Barack Obama

The Good News In Last Week's Jobs Report is Better Than You Realize

This morning’s employment report makes the President’s case that the economy is not only strengthening, but has been for some months now.  The unemployment rate fell to 7.8 percent; and this time, it was not because more people dropped out of the labor force.  The number of discouraged workers or people “marginally attached” to the labor force actually declined.  Rather, the bullish numbers come not only from creating 114,000 net new jobs in September, but from stronger job creation in July and August than originally reported.  Job creation was revised upward from 141,000 to 181,000 for July and up from 96,000 to 142,000 for August.  In addition, the average hours worked was up, and so was average hourly pay.

The Labor Department actually collects the jobs data in two ways.  The Census Bureau surveys business establishments, which produces the numbers above.  It also surveys households, and the household survey is usually more bullish than the establishment survey.  This month was no exception.  It found that the number of unemployed fell by 456,000 in September and total employment rose by 873,000.  Now, some 600,000 of those newly employed people found only part-time work, so the increase in those employed full-time last month was about 270,000 according to the household survey.    When the establishment and household surveys diverge this much, it usually means that a revision is coming down the line, just as we saw this month for July and August.  It is a good bet that in early December, we will learn that under the establishment data, employment last month rose not by 114,000, but by closer to 140,000 to 160,000. 

The jobs picture is improving, because the elements of a stronger expansion finally are coming together.  Household debt has largely returned to normal levels and housing prices have stabilized, and both are bolstering consumer demand.  Next, we should see business investment strengthen in response to the stronger consumer demand.  In fact, conditions would be even better, but for the rest of the world.  For the first time in years, the biggest drag on the American economy is coming not from the after-shocks of the 2008-2007 financial meltdown, but from a new recession in much of Europe and economic weakening in China. 

GOP Revisionism: Rewriting Economic History Against Obama

As Published in the Washington Post on August 17, 2012:

Two respected economic advisers to the Romney campaign launched a new line of criticism of President Obama’s economic stewardship on this page this week [“Obama’s faulty math; his economic arguments contradict themselves,” op-ed, Aug. 16]. The case offered by Kevin Hassett of the American Enterprise Institute and Glenn Hubbard of Columbia Business School contained three bold claims.

Two of the three are demonstrably wrong as matters of economics, and the other is off-point.

First, Hassett and Hubbard say that the president has misled the country in claiming that economies that suffer financial crises typically recover only very slowly. Second, they insist that Obama himself didn’t expect a slow recovery, judging by his administration’s initial forecast. And they say that if Obama did expect a slow recovery, he should have known that Keynesian stimulus wouldn’t work under that circumstance.

If this brief were true, it could suggest that the president was befuddled in his early months in office, then lied to promote his stimulus package and now is lying again. But this brief is simply wrong, and as good economists, they should know it.

To refute Obama’s claim about the slow recovery — as well as a recent, landmark study documenting hundreds of disappointing recoveries following financial crises around the world — Hassett and Hubbard cite a less well-known study from the Cleveland Federal Reserve Bank. That study, by Michael Bordo and Joseph Haubrich, found that financial crises in the United States often have been followed by strong recoveries. But the main evidence comes from the long series of financial busts from 1880 to the 1920s. In fact, Bordo and Haubrich note that the three major U.S. financial crises since the 1920s — 1932-33, 1990-91 and 2007-08 — were all followed by notably slow recoveries. Moreover, as Ezra Klein reported in The Post this month, Bordo believes that the slow pace of the current recovery reflects not the president’s policies but the fact that it follows a meltdown in both finance and housing.

The Romney campaign’s notion that the 2007-08 financial crisis should have been followed by a rapid, strong recovery — and, by implication, would have been but for Obama’s policies — ignores other well-known economic evidence. The data show, for example, that the current recovery is comparable to the one that followed the 2001 recession, when Hubbard chaired George W. Bush’s Council of Economic Advisers. In the three years following the end of the 2001 recession, which did not involve a financial crisis, real gross domestic product grew only modestly faster than it did in the past three years. Moreover, in the 37 months since the end of the 2007-09 recession, U.S. businesses created nearly 3.9 million new jobs. Recall that fewer than 1.1 million were created in the first 37 months after the 2001 downturn.

