AEI » Latest Content American Enterprise Institute: Freedom, Opportunity, Enterprise Tue, 27 Jan 2015 16:34:23 +0000 en-US hourly 1 Trade in 2015: Senate Finance Committee Chairman Orrin Hatch on how America can succeed in today’s global economy Thu, 22 Jan 2015 19:38:14 +0000 Event Description

International trade and the US economy are top issues in the 114th Congress. We welcome you to join us at AEI as Senate Finance Committee Chairman Orrin Hatch (R-UT) outlines his vision for how America can succeed in today’s global economy. Sen. Hatch will speak to his longstanding efforts to renew Trade Promotion Authority and will discuss what the Obama administration must do to get ongoing trade negotiations such as the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership successfully enacted by Congress.

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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Tech policy 2015: The year ahead Wed, 21 Jan 2015 17:14:27 +0000 If you have trouble registering for this event, please contact

Please join AEI’s Center for Internet, Communications, and Technology Policy for a look ahead at the top tech policy issues of 2015. Senator John Thune (R-SD) will present a keynote address, and panels of AEI scholars and outside experts will discuss issues including net neutrality, the Communications Act, and municipal broadband, cybersecurity, Internet governance, and incentive auctions.

As tech policy issues move to the fore in the national debate, this conference will offer unique insights into the year ahead.

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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Why America is betting on Modi Tue, 27 Jan 2015 15:25:05 +0000 Barely a year ago, most foreign policy pundits would likely have agreed on one simple prediction: the election of Narendra Modi as Indian prime minister would set back relations with the United States, and by extension with the West more broadly.

Instead, the opposite has happened. Yesterday President Barack Obama shattered a symbolic taboo by becoming the first American chief guest at India’s annual Republic Day parade. Arguably, the US and India are poised to pursue a deeper and wider partnership – one whose impact will potentially be felt far beyond the two countries’ borders – than at any time before.

To be sure, the detailed mechanics of stepped up cooperation between the US and India outlined in Sunday’s joint statement and joint strategic vision for Asia and the Indian Ocean region need to be fleshed out in the months ahead.

The prudent will hold the champagne until both countries actually begin co-producing weapons, US companies break ground on new Indian nuclear reactors, and we see tangible gains against the likes of Haqqani network, Lashkar-e-Taiba and D Company. But one thing is clear: the US and India don’t lack ambition for the relationship.

Why is America betting on Modi, a man whose visa it rejected a decade ago in a public rebuke for the 2002 Gujarat riots that occurred on his watch? In a nutshell, Washington’s posture reflects a blend of hard-nosed calculation and a genuine reassessment of the Indian prime minister.

To begin with, the alleged Modi-Obama personal chemistry ought to be taken with a pinch of salt. The bookish former law professor and the fiery former RSS pracharak hardly make the most natural friends. If anything, their apparent willingness to forge a personal bond says more about their pressing national interests.

Shared concerns about China’s hegemonic ambitions in Asia and the destabilising impact of radical Islamist terrorism drive the US and India towards each other. Thanks to India’s size, democratic polity, pluralistic society and vast economic potential, Washington has placed a long-term bet on the idea that the rise of India is good for America.

But the success of this bet depends on India fulfilling its own ambition to claim a seat at the high table of global power. Simply put, Modi’s sweeping electoral mandate gives him a better shot at achieving India’s goals than any of his recent predecessors.
To be sure, Modi’s own record has helped generate these hopes. In policy circles, his reputation for no-nonsense administration and business-friendly economic policies earned in Gujarat has eclipsed misgiving generated by the 2002 riots. That Modi stressed development – not identity politics – in his campaign last year helped complete a public makeover years in the making. To the prime minister’s credit, he has remained tightly on message even after winning the election.

That Modi chose to take the high road towards the US also helped. Hardliners in BJP, and in the larger ideological family to which it belongs, would have applauded had the prime minister chosen to snub the US by downplaying ties with it, at least early on in his tenure.

