CBPP: Helping Manufacturing-Intensive Communities: What Works? [feedly]

Helping Manufacturing-Intensive Communities: What Works?
https://www.cbpp.org/research/full-employment/helping-manufacturing-intensive-communities-what-works

This report was commissioned by the Center on Budget and Policy Priorities' Full Employment Project. Views expressed within the report do not necessarily reflect the views of the Center.

Since 2000, U.S. manufacturing jobs have declined by more than one-third.^[2] As a result, communities with above-average shares of manufacturing have typically performed much worse than the average community in the United States.

 Figure 1 shows the performance of the local labor markets in the United States that are the most manufacturing intensive.^[3] These communities account for about one-quarter of U.S. jobs and population. But these communities suffered almost half of the post-2000 job loss in U.S. manufacturing. Their overall job trends have been much worse than the U.S. average.

These manufacturing-intensive communities, compared to the entire United States, have a job-growth gap of over 11 percentage points (a 2.7 percent loss of total private jobs in the manufacturing-intensive communities, versus an 8.5 percent gain in the entire United States). At least three-fifths of this job-growth gap is explained by these areas' greater manufacturing share.^[4]

NOTE: See Bartik (2018b) for data sources and definitions. Manufacturing-intensive communities are the 324 commuting zones (CZs) with a manufacturing location quotient in 2000 of 1.19 or higher. U.S. includes entire country, including both manufacturing-intensive CZs and the rest of the U.S. Data from the Upjohn Institute's WholeData, which comes from County Business Patterns. Private job growth percentage change is change in jobs divided by the average of 2000 and 2015 jobs.

Can anything be done to help manufacturing-intensive communities? What local policies offer cost-effective ways to spur local job growth? Can these communities succeed by reviving manufacturing? This paper seeks to answer these questions.^[5]

The short answers are these:

• Success for manufacturing-intensive communities is possible.
• We know what policies make sense to increase such communities' job growth.
• Such policies can boost local manufacturing.

Since 2007, a significant minority of manufacturing-intensive communities have had above-average job growth. Of this successful group, about half have done much better than the United States in manufacturing job growth.

My analysis of these successful communities shows some commonalities in their economic development approaches. My analysis identifies three cost-effective development strategies:

1. Expand customized services to small and medium-sized manufacturers.Manufacturing can be cost-effectively promoted by manufacturing extension services and customized job training. Manufacturing extension services provide individual firms with lower-cost access to high-quality advice on improving competitiveness. Customized job-training programs provide worker training specific to the firm's skill needs.
2. Invest in infrastructure and services that make the community's land better for business development. Job growth can be cost-effectively promoted by improving services in distressed neighborhoods, cleaning up brownfields, and investing in transportation infrastructure.
3. Increase public spending on services that increase local workers' job skills. Better skills for local workers help attract and grow higher-wage jobs. Adult skills can be improved by programs from birth onward. Effective skills development programs include the following: high-quality child care, high-quality preschool, K-12 education, college scholarships, and adult job training.  

Success Is Possible for Manufacturing-Intensive Communities

To identify determinants of success in manufacturing-intensive communities, my analysis focuses on local labor markets whose populations exceed 200,000. I do not consider smaller communities, whose success could be due to one plant opening, and are unlikely to yield generalizable lessons.

I identified 105 local labor markets that exceed 200,000 in population and are manufacturing-intensive. Out of those 105 areas, I categorized 22 areas as "successful" based on their meeting two criteria: 1) 2007-2015 private job growth greater than the U.S. average and 2) 2000-2015 private job growth that was positive.^[6] I categorized the other 83 areas as "unsuccessful." Figure 2 compares private job growth from 2007 to 2015 in the United States, the unsuccessful 83 areas, and the successful 22 areas.

From 2007 to 2015, U.S. manufacturing jobs declined by 13.8 percent. The successful 22 areas had a manufacturing job share almost 50 percent greater than the U.S. average.^[7] Yet despite U.S. manufacturing trends that were adverse, these 22 communities had job growth almost 2 percentage points greater than the United States: 4.7 percent for these 22 manufacturing-intensive areas, versus 2.8 percent average job growth for the United States as a whole. How did they do it?

Out of the 22 areas, half succeeded despite large manufacturing job losses. The other half succeeded in part by doing better than the United States in manufacturing.

Seven areas did worse than the U.S. in manufacturing job growth (meaning they lost more than 13.8 percent in manufacturing jobs). But six other areas had manufacturing job growth. Another five areas, although they lost manufacturing jobs, did at least 10 percentage points better than the United States (that is, they had manufacturing losses less severe than −3.8 percent). Therefore, 11 out of the 22 successful manufacturing-intensive areas either grew manufacturing jobs or had only modest manufacturing job loss.

Consider the four successful areas whose population exceeded 1 million: 1) Silicon Valley in California; 2) Charlotte, North Carolina; 3) Grand Rapids, Michigan; and 4) the Lehigh Valley in Pennsylvania. Silicon Valley and Charlotte succeeded despite doing poorly in manufacturing: Silicon Valley suffered a manufacturing job loss of 35.5 percent, and Charlotte had a manufacturing job loss of 16.2 percent.

The Grand Rapids area and the Lehigh Valley succeeded in part because they did better than the United States in manufacturing. From 2007 to 2015, Grand Rapids had 4.9 percent manufacturing job growth. The Lehigh Valley lost manufacturing jobs, but only by 0.4 percent.

Consider Grand Rapids. Figure 3 shows Grand Rapids' manufacturing job growth since 1990. To compare this performance with that of the United States, both the United States and Grand Rapids are indexed to a value of 100 in 1990.

Grand Rapids did not escape the large job declines in manufacturing in the United States from 2000 until 2009. But during periods when U.S. manufacturing jobs were holding steady, Grand Rapids showed healthy manufacturing job growth. By 2016, manufacturing jobs in Grand Rapids were over 50 percent greater than if Grand Rapids had followed post-1990 U.S. trends.^[8]

NOTE: Derived from the Bureau of Labor Statistics.

What Explains the Success of Certain Manufacturing-Intensive Communities?

How do we account for successful manufacturing-intensive communities? My analysis identified policy variables that were correlated with 2007-2015 private-sector job growth in these 105 larger manufacturing-intensive local labor markets.^[9]

I find no evidence that job growth in these areas is significantly spurred by cutting business taxes or increasing business tax incentives. The estimates are precise enough to rule out the possibility that such lower business costs could have large growth effects per dollar of cost reduction.

