The mayoral election in Baltimore has brought local economic development strategies to the forefront. In a city in which inequality—by income, by race, and between neighborhoods—has increased in the past five years, the candidates have made it clear that more action must be taken to close disparities and improve economic outcomes for all residents. In a podcast segment, I commend the much-needed focus on equity but argue that the mayoral candidates should not lose sight of another critical piece of the equity equation: economic growth. Citing lessons from my recent paper, I outline strategies that Baltimore’s presumptive leaders should pursue—as well as several they should abandon—to place the city’s residents on the path to a more prosperous, equitable future.

Listen to the full podcast segment here: 

       

Income and wealth inequality in the U.S. is a stark reality.  Research from a variety of fields demonstrates that children born into poor families tend to end up less educated, less healthy, more prone to contact with the police, and less likely to accumulate wealth over a lifetime.  In contrast, children born into well-off families tend to exhibit better outcomes on all of these dimensions.

How should social scientists and policymakers understand and address intergenerational mobility in the U.S.? This question is difficult to answer—and highly politicized.  To start with, there are several possible mechanisms driving high intergenerational persistence of economic outcomes.  These are often characterized as factors related either to “nurture” or “nature.” 

The “nurture” hypothesis asserts that poor parents lack critical resources such as wealth or information.  Such parents may therefore find it difficult to make the education and time investments that would promote better economic outcomes for their children.  If this is true, then children born into poor families never reach their full potential because of a lack of household resources. 

A second possible mechanism is often referred to as the “nature” hypothesis.  Economically successful parents might be more likely to have successful children.  Such an account hinges on the idea that there are heritable biological traits or abilities that more successful parents “pass on” to their children.

To complicate the matter further, the mechanisms of nature and nurture almost certainly operate at the same time.  Moreover, it is likely that abilities and investments interact in complicated ways. For example, a particular investment might do more to improve the outcomes of a lower-ability child than a higher-ability child, or vice versa.  Understanding this process, and how it affects intergenerational mobility, is notoriously difficult.  However, greater clarity is precisely what is needed to guide effective policy. 

If a lack of investment is the dominant mechanism explaining intergenerational persistence in economic outcomes, then we as a society may be wasting human potential.  Policies correcting under-investments in human capital could therefore be justified as economically efficient. In contrast, if the intergenerational transmission of ability plays a role, then investments in poor children’s human capital may not be enough.  To clarify, it is critical to state that the distinction we make here between “high-ability” and “low-ability” individuals should not be interpreted as a claim that some people are naturally or biologically superior to others.  We use “ability” as shorthand to describe those traits that are rewarded in the existing labor market.  Even if these abilities are linked to heritable biological factors, this does not mean that their impact on life outcomes is immutable or fixed.  Modifying environments could substantially affect genetic disparities. The case of vision and eyeglasses offer one classic example.  There may well be biological factors that explain variation in eyesight “ability,” but these biological differences will matter more or less for life outcomes depending on the availability of glasses and other medical interventions.  In short, it is very possible that the consequences of biological differences can be moderated by appropriate changes in the environment.     

Until now, researchers have typically used variables such as cognitive test scores to measure ability endowments related to human capital.  Yet, these traditional measures are subject to the critique that they are the products of earlier investments in human capital. This makes it difficult to distinguish between the “nature” and “nurture” hypotheses using such data.  Two individuals with similar ability endowments but different levels of household resources are likely to exhibit different cognitive test scores, for example. 

Using genetic information to measure ability endowments can help us better understand the intergenerational transmission of human capital.  As a measure, genetic information has a clear advantage over cognitive test scores because it is fixed at conception. Advances in measuring differences in DNA across individuals, together with very recent advances in behavioral genetics research, now make it possible to link genetic differences across people to behavioral traits.  These new discoveries have even extended to educational attainment, which was once thought to be too complicated and removed from direct biological processes for genetic analysis.

In a recent research paper, we use genetic information to better understand the nature of intergenerational mobility.  We follow the cutting edge in behavioral genetics research, which guides us in computing a type of genetic “score” for any individual.  We compute this so-called “polygenic score” for each person in a sample of over 8,000 individuals from the Health and Retirement Study (HRS). The score, which appears to be related to cognition, personality, and facility with learning, has some predictive power for educational attainment. In particular, it explains between 3.2 percent and 6.6 percent of the variation across individuals (depending on the specification). Thus, knowing the exact value of an individual’s score will tell you very little about that person (over 90 percent of the variation is explained by other factors).  However, the average relationship in the population between the score and human capital outcomes can offer some important lessons.  

Using the polygenic score, we believe we can gain new insights into how ability endowments interact with an individual’s environment to generate economic outcomes.  There is a long-standing debate in the economics literature about how ability and investments interact.  One idea is that both ability and investments are needed for success, i.e., that they complement one another. Though our findings show evidence of this type of interaction, the story that emerges from our analysis is somewhat more nuanced.  We show that ability and the environment (measured by parents’ socioeconomic status or SES) complement one another for generating higher degrees, such as college completion, but substitute for one another in generating lower levels of educational attainment such as a high school degree.  In other words, our findings suggest that ability or being born into a well-off family are enough to get an individual through high school.  For college, however, ability and a well-off family are important predictors of success.

"In other words, our findings suggest that ability or being born into a well-off family are enough to get an individual through high school. For college, however, ability and a well-off family are important predictors of success."

Another set of results concerns the wages of high-ability individuals.  We show that individuals who completed college earned substantial returns on their ability starting in the early 2000s.  Individuals without a college degree did not. The post-2000 rise in returns may be driven in part by “skill-biased technological change.”   As new technologies are adopted in the workplace, the people who benefit most are those with the skills required to adapt to and master new ways of working.  It is not difficult to imagine that people with genetic variants associated with higher education may have found it easier to adapt to computers and other new technologies.  However, we also find that a higher polygenic score was not helpful for individuals who did not complete college, likely because the lack of a college degree shut them out of careers that would have allowed them to creatively use new technologies.  This is a troubling finding given the role of childhood SES in predicting college completion.  It means that poor children with high abilities are less likely to attend college and, subsequently, are less likely to benefit from their ability.  Again, these findings suggest wasted human potential.

Using genetic data to compare individuals from different socioeconomic backgrounds, we also find that children from lower SES backgrounds systematically acquire less education when compared to similarly capable individuals from high SES backgrounds.  Among other things, this suggests that access to education may be an important obstacle, even for the highest ability children.  Our analysis offers some suggestive evidence regarding which environments are especially harmful. For example, acute negative events like physical abuse in childhood can lead to a dramatic loss of economic potential—reducing financial wealth in late adulthood for the highest ability individuals by over 50 percent.

Of course, one must be very cautious when interpreting any genetic association.  In particular, it is important to think carefully about correlation versus causality.  The same parents that pass along genetic material predicting educational attainment may also be more likely to have the resources to invest in their children.  Still, since we base our comparisons on individuals from different socioeconomic backgrounds, but with similar polygenic scores, we offer evidence that economic disparities are not solely due to nature.

In summary, recent advances in behavioral genetics have identified specific genetic variants that predict educational attainment.  The fact that such genes exist confirms previous work (largely using data on twins) showing that “nature” matters for economic outcomes.  Our research demonstrates that “nurture” matters, too.  Perhaps more importantly, our research demonstrates that the roles of “nature” and “nurture” are intertwined and that understanding the role of “nurture” (in the form of human capital investments over the life-cycle) is key to understanding how “nature” (in the form of ability endowments) operates.  In particular, we show that similarly apt individuals with different childhood SES see very different returns to their ability.  This means that policies helping children born into disadvantaged circumstances may be justified not solely for ethical reasons rooted in social justice, but perhaps also as an economically efficient way to mitigate wasted human potential.

Finally, we believe that continued progress in understanding the mechanisms underlying how “nature” affects economic outcomes will eventually lead to policies that help people who are born with different abilities.  For example, our findings suggest that some individuals had more difficulty than others in adapting to new workplace technologies, such as computers. With a fuller understanding of this process, policymakers may be able to devise better training programs or improved school curricula that help individuals of all levels of ability to better respond to a changing technological environment.  In other words we believe that our research shows that learning more about the specifics of “nature” may help us to better “nurture” all individuals in society to help them to reach their full potential.      

Editor’s note: The authors contributed equally to this posting and to the research upon which the posting is based. They are listed alphabetically by last name.

       

At the very heart of the American idea is the notion that, unlike in other places, we can start from nothing and through hard work have everything. That nothing we can imagine is beyond our reach. That we will pull up stakes, go anywhere, do anything to make our dreams come true. But what if that's just a myth? What if the truth is something very different? What if we are…stuck?

I. What does it mean to be an American?

Full disclosure: I'm British. Partial defense: I was born on the Fourth of July. I also have made my home here, because I want my teenage sons to feel more American. What does that mean? I don't just mean waving flags and watching football and drinking bad beer. (Okay, yes, the beer is excellent now; otherwise, it would have been a harder migration.) I'm talking about the essence of Americanism. It is a question on which much ink—and blood—has been spent. But I think it can be answered very simply: To be American is to be free to make something of yourself. An everyday phrase that's used to admire another ("She's really made something of herself") or as a proud boast ("I'm a self-made man!"), it also expresses a theological truth. The most important American-manufactured products are Americans themselves. The spirit of self-creation offers a strong and inspiring contrast with English identity, which is based on social class. In my old country, people are supposed to know their place. British people, still constitutionally subjects of Her Majesty Queen Elizabeth, can say things like "Oh, no, that's not for people like me." Infuriating.

Americans do not know their place in society; they make their place. American social structures and hierarchies are open, fluid, and dynamic. Mobility, not nobility. Or at least that's the theory. Here's President Obama, in his second inaugural address: "We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else because she is an American; she is free, and she is equal, not just in the eyes of God but also in our own."

Politicians of the left in Europe would lament the existence of bleak poverty. Obama instead attacks the idea that a child born to poor parents will inherit their status. "The same chance to succeed as anybody else because she is an American…."

Americanism is a unique and powerful cocktail, blending radical egalitarianism (born equal) with fierce individualism (it's up to you): equal parts Thomas Paine and Horatio Alger. Egalitarian individualism is in America's DNA. In his original draft of the Declaration of Independence, Thomas Jefferson wrote that "men are created equal and independent," a sentiment that remained even though the last two words were ultimately cut. It was a declaration not only of national independence but also of a nation of independents.

The problem lately is not the American Dream in the abstract. It is the growing failure to realize it. Two necessary ingredients of Americanism—meritocracy and momentum—are now sorely lacking.

America is stuck.

Almost everywhere you look—at class structures, Congress, the economy, race gaps, residential mobility, even the roads—progress is slowing. Gridlock has already become a useful term for political inactivity in Washington, D. C. But it goes much deeper than that. American society itself has become stuck, with weak circulation and mobility across class lines. The economy has lost its postwar dynamism. Racial gaps, illuminated by the burning of churches and urban unrest, stubbornly persist.

In a nation where progress was once unquestioned, stasis threatens. Many Americans I talk to sense that things just aren't moving the way they once were. They are right. Right now this prevailing feeling of stuckness, of limited possibilities and uncertain futures, is fueling a growing contempt for institutions, from the banks and Congress to the media and big business, and a wave of antipolitics on both left and right. It is an impotent anger that has yet to take coherent shape. But even if the American people don't know what to do about it, they know that something is profoundly wrong.

II. How stuck are we?

Let's start with the most important symptom: a lack of social mobility. For all the boasts of meritocracy—only in America!—Americans born at the bottom of the ladder are in fact now less likely to rise to the top than those situated similarly in most other nations, and only half as likely as their Canadian counterparts. The proportion of children born on the bottom rung of the ladder who rise to the top as adults in the U.S. is 7.5 percent—lower than in the U.K. (9 percent), Denmark (11.7), and Canada (13.5). Horatio Alger has a funny Canadian accent now.

It is not just poverty that is inherited. Affluent Americans are solidifying their own status and passing it on to their children more than the affluent in other nations and more than they did in the past. Boys born in 1948 to a high-earning father (in the top quarter of wage distribution) had a 33 percent chance of becoming a top earner themselves; for those born in 1980, the chance of staying at the top rose sharply to 44 percent, according to calculations by Manhattan Institute economist Scott Winship. The sons of fathers with really high earnings—in the top 5 percent—are much less likely to tumble down the ladder in the U. S. than in Canada (44 percent versus 59 percent). A "glass floor" prevents even the least talented offspring of the affluent from falling. There is a blockage in the circulation of the American elite as well, a system-wide hardening of the arteries.

Exhibit A in the case against the American political elites: the U. S. tax code. To call it Byzantine is an insult to medieval Roman administrative prowess. There is one good reason for this complexity: The American tax system is a major instrument of social policy, especially in terms of tax credits to lower-income families, health-care subsidies, incentives for retirement savings, and so on. But there are plenty of bad reasons, too—above all, the billions of dollars' worth of breaks and exceptions resulting from lobbying efforts by the very people the tax system favors.

So fragile is the American political ego that we can't go five minutes without congratulating ourselves on the greatness of our system, yet policy choices exacerbate stuckness.

The American system is also a weak reed when it comes to redistribution. You will have read and heard many times that the United States is one of the most unequal nations in the world. That is true, but only after the impact of taxes and benefits is taken into account. What economists call "market inequality," which exists before any government intervention at all, is much lower—in fact it's about the same as in Germany and France. There is a lot going on under the hood here, but the key point is clear enough: America is unequal because American policy moves less money from rich to poor. Inequality is not fate or an act of nature. Inequality is a choice.

These are facts that should shock America into action. For a nation organized principally around the ideas of opportunity and openness, social stickiness of this order amounts to an existential threat. Although political leaders declare their dedication to openness, the hard issues raised by social inertia are receiving insufficient attention in terms of actual policy solutions. Most American politicians remain cheerleaders for the American Dream, merely offering loud encouragement from the sidelines, as if that were their role. So fragile is the American political ego that we can't go five minutes without congratulating ourselves on the greatness of our system, yet policy choices exacerbate stuckness and ensure decline.

In Britain (where stickiness has historically been an accepted social condition), by contrast, the issues of social mobility and class stickiness have risen to the top of the political and policy agenda. In the previous U.K. government (in which I served as director of strategy to Nick Clegg, the deputy prime minister), we devoted whole Cabinet meetings to the problems of intergenerational mobility and the development of a new national strategy. (One result has been a dramatic expansion in pre-K education and care: Every 3- and 4-year-old will soon be entitled to 30 hours a week for free.) Many of the Cabinet members were schooled at the nation's finest private high schools. A few had hereditary titles. But they pored over data and argued over remedies—posh people worrying over intergenerational income quintiles.

Why is social mobility a hotter topic in the old country? Here is my theory: Brits are acutely aware that they live in a class-divided society. Cues and clues of accent, dress, education, and comportment are constantly calibrated. But this awareness increases political pressure to reduce these divisions. In America, by contrast, the myth of classlessness stands in the way of progress. The everyday folksiness of Americans—which, to be clear, I love—serves as a social camouflage for deep economic inequality. Americans tell themselves and one another that they live in a classless land of open opportunity. But it is starting to ring hollow, isn't it?

III. For black Americans, claims of equal opportunity have, of course, been false from the founding.

They remain false today. The chances of being stuck in poverty are far, far greater for black kids. Half of those born on the bottom rung of the income ladder (the bottom fifth) will stay there as adults. Perhaps even more disturbing, seven out of ten black kids raised in middle-income homes (i.e., the middle fifth) will end up lower down as adults. A boy who grows up in Baltimore will earn 28 percent less simply because he grew up in Baltimore: In other words, this supersedes all other factors. Sixty-six percent of black children live in America's poorest neighborhoods, compared with six percent of white children.

Recent events have shone a light on the black experience in dozens of U. S. cities.

Behind the riots and the rage, the statistics tell a simple, damning story. Progress toward equality for black Americans has essentially halted. The average black family has an income that is 59 percent of the average white family's, down from 65 percent in 2000. In the job market, race gaps are immobile, too. In the 1950s, black Americans were twice as likely to be unemployed as whites. And today? Still twice as likely.

From heeding the call "Go west, young man" to loading up the U-Haul in search of a better job, the instinctive restlessness of America has always matched skills to work, people to opportunities, labor to capital.

Race gaps in wealth are perhaps the most striking of all. The average white household is now thirteen times wealthier than the average black one. This is the widest gap in a quarter of a century. The recession hit families of all races, but it resulted in a wealth wipeout for black families. In 2007, the average black family had a net worth of $19,200, almost entirely in housing stock, typically at the cheap, fragile end of the market. By 2010, this had fallen to $16,600. By 2013—by which point white wealth levels had started to recover—it was down to $11,000. In national economic terms, black wealth is now essentially nonexistent.

Half a century after the passing of the Civil Rights Act, the arc of history is no longer bending toward justice. A few years ago, it was reasonable to hope that changing attitudes, increasing education, and a growing economy would surely, if slowly, bring black America and white America closer together. No longer. America is stuck.

IV. The economy is also getting stuck.

Labor productivity growth, measured as growth in output per hour, has averaged 1.6 percent since 1973. Male earning power is flatlining. In 2014, the median full-time male wage was $50,000, down from $53,000 in 1973 (in the dollar equivalent of 2014). Capital is being hoarded rather than invested in the businesses of the future. U. S. corporations have almost $1.5 trillion sitting on their balance sheets, and many are busily buying up their own stock. But capital expenditure lags, hindering the economic recovery.

New-business creation and entrepreneurial activity are declining, too. As economist Robert Litan has shown, the proportion of "baby businesses" (firms less than a year old) has almost halved since the late 1970s, decreasing from 15 percent to 8 percent—the hallmark of "a steady, secular decline in business dynamism." It is significant that this downward trend set in long before the Great Recession hit. There is less movement between jobs as well, another symptom of declining economic vigor.

Americans are settling behind their desks—and also into their neighborhoods. The proportion of American adults moving house each year has decreased by almost half since the postwar years, to around 12 percent. Long-distance moves across state lines have as well. This is partly due to technological advances, which have weakened the link between location and job prospects, and partly to the growth of economic diversity in cities; there are few "one industry" towns today. But it is also due to a less vibrant housing market, slower rates of new business creation, and a lessening in Americans' appetite for disruption, change, and risk.

This geographic settling is at odds with historic American geographic mobility. From heeding the call "Go west, young man" to loading up the U-Haul in search of a better job, the instinctive restlessness of America has always matched skills to work, people to opportunities, labor to capital. Rather than waiting for help from the government, or for the economic tide to turn back in their favor, millions of Americans changed their life prospects by changing their address. Now they are more likely to stay put and wait. Others, especially black Americans, are unable to escape the poor neighborhoods of their childhood. They are, as the title of an influential book by sociologist Patrick Sharkey puts it, Stuck in Place.

There are everyday symptoms of stuckness, too. Take transport. In 2014, Americans collectively spent almost seven billion hours stuck motionless in traffic—that's a couple days each. The roads get more jammed every year. But money for infrastructure improvements is stuck in a failing road fund, and the railophobia of politicians hampers investment in public transport.

Whose job is it to do something about this? The most visible symptom of our disease is the glue slowly hardening in the machinery of national government. The last two Congresses have been the least productive in history by almost any measure chosen, just when we need them to be the most productive. The U. S. political system, with its strong separation among competing centers of power, relies on a spirit of cross-party compromise and trust in order to work. Good luck there.

