In this AEI Events Podcast, AEI’s Jeffrey Eisenach hosts Federal Communications Commission (FCC) Chairman Ajit Pai for a discussion on the chairman’s first 100 days and his vision for the future of US communications policy. Chairman Pai emphasizes the need to close the digital divide, modernize rules, eliminate unnecessary regulatory burdens, promote entrepreneurship and innovation, protect consumers and public safety, increase agency transparency, and reform agency processes.

In a follow-up discussion, Dr. Eisenach and Chairman Pai discuss the Open Internet Order proceedings and the role of Congress and the courts in addressing the controversial issue, in addition to the importance of ensuring that FCC policies enable competition and empower innovators.

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Flyover Country: Does the Midwest Need More Tech Superstars?

 

France’s new president, Emmanuel Macron, wants to create a Silicon Valley in his country. After the Trump administration dumped the Paris climate agreement, Macron filmed a video in which he called upon “all scientists, engineers, entrepreneurs, responsible citizens who were disappointed by the decision of the President of the United States, I want to say that they will find in France a second homeland.”

Now let me digress: Over lunch the other day, a trusted AEI colleague told me that Arizona is known for its strong youth hockey. This surprised me. No one is going to mistake a state whose official plant is the saguaro cactus for, you know, Minnesota. But it turns out that many NHL players retire to Arizona. This provides the state with an abundance of coaching talent and interest in the sport. So there was no grand plan to turn Arizona into a youth hockey mecca. It happened organically. More an accident of weather than anything else.

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Will Amazon’s Purchase of Whole Foods Make the Power of Big Tech a Big Political Issue?

 

The business and consumer implications of the $1​4​ billion Amazon-Whole Foods deal are myriad, both short term (​”​the boring U.S. grocery business is about to become much more interesting​“)​ and long term (“the decision by Amazon and Walmart to compete for my grocery business​ … ​are tiny battles in a war to dominate a changing global economy​“​).​

But there is also a political implication that goes beyond politics. As soon as I heard of the acquisition, I thought of some of Candidate Trump’s comments about Amazon, such as these to Fox News:

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Are America’s Tech Giants an Economic and Political Threat?

 

If I were to list America’s big problems here in 2017, I’m not sure it would occur to me note the huge success of Big Tech—Amazon, Apple, Facebook, Alphabet/Google, Microsoft—as one of them. 

But I know there are those who would. As Axios reporter Kim Hart points out in a longish piece today, there are political activists, academics, and economists who are deeply worried that such huge concentrations of wealth and data mean the platform companies “have captured the economy.”

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Can the Private Sector Shake America from Its Long Stagnation?

 
Google CEO Sundar Pichai speaks on stage during the annual Google I/O developers conference.

From Marc Levinson in Foreign Affairs:

The advanced economies have experienced more than four decades of sluggish productivity growth. Governments, it is clear by now, can do very little to influence this situation, at least in any predicable way. Improving infrastructure, supporting scientific research, and fostering education and worker training all may contribute to faster productivity growth over time, but no one can say how quickly those investments will pay off—or whether they will pay off at all.

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This week on Banter, Ian Rowe, Brad Wilcox, and Wendy Wang explain the ‘success sequence,’ or the three norms that millennials can follow to reach the middle class and avoid poverty. Wilcox is a visiting scholar at AEI and a senior fellow at the Institute for Family Studies, where Wang is the director of research. Rowe is the CEO of Public Prep, the nation’s only non-profit network that develops tuition-free Pre-K and single-sex elementary and middle schools. Wilcox and Wang co-authored a report titled, “The millennial success sequence: Marriage, kids, and the ‘success sequence’ among young adults.” Rowe joined the co-authors for the report’s launch event at AEI. The links below will take you to the full report as well as the video from the report’s launch event.

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A Techno-Optimist Take on Automation and Jobs

 

Reason writer Ronald Bailey outlines a strong case that fears about technological unemployment are overblown. For instance: He adds needed context to the recent finding by MIT economist Daron Acemoglu and Boston University economist Pascual Restrepo that each additional industrial robot in the United States results in 5.6 American workers losing their jobs.

But even taking the high-end estimate, job loss due to robots was has been just 670,000 since 1990 while “last year some 62.5 million Americans were hired in new jobs, while 60.1 million either quit or were laid off from old ones, according the Bureau of Labor Statistics.” ​I would add that total nonfarm employment over that span has increased by nearly 40 million.

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On this week’s episode of Banter, Heather Boushey and Doug Holtz-Eakin discuss paid family and medical leave. Boushey serves as the executive director and chief economist at the Washington Center for Equitable Growth and Holtz-Eakin serves as president of American Action Forum. Boushey and Holtz-Eakin participated in the AEI-Brookings Working Group on Paid Family Leave organized by AEI resident scholar Aparna Mathur and the Brookings Institution’s Isabel Sawhill. The working group produced a report titled, “Paid Family and Medical Leave: An Issue Whose Time Has Come.” The links below will take you to the full report as well as the video from the report’s launch event.