Instead Modi accepted Obama’s invitation to visit Washington with alacrity. This signalled two reassuring qualities: that the prime minister is not a man to put personal peeves ahead of the national interest and that he sees the US as a vital partner in fulfilling his ambitious vision for India.

At the margins, Modi’s passionate following among Indian-Americans also helped boost his reputation in Washington. It didn’t hurt that over the years Indian-Americans have been among Obama’s fiercest supporters. A higher proportion voted for him than in most ethnic groups. When Modi filled New York’s Madison Square Garden with his fans last year, it brought him the kind of domestic political attention foreign leaders rarely enjoy in America.

Of course, just because the stars appear to have aligned at the moment for Obama and Modi does not necessarily mean that they will remain permanently aligned. At its core, the US bet on Modi is that he will revive India’s economy, deepen its engagement with fellow democracies, and steer clear of domestic strife. Beyond that, sceptics will also look for evidence of concrete progress in the many areas of cooperation suggested during Obama’s visit.

How will the US and India advance a rules-based international order in the Indian Ocean? How do shared concerns about Islamic State in Iraq and Syria translate into counterterrorism cooperation? When it comes to climate change, have the US and India really drawn closer than before?

Nonetheless, there’s no question that Modi has forced India back on Obama’s foreign policy agenda. He has raised expectations that he is a new kind of Indian leader – unafraid to break some geopolitical crockery while pursuing his goals. If Modi continues to reform the economy and revitalise Indian diplomacy, his honeymoon with Washington will only lengthen. The consequences for India, Asia and the world could be huge.

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The $2 trillion question: Is the CBO overly pessimistic about the US budget deficit? Tue, 27 Jan 2015 15:03:17 +0000 The new CBO budget projection predicts annual deficits will continue to shrink the next few years before rising again in 2018, from 2.5%  of GDP in 2017 to 4.0% in 2025. Two reasons: Higher entitlement spending (from 13.0% of GDP in 2017 to 14.2% in 2025) and interest on the national debt (from 1.7% of GDP in 2017 to 3.0% in 2025).

The almost doubling in interest costs is based on the assumption that long-term Treasury rates normalize back to prerecession levels. Yet at the same time, CBO predicts real GDP growth to average just 2.2%, below the prerecession pace. Paul Ashworth of Capital Economics finds those two predictions — interest rates and economic growth — to be “inconsistent” with their historical relationship:

The CBO assumes that the 10-year Treasury yield rebounds fairly quickly to 4.6% by the end of the decade which, assuming inflation is 2.0%, puts the real long-term rate at 2.6%. At the same time, however, the CBO also assumes that real GDP growth averages only 2.2%. As Chart 4 illustrates, the average real long-run interest rate has historically been lower than average real GDP growth. With the so-called term premium on the 10-year Treasury yield slumping over the past few months, there is a case to be made that real long rates will remain substantially below real GDP growth for quite some time yet. Under those circumstances, the Federal deficit would remain below 3% of GDP for much longer that the CBO currently believes.

Those few tenths of a point make a big difference. If interest costs as a share of GDP stayed at 2.5% over that period, total interest costs would be about $2 trillion less, lowering the 2025 debt-GDP ratio by nearly 10 percentage points. Here is an interesting new paper by Barry Eichengreen looking at the case for low rates withing the context of the secular stagnation thesis. That being said, I certainly would not want to assume a brighter scenario if it means even less urgency to deal with our long-term entitlement spending problems.  A bit on the political implications of the improving budget picture from Potomac Research:

WE’VE BEEN VERY OUTSPOKEN ABOUT THE DEFICIT PLUNGE that CBO underestimated, but now we have to concede that the dramatic progress is slowing. Nevertheless, CBO’s prediction of $468 billion in red ink strikes us as too high; something in the $425 billion neighborhood seems likely if the economy continues to surge. That would take the deficit to under 2.5% of GDP, where it will stay for the next two or three years.