V. So what is to be done?

As with anything, the first step is to admit the problem. Americans have to stop convincing themselves they live in a society of opportunity. It is a painful admission, of course, especially for the most successful. The most fervent believers in meritocracy are naturally those who have enjoyed success. It is hard to acknowledge the role of good fortune, including the lottery of birth, when describing your own path to greatness.

There is a general reckoning needed. In the golden years following World War II, the economy grew at 4 percent per annum and wages surged. Wealth accumulated. The federal government, at the zenith of its powers, built interstates and the welfare system, sent GIs to college and men to the moon. But here's the thing: Those days are gone, and they're not coming back. Opportunity and growth will no longer be delivered, almost automatically, by a buoyant and largely unchallenged economy. Now it will take work.

The future success of the American idea must now be intentional.

Entrepreneurial, mobile, aspirational: New Americans are true Americans. We need a lot more of them.

There are plenty of ideas for reform that simply require will and a functioning political system. At the heart of them is the determination to think big again and to vigorously engage in public investment. And we need to put money into future generations like our lives depended on it, because they do: Access to affordable, effective contraception dramatically cuts rates of unplanned pregnancy and gives kids a better start in life. Done well, pre-K education closes learning gaps and prepares children for school. More generous income benefits stabilize homes and help kids. Reading programs for new parents improve literacy levels. Strong school principals attract good teachers and raise standards. College coaches help get nontraditional students to and through college. And so on. We are not lacking ideas. We are lacking a necessary sense of political urgency. We are stuck.

But we can move again if we choose.

In addition to a rejuvenation of policy in all these fields, there are two big shifts required for an American twenty-first-century renaissance: becoming open to more immigration and shifting power from Washington to the cities.

VI. America needs another wave of immigration.

This is in part just basic math: We need more young workers to fund the old age of the baby boomers. But there is more to it than that. Immigrants also provide a shot in the arm to American vitality itself. Always have, always will. Immigrants are now twice as likely to start a new business as native-born Americans. Rates of entrepreneurialism are declining among natives but rising among immigrants.

Immigrant children show extraordinary upward-mobility rates, shooting up the income-distribution ladder like rockets, yet by the third or fourth generation, the rates go down, reflecting indigenous norms. Among children born in Los Angeles to poorly educated Chinese immigrants, for example, an astonishing 70 percent complete a four-year-college degree. As the work of my Brookings colleague William Frey shows, immigrants are migrants within the U. S., too, moving on from traditional immigrant cities—New York, Los Angeles—to other towns and cities in search of a better future. Entrepreneurial, mobile, aspirational: New Americans are true Americans. We need a lot more of them.

This makes a mockery of our contemporary political "debates" about immigration reform, which have become intertwined with race and racism. Some Republicans tap directly into white fears of an America growing steadily browner. More than four in ten white seniors say that a growing population of immigrants is a "change for the worse"; half of white boomers believe immigration is "a threat to traditional American customs and values." But immigration delves deeper into the question of American identity than it does even issues of race. Immigrants generate more dynamism and aspiration, but they are also unsettling and challenging. Where this debate ends will therefore tell us a great deal about the trajectory of the nation. An America that closes its doors will be an America that has chosen to settle rather than grow, that has allowed security to trump dynamism.

VII. The second big shift needed to get America unstuck is a revival of city and state governance.

Since the American Dream is part of the national identity, it seems natural to look to the national government to help make it a reality. But cities are now where the American Dream will live or die. America's hundred biggest metros are home to 67 percent of the nation's population and 75 percent of its economy. Americans love the iconography of the small town, even at the movies—but they watch those movies in big cities.

Powerful mayors in those cities have greater room for maneuvering and making an impact than the average U. S. senator. Even smaller cities and towns can be strongly influenced by their mayor.

There are choices to be made. Class divisions are hardening. Upward mobility has a very weak pulse. Race gaps are widening.

The new federalism in part is being born of necessity. National politics is in ruins, and national institutions are weakened by years of short-termism and partisanship. Power, finding a vacuum in D. C., is diffusive. But it may also be that many of the big domestic-policy challenges will be better answered at a subnational level, because that is where many of the levers of change are to be found: education, family planning, housing, desegregation, job creation, transport, and training. Amid the furor over Common Core and federal standards, it is important to remember that for every hundred dollars spent on education, just nine come from the federal government.

We may be witnessing the end of many decades of national-government dominance in domestic policy-making (the New Deal, Social Security, Medicare, welfare reform, Obamacare). The Affordable Care Act is important in itself, but it may also come to have a place in history as the legislative bookend to a long period of national-policy virtuosity.

The case for the new federalism need not be overstated. There will still be plenty of problems for the national government to fix, including, among the most urgent, infrastructure and nuclear waste. The main tools of macroeconomic policy will remain the Federal Reserve and the federal tax code. But the twentieth-century model of big federal social-policy reforms is in decline. Mayors and governors are starting to notice, and because they don't have the luxury of being stuck, they are forced to be entrepreneurs of a new politics simply to survive.

VIII. It is possible for America to recover its earlier dynamism, but it won't be easy.

The big question for Americans is: Do you really want to? Societies, like people, age. They might also settle down, lose some dynamism, trade a little less openness for a little more security, get a bit stuck in their ways. Many of the settled nations of old Europe have largely come to terms with their middle age. They are wary of immigration but enthusiastic about generous welfare systems and income redistribution. Less dynamism, maybe, but more security in exchange.

America, it seems to me, is not made to be a settled society. Such a notion runs counter to the story we tell ourselves about who we are. (That's right, we. We've all come from somewhere else, haven't we? I just got here a bit more recently.) But over time, our narratives become myths, insulating us from the truth. For we are surely stuck, if not settled. And so America needs to decide one way or the other. There are choices to be made. Class divisions are hardening. Upward mobility has a very weak pulse. Race gaps are widening. The worst of all worlds threatens: a European class structure without European welfare systems to dull the pain.

Americans tell themselves and the world that theirs is a society in which each and all can rise, an inspiring contrast to the hereditary cultures from which it sprang. It's one of the reasons I'm here. But have I arrived to raise my children here just in time to be stuck, too? Or will America be America again?

Editor's note: This piece originally appeared in Esquire.

       

Everyone is struggling to understand why so many whites—including many who are not suffering economically—are rallying to the angry words and fearful music of Donald Trump's presidential campaign. Meanwhile, blacks and other minorities are sticking with the status-quo incrementalism of Hillary Clinton. It's an odd juxtaposition, but there's an explanation, one with far-reaching ramifications. A wide and growing optimism gap has opened between poor and middle-class whites and their counterparts of other races—and the former are the congenital pessimists.

My research finds deep divisions in our country—not just in terms of income and opportunity, but in terms of hopes and dreams. The highest costs of being poor in the U.S. are not in the form of material goods or basic services, as in developing countries, but in the form of unhappiness, stress, and lack of hope. What is most surprising, though, is that the most desperate groups are not minorities who have traditionally been discriminated against, but poor and near-poor whites. And of all racial groups in poverty, blacks are the most optimistic about their futures.

Based on a question in a Gallup survey asking respondents where they expected their life satisfaction to be in five years (on a 0-10 point scale), I find that among the poor, the group that scores the highest is poor blacks. The least optimistic group by far is poor whites. The average score of poor blacks is large enough to eliminate the difference in optimism about the future between being poor and being middle class (e.g. removing the large negative effect of poverty), and they are almost three times more likely to be higher up on the optimism scale than are poor whites. Poor Hispanics are also more optimistic than poor whites, but the gaps between their scores are not as large as those between blacks and whites.

In terms of stress—a marker of ill-being—there are, again, large differences across races. Poor whites are the most stressed group and are 17.8 percent more likely to experience stress in the previous day than middle-class whites. In contrast, middle-class blacks are 49 percent less likely to experience stress than middle-class whites, and poor blacks are 52 percent less likely to experience stress than poor whites (e.g. their odds of experiencing stress are roughly half those of poor whites.

Why does this matter? Individuals with high levels of well-being have better outcomes; they believe in their futures and invest in them. In contrast, those without hope for their futures typically do not make such investments. Remarkably, the poor in the U.S. (on average) are less likely to believe that hard work will get them ahead than are the poor in Latin America. Their lack of hope is even evident in the words they use, as David Leonhardt (2015) found in a Google search. The words of the wealthy—such as iPads, foam rollers, and exotic travel destinations—reflect knowledge acquisition and health-conscious behaviors; those of the poor -- such as guns, video games, diabetes, and fad diets—reflect desperation, short-term outlooks, and patched-together solutions.

What explains optimism among poor blacks compared to their white counterparts? Some scholars, such as Jeremy Jackson at the University of Michigan, highlight high levels of resilience and a strong sense of community among blacks, something which our data also suggests. There also may be an Obama effect, given the historical marker made by the election of the first African-American president, and support for President Obama remained steady among blacks over the course of his tenure.

And despite visible manifestations of black frustration, as in Baltimore and Ferguson, Mo., and continued gaps in wage, mobility, and education outcomes, there has been black progress. As Eduardo Porter of the New York Times wrote in 2015, at the same time that the gaps in achievement and proficiency have widened across income groups, they have narrowed between blacks (and Hispanics) and whites: The proficiency gap between the poor and the rich is nearly twice as large as that between black and white children. The overall black-white wage gap has also narrowed (black males earned 69 percent of the median wage for white males in 1970 and 75 percent by 2013 [CPS, 2014]).The gap in life expectancy between blacks and whites has also narrowed to its lowest point in history—3.4 years , at 75.6 years for blacks and 79 years for whites.

Poor and high school-educated whites have fallen in status, at least in relative terms. Andrew Cherlin (2016) finds that poor and middle-class blacks are more likely to compare themselves to parents who were worse off than they are, while most blue-collar whites are insecure and facing much more competition for jobs than their parents did. And the markers of their desperation are increasingly evident. Take the increase in mortality rates related to opioid addiction, suicide and other preventable causes among uneducated whites—but not blacks and Hispanics—which was first highlighted in a 2015 study by Anne Case and Angus Deaton, and has since been reported by others, including Joel Achenbach, Dan Keating, and colleagues (2016) in the Washington Post.

Another part of this story is the increasing distance between the lives of those at the top and bottom of the income distribution. Fear of falling behind is even starker if “success” is increasingly out of reach. Sergio Pinto and I (2016), for example, find that poor respondents who live in more unequal cities and suburbs report more stress and worry than those in more equal ones (based on Gallup data). And both poor and rich respondents who live in more unequal areas are less likely to report having family and friends they can rely on in times of need.

The American Dream of prosperity, equal opportunity, and stable democracy is being challenged by increasing income inequality, the hollowing out of the middle class, decreasing wages and increased insecurity for low-skilled workers, and rising mortality rates. We were, until recently, caught by surprise by the depth and breadth of the problem. If it does nothing else positive for our country, the widespread alarm caused by Donald Trump’s political rise and his promises to build walls, ban trade, and create further divisions within our society has woken us up.

The depth and scope of this problem requires difficult political fixes, such as long-term investments in public health and education. It requires developing new forms of social assistance—and language—which encourage hope rather than stigmatize poor recipients—something that Latin Americans have done successfully in recent years. It also requires reducing the distance between the lives of the rich and the poor, so that attaining success—and living the American Dream—is not something that seems forever out of reach for the poor. Finally, tracking well-being as a complement to GDP, as many countries are already doing, would provide an important gauge of the happiness and health of our society in the future—and prevent us from being as surprised by such trends as we were this time.

Carol Graham is the Leo Pasvolsky senior fellow at the Brookings Institution and author of “Happiness for All? Unequal Lives and Hopes in the Land of the Dream” (Princeton University Press, forthcoming).

       

On June 23, Brookings hosted the release of the Immigrants, Immigration Reform, and 2016 Election Survey, a joint project with the Public Religion Research Institute (PRRI). The associated report entitled, How immigration and concern about cultural change are shaping the 2016 election finds an American public anxious and intensely divided on matters of immigration and cultural change at the forefront of the 2016 Election.

Dr. Robert Jones, CEO of PRRI, began the presentation by highlighting Americans’ feelings of anxiety and personal vulnerability. The poll found, no issue is more critical to Americans this election cycle than terrorism, with nearly seven in ten (66 percent) reporting that terrorism is a critical issue to them personally. And yet, Americans are sharply divided on questions of terrorism as it pertains to their personal safety. Six in ten (62 percent) Republicans report that they are at least somewhat worried about being personally affected by terrorism, while just 44 percent of Democrats say the same. 

On matters of cultural change, Jones painted a picture of a sharply divided America. Poll results indicate that a majority (55 percent) of Americans believe that the American way of life needs to be protected from foreign influence, while 44 percent disagree.  Responses illustrate a stark partisan divide:

74 percent of Republicans and 83 percent of Trump supporters believe that foreign influence over the American way of life needs to be curtailed.  Just 41 percent of Democrats agree, while a majority (56 percent) disagrees with this statement. Views among white Americans are sharply divided by social class, the report finds. While 68 percent of the white working class agrees that the American way of life needs to be protected, fewer than half (47 percent) of white college-educated Americans agree.

Jones identified Americans’ views on language and “reverse discrimination” as additional touchstones of cultural change. Americans are nearly evenly divided over how comfortable they feel when they encounter immigrants who do not speak English: 50 percent say this bothers them and 49 percent say it does not. 66 percent of Republicans and 77 percent of Trump supporters express discomfort when coming into contact with immigrants who do not speak English; just 35 percent of Democrats say the same.

 

Americans split evenly on the question of whether discrimination against whites, or “reverse discrimination,” is as big of a problem as discrimination against blacks and other minorities (49 percent agree, 49 percent disagree). Once again, the partisan differences are considerable: 72 percent of Republicans and 81 percent of Trump supporters agree that reverse discrimination is a problem, whereas more than two thirds (68 percent) of Democrats disagree.

On economic matters, survey results indicate that nearly seven in ten (69 percent) Americans support increasing the tax rate on wealthy Americans, defined as those earning over $250,000 a year. This represents a modest increase in the share of Americans who favor increasing the tax rate relative to 2012, but a dramatic increase in the number of Republicans who favor this position.

 

The share of  Republicans favoring increasing the tax rate on wealthy Americans jumped from 36 percent in 2012 to 54 percent in 2016—an 18 point increase. Democrats and Independents views on this position remained relatively constant, increasing from 80 to 84 percent and 61 to 68 percent approval respectively.

Finally, on matters of immigration, Americans are divided over whether immigrants are changing their communities for the better (50 percent) or for the worse (49 percent). Across party lines, however, Americans are more likely to think immigrants are changing American society as a whole than they are to think immigrants are changing the local community. This, Jones suggested, indicates that Americans’ views on immigration are motivated by partisan ideology more than by lived experience. 

At the conclusion of Dr. Jones’s presentation, Brookings senior fellow in Governance Studies, Dr. William Galston moderated a panel discussion of the poll’s findings. Karlyn Bowman, a senior fellow and research coordinator at the American Enterprise Institute, observed that cultural anxiety has long characterized Americans’ views on immigration. Never, Bowman remarked, has the share of Americans that favor immigrants outpaced the share of those who oppose immigrants. Turning to the results of the PRRI survey, Bowman highlighted the partisan divide influencing responses to the proposition that the United States place a temporary ban on Muslims. The strong level of Republican support for the proposal--64 percent support among Republicans--compared to just 23 percent support among Democrats has more to do with fear of terrorism than anxiety about immigration, she argued.

Henry Olsen, a senior fellow at the Ethics and Public Policy Center, remarked that many Americans feel that government should do more to ensure protection, prosperity, and security -- as evidenced by the large proportion of voters who feel that their way of life is under threat from terrorism (51%), crime (63%), or unemployment (65%).  In examining fractures within the Republican Party, Olsen considered the ways in which Trump voters differ from non-Trump voters, regardless of party affiliation. On questions of leadership, he suggested, the fact that 57% of all Republicans agree that we need a leader “willing to break some rules” is skewed by the high proportion of Trump supporters (72%) who agree with that statement. Indeed, just 49% of Republicans who did not vote for Trump agreed that the country needs a leader willing to break rules to set things right.

Joy Reid, National Correspondent at MSNBC, cited the survey’s findings that Americans are bitterly divided over whether American culture and way of life has changed for the better (49 percent) or the worse (50 percent) since the 1950s. More than two-thirds of Republicans (68 percent) and Donald Trump supporters (68 percent) believe the American way of life has changed for the worse since the 1950s. Connecting this nostalgia to survey results indicating anxiety about immigration and cultural change, Reid argued that culture—not economics—is the primary concern animating many Trump supporters.

       

There is a lively debate today over whether or not campaign finance reforms have weakened the role of political parties in campaigns. This seems an odd argument in an era of historically high levels of party loyalty — on roll calls in Congress and voting in the electorate. Are parties too strong and unified or too weak and fragmented? Have they been marginalized in the financing of elections or is their role at least as strong as it has ever been? Does the party role in campaign finance (weak or strong) materially shape the capacity to govern?

In addition, the increasing involvement in presidential and congressional campaigns of large donors – especially through Super PACs and politically-active nonprofit organizations – has raised serious concerns about whether the super-wealthy are buying American democracy. Ideologically-based outside groups financed by wealthy donors appear to be sharpening partisan differences and resisting efforts to forge agreement across parties. Many reformers have advocated steps to increase the number of small donors to balance the influence of the wealthy. But some scholars have found evidence suggesting that small donors are more polarizing than large donors. Can that be true? If so, are there channels other than the ideological positioning of the parties through which small donors might play a more constructive role in our democracy?

In this paper, Thomas Mann and Anthony Corrado attempt to shed light on both of these disputed features of our campaign finance system and then assess whether campaign finance reform offers promise for reducing polarization and strengthening American democracy. They conclude that not only is campaign finance reform a weak tool for depolarizing American political parties, but some break in the party wars is probably a prerequisite to any serious pushback to the broader deregulation of campaign finance now underway.

Downloads

• Download the paper

      

The Supreme Court’s recent McCutcheon decision has reinvigorated the discussion on how campaign finance affects American democracy. Seeking to dissect the complex relationship between political parties, partisan polarization, and campaign finance, Tom Mann and Anthony Corrado’s new paper on Party Polarization and Campaign Finance reviews the landscape of hard and soft money in federal elections and asks whether campaign finance reform can abate polarization and strengthen governing capacity in the United States. The paper tackles two popular contentions within the campaign finance debate: First, has campaign finance reform altered the role of political parties as election financiers and therefore undermined deal making and pragmatism? Second, would a change in the composition of small and large individual donors decrease polarization in the parties?

The Role of Political Parties in Campaign Finance

Political parties have witnessed a number of shifts in their campaign finance role, including McCain-Feingold’s ban on party soft money in 2002. This has led many to ask if the breakdown in compromise and governance and the rise of polarization has come about because parties have lost the power to finance elections. To assess that claim, the authors track the amount of money crossing national and state party books as an indicator of party strength. The empirical evidence shows no significant decrease in party strength post 2002 and holds that “both parties have compensated for the loss of soft money with hard money receipts.” In fact, the parties have upped their spending on congressional candidates more than six-fold since 1980. Despite the ban on soft money, the parties remain major players in federal elections.

Large and Small Donors in National Campaigns

Mann and Corrado turn to non-party money and survey the universe of individual donors to evaluate “whether small, large or mega-donors are most likely to fuel or diminish the polarization that increasingly defines the political landscape.” The authors map the size and shape of individual giving and confront the concern that Super PACs, politically active nonprofits, and the super-wealthy are buying out American democracy. They ask: would a healthier mix of small and large donors reduce radicalization and balance out asymmetric polarization between the parties? The evidence suggests that increasing the role of small donors would have little effect on partisan polarization in either direction because small donors tend to be highly polarized. Although Mann and Corrado note that a healthier mix would champion democratic ideals like civic participation and equality of voice.

