AEIdeas The public policy blog of the American Enterprise Institute Thu, 24 Jul 2014 21:24:52 +0000 en-US hourly 1 Refuting the false claim at The Federalist that ‘food inflation blows away wage growth.’ It’s just not true. Period. Thu, 24 Jul 2014 20:48:47 +0000 read more >]]> fed2Both Sean Davis and Ben Domenech at the web magazine The Federalist have used the chart above in their recent posts about food inflation here and here. As the title of the chart implies, Davis and Domenech are both claiming that “food inflation has blown away wage growth” since the end of the recession in June 2009.

But there’s a problem with that claim. Sure, certain food groups might have gone up in price over the last five years by more than the increase in average hourly wages. But a more realistic representation of what’s happened since June 2009 is shown in the chart below.

inflation2The blue line in the chart shows the 11% increase since June 2009 in the broadest CPI food category “Food and Beverages,” which is one of the eight major CPI groups according to the BLS, and includes: breakfast cereal, milk, coffee, chicken, wine, full service meals, and snacks. It should be noted in any discussion about food prices that “food away from home” is almost 50% of total food spending for Americans, according to the most recent USDA data (see Table 10). Therefore, I’m using the most comprehensive measure of food and beverage prices, which would most accurately reflect the prices of food for the typical American household. Using different CPI measures doesn’t change the analysis much – the “CPI-Food” has increased 11.3%, “CPI-Food Away from Home” has increased the same 11.3%, and “CPI-Food at Home” increased 11.36%.

Here’s the key point – over the last six years, the BLS wage series “Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private” has increased by 10.8% from $18.57 to $20.58 per hour (see red line in chart). Therefore, the broadest measure of food and beverage prices has increased by only slightly more (11%) than the increase in average hourly earnings (10.8%). Food inflation is not “blowing away wage growth” – it’s basically almost exactly matching it! The BLS wage series used here starts in 1964 and is the measure of hourly earnings used most frequently for historical analysis, given its 50-year history. A more recent measure of hourly earnings was introduced by the BLS in 2006 — “Total Private Average Hourly Earnings of All Employees: Total Private” — and that measure has shown a slightly lower increase in hourly wages since June 2009 of 10.4%, but is still just slightly below the 11% increase in food prices, and provides no statistical support for the claim that “food inflation blows away wage growth.”

Even more important than comparing wage growth to only one major CPI group (food and beverages), the chart above shows that overall consumer price inflation (CPI – All Items) has increased by 10.6% (see brown line in chart), which is slightly below the 10.8% increase in hourly earnings, meaning that there has been a slight increase in real, inflation-adjusted earnings since June 2009. Using the other measure of hourly earnings would indicate a slight decrease in real hourly earnings.

Bottom Line: Over the last five years, consumer prices, food prices and hourly earnings have all increased at almost exactly the same rate, and there is absolutely no statistical support for the outrageous and unfounded claim that “food inflation blows away wage growth.” None. Case closed.

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The Ryan pro-work, anti-poverty plan: Thomas Aquinas 1, Ayn Rand 0 Thu, 24 Jul 2014 19:10:50 +0000 read more >]]> If you want America to become Scandinavia, then you won’t like Paul Ryan’s new anti-poverty plan. The House Budget chairman didn’t call for a universal basic income or universal preschool. And if you want Republicans to hush up and just accept the Obama minimum-wage agenda, you won’t like the Ryan plan. Before it was released, the progressive think-tank Center for American Progress opined, “If past is prologue, Rep. Paul Ryan’s latest poverty proposals will exacerbate poverty and inequality.” Now after seeing the plan, CAP wonders if the plan is really “the Ryan Budget in sheep’s clothing?” And so it goes.