In contrast, customized business services boost job growth in manufacturing-intensive communities. For example, communities experience stronger job growth in states that invest more in customized job training programs, all else being the same.^[10] Customized training programs provide free or reduced-cost training, typically delivered by community colleges, that meets the specific skill needs of an individual firm seeking to hire new workers or upgrade its existing workforce. Total state government investment in customized training is around $600 million per year (Hollenbeck 2013).

Another customized business service that works is manufacturing extension services. Manufacturing extension services provide small and medium-sized manufacturers with consulting advice on improving technology, product design, and marketing. Advice is provided by the manufacturing extension office, in cooperation with university and private-sector experts. Each U.S. state has at least one manufacturing extension office, which is funded by federal, state, and local governments and by client fees. Total funding for manufacturing extension is around $400 million per year, with one-half to two-thirds from governments.^[11]

My analysis measures an area's intensity of manufacturing extension services by the job creation or retention due to manufacturing extension, as reported in client surveys.^[12] Reported extension-induced job creation or retention is a significant predictor of an area's overall job growth, holding constant other growth determinants.^[13]

Finally, a community's job growth is significantly affected by the skills of its workforce. Manufacturing-intensive areas with more workers with a college degree had higher job growth, all else being the same.^[14]

The estimated effects of customized business services, or of job skills, are large enough to be economically significant. For example, consider the effects of changing these variables from the values they have in an area with a relatively low level of these variables, to the values in an area with a relatively high level of these variables.^[15] Table 1 shows such effects.

If a community moves from a relatively low to high level in providing customized business services, job growth increases by 3.6 percentage points (= 1.93 percent + 1.67 percent). The percentage of workers who are college educated is less immediately affected by policy, but a community's higher ranking on this variable would increase growth by over 6 percentage points.

TABLE 1
Effect on Private-Sector Job Growth, 2007–2015, in Manufacturing-Intensive Areas, of Changing Three Policy Variables from Low to High Values (%)
Customized job-training spending	1.93
Manufacturing-extension-reported job creation or retention	1.67
Percentage of workforce college-educated	6.31

NOTE:  These calculations take the estimated coefficients from the regression reported in Bartik (2018b) and multiply it by the difference between the values at the 90th and 10th percentiles of a ranking of these communities for these variables. For customized job training, this difference takes customized job training spending from zero to 0.163 percent of value-added of export-base industries. For manufacturing extension, this takes the job growth reported due to manufacturing extension in the 2007–2015 period, as a prediction for total job growth, from 0.14 percent to 2.06 percent. For percentage of population with a college degree in 2007, this takes this percentage from 15.6 percent of the workforce to 32.0 percent.

 

But this is one study. What does the overall research literature say?

Cost-Effectiveness of Policies to Increase Local Job Growth

Much evidence exists on the cost-effectiveness of promoting local job growth through different policies. This research suggests that business tax cuts and incentives are relatively expensive. More cost-effective are two other strategies: 1) customized business services and 2) services and infrastructure to increase the attractiveness of land for business investment.

In measuring cost-effectiveness, we should account for how long jobs last, and when costs are incurred. This paper compares policies by the ratio of the policy's costs to the number of "job-years" the policy creates. One job-year is a job that lasts one year.^[16]

A policy's costs per job-year can be compared with local benefits. Local benefits of a job are less than the job's pay. In the long run, 15 percent of new local jobs lead to additional job opportunities for the local non-employed; the other 85 percent lead to jobs for in-migrants.^[17] Because average U.S. annual earnings are about $60,000, the benefits of local job creation due to increased local earnings from higher employment rates are around $9,000 per job-year. Other local benefits and costs could be added. Jobs may increase local wages, benefiting workers and hurting businesses. Some costs may occur from residents' reduced non-work time. Growth increases housing prices, which benefits property owners and hurts renters. Growth also increases state and local tax revenue, but in-migration drives up public service needs. Local benefits plausibly total $5,000 to $20,000 per job-year.^[18]

For different local policies, Figure 4 presents annual costs per job-year created. These estimated costs per job come from many rigorous studies.^[19]

NOTE: From Bartik (2018b). Costs per job-year are present value of costs divided by present value of job-years created. Policies are funded by what is called "neutral" financing in Bartik (2018b), which comes half from tax increases, half from spending cuts. For business tax cuts, tax increases are only for household taxes. Average incentives, customized services, and land development are assumed to have a multiplier of 2; high-multiplier incentives have a multiplier of 4.

Business tax cuts have a cost per job-year created that is quite high, costing about $46,600.^[20] Because other costs differ greatly across local areas (e.g., worker productivity), it takes a large business tax cut to tip business location decisions.

Business tax incentives are also expensive, at an estimated $16,600 per job-year.^[21] Incentive costs are lower than business tax cuts because incentives can be targeted at "export-base" firms, which are firms that sell goods and services outside the region, such as manufacturers. Export-base sales bring new dollars into a local economy. Other local jobs are created as the export-base firm buys from local suppliers and as its workers buy from local retailers.

In contrast, non-export-base firms sell goods and services to local customers. Expanded sales at one non-export-base firm takes sales away from local competitors. This reduces job-creation effects of policies that include non-export-base firms, such as business tax cuts.

By targeting export-base firms, business tax incentives have a job-multiplier effect on other local firms. Average multipliers for manufacturing firms are around 2: for each job induced in a manufacturing firm, one other job is created locally.^[22]

This job multiplier of 2 helps explain the lower costs per job-year created of average business tax incentives.^[23] If tax incentives are targeted at firms with a multiplier of 4, costs can be further reduced, to $7,100 per job-year.

Customized business services have much lower costs. Customized job training is estimated to have a cost per job-year of $3,000.^[24] Manufacturing extension is estimated to have a cost per job-year of $2,700.^[25]

These customized business services can have low costs because they overcome "market failures" holding back small and medium-sized businesses. Smaller businesses face financing and information barriers in getting the right job-training assistance and business advice. Assistance at modest costs can have larger effects on a smaller business's competitiveness.

Programs to make land ready for development can also have low costs. Redeveloping a distressed neighborhood with services that address neighborhood problems has estimated costs of $1,300 per job-year.^[26] Cleaning up brownfields has estimated costs of $1,000 per job-year.^[27] Providing infrastructure in depressed regions can have estimated costs of $800 per job-year.^[28]

Land development services can be cost-effective because they provide public goods. Improving the transportation access, environmental safety, and amenities associated with land can improve its development potential. Because such improvements often benefit a large area, the private sector is likely to underinvest in such improvements.