The Romney advisers then criticized the Obama administration for its first economic forecast. Yes, the administration initially predicted a stronger recovery than has occurred. In part that was because administration officials, along with everyone else, underestimated the depths of the precipice the economy had fallen into. The Bush administration made much the same mistake, with much more dire consequences. The Bush team ignored all signs of an impending meltdown and then stood by as Lehman Brothers collapsed, taking AIG, Merrill Lynch and others down as well.

Finally, the Romney advisers claim that if Obama had expected a slow recovery, he should have known that stimulus would produce only a temporary lift, to be followed by a comparable decline. There is an economic theory called “rational expectations”; it holds that stimulus never works. Almost all economists dismiss it because the overwhelming consensus is that stimulus often does work. In any case, there is no theory or evidence to support the peculiar claim that the expectation of a slow recovery will disarm Keynesian stimulus. In fact, within two months of Congress passing Obama’s stimulus, our sickening slide toward a depression halted, and growth and job creation resumed — albeit at the moderate pace characteristic of recoveries following a financial and broader economic crisis.

Yes, growth has slowed periodically since then, but not to anything like the degree the Romney advisers claim. According to their notion, we should be in a deep recession today. In any case, the president asked repeatedly for additional measures to bolster the recovery, which Republicans in the House of Representatives have repeatedly rejected.

Beyond the partisan cherry-picking of economic evidence, the question remains: Could Obama have done anything else to drive a more robust recovery? The history of economic meltdowns suggests that a strong recovery is possible only if you directly address the underlying causes of the crisis. In our case, that meant not only stabilizing the financial markets, which we did, but also taking decisive steps to stabilize housing prices by reducing home foreclosures.

Now, imagine the political firestorm if the president had tried to force banks to refinance the mortgages of homeowners in danger of losing their houses or offered short-term loans to help them meet their mortgage payments until the economy recovered. The president’s opponents can hardly blame him now for not taking steps that they would have blocked in any case.

How Much Credit Can Obama Claim on the Economy?

Presidents regularly get the credit or blame for developments beyond their control.    Sometimes, they also get no credit or blame for the decisions they do take.  Barack Obama fits both molds.   A fresh example of the second pattern is the President’s surprising semi-breakthrough on European debt, at this week’s G20 meeting in Los Cabos, Mexico.  For months, President Obama and Treasury officials have quietly urged Eurozone leaders to do what it takes to avoid a sovereign debt meltdown, before they tackle long-term reforms.  This week, it looks like it might pay off.  According to reports, Obama emerged from a private huddle with German Chancellor Angela Merkel with her grudging agreement to use Eurozone funds to directly support Spanish and Italian bonds.  For the first time since the crisis began more than two years ago, the country with the deepest pockets has tacitly agreed to stand behind the full faith and credit of its member countries.  If these reports are true, this week’s agreement should hold off a full-blown debt crisis for a while, and with it the prospect of a deep global recession this year.   Yet, how many Americans will give Obama any credit for all this, come November?  

In a similar fashion, Mr. Obama inherited an economy seized by an historic financial meltdown.  His predecessor mismanaged the crisis so badly that it drove the country into the worst recession in 80 years.  Steeling himself against opponents united only by their partisanship, the President unleashed a flood of fiscal and monetary stimulus to arrest America’s downward spiral towards genuine depression.  Six months later, growth resumed and private employment began to increase.  Yet, in November, how much credit will voters give the President for avoiding the worst case scenario?

Instead, the President finds his reelection threatened by an economic reality he can do little to change — namely, that an economy shaken by financial crisis usually recovers very slowly.  In principle, to be sure, his administration might have done more to overcome the economic drag he inherited from Bush.  He might have pressed harder to stabilize the housing market with short term loans for homeowners facing foreclosure.  He might have tried harder to nail down a grand bargain for long-term fiscal balance.  