But there is good reason why Brookings poverty scholar Ron Haskins calls the Ryan plan “sweeping, bipartisan, reasonable.” See, Ryan wants to raise the ceiling, not lower the floor. The goal: encourage work, self-sufficiency and upward mobility. One Ryan idea, presented at the American Enterprise Institute, would increase the gap between what work pays and what welfare provides by doubling the maximum Earned Income Tax Credit for childless workers to $1000 and lower the minimum eligibility age to 21 from 25. The EITC has been shown to draw low-income Americans into the labor force. Ryan would increase that incentive for a group that has seen a steady decline in the wages for low-skill jobs.

Now there is a whole lot more to the Ryan plan, which he prefers to a call a “discussion draft.” But the EITC expansion shows an endorsement of the safety net – with pro-work reforms, of course — that is currently lacking in some parts of the center-right community. A big part of a healthy American economy, Ryan said, “is having a strong safety net—both for those who can’t help themselves and for those who just need a helping hand.” Thomas Aquinas 1, Ayn Rand 0.

Now the part likely to get the most media intention is Ryan’s “Opportunity Grant” proposal. For states volunteering to participate, 11 existing federal anti-programs – including food stamps, cash welfare, and housing assistance – would be smooshed into a single funding stream for states and include work requirements. Receiving the same amount of federal dough as before, states could then experiment with different ways of providing aid such as partnering with nongovernmental organizations. Ryan: “So if the public and private sector work together, we can offer a more personalized, customized form of aid—one that recognizes both a person’s needs and their strengths—both the problem and the potential.”

Results would be thoroughly tracked and tested by a third party. “In short, more flexibility in exchange for more accountability,” Ryan said. Indeed, that bit about “accountability” is key, even more than the experimentation. To get effective reform, the same people implementing the plan – the “vanguard” Ryan calls them — should be the same ones with accountability and funding authority.

Now some, like CAP, worry that Opportunity Grants would just be block grants meant to cut spending over time and wouldn’t get bigger during recessions. But Ryan stresses this is not a budget-cutting proposal. And if the program moves beyond the experimentation stage, it would “benefit from increasing assistance during recessions.” And certainly there are other questions. Can nonprofits scale up? Will the next House budget reflect the Ryan’s new emphasis on poverty fighting?

But wait, there is even more to the Ryan plan, including expanding access to education through accreditation reform, and giving low-risk, non-violent offenders a second chance to contribute through prison reform. Yes, this is a severely conservative Republican talking: “Here’s the point: non-violent, low-risk offenders—don’t lock them up and throw away the key. Get them in counseling; get them in job training; help them rejoin and contribute to our society.”

At its heart, the Ryan plan rejects the view that the poor are an underserving burden on society. Instead, it sees low-income Americans as underutilized assets who need to be reintegrated into the work economy so they and America can reach full potential.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

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The fall-out from an Argentine default Thu, 24 Jul 2014 18:31:10 +0000 read more >]]> As in a Greek tragedy, Argentina finds itself yet once again moving rapidly and inexorably towards an external debt default. For barring any last minute backing down by US District Court Judge Thomas Griesa, Argentine President Cristina Fernandez, or Elliot Management’s Paul Singer, Argentina will almost certainly default on July 30. This should be a matter of concern not only for Argentina but also for the international community.

Judging by a sharp increase in the price of Argentina credit default swaps, markets are now pricing in around a 50% chance that Argentina will indeed default at the end of the month. They are doing so against the backdrop of the unlikelihood that Judge Griesa will reverse himself and now grant Argentina a stay to the end of the year in making its debt service payments. They are also doing so against the backdrop of the limited room for maneuver that President Fernandez has to negotiate with the hold-outs. A settlement with the hold-outs before year-end could trigger claims for equal treatment by the holders of around US$120 billion in restructured Argentine debt.

