Dropbox costs me nothing for 2.5 GB worth of storage. More important, I’m getting a valuable service for nothing.

Now comes along Google Drive, which supposedly functions much the same way, and offers 5 GB of storage.  Now, I’m not going to switch any time soon because Dropbox is working fine for me. But a reasonable interpretation here is that the “price” of seamless online storage has fallen.

But where does the fall in “price” of the Dropbox/Google Drive-type service show up in the Consumer Price Index? The answer: Nowhere. Free services such as Dropbox and Google Drive (or Facebook, or Yahoo Mail, or any other Web service without a price) do not affect the CPI, even as their usefulness increases.

This is not a new observation at all (see for example the 2009 working paper ”The Broadband Bonus: Account for Broadband Internet’s Impact on U.S. GDP” by Greenstein and McDevitt).

Yet this omission of free online services from the CPI, once insignificant,  has become increasingly important as we spend more and more of our time online. What has the bigger impact on Americans–an increase in the price of “lunchmeats” (2.3% over the past year) or a decline in the price of online storage (arguably down by as much as 50%, though it is probably less )?

That’s a real question, incidentally, not a rhetorical one. We may have reached the point where Internet companies are providing free services that have a higher value than some things we pay for. How we change our economic statistics to reflect this new reality?

Cross-Posted from Innovation and Growth

Photo Credit: Kinopix

Yes, with a little more clarity on why two-year long ideological attacks on Ex-Im creates uncertainty that hurts U.S. companies and detracts from Ex-Im’s effectiveness. As someone who worked at the Bank for almost three years, I’d like to offer some of that clarity.

Ex-Im operates in a competitive global marketplace where other export credit agencies will be happy to help their companies win the deal. If financing becomes problematic to secure, we risk foreign buyers going elsewhere, especially when it comes to big-ticket items and long-term project finance. Just think: if you were building a multi-billion dollar aluminum smelter would you want to risk the delivery of your power generators and the success of the project? If you were purchasing a new fleet of 18 jumbo aircraft to be delivered over the next three years wouldn’t you pick the manufacturer that comes with secure long-term financing? It’s only natural that a delayed reauthorization, which this time ran eight months beyond the Bank’s expiration date, will cause uncertainty for potential foreign buyers. Why buy U.S. when you don’t even know if your financing source will be around next year?

Ex-Im’s role is not just about leveling the playing field internationally. It’s also about acting as a complement to the financial sector, especially when there are market disruptions. And in this role, certainty is key. If lenders are uncertain about Ex-Im’s future, their willingness to participate in large trade finance deals may come into question, putting those potential U.S. exports in danger. During the 2008 financial crisis Ex-Im found ways to keep lenders in the game, and to keep U.S. companies exporting, by using its unique ability to comfort lenders with “the full faith and credit of the U.S. Government.” For example, Ex-Im provided a $250 million working capital guarantee to Ford that supported thousands of U.S. jobs, and developed a new product designed to support the U.S. supply chain of large U.S. exporters. It’s no coincidence that since the financial crisis hit demand for Ex-Im financing virtually doubled.

Some conservatives claim Ex-Im support for U.S. companies like Ford is “corporate welfare.” They see it as another example of the U.S. Government picking “winners” when the market “deems” they are uncompetitive. True, Ford effectively received financing at the same credit rating as the U.S. Government. But Ex-Im’s support here – a loan guarantee that will be paid back with interest – came at a time when the financial markets were in an unprecedented liquidity crunch, distorting a company’s “competitiveness” in terms of assessing capital. Filling this market gap is a perfect example of what Ex-Im was designed to do. Moreover, with the support other countries give their firms (through subsidies, industrial targeting, exchange rate policies, etc.) it’s pretty hard to distinguish actual competitive advantage anymore. We don’t even know how much it costs to produce something in the U.S. versus a comparable product abroad.

