NDN Blog

Simon is off in California this week, so i'll step up and post of few interesting stories from around the media this morning. First up, the Wall St Journal has a new poll. The President inches up to a mighty 39% approval rating. Other indicaters on the economy, iraq and the "right track / wrong track" look positive for the Democrats. And yet, as the paper points out, the party gets its lowest favourability rating for a decade or more, with only 32% viewing the party positively. Clearly, there is work to be done on convincing voters that Democrats are more than an anti-bush protest vote. Beyond the popular wedge issues - minimum wage, stem cells and so forth - there doesn't yet seem to be much traction on the party's alternative agenda. Whatever this might be. 

The Post has an intriguing piece about demography, profiling William Frey, a boffin at Brookings. Frey "has pinpointed three [future] Americas -- the multicultural "melting pot" states, the predominantly white heartlands and the "New Sunbelt" -- that are pulling in young suburbanites." Its worth a read, not least for its claim that ethnic differences will become less important, rather than more over the coming decades. This is deeply counterintuitive, but it makes sense on at least one level. Political scientists tend to believe that many cross-cutting social cleavages - or lots of groups with weak identities - tend to make for more stable social organisations than a few groups with a few very powerful cleavages. (Think about Northern Ireland, for instance.) So as America becomes much more of a mixed race society, perhaps the sharp divide of white, black and hispanic will fade? 

Finally, The rumbles and recriminations from the collapse of the Doha round continue. The consensus seems to be that agricultural interests on both side of the Atlantic are to blame. President Bush gnomically is reported as thinking that the talks are "neither dead nor alive.". Whatever this might mean, Jagdish Bhagwati - a respected and very sane economist- is quoted in the FT as saying that "There is no doubt that Mr Bush remains deeply committed to trade liberalisation and to Doha ... But he cannot afford to make himself hostage to the Democrats before the midterm elections. There can be little doubt he will try to revive Doha after that." Depressing that the issue could be construed in this way, but nice to see someone being optimistic that matters might be revived. And with that thought, let us set about the rest of the day.........

I promised an update on the Hamilton Project event yesterday, but Steve Pearlstein of the Post got their first. His artilce explains the most entertaining moment in a generally ho-hum event. The final panel featured Rob Rubin, Larry Summers and Roger Altman, three of the biggest beast of 90s economic policy making. Their remarks were genial in tone, almost relaxed. They all agreed the Globalization was happening, that there were a few problems with inequality, and that while deficits were generally bad, trade was generally good. All of this was taken in good part, until a questioner named "Steve" - who it now appears was the Post's Pearlstein - took them to task, asking then "if any of them would be willing to support the idea of a "time out" on new free-trade initiatives until there was some tangible progress toward greater economic security for U.S. workers." The genial giants demured a couple of times, before a lion-like Summers finally lost patience and slapped down impudent young-pup "Steve" for ideas that were "dangerous", earning a round applause.  Despite this, it seems pretty clear that the three Rubinomists - with all their talks of trade, deficit reduction and higher saving rates - didn't realize quite how their economic orthodoxy has become controversial within the Democratic party. As a side note, despite the FT coverage, they didn't really mention wages much either.      

Beyond that exchange, the most interesting point of the afternoon was raised in the first panel, a debate between centrist Gene Sperling and less centrist Larry Mishel, of the Economic Policy Institute. One of them - i forget which - noted that that the problem for the Democrats interested in promoting a roll for the state (and most specifically in relation to trade) is that voters demand most vocally those things which the state is least good at delivering: protecting their jobs, and identifiying which industries will provide them with good jobs in the future. Instead, the argument was made that the state must talk up the things it can do well, namely providing simple, universal programs that help workers feel less anxious about losing their jobs. Sperling also mentioned that the sharp end of Globalization was felt less keenly in countries with more such programs like the UK; where losing a job - albeit temporarily - did not mean losing benefits like healthcare. Some to mull on. 

Following this morning's piece in the FT, Simon and Rob Shapiro have put together a new memo (now with new and improved snazzy graphics) to build NDN's case on the ongoing debate about wages and productivity:

The Emerging Progressive Economic Concensus on Wages

I'll put up a little bit more about today's Hamilton Project event when i get a chance, tomorrow.