WHAT ARE THE POLICY IMPLICATIONS? In the short run, the good news on deficits will reinforce a movement to replicate the two-year budget deal hammered out by Paul Ryan and Patty Murray 15 months ago that loosened the rigid budget sequester.  A new deal — perhaps in conjunction with a debt ceiling extension late this summer — probably would waive meat-ax sequester caps for defense and perhaps allow domestic spending to stay roughly flat.
"Secular Stagnation: The Long View" by Barry Eichengreen

“Secular Stagnation: The Long View” by Barry Eichengreen


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Do we need government regulations to preserve net neutrality? Tue, 27 Jan 2015 14:46:55 +0000 Net neutrality sounds good, but it means different things to different people, making it easy for special interests to manipulate it for narrow political ends.

One definition of net neutrality is a user’s freedom to connect to any Internet content, application or service. This is uncontroversial, and Internet providers already agree to uphold this principle.

Using their own definitions, however, companies such as Netflix hijack the language of net neutrality to lobby for regulatory favors. They want the government to mandate that transit costs they pay for today become free. In the offline world, such a deal would mean that retailers could not negotiate agreements with their suppliers or even where products could be placed on shelves.

This campaign intensified when President Obama called for the Internet to be regulated under Title II of the Communications Act of 1934. Title II would effectively give control of the Internet to the federal government, allowing it to monitor networks and set prices. For starters, expect a price increase of at least $150 per year due to new federal, state, and local fees on your Internet subscription.

Regulation proponents argue that without such rules your Internet provider would speed up or slow down websites. There have never been rules against this, but Internet providers don’t do it anyway. Simply put, the business opportunity to deliver an open Internet is far greater. Failing that, antitrust laws deter discriminatory behavior, already ensuring net neutrality. Of the billions of Internet experiences every day, there are only two minor net neutrality violations on record. They were resolved swiftly with existing rules.

Many Americans oppose Internet regulation. Recently, 60 tech companies and 100 American manufacturers –including IBM, Intel, and Black & Decker – warned that Title II regulation would harm the economy and reduce investment.

Americans, just 4 percent of the world’s population, enjoy a quarter of the world’s private investment in Internet infrastructure and drive one-third of the world’s Internet traffic. This investment delivers 5 percent of gross domestic product and employs 10 percent of America’s workforce, 11 million Americans. The unregulated Internet allows almost half of America’s employed to work from home and countless companies to grow. Fifteen of the world’s top 25 Internet companies are American.

With more high-speed wireless connections than any country, the US is the hotbed of mobile innovation. Do we need government regulations to preserve net neutrality? No. The Internet in America works extraordinarily well.

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The school choice journey: A conversation featuring US Senator Tim Scott Tue, 06 Jan 2015 22:15:02 +0000 The impact of school choice in America is about more than improved student test scores. School choice has the potential to inspire political activism among low- and moderate-income parents and families. In their thought-provoking new book, “The School Choice Journey: School Vouchers and the Empowerment of Urban Families” (Palgrave Macmillan, 2014), researchers Thomas Stewart and Patrick Wolf track the experiences of families participating in the DC Opportunity Scholarship Program, the first federally funded school voucher program based in the District of Columbia. They find that parents look to several factors when choosing a school for their child, and the impacts of school choice on parents and families go far beyond anything that can be measured by a standardized test.

We welcome you to join us at AEI during School Choice Week as US Senator Tim Scott (R-SC), Stewart, and Wolf discuss “The School Choice Journey” and why promoting school choice is important to expanding the range of education opportunities for every student in the United States, regardless of zip code.

We invite you to follow the event and comment on Twitter with #ScottatAEI.