What’s more, with uncertainty over the future comes an internal hesitation to modernize Ex-Im’s core policies, detracting from the Bank’s overall effectiveness. After all, if reauthorization is so timely and energy consuming with current policies as is, could we imagine if there were also substantial changes? That’s probably one major reason why a domestic content policy developed decades ago hasn’t moved with the times to adequately account for intangible services exports like software and other intellectual property. At the end of the day it’s just Ex-Im’s customers that are forced to work around outdated requirements.

And we cannot forget a great benefit of Ex-Im financing on the broader economy – the U.S. jobs supported through Ex-Im’s financing (via loans, guarantees, and insurance). The types of jobs Ex-Im financing supports are mainly the ones our economy doesn’t have enough of – those middle-tier manufacturing and supply-chain jobs that pay well and create real value to the economy. What’s more, recent work by PPI shows that the potential role manufacturing and supply-chain jobs can play in generating sustainable and balanced growth is much larger than we think.

So let’s think twice next time about spending two years debating a two and a half year reauthorization. Instead, why not reauthorize the Bank for five years (like Congress used to), or better yet, for 10 or 15 years. That additional certainty would benefit U.S. competitiveness and U.S. jobs, at no cost to the taxpayer.

The day after the primary Mourdock reinforced the “lesson” by calmly telling Chuck Todd that he defined “bipartisanship” as “Democrats coming to the Republican point of view.”

While Indiana’s current pro-GOP tilt makes Mourdock a slight favorite in a general election contest with Rep. Joe Donnelly, the unexpected vulnerability of the seat has scrambled many early assumptions about the 2012 Senate election landscape, particularly when combined with Olympia Snowe’s recent surprise retirement. Today the Washington Post’s Paul Kane published an overview of Senate races quoting several leading handicappers as giving Democrats a slight edge in their battle to hang onto control of the chamber; it all may come down to the vice president’s tie-breaking vote.

The other election news on Tuesday was less dramatic. In Wisconsin, as expected, Milwaukee mayor Tom Barrett easily defeated former county executive Kathleen Falk to become the Democratic candidate who would succeed Scott Walker if he’s recalled on June 5. Falk’s labor backers—many of whom were deeply unhappy with Barrett’s treatment of public employees in Milwaukee-appear to be lining up loyally for the winner. Polling of the June 5 contest remains mostly too-close-to-call, though Walker will have a significant financial advantage thanks to massive funding from out-of-state conservatives and business interests.

In North Carolina, Democratic Lt. Gov. Walter Dalton used a big financial advantage and late momentum to defeat former congressman Bobby Etheridge for the gubernatorial nomination (embattled incumbent Gov. Bev Perdue decided not to run), though the Republican nominee, former Charlotte mayor Pat McCrory, is the early favorite for November. But the big national news from North Carolina was the landslide (61%) approval of Amendment One, a constitutional gay marriage ban that was worded in a way that would probably ban legal protections for civil unions and even heterosexual domestic partnerships as well. Polling showed the amendment might have failed had voters understood its scope, but despite losing in most of the state’s major urban centers, it won overwhelmingly in rural counties, helped along by last-minute ads featuring the state’s most famous citizen, the Rev. Billy Graham.

Although the president had earlier issued a statement opposing Amendment One, he conspicuously didn’t mention in a recent appearance in North Carolina, and inevitably disappointed marriage equality advocates were especially disappointed with him. That, along with mounting support for a 2012 Democratic platform plank supporting marriage equality, plus the (apparent) coincidence of the vice president’s casual remarks on the subject last weekend, were enough to push Obama into the calculated risk of yesterday’s interview in which he expressed support for same-sex marriage.