Yet another default now would likely have devastating consequences for the Argentine economy, particularly given its past experience with hyper-inflation. For the country is already in recession, its international reserves are depleted, its currency is on the ropes, and its inflation rate is already in the region of 40%. A default now would almost certainly trigger more capital flight from the country, which would severely impact the Argentine currency and cause inflation to ratchet up further. More serious yet, a default now would keep Argentina locked out of international capital markets for many years to come, which would severely constrain the country’s longer-run economic growth prospects.

Fortunately for the rest of the world, Argentina is a small economy with little systemic significance. However, because of its strong trade links with Brazil, Argentina’s fortunes do have an important bearing on the Brazilian economic outlook. This would seem to be particularly the case at a time when the Brazilian economy is struggling to avoid recession and when its politics are becoming very much more fluid ahead of its October presidential elections.

Argentina’s debt troubles will also have a bearing on the future functioning of the global debt market, even though in today’s environment of ample global liquidity such troubles should not be expected to affect global bond prices materially anytime soon. This bearing will not be the consequence of an Argentine default per se but rather of the US court’s recent ruling that a country cannot make payments on its restructured debt without also making payments to the hold-outs on the debt restructuring exercise. This is bound to complicate future debt restructuring exercises since it will increase the incentives for bond holders to remain outside such exercises. In the process, it must also be expected to raise the future cost of debt issuances.

Given the high stakes involved, one must hope that cooler heads prevail and that somehow a solution to the Argentine debt problem will be devised over the next few days by Judge Griesa, President Fernandez, and Elliot Management. However, this would not be the first time that there was an irrational resolution of an Argentine debt problem that had serious consequences both for Argentina and for its main trade partners.

Follow AEIdeas on Twitter at @AEIdeas.

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Social Security deficit quadruples. Solution: Expand Social Security! Thu, 24 Jul 2014 17:44:42 +0000 read more >]]> On July 15 the Congressional Budget Office rolled out updated projections for Social Security, which show the system’s long-term deficit has nearly quadrupled since 2008 to 4% of payroll. This means that to pay full benefits through 75 years would require an immediate and permanent increase in the Social Security tax from 12.4% to 16.4% of pay. Similarly, while in 2008 the CBO projected that Social Security would remain solvent until mid-century, today the trust funds’ exhaustion date has moved forward by nearly 20 years to just 2030. If you like dollar figures, by my math the long-term shortfall is nearly $15 trillion.

CBO: Long-term Social Security shortfall nearly quadrupled since 2008

Given that Social Security is the largest spending program of the federal government, the payroll tax is already the largest tax paid by most households, and Social Security benefits are the largest source of income for most retirees, you’d think this would finally move Congress to reform the system. If so, you’d think wrong.

Today, the biggest movement among progressives is to expand Social Security to pay higher benefits. Worse, these plans would use the tax increases that progressives once had pegged to fix the system’s deficit – say, raising or eliminating the payroll tax ceiling – and instead use that money to raise benefits. As a result, plans like Sen. Tom Harkin’s (D-IA) would extend solvency by only around 10 years. The new proposal from Sens. Mark Begich (D-AK) and Patty Murray (D-WA) would solve a full 3% of the long-term deficit.

So how do progressives now plan to make Social Security solvent so retirees and the disabled don’t face a roughly 25% benefit cut in 2030? That’s a very good question.

Follow AEIdeas on Twitter at @AEIdeas.


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Ticket scalping as a beneficial form of risk management? Thu, 24 Jul 2014 16:43:19 +0000 read more >]]> In an interesting article that is forthcoming in the next issue of Economic Affairs, Vincent Geloso (Ph.D. candidate at the London School of Economics) presents an interesting defense of “ticket scalping,” arguing that it can provide an effective form of risk management and greater certainty of profits for artists, concert promoters and venue owners. By managing risk with ticket scalping on secondary ticket markets, there could be an increase in the overall supply of events, concerts and ticket sales, especially for lesser-known artists.