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The Trump/Sessions Department of Justice Just Did “Justice”

 

The DOJ has communicated to Congress that it is ending the Obama-era corporate shakedown regime, where it forced corporations who paid huge settlements to resolve conflicts relating to the financial crisis, to pay (liberal) third-party organizations as part of those settlements. Billions of dollars were siphoned off to various Obama special-interest groups, in violation of the Constitution.

Well, those days are over. Congress is working on legislation to outlaw that sort of executive-branch misbehavior. Jeff Sessions, in one of his very best actions to date, has ended the Obama slush-funds.

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Is Automation Really the Worst Enemy of the Middle Class?

 

This Axios headline is problematic: “Summers: Automation is the middle class’ worst enemy.”

The accompanying piece doesn’t actually quote economist Larry Summers making that declaration. Rather it summarizes an interview in which Summers indeed points out the challenge automation poses for workers. He’s right.​ Of course that’s been the case for the past 200 years and will likely be the case for the next 200. But in exchange for a degree of instability and disruption, technological progress has dramatically raised living standards for workers.

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In this AEI Events Podcast, Jose Carrion, chairman of the Financial Oversight and Management Board for Puerto Rico, discusses the economic and political challenges faced by Puerto Rico. Following his address, a panel, including AEI’s Andrew Biggs and Desmond Lachman, exchange views on these challenges and propose a number of solutions, ranging from labor market reforms to stimulating economic growth through existing Medicaid reforms and the earned income tax credit.

The panel features Andrew Biggs (AEI, Financial Oversight and Management Board for Puerto Rico), Desmond Lachman (AEI), Anne Krueger (Johns Hopkins School of Advanced International Studies), and Antonio Weiss (Harvard Kennedy School), and is moderated by Alex J. Pollock (R Street Institute).

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In this AEI Events Podcast, AEI’s Peter J. Wallison hosts Chairman Jeb Hensarling (R-TX) of the House Financial Services Committee at AEI to discuss the Financial CHOICE Act. They evaluate the causes of the 2007–08 financial crisis and how the Dodd-Frank Act fails to address those causes.

Mr. Wallison and Chairman Hensarling consider the Dodd-Frank Act’s role in reducing lending activities — especially among small and community banks — and the ensuing slow recovery. They then discuss the challenges for the CHOICE Act in the House and Senate.

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May Jobs Report: Bad But Not Terrible

 

The US employment rate ticked lower last month, and at 4.3% fell to its lowest level since May 2001. But that’s pretty much where the good news ends. Job growth was just 138,000 versus Wall Street expectations of 180,000, and the prior two months were revised down a net 66,000 jobs. (Though it seems the calendar played a role here. The payroll survey week may have been a bit too early to capture students going to work at summer jobs.)

Moreover, the jobless rate fell “for all the wrong reasons,” notes Capital Economics. The decline was driven by the labor force participation rate falling 0.2 percentage point to 62.7%. The employment rate fell by the same amount.

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Trump’s Speech Should Have Been About Nuclear Power, Not the Paris Climate Agreement

 

Maybe the best reason, such as it is, to support American withdrawal from the Paris climate agreement has nothing to do with the climate. Under President Obama, the United States agreed to a de facto treaty without submitting it to the Senate for ratification. As the editors at National Review rightly note, “In a government of laws, process matters.” Government certainly doesn’t need more unilateralism by its chief executive.

Unfortunately, the actual reasons driving withdrawal had more to do with populist politics, nationalism, partisanship, and unreasonable disbelief in climate science than constitutional conservatism. Oh, and plenty of reflexive anti-Obamaism in there, too.

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Driverless Cars Are Happening, Even If Some in Washington Don’t Get It

 

In a chat not long ago with me, an influential GOP member of Congress pooh-poohed self-driving cars based on the idea that people wouldn’t be interested in the technology. Voters like their pickup trucks! Apparently this politician didn’t know any parents with teenagers getting ready to get behind the wheel. Certainly some polls show consumer concern.

But I recall someone who rode in a driverless car with great initial apprehension, which later turned to boredom since the car drove like it had downloaded the brain of a driver’s ed instructor. Actually I think the phrase “grandmotherly” may have been used.

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Tech Progress Makes Us Discontented. And That’s OK!

 

In a recent podcast chat with me, economist Tyler Cowen spoke about his new book, “The Complacent Class,” which posits America as a stagnant society. Not moving to take a new job. Not starting businesses. Not taking risks. Cowen: “Life is safer, more convenient and more comfortable – no one wants to say those are bad things. But, at the margin, if you don’t take enough risk, there does come a time where you start moving backwards, can’t pay the bills, or have decent governance. So over the longer run it’s a bad thing.”