Taking both points together, Mann and Corrado find that campaign finance reform is insufficient for depolarizing the parties and improving governing capacity. They argue forcefully that polarization emerges from a broader political and partisan problem. Ultimately, they assert that, “some break in the party wars is probably a prerequisite to any serious pushback to the broader deregulation of campaign finance now underway.”

Click to read Mann and Corrado’s full paper, Party Polarization and Campaign Finance.

      

Tom Mann and Anthony Corrado recently argued that campaign finance reform will likely have little effect on political polarization. Their new paper has sparked a host of debate over campaign finance, the strength of parties, and the ideological motivations of donors. Today, the Monkey Cage blog hosted Mann and Corrado’s response to a critique from Ray LaRaja and Brian Schaffner.

LaRaja and Schaffner argue that pumping more funding to parties and changing the rules to facilitate that practice will provide a respite from polarization; to argue their point, they examine polarization at the state legislative level. In their response, Mann and Corrado argue that the critique is off point, noting that “no causal link to campaign finance laws (and polarization) is demonstrated.” Ultimately, Mann and Corrado explain: “The link between party financial practices and regulatory regimes is often a matter of strategy than law, and the evidence offered in their (LaRaja and Schaffner) response certainly falls well short of making a case that greater party resources would reduce the polarization that undermines the capacity to govern.”

For more on this debate:

Read Mann and Corrado’s paper, “Party Polarization and Campaign Finance”

Read LaRaja and Schaffner’s critique, “Want to reduce polarization? Give Parties Money”

Read Mann and Corrado’s response, “Don’t expect campaign finance reform to reduce polarization”

And check out some other great research on Washington Post’s Monkey Cage Blog

      

The news that Charles and David Koch and their network of conservative activists plan to spend $889 million on the 2016 elections has sent shockwaves throughout the political landscape. Publicized this week at a California gathering hosted by the business group Freedom Partners, this declaration of financial war raises the question of whether billionaires and their allies can buy elections.

As I note in my Brookings Institution Press book Billionaires: Reflections on the Upper Crust, the answer in 2012 clearly was no. A few billionaires devoted several hundred million dollars seeking to defeat President Barack Obama yet lost. Republicans nominated a candidate who was easy to caricature as an out-of-touch plutocrat who did not share the values of ordinary Americans. The President was successful in using that stereotype to mobilize voters, expand the electorate, and appeal to basic fairness on the part of the general public.

Yet 2014 was a different story. Conservative billionaires were far more successful in helping Republicans regain control of the Senate, boost their House numbers, and increase their domination over governorships and state legislatures.  The country now has GOP control of the House and Senate, and 31 governorships across the country.

In analyzing why they lost the 2012 presidential campaign, conservative billionaires decided they needed to recalibrate their message and strategy for the midterms. For example, Americans for Prosperity (AFP) focused on ads that employed moving personal stories to deliver policy messages and a robust field operation. Central to their approach was the idea that Obamacare was a failure and hurting ordinary people.

Explaining this communications shift, AFP President Tim Phillips told a reporter that “too often, we did kind of broader statistical ads or messages, and we decided that we needed to start telling the story of how the liberals’ policies, whether it’s the administration or Congress, are practically impacting the lives of Americans every day.” Media expert Elizabeth Wilner of Kantar Media/CMAG correctly anticipated that those kinds of ads would have a greater likelihood of electoral success. “Ads that tell stories are more compelling than ads that don’t,” she said. “And ads that use sympathetic figures are more compelling, generally, than those that don’t.”

In looking ahead to 2016, there are ominous signs that big money may distort the election outcome. Wealthy interests were far more likely in 2012 to contribute to Republicans than Democrats. Even if Democrats mobilize liberal billionaires, the GOP nominee is going to have a substantial fundraising advantage.

Money alone, of course, does not dictate elections. Research shows clearly that public opinion, media coverage, campaign strategies, policy positions, and the nature of the times matter as well. However, during a time of rising campaign costs and limited public engagement in the political process, big money sets the agenda, affects how the campaign develops, and shapes how particular people and policy problems get defined. It takes skilled candidates, favorable media coverage, and strong organizational efforts to offset the power of great wealth.

There are no guarantees that the future Democratic nominee will replicate Obama’s 2012 success. If Republicans nominate someone who relates well to ordinary voters and they tone down policies that disproportionately benefit the wealthy, the money story in 2016 likely will turn out very different from the last time. Billionaire activism very well could tilt a close election in favor of conservative interests.

      

One of the fundamental arguments in the “Political Realism” debate is whether or not strong political parties could make government work better. One way to assess party strength is to look at how much money parties can raise and spend.

In this vein, political scientists Ray LaRaja and Brian Schaffner have claimed that removing limits on party funding activity would make politics less polarized. I’ve been skeptical of this claim. In fact, in a short analysis, I found that the opposite is more likely the case—that states with limits on party fundraising appear to be less polarized, though I cautioned against inferring too much from this pattern.

LaRaja and Schaffner have now responded and previewed their forthcoming book, Campaign Finance and Political Polarization: When Purists Prevail, which will be out this fall from the University of Michigan Press. So, a response to their response is now in order.

I’ll start by granting a point of agreement: LaRaja and Schaffner note that I didn’t re-produce their analysis. I didn’t do this because, based on what they’ve written, it’s not clear exactly which states they consider to be “Parties Unlimited” and “Parties Limited” states. So, until they make their list public, it will be impossible to conduct a precise replication of their analysis.

The good news is they’ve promised to make their data public in the future. As they write in their recent post, “we will be posting all the data necessary to replicate (and challenge) our results upon publication of our book this fall, and we look forward to seeing what others find when they dig into the data.” They also note in their analysis that “11 states changed their laws on party limits during the period of our study (1993-2012).” Assembling this list, they note, was “possibly the most painstaking work we did on this book.” For now, their list of changes remains a well-kept secret, though the changes appear to be driving their analysis. So it will be good when all the relevant data and categorization choices are clear and on the table.

A lot depends on which states fall into which categories. But, there is a more fundamental question: does it make sense to dichotomize states into “Parties Unlimited” and “Parties Limited” states? States with limits vary considerably. Some states limit the money into parties, but allow unlimited flows to candidates; some states allow unlimited money into parties, but limit money from parties to candidates. Some limits are high, some are low. Some have exceptions for party-building activities. Rules vary between primary and general elections, as well.

Consider California. There are limits on how much parties can raise from individuals, but those limits are quite high (they are now at $35,200), and also only cover the party accounts that go to state candidates (so, for example, ballot measures are exempt or general party activities are exempted). California also has no limits on how much parties can transfer to candidates. So should California be a “limits” or “no limits” state? California also has the most polarized legislature, as measured by the distance between party medians. Depending on how you choose to classify states, you can get very different results, especially when you are only working with 20 states (LaRaja and Schaffner limit their claims to the 20 states with the most professionalized legislatures, as per the Squire Index).

LaRaja and Schaffner’s response presents a time series regression model to “calculate the predicted level of polarization over time in a state that limited party fundraising … and spending to on where those limits were removed.” But if states that removed limits became less polarized following the removal of those limits, why not tell us what those states were, and report the actual polarization trends in the states? Put another way: Why rely on model predictions when there are real world data? Grounding this debate in the trajectories of actual states would lend some realism to the claims. Then we could debate examples.

For example, as Thomas Mann and E.J. Dionne note in a recent Brookings paper, two of the states with no limits are Texas and North Carolina. As Mann and Dionne write, “The behavior of their legislatures in recent years cannot, on any plausible definition, be described as 'moderate.'” However, neither Texas nor North Carolina shows up as excessively polarized when polarization is merely a measure of voting patterns. Moreover, if parties are so pragmatic, why did the North Carolina Republican Party (which could raise and spend unlimited sums of money) fail to stop a takeover by multi-millionaire right-wing extremist Art Pope?

This takes us to questions of how party leaders actually behave. LaRaja and Shaffner show evidence in their response that parties give more money to moderate incumbents than to extreme incumbents. This should not be surprising. Presumably, moderate incumbents are more likely to be in competitive races, since moderates are more likely to represent competitive districts.

The more relevant question is what types of candidates parties recruit. Thankfully, we have answers to this courtesy of excellent work by David Broockman, Nicholas Carnes, Melody Crowder-Meyer, and Christopher Skovron, who surveyed 6,000 county-level political party leaders. They found that, “party leaders…use their influence to discourage moderates from seeking office: they strongly prefer candidates at least as ideologically polarized as their median party member. Republican party leaders show this preference especially.”

Their findings also reinforce something that should be apparent to students of polarization—that polarization is asymmetric. Republicans have moved far to the right. Democrats have mostly stayed in place. Let me quote Broockman et al.’s paper at further length, because the findings are extremely relevant to this debate:

“Republicans are much more likely to, unprompted, mention ideology as an important factor for candidates. Our evidence suggests that not only do Republicans care more about ideology, it is also readily accessible when they think of candidate recruitment. It seems likely, then, that Republicans are much more active in recruiting ideologically polarized candidates than Democrats are.”

“Democratic chairs are most inclined to support candidates who are middle-of-the-road or slightly left with respect to the party, while Republicans prefer candidates who espouse an ideology matching or more conservative than their party. In fact, while Democratic chairs are less likely to support very liberal candidates than those nearer to their party average, Republican chairs seem to give very conservative primary candidates the same boost that Democrats give to moderates.”

This does suggest that perhaps giving parties more money and therefore more control over candidates would produce moderation in blue states, but exacerbate polarization in red states. Unfortunately, there is nothing in LaRaja and Schaffner’s analysis that addresses this possibility.

The importance of recruitment also suggests that what we really want to know is who controls the actual recruitment mechanisms in the first place. It’s possible that states with limits might have strong party recruitment mechanisms. If what we really care about is the strength of party machines, why not try to measure that more directly?

LaRaja and Schaffner seem to envision parties being run by hard-headed pragmatists who can determine outcomes with money alone. They seem to assume that if parties can get billionaires to fund them, this will enable party leaders to support more moderate candidates. They seem to ignore that the billionaires may have a few ideas of their own about how they think government should be run (see, e.g. North Carolina).

This gets to a final point, about whether we ought to care if parties rely on small or large donors. LaRaja and Schaffner dismiss the case for small donors, noting that: “the endless romanticizing of small donors as being emblematic of American voters has no empirical grounding.” They go on to note that the ideological distribution of small donors and the ideological distribution of large donors “are nearly identical,” and therefore, “[p]utting more emphasis on ideological small donors may even make our politics worse as politicians streamline their messages to cater to this minority of individuals with more extreme views.”

Let’s grant that large and small donors have the same ideological distribution. If there is no difference, then there’s no reason to think that relying more on small donors would make politics any more extreme. However, since there are many more small donors than there are large donors, a small-donor matching system would allow less extreme candidates the ability to seek out less extreme donors from a larger population of potential donors. We know large donors are polarized, so relying more heavily on them doesn’t give parties much room to moderate. Of course, this presumes that large donors want to shape party positions. But that seems a safe bet.

There are also good (small-d) democratic reasons to support small-donor programs: they bring more participants into the political process; they orient politicians to think differently about whom they represent, and they probably make politics an attractive profession for a broader set of potential candidates. I’d even trade off some polarization for a small donor system. Fortunately, based on their data, it doesn’t appear that I’d even have to.

Finally, and perhaps most importantly, polarization is a function of many, many things, and it’s hard to imagine how changing limits on what parties can raise and spend would have much of an influence given the many other factors. Consider this thoughtful systems map developed by the Hewlett Foundation to analyze American politics as a system: it describes multiple factors that might influence levels of polarization. Systems thinking warns us to be careful of putting too much focus on a single point of leverage without thinking about the larger systems dynamics. This is why many reform skeptics are cautious about unintended consequences—thinking about a single variable in the absence of a larger context usually has unexpected results.

Moreover, as Mann and Dionne explain, we need to be cautious of applying lessons from the states to Washington:

"The gridlock in Washington is a consequence of the ideological polarization of the parties buttressed by vast party networks, their strategic opposition to one another throughout the legislative process fueled by the intense competition for control of the White House and Congress, the prevalence of divided party government, and the asymmetry between the parties that leads Republicans to eschew negotiation and compromise."

"The situation in the states is dramatically different. Most now have unified party governments, and gridlock is the exception, not the rule. There is little evidence of moderation in the Republican- controlled states, whatever their campaign finance laws."

I’m sure we will continue this debate for many months to come, especially after the publication of Campaign Finance and Political Polarization: When Purists Prevail this fall. I’m glad that LaRaja and Schaffner are bringing valuable data to this important question. It’s certainly far from settled.

       

The use of economic resources to support election campaigns is an essential ingredient of democratic competition. Often viewed as a malady of democracy, campaign finance is actually part of the normal workings of democratic life. However, it is indisputable that money is capable of inflicting significant distortions on politics and policymaking. When there is a failure to regulate money in the political process or existing regulation is ineffectual, the legitimacy of democratic processes can be jeopardized.

These concerns are particularly relevant to Latin America, a region plagued by a highly unequal income distribution, and where organized crime has a major presence, transacts billions of dollars each year in illicit business, and has the potential to corrupt democratic institutions. In this policy brief, Kevin Casas-Zamora and Daniel Zovatto offer practical guidance for making campaign finance regulation feasible and increasing its likelihood of success. In undertaking reform, countries should prioritize the most urgently needed changes with the broadest political consensus. Proposals for reform include:

• Establish greater control over private funding of parties and election campaigns;

• Create a public subsidy system to ensure fair access for parties and candidates to adequate funding to finance both regular day-to-day operations and election campaigns;

• Adopt mechanisms to keep campaign spending from skyrocketing;

• Craft party and candidate reporting systems to increase accountability, transparency, and disclosure; and

• Establish a graduated and credible system of sanctions for the chief financial officers of political parties in the event of violations of the rules in force.

Downloads

• The cost of democracy: Campaign finance in Latin America

       

Editor’s Note: This post was originally published by the Institute of Governmental Studies. Thomas Mann is also Resident Scholar at IGS.

Donald Trump and the Amen chorus of Republican presidential aspirants may have appeared to monopolize the capacity to make fantastical claims about what’s wrong with America and how to fix it. But a rival has appeared on the scene, outlining a very different fantasy plan to run for president on the Democratic side of the aisle.

Harvard law professor Lawrence Lessig looks meek—a dead ringer for Mr. Peepers—yet is anything but. Lessig built an impressive career in legal scholarship on the regulation of cyberspace, and the mild-mannered, soft-spoken academic became a cult hero among libertarians fearful of increasing legal restrictions on copyright, trademark and the electromagnetic spectrum. But Lessig’s transformation into a political activist was spurred by his personal revelation that money in politics is the root of all our governing problems. Eliminate the dependence of elected officials on private donors and the formidable obstacles to constructive policymaking will crumble. Simple but searing truth, or a caricature of a complex governing system shaped by institutions, ideas/ideologies, and interests?

Lessig became a whirlwind of energy and organization to promote his new values and beliefs, leading efforts to “Change Congress,” convene a second constitutional convention, raise awareness of corruption in politics through the “New Hampshire Rebellion,” and start the “Mayday PAC,” a super PAC designed to end all super PACs. He wrote the bestselling book Republic, Lost: How Money Corrupts Congress—and A Plan to Stop It, delivered a series of popular TED talks, and tirelessly traveled the country with his PowerPoint.

With none of these enterprises yet bearing fruit, Lessig has decided to raise the stakes. He has announced that if he receives $1 million from small donors by September, he will seek the Democratic presidential nomination, running as a “referendum candidate.” His single-issue platform, built around the concept of “Citizen Equality,” consists of “true” campaign finance reform supplemented by electoral reform (to weaken the influence of gerrymandering) and voting rights. His goal is to use the election to build a mandate for political reform that will cure our democratic ills. Lessig will apparently have nothing to say about anything other than political reform, insisting that his issue should be and can be the number one priority of voters in the 2016 elections. If nominated and elected, President Lessig will serve in office only long enough to enact the Citizen Equality Act and then resign, turning over the powers and responsibilities of the office to the vice president. Recently he generously informed the Vice President that he would happily enable a third Joe Biden term by selecting him as his running mate.

The hubris of the Harvard Professor is breathtaking. In virtually every respect, his strategy is absurd. Lessig’s political reform agenda is stymied by Republicans, not Democrats. Why not direct his energies where the opposition resides? All of the current Democratic presidential candidates support the thrust of these reforms. But saying that this is their highest priority is likely to harm, not boost, their candidacies. Why would even the most ardent supporter of the three pillars of Lessig’s reform agenda cast a ballot solely on this basis? Big and important issues divide the two parties today and the stakes of public action or inaction are huge. We don’t have the luxury of using the election to try to build a mandate for a set of political reforms that would have no chance of passing in the face of GOP opposition and would be of only incremental utility if they did.

Campaign finance does play a corrosive role in our democracy and I have invested much of my career grappling with it. There is no doubt that money in elections facilitates the transfer of economic inequality into political inequality, and the spectacle of several hundred plutocrats dominating the finance of our elections should be a target of serious reform efforts in the courts and the Congress. At the same time it is foolish to imagine that campaign finance is the only route for private wealth to influence public policy or that its reform will dramatically transform the policy process. Money did not prevent the major legislative enactments of 2009-2010—including the stimulus, student loans, the Affordable Care Act, and financial services reform. Nor is it likely to be the critical factor on climate change, immigration, infrastructure or jobs and wages; which party wins the White House and whether control with Congress is unified or divided is key. If anything, the Lessig campaign is likely to weaken the forces for political reform by demonstrating just how small the relative priority for this action is.

Trump offers the country his outsider status, success in building his personal wealth, an outsized personality, a brashness in asserting how easily he can solve the country’s problems, and a hearty appetite for and skill in stoking the anger and fears of a segment of the country. He feeds the notion that a strong, fearless, wily leader, inexperienced and mostly uninformed in politics and governing, can be the man on a white horse saving a great country losing its exceptional status. His claim that all politicians are bought by private interests—a claim Lessig eagerly embraces—fits well with his grandiose claims that he alone can fix what ails the country. A significant segment of Republican voters, presumably not well versed in the American constitutional system are attracted to him, at least enough for him to be a factor in this election campaign.

Lessig is a far less commanding presence but his ambition burns no less than that of Trump. The notoriety, celebrity, and adoring audiences are heady stuff, even if on a much smaller scale. Lessig told Bloomberg that Trump’s candidacy is evidence that his reform message is taking hold. Lessig said, Trump “strikes people as credible when he says all these people (politicians) are bought—I used to buy them …Trump is saying the truth.” Lessig will be a minor figure in this election and the causes for which he fights are unlikely to advance from it. Both Lessig and Trump, despite their differences in visibility and importance in the election, will have contributed to the dumbing down of American politics, a reality that will bring tears to the eyes of civics teachers and political science professors across the country.

       

Hillary Clinton’s release of her campaign finance proposals on Tuesday confirms there will be no significant substantive differences on political reform among the aspirants for the Democratic presidential nomination but a huge gulf between the two parties, whoever the nominees.