Local Earnings Effects of Skills Development Programs

Local economic development is not just about job growth. A higher number of local jobs has its greatest benefits because it increases residents' earnings per capita. Residents' earnings per capita are also boosted by increasing local wages.

A person's wages can be increased by skills development programs. Skills development programs can intervene at any stage of the person's life cycle, from high-quality child care and preschool to K-12 education to college and job training programs. For example, high-quality child care is a skills development program because it helps a child develop better "soft skills," which in turn leads to acquiring other skills later, culminating in better adult skills. As Nobel Prize-winning economist James Heckman has said, "Skills beget skills."^[29]

Does investing in skills development for residents lead to increases in local earnings per capita? Local earnings effects depend on whether higher-skilled residents stay or move away from the area. Americans are less mobile than is sometimes understood: half of all Americans, and 40 percent of college graduates, spend most of their working career in their childhood metropolitan area (Bartik 2009).

Moreover, skills acquisition by some residents benefits other residents. If the skills of some residents increase, these higher skills not only increase their own earnings but also increase earnings of other residents (Moretti 2004). For example, when 1 percent of the area population gets a college degree, this directly increases average area earnings by 1.4 percent, since a college degree increases the average earnings of each person in this 1 percent by 140 percent. But beyond that, studies suggest that because of this higher percentage of college-educated workers in the local community, the other 99 percent of the population will get earnings increases of 1.2 percent. Thus, overall area earnings will go up by 2.6 percent, almost twice the direct effect on the individuals getting college degrees.

Why do skills have these local "spillover" benefits? One theory is that business productivity depends upon teamwork, coordination, and idea sharing among many workers, both within and across firms. Even if an individual worker is skilled, a firm may not invest in new technologies unless most of the firm's workers are skilled. A firm may benefit from hiring workers from other firms. In addition, a firm's competitiveness may depend in part upon whether its local suppliers are able to provide it with a quality product at a low price, which will indirectly depend on the skills of these local suppliers' workers.

Figure 5 presents ratios of the present value of the local earnings increase, per dollar of program costs, for skills development programs. These ratios are based on estimates of the direct earnings effects, the proportion of workers staying in the area, and local spillovers. The figure also shows the ratio of earnings increases to program costs for an "average" business tax incentive. For incentives, the earnings increases are based on how job creation affects earnings per capita due to increasing local employment-to-population ratios.^[30]

NOTE: These ratios assume that programs are financed by increased taxes on the top 10 percent local income group, which, based on Zidar (2017), have no negative effects on local growth. Sources are specified in Bartik (2018b), except for community college workforce education. These numbers take the ratios for community college workforce education programs from Hollenbeck and Huang (2014) and multiply by 50 percent to account for migration.

All these skills development programs have local benefits, in higher earnings per capita, that far exceed program costs.^[31] Benefit-cost ratios range from just over 2-to-1 to over 8-to-1.^[32]

Skills programs have higher benefit-cost ratios than typical business tax incentives. Skills programs increase earnings per capita directly, whereas job creation programs only do so indirectly. As discussed above, only 15 percent of new jobs end up boosting residents' job prospects. Job creation programs don't have high benefit-cost ratios unless costs per job are low, which they aren't for typical incentives.

Both early and late skills development can pay off. Preschool has a benefit-cost ratio exceeding 5-to-1,^[33] but so do later interventions such as K-12^[34] and community-college workforce education.^[35] Child care has a lower benefit-cost ratio because of its high costs.^[36] College scholarship programs have lower earnings benefits relative to scholarship costs because many scholarships go to individuals who would have completed college anyway.^[37]

Skills development programs have two drawbacks. First, some benefits are long delayed. Child care has immediate benefits for parental earnings, and job-training programs have good medium-term benefits, but preschool and K-12 and even college scholarship programs do not fully realize their highest earnings benefits until former participants are in their prime earnings years, after age 40.

Second, these programs' ability to boost wages depends on job availability. In places or times of high unemployment, having more job skills is not enough.

Both drawbacks argue for combining skills development with cost-effective job creation. Job creation can offset a job shortage and provide more immediate benefits.

Grand Rapids as a Case Study

Is there evidence from specific communities that such strategies pay off? Yes. Consider Grand Rapids.

As mentioned, Grand Rapids has done relatively well in recent years in overall job creation, and in manufacturing job creation, compared to other manufacturing-intensive communities, and compared to the United States. What are some strategies accompanying that success?^[38]

• Grand Rapids put significant economic development resources into locating a branch manufacturing extension services office.
• The state of Michigan devotes more resources than the average state to customized job training programs.
• The local economic development organization has invested great effort in developing clusters of related manufacturing industries that can work together to identify common problems (e.g., skill needs) and that seek to overcome those problems.
• The local area has a high-profile initiative, Talent 2025, which is trying to improve the area's skills development from early childhood through adulthood.^[39]
• Extensive infrastructure investments have been made in downtown Grand Rapids.
• Local business interests put up funds for extensive subsidies that helped attract the medical school of Michigan State University to locate in Grand Rapids.

A specific example of an economic development effort in Grand Rapids was the creation of the West Michigan Medical Device Consortium. According to Atkins et al. (2011, p. 17),

[this] Consortium was formed to give medical device companies throughout the region the opportunity to collaborate, and to promote their specialized expertise in the medical device industry. An automotive parts firm . . . moved into the medical devices market, making [orthopedic] parts. A bakery and wrappings supplier established a medical packaging subsidiary, manufacturing packaging for medical test kits.

These Grand Rapids anecdotes are consistent with overall research on what spurs success in manufacturing-intensive communities.

Conclusion

What policies can help manufacturing-intensive communities? If aggregate U.S. manufacturing job decline is as bad as it was from 2000 to 2009, the answer is "nothing."

Therefore, to help manufacturing-intensive communities, federal policy should be supportive by stabilizing long-run U.S. manufacturing employment. This is possible. Because of global trends, such as increased customization of products, and rising costs in other countries, some manufacturing may move closer to its U.S. markets (Livesey 2017). Better U.S. macroeconomic policies may be able to make exchange rates more favorable to manufacturing.