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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Improving education requires hard choices and sustained leadership Tue, 27 Jan 2015 13:22:57 +0000 ...]]]>

The education policy world is buzzing. Universal pre-k for all 4 year olds. Free community college to anyone who wants to attend. Major changes to the No Child Left Behind Act. National School Choice Week.

Attention is warranted: education is a key to economic mobility in America. An additional year of schooling raises earnings by between 6 and 10 percent per year. According to Bureau of Labor Statistics data, the unemployment rate for those without a high school diploma is 8.6 percent. For college graduates? 2.9 percent.

Few things prevent poverty more effectively than does educational attainment. And there’s universal agreement that we should do better.

But what exactly is “better?” And how do we get there?

A series of four talks out this month featuring D.C. Public Schools chancellor Kaya Henderson, former Milwaukee Public Schools superintendent Howard Fuller, and AEI’s Frederick Hess and Arthur Brooks tackle these tough questions and should inform the debate.

All seem to agree on common themes: That our educational system should provide children with the opportunity to grow their unique gifts and talents—not just the ones that are easiest to measure; that no silver bullet policy has solved or will solve America’s education challenge; and that the process of reform—and the way it is communicated—must involve the communities, parents, and students affected by that change.

More specifically, each cautions against a key notion circulating in public debate.

First, we shouldn’t limit what education can or should do with the rhetoric we employ to spur change. Al Sharpton and Ted Cruz seem to agree on one thing (and possibly only one thing): That education is a civil right. But as Rick Hess argues, terming education a “civil right” implies that its primary goal is to boost the achievement of students who aren’t proficient and fix schools that are failing.

That’s a limiting notion, says Hess. Education’s goals should be expansive, fostering excellence for all students of all backgrounds and talent sets. Focusing on failures didn’t work well in No Child Left Behind. And such rhetoric ignores the reality that while attending school may be a right, educational advancement requires a handshake of commitment between teachers, students, and parents. Students who overcome problems associated with poverty and unstable families should be celebrated, but schools can’t be expected to solve those problems on a large scale—and policy that expects them to do so isn’t realistic.

Second, measure and focus on what parents and kids really desire—not just what policy wonks and bureaucrats think they should want. According to Henderson, “Parents like me want to know that their kids are going to go on to something amazing. Not that their kids have scored X on the CAS or Y on the NAEP. They don’t care about international competition. They don’t care about spending.” They care that when their kids are done with their education, they don’t come back to live in the basement.

While measures of math and reading proficiency are important, Henderson contends, the pursuit of scores shouldn’t drain every educational resource from other enriching activities—like music, social studies, and athletics—that serve as gateways to better life outcomes for many students.

And just as a narrow focus on a limited number of outcomes can be counterproductive, a limited focus on policy levers can be, too. When Henderson joined DCPS, she was convinced that if the system had the right teachers and administrators, its problems would be solved. Others argued that if 50 percent of DC’s students attended charters, outcomes would skyrocket. Neither proved to be a silver bullet. Success at scale requires sustained, dedicated leadership at the local level and a wide range of innovative policy efforts—not belief in a magic elixir.

Third, those effected by educational change must define and participate in that change. While Howard Fuller defends the value of school choice in empowering low-income families to attend better schools, he notes that the school choice movement is run by rich white people and primarily affects poor black and brown kids. If school choice is to succeed in the long term, he argues, those affected most by school choice must both buy in to its proposition and have agency in making it happen.


Finally, as Arthur Brooks argues, the debate should focus on the people policy aims to help rather than the things people oppose—not unions, as the right tends to do, or charters, as the left tends to do. That forces a connection between the aspirations of parents for their children and the leaders charged with creating an environment for them to realize those dreams. If arguments aren’t moral, aren’t people-focused, and aren’t succinct, they’re won’t be effective. Comparing Atlanta’s test scores to those of the Finns won’t do it.