Harvard law professor and activist Larry Lessig announced his candidacy for the Democratic nomination this past weekend based on the single issue of political reform, but his quixotic and gimmicky campaign is akin to carrying coals to Newcastle. His only difference with the other Democratic candidates is his insistence that political reform (primarily on campaign finance) should be of the highest priority and other concerns (immigration, wages, climate change, economic inequality, infrastructure, national security) should play second fiddle. Lessig apparently believes that Republican and independent voters will rally to his call and create a broad base of public support for bipartisan cooperation on changing the rules of the electoral game.

If only it were that simple. The gaping differences between the parties on campaign reform are both ideological and strategic. Republicans are more philosophically disposed to elevate free speech over political equality. They also realize that as presently constituted, their party is advantaged by fewer or no restrictions on money in politics, lower turnout among minorities and youth, and single-member districts. Democrats instinctively reject the argument that money is speech and are comfortable with using public authority to set and enforce the rules of democracy. But they also know that they would benefit from restrictions on big money in elections, guaranteed voting rights for all citizens, and a more proportional translation of votes into seats.

The Clinton campaign finance proposals generally follow the thrust of liberal reformers: building a counterforce to big money through multiple matching funds for small donors, increasing transparency by requiring timely disclosure of mega-contributions and transfers that now evade public scrutiny, and overturning Citizens United, which set the stage for a Wild West of outsized contributions and spending. Her support for a constitutional amendment to accomplish the latter is a pipedream and probably wouldn’t work if it were adopted. As she acknowledges, appointing Supreme Court justices to change the current 5-4 majority is the more promising route to the desired change.

Lessig’s dream notwithstanding, this particular agenda will be achieved only if and when Democrats manage to control both ends of Pennsylvania long enough to put the policies and a sympathetic Supreme Court in place. It’s an important choice for voters to consider in the 2016 elections but by no means the only or most pressing one.

       

I was honored today to speak at the kick off meeting of the new ReFormers Caucus. This group of over 100 former members of the U.S. Senate, the House, and governors of both parties, has come together to fight for meaningful campaign finance reform. In the bipartisan spirit of the caucus, I shared speaking duties with Professor Richard Painter, who was the Bush administration ethics czar and my predecessor before I had a similar role in the Obama White House. 

As I told the distinguished audience of ReFormers (get the pun?) gathered over lunch on Capitol Hill, I wish they had existed when in my Obama administration role I was working for the passage of the Disclose Act. That bill would have brought true transparency to the post-Citizens United campaign finance system, yet it failed by just one vote in Congress.  But it is not too late for Americans, working together, to secure enhanced transparency and other campaign finance changes that are desperately needed.  Momentum is building, with increasing levels of public outrage, as reflected in state and local referenda passing in Maine, Seattle and San Francisco just this week, and much more to come at the federal, state and local level.

       

The rise of SuperPACs, the decision in Citizens United, and intensified polarization in Congress has ignited a flame under the already robust academic debate over the role of money in elections. Last week, Lee Drutman wrote an article for Vox outlining the recent contribution of Raymond J. La Raja and Brian Schaffner made to the debate with their book, Campaign Finance and Political Polarization: When Purists Prevail.

The crux of the book argues that allowing political parties to control more money, not less, is the key to reducing polarization. This runs counter to many pro-reform writings, focused chiefly on empowering small donors in order to counter big-money politics. La Raja and Schaffner counter this narrative, suggesting parties channel money to create moderation, rather than small donors, which are polarizing.

Drutman pushes back on both accounts by taking issue with some of the underlying assumptions in When Purists Prevail, including the weight they place on median voter theory and the extent parties will spend money on moderate candidates in primary elections. He marshals a host of recent research to support the critique, including: a recent Brookings paper on the strength of political parties, data on the power of outside money in congressional elections, and research showing moderate districts do not necessarily produce moderate candidates.

Click here to read the full article on Vox.

       

Event Information

Register for the Event

As the sixth anniversary of Citizens United v. FEC approaches on January 21, both experts and ordinary citizens believe the United States is confronting a campaign finance crisis. Citizens United and related court cases have unleashed a flood of dark money that many believe could drown our democracy. It is estimated that over $5 billion will be spent on the 2016 presidential race—more than 3 times the amount spent in 2008 (already the most expensive election cycle in history). A comprehensive poll conducted by the New York Times and CBS News in the spring of 2015 showed that 84 percent of adults—including 90 percent of Democrats and 80 percent of Republicans—believe that money has too much influence in American political campaigns. Even the richest Americans agreed: 85 percent of adults making $100,000 or more share that same belief.

There has been much handwringing about this state of affairs. But there has been too little public attention paid to finding solutions. On the sixth anniversary of Citizens United, the Governance Studies program at Brookings hosted current and former government officials, lobbyists, donors, advocates, and other experts to discuss how to resolve the campaign finance crisis. They focused on innovative reform efforts at the federal, state, and local levels which offer the hope of addressing the problem of big money in politics.

Panelists will included:

Cheri Beasley, Associate Justice, North Carolina Supreme Court
Daniel Berger, Partner, Berger & Montague, P.C.
John Bonifaz, Co-Founder and President, Free Speech for People
Norman L. Eisen, U.S. Ambassador to the Czech Republic (2011-2014); Special Assistant and Special Counsel to the President (2009-2011); Visiting Fellow, The Brookings Institution
Bruce Freed, Founder and President, Center for Political Accountability
Steve Israel, Member, U.S. House of Representatives (D-NY)
Roger Katz, Chair, Government Oversight Committee, Maine State Senate (R)
Allen Loughry, Justice, Supreme Court of Appeals of West Virginia
Chuck Merin, Executive Vice President, Prime Policy Group; Lobbyist
Connie Morella, Ambassador to OECD (2003-2007); Member, U.S. House of Representatives (R-Md., 1987-2003)
Jeffrey Peck, Principal, Peck Madigan Jones; Lobbyist
Nick Penniman, Executive Director, Issue One
Trevor Potter, Commissioner, Federal Election Commission (1991-1995; Chairman,1994)
John Pudner, Executive Director, Take Back Our Republic
Ann Ravel, Commissioner, Federal Election Commission (Chairwoman, 2015)
Timothy Roemer, Ambassador to India (2009-2011); Member, U.S. House of Representatives (D-Ind., 1991-2003); member 9/11 Commission; Senior Strategic Advisor to Issue One
John Sarbanes, Member, U.S. House of Representatives (D-Md.)
Claudine Schneider, Member, U.S. House of Representatives (R-R.I.,1981-1991)
Peter Schweizer, President, Government Accountability Institute
Zephyr Teachout, CEO, Mayday PAC
Lucas Welch, Executive Director, The Pluribus Project
Fred Wertheimer, Founder and President, Democracy 21
Tim Wirth, Member, U.S. Senate (D-Colo.,1987-1993); Member, U.S. House of Representatives (D-Colo.,1975-1987)
Dan Wolf, Chair, Committee on Steering and Policy, Massachusetts State Senate (D)

Click here for a full agenda.

Video

• The campaign finance crisis in America and how to fix it - Part 1
• The campaign finance crisis in America and how to fix it - Part 2
• The campaign finance crisis in America and how to fix it - Part 3
• The campaign finance crisis in America and how to fix it - Part 4

Audio

• The campaign finance crisis in America and how to fix it: A solutions summit (Part 1)
• The campaign finance crisis in America and how to fix it: A solutions summit (Part 2)
• The campaign finance crisis in America and how to fix it: A solutions summit (Part 3)
• The campaign finance crisis in America and how to fix it: A solutions summit (Part 4)

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• Solution Summits Agenda120
• 20160121_campaign_finance_summit_transcript

       

We have received many emails and calls in response to our blog last week about our campaign finance reform “Solutions Summit," so we thought we would share some pictures and quotes from the event. Also, Issue One’s Nick Penniman and I just co-authored an op-ed highlighting the themes of the event, which you can find here.

Ann Ravel, Commissioner of the Federal Election Commission and the outgoing Chairwoman kicked us off as our luncheon speaker. She noted that, “campaign finance issues [will] only be addressed when there is a scandal. The truth is, that campaign finance today is a scandal.”

    

(L-R, Ann Ravel, Trevor Potter, Peter Schweizer, Timothy Roemer)

Commenting on Ann’s remarks from a conservative perspective, Peter Schweizer, the President of the Government Accountability Institute, noted that, “increasingly today the problem is more one of extortion, that the challenge not so much from businesses that are trying to influence politicians, although that certainly happens, but that businesses feel and are targeted by politicians in the search for cash.” That’s Trevor Potter, who introduced Ann, to Peter’s left.

Kicking off the first panel, a deep dive into the elements of the campaign finance crisis, was Tim Roemer, former Ambassador to India (2009-2011), Member of the U.S. House of Representatives, (D-IN, 1991-2003) Member of the 9/11 Commission and Senior Strategic Advisor to Issue One. He explained that “This is not a red state problem. It’s not a blue state problem. Across the heartland, across America, the Left, the Right, the Democrats, the Republicans, Independents, we all need to work together to fix this.”

(L-R, Fred Wertheimer, John Bonifaz, Dan Wolf, Roger Katz, Allen Loughry, Cheri Beasley, Norman Eisen)

Our second panel addressed solutions at the federal and state level.  Here, Fred Wertheimer, the founder and President of Democracy 21 is saying that, “We are going to have major scandals again and we are going to have opportunities for major reforms. With this corrupt campaign finance system it is only a matter of time before the scandals really break out. The American people are clearly ready for a change. The largest national reform movement in decades now exists and it’s growing rapidly.”

Our third and final panel explained why the time for reform is now. John Sarbanes, Member of the U.S. House of Representatives (D-MD) argued that fixes are in political reach. He explains, “If we can build on the way people feel about [what] they’re passionate on and lead them that way to this need for reform, then we’re going to build the kind of broad, deep coalition that will achieve success ultimately.”

 

(L-R in each photo, John Sarbanes, Claudine Schneider, Zephyr Teachout)

Reinforcing John’s remarks, Claudine Schneider, Member of the U.S. House of Representatives (R-RI, 1981-1991) pointed out that “we need to keep pounding the media with letters to the editor, with editorial press conferences, with broad spectrum of media strategies where we can get the attention of the masses. Because once the masses rise up, I believe that’s when were really going to get the change, from the bottom up and the top down.”

Grace Abiera contributed to this post.

       

Campaign finance is a key issue for the quality of democracy. As we noted in a recently-published book of which we are co-authors, and which we had the honor to present in the Hall of Former Presidents of the Legislative Assembly last February 11 (El costo de la Democracia: Ensayos sobre el financiamiento político en América Latina, UNAM, Mexico City, 2015), it is important because of an inescapable fact: While democracy has no price, it does have an operating cost. The use of economic resources is an essential element for democratic competition. More than a pathology of democracy, political financing, when well-regulated, is a normal part of democratic life.

Yet it is undeniable that money is capable of introducing distortions in the democratic process. Its unequal distribution impacts, first, on the real possibilities enjoyed by the parties and the candidates to take their message to the voters. Second, having money gives individuals and social groups a differentiated possibility of participating in elections and exercizing their influence over the candidates through their contributions. This is vital for democracy. When political power is simply a reflection of economic power, the principle of “one person, one vote” loses meaning. Third, fundraising efforts offer obvious opportunities for the articulation of exchanges between donors and those who make decisions on public affairs, or at least for the continual appearance of conflicts of interest. This can be very problematic in the case of Latin America, where there is a risk of money from organized crime penetrating the campaigns.

And so it is not surprising that the issue is on the political agenda in many countries of the region, just as it has been for a long time in Costa Rica. Costa Rica introduced public financing for political parties in 1956, making it the second country in the world to do so, after Uruguay. Nonetheless, the generosity of the government contribution did not avoid a long succession of scandals associated with the issue, a history that includes figures ranging from Robert Vesco and Manuel Antonio Noriega to Carlos Hank González and the illegal donations from the government of Taiwan. 

The wounds left by each of these episodes gave way to worthy yet incomplete regulatory efforts. Most important has been the reform of the Electoral Code approved in 2009, which among many necessary changes prohibited corporate contributions to the political parties. And not only legislative action has made a difference. The Constitutional Chamber of the Supreme Court has also made a difference by lifting bank secrecy on financing, a very important decision that has been pointed to internationally.

Each of these steps has been moving the country in the right direction. This is worth underscoring: At a time when it is so easy to revile the Costa Rican political system, it should be recognized that in terms of political financing the country is, in general, better situated than it was 20 or 30 years ago. All the evidence we have indicates that private contributions today are less important in our campaigns than one generation ago. We can state with great certainty that our parties are financing more than 80% of the cost of their campaigns with the state contribution. That is good news.

However, the current regulatory framework presents problems such as:

a) It continues to be a regulatory system that is somehow upside down: It meticulously keeps tabs on the use of the state contribution by the parties, which does not give rise to conflicts of interest, while it is much less effective when it comes to verifying the truth of the information the parties provide about their private sources of financing, which do have the potential to compromise the autonomy of the political system. Correcting this imbalance, getting the Supreme Electoral Tribunal to prioritize monitoring private financing and to devote more resources to it, would not only be a way to straighten out its priorities, but frankly, all the parties would also breathe a sigh of relief.

b) The system of advances on the state contribution continues to be very limited (only 15% of the subsidy is disbursed before the presidential election and nothing in the case of municipal elections). It is time to admit that eliminating the system whereby the contributions were distributed in advance payments, which existed from 1971 to 1991 (when 50% was disbursed in advances), caused grave prejudice to the political system. The weakness of the advanced disbursement has ended up leaving the parties at the mercy of banks and lenders during the campaigns. Worse still, today the possibility of a party receiving loans during the campaign against its electoral expectations depends entirely on the fickle behavior of the opinion polls. This is unfair and risky, as the OAS electoral observation missions have noted.

c) The legal framework does little to limit parties’ spending on advertising, one of the most effective ways to reduce outlays during campaigns and to bring about fairness in electoral competition, which is one of the most important objectives in improving the current system. One must evaluate the advisability of adopting a system of advertising slots (provided free of charge by those holding concessions for the radio spectrum or purchased by the Supreme Electoral Tribunal and then made available to the parties) as has been done, with a positive outcome, by other democracies in the region such as Argentina, Brazil, Chile, Ecuador, and Mexico.

d) The current regulatory framework has serious vulnerabilities at the local level. Requiring the parties to file a single financial report with the contribution they receive nationwide (the same system that exists for the presidential election) is insufficient when in practice there are 81 local elections in which each candidate raises and spends money autonomously. Let’s be clear: Relatively little is known about who finances the campaigns at the local level in Costa Rica. This would not matter much except that the experience of other countries – from Mexico to Colombia – shows that local campaigns are the preferred point of entry for organized crime to penetrate the electoral structures. Reinforcing the financial controls on municipal elections is one of the country’s most urgent tasks in relation to campaign finance.

Costa Rica has made major strides in regulating political financing. Yet there is an urgent need to address the weaknesses in the current regulatory framework. There are bills in the legislative pipeline, such as No. 18,739, introduced by the Supreme Electoral Tribunal in April 2013, that incorporate almost all the reforms suggested here and that provide an excellent basis for moving this inevitable discussion forward. 

We will have to address the problems in the current regulatory framework sooner or later. The question is whether we will do so before or after the next scandal. Let’s hope that, for once, we act on time.

This piece was originally published by International IDEA. 

       

       

       

       

       

       

       

       

       

       

       

       

Researchers from the Brookings Metropolitan Policy Program have released new Earned Income Tax Credit (EITC) data from the IRS on federal individual income tax filers. The interactive data are available for all ZIP codes, cities, counties, metropolitan areas, states, state legislative districts, and congressional districts in the U.S. Users can also find new MetroTax model estimates of the EITC-eligible population in 2012 based on the latest American Community Survey data.

From the 2012 MetroTax model, here are 10 facts about EITC-eligible tax filers

• 71.1 million people live in tax units that are eligible
• 31.1 million children live in eligible households
• 72.8% of eligible filers speak English
• 50.9% are white
• 36.1% received food stamps at some point in the last year
• 25.8% are married filing jointly
• 13.2% have earned a bachelor’s degree or higher
• The median adjusted gross income is $13,638
• 12.7% of eligible filers work in the retail trade industry
• 13.6% work in office and administrative occupations

Read the blog post by Jane Williams and Elizabeth Kneebone to learn more and also visit the EITC interactive.

      

In his state of the union and his budget, the President spoke of the stagnation of middle class incomes. Whatever growth we have had has not been broadly shared.  More than 78% of the growth in GDP between 1979 and 2013 has gone to the top one percent. Even Republicans are beginning to worry about this issue although they have yet to develop concrete proposals to address it.

Slow Growth in Incomes

Middle class incomes were growing slowly before the recession and have actually declined over the past decade.   In addition, according to the New York Times, the proportion of the population with incomes between $35,000 and $100,000 in inflation-adjusted terms fell from 53% in 1967 to 43% in 2013.  During the first four decades this was primarily because more people were moving into higher income groups, but more recently it was because they have moved down the ladder, not up.  One can define the middle class in many different ways or torture the data in various ways, but there is plenty of evidence that we have a problem.

What to Do

The most promising approach is what I call “the second earner solution.”  For many decades now, the labor force participation rate of prime age men has been falling while that of women has been rising.  The entry of so many women into the labor force was the major force propelling whatever growth in middle class incomes occurred up until about 2000. That growth in women’s work has now levelled off.  Getting it back on an upward track would do more than any policy I can think of to help the middle class.

Imagine a household with one earner making the average wage of today’s worker and spending full-time in the job market.  That household will have an income of around $34,000. But if he (or she) has a spouse making a similar amount, the household’s income will double to $68,000. That is why the President’s focus on a second-earner credit of $500, a tripling of the child care tax credit, expanding the Earned Income Tax Credit, and providing paid leave are so important. These policies are all pro-work and research shows they would increase employment.

No Marriage = No Second Earner

One problem, of course, is that fewer and fewer households contain two potential workers.  So it would also help to bring back marriage or at least its first cousin, a stable cohabiting relationship.  My ideas on this front are spelled out in my new book, Generation Unbound. In a nutshell, we need to empower women to not have children before they have found a committed partner with whom to raise children in a stable, two-parent family. Whatever the other benefits of two parents, they have twice as much time and potentially twice as much income.    

Other Needed Responses

Shouldn’t we also worry about the wages or the employment of men?  Of course.  But an increase in, say, the minimum wage or a better collective bargaining environment or more job training will have far smaller effects than “the second earner solution.”  In addition, the decline in male employment is related to still more difficult problems such as high rates of incarceration and the failure of men to take advantage of postsecondary education as much as women have. 

Still the two-earner solution should not be pursued in isolation. In the short-term, a stronger recovery from the recession is needed and in the longer-term, more effective investments in education, research, infrastructure, and in labor market institutions that produce more widely-shared growth, as argued by the Commission on Inclusive Prosperity. But do we really expect families to wait for these long-term policies to pay off?  It could be decades. 

In the meantime, the President’s proposals to make work more appealing to existing or potential second earners deserves more attention.  

      

      

Each year millions of low- to moderate-income Americans supplement their income by claiming the Earned Income Tax Credit (EITC) during tax season. Last year, 1 in 5 taxpayers claimed the credit and earned an average of nearly $2,400.

This tax season, some of those eligible for the EITC may also be able to claim, for the first time, a new credit created by the Affordable Care Act (ACA) to offset the cost of purchasing health insurance for lower-income Americans. It’s called the ACA premium tax credit.