But the President also recognized the new political reality following the 2010 elections.  However hard he pressed or pushed Congress, neither deal was possible with Tea Party members calling the shots in the House, and Tea Party activists threatening to take down any Republican willing to work with the “enemy.”  Obama did successfully block the hard right program of slash-and-burn budget austerity, which almost certainly would have plunged the economy back into recession, as it did in Britain.  But once again, come November, how much credit will he get for avoiding another downturn? 

This President has shown that he can take care of himself politically.  He may not be able to point to the dismal hand he inherited from Bush, at least not without seeming to whine.  But he can point voters to the numerous troubling aspects of Romney’s economic record in Massachusetts and Bain Capital.  Obama also has the political advantage in many policy areas, since the public generally favor his approach to taxes, Medicare and Medicaid, higher education, and the deficit.

Unhappily, however, the economy is still far from safe and sound.  This week’s news from the G20 meeting will not settle the Eurozone’s economic problems. That leaves the President’s reelection still hostage to the sovereign debt crisis. On top of the Obama-Merkel meeting of minds, the other good news is that Greece’s new government should be able to avoid a precipitous default and chaotic exit from the Euro.  Eventually, Greece almost certainly will default and leave the Euro, but hopefully not before the Eurozone has prepared for it.  

The question remains, then, of what additional arrangements Frau Merkel will accept to reassure international investors that Spain and Italy will not follow Greece’s path.  Time is short, because Europe is already in recession, and such deals are usually pricey.  Moreover, at this moment, European leaders cannot even agree on whether the next step should be uniform banking regulation, a fiscal union, or expanded political authority for the Eurozone.  All of these measures are important for the Eurozone to become a stable economic entity.  But first, the Eurozone has to survive.  That will require what the President has called for all along – measures such as Eurobonds or central bank authority to guarantee that after Greece, no other Eurozone country will ever have to default.

President Obama urges to pass DREAM Act and an immigration reform

President Obama delivered a speech on Friday, June 15 in which he stood with young immigrants who were brought as undocumented children before turning 16 years old and who would qualify for a pathway to citizenship under the DREAM Act bill if they obtain a college degree or serve in the military.

He said that a recent policy decision to stop deportations of undocumented young people is “the right thing to do” to the country´s economy although he recognized that this is a temporary relief for young people. Obama urged Congress to pass the DREAM Act along with a Comprehensive Immigration Reform to allow farmers and ranchers to have access to a stable workforce, and to allow high skilled immigrants to work in the fields of science and technology.

The President also reminded when the Dream Act was approved in the House but failed to pass in the Senate last time it was voted in December 2010. “The need has not changed, the only thing that changed is politics. It makes no sense to expel talented young people."

Watch his speech on video.

An Economic Program for the Fall Campaign and the Next Four Years

With the presidential election turning on the economy, the debate has focused on what’s right or wrong with the current recovery, and who’s responsible.  They agree that growth is too slow and deficits are too high; and unsurprisingly, President Obama blames the GOP for both while Mr. Romney blames the President.  The President’s arguments are stronger, especially given Romney’s risible claim that he can balance the budget and cut taxes another $5 trillion at the same time.  The larger point is that the high deficits and tepid expansion are legacies of the financial meltdown, and resolving them would only allow economic policy to finally move past 2008-2009.  The next stage of the economic debate, then, should focus on the two critical issues that have bedeviled middle-class Americans for more than a decade — namely, historically-slow jobs growth, and stagnating incomes.  

A presidential campaign can accommodate only a handful of big ideas.  Here, then, are three new policy initiatives to help reignite job creation and income gains:  1) reduce the cost of creating new jobs by reforming payroll taxes; 2) restore the foundation for middle-class wealth by stabilizing the housing market; and 3) enable everyone to become more productive by providing universal, low-cost access to college education and worker training. 

