Forbes

Green Jobs Can't Save The Economy | Forbes

Cecille Isidro — Mon, 03 Aug 2009 23:03:00 -0400

Indeed a recent study by Sam Sherraden at the center-left New America Foundation finds that, for the most part, green jobs constitute a negligible factor in ...

Six Ways Uncle Sam Can Rescue Newspapers | Forbes

Cecille Isidro — Wed, 06 May 2009 19:01:00 -0400

The principle funding source for National Public Radio and PBS could be expanded to fill the gap from closing newspapers, argues Steve Coll, a former managing editor of the Washington Post. Congress should up the funding (Coll argues that Congress does ...

Health Reform Is Nigh | Forbes

Cecille Isidro — Thu, 05 Mar 2009 15:31:00 -0500

"You have major league middle-class anxiety," said Len Nichols, a health economist and director of the Health Policy Program at the New America Foundation, a nonprofit public policy think tank in Washington, DC It no longer appears to be an option for ...

Obama Turns to Deficit-Cutting | Forbes

Cecille Isidro — Mon, 23 Feb 2009 06:06:00 -0500

Whether it will actually accomplish anything is another matter entirely. Budget watchdog groups are cautiously optimistic. “The summit is the first step toward action,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget. ...

Obama, Fight The Green Agenda | Forbes

Cecille Isidro — Tue, 27 Jan 2009 00:03:00 -0500

This "post-industrial strategy," notes author Michael Lind, may be fine for Manhattan and San Francisco, but it's not so appealing in Michigan, Ohio, ...

The Plug-In Paradox

Cecille Isidro — Mon, 24 Nov 2008 13:56:00 -0500

With its quirky vintage cars and grease-stained floor, pat's garage looks like a typically hip San Francisco auto repair shop. Until you notice that the street outside is overweighted in Toyota Priuses and inside, against the wall, stands a stack of $10,000 batteries made by A123 Systems. Drop one of these 185-pounders into the spare tire well of the Prius, get garage owner Patrick Cadam and partner Nicholas Rothman to tinker with it overnight, and you've got a hybrid that can be plugged into any outlet for maxing your gas mileage. Rothman, fluent in Japanese and a certified Prius technician, says he's performed more than 100 upgrades and is "addicted" to keeping the car's fuel economy at 99.9mpg, which is as high as its display goes.

Plug-in hybrids use 60% less gasoline than nonhybrid cars. Despite their high sticker price, they've earned powerful fans, including former CIA director James Woolsey, Google founders Sergey Brin and Larry Page, and California's Air Resources Board, which has ordered that 58,333 be produced by 2014 as part of the state's climate change policy. In September GM unveiled its Chevy Volt, capable of driving 40 miles on battery power before the battery needs a recharge from the gasoline engine. The Senate also managed to find a place in the $700 billion bailout for a $7,500 tax credit for plug-ins.

Plug-ins are ready to hit the highway, but are drivers? Their behavior has a huge influence on the performance of the technology under the hood. Rothman can get 99.9mpg, but an average driver will get 80, an aggressive one, 60 and a negligent one, who forgets to plug in the vehicle the night before and then drives like Dale Earnhardt Jr., less than 40. Argonne National Lab found that a bad driver who turns on the air conditioner can squash the plug-in's performance by reducing battery range from 40 miles to 15, which won't get most commuters to work and back.

UC, Davis anthropologist Thomas Turrentine and engineer Kenneth Kurani have spent 19 years looking at how the wiring in drivers' heads interfaces with the engineering under the hoods of alternative vehicles. Their interviews with drivers have flipped conventional thinking on its head more than once. While everyone knows how much they pay at the pump, none of 57 households surveyed kept track of annual gas spending. None of the Prius buyers they talked to had ever looked under the hood. One engineer told them he'd done an elaborate spreadsheet of costs for different vehicles but ultimately bought a Ford Escape Hybrid, the car that made the least financial sense, because he wanted to let Detroit know what kind of cars he wants them to build.

Plug-ins may be an entirely different story from hybrids like the Prius. They offer far higher efficiency, but no one knows how to use them or make the most of them. "There's a big behavior variable with the benefits," says Turrentine. To measure that variable, he and Kurani got a two-year, $1.8 million grant this summer from California to upgrade ten Priuses at Pat's Garage and place them in 80 commuter households. The cars will record every plugging-in, every trip, speeds and fuel use. Some dashboards will have screens offering drivers extra feedback to increase their gas mileage. Afterward the profs will interview drivers.