To qualify for the ACA premium tax credit, filers need first to have an annual income that falls between 100 and 400 percent of the federal poverty line (between $11,670 and $46,680 for a single-person household in 2014). Beyond the income requirements, however, filers must also be ineligible for other public or private insurance options like Medicaid or an employer-provided plan.

Why the tax credit overlap matters

Identifying the Americans eligible for both credits is important because it sheds light on how many still need help paying for health insurance even after the ACA extended coverage options.

In a recent study of the EITC-eligible population, Elizabeth Kneebone, Jane R. Williams, and Natalie Holmes estimated what share of EITC-eligible filers might also qualify for the ACA premium tax credit this year.

Below, see a list of the top 10 states with the largest overlap between filers eligible for the EITC and those estimated to qualify for the ACA premium tax credit.* Notably, none of these states has expanded Medicaid coverage to low-income families after the passage of the ACA.

Nationally, an estimated 7.5 million people (4.2 million “tax units”) are likely eligible for both the ACA premium tax credit and the EITC. Nearly 1.3 million of those tax units are from the following ten states.

1. Florida

Overlap: 22.5 percent / 405,924 tax units
State-based exchange? No Expanded Medicaid coverage? No

2. Texas

Overlap: 21.4 percent / 513,061 tax units
State-based exchange? No Expanded Medicaid coverage? No

3. South Dakota

Overlap: 20.5 percent / 15,124 tax units
State-based exchange? No Expanded Medicaid coverage? No

4. Georgia

Overlap: 19.8 percent / 186,020 tax units
State-based exchange? No Expanded Medicaid coverage? No

5. Louisiana

Overlap: 19.6 percent / 86,512 tax units
State-based exchange? No Expanded Medicaid coverage? No

6. Idaho

Overlap: 19.3 percent / 28,855 tax units
State-based exchange? Yes Expanded Medicaid coverage? No

7. Montana

Overlap: 18.9 percent / 18,138 tax units
State-based exchange? No Expanded Medicaid coverage? No

8. Wyoming

Overlap: 18.4 percent / 7,276 tax units
State-based exchange? No Expanded Medicaid coverage? No

9. Utah

Overlap: 18.1 percent / 42,284
State-based exchange? No (Utah runs a small businesses marketplace, but it relies on the federal government for an individual marketplace) Expanded Medicaid coverage? No

10. Oklahoma

Overlap: 18.0% / 63,045 tax units
State-based exchange? No Expanded Medicaid coverage? No

* For the purposes of this list, we measured the overlap in “tax units,” not people. One tax unit equals a single tax return. If a family of four together qualifies for the ACA premium tax credit, they would be counted as one tax unit, not four, since they filed jointly with one tax return.

       

When California passed its 2016 budget late last month, it joined a growing list of states that have recently adopted or expanded state versions of the federal Earned Income Tax Credit (EITC). First enacted in 1975, the EITC has become one of the country’s most effective antipoverty programs. We estimate that the federal EITC keeps millions of individuals and children out of poverty each year, reducing the national poverty rate by several percentage points. Others have shown how the EITC creates a strong incentive to work and works as a powerful tool for reducing income inequality.

How the federal EITC works

For an unmarried worker with one child in 2015, the federal EITC works like this: Up to her first $9,880 earned, the worker receives a tax credit equal to 34 cents on the dollar, for a maximum credit value of $3,359. The credit is reduced by 16 cents for each dollar earned beginning at $18,110, eventually phasing out at $39,100 in earnings. Phase-in and phase-out rates and ranges depend on a worker’s filing status and number of dependents claimed. Importantly, the EITC is refundable; a filer can still claim any credit in excess of her tax liability, contributing to refunds that can represent double-digit shares of annual income for lower-paid workers.

Most states have their own EITCs

Of the 26 states and the District of Columbia with their own EITCs, most have structured their programs to mirror the federal EITC, by simply matching some percentage of the federal credit in a given tax year (see map). This year, Massachusetts, New Jersey, and Rhode Island all increased their state EITCs’ matching percentages. In three states, the EITC is non-refundable, making it a less effective incentive for very low-income workers (Maine this year made its credit refundable). California’s EITC joins a couple of others that, while still refundable, vary in the degree to which they mirror the federal credit based on filing status and income.

State EITCs: Not perfect but increasingly important

Through our work maintaining Brookings’ EITC Interactive, we hear regularly from stakeholders around the country engaged in efforts to expand the EITC and increase local participation to strengthen low-income families and communities. Although it is difficult to determine uptake rates locally, there are several factors associated with participation. Self-employed workers are less likely to claim the credit, as are workers with low English proficiency, and those who do not claim any dependents. The availability of tax preparation assistance tends to increase participation rates. For groups who hope to expand access to the EITC in their communities, these considerations are a good place to start.

To be sure, the EITC is not a silver bullet. Because it is explicitly tied to work effort, the credit does not support low-income families who can’t find work. And because states must balance their budgets, many have had difficulty sustaining their EITCs during periods of economic downturn. (Several of the recent state EITC expansions actually represent the restoration of benefits following drastic cuts during the Great Recession.) Additionally, the federal EITC and its state analogues provide only modest support to workers who do not claim any dependents on their tax return. As such, policy makers should consider state EITCs strong complements to other interventions, such as the growing number of increases in the minimum wage occurring in states and cities.

Nevertheless, the EITC remains one of the best tools we have to fight poverty. Despite bipartisan support for the federal EITC, it is unlikely to be expanded anytime soon. In that light, recent state EITC expansions may be helping to create a more responsive, sub-national safety net that better reflects a large and diverse nation where local priorities and needs differ markedly.

       

One in five tax filers in the United States claims the Earned Income Tax Credit—a refundable federal tax credit targeted to low-income working Americans that has proven to be one of the nation’s most effective anti-poverty policies. Last year, at tax time the average EITC filer claimed just over $2,400 through the credit.

However, the share of filers claiming the EITC and the level of benefits they receive vary widely within and across communities, as shown by the local-level IRS data we post each year on our EITC Interactive data tool. For instance, almost one in three filers in the Memphis metro area claimed the credit (32 percent) in tax year 2013 compared to just 12 percent of filers in metro Boston. Local labor market conditions can affect these numbers, like the incidence and concentration of low-wage jobs or regional differences in cost of living and average wage levels. But the credit itself is also designed to vary across different kinds of filers and families. Maximum credit levels for workers without children are quite small, but they increase considerably for workers with one, two, or three children—boosting the credit’s work incentive and anti-poverty impacts.

For the first time, our EITC Interactive tool now includes data on how EITC receipt varies by the number of children claimed.

According to that data, last tax year workers without qualifying children received an average credit of $281 (Figure 1). Although they made up almost one in four EITC filers, childless workers accounted for just 3 percent of EITC dollars claimed, due to the small size of their credit (Figure 2). In contrast, workers with one child—the largest share of EITC filers (37 percent)—claimed an average credit of $2,316. Workers with two kids accounted for 27 percent of EITC filers, but with an average credit of $3,682 they took home 40 percent of all EITC dollars. Working families with three or more children made up the smallest share of EITC filers last tax year, but claimed the largest credit on average at $4,036.

These data, which are available down to the ZIP code level, offer insights into the ways in which the makeup of the EITC population (and the low-wage workforce more generally) varies across places. Returning to the Memphis and Boston regions, each metro area received more than half a billion dollars through the EITC last year ($517 and $512 million, respectively). However, the number of filers claiming the EITC was much larger in metro Boston (256,456) than in the Memphis metro area (178,241). In part, these numbers reflect the fact that 30 percent of metro Boston’s EITC filers were childless workers. In the Memphis metro area, just 15 percent of EITC filers did not have qualifying children, while 41 percent had one child, 31 percent had two children, and 12 percent had three or more children—higher than Boston’s share of EITC filers with children across the board (37 percent had one child, 24 percent had two children, and 9 percent had three or more children).

For EITC outreach campaigns working to ensure eligible filers claim the EITC at tax time, and for practitioners looking to use tax time to connect low-income workers to financial services and benefits, these numbers give a sense of who lives in their community and how to target their services. For advocates and policymakers, these numbers help shed light on how potential changes to the credit might affect different places.

For instance, the Obama administration, several legislators, and at least one presidential candidate have proposed expanding the EITC for workers without qualifying children to make it a more effective poverty alleviation and work support tool. Every congressional district in the country has childless workers or noncustodial parents who would stand to benefit from that expansion. But that expansion would be particularly important for the more than 240 districts—largely clustered on the coasts and roughly split between Republican and Democratic representatives—with above average shares of childless EITC filers (Map 1).

In contrast, if Congress does not act to make recent expansions to the credit permanent, every district will see a cut in EITC benefits in 2017, when the credit for workers with three or more children is set to disappear. In particular, more than 200 districts with above average shares of EITC filers with three or more kids—this time predominantly Republican districts clustered in the Intermountain West, parts of the Great Plains, and along the Texas border—would be most affected (Map 2). 

In the coming weeks, we will be delving deeper into the impact of proposed and potential changes to the EITC and releasing new resources on the EITC-eligible population and the credit’s anti-poverty impact. In the meantime, these new EITC Interactive data offer an important resource that can help practitioners, policymakers, advocates, and researchers better understand how the EITC affects low-income workers and families and their communities across the country.

       

       

       

       

Executive Summary
In order to realize the world’s commitment to ensuring education for all by 2015, important innovations and reforms will be needed in the governance and financing of global education. In 2008, Presidential Candidate Barack Obama committed to making sure that every child has the chance to learn by creating a Global Fund for Education. Secretary of State Hillary Clinton has recently called for a new architecture of global cooperation that requires institutions to “combine the efficiency and capacity for action with inclusiveness.” A new Global Fund for Education should be an independent and inclusive multi-stakeholder institution that builds upon existing institutions and supports country-driven solutions. It must be capable of mobilizing the approximately $7 billion annually still needed to achieve education for all, while holding all stakeholders accountable for achieving results with these resources.

None of these objectives will be achieved without a major rethinking of the global education architecture and an evolution of current mechanisms for financing education. More than 75 million children remain out of primary school, and only 53 of the 171 countries with available data have achieved gender parity in primary and secondary education. Achieving these two Millennium Development Goals, and the broader Education for All Goals set out by 164 countries, will require more capable international institutions. A Global Fund for Education that links funding to performance, that ensures a greater share of resources reach schools and that coordinates the efforts of diverse stakeholders is essential to putting these goals within reach.

In order to realize President Obama’s vision for creating a Global Fund for Education, significant leadership by the United States on global education will be needed in the coming year. A clear commitment by the United States to leverage the contributions of other nations and work together to support country-driven strategies through a Global Fund for Education could catalyze unprecedented international energy around achieving education for all.

Policy Brief #169

Learning from Existing and Innovative Mechanisms

The Global Fund for Education should reflect an evolution of the successful elements of existing multilateral mechanisms. Seven years ago, the Fast Track Initiative (FTI) was launched as the primary financing vehicle for achieving education for all. Working with key donors and international institutions, the FTI was supposed to mobilize the resources needed to close the massive education-financing gap. Housed within the World Bank, the FTI has not yet been able to build a strong public brand, engage the support of a number of leading donors or mobilize adequate resources from major donor countries.

The FTI has not been capable of generating resources on a scale consistent with its founding vision of achieving universal education for all. Although the FTI initially focused on expanding bilateral investments in education, in 2003 it created a multilateral Catalytic Fund to mobilize additional resources with an early focus on countries without major bilateral donors. In 2006, the FTI’s multilateral Catalytic Fund represented approximately 2% of aid commitments to basic education. Although the number of countries contributing to the Catalytic Fund has increased in recent years, many of the biggest donors are still not participating, and just three countries accounted for over 70% of total pledges in 2008. As a result, the FTI faces a shortfall of $1.2 billion for the coming year, which is more than all the money it has received from donors in the last six years. Although many countries endorsed by the FTI have experienced increases in bilateral basic education funding, their share of overall assistance focused on basic education has not increased, a fact that makes it hard to rule out the possibility that overall aid trends were largely responsible for that growth.

The FTI has recently undertaken a set of internal governance reforms designed to improve its performance, but these changes alone are unlikely to overcome some of the structural challenges it still faces. Without independent capacity for action, more inclusive governance, greater attention to conflict-affected countries and stronger accountability for results the FTI will not be able to mobilize sufficient resources or deliver the results that it was set up to achieve. At the same time, the FTI’s model of requiring and supporting the development of comprehensive national education strategies and seeking to align donor funding around these strategies should be incorporated in any evolution to a Global Fund for Education. Similarly, the FTI’s ambition of aligning bilateral flows along with multilateral funding remains an important objective to ensure that all types of donor funding are being fully leveraged.

A Global Fund for Education should also draw on the successful experience of other innovative global development financing mechanisms. Among the most successful of these new institutions is the Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM). Since its inception, the GFATM has generated commitments of over $20 billion and is now the leading source of external financing for tuberculosis and malaria. One of the keys to the GFATM’s success in resource mobilization has been the strong engagement of both civil society and developing countries as full partners with donors in its governance. Civil society representatives and developing countries have equal standing in decision-making at the global level within the GFATM. As a result, civil society stakeholders have been at the center of the largely successful drive for resource mobilization for the Fund and partner countries are more invested in its success.

Toward a Global Fund for Education

The core mission of the Global Fund for Education should be to mobilize the financing needed to achieve universal quality education. Linking successful early learning with meaningful opportunities for secondary education, the Global Fund for Education should maintain a focus on achieving universal quality basic education for all while also supporting early childhood learning and secondary schooling as part of a comprehensive approach to education. The GFE should be guided by a set of core principles, focused on key objectives, and reflect an evolution of existing mechanisms:

1. Independent Capacity for Action

Independence from any other international institution will be essential to establish the public profile necessary to succeed in this resource mobilization challenge. The independence of the Global Fund to Fight AIDS, Tuberculosis and Malaria has been a key to its success, while the lack of independence of the FTI has been a primary obstacle to its ability to mobilize sufficient resources. An independent Global Fund for Education should still leverage the expertise and commitment of other international institutions, such as UNESCO, UNICEF and the World Bank. Technical experts from these institutions can play an important role in supporting countries both in the development of national strategies and in the effective implementation of these strategies.

2. Inclusive Governance

Inclusive governance will be critical to building a multi-stakeholder constituency that is committed to mobilizing resources. Developing countries, civil society and donor countries should be equal partners in a system in which there is equal representation and the support of each constituency is necessary for major decisions. Such a requirement in the governance structure of the GFE will not only strengthen the internal decision-making process by subjecting it to the scrutiny of diverse perspectives but will also provide external legitimacy and increase the effectiveness of its implementation efforts. Without such inclusiveness, the Global Fund for Education will not be able to succeed in either mobilizing donors to make education a top priority nor in ensuring that these resources are being well-spent in partner countries.

3. Country-Driven Solutions

Developing countries should set the agenda for the best approach for themselves through the development of comprehensive national education strategies. The Global Fund for Education should build on the FTI’s ambition of aligning donor investments around comprehensive national education plans that reflect country-driven solutions. In order to ensure that strategies are truly national—not simply government plans—the Global Fund for Education should mandate that civil society and other non-governmental stakeholders are full partners in the development of these strategies at the national level. Just as inclusive participation at the global level supports effective resource mobilization, ensuring full participation at the national-level supports effective implementation by diverse stakeholders.

4. Accountability for Results

Accountability must be central to the design of the Global Fund for Education. Systems to ensure financial accountability and that money actually reaches the school level and helps students learn are essential to the effectiveness of the Fund. Performance-based disbursement, which connects continued funding with demonstrated results, is the best way to create incentives for recipient countries to deliver on promised results. In addition, key indicators including gains in enrollment, gender equity and student learning outcomes should be included among performance measures. Utilizing improved measures for assessing student learning will be critical to improving completion rates and maximizing the development gains from education. In order to ensure some reasonable predictability of financing, countries that show strong performance should be eligible for extensions of funding over significant periods.

5. Focus on Low-Income and Conflict-Affected States

Given the inevitable limits on the resources of the Global Fund for Education, it is important to establish an allocation principle for distributing funding. First, the eligibility for funding should be limited to low-income countries, or those countries that are eligible for funding under the World Bank’s IDA window. Second, there should be special attention to the challenges of states currently experiencing or emerging from conflict and mechanisms to ensure support for education in these states. Third, the GFE should prioritize those countries categorized as least-developed and that have the most limited national resources. Finally, funding should generally be linked to the level of effort by national governments in supporting education.

6. Leverage and Align Donor Resources

The Global Fund for Education holds enormous promise for mobilizing funding from a diverse array of donors. Just as the Global Fund to Fight AIDS, Tuberculosis, and Malaria has leveraged a two-to-one match of U.S. resources from the rest of the world, the Global Fund for Education could similarly leverage global resources for education. In order to ensure adequate incentives for countries to contribute their fair share, donor board seats should be allocated and adjusted with reference to donor contributions. In addition, there should be a regularized replenishment process built into the initial design that is linked to the overall resource needs for universal education and that encourages long-term commitments by donors. The GFE should also be committed to providing multiple channels for donor assistance, both bilateral and multilateral, as long as these funds are truly aligned with national strategies. While there is a clear need to expand multilateral financing for education far beyond what has been possible to date, it is also important that ongoing bilateral commitments are much better integrated with the objectives of national education strategies.

A Global Fund for Education holds the key to delivering on the world’s commitment to education for all by 2015. Evolving current mechanisms into a more independent, inclusive, and accountable institution can catalyze the resources and performance needed to achieve universal education. Since education is one of the most leveraged of all development investments, establishing a Global Fund for Education would make a major contribution to reducing global poverty, empowering women, and promoting economic growth in low-income countries around the world.

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Policy Brief #174

A nation’s education system is a pillar of its economic strength and international competitiveness. The National Bureau of Economic Research analyzed data from 146 countries, collected between 1950 and 2010, and found that each year of additional average schooling attained by a population translates into at least a two percent increase in economic output. A 2007 World Bank policy research working paper reported similar results. Based on these findings, if the United States increased the average years of schooling completed by its adult population from the current 12 years to 13 years—that is, added one year of postsecondary education—our gross domestic product would rise by more than $280 billion.

The story also can be told by focusing on the returns to education for individuals. The difference in income between Americans who complete high school and those who drop out after 10th grade exceeds 50 percent. Large income differentials extend throughout the continuum of education attainment, with a particularly huge gap occurring between an advanced degree and a four-year college degree.

Although education clearly pays, the education attainment of the nation’s youth has largely stagnated, falling substantially behind that of countries with which we compete. In 1960, the United States led the world in the number of students who graduated from high school. Today young adults in many countries, including Estonia and Korea, exceed their U.S. counterparts in education attainment.

	RECOMMENDATIONS
	America’s economic productivity and competitiveness are grounded in education. Our public schools and our higher education institutions alike are falling behind those of other nations. Four policy proposals offer substantial promise for improving American education, are achievable and have low costs: Choose K–12 curriculum based on evidence of effectiveness. Evaluate teachers in ways that meaningfully differentiate levels of performance. Accredit online education providers so they can compete with traditional schools across district and state lines. Provide the public with information that will allow comparison of the labor market outcomes and price of individual postsecondary degree and certificate programs.

The problem of low education attainment is particularly salient among students from low-income and minority backgrounds. The graduation rate for minorities has been declining for 40 years, and majority/minority graduation rate differentials have not converged. Hispanic and black students earn four-year or higher degrees at less than half the rate of white students.

The economic future of the nation and the prospects of many of our citizens depend on returning the United States to the forefront of education attainment. Simply put, many more of our students need to finish high school and graduate from college.