Indeed, perpetual discontent is at the heart of innovative modern capitalism. Good enough never is, at least not for too long. What’s the latest? Perhaps this idea is best summed up by technology writer Kevin Kelly (another podcast guest of mine) in his latest book, “The Inevitable.” Kelly writes:

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Congress Should Support the Trump Administration’s Balanced Budget … and Sustain It

 

The Trump Administration released its first full budget proposal on Tuesday. It is a good proposal. First, it balances the federal budget by the end of the 10-year budget period. Second, its gets a handle on the federal government’s accelerating debt and interest costs. Finally, it is pro-growth. This final point is critical because achieving the goal of the restoration of a responsible federal fiscal policy will be a practical impossibility in the midst of a stagnant economy.

The immediate task for Congress is to adopt a budget that matches the general parameters of the Trump Administration’s proposal. This is to say, the budget Congress adopts should include the same numbers for the total outlays, the total revenues, deficits, debt, and interest costs (both on debt held by the public and debt held by other government accounts) in each fiscal year. On the other hand, it is appropriate for Congress to modify the budget proposed by the Administration in terms of the individual accounts under these general numbers. The Trump Administration cannot expect to get everything it wants. Most important for President Trump is that he limit himself to issuing veto threats against any appropriations bill and reconciliation bill that follows from such a budget to very few matters—those that are at the very top of his policy priorities.

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Anti-growth Housing Policy May Have Seriously Damaged the US Economy for Decades

 

In a dynamic economy, finance, ideas, people, and other resources flow to their most productive use. It’s an economy of constant disruption and change. Companies rise and fall, begin and end. Workers change jobs, moving if they must. Social mobility is high, and hopefully income growth, too. Misallocation of resources is the enemy of growth and opportunity.

But in his new book, “The Complacent Class,” Tyler Cowen describes modern America as a society that is “more risk averse and more set in our ways, more segregated … sapped … of the pioneer spirit that made America the most productive and innovative economy in the world.”

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Progressively Bankrupt

 

A recent story in the Wall Street Journal foretells a grim financial future for Connecticut, the wealthiest state in the union by per capita income. Its great wealth, however, does not translate into financial stability. For this coming year, the state expects a $400 million shortfall in tax collections that will only compound its looming budget deficit of some $5.1 billion, attributable to the usual suspects: service on existing debt, a lowered credit rating, surging pension obligations, runaway health care expenditures, and a declining population. In both 2011 and 2015, Connecticut Governor Dannel Malloy sought to fill the fiscal gap by engineering two tax increases on the state’s wealthiest citizens, so that today the state’s highest tax bracket is 6.99 percent. Under the state’s tax pyramid, about one-third of the state’s $7-billion budget is paid by the several thousand people earning over $1 million per year.

But reality has finally set in. Kevin Sullivan, head of Connecticut’s tax commission, has conceded that “you can’t go back to that well again.” Determined progressives may claim the path to prosperity remains blue. But sooner or later, the bubble has to burst. Even the well-heeled individuals willing to pay high taxes for superior services will cut back their business activities or flee when fleeced. Massive government wealth transfers cannot succeed if those whose wealth is to be transferred end up leaving the state altogether. Indeed, in some cases, the departure of just one billionaire can lead to a hole in the budget, as with David Tepper’s departure from New Jersey.

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China Seems Less Freaked Out by the Rise of the Robots than America

 

A Robot Revolution, This Time in China” by New York Times reporter Keith Bradsher pretty much gives a modern economic lesson every sentence. It also presents a picture of a modernizing China that was completely missing from the 2016 presidential campaign. From the piece:

Robots are critical to China’s economic ambitions, as Chinese companies look to move up the manufacturing chain. The Ford assembly plant is across the street from a robot-producing factory owned by Kuka, the big German manufacturer of industrial robots that a Chinese company bought last summer. For carmakers, the reliance on robots is driven partly by cost. Blue-collar wages have soared because multinational companies have moved much of their production to China even as its labor force is rapidly changing. The combination of the one-child policy, which cut the birth rate through the 1980s and ’90s, and an eightfold increase in college enrollments has cut by more than half the number of people entering the work force each year who have less than a high school degree and may be willing to consider factory work. Blue-collar wages are now $4 to $6 an hour in large, prosperous cities, though still far lower than in the United States.

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Let’s Keep America Weird

 

In “The Innovation Illusion: How So Little Is Created by So Many Working So Hard,” Fredrik Erixon and Björn Weigel argue neither a lack of scientific discovery nor technological progress is ultimately responsible for chronically weak productivity and output growth among advanced economies. We are not running out of good ideas.

Instead the problem lies in the mechanism for translating those advances into goods and services that meaningfully change how we live. It’s modern capitalism that’s busted, despite the limited illusion of innovation conjured by Silicon Valley. Blame the self-reinforcing combo of aging societies, too much institutional ownership of big companies, risk-averse execs, global value chains, and complex regulation. Together they create a defensive, cautious capitalism.

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