The only thing the researchers can conclude at this stage is that, despite knowing very little about plug-ins, the public is bonkers about them. Hundreds of families volunteered for the study. They sent résumés and photos of their solar panels. One engineer offered up data he'd been gathering on his own driving for two years. There was even an awkward moment during a meeting when a state official asked to be part of the study.

UC, Davis Ph.D. candidate Jonn Axsen designed an online game last year to measure how 2,373 new car-buying households would weigh tradeoffs between cost and fuel efficiency. He found that while nearly 62% of those surveyed wanted a car with gas mileage near 125mpg, only 12% were comfortable with leaving gas behind altogether with an all-electric vehicle, probably out of fear of running out of juice. This emotional trigger could fade as more drivers experience plug-ins. "It's unavoidable that the world will change while we're doing this research," says Kurani.

Google is seeking early answers, too, and doing so through its forte: social engineering. This is a company that decorates the inside of its bathroom stalls with productivity tips. (Example: how to increase type size in a Java program.) The company has a fleet of six Prius plug-ins, averaging 94mpg, and two Ford Escape plug-ins averaging 49mpg, all from Pat's Garage. Even though all the stats are up for public inspection at rechargeit.org, there is no system of shaming for poor mileage. "The more Googley thing to do is to set up a contest for getting the best mileage," says Google engineer Rolf Schreiber. No such contest is planned, but members of the company's climate-change group have an informal rivalry to exceed 105mpg. "I could totally see something erupting in social networks where people compare driving styles," he adds.

Google has bigger plans than improving gas mileage. Like other plug-in champions, Google wants to make hybrids a form of distributed storage, pushing and pulling power to and from the electrical grid to make it more resilient to fluctuations in demand. But simply substituting coal-fired electricity for gasoline is not particularly Googley, hence the giant solar panels that hover like comic-strip thought balloons over its hybrid parking lot. A study by the American Council for an Energy-Efficient Economy suggests that in some states with heavy dependence on coal-fired power, using plug-in hybrids releases as much greenhouse gas as driving unimproved Priuses.

"When you look at the horizon, there are chances for big changes here," says Schreiber. "West Texas wind blows in the middle of the night, when the electricity is almost worthless!" Hybrids plugged in at night could capture that electricity and redirect it to the morning commute or feed it back onto the grid at noon when it's worth something.

Willett Kempton, a professor of marine policy at the University of Delaware, who runs its carbon-free energy program, says owners of plug-ins should be given an incentive to make their batteries available to the grid. Frequency regulation--the minute-by-minute balancing of electrical current on the grid--is already a service worth $40 per megawatt-hour delivered. He estimates that some plug-in drivers could earn $2,000 a year by making their batteries available as reservoirs. Now he's studying databases of driving habits to see if some groups of people would be better candidates than others. "Some people have very erratic and bizarre driving patterns, like volunteer firemen," says Kempton.

For decades Americans have embraced the cognitive dissonance of sitting in traffic during punishing commutes while claiming that what they value about their cars is the sense of independence and the open road. Are we ready to let rationality intrude on our sacred relationship with our cars?

Chinese Largesse

Cecille Isidro — Mon, 13 Oct 2008 10:08:00 -0400

The financial crisis is raising serious questions about the future of American power. Can the United States sustain the burdens of global leadership while we dust ourselves off from what looks like a near-knockout blow to our economy?

As Zachary Karabell has argued, we are now seeing a globalization of finance that parallels the globalization of manufacturing that began in earnest in the 1970s. Wall Street is no longer the center of the financial world as wealth flows from our shores to the Gulf and Asia's rising states. The sharp increase in the quantity and quality of consumption, which we owe to a combination of Wal-Mart (i.e., China), cheap credit, and historically low fuel prices, has bought the United States social peace in an era of stagnant wages and rising inequality.

Now, however, that grand bargain has come to a spectacular end, and it's easy to imagine Americans turning away from the world to focus exclusively on our domestic troubles.