Tax reforms offer the best way to reduce the cost of creating new employment and keeping those already employed in their jobs.  The focus of such reforms is not the tax on corporate profits.  Yes, the corporate tax is an inefficient mess, but reforming it will do little for those looking for work.  The right target for job creation is the payroll tax, because it directly increases the labor costs of every employer.  The idea here is to stimulate job creation and employee retention by cutting the employer side of the payroll in half, and on a permanent basis.  And we can replace the revenues lost to Social Security with a carbon-based pollution tax. 

The second idea could help address slow job creation and the slow expansion, as well as widening inequality.  Employers have been creating relatively few new jobs not only because of the cost of doing so.  Employers also are not  confident about when Americans will begin to spend again like they used to, creating the demand for the goods and services which additional workers could produce.  The simplest way to boost demand is more budget stimulus – and good luck with that.  A more efficient way, however, is to remove any factors holding back normal consumer spending.  It’s not unemployment, with the jobless rate already down from 9.8 percent to 8.2 percent.  Rather, what continues to hold back tens of millions of consumers is the hard fact that the housing bust has left them substantially poorer.

So far, the bust has cost most homeowners one-third of the value of their homes.  This is a big deal economically, because home equity is the main form of wealth or saving held by most of the middle class.  Consider the following: The bottom 80 percent of Americans, measured by income, own just 7 percent of the value of the country’s financial assets – but they also hold 40 percent of the value of all residential real estate.  The sharp drop in housing values, therefore, wiped out most or all of the home equity built up by tens of millions of Americans.  Before most people begin spending again at the rate required to boost business investment and hiring, housing prices have to stabilize and begin to move up. 

 Washington spent more than $1 trillion to stabilize the financial markets, which generate most of the wealth of the top 1 percent to 20 percent of Americans.  For much less, we can stabilize the housing markets which generate the wealth of everybody else.  The most direct way to do this is to keep people in their homes by bringing down the current abnormally-high foreclosure rates.  Fannie Mae, which taxpayers now own, could extend low-cost, two-year loans to millions of homeowners facing foreclosure.  The funds could be used only for mortgages held by Fannie Mae.  And to control the moral hazard lurking in such relief, 20 percent of any capital gain earned from eventually selling those homes would go back to taxpayers.  

The third initiative would ensure that everyone can build the skills needed to earn a rising income by providing low-cost access to college education and worker training.  First, we could replace student loans with an expanded and upgraded form of national service:  Two years of service in the military or the Peace Corps, or three to four years service in Americorps, would earn any young person in-state tuition at a public college or university for four years.  Young people considering college would be asked to give something of themselves back in service to the country, and would no longer have to face huge debts that can take decades to work off.  In addition, every working American should have access to additional training in the information technologies integral to virtually all industries and jobs.  The plan here is one that Mr. Obama supported when he was in the Senate – provide grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends, so any adult can walk in a receive free instruction. 

This agenda is forward-looking rather than present-oriented, so it does not address the deficit.  In truth, everyone knows perfectly well what to do about it.  Simpson Bowles, Domenici-Rivlin, the Senate Gang of Six all rely on the same formula: Raise new revenues, reform Medicare and Medicaid, cap discretionary spending, and reduce defense spending.  This approach, which President Obama supports, broke the deficit logjams in the 1980s under Ronald Reagan and the 1990s under Bill Clinton.  The only thing standing in its way today is the intransigence of extreme conservatives who would rather see the U.S. default on its sovereign debt than consider raising taxes.  We can only hope that the public will continue to rally around this balanced approach and convince House Speaker John Boehner and Senate GOP leader Mitch McConnell. Once that is done, we can turn to the real business of restoring jobs and income gains.

A Modest Proposal to Help the U.S. Avoid an Economic Train Wreck

The United States is headed for an economic version of a Wall Street “triple witching hour.”  In finance, a triple witching house comes along four times a year, when options contracts on stocks, options contracts on stock indexes, and futures contracts of those indexes all expire at the same time on the same day.  Washington’s own version will unfold at midnight, December 31, 2012.  That is the moment when, at once, all of George W. Bush’s tax cuts expire, President Obama’s payroll tax relief ends, and the grace period before $1.2 trillion in across-the-board cuts runs out.  If the President, Congress and the two parties cannot finally agree on what to do about spending and revenues, their doing nothing will actually solve most of the U.S. deficit problem.  But all of that austerity coming at once would also shut down the U.S. economy.   

