still be enjoyed for its irreverent treatment of political imaging. It might even be described as a regular hoot for anyone soul-weary of 12+ months of staid campaign ads.

“Attend all public meetings…and get some friends to move that you take the chair; if you fail in this attempt, make a push to be appointed secretary; the proceedings of course will be published, and your name is introduced to the public. But should you fail in both undertakings, get two or three acquaintances, over a bottle of whiskey, to pass some resolutions, no matter on what subject; publish them…it will answer the purpose of breaking the ice, which is the main point in these matters. Intrigue until you are elected an officer of the militia; this is the second step towards promotion, and can be accomplished with ease… You may not accomplish your ends with as little difficulty, but do not be discouraged—Rome wasn’t built in a day.

“If your ambition or circumstances compel you to serve your country, and earn three dollars a day, by becoming a member of the legislature, you must first publicly avow that the constitution of the state is a shackle upon free and liberal legislation; and is, therefore, of as little use in the present enlightened age, as an old almanac of the year in which the instrument was framed. There is policy in this measure, for by making the constitution a mere dead letter, your headlong proceedings will be attributed to a bold and unshackled mind; whereas, it might otherwise be thought they arose from sheer mulish ignorance. ‘The Government’ has set the example in his attack upon the constitution of the United States, and who should fear to follow where ‘the Government’ leads?

“When the day of election approaches, visit your constituents far and wide. Treat liberally, and drink freely, in order to rise in their estimation, though you fall in your own. True, you may be called a drunken dog by some of the clean shirt and silk stocking gentry, but the real rough necks will style you a jovial fellow, their votes are certain, and frequently count double. Do all you can to appear to advantage in the eyes of the women….

“Promise all that is asked,” said I, “and more if you can think of any thing. Offer to build a bridge or a church, to divide a county, create a batch of new offices, make a turnpike, or any thing they like. Promises cost nothing, therefore deny nobody who has a vote or sufficient influence to obtain one.

“Get up on all occasions, and sometimes on no occasion at all, and make long-winded speeches, though composed of nothing else than wind—talk of your devotion to your country, your modesty and disinterestedness, or on any such fanciful subject. Rail against taxes of all kinds, office-holders, and bad harvest weather; and wind up with a flourish about the heroes who fought and bled for our liberties in the times that tried men’s souls. To be sure you run the risk of being considered a bladder of wind, or an empty barrel, but never mind that, you will find enough of the same fraternity to keep you in countenance.

“If any charity be going forward, be at the top of it, provided it is to be advertised publicly; if not, it isn’t worth your while. None but a fool would place his candle under a bushel on such an occasion.

“These few directions,” said I, “if properly attended to, will do your business; and when once elected, why a fig for… the promises, the bridges, the churches, the taxes, the offices, and the subscriptions, for it is absolutely necessary to forget all these before you can be-come a thorough-going politician, and a patriot of the first water.”

Follow AEIdeas on Twitter at @AEIdeas.

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The Boss can write. But what does he read? Fri, 31 Oct 2014 17:18:32 +0000 It has long been known by the wise that the characters Bruce Springsteen creates for his songs often have great depth and a staggering level of development. As just one example, recall that Sean Penn’s 1991 crime drama The Indian Runner was based off Mr. Springsteen’s 1982 song “Highway Patrolman,” a masterpiece.

Knowing that the Boss can write, the New York Times took the natural step of asking what he reads. You can find the whole interview here, but my favorite question was the hardest: “If you had to name one book that made you who you are today, what would it be?”

Mr. Springsteen’s answer:

One would be difficult, but the short stories of Flannery O’Connor landed hard on me. You could feel within them the unknowability of God, the intangible mysteries of life that confounded her characters, and which I find by my side every day. They contained the dark Gothicness of my childhood and yet made me feel fortunate to sit at the center of this swirling black puzzle, stars reeling overhead, the earth barely beneath us.

Flannery O’Connor is one of the greats, especially for Catholics. And my experience listening to many of Mr. Springsteen’s songs often feels remarkably similar to reading some of O’Connor’s short stories: Their unflinching courage to show the cruelty of life, always tempered with deep faith in the presence of grace and the possibility of redemption.

As you probably expect, after reading this passage from his Times interview my mind immediately turned to the conclusion of Mr. Springsteen’s 2004 speech inducting Jackson Browne into the Rock and Roll Hall of Fame.

Now I always thought that in our fall from Eden, besides the strains of physicality and the bearing of earthly burdens, our real earthly task was that an unbridgeable gap, or a black hole, was opened up in our ability to truly love one another. And so our job here on earth — and the way we regain our divinity, our sacredness, and our general good-standing — is by reconstructing love and creating love out of the broken pieces that we’ve been given. That’s all we have of human promise. That’s the way we prove ourselves in the eyes of God and facilitate our own redemption.

Amen, Boss.

Michael R. Strain is a resident scholar and economist at the American Enterprise Institute. 