The air is currently full of spin—with some analysis—on how this gamble will play out. Long-term, it makes sense to align the Democratic Party with a view that is shared by a majority of rank-and-file Democrats (and, according to most polls, of independents), and that is almost certain to become a large majority of the public over time, given the strong and uniform generational trends in favor of same-sex marriage (under-30 adults are almost invariably 20-percentage-points more likely than over-30 adults to support it, even among conservative evangelicals). In the medium-term, Ron Brownstein’s analysis makes abundant sense:

[Obama’s] decision…reflects a hard-headed acknowledgement of the changing nature of the Democratic electoral coalition. Indeed, historians may someday view Obama’s announcement Wednesday as a milestone in the evolution of his party’s political strategy, because it shows the president and his campaign team are increasingly comfortable responding to the actual coalition that elects Democrats today-not the one that many in the party remember from their youth.

In other words, Democratic politicians can no longer differ from most of the rising cohorts of voters aligned with their party on cultural issues in the endless pursuit of non-college educated white men who may be—at least in large numbers—simply lost, important as they were to the New Deal coalition.

It’s the short-term implications of Obama’s action that are perhaps hardest to calculate. Economic issues (defined broadly to include fiscal issues, including the role of government in dealing with the economy and the future of the social safety net) are undoubtedly going to be the most powerful consideration for persuadable voters. And with sentiment on same-sex marriage increasingly polarized between the two parties, most of the people most likely to be upset by Obama’s new position are already certain to vote against him.

But there is arguably a “wedge” opening for Republicans thanks to the unusually high levels of resistance to gay marriage among one key element of Obama’s base—African-Americans—and to a lesser extent among another where he needs a very strong vote—Hispanics. The main dilemma for Team Romney is that pursuing such opportunities could, ironically, help Obama by framing the election as a choice between two different cultural ideologies rather than a straight referendum on the president’s record. More alarmingly for Republicans, Obama’s action could enormously heighten the visibility of the hard-core Cultural Right in the anti-Obama effort just as they were resigning themselves to a seat in the back of the Romney campaign bus. The more you look at it, Obama may have simply taken an unavoidable chance, while posing a strategic challenge to his opponent that may be very hot to handle.

Although the cabinet and its role in government are not formally established in the Constitution, presidents since George Washington have convened a collective body of the heads of the executive departments. Washington used cabinet meetings to tap into the wisdom of such luminaries as Secretary of State Thomas Jefferson and Secretary of the Treasury Alexander Hamilton. In her 2005 book Team of Rivals, Historian Doris Kearns Goodwin demonstrated how the strong and diverse cabinet assembled by Abraham Lincoln girded the nation at its time of greatest peril. FDR convened his cabinet the day after the Pearl Harbor attacks, while JFK famously relied on a subset of his cabinet during the Cuban Missile Crisis.

Over the past half-century, however, the rise and expansion of the White House staff has centralized deliberation and decision-making increasingly within the confines of 1600 Pennsylvania Avenue. Between this reliance on professional staffers and life in the ever-more restrictive “security bubble,” presidents have had less and less direct access to a range of views and opinions. Indeed, while the Kennedy and Johnson cabinets met monthly, the Obama cabinet has met less than one-third as often.

Today, cabinet meetings are often little more than occasional photo ops to bring together POTUS, the VP, the heads of the 15 executive departments and a few other “cabinet-rank” officials such as the heads of the Office of Management and Budget and the Environmental Protection Agency, the Ambassador for the United Nations, and the U.S. Trade Representative. Virtually the only time they are seen together by the public is in the front row at the annual State of the Union Address.

By contrast, many of America’s democratic allies benefit from the much more central role played by their cabinets, particularly in parliamentary systems where they are critical partners in the governance of their nations. In countries such as the United Kingdom, Canada, Australia, and Germany, the executive leadership comprises an entire team of senior politicians who meet weekly to lay out political alternatives and strategize about policy implementation. In many parliamentary systems, the cabinet is considered so central that the members are all considered to share “collective responsibility” for the work of government.

Under the U.S. Constitution, the American president will always remain paramount, but both the president and the nation could benefit greatly by enhancing the role and strengthening the position of the cabinet. Below are five ideas to maximize the reach and impact of the president’s hand-picked first-string team.

Read the entire memo here

In their report, the Trustees also issued a sober warning: “Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare.”