In short, improving education isn’t simple. Having more of it doesn’t make it more effective. And making education “better” is misleading if advancement is limited to two metrics. It is vital to rethink the structures and practices that are no longer suited to today’s students or the futures they have ahead of them. But change also requires a holistic understanding of the goals and aspirations that parents have for their students, hard choices and sustained leadership, and an acknowledgment that silver bullets don’t work.

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On the power and importance of the ruthless consumer – ‘they make poor men rich and rich men poor’ Tue, 27 Jan 2015 00:38:13 +0000 ...]]]> In his 1944 book “Bureaucracy,” legendary economist Ludwig Von Mises explained the important and supreme role of the ruthless consumer in the market economy (emphasis added):

The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor.

The consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequences of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers.

The consumers are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy.

Here’s how I explained the role of ruthless consumers and the concept of “consumer greed” in a 2002 article for the Mackinac Center:

Here’s a dirty little secret about capitalism: consumers, not corporations, run the show. If you find something about the marketplace objectionable, it would be more appropriate to blame those who actually call the shots: the ruthless, cutthroat, and disloyal American consumers.
Consumers are the kings and queens of the market economy, and ultimately they reign supreme over corporations and their employees. When corporations make mistakes and introduce products that consumers don’t want, which happens frequently, you can count on consumers voicing their opinions forcefully and immediately by their lack of spending.
In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive—and which ones fail. It is therefore consumers who indirectly but ultimately make the hiring and firing decisions, not corporations. After all, corporations can make no money, hire no people, and pay no taxes unless somebody, sooner or later, buys their products.
What consumer sovereignty in a free marketplace translates into is each person husbanding his resources for the greatest benefit to himself and his family, which in turn translates into the greatest efficiency in the consumption of the world’s scarce resources. If you don’t like the message of the marketplace, don’t assume that corporations and greed are to blame while consumer behavior and consumer greed play no role in the outcome. We should be thankful, in fact, that the marketplace puts consumers on such a powerful pedestal.

Bottom Line: Consumers ultimately run the market economy, and for that we should be thankful. Because what’s the alternative? The alternative is allow producers to run the economy, inevitably with the assistance of their government enablers who help erect barriers to entry and restrict competition for producers in the form of occupational licensing, protectionist trade barriers, artificial limits on the number of firms allowed to operate (e.g. taxi cartels), etc. In other words, the alternative to consumers running a capitalist market economy, is to have producers running an economy based on the corrupt, anti-consumer principles of “crony capitalism.”

Further, we typically assume that “greedy” behavior is practiced exclusively by business owners and corporate executives, and never by consumers. But consumers, especially when spending their own money on goods and services for themselves and their families, are frequently the very epitome and apotheosis of greed. As Mises observed, “With them [consumers] nothing counts more than their own satisfaction,” and for that we should be thankful. Because in a market economy, the ruthless consumers provide the discipline that guarantees that producers will operate efficiently and offer the best products and services at the lowest prices.
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The school choice journey: Parents experiencing more than improved test scores Tue, 27 Jan 2015 00:30:57 +0000 ...]]]> Key Points

  • Studies indicate that low-income parents participating in the District of Columbia’s private-school choice program prioritize—at least initially—the safety of schools over schools’ academic quality as they transition from public schools. Furthermore, when evaluating their child’s academic progress, parents do not view standardized test scores as a key metric of success.
  • Most interestingly, these urban parents report that they want to be respected as advocates of their child’s education and will fight hard to keep their child’s private-school choice program if that program’s future is threatened.
  • These lessons should be considered when designing and implementing publicly funded, means-tested programs in an effort to break the cycle of poverty among low-income families and disadvantaged communities.

 Read the PDF.

Private-school choice is many things, depending on families’ income and geographic location. It is an education policy reform, a flashpoint of political controversy, and an example of government outsourcing of public-service provision. It is also a journey for low-income parents who move from being clients of social services to consumers of goods and advocates for their own political interests.