We actually face something close to a quadruple witching hour, because sometime in late-December or early-January, within days or weeks of everything else, the U.S. debt limit will run out again.  The irony is that if the lame duck Congress and possibly a lame duck President cannot resolve these matters, the United States could face a technical sovereign debt default even as its political gridlock carves out a sustainable path for its government debt.  Given how tortuously difficult it has been to resolve any one of these issues thus far, on even a temporary basis, the health of the American economy demands some new political thinking.

The range of scenarios for the post-election period is mind-boggling.  For example, conservatives might be tempted to trade a multi-year extension of payroll tax relief for permanent status for all of the Bush tax cuts.  A newly-reelected President Obama might consider agreeing if, say, the Republicans also would agree to find some new revenues from other sources and fold in a multi-year extension for the debt limit.  (Good luck with that.)  And if Romney wins the White House, congressional Democrats could call his bluff, let him enter office with a sinking economy, and then force him to negotiate with a Senate Democratic caucus able to block whatever a GOP House passes.  Or, in what would pass for a rosy scenario here, everyone may be so exhausted from the years of political trench warfare that all sides agree to extend everything for several more months, so the new Congress and whoever is President can try to work it all out. 

Whatever the election results, the debate over taxes and the budget will dominate our politics and government through at least the first half of 2013.   In fact, that happens nearly every four years.  Since Ronald Reagan’s first term, most Presidents have figured out that they can use their initial budget and tax initiatives to carry most of their agenda – and that their sway with Congress will likely only erode with time.  To be sure, this initial focus on budget and taxes made more sense when Washington still knew how to forge bipartisan compromises.  The question today is, can any president get the current crop of Republicans to sign on to any plan that includes new taxes?  And without that concession, could any president persuade congressional Democrats to reform Medicare and Social Security?

If taxes and entitlement remain off-the-table, there can be no grand bargain and no resolution.  For the short-term, the United States instead will face auto-pilot austerity.  More important, the patience of global investors with our stumbling political process could run out, which would mean rising long-term interest rates.  If that happens, the U.S. expansion will end before it can generate any benefits at all for most Americans.

The next president needs a game changer, one that might entice each side to make painful concessions, say, in exchange for control over the impact of those concessions.  As president, Bill Clinton could intuit the terms of such mutual concessions.   We will have to settle for a new process – or for putting an old one to new use.  

For many years, certain aspects of taxation have been seen as too complex and esoteric for even the professional tax mavens at the Senate Finance and House Ways and Means committees.   The taxation of mutual and stock life insurance companies is an example.  So when Ronald Reagan raised corporate taxes, the tax writing committees parceled out several billions of dollars in new revenues to the life insurers and told them to figure out how to raise it in ways that would be least disruptive economically.   Those were simpler times politically, to be sure, but the same model could be adapted to our current problem.

Let’s assume that the lame duck gives the President and Congress a few more months to work out everything.  Next January, the President and the leaders of both parties in both houses agree – tacitly, of course -- on how to broadly allocate another $4 trillion in budget savings over 10 years, under new rules.  Say, for example, that $1 trillion would come from new revenues, $2 trillion from entitlement reforms, $200 billion from discretionary defense spending, $300 billion from additional discretionary non-defense programs, and the rest from interest savings.  By agreeing to $1 trillion in new revenues, Republicans get the right to design whatever reforms they deem best to achieve the target.  Similarly, by agreeing to $2 trillion in entitlement savings, Democrats gain the right to fashion whatever Medicare and Social Security changes they deem best.  Similarly, Republicans could allocate the additional defense cuts, and Democrats would parcel out the additional, discretionary non-defense cuts.  And the looming threats from the expiration of everything, combined with the knowledge that each party would control the terms of the changes it fears most, might just be enough to get both sides to agree to the underlying allocation of pain. 