The Financial Times this morning prominently quotes Rob Shapiro, the Director of our Globalization Initiative, on the launch of the Hamilton Project's latest tranche of work. In something of a confirmation of arguments Rob and the rest of us have been making, the FT reports that this morning news: "Summers and Rubin to highlight lagging US wages".

Larry Summers, the last Treasury secretary of the Clinton administration, will on Tuesday join Robert Rubin, his immediate predecessor, in a high-profile drive to highlight stagnation in wage growth for the majority of workers in the US economy.

The article goes on to look in some detail at the recent dismal performance on incomes, which we and others have reported here before. The piece quotes Rob twice, in the first of which he links the wages issue back to Globalization

“What we are seeing is a major structural shift in the way the US economy works,” says Rob Shapiro, head of the New Democrat Network’s Globalisation Initiative, a centrist advocacy group. “The ripple effects caused by the supply shock of the entry of hundreds of millions of Chinese workers into the global economy has changed the way American workers benefit from trade.”

I'll be attending the Hamilton event. I'll have some reflections on it later. Rob and Simon are also planning a new Memo, which we will release later today and post on the blog, giving our updated thinking on some of these economic issues. 

Various interesting things around the newspapers this morning. The President's startlingly sucessful approach to trade policy continued yesterday with the final collapse of the Doha round. We all knew it was coming, but its still disappointing. We can't be too partisan on this issue. Its deathly complicated, and not exactly anyone's fault in particular that it failed.  As the Economist pointed out last month, the President pretty much signalled he'd given up on it when he moved Portman to OMB. (Given the failure, though, it is certainly legitimate to ask if the President's political decision to impose Steel tarrifs - which we know cost consumers millions of dollars - were worth the cost.) What we can say for sure is that the failure is a victory for fear over leadership; politicians in Europe, America and elsewhere have largely caved to their producer interests, rather than acting in the long-term interest of growth in the global economy. And, as the WAPO points out, it does tend to be exporters of commodity goods in the poorest countries that lose out most. Given the state the negotiations seem to be in, this means there is precious little chance of making progress until after the next election. With luck, though, that means a different party will be in charge. 

Elsewhere, NDN's Globalization Initiative is planning to do more work on Intellectual Property in the future, an under covered political issue. To that extent, its good to see a piece in the FT this morning highlighting how Europeans are understanding that "Patents are key to taking on China."Given the current administrations poor record of prosecuting international IP issues through the WTO and elsewhere, we can only hope they might also begin to make protection of IP more of a priority. 

Our friends at the Democratic Leadership Council today published their American Dream Initiative. This has been a year-long research project lead by Senator Hillary Clinton, and in which NDN is proud to have been a partner organisation. The main proposal from the initiative is a plan to help many more Americans attend college over the next ten years. There are also a number of articles on the same subject in the latest edition of the DLC's Blueprint magazine, including an overview by Clinton and others. These documents are an important part of the ongoing thinking happening in all parts of the Democratic family in advance of November, and on the road to '08. Just as excitingly, the Brooking's Hamilton Project will have a big launch tomorrow profiling some of the latest thinking on Economics. NDN - or rather, I - will be attending the launch, and i'll report back on it tomorrow in more details.

Its been a busy week here at NDN, and i haven't quite been able to waste as much time blogging as i would have liked. Here is one thing i forgot to post yesterday- a superb, superb article in the FT yesterday on that strange new country everyone is talking about - Chinarunindia. It is now almost a political trope that Chinarunindia threatens American jobs. And so it does. But not in the way people often think. Case in point are the statistics people use. You see this often, of the following type.

"Chinarunindia graduate [big number] students every year, while America only graduates [small number]." - Or - "Chinarunindia graduates more engineering students than [America / Europe / Americananeuropetogetha]."

Such statistics are part of statistics-as-metaphor. Whether or not they are true is not the point. You should treat them in the same way people say "Eskimo's have 27 words for snow" or "half the world has never made a phone call." Are these true? They might be. They probably are not. [Read for instance this superb essay by technology thinker Clay Shirky on exactly this point, examining the truth behind the second quote.] But that isn't the point. The point is that they are meant to tell you something bigger: namely that language responds to circumstance, and the technological revolution is confined to rich countries. My favourite is: "1 in 7 people is a chinese farmer." This one is actually true, with 6 billion people and 900m employed in chinese agriculture. But what it really means is nothing to do with farming. It means: holy hell! there are a lot of people in China!