If overall U.S. manufacturing job numbers stay at about the same level in the long run, then manufacturing-intensive communities have good policy options. Community success can be achieved by making the local economy more productive. Local policies can do the following:

• Help the competitiveness of small and medium-sized manufacturers.
• Make land more developable through better amenities, infrastructure, and environmental cleanup.
• Enhance the skills of the workforce.

Such local policies are best administered, customized, and delivered by local entities.  Distressed communities will need financial help from the state and federal government.

The federal government can also help by paying for policy evaluations. Local communities are laboratories of democracy. However, we don't learn much from labs if no one pulls together the results.

What is needed to help manufacturing-intensive communities? Two things: 1) federal policy to make success possible, and 2) local policies that invest in the factors that drive business productivity.

For additional details and analyses, see the longer report: Timothy J. Bartik (2018b),What Works to Help Manufacturing-Intensive Local Economies? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

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TOPICS: 

Economy, Full Employment

End Notes

^[1] Timothy J. Bartik is Senior Economist at W.E. Upjohn Institute for Employment Research. He thanks Ben Jones, Somin Park, Claire Black, and Nathan Sotherland for assistance, and Jared Bernstein, George Erickcek, and Sue Houseman for comments.

^[2] Unless otherwise noted, jobs data is taken from the Upjohn Institute's WholeData database, derived from County Business Patterns.

^[3] "Communities" and "local labor markets" are used synonymously in this paper. Local labor markets are defined as "commuting zones" (CZs): groups of counties with sufficient intercommuting to equalize labor market conditions. CZs are similar to metropolitan areas, but also group rural counties into local labor markets. The United States is divided into 709 CZs.

^[4] The percentage job loss in manufacturing was similar in the manufacturing-intensive CZs to the entire United States, at −36.3 percent in the 324 CZs versus −34.7 percent in the entire United States. But because of their greater manufacturing share, the loss of manufacturing, as a percentage of private jobs, was much greater in the 324 CZs: −7.5 percent vs. −4.1 percent in the entire United States. This 3.4 percent greater manufacturing job loss, as a percentage of private jobs, would directly reduce job growth by 30 percent of the overall gap. But manufacturing has a "multiplier effect" of 2 or 3 on local jobs — for each one job lost in manufacturing, one or two other jobs are lost by suppliers or retailers. A multiplier of 2 would suggest that the larger manufacturing job loss, as a percentage of the economy, would reduce job growth in these 324 CZs, relative to the United States, by 6.8 percentage points — 61 percent of the overall gap.

^[5] This paper relies on a longer report (Bartik 2018b).

^[6] Bartik (2018b) lists the 22 areas and gives more statistics.

^[7] 16.0 percent of total jobs in 2007 versus 11.0 percent in the United States.

^[8] 1.56 = Grand Rapids index number of 109.0 in 2016 divided by U.S. index of 69.8. Bartik (2018b) shows Grand Rapids' manufacturing growth is not due to its industry mix.

^[9] The analysis used a regression approach, explained in Bartik (2018b). I used extensive controls for other growth determinants, so the policy variables represent effects, holding many other growth determinants constant.

^[10] This effect of customized job training is statistically significantly different from zero at the 10 percent significance level, but not the 5 percent level.

^[11] The $130 million in federal funding has been proposed for elimination in the Trump administration's 2019 budget.

^[12] The survey is administered by a third party to all clients of programs funded by the Manufacturing Extension Partnership (MEP), and it gets a 70 percent response rate. Services are not conditional on survey responses.

^[13] The estimated coefficient is statistically significantly different from zero at a 5 percent significance level, with a t-statistic of 3.55.

^[14] The estimated coefficient is statistically significantly different from zero at a 5 percent level, with a t-statistic of 2.98.

^[15] The thought experiment involves changing each variable from its value in the area that is at the 10th percentile in a ranking of the 105 areas by this variable, to an area in the 90th percentile in a ranking of all areas by this variable. This is a change from an area ranked 95th out of 105 areas, to an area ranked 10th out of the 105 areas.

^[16] More specifically, I calculate the present value of costs, in 2015 dollars, per present value of job-years created, using the common convention of a 3 percent social discount rate to calculate present values.

^[17] This is not the same as the proportion of new jobs that go to residents. Any new local job must be filled by residents who are employed, residents who are not employed, or in-migrants. But the jobs filled by employed residents lead to job vacancies, which are filled in the same three ways. This job vacancy chain implies that new local jobs ultimately either increase jobs for the local non-employed or for in-migrants. The 85/15 percent split is what research shows ultimately happens, as shown in the review in Bartik (2015).

^[18] Bartik (2018a) examines the benefits and costs of local job growth due to business tax incentives and finds an average benefit per job-year under "baseline" assumptions of $12,160. This estimate is derived from numerous other studies of these various benefits and costs.

^[19] Bartik (2018b) provides a more detailed discussion of the various studies behind these estimates.

^[20] This cost estimate is derived from numerous research studies of how business taxes affect business location decisions. This literature is summarized in Bartik (1991), Phillips and Goss (1995), and Wasylenko (1997). More recent work on business taxes is consistent with this research literature (e.g., Suárez Serrato and Zidar 2016).

^[21] This cost-per-job-year estimate for incentives is derived from the business tax literature as well, with an allowance for multiplier effects. This estimate is also consistent with research on the effectiveness of incentives, for example Jensen (2017).

^[22] This is the multiplier allowing for negative effects of higher costs on job growth. This net multiplier is consistent with Moretti (2010) and Van Dijk (2018).

^[23] The multiplier of 2 implies incentive costs of half the tax cut. The larger discrepancy is partly due to incentives targeting firms on the margin of making investment decisions, and partly due to interactions with financing costs (Bartik 2018b).

^[24] Derived from Holzer et al. (1993). This study is consistent with evidence from Hollenbeck (2008) and Hoyt et al. (2008).

^[25] Derived from Jarmin (1998, 1999). Jarmin's results are consistent with other evidence on manufacturing extension from Ehlen (2001).

^[26] Based on a study of the Empowerment Zone program by Busso, Gregory, and Kline (2013).

^[27] Based on case study evidence from Paull (2008).

^[28] Based on study of Tennessee Valley Authority by Kline and Moretti (2014).

^[29] See the "Heckman Equation" website at https://heckmanequation.org/resource/skills-beget-skills/.

^[30] For the purposes of this calculation, one job created is assumed to increase earnings per capita by $12,500, due to both direct effects on employment-to-population ratios and indirect effects of such higher ratios on real wages.