Millennials Still Supporting Obama's Re-election

Millennials (born 1982-2003) were crucial to Barack Obama’s 2008 election.  Other than the state of the economy, the most pivotal factor in determining the outcome of the 2012 general election is likely to be whether or not America’s youngest voters repeat their 2008 electoral performance in 2012.  

In November 2008, Millennials comprised about 17% of the electorate and voted overwhelmingly for Barack Obama over John McCain (66% to 32%). With older generations dividing their votes almost evenly between the two candidates, Millennials accounted for about 80% of Obama’s national popular vote margin over McCain, turning what would have been a narrow  win into a decisive seven-point victory.

So far, the data suggests Millennials are poised to support Barack Obama at the same level this year that they did four years ago. In a recent Pew survey, Millennials preferred Obama over Mitt Romney, the likely Republican nominee, by a 62% to 36% margin.   But this year, Millennials make up 24% of those eligible to vote. Coupled with its partisan unity in comparison with older voters, the sheer size of the Millennial Generation, America’s largest ever, could make its impact even more decisive in 2012 than in 2008.

Whether Millennials have that kind of impact depends on what the two parties do to attract their votes.  For Republicans, the best approach is to connect with Millennials before they are solidly in the Democratic camp for the next three or four decades. A few Millennial Republicans such as John McCain’s daughter, Meghan,  and Kristen Soltis, a GOP pollster,  have argued that their party should moderate its stance on social issues and immigration in order to have greater appeal to their highly tolerant and diverse generation. So far, however, the GOP presidential field has attracted relatively little Millennial support; through Super Tuesday the Republican frontrunners (Mitt Romney, Rick Santorum, and Ron Paul) combined had received less than half the Millennial votes that Barack Obama did in 2008.   Perhaps the lack of Millennial interest in the GOP candidates explains why Republicans in at least half of the states are more focused on limiting Millennial voting turnout than in actively courting the generation’s support 

For Democrats, the concern is not so much the partisanship of Millennials, but their engagement. One way to reinforce Millennials’ Democratic leanings is to remind them of their stake in the election by emphasizing the Millennial-friendly policies the Obama administration has pursued. Help with the cost of attending college, funding more national service opportunities, and permitting young people to remain on their parent’s health insurance until age 26 are all initiatives the Obama team could raise with Millennials.  Already that campaign is gearing up online and offline organizational efforts to bring Millennials to the polls in November that exceed the technological sophistication of its very successful efforts in 2008. 

If Millennials vote in numbers proportionate to their presence among eligible voters, their continued support of the president should allow him to overcome any attrition he suffers among older voters. But if large numbers of Millennials do not vote, the president’s reelection chances will be sharply reduced. Whichever alternative occurs will very likely determine whether Barack Obama or his eventual Republican opponent is inaugurated as president on January 20, 2013. 

The White House On Targeted Killings: More Questions Than Answers

Attorney General Holder gave a widely-anticipated speech yesterday attempting to shed some light on the Administration's policy regarding the targeted killing of American citizens engaged in terrorism abroad. Politico has a good summary of what was said and I recommend reading Adam Serwer's take over at Mother Jones.  The bulk of the speech was boilerplate that we've heard before, but the important portion was when Holder laid out the standard used by the Administration when making decisions about targets:

"Let me be clear: an operation using lethal force in a foreign country, targeted against a U.S. citizen who is a senior operational leader of al Qaeda or associated forces, and who is actively engaged in planning to kill Americans, would be lawful at least in the following circumstances: First, the U.S. government has determined, after a thorough and careful review, that the individual poses an imminent threat of violent attack against the United States; second, capture is not feasible; and third, the operation would be conducted in a manner consistent with applicable law of war principles."

While this is the clearest statement that's been given by the Administration on the subject, it begs more questions than it answers. He characterizes Al Qaeda as posing an ongoing and imminent threat to the US. Given that reality, it's not clear what relevant distinction exists between "operational" and non-operational leadership. Holder's internal logic wouldn't seem to preclude the targeting of people who provide significant material, recruiting, or logistics support if the entire organization is viewed as posing an imminent threat to Americans.