At the same time, graduation standards for high school and college must be raised. Forty percent of college students take at least one remedial course to make up for deficiencies in their high school preparation, and a test of adult literacy recently given to a random sample of graduating seniors from four-year U.S. institutions found less than 40 percent to be proficient on prose and quantitative tasks.

Barriers to Innovation and Reform

Our present education system is structured in a way that discourages the innovation necessary for the United States to regain education leadership. K-12 education is delivered largely through a highly regulated public monopoly. Outputs such as high school graduation rates and student performance on standardized assessments are carefully measured and publicly available, but mechanisms that would allow these outputs to drive innovation and reform are missing or blocked. For example, many large urban districts and some states are now able to measure the effectiveness of individual teachers by assessing the annual academic growth of students in their classes. Huge differences in teacher effectiveness are evident, but collective bargaining agreements or state laws prevent most school district administrators from using that information in tenure or salary decisions.

Further complicating K-12 reform is the fact that authority for education policy is broadly dispersed. Unlike countries with strong national ministries that can institute top-down reforms within the public sector, education policy and practice in the United States are set through a chaotic network of laws, relationships and funding streams connecting 16,000 independent school districts to school boards, mayors, and state and federal officials. The lack of central authority allows the worst characteristics of public monopolies to prevail—inefficiency, stasis and catering to interests of employees—without top-down systems’ offsetting advantage of being capable of quick and coordinated action.

The challenges to reforming higher education are different. The 6,000-plus U.S. postsecondary institutions have greater flexibility to innovate than do the public school districts—and a motive to do so, because many compete among themselves for students, faculty and resources. However, while output is carefully measured and publicly reported for public K-12 schools and districts, we have only the grossest measures of output for post secondary institutions.

Even for something as straightforward as graduation rates, the best data we have at the institutional level are the proportion of full-time, first-time degree-seeking students who graduate within 150 percent of the normal time to degree completion. Data on critical outputs, including labor market returns and student learning, are missing entirely. In the absence of information on issues that really matter, postsecondary institutions compete and innovate on dimensions that are peripheral to their productivity, such as the winning records of their sports teams, the attractiveness of their grounds and buildings, and their ratio of acceptances to applications. Far more information is available to consumers in the market for a used car than for a college education. This information vacuum undermines productive innovation.

Examining Two Popular Reforms

Many education reformers across the political spectrum agree on two structural and governance reforms: expanding the public charter school sector at the expense of traditional public schools and setting national standards for what students should know. Ironically, the evidence supporting each of these reforms is weak at best.

Charter schools are publicly funded schools outside the traditional public school system that operate with considerable autonomy in staffing, curriculum and practices. The Obama administration has pushed to expand charter schools by eliminating states that don’t permit charters, or capping them, from competition for $4.35 billion in Race to the Top funding. Both President Obama and Education Secretary Arne Duncan have proposed shuttering poorly performing traditional public schools and replacing them with charters.

What does research say about charter schools’ effects on academic outcomes? Large studies that control for student background generally find very small differences in student achievement between the two types of public schools.

For example, on the 2005 National Assessment of Educational Progress (the “Nation’s Report Card”), white, black and Hispanic fourth graders in charter schools performed equivalently to fourth-graders with similar racial and ethnic backgrounds in traditional public schools. Positive findings do emerge from recent studies of oversubscribed New York and Boston area charter schools, which use lotteries to determine admission. But these results are obtained from children whose parents push to get them into the most popular charter schools in two urban areas with dynamic and innovative charter entrepreneurs.

What about common standards? Based on the belief that high content standards for what students should know and be able to do are essential elements of reform and that national standards are superior to individual state standards, the Common Core State Standards Initiative has signed up 48 states and 3 territories to develop a common core of state standards in English-language arts and mathematics for grades K-12. The administration has praised this joint effort by the National Governors Association and Council of Chief State School Officers, made participation in it a prerequisite for Race to the Top funding, and set aside $350 million in American Recovery and Reinvestment Act funding to develop ways to assess schools’ performance in meeting common core standards.

Does research support this approach? The Brown Center on Education Policy at Brookings examined the relationship between student achievement outcomes in mathematics at the state level and ratings of the quality of state content standards in math. There was no association. Some states with strong standards produce high-achieving students, such as Massachusetts, while other states with strong standards languish near the bottom in terms of achievement, such as California. Some states with weak standards boast high levels of achievement, such as New Jersey, while others with weak standards experience low levels of achievement, such as Tennessee.

Four Ideas

For every complex problem there is one solution which is simple, neat, and wrong. — H. L. Mencken

I will avoid Mencken’s approbation by proposing four solutions rather than one. Although education has far too many moving parts to be dramatically reformed by any short list of simple actions, we can start with changes that are straightforward, ripe for action and most promising, based on research and past experience.

Link K-12 Curricula to Comparative Effectiveness

Little attention has been paid to choice of curriculum as a driver of student achievement. Yet the evidence for large curriculum effects is persuasive. Consider a recent study of first-grade math curricula, reported by the National Center for Education Evaluation and Regional Assistance in February 2009. The researchers randomly matched schools with one of four widely used curricula. Two curricula were clear winners, generating three months’ more learning over a nine-month school year than the other two. This is a big effect on achievement, and it is essentially free because the more effective curricula cost no more than the others.

The federal government should fund many more comparative effectiveness trials of curricula, and schools using federal funds to support the education of disadvantaged students should be required to use evidence of effectiveness in the choice of curriculum materials. The Obama administration supports comparative effectiveness research in health care. It is no less important in education.

Evaluate Teachers Meaningfully

Good education outcomes for students depend on good teachers. If we have no valid and reliable system in place to identify who is good, we cannot hope to create substantial improvements in the quality of the teacher workforce.

A substantial body of high-quality research demonstrates that teachers vary substantially in effectiveness, with dramatic consequences for student learning. To increase academic achievement overall and address racial, ethnic and socioeconomic achievement gaps, we must enhance the quality of the teacher workforce and provide children from poor and minority backgrounds with equitable access to the best teachers.

Despite strong empirical evidence for differences in teacher performance—as well as intuitive appeal, demonstrated when we remember our own best and worst teachers—the vast majority of public school teachers in America face no meaningful evaluation of on-the-job performance. A recent survey of thousands of teachers and administrators, spanning 12 districts in four states, revealed that none of the districts’ formal evaluation processes differentiated meaningfully among levels of teaching effectiveness, according to a 2009 report published by The New Teacher Project. In districts using binary ratings, more than 99 percent of teachers were rated satisfactory. In districts using a broader range of ratings, 94 percent of teachers received one of the top two ratings, and less than one percent were rated unsatisfactory. In most school districts, virtually all probationary teachers receive tenure—98 percent in Los Angeles, for example—and very small numbers of tenured teachers are ever dismissed for poor performance.

Conditions of employment should be restructured to recruit and select more promising teachers, provide opportunities for them to realize their potential, keep the very best teachers in the profession, and motivate them to serve in locations where students have the highest needs. The precondition for these changes is a valid system of evaluating teachers.

The federal government should require school districts to evaluate teachers meaningfully, as a condition of federal aid. Washington also should provide extra support to districts that pay substantially higher salaries to teachers demonstrating persistently high effectiveness and serving in high-needs schools. But, because many technical issues in the evaluation of on-the-job performance of teachers are unresolved, the federal government should refrain, at least for now, from mandating specific evaluation components or designs. The essential element is meaningful differentiation—that is, a substantial spread of performance outcomes.

Accredit Online Education Providers

Traditional forms of schooling are labor-intensive and offer few economies of scale. To the extent that financial resources are critical to education outcomes, the only way to improve the U.S. education system in its current configuration is to spend more. Yet we currently spend more per student on education than any other country in the world, and the appetite for ever-increasing levels of expenditure has been dampened by changing demographics and ballooning government deficits. The monies that can be reasonably anticipated in the next decade or two will hardly be enough to forestall erosion in the quality of the system, as currently designed. The game changer for education productivity will have to be technology, which can both cut labor costs and introduce competitive pressures.

Already, at the college level, online education (also termed “virtual education” or “distance learning”) is proving competitive with the classroom experience. Nearly 3.5 million students in 2006—about 20 percent of all students in postsecondary schools and twice the number five years previously—were taking at least one course online, according to a 2007 report published by the Sloan Consortium.

In K-12, online education is developing much more slowly. But, the case for online K–12 education is strong—and linked to cost control. A survey reported on page one of Education Week (March 18, 2009) found the average per-pupil cost of 20 virtual schools in 14 states to be about half the national average for a traditional public school.

Local and state control of access to virtual schooling impedes the growth of high-quality online education and the competitive pressure it contributes to traditional schooling. Development costs are very high for virtual courseware that takes full advantage of the newest technologies and advances in cognitive science and instruction—much higher than the costs for traditional textbooks and instructional materials. These development costs can only be rationalized if the potential market for the resulting product is large. But, states and local school districts now are able to determine whether an online program is acceptable. The bureaucracy that may be most disrupted by the introduction of virtual education acts as gatekeeper.

To overcome this challenge, K-12 virtual public education would benefit from the model of accreditation used in higher education. Colleges and universities are accredited by regional or national bodies recognized by the federal government. Such accrediting bodies as the New England Association of Schools and Colleges and the Accrediting Council for Independent Colleges and Schools are membership organizations that determine their own standards within broad federal guidelines. Once an institution is accredited, students residing anywhere can take its courses, often with the benefit of federal and state student aid.

Federal legislation to apply this accreditation model to online K-12 education could transform public education, especially if the legislation also required school districts to cover the reasonable costs of online courses for students in persistently low-performing schools. This approach would exploit—and enhance—U.S. advantages in information technology. We are unlikely to regain the international lead in education by investing more in business as usual; but we could leapfrog over other countries by building new, technology-intensive education systems.

Link Postsecondary Programs to Labor Market Outcomes

On a per-student basis, the United States spends two and one-half times the developed countries’ average on postsecondary education. Although our elite research universities remain remarkable engines of innovation and are the envy of the world, our postsecondary education system in general is faltering. The United States used to lead the world in higher education attainment, but, according to 2009 OECD data, is now ranked 12th among developed countries. We have become a high-cost provider of mediocre outcomes.

Critical to addressing this problem is better information on the performance of our postsecondary institutions. As the U.S. Secretary of Education’s Commission on the Future of Higher Education concluded in 2006:

Our complex, decentralized postsecondary education system has no comprehensive strategy, particularly for undergraduate programs, to provide either adequate internal accountability systems or effective public information. Too many decisions about higher education—from those made by policymakers to those made by students and families—rely heavily on reputation and rankings derived to a large extent from inputs such as financial resources rather than outcomes. Better data about real performance and lifelong working and learning ability is absolutely essential if we are to meet national needs and improve institutional performance.

Ideally, this information would be available in comparable forms for all institutions through a national system of data collection. However, achieving consensus on the desirability of a national database of student records has proved politically contentious. One of the issues is privacy of information. More powerful is the opposition of some postsecondary institutions that apparently seek to avoid accountability for their performance.

The way forward is for Congress to authorize, and fund at the state level, data systems that follow individual students through their postsecondary careers into the labor market. The standards for such state systems could be recommended at the federal level or by national organizations, to maximize comparability and eventual interoperability.

The public face of such a system at the state level would be a website allowing prospective students and parents to compare degree and certificate programs within and across institutions on diverse outcomes, with corresponding information on price. At a minimum, the outcomes would include graduation rates, employment rates and average annual earnings five years after graduation. Outcomes would be reported at the individual program level, such as the B.S. program in chemical engineering at the University of Houston. Price could be reported in three ways: advertised tuition,average tuition for new students for the previous two years, and average tuition for new students for the previous two years net of institutional and state grants for students eligible for federally subsidized student loans. These different forms of price information are necessary because institutions frequently discount their advertised price, particularly for low-income students. Students and families need information about discounts in order to shop on the basis of price.

Many states, such as Washington, already have data that would allow the creation of such college search sites, at least for their public institutions. The primary impediment to progress is the federal Family Educational Rights and Privacy Act (FERPA), which makes it very difficult for postsecondary institutions to share data on individual students with state agencies, such as the tax division or unemployment insurance office, in order to match students with information on post-graduation employment and wages. Congress should amend FERPA to allow such data exchanges among state agencies while maintaining restrictions on release of personally identifiable information. To address privacy concerns, Congress also should impose substantial penalties for the public release of personally identifiable information; FERPA currently is toothless.

Creating a higher education marketplace that is vibrant with transparent and valid information on performance and price would be a powerful driver of reform and innovation. Easily addressed concerns about the privacy of student records and political opposition from institutions that do not want their performance exposed to the public have stood in the way of this critical reform for too long. America’s economic future depends on returning the United States to the forefront of education attainment. Simply put, many more of our students need to finish high school and graduate from college. Investments in improved data, along with structural reforms and innovation, can help restore our leadership in educational attainment and increase economic growth.

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Policy Brief #181

The new normal for local, state and federal governments is fiscal austerity. Although President Obama supported education during his State of the Union address and in his budget proposal to Congress, cash-strapped localities and states—which foot most of the bill for educating America’s children—may have to balance their budgets with cuts to schools and teachers. The recession exposed a long-developing structural imbalance between public expenditure versus raising the revenue for public services. Especially on education, reality has set in, with a vengeance.

Cutting public expenditure is not necessarily a bad thing. There are, however, some activities that have become so fundamentally governmental and so critically important to the nation’s future that they require special care during a period of severe budget trimming. Education is one such example.

The Brown Center on Education Policy at Brookings has recently developed proposals to ensure that federal investments in education have impact. These proposals present the dual advantage of low costs of implementation at the federal level coupled with the promise of considerable leverage at the state and local level. Two of those proposals are presented in this brief: increasing digital and virtual education and expanding consumer information on higher education.

	RECOMMENDATIONS
	One important path to individual opportunity is higher levels of educational attainment. The U.S. economy is marked by an increasing economic divide between those who are educated and those who are not. In a time of fiscal austerity, every federal dollar invested in education must have a return. Congress should: Increase digital and virtual education. In reauthorizing the No Child Left Behind Act, provide that parents of economically disadvantaged students who are eligible for federal Title I funding should be able to direct that the funding associated with their child be spent to cover the costs of enrolling their child in virtual courses or in a virtual school.   Expand consumer information in higher education. Amend the Higher Education Act (HEA) to require that states that receive federal funds for statewide longitudinal data systems provide information on completion rates, employment levels, and annual earned income for each degree or certificate program and for each degree-granting institution that operates in the state. This information could be disseminated on the Internet.

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Policy Brief #184

The Leahy-Smith America Invents Act (AIA) approved in September 2011 constitutes the most significant overhaul of the American patent system in decades. This policy brief examines some key patent law changes and studies mandated by the legislation, and provides recommendations for companies on successfully navigating the new landscape. [Editor's Note: the legislation was signed into law by President Obama on September 16, 2011.]

Perhaps most notably, the new law will move the United States away from a “first to invent” system and closer to the “first to file” approach used in much of the rest of the world. Other important changes include a new proceeding in the U .S. Patent and Trademark Office (PTO) for third-party challenges to the validity of a recently issued patent, an expanded mechanism for a third party to provide information to the PTO that could be used to narrow or eliminate claims in a pending patent application being prosecuted by a commercial rival, and the introduction of a new, broadly applicable patent infringement defense based on prior commercial use.

	RECOMMENDATIONS
	Under the “first to file” provision of the AIA, companies should be more careful when producing pre-filing disclosures for venues such as conferences and trade shows, with the understanding that under the AIA those disclosures may play a much larger role than in the past with respect to patentability of the associated IP.   Under the AIA, rights to an invention prior to a filing date will depend more on the history of relevant disclosures and less on nonpublic, internal company documents such as laboratory notebooks. All companies—large and small—should consider how to modify their procedures for protecting, evaluating, and filing patents on their inventions accordingly.   The AIA provides a grace period during which inventors can disclose their invention without losing the right to patent it, but leaves uncertainty regarding the definition of “disclosure”. Companies should carefully monitor case law and PTO actions that will undoubtedly help clarify this issue in the coming years.   Companies should reevaluate the extent and manner to which they use provisional patent applications to preserve IP rights.   In light of the increased number of mechanisms available to challenge the validity of pending and issued patents, companies engaged in patent prosecution should reconsider the tradeoffs of performing their own thorough prior art searches during patent prosecution. By finding and disclosing relevant prior art to the PTO, companies may reduce the likelihood that the disclosed prior art will be used successfully against them in future validity challenges.

In addition, there are several other aspects of the AIA that do not change patent law, but may have far reaching consequences. For example, an AIA mandated study by the Government Accountability Office promises to furnish vitally important information on the economic impact of patent litigation by non-practicing entities, and will almost certainly influence future patent legislation. Under the AIA, the hurdles small businesses face in protecting their patents internationally will also receive attention through a PTO study.

It will take many years to develop a mature body of case law and legal scholarship on the full impact of the AIA. What is clear today is that it will profoundly impact the ways that patents are filed, prosecuted, and litigated in the coming years. Companies and other entities that retool their patent strategies to address these changes will be in a much stronger position to maximize the value of their intellectual property (IP) portfolios.

First Inventor to File

One of the most significant components of the AIA concerns the move from a first to invent system to a first to file system. Under this provision, which takes effect 18 months after the AIA is enacted into law, an inventor may win the race to create the invention but lose the race to file the corresponding patent application, and thus lose the right to patent the invention.

However, the AIA includes an important exception in the form of a grace period allowing an inventor or others who obtained information from the inventor to make disclosures regarding the invention in advance of filing a patent application, as long as the application is filed within one year after the first disclosure. Some form of grace period has been a feature of the U.S. patent landscape since the 19th century, and allows an inventor time to examine the commercial practicability of the invention, engage in discussions with potential partners and customers and secure the resources necessary to draft a patent application.

The inclusion of both first to file language and a grace period in the new patent law creates what could amount to a hybrid between first to invent and first to file. For example, in the case of two inventors who independently disclose the same invention immediately following its conception, both the pre-AIA “first to invent” law and the post- AIA “first to file” law can favor the earlier discloser, who is by definition the earlier inventor if the disclosure is truly immediate. However, in the absence of disclosure in advance of a patent filing, pre-AIA law favors the earlier inventor, while the AIA “first to file” provision will favor the earlier filer.

As a result, under the AIA inventors and the companies that employ them must think much more carefully about how to manage pre-filing disclosures. Put simply, silence can be costly. To the extent that a company remains quiet about an invention while contemplating whether or not to pursue patent protection, it stands exposed to the possibility of losing the right to do so if a competitor files first. A company wishing to avoid this risk faces the additional challenge that the AIA does not specifically define what constitutes “disclosure” sufficient to preserve patentability. The use of provisional patent applications, which offer advantages including a more formalized way to document the dates and content of disclosures than activities such as presentations at trade shows, should also be reevaluated in light of the AIA.

Some companies may find themselves targeted by competitors’ disclosures engineered specifically to foreclose patent opportunities. To reduce vulnerability to such attacks, companies can engage in preemptive “defensive” disclosures, but must be mindful of the impacts of these disclosures on their own patent filing deadlines.

In addition, employees engaged in intellectual property creation can be made aware that there is an increased need to pursue timely steps to secure patent protection on new inventions. Internal company systems for documenting, reporting, and rewarding innovations can be modified to better match the provisions of the AIA. Companies should also consider the budgetary impact of the AIA in terms of the amount and timing of expenditures.