^[31] These higher earnings benefits occur through two channels: 1) skills programs increase wage rates and 2) skills programs increase local job creation. The available evidence indicates the wage channel is more important (Bartik 2018b).

^[32] Sources of these estimated benefit-cost ratios are presented in the full report (Bartik 2018b) and are briefly referenced later.

^[33] The preschool estimate comes from a literature review that includes the Perry Preschool program and the Chicago Child-Parent Center program (Bartik 2014).

^[34] The K-12 spending evidence comes from Jackson, Johnson, and Persico (2016).

^[35] Derived from Hollenbeck and Huang (2014).

^[36] The child-care calculation is from the Abecedarian program, which offered full-time child care from birth until age 5, with a per-child cost of $90,000 (Bartik 2014). About 60 percent of higher earnings benefits are for the parent, not the child, as the child care allows added on-the-job experience and education.

^[37] The place-based scholarship ratio comes from a study of the Kalamazoo Promise by Bartik, Hershbein, and Lachowska (2016). In a more formal benefit-cost analysis, scholarship costs would in large part be a transfer to scholarship recipients. If we only count the costs of more years of college, the local benefit-cost ratio is 6.51 (= 40 percent local share × benefit-cost ratio in Bartik, Hershbein, and Lachowska [2016, Table 8]).

^[38] See Bartik (2018b), Atkins et al. (2011), and Miller-Adams et al. (2017) for more on Grand Rapids.

^[39] See http://www.talent2025.org/

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Republicans’ “Jobs Gap” is a misleading measure that means nothing. [feedly]

Republicans' "Jobs Gap" is a misleading measure that means nothing.
http://jaredbernsteinblog.com/republicans-jobs-gap-is-a-misleading-measure-that-means-nothing/

The Republicans' "Jobs Gap" is a meaningless measure that reveals nothing about the job market. It can, and is, easily manipulated to show any outcome you like.

On the other hand, the facts about the current labor market are as follows.

–The long-term trend of job growth remains solid, unemployment is low, and, contrary to claims related to the "jobs gap," employment among working-age people is growing relative to their population.

–Anecdotes suggest that some particularly hot labor markets are helping workers overcome steep labor market barriers, like criminal records. Conversely, some groups of workers face skill or health deficits, the absence of necessary work supports, or live in places that have not yet been reached by strong labor demand.

–Even as the job market continues to tighten, wage growth has been relatively sluggish. Since late 2016, real earnings for middle-wage workers has been flat.

The phony jobs gap measure 

The Republicans "Jobs Gap" measure consists of two disparate series—the labor force participation rate (LFPR) and job openings—with very different scales and no substantive meaning. The commentary around the measure suggests its advocates think the jobs gap shows that people are not taking advantage of labor market opportunities, but the actual data belie that claim.

The LFPR is the percentage of the 16+ population that's employed or unemployed (i.e., in the labor force), and job openings are millions of jobs. Importantly, the 16+ population includes persons of retirement age, an increasing share of the U.S. population, as well as teenagers in high school and young adults in college, so it is not a useful measure for the purpose it is intended (I show better measures below). Labor economists have long expected the overall LFPR to grow less quickly as the baby boomers age out of the labor force.

But the immediate problem with the "jobs gap" is that there's no meaningful way to present these two series on one graph. In fact, by tweaking their different scales in ways that make no more or less sense than the Republicans' version, you can get a gap of any size you like or no gap at all!

Here's the Republicans' version.

Here's one with a much bigger gap. Oh no!

Here's one with a negative jobs gap (LFPR appears greater than job openings)! Phew!

What do the job openings data show?

A more serious attempt to learn about the current labor market from the jobs opening data might make use of two figures that the BLS publishes every month when the openings data are released (new data came out this AM). Both show a tightening labor market with people filling available jobs in the way we'd expect at this point in the business cycle.

The first figure shows the unemployed per job opening. During the recession, there were almost 7 unemployed persons per job opening. Now, there's only 1, and the measure is actually a bit below its pre-recession level.

 

The next figure shows job openings and hires as rates (shares of total employment). They've both been on the rise as the job market has improved and are at similar levels now. Again, there's nothing in these data that show people not taking advantage of job opportunities.

In fact, for prime-age (25-54) workers, employment rates have been rising at a solid clip.

As noted, due to our aging population, the total LFPR can be misleading when evaluating the job market. In fact, the increased share of older persons in the LFPR is one reason for the recent flat trend in the LFPR in the jobs gap figures above, which is why many labor market analysts prefer to look at the prime-age population, age 25-54, as this excludes persons aging out of the labor force.

The simplest way to discern if working-age people are taking advantage of job opportunities is simply to look at their employment rates (the share of the working-age population with jobs). The next two figures look at the employment rates for men and women in this 25-54 age range. In a trend that clearly contradicts conservative stories about prime-age workers unresponsive to opportunities, both series have climbed steadily in the expansion and both are closing in on their pre-recession peaks.

Some anecdotal accounts reveal that in some parts of the country, the tight labor market is providing opportunities for people who in less hot job markets face steep barriers to entry into the job market. From the NY Times:

"A rapidly tightening labor market is forcing companies across the country to consider workers they once would have turned away. That is providing opportunities to people who have long faced barriers to employment, such as criminal records, disabilities or prolonged bouts of joblessness."

In sum, the labor market is on a long-term, tightening trend, and working-age people are increasingly employed. Unemployment per job opening is low, hires and openings rates are up, and employment rates for prime-age workers are steadily climbing back to pre-recession levels.

Are there any downsides to the current job market?

One significant shortcoming in the current labor market is that national wage growth has disappointed, especially for middle-wage workers, both in nominal and real terms. As I show in this recent analysis, wages have typically grown faster at current levels of unemployment, and in real terms, middle-class worker pay is not up at all since 2016.

It is also the case that even at low unemployment, regional pockets of above-average joblessness still exist. Recent research published by the Brookings Institution, for example, shows that potential workers in some places remain unreached by low unemployment, emphasizing, for example, the gaps between employment rates for prime-aged workers in the hot coastal markets versus places hurt by manufacturing job losses. Moreover, as is far too often the case, minority jobless rates remain well above those of whites, even controlling for education.

Congress could therefore do more to address the structural barriers that even at low unemployment stand between too many Americans and the job market. These barriers occur on both the demand side (too few job opportunities) and the supply side (skill or health deficits, discrimination, criminal records) of the labor market. Workers whose skills don't align with today's employers' demands will need robust training and apprenticeship programs. Others will require work supports including higher minimum wages, housing and nutritional support, and, in some places, direct job creation programs.

