Hillary Clinton also had a ready response. “What Senator Sanders says certainly makes sense in the terms of the inequality that we have,” she agreed. But, she continued,

we are not Denmark. I love Denmark. We are the United States of America. And it’s our job to rein in the excesses of capitalism so that it doesn’t run amok and doesn’t cause the kind of inequities we’re seeing in our economic system. But we would be making a grave mistake to turn our backs on what built the greatest middle class in the history of the world.

What is that special American something that built “the greatest middle class in the history of the world” but that makes us different from Scandinavian Europe? Clinton didn’t really say, and Cooper didn’t press her.

The closest she came was stating that America affords the opportunity and freedom to start small businesses. But Sanders also professed support for entrepreneurialism. Indeed, on a range of issues, her policy prescriptions aren’t that different than his. She’s at least as big an advocate of paid family leave as he is. He’d probably demand higher taxes on the rich and a bigger expansion of the federal government. She’d probably settle for less-steep tax increases on the rich and a greater role for the private sector in the delivery of services. But both would tackle inequality by strengthening Washington’s hand.

Republicans, of course, would do the opposite. “Doesn’t it make more sense to shift power away from Washington,” Jeb Bush asked an Iowa crowd, and “back to communities and states so that we can grow at a rate where median income in Washington, Iowa, is growing and maybe median income in Washington, D.C., starts to shrink?”

Here’s the thing, though. Jeb’s right to focus on narrowing the income gap between Washington, Iowa, and Washington, D.C., even if devolving political power isn’t the answer. Bernie’s right that the American economy could use more Denmark-like services, like paid family leave, even though that’s not going to correct the economic imbalance between Washington, D.C., and Washington, Iowa. And Hillary’s right that there’s a uniquely American way of achieving a more equal economic order, even if she didn’t, at that moment, articulate it.

That “secret sauce” of American economic equality is the subject of Phillip Longman’s cover story in this issue. He begins by noting that for most of American history, but especially in the middle decades of the twentieth century, average incomes among different regions of the country were converging. Beginning around 1980, however, this convergence reversed. Today, incomes in a handful of coastal metro areas (New York, D.C., San Francisco, Seattle, Boston) have grown spectacularly, while the rest of America has fallen further and further behind.

What changed, Longman argues, is public policy. First under Jimmy Carter, then under Ronald Reagan, Washington politicians stripped away numerous statutes and regulations put in place by their predecessors over the previous century that were designed to preserve local control of businesses and to check the tendency of behemoth corporations in a few dominant cities to monopolize power over the rest of the country. These laws and rules, covering everything from transportation to retail, are now largely forgotten (ever heard of the Robinson-Patman Act?). But they comprised a system of managed market competition—enforced by federal political power but aimed at decentralizing economic power—that was American’s unique and successful alternative to socialism.

Other stories in this issue address aspects of this loss of local autonomy. John Heltman details how today’s journalism market in D.C. keeps Washington insiders, but not average citizens, abreast of news about the federal government. Anne-Marie Slaughter and Ben Scott argue that think tanks can only stay relevant by engaging local communities in policy formulation. And a piece by yours truly notes that many of America’s economically “hot” cities enjoy the peculiar advantage of being state capitals, and hence are awash in federal money.

It’s not too late for these ideas to find their way into the 2016 contest. Here’s hoping the candidates start debating Robinson-Patman as vigorously as Glass-Steagall.

The post America’s Forgotten Formula for Economic Equality appeared first on Washington Monthly.

Forget about playing shadowy, Nixonian dirty tricks on one’s political opponents. This POTUS race is shaping up to be all about the public trolling—with bonus points awarded for daffiness.

Exhibit A: After Marco Rubio got all sweaty in the endless CNN debate, Team Trump delivered a thoughtful care package to Rubio HQ, containing a case of Trump Ice Natural Spring Water (yep, that’s a thing), two towels printed with “Make America Great Again,” some Trump bumper stickers, and a note reading, “Since you’re always sweating, we thought you could use some water. Enjoy!”

Admittedly, Trump lives to publicly gig his adversaries—and has the soul of a carnival barker. But Hillary? Even as Trump was tweaking Rubio, the Clinton campaign sent the entire Republican field copies of her book Hard Choices. A cheeky comeback to attacks lobbed at Clinton during the GOP debate, the book arrived with a friendly note from Hillary: “From working to restore America’s standing in the world to bringing crippling sanctions to Iran to negotiating a ceasefire in Gaza, please enjoy all 596 pages of my time as secretary of state. With 15 candidates in the race, you’ve got enough people for a book club!”