Most policy analysts and policymakers evaluate private-school choice programs based on the sole criterion of student test-score gains. They assume that test-score increases are what parents and society want most from schools and that student scores are the outcome that school choice will most affect. Our research suggests that these assumptions are largely false.

From 2004 until 2009, we carefully documented the school choice journey of 100 families participating in the District of Columbia (DC) Opportunity Scholarship Program (OSP). The OSP is the nation’s only federally funded private-school choice program. It provides K–12 tuition vouchers worth up to $7,500 to low-income students in DC to attend any participating private school of their family’s choosing.

With financial support from the Annie E. Casey Foundation, we conducted an annual series of focus-group sessions and personal interviews with these low-income urban families. Most of the families were selecting schools, specifically private schools, for the first time. Their stories of excitement, challenge, occasional frustration, and ultimate triumph are told in our new book, The School Choice Journey: School Vouchers and the Empowerment of Urban Families.1

The Journey reveals four key lessons:

  • Parents participating in OSP tend to follow Abraham Maslow’s hierarchy of human needs when selecting schools. They first ensure that their child is safe at school before focusing on academic quality.
  • Unlike policymakers, parents do not view test scores as the key metric of success in education (or even as one of the main indicators of success). They use less-formal measures of student growth and development to assess progress and satisfaction.
  • Urban parents benefit from informational and programmatic supports when exercising school choice for the first time, but they also need to be respected as the shapers of their child’s education.
  • Low-income parents view private-school choice programs as sufficiently valuable to them that they will fight hard to keep their child’s program if politicians try to take it away from them.

Government programs can be delivered to recipients in ways that range from highly paternalistic to completely hands-off. We argue in The Journey that neither of these extremes is constructive for interventions geared toward income-disadvantaged urban families. When government programs are implemented in a highly paternalistic way, clients play no role in shaping the nature of the service and often feel demeaned, disenfranchised, and dependent.

When government initiatives are completely hands-off, though, income-disadvantaged participants can feel overwhelmed by their new responsibilities and fail to make the program work to their advantage. The best way for the government to implement social interventions, we argue, is to aim for a sweet spot that allows program participants sufficient control over the service so that they feel they own it, while also providing key programmatic supports needed to make the program a success.

Many parents whose child received the Opportunity Scholarships to attend a private school of their choice initially had a client mentality: they were used to receiving government services such as Medicaid and disability benefits, which tend to be delivered by professional bureaucrats with an air of spirit-crushing paternalism.2 The new school choice program challenged these parents to transcend their client perspective and become informed consumers and proactive choosers of their child’s private school. A school choice was not going to be handed to them. They had to make their own choice and remain active participants in the process.

Read the full report.


1, For this and subsequent references to The Journey, see Thomas Stewart and Patrick J. Wolf, The School Choice Journey: School Vouchers and the Empowerment of Families (New York: Palgrave Macmillan, 2014).

2. Joe Soss, “Lessons of Welfare: Policy Design, Political Learning, and Political Action,” American Political Science Review 93, no. 2 (1999): 363–81.

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Why Netanyahu is right to go around Obama to Congress Tue, 27 Jan 2015 00:30:39 +0000 Do they talk this way about Iranian President Hassan Rouhani?

After learning that Israeli Prime Minister Benjamin Netanyahu had accepted an invitation to address a joint session of Congress about the need for new sanctions to stop Iran’s nuclear program, the Obama administration went . . . well, nuclear.

One “senior American official” threatened Netanyahu, telling the Israeli newspaper Haaretz that “Netanyahu ought to remember that President Obama has a year and a half left to his presidency, and that there will be a price.” Meanwhile a “source close to [Secretary of State John] Kerry” told The Post that the “secretary’s patience is not infinite” and that “playing politics with that relationship could blunt Secretary Kerry’s enthusiasm for being Israel’s primary defender.”