Here’s the abstract and part of the conclusion from the paper “Ticket Scalping As a Means of Managing Risk“:


Ticket scalping is often criticized for raising prices to consumers and producing unjustified profits. Conventional economic theory, however, shows that ticket scalping allows tickets to be reallocated in a more optimal manner with regard to the utility of consumers. This article points to an additional benefit from ticket scalping: by providing a secondary market it acts as a potentially powerful tool of risk management for event organizers. It is argued that curtailing ticket scalping may in the long run lead to a decline in the supply of privately provided events and concerts, especially for lesser-known artists. This in turn may stimulate a demand for public subsidy.

From the conclusion:

Since resellers are better at managing risks than site owners, they allow tickets to be reallocated to those who attach the greatest value to them. This leads to attendance at events being maximized, which also means greater certainty of profit for site owners, which in turn increases the supply of such events. Hence, curtailing secondary markets may imply a reduction in supply of these events, which will deprive consumers of opportunities for entertainment. In terms of political economy, it may also mean that organizations involved in sport, the arts and other cultural events seek subsidies to keep the supply at higher levels, which would have been unnecessary in the presence of secondary markets for tickets.

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US violent crime is lowest in 44 years and half the rate in 1991, so why have we become the United States of SWAT? Thu, 24 Jul 2014 15:51:32 +0000 read more >]]> crimeJohn Stossel’s column this week is called “Policing America,” and he points to the fact that violent crime in America peaked in 1991 at 758.2 crimes per 100,000 population, and has consistently fallen in almost every year since then. Last year the violent crime rate was the lowest since 1970, and less than half the rate in 1991 (see chart above).

So why have we become the “United States of SWAT,” with 50,000 no-knock SWAT raids every year, almost six every hour, one every ten minutes, and more than 100 every day? In these no-knock, SWAT raids, people’s homes are often destroyed, infant children have been burned with stun grenades, hundreds of family pet dogs have been shot and killed, and dozens of suspects and some police officers have died in these violent paramilitary operations. Not all, but most of these SWAT raids are part of America’s cruel, expensive, senseless and immoral War on Drugs Otherwise Peaceful Americans Voluntarily Using Plants, Weeds, and Intoxicants Arbitrarily Proscribed by the Government. In some cases, these increasingly frequent SWAT raids are mobilized over the possession or sale of very small amounts of weeds or other controlled substances.

Here’s part of Stossel’s column:

SWAT teams were once used only in emergencies such as riots or robberies where hostages were taken. But today there are more than 50,000 “no-knock raids” a year. It’s not because crime got worse. There is less crime today. Crime peaked around 1990 and is now at a 40-year low (see chart). But as politicians keep passing new criminal laws, police find new reasons to deploy their heavy equipment.

Washington Post reporter Radley Balko points out that they’ve used SWAT teams to raid such threatening haunts as truck stops with video poker machines, unlicensed barber shops and a frat house where underage drinking was reported.

SWAT raids are dangerous, and things often go wrong. People may shoot at the police if they mistake the cops for ordinary criminals and pick up guns to defend their homes against invasion. Sometimes cops kill the frightened homeowner who raises a gun.

Because America has so many confusing laws, and also because cops sometimes make mistakes, it’s harder to assume — as conservatives often do — that as long as you behave yourself, you have nothing to fear. The raids should also trouble libertarians who sometimes believe that government can mostly be trusted when it sticks to “legitimate” functions like running police, courts and the military. Government always grows, and government is force. Force is always dangerous.

It’s healthy for conservatives, libertarians and liberals alike to worry about the militarization of police. Conservatives worry about a repeat of incidents like the raids on religious radicals at Ruby Ridge and Waco, Texas. Liberals condemn police brutality like the recent asphyxiation death of a suspect at the hands of police in New York.

This is a rare issue where I agree with left-wing TV host Bill Maher. On his TV show last week, Maher ranted about no-knock raids “breaking up poker games, arresting low-level pot dealers.” Maher’s right to point out that most SWAT raids are now done to arrest nonviolent drug offenders. “It’s a guy who sells weed,” says Maher. “You don’t need to shoot his dog and crash through his window.”