Yet we simply can't afford to look inward. Our prosperity is so deeply enmeshed in that of the rest of the world--and particularly with the prosperity of China, which has become our economic Siamese Twin--that turning away is all but unthinkable. Just as importantly, there is no plausible successor to America as global hegemon. You might say that we are the hegemon by default. The real question isn't whether America will still be called upon to lead.

Rather, the question is: Where exactly do we intend to go? When it comes to foreign policy, conservatives have focused almost exclusively on fighting terrorists and rolling back rogue states and spreading political democracy. As a result, conservatives have tended to neglect the economic dimension of foreign policy. But we've now seen how global economic imbalances shape the strategic picture.

Consider the following nightmare scenario: Just as the next president begins a renewed push to bring peace to Afghanistan and to consolidate security gains in Iraq, he discovers that the Iranian nuclear program has advanced far further than he had hoped. Because of the Bush administration's malign neglect, which ostensibly sought to "preserve the options" of the next president, President ObaMcCain is left with only one option: to launch a ferocious military attack on the world's most fearsome rogue state.

Imagine what such an attack would do to global energy markets, and thus to the global economy. Who believes that China and Russia would be eager to lend the United States a helping hand in the wake of such an attack given that both states have eagerly worked with hydrocarbon exporters, including Iran, to restrain American power?

When Paul Kennedy published The Rise and Fall of the Great Powers, the bestselling 1987 polemic that famously predicted the United States would follow the Roman and British and Soviet Empires into irreversible decline, he saw Japan as the world's ascendant power, a state that, like Venice and Britain before it, would use its trading might to make up for its modest size. This prediction was made shortly before Japan's so-called "Lost Decade," during which economic growth almost slowed to a half and unemployment inched steadily upwards. And of course America was on the verge of an extraordinary innovation boom, which made talk of American decline seem faintly ridiculous.

In fairness to Kennedy, he maintained that the unraveling of an empire often takes a very long time, and that there will always be false dawns. Kennedy's essential argument was that massive deficit spending was a serious sign of weakness, particularly when dedicated to a military buildup. Does this sound familiar?

The fight against Al-Qaeda has led to a vast expansion of our military budget just as the boomers retire and as years of neglect have left us with crumbling infrastructure. Tax cuts haven't been matched by spending cuts, and we've essentially been relying on Chinese largesse to stay afloat. It is a rather awkward position for a hegemon to find itself in.

So how do we get out of this mess? It's not enough to encourage a more democratic world. We also need to encourage a more middle-class world. Sherle Schwenninger and Afshin Molavi have been arguing for an economic strategy that fosters full employment and ample demand in the developing world--a kind of Keynesianism for the BRIC economies. Both Schwenninger and Molavi are on the center-left, yet the project of building a middle-class world ought to appeal to conservatives most of all, particularly social conservatives interested in encouraging stable families and fighting poverty. Unbalanced growth in the developing world has made states more unstable and bellicose--and it's also put severe pressure on family life.

Right now, China suffers from severe interregional inequalities that threaten to spiral out of control. Robust economic growth in rural regions in the 1980s has been followed by an economic policy that taxes the countryside to benefit the export-oriented big cities. Perhaps unsurprisingly, this has led to a mass breakup of rural families as fathers and mothers leave home to send money back to struggling children.

By reversing this pro-urban policy, and by investing more in education and infrastructure in the interior, China would enjoy more balanced growth. A similar approach could be embraced in India, Russia, Mexico and other emerging economies. This would tackle several interrelated problems, ranging from the persistence of poverty in the developing world to the global savings glut that helped create the current financial crisis to the global labor glut that has put pressure on American workers. Americans would export more and import less while the Chinese and Indians and Brazilians would do the opposite. The end result would be a more prosperous and balanced global economy, and, as an added bonus, more bourgeois societies are likely to be less violent and more inclined to embrace liberal democracy.

And which country would be better suited to leading this bourgeois world than a reinvigorated United States?

A National Party No More?

Cecille Isidro — Fri, 05 Sep 2008 14:14:00 -0400

Does Sarah Palin represent the future of the Republican Party? Well, yes and no.

First, Palin speaks to the right constituencies. For the Republican Party to flourish, it needs to speak to the aspirations of working-class voters in general and to women in particular.