The same habit crops up with the statistics politicians use to describe Chinarunindia. They are trying to make the point - quite correctly - that the world is changing fast. They want you to understand that this brief period of history when the US is the (as Rob Shaprio, our Globalization Initiative directorl likes to say) only global power with no peer since Rome, will be just that. Brief. But in the course of making this point, some real whoppers emerge. As the FT explains:

Although both countries produce millions of graduates annually, the raw numbers are a misleading metric for employable skills. China produces 600,000 university-trained engineers every year, for example, a figure often cited to illustrate the country's inexorable rise as a technology power. But a McKinsey survey of nine occupations including engineers, accountants and doctors found that fewer than one in 10 were employable by multinationals.

The rest of the piece is similarily on the money, and you should read it. It highlights something almost no one seems to understand, namely that (unbelievably) Chinarunindia are running out of workers. They aren't running out of people exactly. But because they invest so little in education, they are running out of employable workers. These labour shortages will ripple out accross the world economy in the coming years. But because politicans use these misleading stats, they miss the bigger point. It is this. Imagine how much Chinarunindia will change our economy when 9 out of 10 of their professionals are employable by multinationals? Makes you think. Have a great weekend............

NDN ran two terrific events in the last two days, one on our Hispanic poll, the other on the New Politics Institute's technology work. Cutting edge tech and grassroots Latino politics. Distinct areas, right? Wrong. Becuase you did read the title of this post right. According to yesterday's Pew Blogging Study, 19% of all bloggers are (english speaking) Hispanics. Given how much i know people reading this love it when I try to show off my child-like statistical abilities, i'm only happy to oblige. We have 147 million Americans are online, of whom 8%, or 12 million, blog. 19% of bloggers are hispanics, which comes out as 2.28 million. This is from a total universe of Hispanic internet users of 16m. To put this another way, the ratio of white bloggers to total internet users is 15:1. The ration for hispanics is 7:1, more than twice as many. Even more strikingly, the number of hispanic bloggers is almost double the number of African Americans, despite there being roughly the same numbers of African Americans and Hispanics in the country.

What explains this? It might be an error. The poll sample on the bloggers is small giving a larger than usual error range of +/-7%. But even this means that we can be pretty sure that the true number is between 1.4m and 3.12m. My hunch is that that online hispanics - being a smaller group of the total population of hispanics compared to whites - are disproportionately younger, and wealthier than the group average, factors likely to be associated with having enough money to own a computer and actually know how to use it. Despite the fact the Hispanics are, on average, less wealthy than white Americans, at present those on line must be more blog-friendly on average than white Americans. And youth must have a lot to do with this. Come what may, if these figures are even remotely correct, it means that Hispanics are the most blog rich demographic group in America. I'm going to write to the poll people are see what their hunch is. More anon.

UPDATE - Amanda Lenhart, the author at PEW, writes back in double quick time. Thanks Adanda. Turns out my hunch was not too far off the mark.  More predictably, i goofed on some of the stats, but we'll gloss over that. Lets leave it to the experts:

"As you may have noticed, the sample for this survey is quite small (n=233) which limits the kind of analysis we can do of the data. However, our hunch is that bloggers are more diverse than internet users because they are overwhelmingly young (54% of bloggers are 18-29, compared to 24% of adult internet users), and work by the Census bureau suggests that younger Americans are a more diverse cohort than old Americans – due to birth rates and immigration. (see this USAToday article for a quick overview and a nice chart: http://www.usatoday.com/educate/college/careers/Hot/6-9-05b.htm ) While we can’t analyze our data to show causation, I believe that the age of bloggers at least partly explains the diversity of the group."

"The backlash against globalisation is becoming more pronounced every day in the US." So begins a comment piece by Jacques Mistral, a European economist currently at Harvard, in this Morning's FT. Tell us more about that, Jaques:

Rapid growth in recent decades did not deliver those results; the best-off have done so well in the past decade only because they succeeded in capturing a huge part of the increase in national income. The top one-tenth of 1 per cent of the income distribution earned as much of the real 1997-2001 gain in wage and salary income (excluding non-labour income) as the bottom 50 per cent. It should come as no surprise that the number of those without health insurance is increasing and poverty ratesin the US are the highest amongall Organisation for Economic Co-operation and Development countries, in particular for children and seniors.