But they do. If cops continue to take a warlike us-versus-them approach to policing the population, they just might bring the left and right together. Government is reckless, whether it is intruding into our lives with byzantine regulations that destroy a fledgling business or with a flash-bang grenade like the one that critically wounded a child in a recent SWAT raid in Janesville, Georgia.

Regardless of our political leanings, we should be wary of big government in all its forms.

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Expanding opportunity in America: Paul Ryan’s new policy reforms for reducing poverty Thu, 24 Jul 2014 15:02:53 +0000 read more >]]> This morning at AEI, House Budget Committee Chairman Paul Ryan (R-WI) unveiled a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America. Ryan’s plan seeks to reconnect struggling Americans with their local communities and give social-services programs the flexibility to better serve individual needs. His suggestions include creating the Opportunity Grant, expanding the EITC, and criminal-justice reform. Below are his full remarks; you can find the discussion draft of “Expanding Opportunity in America” here.


Hi, everybody. I want to thank Arthur, our panel, and everyone at AEI for hosting us here today.

I look forward to hearing from everybody. But let’s start with a principle we can all agree on: Hardworking taxpayers deserve a break in this country. Too many families are working harder and harder to get ahead, and yet they’re falling further and further behind. The costs of food, housing, and gas keep going up, but paychecks haven’t budged. So whether you’re a Republican or a Democrat, I think we can all agree: America deserves better.

What do we want? A healthy economy. And a big part of that is having a strong safety net—both for those who can’t help themselves and for those who just need a helping hand. That’s our goal. The problem is, that’s not what we’re getting—though it’s not for a lack of trying. We spend almost $800 billion on 92 federal programs each year to fight poverty. And yet the poverty rate is the highest in a generation. Deep poverty is near record highs. When you take a step back and look at all this, you just have to think, “We can do better.”

Now, I don’t have all the answers. Nobody does. But the way I see it, we have an obligation to expand opportunity in America—to deliver real change, real solutions, and real results. And to do that, we need to stop listening to the loudest voices in the room—and start listening to the smartest voices in the room.

So I’ve spent the last year traveling all over the country—learning from people fighting poverty on the front lines. I’ve been to a high school in Milwaukee that’s eliminated 14 gangs from school grounds. I’ve been to a church in Indianapolis that’s helped hundreds of men get off drugs. I’ve been to a homeless shelter in Denver and a rehab center in San Antonio. The point is, there’s a lot of good going on in our country. And since Washington can’t fight poverty alone, then it’s time to bring in reinforcements.

So today, I want to start a conversation. I want to talk about how we can repair the safety net and help families get ahead. And then I want to talk about a few other ideas my colleagues in the House and Senate have put forward: proposals on income support, education, criminal justice, and cutting down red tape. Each idea touches on a different topic, but they all reinforce the same principle: Give more flexibility in exchange for more accountability. My thinking is, listen to the “boots on the ground”—the local leaders who are changing the status quo. Let them try unique and innovative ideas with a proven track record. And then test the results.

That’s my guiding principle. And the first place to apply it is the safety net.

Today, federal aid is fragmented and formulaic. Washington looks at each person’s needs in isolation, like food, housing, energy. It doesn’t see how their needs interact. And what’s worse, Washington looks at each person in isolation. It doesn’t see how people need to interact. The secret of our country’s success is collaboration: people working together, learning together, building together—of our own free will. What government should do, then, is encourage collaboration. Bring people together. Get them in the mix. Don’t force them. Empower them.

So what we need to do is coordinate assistance to families in need. Get the public and private sector working together. That’s how we can smooth the transition from assistance to success. The fact is, each person’s needs fit into a coherent whole: a career. And each person fits into a coherent whole: a community. So if the public and private sector work together, we can offer a more personalized, customized form of aid—one that recognizes both a person’s needs and their strengths—both the problem and the potential.