Two new papers from CBPP provide excellent guidance in terms of what sort of interventions have been found to be most effective in helping left-behind workers overcome this spate of labor market barriers.

It should be noted that because they fail to address these structural barriers, adding work requirements to anti-poverty programs will backfire. And yet, instead of investing in jobs, training, and work supports, the Congressional majority passed a regressive, deficit-financed tax cut that adds almost $2 trillion to the 10-year budget deficit. If we truly hope to help workers left behind, these resources are sorely misdirected.

Note: All data are from the BLS. Thanks to Somin Park for lots of great help.

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What the boss wants to hear ... [feedly]

What the boss wants to hear ...
http://understandingsociety.blogspot.com/2018/05/what-boss-wants-to-hear.html

According to David Halberstam in his outstanding history of the war in Vietnam, The Best and the Brightest, a prime cause of disastrous decision-making by Presidents Kennedy and Johnson was an institutional imperative in the Defense Department to come up with a set of facts that conformed to what the President wanted to hear. Robert McNamara and McGeorge Bundy were among the highest-level miscreants in Halberstam's account; they were determined to craft an assessment of the situation on the ground in Vietnam that conformed best with their strategic advice to the President.

Ironically, a very similar dynamic led to one of modern China's greatest disasters, the Great Leap Forward famine in 1959. The Great Helmsman was certain that collective agriculture would be vastly more productive than private agriculture; and following the collectivization of agriculture, party officials in many provinces obliged this assumption by reporting inflated grain statistics throughout 1958 and 1959. The result was a famine that led to at least twenty million excess deaths during a two-year period as the central state shifted resources away from agriculture (Frank Dikötter, Mao's Great Famine: The History of China's Most Devastating Catastrophe, 1958-62).

More mundane examples are available as well. When information about possible sexual harassment in a given department is suppressed because "it won't look good for the organization" and "the boss will be unhappy", the organization is on a collision course with serious problems. When concerns about product safety or reliability are suppressed within the organization for similar reasons, the results can be equally damaging, to consumers and to the corporation itself. General Motors, Volkswagen, and Michigan State University all seem to have suffered from these deficiencies of organizational behavior. This is a serious cause of organizational mistakes and failures. It is impossible to make wise decisions -- individual or collective -- without accurate and truthful information from the field. And yet the knowledge of higher-level executives depends upon the truthful and full reporting of subordinates, who sometimes have career incentives that work against honesty.

So how can this unhappy situation be avoided? Part of the answer has to do with the behavior of the leaders themselves. It is important for leaders to explicitly and implicitly invite the truth -- whether it is good news or bad news. Subordinates must be encouraged to be forthcoming and truthful; and bearers of bad news must not be subject to retaliation. Boards of directors, both private and public, need to make clear their own expectations on this score as well: that they expect leading executives to invite and welcome truthful reporting, and that they expect individuals throughout the organization to provide truthful reporting. A culture of honesty and transparency is a powerful antidote to the disease of fabrications to please the boss.

Anonymous hotlines and formal protection of whistle-blowers are other institutional arrangements that lead to greater honesty and transparency within an organization. These avenues have the advantage of being largely outside the control of the upper executives, and therefore can serve as a somewhat independent check on dishonest reporting.

A reliable practice of accountability is also a deterrent to dishonest or partial reporting within an organization. The truth eventually comes out -- whether about sexual harassment, about hidden defects in a product, or about workplace safety failures. When boards of directors and organizational policies make it clear that there will be negative consequences for dishonest behavior, this gives an ongoing incentive of prudence for individuals to honor their duties of honesty within the organization.

This topic falls within the broader question of how individual behavior throughout an organization has the potential for giving rise to important failures that harm the public and harm the organization itself.

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How Xi Jinping's Marxism Out-thinks the West [feedly]

How Xi Jinping's Marxism Out-thinks the West
http://www.humaniteinenglish.com/spip.php?article3184

The Hamburg G20 summit was a further stage in a process that has been developing strongly during the 2017: a recognition that a new stage in China's international 'though leadership' has developed. For decades China had the world's most rapidly growing economy, the world's fastest increase in living standards, and was responsible for over 80% of the reduction of the number of people in the world living in poverty. But now, as Edward Luce, the chief Washington correspondent for the Financial (...)

- International Communist and Labor Press

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What Next For The Teacher’s Movement? [feedly]

What Next For The Teacher's Movement?
https://economicfront.wordpress.com/2018/05/03/what-next-for-the-teachers-movement/

Public school teachers in West Virginia, Oklahoma, Kentucky, and Arizona have won meaningful salary gains for themselves, and in several cases other school workers, and real although limited increases in education spending.  Unfortunately, their demands for significant tax reform, including new taxes on corporations and the wealthy to fund a more general increase in public services, remain largely unfulfilled.  Hopefully, the lessons learned and the connections made will lead to more democratic and powerful unions and worker-community movements for change that can carry the fight forward.

Teachers deserved a raise

Teachers definitely deserve a raise.  A recent Economic Policy Institute study by Sylvia Allegretto and Lawrence Mishel finds a substantial and growing wage and compensation gap between what teachers and other similarly educated workers earn.  For example:

• Average weekly wages (inflation adjusted) of public-sector teachers decreased $30 per week from 1996 to 2015, from $1,122 to $1,092 (in 2015 dollars). In contrast, weekly wages of all college graduates rose from $1,292 to $1,416 over this period.
• For all public-sector teachers, the relative wage gap (regression adjusted for education, experience, and other factors) has grown substantially since the mid-1990s: It was ‑1.8 percent in 1994 and grew to a record ‑17.0 percent in 2015.
• While relative teacher wage gaps have widened, some of the difference may be attributed to a tradeoff between pay and benefits. Non-wage benefits as a share of total compensation in 2015 were more important for teachers (26.6 percent) than for other professionals (21.6 percent). The total teacher compensation penalty was a record-high 11.1 percent in 2015 (composed of a 17.0 percent wage penalty plus a 5.9 percent benefit advantage). The bottom line is that the teacher compensation penalty grew by 11 percentage points from 1994 to 2015.
• Collective bargaining helps to abate the teacher wage gap. In 2015, teachers not represented by a union had a ‑25.5 percent wage gap—and the gap was 6 percentage points smaller for unionized teachers.