Unfortunately, Congress doesn’t look like it’s up to the task, especially in an election year.  Not too long ago, the House of Representatives overwhelmingly rejected—by a vote of 382-38—a bipartisan budget plan based on the recommendations of the White House’s deficit reduction commission that would have included some highly sensible steps toward entitlement reform.

But as long as Congress is stalling on tough decisions around this issue, why not let citizens take charge? Let retiring seniors choose the level of Social Security benefits they’d like to get—especially those comfortable enough to afford giving up some of their benefits.

Under this system, citizens can opt to “give back” $50, $100, $500 or more of the benefits they don’t truly need while also providing a direct mechanism for reducing the deficit while Congress sits on its hands.

Of course it’s possible that no one would opt for a partial benefit. But according to a new study by the Center for Economic and Policy Research, Social Security benefits make up a much smaller share of the wealth of affluent seniors than of lower-income ones. This means that at least for the top quintile of seniors, receiving partial benefits should not be a major sacrifice.

Granted, this measure is certainly more symbolic than substantive. Nevertheless, it might be worth trying for two reasons.

First, it would empower citizens—even if to a tiny extent—in the battle over the federal deficit. One of the most frustrating aspects of the budget debate, from a citizen’s point of view, is the utter inability to affect policy directly. All power is in Congress’s hands, which has meant more problems and no solutions. Voluntarily opting for a reduced benefit would have direct—if small—bottom-line impact on Social Security’s health.

Conceptually, the idea is similar to the voluntary “deficit reduction fund” proposed by others. The U.S. Treasury in fact welcomes “gifts” to reduce the public debt and has collected more than $3 million so far from well-meaning citizens in fiscal 2012. While a drop in the bucket, it’s also remarkable given the government doesn’t actively solicit these donations.

Second, the notion of a voluntary reduced benefit could help socialize the concept of “shared sacrifice.” This proposal relies on Americans’ sense of civic duty to help take the first real steps toward reform. Moreover, government can help “nudge” wealthier seniors in the right direction by providing information about the amount of total Social Security and Medicare benefits a senior is likely to receive (which in almost all instances is more than what is contributed).

And if no one participates, it would actually reveal a lot about Americans’ appetite for entitlement reform and the extent of the “I get mine” mentality that makes reform so difficult in the first place.

So here’s how a partial benefit option could work.

Currently, the amount of benefits a senior receives is determined by a formula based on a worker’s lifetime earnings, and is an all-or-nothing proposition. While seniors can opt out of Social Security altogether, they can’t opt for partial benefits. For example, a relatively affluent senior (e.g., with $75,000 in annual income) can’t opt for a lesser amount in benefits than the 2012 maximum monthly benefit of $2,513 to which they might be entitled.

To calculate the partial benefit, one possibility is to use the deficit commission’s proposals for changing the benefit calculation formula. Under this proposal, the top 20% of seniors would see an 18.7% benefit reduction by 2050, and this lesser amount could be the “suggested” optional benefit for more affluent seniors.

Of course, seniors would also always have the option to opt back in to a full benefit if their circumstances change for the worse.

At best, an optional partial benefit could help pave the way for more meaningful change. At worse, the optional partial benefit would give citizens a shot at trying what Congress can’t currently fix. Given the current deadlock in Washington—why not?

Photo Credit: Donkey Hotey

“Mitt Romney and his fellow Republicans are gleefully pounding President Barack Obama for the weaker-than-expected employment report released on May 4. Growth seems to be weakening and Romney is positioning himself as the business-minded economy savior for the country.

“At the same time, the Facebook IPO, anticipated to value the company at more than $75 billion, is a tangible sign of the vast amounts of wealth and income being generated by the communications boom and the so-called App Economy. Smartphones, broadband wireless, social media, apps — all are combining to provide a potent force for economic growth.

“So the question is: Should Romney be worried about an “App Surprise” — a sudden acceleration of growth and job creation fueled by the smartphone/communications boom?