So I’d start a pilot program called the Opportunity Grant. It would consolidate up to eleven federal programs into one stream of funding to participating states. The idea would be to let states try different ways of providing aid and then to test the results—in short, more flexibility in exchange for more accountability. My thinking is, get rid of these bureaucratic formulas. Put the emphasis on results. Participation would be voluntary; no state would have to join. And we would not expand the program until all the evidence was in. The point is, don’t just pass a law and hope for the best. If you’ve got an idea, let’s try it. Test it. See what works. Don’t make promise after promise. Let success build on success.

Here’s how it would work: each state that wanted to participate would submit a plan to the federal government. That plan would lay out in detail the state’s proposed alternative. If everything passed muster, the federal government would give the green light. And the state would get more flexibility; it would get to combine into one stream of funding up to eleven different programs—things like food stamps, housing assistance, child care, cash welfare. This new, simpler stream of funding would become the Opportunity Grant, and it would be budget neutral. The state would get the same amount of money as under current law—not a penny less.

In effect, the state would say, “Give us some space, and we can figure this out.” And the federal government would say, “Go to it—on four conditions”: First, you’ve got to spend that money on people in need—not roads, not bridges, no funny business. Second, every person who can work should work. Third, you’ve got to give people choices. The state welfare agency can’t be the only game in town. People must have at least one other option, whether it’s a non-profit, a for-profit, what have you. And fourth, you’ve got to test the results. The federal government and the state must agree on a neutral third party to keep track of progress. That’s the deal.

If approved, the state could use that money to expand state programs and to partner with local service providers. In other words, families in need would have a choice. There wouldn’t just be a federal agency or a state agency. Instead, they could choose from a list of certified providers. We’re talking nonprofits, or for-profits, or even community groups unique to your neighborhood. These groups could work with people one-on-one—and provide personalized aid through case management.

Think of it this way: right now, you have to go to a bunch of different offices to enroll in a bunch of different programs. Under the Opportunity Grant, you could go to one office and work with one person for all your needs. That person would give you financial assistance, but could also act as a personal resource. Maybe you’re struggling with an addiction, and you need counseling. Maybe you come from a broken family, and you need a network of support. The point is, you would work together to get you from where you are to where you want to go.

Take an example. Let’s call her Andrea. She’s 24. She has two kids ages four and two. Her husband left the family six months ago, and she does not know how to contact him. Andrea graduated from high school, but her only work experience was a two-year stint in retail. She and her kids now live with her parents in a two-bedroom mobile home. Her parents can’t support her over the long haul. She’s been trying to find work for the last five months. She doesn’t have a car. She can’t afford child care. And her dream is to become a teacher.

Under this plan, Andrea would go to a local service provider. She would sit down with a case manager and develop an “opportunity plan.” That plan would pinpoint her strengths; her opportunities for growth; her short-, medium-, and long-term goals. The two of them would sign a contract. Andrea would agree to meet specific benchmarks of success, a timeline for meeting them, consequences for missing them, and rewards for exceeding them.

Andrea’s short-term goal is to find a job. But her long-term goal is to find the right job—to become a teacher. So she might find a job in retail to pay the bills. Meanwhile, her case manager would help pay for transportation and child care so she could take classes at night. Over time, Andrea could go to school, get her certification, and find a teaching job. The point is, with someone to coordinate her aid, Andrea would not just find a job; she would start a career.

And all this time, a neutral third party would keep tabs on each provider and their success rate. It would look at key metrics agreed to by the state and federal government: How many people are finding jobs? How many people are getting off assistance? How many people are moving out of poverty? And so on. Any provider who came up short could no longer participate. And at the end of the program, we would pool the results and go from there.