You might say that John McCain is the candidate of the first half-hour of the Today Show--the hard-news gruel that most viewers simply endure as they wait for light entertainment--while Palin represents the softer focus of the rest of the program. That is the same terrain occupied by Mike Huckabee, who spoke more forcefully and intelligently about fighting obesity than about fighting radical jihadists, and Barack Obama, who has already become a cultural icon in the Jack Kennedy vein.

Moreover, Palin’s deft handling of her trial by fire this past week suggests that she has a steely determination that will serve her well. Her address at the Republican National Convention was greeted with thunderous applause and, more importantly, a television audience that fell just shy of Barack Obama’s. Barring disaster, she will be a conservative folk hero for decades to come--and actually, it is entirely possible that an electoral disaster will only reinforce love for Palin among the conservative grassroots, who are nothing if not loyal.

Palin was a Happy Warrior, hitting back at her critics with wit and charm and also a hint of venom. And then, of course, there is the symbolism of her selection as McCain’s running mate.

We know that Palin is an ardent social conservative, one who practices the pro-life values she preaches, much to the alarm of some of her most ferocious critics. Yet she is also a crusader against public corruption and is loathed by many in Alaska’s Republican establishment. As a working mother, Palin represents a critical constituency for Republicans, and, as evidenced by her speech, she has a gift for translating the case against big government in appealing, accessible language.

Imagine what might have happened in St. Paul this week had McCain named Joe Lieberman, independent Democrat of Connecticut, as his running mate. Chances are, we’d have seen an open revolt among pro-lifers, whether or not McCain and Lieberman made a one-term pledge or assurances to appoint anti- Roe judges. In fact, those assurances would only serve to underline the party’s deep social conservatism to swing voters in the suburbs.

The non-conservative press might have made favorable noises regarding McCain’s maverick move, yet it is far more likely that they’d highlight Lieberman’s hawkish stance on the wars in Iraq and Afghanistan, drawing attention to an issue that is a vulnerability for Republicans almost as much as it is a strength. There would undoubtedly be serious agitation for a minor-party challenger from the evangelical right. The Palin nomination, in contrast, has had an almost magical effect. It has erased all of the conservative ill will that has long been directed against McCain--an extraordinary feat.

But while there’s no doubt that Palin can, and will, fire up the base, it is by no means obvious that she can expand the Republican tent. The McCain-Palin ticket is unusual in that neither Republican hails from the Old Confederacy, the demographic heart of today’s party. Yet we have no reason to believe that the McCain-Palin coalition will be any less narrowly southern than those who barely elected George W. Bush in 2000 and 2004.

When Zell Miller wrote A National Party No More, he was referring to the Democrats--but when you consider Republican defeats across the South in special elections, when you watch northeastern Republicans edge toward extinction, you wonder if it is the Republican Party that will become a regional rump.

Palin’s culture-war appeal won’t make the GOP America’s majority party--an aggressive new agenda on health care, education and jobs will. During his lackluster speech on Thursday night, McCain floated a wage insurance proposal, clearly designed to draw in voters in the big industrial states of the Midwest. That's a step in the right direction.

But such proposals can’t simply be tacked on, and they can’t simply serve as a Band-Aid designed to heal the wounds caused by industrial need. Rather, they need to be carefully woven into a pro-growth narrative, one that outlines in rich detail how Republican policies can materially help stressed-out moms and dads leap ahead economically.

There was one candidate who came close to doing exactly this for a very brief period of time: the much-derided Mitt Romney. Sadly, Romney has reinvented himself as a right-wing caricature, while McCain looks too fondly to America’s past. Sarah Palin could be the future of the Republican Party--but only if she can connect her gut-level personal appeal to a meaty economic agenda.

Covered Bonds Can Rebuild America

Cecille Isidro — Mon, 28 Jul 2008 09:58:00 -0400

Monday's embrace of covered bonds by U.S. Treasury Secretary Henry Paulson and senior representatives of the Fed, the Federal Deposit Insurance Corp. and the country's largest banks to help thaw the U.S. mortgage market is a laudable step, appealing to market proponents and skeptics alike. Introducing covered bonds to the U.S. is a great idea. In fact, covered bonds can help more than just the mortgage market.

At its most basic, a covered bond is a bond issued by a bank and backed by a dedicated group of loans kept on the issuing bank's balance sheet. While the introduction of covered bonds in the U.S. is not a magic bullet, covered bonds may be more than just a way to restart the mortgage market. They may also help unlock sorely lacking investment for U.S. infrastructure.