He goes on to acknowledge the necessity of "robust oversight," explaining the detailed procedures in place to deal with intelligence gathering, wire-tapping, and prosecuting suspects through military tribunals. When he gets back to the situation at hand, however, the only oversight that appears to apply to targeted killings is for the White House to "regularly inform...the appropriate members of Congress." Mere Congressional notification hardly seems like a robust form of oversight. In fact, it's really the bare legal minimum. It certainly sounds as though the White House is operating under the amended National Security Act which doesn't require them to notify all of Congress, or even everyone on the relevent Intelligence committees. They can choose to brief only the so-called "Gang of 8," and the Congressional Research Service points out that "Congress does not have the authority under statute to veto outright a covert action." There may be compelling reasons for the Administration to limit oversight so severely, but the Attorney General didn't make those arguments.

Holder did, however, attempt to take his most vocal legal critics head-on when he asserted--correctly--that "Due process and judicial process are not one and the same." The Supreme Court has consistently allowed for alternative, extra-judicial processes in instances where a judge and traditional trial are unnecessary. Kevin Drum points out, however, that historically this approach has been "meant to keep full-blown trials from being required even for fairly minor offenses, something that could grind the criminal justice system to a halt. It's not meant to demean the due process required for something as serious as targeting someone for killing." The legal precedent is clearly on the side of the Administration here, but in order to know whether or not they are, in fact, demeaning the standard--we would need a lot more knowledge about how the internal process of target selection and approval is carried out. These are details that the White House appears intent on keeping to itself.

It isn't just American terrorist supporters who have a deeply vested interest in this policy, however. There's more than a few foreign countries that I'm sure are weary of American Hellfire missiles targeting people within their borders. Holder recognized these concerns, assuring the audience that the White House's legal interpretation "does not mean that we can use military force whenever or wherever we want." After this throat-clearing, however, he goes on to remind everyone that "neither Congress nor our federal courts has limited the geographic scope of our ability to use force... the use of force in foreign territory would be consistent with these international legal principles if conducted, for example, with the consent of the nation involved - or after a determination that the nation is unable or unwilling to deal effectively with a threat to the United States." We know that the Osama bin Laden raid, for example, was conducted without the consent or knowledge of the Pakistani government, so presumably there is some kind of process and criteria in place to make a determination about whether or not a country is "unable or unwilling" to act. Like the process for determining individual targets, though, the actual standards and calculus being used remains too opaque to judge.

All told, I commend the Administration's attempt to increase, if only marginally, the transparency around this policy. Americans, legal scholars, and foreign countries are right to view these actions with skepticism. The Authorization for Use of Military Force, passed by Congress in the wake of the September 11 attacks, grants the President broad powers to use "necessary and appropriate force" in protecting the nation from terrorism. As the Attorney General himself pointed out, though, proper oversight and review are essential to ensure that the White House exercises this power in a way that's consistent with our constitution, values, and international legal commitments. The ACLU, in a response to Holder's speech, argued that "judicial oversight is critically important given the breathtaking authority the government has claimed." Some accommodation for national security is clearly appropriate, but whether more formal judicial oversight is needed can't be fairly determined without understanding the rigor of the Administration's internal due process. With that in mind. civil rights groups are doing a real service by continuing to push for the needed level of disclosure. 

The State of the Union and the Power of Technological Change

President Obama made inequality a major theme of his State of the Union address last night, an unsurprising choice as he prepares to face Mitt Romney. Everyone now knows that just last year Mr. Romney paid a smaller share of his $21 million income in taxes than the average American paid on a $50,000 salary. But if inequality was the President’s theme, his main subject was jobs. For Obama, faster job growth depends on more government. We need Washington, for example, to retrain workers, reduce college costs, and provide special supports for manufacturers. For Romney, the answer for job creation is, what else, less government: Washington needs only to cut regulation and reduce taxes, especially for the wealthy people and corporations who, in the Romney worldview, create the jobs.