The figure below highlights the growing wage gap between public school teachers and similar workers (controlling for age, education, race/ethnicity, geographic region, marital status, and gender).

The next figure shows that in no state are teachers paid more than other college graduate.  In fact, as the EPI study points out:

The ratio for the overall United States is 0.77, meaning that, on average, teachers earn just 77 percent of what other college graduates earn in wages. . . . In 18 states, public school teacher weekly wages lag by more than 25 percent. In contrast, there are only five states where teacher weekly wages are less than 10 percent behind.

And, as the table below makes clear, teachers suffer an overall compensation gap, with their benefit advantage not nearly big enough to compensate for their large and growing wage penalty.

The rightwing playbook

Teacher victories in West Virginia, Oklahoma, Kentucky, and Arizona were made possible by strong community support for their strike actions.  However, teachers and other activists need to prepare for the likely rightwing counter attack, which will aim to break the newly created bonds of solidarity and support for collective, militant action.

A Guardian newspaper article, which includes a secret three-page manual on how to talk about teacher strikes produced by the State Policy Network, sheds light on rightwing fears and planning.  The State Policy Network is "an alliance of 66 rightwing 'ideas factories' that span every state in the nation," that is well funded by, among others, the Koch brothers, the Walton Family Foundation, and the DeVos family.

The manual talks about the need to discredit the strikes by portraying them as harmful to low income parents and their children.  But it also recognizes that this is a challenging task.  For example, it says:

A message that focuses on teacher hours or summer vacations will sound tone-deaf when there are dozens of videos and social media posts going vital from teachers about their second jobs, teachers having to rely on food pantries, classroom books that are falling apart, paper rationing, etc.  This is an opportunity to sympathize with teachers, while still emphasizing that teacher strikes hurt kids.  It is also not the right time to talk about social choice—that's off topic, and teachers at choice-schools are often paid less than district school teachers.

As to what should be said, the manual encourages rightwing activists to respond to concerns about insufficient school funding by calling for more efficient use of existing monies, in particular by reducing "administrative bloat" and "red tape."  And, it has special advice for those that live in states where taxes have been recently slashed:

That is obviously a challenging message to counter.  But you can consider something like "One of the most important things we can do to make sure our schools are properly funded is to have a strong economy where everyone who can work can find a job and contribute to the tax coffers that fund the government. Lower tax rates help contribute to stronger job growth.  Also lower taxes on individuals let teachers keep more of the money they earn."

More dangerous are some of the ways in which the rightwing actually seeks to punish or intimidate teachers.  Jeff Bryant, writing at OurFuture.org provides a sobering list:

Leading into the two-day teacher walkout in Colorado, Republican legislators introduced a bill that would lead to fines and potentially up to six month's jail time for the striking teachers. The bill was pulled, when it became clear even some Republicans weren't too keen on the measure.

In Arizona, a libertarian think tank sent letters to school district superintendents threatening them with lawsuits if they didn't reopen closed schools and order striking teachers to return to work. It's unclear how or whether the threat will actually be carried out now that teachers are back on the job.

In West Virginia, where teachers used a nine-day strike to secure a five percent raise, Republicans have vowed to get their revenge by cutting $20 million to Medicaid and other parts of the state budget to pay for the increase. No doubt, when the axe falls on these programs, Republican lawmakers will be quick to blame the "greedy" teachers.

In Kentucky, Republican Governor Matt Bevin accused striking teachers of leaving children exposed to sexual assaults or being in danger of ingesting toxic substances because teachers weren't at school. Now that the uprising has ended, Bevin has turned his revenge against teachers into an effort to take over the largest school system in the state and take away local control of the schools.

No doubt, this is just the beginning, which means that activists need to move quickly to build on victories and expand their challenge to existing relations of power.

The challenges ahead

One hopes that teacher activists in states where strikes have taken place are finding ways to build upon recent mobilizations to build organizations and revitalize their unions.  And, that they are also reaching out to other public sector unions, with the aim of building a broad alliance that can spearhead a grass-roots movement for new progressive taxes and a more class conscious vision of state policy. Despite the dangers, this is a hopeful political moment for all of us.

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China Won’t Wait [feedly]

China Won't Wait
https://www.project-syndicate.org/commentary/china-and-west-reform-international-order-by-p-h-yu-2018-05

China's rise is both unambiguous and unstoppable, whether the West likes it or not. Refusing to acknowledge reality will only generate more tension – and more risk, because failing to accommodate China will destabilize the rules-based order on which the world has come to rely.

BEIJING – The global balance of power is shifting. As the United States retreats from global leadership, China is expanding its international influence. Now, many in the West fear a China-led attempt to overhaul the rules and norms that underpin the existing world order. Are they right to be afraid?


The reemergence of China as a major regional and even world power certainly poses profound challenges to the US-led international order that was created after World War II. But Chinese leaders' goal is not explicitly to upend that order, which did, after all, prove flexible enough to enable the impoverished China of the 1970s to become what it is today. Instead, the goal is to ensure that the existing order can adequately accommodate the interests and objectives of both China and the US.

China's objectives are ambitious, to say the least. Deng Xiaoping's policy of "reform and opening up" enabled an economic miracle that has lifted hundreds of millions of Chinese out of poverty. President Xi Jinping's task is not only to complete what Deng started and eradicate poverty, but also to forge an economy that returns China to its position, held for most of recorded human history, as a major world power.

It is that vision – what Xi calls the "China dream" – that really seems to unsettle the West, to the point that some advocate a kind of coordinated containment strategy. But the fact is that China's domestic economy, like that of the US, is already strong enough to secure the country's future influence.

In that context, a backward-looking strategy of rigid containment is bound to fail. Worse, it could drive China to mount a more fundamental challenge to the existing international order. The only way to preserve that order is thus to prove that it remains flexible enough to respond to China's needs and aspirations.

Of course, this is easier said than done, not least because the West already feels blindsided by the scope and pace of China's rise. But if the West was understandably unprepared for a development that is unprecedented in world history, its own complacency also played a major role.



After the Soviet Union's fall, Francis Fukuyama declared that the "end of history" – in the teleological Hegelian sense – had arrived. From then on, he argued, building a modern society would demand a market economy and a democratic political system. In the ensuing decades – even as China grew and modernized – Western thinkers treated this self-indulgent delusion as an empirical certainty. They confirmed their biases – and obscured reality further – by relying on rigid and outdated academic models that were inadequate to explain China's success.