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US sugar lobby: trick or treat? Fri, 31 Oct 2014 17:09:15 +0000 You stocked up on candy in anticipation of trick or treaters tonight—and you paid more than you should have. The current US government sugar program results in consumers paying an additional $3 billion a year for the sugar they use. In his latest piece “Beware! The US sugar lobby may have its claw in your Halloween basket,” AEI Visiting Scholar Vince Smith explains why:

While the cost of the US sugar program to the average American household is only about $25 a year, the benefits to sugar processors and sugar beet and cane farmers is substantial.  A typical grower with a relatively small farm who plants about 300 acres to sugar beets typically harvests between 7500 and 9000 tons of the crop, with yields of between 25 and 30 tons an acre.  Through price supports and import restrictions, the US sugar program increases the prices of those beets by several dollars a ton.   When world prices fall below six or seven cents below the U.S. sugar beet support price of 22.9 cents per pound, as is the case this year (the current world price is about 16.5 cents a pound), that farmer benefits from the program to the tune of $2 to $4 a ton.  So our representative sugar beet grower is likely to obtain between $20,000 and $30,000 from American consumers and taxpayers, courtesy of a government program for which there is no real need.

For more on the sugar lobby, the Farm Bill, or other agriculture news, check out AEI’s American Boondoggle Project.


Vincent Smith, Visiting Scholar.
Research Areas: International/Domestic Agricultural Commodity Policy, Agricultural Risk Management Policy, Agricultural Science and Technology Policy

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‘The job of economists should be to make a top tax rate of 80% at least thinkable again.’ Really? Fri, 31 Oct 2014 16:58:27 +0000 Who says the left has no big ideas? And you have to appreciate the honesty and candor of equalitarian, left-wing economists Thomas Piketty and Emmauel Saez, a duo very much admired by Democrats. As they explain in this Guardian note, they think high incomes pretty much reflect the ability of one percenters to manipulate corporate boards rather than their own productivity and value-creating power. And under that theory, lower taxes only increase such rent-seeking efforts by increasing the reward for success at manipulation. So crank up the rates!

Again, data show that there is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates, such as the United Kingdom or the United States, have not grown significantly faster than countries that did not, such as Germany or Denmark. What that tells us is that a substantial fraction of the response of pre-tax top incomes to top tax rates may be due to increased rent-seeking at the top (that is, scenario three), rather than increased productive effort. …

In the end, the future of top tax rates depends on what the public believes about whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence both social beliefs (through thinktanks and media) and policies (through lobbying), thereby creating some “reverse causality” between income inequality, perceptions, and policies. The job of economists should be to make a top rate tax level of 80% at least “thinkable” again.

The job of economists? I don’t know. The job of public intellectuals operating as policy entrepreneurs and advocates? Sure. Anyway, their basic point is that tax rates don’t matter for economic growth — at least not until rates get much, much higher. This is a topic about which I’ve written frequently, including here,  here, and here. And clearly I think Piketty and Saez are wrong, as a quick glance at those links will indicate.

But let me take a different angle here. Innovation drives productivity, which drives growth over the long term. Now it doesn’t necessarily matter so much where innovation happens, as long as an economy is open and can obtain and use that innovation. But someone needs to generate the innovation. And the US generates a whole lot of it. The US pushes the technological frontier.

One novel way to measure US innovation is by how many billionaire entrepreneurs we generate. The US creates 2-3 times as many per million people as other large advanced economies. (The gap between the US and high-tax France, the home country of Piketty and Saez is even larger.) As Swedish researchers Magnus Henrekson and Tino Sanandaji find (see below chart): “Countries with higher income, higher trust, lower taxes, more venture capital investment, and lower regulatory burdens have higher billionaire entrepreneurship rates.” I think that is an interesting correlation that should at least give the high taxers pause.


And given that innovation spillover effect, global policymakers and policy entrepreneurs should be hesitant that the US follow the advice of Piketty and Saez. A less innovative America could mean a less prosperous world, economists Daron Acemoglu, James A Robinson, Thierry Verdier argue:

We show that, under plausible assumptions, the world equilibrium is asymmetric: some countries will opt for a type of “cutthroat capitalism” that generates greater inequality and more innovation and will become the technology leaders, while others will free- ride on the cutthroat incentives of the leaders and choose a more “cuddly” form of capitalism. Paradoxically, those with cuddly reward structures, though poorer, may have higher welfare than cutthroat capitalists; but in the world equilibrium, it is not a best response for the cutthroat capitalists to switch to a more cuddly form of capitalism.

Free riders beware Frenchman bearing policy advice for sky-high tax rates!