In short, we’re reconceiving the federal government’s role. No longer will it try to supplant our communities but to support them. In my view, the federal government is the rearguard—it protects the supply lines. But the people on the ground—they’re the vanguard. They fight poverty on the front lines. They have to lead this effort, and Washington should follow their lead.

In that spirit, I want to throw my support behind a number of ideas that my colleagues in the House and Senate have put forward. They all expand opportunity by taking decision-making away from Washington and bringing more accountability to government at all levels.

First, we should make sure that in this country it always pays to work. I’d do that by increasing the Earned Income Tax Credit for childless workers. This is one of the few programs that have shown results. It encourages people to work by increasing the rewards of work. And we all know that the more people we have in the work force, the more opportunity we’ll have in this country.

So I’d roughly double the maximum credit for childless workers to $1,005. And I’d lower the minimum eligibility age from 25 to 21. This is similar to what the president has proposed, but with one big difference: I wouldn’t raise taxes. I’d pay for it by eliminating ineffective programs and corporate welfare, like subsidies to energy companies. My thinking is, stop programs that don’t work and support programs that do.

Second, we need to expand access to education. We need to give students more options—in other words, we need accreditation reform, similar to what my friends Senator Mike Lee and Congressman Ron DeSantis have proposed. Let other schools in on the action. And we need to keep reforming our job-training programs. If employers can design their own curriculum, then workers will know just what skills they need.

Third, we need commonsense criminal-justice reform. We need to give people the opportunity to earn a second chance. Luckily, my colleagues have done a lot of good work on this front. Senator Mike Lee and Congressmen Raul Labrador and Bobby Scott have introduced a bill to reform our sentencing guidelines. It would give judges more discretion with low-risk, non-violent offenders. All we’re saying is, they don’t have to give the maximum sentence every time. There’s no reason to lock someone up any longer than necessary.

We also have to tackle recidivism. About half of ex-cons are re-incarcerated within three years of release. But we know there are programs that work—that get people out of a life of crime. That’s why Congressmen Jason Chaffetz of Utah and Bobby Scott of Virginia have introduced the Public Safety Enhancement Act. We’d let low-risk, non-violent offenders exchange time in prison for time in pre-release custody—as long as they complete a program with a proven track record.

Here’s the point: non-violent, low-risk offenders—don’t lock them up and throw away the key. Get them in counseling; get them in job training; help them rejoin and contribute to our society.

Finally, we need to cut down on bureaucratic red tape. A lot of families are trying to get ahead, but Washington’s getting in the way. So I’d propose a simple rule for all future regulations. If you’re a federal agency, and you want a regulation that would unduly burden low-income families, you’ve got to go to Congress. If they want it, they should have to fight for it—on the record. It’s your government; you deserve a voice and a vote.

All of these are good ideas, but they’re just a start. What we’re releasing today, we’re calling it a “discussion draft,” because it’s meant to start a discussion. So if you have an idea to expand opportunity, we want to hear from you. Send your idea to

You know, when I went to Milwaukee or Denver or Indianapolis, nobody asked me what party I belonged to. They welcomed anybody who was willing to listen and learn. That should be our approach in Washington. Enough with the politics. Let’s talk solutions—because this isn’t a Republican or a Democratic issue. It’s an American issue.

As a matter of principle, we need to build a society where hard work is rewarded and every American has the opportunity to succeed—regardless of birthplace or background. And to do that, everybody’s got to get involved. If we all work together, we can build a healthy economy. We can fix this. We can get this done. That’s what hardworking taxpayers want—and that’s what they deserve.

Thank you.

Follow AEIdeas on Twitter at @AEIdeas.

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Chart of the day: Hourly wages vs. CPI-Food vs. CPI-All Wed, 23 Jul 2014 17:50:40 +0000 read more >]]> foodUpdated: The chart above shows the percent changes between January 2000 and June 2014 for: a) Average Hourly Earnings (blue line), b) the CPI for Food and Beverages (red line) and c) the CPI for All Items. As the chart shows, average hourly earnings have increased over the last 14 years by more (49.6%) than food and beverage prices (45.7%) and all prices on average (40.3%).