Increasingly, however, people are recognizing reality. This was confirmed at a recent international conference in Beijing entitled "China and the West: The Role of the State in Economic Growth," organized by Columbia University's School of International and Public Affairs.

Many participants agreed that China's top-down decision-making structure, by enabling the government to invest in painful but needed reforms, confers a powerful development advantage. Some openly questioned the current US economic model, which is increasingly characterized by the monopolization of resources and distortion of political decision-making by vested interests.

Yet this recognition may be part of the problem: though China continues to reassure the West that it is not nurturing imperial or expansionist ambitions, Western political leaders remain dubious, if not outright suspicious. They fear being blindsided yet again and losing control of a system that they have painstakingly built in their own image.

But China's rise will continue, whether the West is ready or not. It might help if Western thinkers developed new analytical frameworks to help political leaders better comprehend China's development model. They can start by recognizing that China's economic model – which has proved effective in boosting growth and reducing poverty in a sustained way – is a genuine alternative to the Western approach.

Refusing to acknowledge reality will only generate more tension – and more risk, because failing to accommodate China will destabilize the rules-based order on which the world has come to rely. Instead of clinging to outdated assumptions and rigid ideas, the West should work with China to reform the existing global order in ways that benefit all. Otherwise, Western leaders' worst fears will be realized.

1. 
   

P.H. YU

1 Commentary

P.H. Yu is Chairman of the Council of the Institute of New Structural Economics at Peking University.

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The Destruction of the Republican Party [feedly]

The Destruction of the Republican Party
https://www.project-syndicate.org/commentary/trump-end-of-republican-party-by-j--bradford-delong-2018-05

There can no longer be any doubt that America has an unhinged, unqualified kleptocrat presiding in the White House. Nor can there be any question that the Republicans who put him there may be sealing their party's fate as the manifestation of Trumpism, rather than traditional conservatism.

BERKELEY – It has been one and a half years since Donald Trump was elected to the US presidency, so now is as good a time as any for Americans to take a deep breath and contemplate their broken political system.




To be sure, the United States has not experienced any major catastrophes, even though massive policy mistakes always seem to be looming on the horizon. But the country has been suffering a death by a thousand cuts, leaving it weaker and poorer the longer Trump is in office.

Much of the blame for this belongs to the Republicans, who have fallen into line behind Trump for reasons that are still difficult to understand. Trump was elected with over 60 million votes – some three million fewer than his opponent, Hillary Clinton. But he gained public backing from a wide array of Republican mandarins, policy advisers, and activists, all of whom knew that a President Clinton would pose less of a risk to the country.

Why did they do it? The most persuasive hypothesis is that – like former FBI Director James Comey and Dean Baquet, the executive editor of The New York Times – they ignored polling that did not underestimate the risk of a Trump victory. Mainstream Republicans assumed that they had little to lose, and perhaps something to gain, by opposing Clinton, because that is the lesson they took from the experiences of both Richard Nixon and Ronald Reagan.

It is worth remembering that in 1964, Nixon backed the Republican presidential candidate Barry Goldwater, while other Republicans, such as then-Governor of Michigan George Romney, did not. Nixon then went on to become the party's presidential nominee in 1968, winning out over Republicans who had alienated the party's activist base by opposing Goldwater.

Likewise, Ronald Reagan backed Nixon until the very end, even as Nixon's impeachment was imminent, while Republicans such as Senator Howard Baker of Tennessee concluded that Nixon would have to go. Reagan went on to become the party's presidential nominee in 1980, winning out over Republicans who had stepped out of line with the party's activist base.


In 2016, the Republicans who backed Trump most likely saw it as a cheap way to advance their future in the party. What they did not count on was that he would actually become president, and that they would still have to look at themselves in the mirror every morning. Now that Republican rank-and-file voters have come to regard themselves more as Trump supporters than as Republicans, the party's leading lights must decide what to do next.

Some have already made their choice. Speaker of the House Paul Ryan is retiring at the end of this term. Barring the unlikely possibility that he will mount a presidential run sometime in the future, he is effectively abdicating one of the most powerful positions in the US government, and abandoning his country to the leadership of an unhinged and unqualified kleptocrat. And Ryan is hardly alone: at last count, 43 Republican House members have decided not to seek reelection in November.

Whatever becomes of the Republican Party, it is within the American people's power to mitigate some of the damage from Trump's domestic policies at the local level. That is precisely what California and other Democratic ("blue") states have been doing – and with a great deal of success so far.

But in Kentucky, Alabama, Mississippi, Nebraska, and other red states, the Republican voter base continues to be easily grifted. Farmers in Iowa and other heartland states turned out heavily for Trump in 2016, only to find that he regards them as acceptable casualties in the trade war he wants to launch against China, and perhaps Mexico, too. One should feel sorry for these voters, but not for the Republican politicians who have continued to swindle them by supporting Trump.

What can be done? For starters, we have to educate voters, and keep the spotlight on policies that are against their interests. Normalization is not an option. Pointing out the stupidity and destructiveness of Trump's policies, and making the case for their immediate reversal, should be an everyday occurrence.

Beyond that, Americans should try to persuade Vice President Mike Pence that it's time to invoke Section 4 of the 25th Amendment, which provides for the removal of a president who has been deemed unfit to serve by a majority of his or her cabinet.

Public pressure should also be brought to bear on Rupert and Lachlan Murdoch, the co-chairmen of 21st Century Fox, which owns Fox News. Many of Trump's policy decisions and tweets track whatever his favorite Fox News commentators say on any given day. In the long run, though, kleptocrats tend to make prey of plutocrats. If the Murdochs care about their long-term fortunes, their best move may be to have their network tell the president: "You gave it a good try, but you're tired and clearly unhappy in the job, so why not just quit and go play golf, for the sake of your health?"

Finally, Republicans should be made to understand that this is their party's "Pete Wilson" moment. Pete Wilson is a former Republican governor of California who in the 1990s consigned his party to permanent minority status in the state by smearing Latinos as a menace. Today, California's large Latino population – which includes many dedicated, socially conservative churchgoers – have no truck with the Republicans. (Nor do many elderly white men in California, because even they are capable of embarrassment.)

Trump could do to the Republican Party nationally what Wilson did to it in California. Party leaders – already facing the likely loss of the House, and possibly the Senate, in November – need to act before it's too late.



J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America's transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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