Lest you think this is just a nasty case of we-told-you-so euromoaning, Mistral isn't the only one making this argument. Listen carefully, and elsewhere in the commentary jungle this morning you'll hear the unmistakeable thound of distant resumes clashing. This thudding noise is a different take on same brouhaha, midway to being thrashed out by Paul Krugman (D- Times, nobel laureate presumptive), Brad De Long (D- Berkely, Republican hating ex-Clinton economy boffin) and Greg Mankiw (R- Harvard, ex-Bush economy boffin.)

The gist of the debate has been exactly how unequal America has become, and how much of that inequality can be put down to returns to education.A decent summary of where they've got to is here, on the superb Economist's View website. The argument stems from an updated economic study, mentioned here last week. The killer point of disagreement is what explains the huge recent income gains made by the top 1% of Americans (see graph in link). The fact that such an increase has occured - what Krugam calls "Guilded Age II - is not in dispute. (In fact, the discussion is all the more remarkable for what isn't up for discussion. Just one example would be the fact that even the top 10% of wealthy Americans have seen relatively pedestrian increases in their incomes lately)

Again, don't take my word for it. Whats that? You want me to engage in my usual habit of finding business-friendly firepower to back up seemingly partisan anaylsis. Well ok then, i'll give you the ever Democrat-supporting Outlook section of this morning's Wall St Journal, discussing last week's improved budget figures. Quoth the Journal: "So, the tax windfall is another piece of evidence that income inequality in the U.S. continues to grow, which in turn may explain why the average American still gives President Bush low marks on the economy despite its overall strength.

Does this matter? Sure it does. The latest example of why comes in the opening paragraph of a fascinating story in this morning's Washington Post:

Jerry Nelson steered his grocery cart out of the Wal-Mart on a recent night, fuming about globalization, Southern style. "Another great night at the Mexican Wal-Mart," he groused to no one in particular.

Whatever the smartest-men-in-the-room decide, its increasingly clear that this 1% economy is not performing for Jerry Nelson, or most other Americans for that matter. Bringing that fringe 99% of the rest of us along for the ride can rarely have seemed more important.

Its been a fascinating week for that bemused breed: the GOP economic policy observer. And all the more so for Paul Krugman's collumn in The Times this morning. He nicely lays out the debate. Republicans complain they don't get much credit for a growing economy. Economists point out this is because most people haven't seen any benefit. He also picks up on new research highlighed a few days ago over at the CBPP showing huge rises in income concentration for the top 1% (and the top .01%) of Americans, and argues that most Americans haven't shared in this sucess.

Just for fun, here is a case in point. I was fiddling around with some wage figures for a report NDN is putting together on the Republican economic record. The Bureau of Labor Statistics tells us that the average American wage when the President won re-election was $480.41. (Stats fans - check the average weekly earnings box, and click retrieve data.) Today that figure is $543.65, which looks ok. But control for the fact that prices have gone up around 15% in this period and the real weekly wage of the average America is - guess what? - $480.40. So, on our calculations, average americans haven't gained one cent under President Bush. In fact, they've lost one.

But perhaps the most perceptive comment on all of the week's economic news comes nestled in an editorial in this morning's Financial Times. They note that the President economic push this week wasn't just to battle for a tie on his economic record in the run-in to November. In fact, something more important is afoot, something central to his legacy as a President and the governance strategy of conservatives more generally.

"The president's chief aim was in fact to bolster his campaign to convert the temporary tax cuts enacted in 2001 and 2003 into permanent reductions beyond their 2010 expiry date. It is smart politics that sends two messages: first, the numbers reassure fiscal conservatives alienated by the administration's record of rising deficits; and, second, Mr Bush's interpretation of the data rallies supply-side radicals who believe America's thumping GDP growth has been caused by the tax cuts."

As Rob Shapiro wrote yesterday, its difficult to know where to begin. The changed estimates can't have been the result of tax policy, because tax policy is unchanged since they were first made. They could well have been the result of fiddled figures, as both Rob and Brad De Long argued this week. And it couldn't be clearer after this week that the tax cuts do not pay for themselves. Yet, the more important battle is whether the tax cuts will be made permanent when they expire in 2010. If they are most estimates suggest that their costs will go through the roof - 3.3 trillion through 2017, says the Congressional Budget Office - significantly worsening the budget deficit for whoever is unlucky enough to pick up the President's economic tab. Not allowing this to happen must be among the most important economic fights of the next two years.