It is important to recognize that the AIA leaves substantial differences between the patent laws in the United States and those in other countries. For example, unlike in the United States both pre- and post-AIA, in Europe an inventor’s own public disclosures in the year prior to a patent filing can be invalidating prior art. To the extent that for financial or other reasons a company needs to defer filing a U.S. patent application to a future date, in one sense the systems have actually moved farther apart. This is due to what amounts to a newly incentivized option to buy some measure of protection in the U.S. by disclosing in advance of a filing at the cost of losing patentability in Europe. This requires careful consideration of disclosure plans.

Best Mode and Invalidity

The AIA does not alter the requirement that a patent application must “set forth the best mode contemplated by the inventor of carrying out” the invention. However, somewhat paradoxically, for proceedings commenced on or after the date of its enactment, the AIA eliminates the alleged failure to follow this requirement as grounds for asserting invalidity.

This change has the potential to alter a fundamental compact between an inventor and the government that is at the core of the patent system, which grants a patent holder the right to exclude others from practicing an invention in exchange for disclosing the best mode contemplated by the inventor. The AIA eliminates the failure to make this disclosure as grounds for asserting invalidity. Some inventors may view this as creating an incentive to intentionally withhold information on how to best carry out an invention.

Supplemental Examination

The AIA creates a new supplemental examination procedure, effective one year after enactment, allowing a patent owner to request that the PTO perform a supplemental examination to “consider, reconsider, or correct information believed to be relevant” to a patent. Subject to certain exceptions, this process can prevent a patent from being “held unenforceable on the basis of conduct” relating to this information.

The supplemental examination provision is particularly relevant to inequitable conduct allegations that are frequently raised by defendants in patent litigation. Defendants often try to identify information relating to the prosecution of patents that have been asserted against them that, in their view, indicates inequitable conduct rendering the patents unenforceable. Supplemental examination provides a way for a patent owner to preemptively attempt to inoculate a patent against such allegations.

Pre-Issuance Submissions

Beginning one year after the AIA is enacted, third parties will have the option of providing pre-issuance submissions of prior art accompanied by “a concise description of the asserted relevance of each submitted document” to the PTO in connection with a pending application. Such submissions can be used, for example, to attempt to prevent or hinder the issuance of a patent that the submitting party views as detrimental to its interests. However, to the extent that a patent examiner finds the arguments provided through a pre-issuance submission unconvincing, the resulting patent might actually be strengthened, not weakened.

Prior Commercial Use Defense to Infringement

Since 1999, alleged infringers of business method patents have had access to a “prior use” provision that can constitute a defense against infringement, provided certain conditions are met. For patents issued on or after the date of enactment of the AIA, the prior use defense can be applied, subject to certain exceptions, to patent infringement claims covering a much broader range of subject matter “consisting of a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process.”

Post-Grant Review Proceedings

Post-grant review proceedings are conducted through the PTO in order to reconsider alreadyissued patents, and can lead to the confirmation, cancellation, withdrawal, or modification of patent claims. T he phrase “post-grant review” is sometimes used to broadly refer to multiple types of post-grant proceedings including the ex parte and inter partes reexaminations available under pre- AIA patent law, and sometimes to more narrowly refer to a specific new review option created by the AIA (in fact, in the AIA itself the phrase is used in both the broad and narrow meanings).

Under pre-AIA patent law, a requester wishing to initiate an ex parte or inter partes reexamination provides the PTO with one or more published prior art references and an explanation why those references, in the view of the requester, raise a “substantial new question of patentability.” The PTO can either grant or deny the request; if the request is granted, an ex parte reexamination proceeds without any further input from the requester (unless the requester is the patent owner), while in an inter partes reexamination the requester participates during the reexamination process.

Both types of reexaminations have proven to be highly effective ways for third parties to challenge the validity of issued patent claims, often in tandem with or as a lower cost alternative to challenges adjudicated through the Federal court system and the International Trade Commission. According to data released by the PTO in June 2011, 92% of the requests for ex parte reexamination filed since the proceeding was introduced in the 1980s have been granted, and fewer than one quarter of patents subject to ex parte reexamination have emerged without any claim changes or cancellations. Inter partes reexamination was introduced in 1999; since then 95% of inter partes reexamination requests have been granted, and only 13% of patents subject to inter partes reexamination have survived with all claims confirmed.

The AIA leaves ex parte reexamination in place, but a year after enactment will replace inter partes reexaminations with “inter partes review” proceedings adjudicated by a newly renamed Patent Trial and Appeal Board within the PTO. The pre-AIA threshold to grant an inter partes reexamination of a “substantial new question of patentability” will be replaced with a higher threshold requiring that the PTO find a “reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.” This higher standard will also be applied to inter partes reexaminations filed during the transition period immediately following enactment of the AIA and preceding the shift to inter partes review. Inter partes review requests must be filed no earlier than nine months (and in some cases longer) after the grant or reissue of the patent being challenged.

Additionally, the AIA creates a new “post-grant review” process through which a petitioner who is not the patent owner can request the cancellation as invalid of one or more claims of a patent granted or reissued within the previous nine months. The PTO can authorize a post-grant review if the information presented by the petitioner, “if not rebutted, would demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable.” Under the AIA this threshold can be satisfied not only using traditional invalidity arguments based on settled law, but also by a petition that raises “a novel or unsettled legal question that is important to other patents or patent applications.” This language amounts to an invitation to address “novel or unsettled” legal questions through the PTO, raising a number of issues relating to respective roles the courts and the PTO will play in resolving them.

For companies engaged in or threatened with patent litigation or those that simply want to launch a pre-emptive strike at patents held by a competitor, post-grant review introduces a new way to challenge patents. The AIA contains estoppel and other provisions intended to prevent a requester from having two bites at the apple by challenging a claim in both a PTO post-grant (or inter partes) review and a civil action or International Trade Commission proceeding. However, in some circumstances these provisions may turn out to be largely toothless, since patent cases often involve multiple defendants who form joint defense groups and engage in coordinated attacks on patent validity. There is nothing in the AIA preventing one defendant from challenging claim validity through a post-grant or inter partes review and another from simultaneously or later asserting invalidity of the same claims in the federal court system or at the International Trade Commission.

The AIA also expressly provides that, starting one year after enactment, statements by a patent owner filed in a federal court or with the PTO regarding claim scope can be cited to the PTO for consideration in ex parte, inter partes, and post-grant review proceedings to determine claim meaning.

Other Provisions

In addition to codifying many changes to patent law, including those described above, the AIA contains other provisions that will likely have a significant impact on the operation of the PTO and on future patent legislation. Several of these provisions are discussed below.

Fee Diversion

One of the most controversial aspects of the patent reform debate has pertained to the practice of fee diversion, which arises because the PTO takes in an amount in fees that exceeds its appropriation. The Senate version (S. 23) of the AIA passed in March 2011 provided for the creation of a fund that would have allowed the PTO roll over excess funds into future fiscal years. However, in the House version (H.R. 1249) passed in June 2011 that became the template for the final legislation, this provision was removed and replaced with a newly established “Patent and Trademark Fee Reserve Fund” to be held in the treasury and into which excess fees will be deposited. This approach does not cleanly put the fee diversion issue to rest, and the details of how the reserve fund will be managed in future years remain unclear.

Studies Mandated by the AIA

The AIA mandates several studies, including one to be performed by the Government Accountability Office to examine the “consequences of litigation by non-practicing entities, or by patent assertion entities,” to gather data, among other things, on the volume of litigation, the number of cases found to be without merit, the costs to patent holders, licensees, licensors, and inventors, the economic impact of this litigation, and the “benefit to commerce, if any, supplied by non-practicing entities or patent assertion entities that prosecute such litigation.”

“Non-practicing entities” and “patent assertion entities” are terms that are sometimes used to describe companies that have little or no business other than the assertion of patents. Patent litigation involving these entities has grown significantly in recent years, in large part due to the potential for large judgments and settlements. The GAO study provides an opportunity for an unbiased examination of a significant aspect of the litigation environment, and is likely to produce information that will be valuable in drafting future patent legislation.

The AIA also mandates that the PTO perform a study on international patent protections for small businesses. T he financial burden of obtaining international patent protection is particularly heavy for small companies due to the combined costs of performing many different country-specific filings. As a result, many small companies either avoid foreign filings altogether, or perform foreign filings only for a small subset set of countries and only for the patents that they believe to be the most valuable. A goal of the AIA-mandated study is to determine whether to recommend establishing a loan or grant program to help small businesses defray the costs associated with international patent protection.

It is likely the study will conclude that such a program would be beneficial to small businesses, but it is just as likely that implementing it will prove to be extremely difficult in the current budgetary environment. However, the study may influence future patent legislation in the United States and abroad, and may be useful in multilateral discussions regarding international patent protection.

Conclusion

The AIA will reshape how United States patents are obtained, challenged, and valued in acquisition, licensing, and litigation settlement discussions. Companies that overhaul their intellectual property strategies in light of the provisions of the AIA will be in a better position to maximize the value of their patent portfolios and to strengthen their options in patent litigation matters.

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EXECUTIVE SUMMARY

A few influential Americans have begun to suggest that the United States should reduce its long-standing security commitment to Taiwan. Some say that Taiwan itself has chosen to improve relations with China, so the island has less need for advanced U.S. weaponry and a defense pledge. Others argue that Washington, to avoid unnecessary tensions with a rising China, should accommodate Beijing on the most neuralgic issue—Taiwan.

The first group overstates the limits of the ongoing Taiwan-China détente. True, progress has been made in normalizing, liberalizing, and institutionalizing the economic relationship. But, to the disappointment of many Chinese, none has occurred on political and security issues, because the Taiwan public is not ready to go there and serious conceptual differences exist on how to get there anyway. So the prospects for cross-Strait relations in the near-term are for modest, incremental progress only, or a stall.

The second group misunderstands the benefits and costs of a significant American accommodation to China regarding Taiwan (e.g. by sharply cutting back arms sales). In fact, Washington has frictions with China on a growing list of issues. Conceding to Beijing on Taiwan will not help us elsewhere. Moreover, our friends and allies (e.g. Japan and Korea) will worry that the United States might sacrifice their interests next for the sake of good relations with China. Finally, the primary reason China has failed to incorporate Taiwan on its terms is not U.S. arms sales but because its negotiating position is unacceptable to the Taiwan public.

As China rises and seeks to reshape East Asia more to its liking, how the United States responds will be a critical variable. It needs the right mix of accommodation and firmness. Giving way on Taiwan will neither pacify Beijing nor assure our allies.

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Introduction

Should the United States abandon Taiwan? Until recently, even to pose such a question would have been unthinkable in Washington. While the U.S. relationship with Taiwan may have had its ups and downs over the past six decades, but the strong American commitment has endured. But now, individuals who previously served in senior positions in the U.S. government are calling it into question. Theirs is not a modest proposal, and it deserves careful examination.

Some observers believe that Taiwan has become a strategic liability. They remind us that China regards the settlement of the Taiwan problem as its internal affair, yet the United States continues to provide the island with advanced weaponry and at least an implicit pledge to come to its defense. They echo Chinese diplomats who argue that our arms sales are the major obstacle to good U.S.-China relations. (These diplomats also assert that U.S. arms sales both discourage Taipei to negotiate seriously with Beijing and encourage Taiwanese politicians who have separatist agendas.) Therefore, it is argued, the United States needs to reconsider fundamentally its security support for Taiwan.

The most prominent voice for this point of view is Zbigniew Brzezinski, Jimmy Carter’s national security adviser. He argues that the hostility that arms sales foster in Beijing precludes whatever strategic cooperation a declining United States can secure from a rising China. Moreover, he says, “it is doubtful that Taiwan can indefinitely avoid a more formal connection with China,” and points to some version of the unification formula Beijing used for Hong Kong as a possible basis. That in turn would end the island’s need to depend on the United States for its security.[1] Others in this camp, more or less, include retired admiral Bill Owens, retired ambassador Chas Freeman, Charles Glaser of George Washington University, and the members of a policy panel assembled by the Miller Center of the University of Virginia.[2]

To make the conversation even more interesting, there are two other versions of this abandonment idea, ones that start with how Taiwan has changed since 2008:

• At least one conservative Congressman, a long-time supporter of Taiwan, believes that Taiwan was now working with an “autocratic China,” and since he opposes autocracy, the island’s government no longer deserved his support.[3] That is, Taiwan has abandoned U.S. values, which is bad, so he has abandoned Taiwan.
   
• A Portland State University scholar has argued that Taiwan seems to have decided that its own best interests require it to accommodate to China and rely much less on the United States (as Finland accommodated the Soviet Union during the Cold War). But in his view, this is good for Washington because it eliminates a long-time burden.[4]  And a Taiwan scholar recently argued that it was in the island’s own interest to get out of the middle of the China-U.S. rivalry.[5]

In the abstract, it should not be surprising that some Americans are rethinking U.S. support for Taiwan. We live in a new world. China’s power and international role are growing. It is in the interest of the United States to maximize areas of cooperation and mutual benefit with Beijing where possible, even as we demonstrate firmness when it overreaches (as it has). It is not in the U.S. interest to act in ways that lead Chinese leaders to conclude that America pursues a policy of containment. So, this logic goes, perhaps Washington should end commitments that are so offensive to China that it will not cooperate with the United States on projects of strategic value to us. Moreover, as the People’s Liberation Army (PLA) becomes more capable, America may find it harder operationally to honor its commitments to Taiwan, even if it wished to do so.

Taiwan Shifts Strategy

To sort through these competing ideas, it is necessary to understand how U.S.-China-Taiwan relations have changed in the last five years and what it means for U.S. policy.

For twenty-five years, Taiwan has faced a serious dilemma. On the one hand, many Taiwan companies benefit from investing in China to produce goods for the Chinese and international markets. On the other hand, China wishes to end Taiwan’s separate political status on terms similar to that used for Hong Kong, which most Taiwan people oppose. From around 1995 to 2008, Taiwan’s response to China’s political goals was to emphasize the island’s sovereignty, which only led Beijing to fear that Taiwan’s leaders intended to create a totally independent country. China in turn built up military capabilities to deter what it feared, which only made Taiwan more anxious. Washington worried that this action-reaction spiral might lead to war, and it periodically opposed some of Taipei’s initiatives.

Ma Ying-jeou won Taiwan’s 2008 presidential election by articulating a different vision: that the island could better preserve its prosperity, freedom, dignity, and security by engaging China rather than provoking it. Engagement would focus first on enhancing economic cooperation, thus avoiding contentious and unproductive political arguments. Expanding business ties would yield concrete benefits for both sides of the Taiwan Strait. Opening Taiwan universities to Mainland students would fill out enrollments and expose Chinese young people to a democratic society. In short, Ma believed, Taiwan could give China such a large stake in peace that it would not dare to risk that stake by coercing the island into submission. He made significant progress during his first term in removing obstacles to business and liberalizing trade, most notably in reaching an Economic Cooperation Framework agreement with China in 2010, the first step toward creating a free-trade area. Taiwan bounced back fairly quickly from the global economic crisis and had 4 percent growth in 2011. A growing stream of Chinese tourists buoyed some sectors of the Taiwan economy, and the number of Mainland students grew steadily.

Ma had another reason for engaging China: the United States. Taipei’s relations with Washington had suffered before 2008 because U.S. officials feared Taiwan’s political initiatives would spark a Chinese over-reaction, creating a conflict that might require American intervention. The reduction of tensions that Ma’s policies brought about calmed Washington’s fears and increased U.S. confidence that Taiwan’s intentions were constructive. The Bush and Obama administrations responded by improving U.S.-Taiwan relations, by approving three large arms-sales packages and extending other benefits.

Yet Ma’s China policy was not a total accommodation to Chinese wishes. Even though Beijing in 2009 exerted pressure on Taiwan to move toward political and security talks, Ma pushed back, and for good reason. The Taiwan public was not yet ready to support them, particularly the approximately 25 percent who retain the goal of total independence. In any case, there were serious conceptual differences between the two sides, specifically whether Taiwan was a sovereign entity for purposes of cross-Strait relations and the island’s international role. On the security side, China continued to build up its military capabilities relevant to Taiwan—particularly ballistic and cruise missiles. According to one think-tank’s analysis, an intensive missile barrage by the PLA can now ground Taiwan’s air force in the very early stages of a conflict, and Taiwan’s current defense strategy depends on its aircraft getting off the ground.[6] So Ma has spurned Chinese proposals for a peace accord because he does not see how it would improve Taiwan’s security, and his caution has persisted to this day.

In effect, Ma has pursued a mixed or hedging strategy toward China: engage it in areas that both benefit Taiwan and encourage Chinese restraint (economics and education); deflect Beijing on proposals that are not in the island’s interests (politics and security); and preserve a good relationship with the United States (to guard against the worst). A significant part of the Taiwan public—known as the Green Camp—was not happy with Ma’s mix of engagement and firmness. They feared he had put the island on a slippery slope to subordination and unification on China’s terms. The Greens would have preferred more firmness and less engagement. Yet so far, Ma’s strategy has the backing of the majority of island’s public, usually known as the Blue Camp. In the last election apparently, around 55 percent of voters approved of his approach while 45 percent remained skeptical or deeply opposed. 

Back to the Question of Abandonment

The fact that Ma is hedging the island’s bets should be reassuring to Americans who worry that Taiwan is, in effect, “abandoning the United States” for the sake of relations with China. Such strategic appeasement would only be happening if Taipei were willing to concede to Beijing on political and security matters. Yet Taiwan has been unwilling to abandon its claim that it is a sovereign entity and accept a solution similar to that applied to Hong Kong. Instead, it asserts what Ma calls “the sovereignty of the Republic of China.” Moreover, Taipei sees a continuing need for a deterrent against China’s use of its growing military capabilities. Even as it sees the value of enhancing Beijing’s stake in peace, it does not fully trust statements of peaceful intentions. And it is certainly not prepared to terminate its special security relationship with the United States.[7]

The more difficult question is whether the United States, for the sake of its own relationship with China, should, in effect, abandon Taiwan. China believes that U.S. political and security support for Taiwan is the primary reason it has not achieved its unification goal, because it fortifies the confidence of the island’s leaders that they can get away with refusing to negotiate on PRC terms. So Beijing believes that if it could induce Washington to end arms sales to Taiwan’s military, drop even an implicit commitment to defend the island if attacked, and support unification, its problem would be solved. So China would be very pleased if the United States abandoned Taiwan, and has suggested that if only Washington ended arms sales, U.S.-China relations would be problem free.

American analysts have offered several compelling reasons why the United States should not dissociate itself from Taiwan as long as Taiwan desires American support:[8]

• Although Taiwan has at times been the most important source of U.S.-China conflict, it is not the only one. For example, Beijing’s goals in East Asia are not limited to bringing the island back into the PRC fold. In addition, it seeks to expand its security perimeter away from its eastern and southern coast, where it was for decades. That in turn has meant that the PLA navy and air force are operating increasingly in the traditional domain of U.S. and Japanese forces.[9] Removing Taiwan as a problem would in no way end or reduce this mutual impingement; it would only change its location. Taiwan aside, Beijing would still regard American “socialization” as negative.
   
• U.S. allies and partners—Japan, the Republic Korea, and others not necessarily in the Asian region—have have much at stake in Washington’s future approach to Taiwan. Simply put, a United States that would abandon Taiwan could abandon them. Of course, there may be hypothetical reasons why America might withdraw support that stem from Taiwan’s policies rather than its own commitment. So the reasons for any abandonment would be important. But the fear remains.
   