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4 things you need to know before Nov. 4th Fri, 31 Oct 2014 16:51:47 +0000 Midterms are so close it’s scary! With Election Day on Tuesday, AEI’s Political Corner shares what you need to know:

1. The GOP will take the Senate. Or Won’t They?

“The prevailing assumption is that Republicans will take the Senate in the midterm elections on Nov. 4. It would be a surprise if they didn’t. But not a huge surprise. In the poll averages at RealClearPolitics, Republican Senate candidates have leads smaller than 2.3 percentage points in Alaska, Georgia and Iowa. If all three of them lost — because of better-than-expected Democratic turnout, last-minute shifts in the race, or dumb luck — Republicans would come up just short of a majority.”
—Ramesh Ponnuru

2. Top 5 Senate Races to watch: Karlyn Bowman and Ethics and Public Policy Center’s Henry Olsen


3. The economy is still the #1 issue

“A lot of Americans still believe that we are in a recession even though the actual statistics show that the recession ended quite a while ago. I think people are really beaten down and roughed up by this economy. About 4 in 10 Americans say that they or somebody in their family has lost a job in the last 5 years so it’s no wonder that the economy is the top issue for voters. And you have a very, very pessimistic public with only about 25-30% of Americans saying the country is on the right track.”
—Karlyn Bowman

4. The House will stay Republican. But do we know why?

“Republicans have an edge in House districts partly due to partisan redistricting but mostly because of demographic clustering. Heavily Democratic groups — blacks, Hispanics, gentry liberals — are heavily clustered in relatively few heavily Democratic districts. Republican voters are more evenly spread around the rest of the country…The liberal party seems to have an edge, though not an overwhelming one, in presidential elections. But the conservative party, to the dismay of many political scientists, has an edge, though again not overwhelmingly, in elections to the House of Representatives.”
—Michael Barone


Karlyn Bowman, Senior Fellow and Research Coordinator.
Research Areas: Public opinion and polls, U.S. politics, Media

Michael Barone, Resident Fellow.
Research Areas: Campaigns and elections, American government and political system, Politics

Jonah Goldberg, Fellow.
Research Areas: Media, U.S. politics and culture, The Conservative movement, The Progressive movement

Norman Ornstein, Resident Scholar.
Research Areas: U.S. politics, Congress, Elections

Ramesh Ponnuru, Visiting Fellow.
Research Areas: Conservatives and health care policy, Conservatives and economic policy, Constitutionalism

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Surprise stimulus! The Bank of Japan acts and markets jump. But what next? Fri, 31 Oct 2014 15:02:05 +0000 Shock and awe. From the Financial Times:

On Friday morning, a report in the Nikkei newspaper that the national pension fund was poised to double its allocation to domestic stocks set pulses racing. But that was nothing compared with the excitement unleashed at 1:44pm, when the BoJ said it would crank up its already-aggressive monetary easing programme, buying 60 per cent more bonds and tripling purchases of stocks to head off a recent slide in inflation. The twin announcements did the trick, sending the yen to a new six-year low of 110.9 against the US dollar while pushing the Nikkei 225 stock average up almost 5 per cent, the biggest daily rise since last year’s “taper tantrum”. For investors in Japanese assets, the one-two punch was a reminder that the key institutions are lined up squarely behind the prime minister in his mission to haul Japan out of more than a decade of deflation.

Why did the Bank of Japan act (narrowly, by a 5-4 majority vote)?

First, Japan’s core CPI, notes IHS Global Insight, had “eased to near 1% y/y and the weakness is partially reflected in slowing domestic demand.” And although a lower oil price would tend to support the economy over the medium-term, right now it only adds to deflationary pressures.

Second, both those things are happening in the wake of an economy-slowing April increase in the nation’s consumption tax, a tax which is scheduled to increase again next year.

Again, IHS: “The aggressive monetary policy will support economic activity through higher corporate profits and encourage investment and wage increases. But the IHS view is that the BoJ still has a long way to go to reach its target of inflation of 2%.” Of course, dour expectation such as those expressed in the IHS comments are the sort of thing working against the BOJ and Abenomics. Japan has been in a funk for a long, long time. And Abenomics has just arrived. Who knows its staying power? The split BOJ is hardly reassuring in that conext. Scott Sumner addressed these very issues last August:

Asset markets tend to be very pessimistic about the prospects for reflation after monetary policy has had a severe failure. This suggests that markets believe the political barriers to reflation are formidable. Japan is a perfect case study. Asset markets took off after mid-November 2012, when then candidate Abe first indicated he was going to push for a 2% inflation target. The yen fell from about 80 to the dollar to 103 today, while the Nikkei rose from under 8700 to over 15,300 today. So the asset price gains have been sustained. And we did see a rise in the Japanese price level, RGDP and NGDP. So in one sense Abenomics “worked.” On the other hand the Japanese 10 year bond yield is 0.51%, vs. 2.50% in the US, and the 30 year bond yield is 1.67%, vs. 3.30% in the US. That tells me that the bond market probably expects Japanese inflation to remain well below US levels in the long run, perhaps close to zero. And that suggests that Japanese asset markets believe that the political obstacles remain formidable. After all, Abe won’t be the prime minister forever. And yet if the BOJ did another round of stimulus—enough to push the yen down to 120, there is little doubt that stocks would rally again and GDP growth would pick up (at least nominal, and probably real as well.) The problems are political, not technical.

As Sumner has put it on various occasions, “No fiat money central bank ever tried to inflate and failed.” It’s a matter of effort not expertise,with the former affected by politics. I would add this: Japan is worried about its fiscal situation, thus the consumption tax increases. But wouldn’t faster nominal GDP do plenty to lower that debt burden? Tax hikes that work against the BOJ look like self sabotage. Growth needs to be Japan’s top priority, both in terms of monetary policy and structural reforms.

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