Updated: This then provides more evidence that: a) average hourly earnings have increased more than the CPI for Food and Beverages since 2000, and b) real, inflation-adjusted average hourly earnings have risen since 2000.

Note: This chart is partly in response to a recent article in The Federalist by Sean Davis who claims that “food inflation blows away wage growth,” “food prices have soared since 2009,” and “food prices are growing 64 percent faster than wages.”

New Update: A more detailed response to Sean Davis, with a more exact match of his time period (June 2009 to June 2014), now appears here.

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The best case scenario for the US debt would be historically terrible Wed, 23 Jul 2014 17:16:26 +0000 read more >]]> The current US (publicly held) federal debt-to-GDP ratio is about 75%. As the above chart shows, under the “best case” fiscal scenario — including continued low interest rates, higher productivity, reduced healthcare cost growth — that ratio stabilizes between now and 2040. (Keep in mind, of course, that at 75%, the debt-GDP-ratio is twice what it was before the Great Recession.)

And if everything doesn’t go so well? The the debt more than doubles to 159% of GDP. From the Committee for a Responsible Federal Budget:

While long-term projections are inherently very uncertain, uncertainty is not a reason to disregard them. It is reasonable to anticipate a significant rise in debt over the long term considering the demographic and health care pressures facing the budget. Even if lawmakers adhered to PAYGO and economic and technical assumptions turned out better than CBO anticipates in its baseline, debt would only stabilize at twice its historical share of GDP; it could very well could be worse.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

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Obama refused ‘repeated requests’ since August 2013 for drone strikes against ISIS Wed, 23 Jul 2014 17:02:01 +0000 read more >]]> Breaking on Capitol Hill is the news that Iraqi officials began requesting almost a year ago for the US to carry out drone strikes against ISIS – but the requests were shot down by the White House. That stunning revelation came during a hearing on the situation in Iraq this morning.

The Hill reports:

During a hearing on the Islamic State in Iraq and Syria, House Foreign Affairs Chairman Ed Royce (R-Calif.) said the administration knew six months ago that the Islamic State in Iraq and Syria (ISIS or ISIL) had established armed camps, staging areas and training grounds in Iraq’s western desert and its leader Abu Bakr al-Baghdadi was threatening to attack the U.S.

“However, what the Administration did not say was that the Iraqi government had been urgently requesting drone strikes against ISIS camps since August 2013,” Royce continued.

“These repeated requests, unfortunately, were turned down,” he said. “I added my voice for drone strikes as ISIS convoys raced across the desert.”

The New York Times previously reported that in May 2014 Prime Minister Maliki had “secretly asked the Obama administration to consider carrying out airstrikes against extremist staging areas” and that “Iraq’s appeals for a military response have so far been rebuffed by the White House, which has been reluctant to open a new chapter in a conflict that President Obama has insisted was over when the United States withdrew the last of its forces from Iraq in 2011.”

But the fact that Iraqis have been begging for nearly a year for the US to strike ISIS with drones – and that those requests were repeatedly denied by Obama – was not previously known.

Obama regularly authorizes drone strikes against terrorist targets in Pakistan, Yemen and the Horn of Africa. The White House even boasted that the president personally approves the “kill lists” himself.

Why on earth would he refuse to do the same in Iraq?  Was he hoping the problem would just go away?

This places culpability for the current fiasco in Iraq squarely on Obama’s shoulders. We already knew that the rise of ISIS was made possible by Obama’s decision to withdraw all American forces from Iraq, against the advice of his military commanders. But now we know that as ISIS was preparing its current offensive, Obama was warned of the coming danger–and refused Iraqi requests to strike ISIS before they recaptured American-liberated cities across Iraq.

The incompetence of this administration is simply mind-boggling.

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