• Whatever China says, U.S. arms are actually not the reason that Beijing has been unable to bring Taiwan “into the embrace of the Motherland.” More to the point, China has not been able to persuade Taiwan’s government and public to accept its formula, which is called “one country, two systems” and was the one used for Hong Kong. If China were to make an offer that was actually to Taiwan’s liking, it would not refuse because of U.S. arms sales. Of course, a weak and friendless Taiwan might conclude that it had no choice but to settle on whatever terms it could extract. But that is not an outcome to which Washington should be a party (nor is it really in China’s interest to gain Taiwan through intimidation).
   
• Finally, how a status quo United States and a reviving China cope with each other—their key foreign policy challenge for the rest of the century—will be played out over the next few decades in a series of test cases. North Korea, maritime East Asia, and Iran are a few of them. Taiwan is another. While active U.S. opposition to Taiwan’s unification with the Mainland would understandably lead Beijing to infer that our intentions are hostile across the board, supporting Beijing’s approach when Taipei objects would be a serious demonstration of weakness.

Should the United States concede to China on Taiwan, the lessons that Beijing would learn about the intentions of the United States would likely discourage its moderation and accommodation on other issues like Korea or maritime East Asia; in that respect, America’s friends and allies are right. Continuity of U.S. policy toward Taiwan will not guarantee that China’s actions in other areas will support the status quo, but it increases the likelihood that it will. Conversely, a China that addresses its Taiwan problem with creativity and due regard to the views on the island says something positive about what kind of great power the PRC will be. A more aggressive approach, one that relies on pressure and intimidation, signals reason for concern about its broader intentions. In this regard, Taiwan is the canary in the East Asian coal mine.

A Slippery Slope?

Even if Taipei does not make a proactive strategic decision to appease Beijing, and even if Washington does not seek to curry Chinese favor by sacrificing Taiwan’s interests, there remains the possibility that Taiwan might undermine itself through inattention or neglect. That is, Taiwan might assume that Beijing’s intentions are so benign that it is prepared to accept some version of the status quo over the long term. Yet China has a different objective—ending Taiwan’s de facto independence more or less on its terms—and it may not have infinite patience. The danger is, therefore, that a frustrated China might seek to exploit the power asymmetry between the two sides of the Strait and intimidate Taiwan into accepting “an offer it can’t refuse.”

So what can Taiwan do to forestall that day? The first thing is to not create the impression in Beijing that the door on unification is closing forever—which Taiwan is currently doing. In addition, there are things it can do at the margin to strengthen itself and therefore increase the confidence needed to resist PRC pressure.

• Economically, sustain the island’s competitiveness in shifting to a knowledge-based economy, and by liberalizing its economic ties with all its major trading partners, not just China. This will require eliminating some protectionist barriers, but the structural adjustment thus created will work to Taiwan’s benefit.
   
• Politically, reform the political system so that it does a better job of addressing the real challenges that Taiwan faces (rather than focusing on relatively superficial issues).
   
• Also politically, foster a clearer sense of what it means to say that Taiwan or the ROC is a sovereign entity, not just for its role in the international system but also regarding cross-Strait relations.
   
• Militarily, enhance the deterrent capabilities of Taiwan’s armed forces in ways that raise the costs and uncertainties for Beijing if it were ever to mount an intimidation campaign.

None of these forms of self-strengthening will be easy. But they will buoy Taiwan’s psychological confidence and reduce the chances of PRC pressure in the first place.

Because the United States has an interest in China approaching its Taiwan “test case” in a constructive manner—that is, avoiding intimidation and accommodating Taiwan’s concerns—it should help Taiwan where it can to improve its odds. The most obvious ways are economically, by drawing Taiwan into the circle of high-quality liberalization, and militarily, by supporting innovative and cost-effective ways to enhance deterrence.

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Missouri's population is spreading out, adding to the costs of providing services and infrastructure across the state, according to a new study released today by the Brookings Institution Center on Urban and Metropolitan Policy.

The 84-page study, Growth in the Heartland: Challenges and Opportunities for Missouri, reports that Missouri's population is quickly dispersing, with smaller metropolitan areas experiencing some of the state's fastest growth and residency in unincorporated areas on the rise. Though new residents and jobs fueled prosperity in the 1990s, the report finds that growth has slowed in the past year, and suggests that the state's highly decentralized development patterns could become troublesome as Missouri contends with a slowing economy and serious budget deficits.

Sponsored by the Ewing Marion Kauffman Foundation, Growth in the Heartland provides the most comprehensive and up-to-date body of research and statistics yet assembled analyzing the direction, scope, and implications of development in Missouri. In addition to assessing the consequences of those trends for the state's fiscal health, economic competitiveness, and quality of life, the report addresses the potential role of state and local policy in shaping those trends in the future. Specific findings of the report conclude that:

• Growth in the Columbia, Springfield, Joplin, and St. Joseph metropolitan areas strongly outpaced that of the Kansas City and St. Louis metropolitan areas in the 1990s. Altogether the four smaller areas captured fully one-quarter of the state's growth and doubled the growth rate of the Kansas City and St. Louis areas.
  
  
• Population and job growth also moved beyond the smaller metro areas and towns into the state's vast unincorporated areas. Overall, residency in these often-outlying areas grew by 12.3 percent in the 1990s—a rate 50 percent faster than the 8.1 percent growth of towns and cities.
  
  
• Most rural counties reversed decades of decline in the 1990s, with eight in ten rural counties experiencing population growth and nine in ten adding new jobs. By 2000, more rural citizens lived outside of cities and towns than in them, as more than 70 percent of new growth occurred in unincorporated areas.

"Missouri experienced tremendous gains during the last decade, but the decentralized nature of growth across the state poses significant fiscal challenges for the future," said Bruce Katz, vice president of Brookings and director of the policy center. "The challenge for Missouri is to give communities the tools, incentives, and opportunities to grow in more efficient and fiscally responsible ways."

The Brookings Institution Center on Urban and Metropolitan Policy is committed to shaping a new generation of policies that will help build strong neighborhoods, cities, and metropolitan regions. By informing the deliberations of state and federal policymakers with expert knowledge and practical experience, the center promotes integrated approaches and practical solutions to the challenges confronting metropolitan communities. Learn more at www.brookings.edu/urban.

      

Lynn Neary: I'm Lynn Neary in Washington, sitting in for Neal Conan.

John Kerry may not have clinched the Democratic nomination for president in yesterday's primaries and caucuses, but his victories in five of the seven races certainly completed his rehabilitation from an also-ran to a front-runner. John Edwards and Wesley Clark also won last night, Edwards in South Carolina, Clark in a tight race in Oklahoma, where Edwards came in second. Joe Lieberman dropped out of the race altogether. Howard Dean vowed to fight on despite a dismal showing. So did Al Sharpton, who placed third in South Carolina. Dennis Kucinich barely registered with voters. All the candidates now have their eyes on the future with contests in delegate-heavy states now up for grabs.

...

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Lynn Neary:...With us to talk about money in politics is Anthony Corrado. He's a professor of government at Colby College in Waterville, Maine, and is spending this year as a visiting fellow at The Brookings Institution here in Washington.

Thanks for being with us.

Anthony Corrado: Well, thanks for inviting me, Lynn.

Lynn Neary: Do we know exactly how much money's been spent so far by the candidates?

Anthony Corrado: Well, so far the Democrats have raised about $170 million in private donations and public funding all together, and all of that money's now been spent. This very competitive contest has proved to be very expensive so that as we enter this crucial part of the nominating process, no candidate really has a large reservoir of cash that's available to be spent.

Lynn Neary: Yeah. Both Dean and Kerry used the same strategy, focusing on Iowa and New Hampshire, but came up with very different results, didn't they?

Anthony Corrado: Yes, they did, and it was particularly problematic for Howard Dean because what Dean decided to do was use the large store of cash that he had raised in 2003 to spend lots of money in the states that would be voting in February, as well as in Iowa and New Hampshire, and as a result spent over $3 1/3 million on television in states that were voting after New Hampshire. Whereas John Kerry basically took all of the money he had and put it into Iowa and New Hampshire and was able to get the victories he needed to spur additional fund-raising so that he right now is in the best position even though he ended up raising much less than Howard Dean prior to New Hampshire. He's now in the best position to raise and spend money in this next stage of the race.

Lynn Neary: Yeah. And what about Dean? Has he been able to--he was so well-known for his fund-raising. How has his fund-raising been since he has started losing?

Anthony Corrado: Well, his fund-raising has actually held up very well. He's raising about a million dollars a week. He's raised about $3 million since that now-infamous night in Iowa. But one of the problems that he has is that he built such a large organization that it's very expensive to maintain. And as a result he has not had money for television advertising this week. He's not doing any television advertising in the states this weekend. And he probably won't do any television advertising in Tennessee and Virginia. So he's basically gone off of the airwaves in terms of paid television, with the exception of looking towards Wisconsin, which isn't until February 17th.

...

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*A slightly modified version of this commentary appeared in the St. Louis Post-Dispatch on October 19, 2004.

So it looks like Missouri's gubernatorial race will turn on "character" issues.

GOP consultant Paul Zemitzsch predicts Secretary of State Matt Blunt will portray Claire McCaskill, the Democratic state auditor, as "an extra-liberal female candidate" and "waffler" when things get ugly. McCaskill, for her part, has already countered one attack on her "hypocrisy" with her own attack on Blunt's veracity.

Look for more talk about character as Election Day approaches.

Yet that would be too bad.

Missouri needs to talk about some other things this fall.

In a recent statewide report, "Growth in the Heartland: Challenges and Opportunities for Missouri," for example, we argued that Missouri faces a land-use and competitive crisis that demands serious attention.

The crisis is not new—we described it two years ago—but the fact remains that Missouri's chaotic style of low-density development is defacing the state's rural heritage, gutting towns and cities, and exacting a heavy toll on Missourians' pocketbooks and quality of life just when the state needs to compete at a higher level on those factors.

Just look around:

Strip malls and home sites chewed across nearly 350 square miles of Missouri prairie and fields in the 1990s as sprawl engulfed rural Missouri and the state continued to develop land almost four times as fast as it's been adding population.

Cities are struggling, as fast exurban growth either outstrips city and town growth or, in the case of St. Louis, drains the center-city of vibrancy.

And recently decline has spread beyond the state's big urban centers into numerous older suburbs, so that inner-ring municipalities like Wellston and Rock Hill in the St. Louis area, or Raytown and Grandview near Kansas City, now suffer from population losses.

Why do these trends matter? For some the concern is cultural. They fear the state is losing its rural ambiance. For others the threat is environmental. They know scattershot development is tainting the Ozark lakes and degrading Missouri's natural areas.

However, for us the concern is mostly economic: By remaining virtually laissez faire on growth and development issues, we fear the Show Me State is undercutting its ability to parlay its very real assets in the life sciences and other high-value industries into a broader prosperity.

On the one hand, Missouri's dispersed development adds to the size of the state's enormous—and crumbling—highway system. Already Missouri taxpayers struggle with a maintenance backlog that will require half a billion dollars a year over the next 10 years—$200 million more than current finding will provide.

On the other, we suspect that the state's spread-out, low-quality development diminishes Missouri's appeal to the educated workers necessary to prosper in biotech, medical instruments, and infomatics. Educated workers gravitate to vibrant urban centers with plenty of amenities. Missouri's sprawl, by contrast, drives them away by draining the state's downtowns and Main Streets of life and variety.

And so we say it again: Missouri and the gubernatorial candidates need to face up to some tough realities this fall:

• Missouri can't afford to keep sprawling, even with tax revenues stronger this year. Blunt and McCaskill need to tell Missourians how they will foster more efficient, less chaotic growth that doesn't break the bank

 

Ditto the highway issue: Notwithstanding rural pleas, Missouri can't afford to keep building new roads until it contends with the maintenance hole it's paved itself into. The candidates absolutely must explain how they will modernize the state's deteriorating transportation system while aligning it with the principles of sound land-use and fiscal sanity

 

And what about the whole connection of economic vitality to strong cities and higher education? Growth now depends on brainpower and quality of life. Therefore, the candidates owe it to Missourians to detail how they will bolster the quality and affordability of Missouri's colleges and universities. They also must explain how they plan to bolster the state's flagging town and city centers to attract and retain the best and the brightest

In sum, the Show Me State stands at a crossroads.

With huge issues about their state's future livability and prosperity in the balance, Missourians shouldn't buy into a campaign focused on character issues and divisive wedge issues.

Instead, they should insist candidates Blunt and McCaskill address the state's problems head on and get to work.

 

      

Though possessing much economic strength, the Kansas City region faces stark barriers to its long term competitiveness, including a limited capacity for innovation, unfocused growth, and wide racial disparities. This paper—in conjunction with two companion papers delving into the region's economic assets and its life sciences economy—examines how Kansas City can overcome these challenges.

 

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Event Information

The Metropolitan Policy Program at Brookings, hosted The Political Geography of America's Purple States: Five Trends That Will Decide the 2008 Election, a briefing on a new series of reports on the political demography of "purple" states in the 2008 election.

Purple states-or states where the current balance of political forces does not decisively favor one party or the other-will play an undeniably pivotal role in the upcoming election and include: Virginia and Florida in the South; the Intermountain West states of Colorado, New Mexico, Nevada, and Arizona; Michigan, Missouri, and Ohio in the Heartland; and Pennsylvania.

On October 10, 2008 at the National Press Club in Washington DC, authors William Frey and Ruy Teixeira highlighted the political and demographic trends in these 10 battleground states, focusing not only on their role in the 2008 election, but their position as toss-ups in years to come.

The session opened with an overview of the demographic shifts shaping all the contested states studied, and evolved into a detailed presentation of the trends that are testing and reshaping the balance of their voting populations, focusing particularly on five trends that Frey and Teixeira believe will decide the 2008 election. Feedback from James Barnes, political correspondent for the National Journal, helped shape the conversation.

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This is the fourth in a series of reports on the demographic and political dynamics under way in key “battleground” states, deemed to be crucial in deciding the 2008 election. As part of the Metropolitan Policy Program’s Blueprint for American Prosperity, this series will provide an electoral component to the initiative’s analysis of, and prescriptions for, bolstering the health and vitality of America’s metropolitan areas, the engines of the U.S. economy. This report focuses on two major battleground states in the South, Virginia and Florida, which serve as bookends to an emerging New South.

Virginia and Florida have eligible voter populations that are rapidly changing. White working class voters are declining sharply while white college graduates are growing and minorities, especially Hispanics and Asians, are growing even faster. These changes are having their largest effects in these states’ major metropolitan areas, particularly Miami and rapidly-growing Orlando and Tampa in Florida’s I-4 Corridor and the suburbs of Washington, D.C. in Northern Virginia. Other large metro areas in these states are also feeling significant effects from these changes and will contribute to potentially large demographically related political shifts in the next election.

In Virginia, these trends will have their strongest impact in the fast-growing and Democratic-trending Northern Virginia area, where Democrats will seek to increase their modest margin from the 2004 election. The trends could also have big impacts in the Richmond and Virginia Beach metros, where Democrats will need to compress their 2004 deficits. Overall, the GOP will be looking to maintain their very strong support among Virginia’s declining white working class, especially in the conservative South and West region. The Democrats will be reaching out to the growing white college graduate group, critical to their prospects in Northern Virginia and statewide. The Democrats will also be relying on the increasing number of minority voters, who could help them not just in Northern Virginia, but also in the Virginia Beach metro and the Richmond and East region.

In Florida, these trends will have their strongest impacts in the fast-growing I-4 Corridor (36 percent of the statewide vote), which, while Democratic2 trending, is still the key swing region in Florida, and in the Miami metro, largest in the state and home to 27 percent of the vote. The trends could also have big impacts in the South and North, where Democrats will be looking to reduce their 2004 deficits in important metros like Jacksonville (North) and Sarasota and Cape Coral (South). Across the state, the GOP needs to prevent any erosion of support among white working class voters, especially among Democratic-trending whites with some college. They will also seek to hold the line among white college graduates, whose support levels for the GOP are high but declining over time. Finally, the support of the growing Hispanic population is critical to GOP efforts to hold the state, but this group is changing generationally and in terms of mix (more non-Cuban Hispanics), which could open the door to the Democrats.

Both of these states are near the top of the lists of most analysts’ list of battleground states for November 2008. Florida was a very closely contested state in both 2000 and 2004 (especially 2000). But Virginia’s status as a battleground is new to 2008. Yet in both states the contested political terrain reflects the dynamic demographic changes occurring within them. With 27 and 13 electoral votes, respectively, all eyes will be on Florida and Virginia on election night.

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This is the third in a series of reports on the demographic and political dynamics under way in key “battleground” states, deemed to be crucial in deciding the 2008 election. As part of the Metropolitan Policy Program’s Blueprint for American Prosperity, this series will provide an electoral component to the initiative’s analysis of and prescriptions for bolstering the health and vitality of America’s metropolitan areas, the engines of the U.S. economy. This report focuses on three major battleground states in the Midwest—Ohio, Michigan, and Missouri—and finds that:

Ohio, Michigan and Missouri all feature eligible voter populations dominated by white working class voters. However, this profile is changing, albeit more slowly than in faster-growing states like Colorado or Arizona, as the white working class declines and white college graduates and minorities, especially Hispanics, increase. The largest effects are in these states’ major metropolitan areas— Cleveland, Columbus, and Cincinnati in Ohio: Detroit in Michigan; and St. Louis and Kansas City in Missouri— especially in their suburbs.

In Ohio, these trends could have their strongest impact in the fast-growing and Democratic-trending Columbus metro, where Democrats will seek to tip the entire metro in their favor by expanding their margin in Franklin County and reducing their deficit in the suburbs. The trends could also have big impacts in the Cleveland metro (especially its suburbs), in the Cincinnati metro (especially Hamilton County) and in the mediumsized metros of the Northeast (Akron, Canton, and Youngstown). Overall, the GOP will be looking to maintain their support among the declining white working class, especially among whites with some college, who have been trending Democratic. Also critical to their prospects is whether the growing white college-educated group will continue its movement toward the Democrats.

In Michigan, these trends will likely determine whether the fast-growing and populous Detroit suburbs continue shifting toward the Democrats, a development which would tip the Detroit metro (44 percent of the statewide vote) even farther in the direction of the Democrats. The trends will also have a big impact on whether the GOP can continue their hold on the conservative and growing Southwest region of the state that includes the Grand Rapids metro. The GOP will seek to increase its support among white college graduates, who gave the GOP relatively strong support in 2004, but have been trending toward the Democrats long term.

In Missouri, these trends will have their strongest impact on the two big metros of Democratic-trending St. Louis (38 percent of the vote)—especially its suburbs— and GOP-trending Kansas City (20 percent of the statewide vote). The Democrats need a large increase in their margins out of these two metros to have a chance of taking the state, while the GOP simply needs to hold the line. The trends will also have a significant impact on the conservative and growing Southwest region, the bulwark of GOP support in the state, where the Republicans will look to generate even higher support levels. The GOP will try to maintain its support from the strongly pro-GOP white college graduate group, which has been increasing its share of voters as it has trended Republican.

These large, modestly growing states in the heartland of the United States will play a pivotal roll in November’s election. Though experiencing smaller demographic shifts than many other states, they are each changing in ways that underscore the contested status of their combined 48 Electoral College votes in this year’s presidential contest.



Table Of Contents:
Executive Summary » 
Introduction and Data Sources and Definitions » 
Ohio » 
Michigan » 
Missouri » 
Endnotes »

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