“That might seem unreasonable given the other drags on the economy. Yet Romney and his advisers would be wise to remember the events of the 1996 election campaign.”

Read the full article at The Atlantic

The survey, which assessed how “friendly” states and local areas were to new and small businesses, finds that those states with the friendliest climates had fewer licensing regulations and other legal hurdles that hindered business registration. In fact, the survey found small businesses viewed licensing requirements as almost twice as important as tax rates in determining how friendly a state was to its businesses. And states deemed the most friendly to business, including Texas, Idaho, and Oklahoma, were also the states where respondents claimed starting a new business was easy.

The survey, which received over 6,000 responses from small businesses across the country, was conducted by Thumbtack.com in partnership with the Kauffman Foundation. It found Texas was the friendliest state in the nation for small businesses, while California was ranked as the least friendly.

Small businesses are a crucial backbone to the U.S. economy, employing almost half of all American workers. That’s why it’s important to implement business regulations and policies that make establishing a new business a relatively smooth process. States that have excessive or redundant regulatory processes could be discouraging an important source of economic growth, or lose out on business opportunities to a more friendly state. And with those lost business ventures comes lost spillover effects to the local economy that are an important source of state and local revenue.

PPI has long advocated for reducing unnecessary regulatory hurdles, to encourage the development of new innovations and facilitate getting those innovations to market quickly and efficiently. That’s why PPI proposed a Regulatory Improvement Commission, a congressionally authorized body designed to reduce and remove unnecessary Federal regulations as submitted by the public, as part of our Regulatory Reform Initiative.

Given how many states have “unfriendly” regulations, emulating such a Commission at the state level could certainly have a significant impact on creating friendlier business climates. And given the slow economic recovery, it’s as important as ever policymakers at all levels of government work to balance consumer safety and business legitimacy with creating a more conducive climate for small and new businesses.

Photo credit: marsmet526

Americans look to France for many things – fine wine and food, romantic getaways, bullet trains – but rarely for political models. Some Republicans may try to draw parallels between President Obama and a real Socialist, Francoise Hollande, but swing voters don’t share the GOP’s Francophobia.

Besides, as Reds go, Hollande isn’t very menacing. For all his talk of putting growth before austerity, Hollande promised during the campaign to balance France’s budget just one year later than Sarkozy. And Hollande’s will be constrained from a massive public spending splurge by France’s need to borrow from capital markets to finance its enormous debt (90 percent of GDP).

Read the entire op-ed here

PPI Chief Economic Strategist Michael Mandel presented the findings of his new paper, “Manufacturing in the Age of the App Economy: How Many Factory Jobs Should We Aim For?”, co-authored with PPI economist Diana G. Carew.

The panel included Michael Mandel, Jared Bernstein, Leo Hindery and Louis Uchitelle, who discussed the critical role manufacturing plays in today’s app-fueled economy. There was debate regarding the best tools and policy options available, and the consensus that emerged was that the federal government must refocus and redouble its efforts to promote American manufacturing and make it more competitive. By creating a smart manufacturing agenda for the 21st century, we can add balance to our economy and put America back on the sustainable path of producers, not consumers.

An explicit jobs target is the first concrete step towards achieving that goal. PPI believes we should aim to boost manufacturing employment up to 15.5-16 million, a level last reached in 2001. The employment spillover effects of manufacturing are also significantly larger than commonly thought, so more manufacturing jobs would create more jobs elsewhere as well. With unemployment still unacceptably high, the imperative to act has rarely been more clear.

Download “Manufacturing in the Age of the App Economy: How Many Factory Jobs Should We Aim For?”

Date:
Wednesday, May 2, 2012
9:30 – 11 a.m.

Featured Panelists:
Michael Mandel, Chief Economic Strategist, Progressive Policy Institute
Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities
Leo Hindery, Managing Director, Intermedia Partners
Louis Uchitelle, Economics Writer, The New York Times

Location:
The Mayflower Hotel, Chinese Ballroom
1127 Connecticut Ave. NW, Washington, DC