But not so fast — there are other options as well. A new report from the NDN think tank suggests that certain kinds of new technologies can spur job creation more effectively than most government programs or tax cuts. The new study, conducted by Kevin Hassett of the American Enterprise Institute and myself, found that the rapid spread of new 3G wireless devices from 2007 to 2011 led directly to the creation of nearly 1.6 million new jobs. And those job gains occurred even as the overall economy was shedding 5.3 million other jobs.

Our analysis tracked shifts by consumers and businesses from 2G wireless phones to 3G smart phones and tablets, quarter by quarter and state by state, from July 2007 to December 2011. We then analyzed the links between the shift to the more powerful 3G devices and changes in employment, quarter to quarter and state by state. We did the math and found that every 10 percentage point increase in the use of those devices generated more than 231,000 new jobs within a year.

It makes clear and compelling economic sense. As a growing share of Internet use shifts to wireless devices, the people and businesses that use them become more efficient and productive. Those gains, in turn, create new value which ultimately leads to more job creation. The spread of 3G wireless devices also created a platform for new services — for example, in mobile e-commerce, mobile social networking, and location-based services. The growth of those new services also led to more job creation.

And the best news for jobs is that another technological shift is occurring right now, from 3G to 4G wireless devices. 4G wireless networks and the Internet infrastructure that supports them have the potential to drive significant new efficiencies and innovations across the economy. Jobs already are being created in 4G-dependent areas such as cloud-based services and mobile health applications. According to industry analysts, 4G wireless networks in the near future could be used to create a Smart Electricity Grid and a national public safety system.

This analysis, then, can provide a new direction for job creation efforts: Adopt spectrum and other policies that will promote the broad and rapid deployment of 4G

Still, there are also kernels of economic truth in the Romney and Obama positions. Romney is not wrong, for example, when he says that lower taxes are usually better for the economy than higher taxes. But there’s no evidence that lower taxes on wealthy people or corporations would produce many jobs. And in a period of trillion-dollar budget deficits, calls for tax cuts seem at best irrelevant, and at worst politically cynical and misleading.

The President is on firmer ground. Greater access to higher education and retraining should increase productivity and growth, at least over the long haul. Since the direct benefits from those efforts would presumably go to people from modest or middle-income households, Obama’s approach also could help address inequality. And since the President seems prepared to raise the revenues to finance his proposals, they could be more than political window dressing.

For all of these good points, these approaches are not the answer to slow job creation. For that, President Obama and Mr. Romney have to directly address the forces that actually create and destroy private-sector jobs. One such force is technology, and our new analysis shows that the 3G and 4G wireless technologies can create many more jobs than they may destroy, and do so quickly. Another approach could focus on reducing the additional costs that businesses bear directly when they create new jobs. That could mean cuts on the employer side of the payroll tax or new measures to slow increases in the health care costs that businesses bear for their employees. At a minimum, any of these approaches would produce more economic benefits for more people than all of the tax cuts promoted by Obama’s opponents.

Statement on the Jobs Report

I released the following statement today:

"Today’s report that the U.S. economy created  200,000 new jobs, net of layoffs, certainly counts as strong gains for this recovery.  Of course, what constitutes strong job growth today would have seemed, at best,  moderate in the 1990s and 1980s, when the United States routinely created more than 300,000 new jobs per month.   Still, for the first time since the 2007-2009 recession, decent levels of job creation seem sustainable.  Business investment is growing nicely, creating jobs directly.  The trade deficit keeps falling, slowing the drain of U.S. jobs overseas.  And while consumer spending is still fragile, household debt continues to fall, setting the stage for a stronger recovery.  

If Washington would take steps to help stabilize housing prices, as Ben Bernanke called for this week, and if the Eurozone manages to avoid a financial meltdown, Obama could find himself presiding over a decent recovery by November."

You can find Rob's statement on Thursday about the promising ADP report showing similar numbers here.

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