Covered bonds are, for the U.S. at least, a long time coming. They've existed in Europe for centuries and are a mainstay of the global capital markets landscape. While few in the U.S. have heard of them, the market for covered bonds in Europe is well established, large and an important tool for banks to fund themselves. By pooling together lots of smaller loans into a larger bond, which is then sold to investors, a covered bond is large and liquid enough to generate interest from large investment funds.

Crucially, unlike the way banks securitized and sold mortgages in the U.S., the underlying loans for a covered bond stay on the bank's balance sheet. This leaves less risk that the bank will ignore prudent lending standards. The loans that "cover" the bond are also highly regulated. They are monitored by independent third parties and must be of high quality. Any deteriorating loans in the cover pool must be replaced with stronger ones. If something goes wrong, covered bond holders have both the bank and the underlying collateral to protect their investment.

But Paulson's effort to introduce covered bonds backed by mortgages leaves a very real opportunity on the table. An entire market for covered bonds backed by public sector debt thrives in Europe alongside its sister mortgage-backed equivalent. In Europe, public sector covered bonds are a centerpiece of infrastructure finance and an important investment vehicle for global investment funds and central banks.

These bonds typically pool loans given to regional and local government authorities or public-private partnerships, and are guaranteed by the public authorities. They finance projects like roads, bridges, high-speed rail, hospitals, schools and utilities. By pooling these loans and issuing large covered bonds, banks in Europe are able to attract the large pools of global capital that shy away from U.S. municipal markets, the traditional source for financing much state and local infrastructure.

Municipal bond markets in the U.S. have functioned well for years, channeling private capital into financing public infrastructure. But municipal bonds are unable to take advantage of the world's largest pools of capital that are available for infrastructure financing elsewhere. The universe of investors willing to invest in U.S. municipal bonds is limited because of the relatively small size of most individual municipal finance debt issues and the subsequent illiquidity of the bonds. It is hard to get a large global investor interested in a bond issue of less than a billion or so.

Also municipal bonds in the U.S. exclude investors who are unable to take advantage of the tax-based incentives. This includes every non-U.S. pool of capital and many U.S. pension funds.

While federal, state and local governments struggle to fund basic infrastructure, there is abundant private capital available for infrastructure investment using the right market mechanisms. Covered bonds provide that mechanism in other parts of the world. Investors in Europe's public sector covered bonds come from a universe of roughly $30 trillion held by central banks, sovereign funds and global pension funds. There is certainly enough capital to bridge what has now become a trillion-dollar infrastructure financing gap in the U.S.

Elsewhere in the world, many commercial banks and specialty public-sector banks use public sector covered bonds as a cheap source of funding. In particular, as a result of the enormous availability of funds for infrastructure projects through securities like covered bonds in Europe, European banks have developed great comfort with infrastructure as a core part of their general banking activities.

Their experience with infrastructure makes them often the lenders of choice for U.S. infrastructure projects, in contrast to their American counterparts. Notably, the loans for public-private partnership infrastructure projects like the Chicago Skyway, the Indiana Toll Road, the San Diego Toll Road and the Pocahontas Parkway in Virginia all came from European, not U.S., banks.

As we search for ways to improve America's outdated--and in some cases, failing--infrastructure, we must look to creative mechanisms to address the very real question of how to pay for it in the most cost-effective manner. What is missing in the U.S. is a mechanism for channeling enormous global pools of capital into our long-term infrastructure development.

The U.S. government, as it seeks to unlock the mortgage market deadlock, should not miss the opportunity to include the public sector in its newly proposed covered bond framework. Creating U.S. covered bond legislation that incorporates public sector debt as well as mortgages is one tool in the financial toolbox we can use to both help jump-start the mortgage market and open channels for attracting infrastructure investment through the global capital markets.

Len Nichols in Forbes | 'Lackluster Legacy On Health Care'

Communications — Tue, 29 Jan 2008 15:11:00 -0500

Lackluster Legacy On Health Care (Forbes)

"There's going to be a lot of fallout over the decisions they made on SCHIP," says Len Nichols, a fellow at the Washington, D.C.-based think tank New America Foundation and a health care adviser to seven Republican and Democratic presidential campaigns. "[The president's veto] will play out over and over again in Congressional districts, and Republicans will lose seats over it."