Oh, please. No wonder Netanyahu is going around these people to Congress for support. Is Kerry defending Israel as a favor to Netanyahu, or because it is in the United States’ vital interests to stand with our closest ally in the Middle East? Just the threat of withdrawing that support validates Netanyahu’s suspicion that the Obama administration does not have Israel’s back in its negotiations with Iran.

Using anonymous officials to attack Netanyahu is nothing new. Unnamed officials have called him “chickens—,” “recalcitrant,” “myopic,” “reactionary,” “obtuse,” “blustering,” “pompous,” and “Aspergery” — all to one journalist (Jeffrey Goldberg of the Atlantic, who keeps a running list).

The Obama team’s outrage is a bit overwrought. Clearly, it is not a breach of protocol for a foreign leader to lobby Congress. After all, Obama himself deployed British Prime Minister David Cameron to lobby lawmakers to oppose new sanctions on Iran. It seems Netanyahu’s crime is not so much a breach of diplomatic protocol, but rather, opposing the administration’s position.

The fact that Netanyahu felt compelled to speak directly to Congress in order to oppose the administration’s position speaks poorly, not of Netanyahu, but of Obama. If the leader of one of our closest allies is so worried about the deal Obama is going to cut with Iran that he is willing to risk a diplomatic rift with the administration to speak out, perhaps the problem is not with Israel, but with the Obama administration. And it is not just Israel that opposes Obama’s deal with Iran; Arab leaders have made clear that they share Israel’s view.

No doubt politics plays a role in Netanyahu’s decision to address Congress. His speech will come just two weeks before the Israeli elections. But is it wrong for a politician to use the foreign stage of an ally to buttress his electoral case back home? If it is, then Barack Obama — who gave a campaign speech in Berlin before 200,000 adoring Germans who could not vote for him — is the wrong man to level that criticism.

Obama claims that new sanctions on Iran “will all but guarantee that diplomacy fails.” If the mere threat of sanctions is enough to derail Iran’s nuclear talks, then whatever deal is in the works is not worth having. It means that Obama is far more desperate for a deal than Tehran is — which is a sure-fire way to guarantee a bad agreement.

Obama wants a nuclear deal with Iran because it would be a major feather in his political cap at a time when his foreign policy is imploding across the world, from Yemen to Syria to Iraq. For Israel, Iran’s nuclear program is not a political challenge; it is an existential one.

Obama can afford a bad deal because, as that anonymous official put it, he has a year and a half left to his presidency. The people of Israel, on the other hand, will have to live with the consequences long after Obama is gone.

Netanyahu understands this — which is why it is good that he is coming to Washington, and why House Republicans deserve credit for inviting him.

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Did cutting unemployment benefits create jobs? Mon, 26 Jan 2015 21:08:10 +0000 In a new NBER working paper, Marcus Hagedorn of the University of the University of Oslo, Iourii Manovskii of Stockholm University and Kurt Mitman of the University of Pennsylvania – Tea Party extremists to a man, I am sure – conclude that 2014’s high job growth and decline in unemployment came not despite Congress’s December 2013 failure to renew extended unemployment benefits, but because of it. At the time, the usual suspects mocked the idea: “the G.O.P. answer to the problem of long-term unemployment is to increase the pain of the long-term unemployed: Cut off their benefits, and they’ll go out and find jobs. How, exactly, will they find jobs when there are three times as many job-seekers as job vacancies? Details, details.”

Apparently actual individuals looking for work may be more inventive than Prof. Krugman. Since that’s pretty much what appears to have happened.

Hagedon, Manovskii and Mitman take advantage of the fact that, prior to the failure to extend benefits, different states offered different durations of unemployment benefits. Some had the basic federal level of 26 weeks of benefits, while others were allowed to offer up to 47 weeks more. This produced a natural experiment in which unemployment benefits were cut much more in some state than others. What did the authors find?

A simple descriptive analysis shows a much faster employment growth in 2014 in high benefit states prior to the reform relative to their low benefit counterparts. The same finding holds if we compare the employment growth in counties that belong to high benefit states relative to their neighboring counties that belong to states with lower benefit durations prior to the reform.

Overall, they find that 61% of the growth of employment in 2014 can be attributable to the reduced duration of benefits available to the unemployed.

Does this mean that we should cut unemployment benefits to zero, or reduce all other benefits to the needy? No. But as I argued in a 2012 National Review article, using a very different example, incentives matter: whether it’s using carrots or sticks, the unemployed and those out of the labor force entirely need to want to get back in.

Follow AEIdeas on Twitter at @AEIdeas.

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Congressional leadership: thumbs up or down? Mon, 26 Jan 2015 21:00:05 +0000 POLITICO reported Monday that House Democratic Minority Leader Nancy Pelosi faces “unrest” within her party’s ranks as House Democrats head to Philadelphia for their policy retreat this week. House Democrats may be making known their opinion of Pelosi, but the rest of the leadership  team in the 114th Congress doesn’t fare much better.

The Pew Research Center most recently asked Americans about their overall opinions of all four party leaders in the House and the Senate. In December 2014, 47% of Americans had an unfavorable opinion of then-outgoing House Majority Leader Pelosi, down from a high negative of 55% in December 2010. Twenty-seven percent viewed her favorably. Forty-one percent had an unfavorable opinion of outgoing Senate Majority Leader Harry Reid, the highest unfavorable rating for him yet in Pew’s trend, while 20% viewed him favorably.

On the other side of the aisle, then-incoming House Speaker John Boehner and Senate Majority Leader Mitch McConnell fared about the same. Forty-six percent of Americans said they have an unfavorable opinion of the then-incoming Speaker, and 24% had a favorable opinion of him. As for McConnell, 37% reported an unfavorable opinion of him, while 21% expressed a favorable one.

Over the past few years, Pelosi’s ratings have been the weakest. According to the CNN/Opinion Research Corporation trend, a majority of Americans had an unfavorable opinion of her from January 2010 through September 2013. Boehner’s unfavorability breached the 50% mark in October 2013 (55%) in the midst of the government shutdown.

Pelosi’s support within her party caucus may be a bit shaken, but one thing is certain. Although they sit atop Capitol Hill, all four party leaders face an uphill climb to increase their standing among Americans.

Follow AEIdeas on Twitter at @AEIdeas.

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CBO: This is pretty much as good as America gets Mon, 26 Jan 2015 20:16:01 +0000 The Congressional Budget Office just released its 10-year budget and economic forecast. Let me boil it down for you: These are the good times. Enjoy them because things are unlikely to get much better. In fact, they are likely to get worse. For instance: CBO expects the US economy to grow at 3% this year and next, and at 2.5% in 2017. That’s a definite upturn in post-recession performance, though still below the postwar average of 3.4%.

But then deceleration: “For 2020 through 2025, CBO projects that real GDP will grow by an average of 2.2 percent per year—a rate that matches the agency’s estimate of the potential growth of the economy in those years.”

Or how about the budget deficit? At 2.6% of GDP, according to CBO, this year’s fiscal shortfall is projected to be the smallest since 2007 and a smidgen below the 2.7% that deficits have averaged over the past 50 years.

But then:

Although the deficits in CBO’s baseline projections remain roughly stable as a percentage of GDP through 2018, they rise after that. The deficit in 2025 is projected to be $1.1 trillion, or 4.0 percent of GDP, and cumulative deficits over the 2016–2025 period are projected to total $7.6 trillion. CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year—more than twice what it was at the end of 2007 and higher than in any year since 1950 (see figure below). By 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.

So this is America’s 21st century Golden Age … unless of course we do something about it. The CBO forecast is only a prediction of what may be, what we are on course to be — not what has to be. Let’s assume the worst and work that much harder to avoid that future and instead create one of prosperity and expanded opportunity.

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