Then there’s the desperate-for-attention Martin O’Malley. In August, the governor tried drawing Trump’s fire by rallying outside the billionaire’s Vegas hotel with a crowd of hotel workers looking to unionize. The next month, O’Malley pulled an outright goofy stunt aimed both at financial fat cats and the non-grassroots campaigns they fund. Longtime front man for a Celtic rock band, the governor donned his coolest black T-shirt, grabbed his guitar, and spent an hour busking on Wall Street to see if a guy could “make an honest buck” there. According to the video/fund-raising plea his team subsequently sent out, O’Malley pulled in $1.74 and a pack of gummy bears.

Presidential behavior clearly isn’t what it used to be. These days, even our aspiring commanders in chief feel compelled to display what fun-loving, down-to-earth characters they are. Blame it on social media or the Kardashians or Bill Clinton’s long-ago willingness to share with us his underwear preferences. But things are getting wacky out there on the trail. At this rate, I half expect to see Jeb! try to pants Rubio in some future debate.

Take my wife, please

Deep into the twelfth hour of the second Republican debate, CNN’s Jake Tapper asked candidates what notable woman they would like to see replace Andrew Jackson’s face on the $10 bill. Several made solid suggestions: Rand Paul proffered Susan B. Anthony; Marco Rubio, Ted Cruz, and Donald Trump went with Rosa Parks. Others punted: Jeb Bush bizarrely suggested “Ronald Reagan’s partner, Margaret Thatcher”—making you wonder if he really couldn’t think of an American lass worthy of U.S. currency. Carly Fiorina did that thing that women who don’t want to be accused of playing the gender card do: pooh-poohed the very notion that women are “a special interest” group who need such meaningless “gestures.” (I don’t know: as the mother of a ten-year-old girl, I’m all for reminding people that U.S. history includes some kick-ass women.) Ben Carson named his mamma.

But the answer that stood out—and not in a good way—came from Mike Huckabee, with his grinning, self-satisfied suggestion that his wife, Janet, be tapped: “I’ve been married to her forty-one years. She’s fought cancer and lived through it. She’s raised three kids and five great grandkids. And she’s put up with me. I mean, who else could possibly be on that money other than my wife? And then that way she could spend her own money with her face.”

Ick. Let us ignore for a moment that what begins as a cutesy-pie nod to Janet’s surviving cancer and motherhood winds up as a joke about how she likes to spend money. (Ha. Ha. Get it? The little woman has a shopping problem.)

More generally, Huckabee’s benignly sexist blather is the ultimate in cheap pandering. Candidates looking to score points with the ladies are forever tossing off some variation on the my-wife-is-the-real-superstar theme to try and show what appreciative, not-remotely-self-absorbed husbands they are. (Even the professionally abrasive Chris Christie isn’t immune. “Everyone thinks I’m the politician in the family,” he recently gushed to Time about his wife, Mary Pat. “But the politician just as good as me in the family is the woman that I met all those years ago at the University of Delaware.”) Are women still charmed by this sort of thing? More often than not, such flattery comes across less as genuinely admiring than as patronizing. (Yessiree, my gal could run circles around me if she wanted to!) I cannot imagine the husbands of female candidates putting up with this pat-on-the-head nonsense for very long. Although, if Carly Fiorina wants to give it a shot, I’d love to watch.

The civil servant’s lament

Pity the poor good-government crusader, forever championing a cause that, though worthy, is about as sexy as a pair of mom jeans. How is government reform supposed to capture the public, much less the presidential, imagination when up against more urgent perils like economic inequality, racial unrest, ISIS, and Donald Trump?

With the clock on the Obama era running out, Max Stier, head of the Partnership for Public Service, recently launched a classic, you’ve-failed-miserably-on-this-issue-thus-far-but-there’s-still-time-to-save-your-legacy Hail Mary. In a September 2 op-ed in the Washington Post, Stier criticized Obama for having abandoned his 2008 campaign promise to “make government cool again,” then listed a number of administration fiascos—the botched ACA rollout, the VA scandal, the OPM data breach, Secret Service agents gone wild—that might have been avoided if only Obama had been serious about reform. “But it is not too late,” Stier assured the president, before laying out his multipoint plan for tackling government inefficiency. He ends with this cri de coeur: “It is incumbent on the president to make up for lost time by investing—while he still has the power to deliver results—more of his energy and clout in improving how government works. In the process, he can help restore faith in the government’s ability to meet the needs of the American people.”

A little desperate, maybe. But you’ve got to give the guy props for fighting the good fight.

Bureaucrats with jet packs

To be fair, President Obama probably never had a prayer of “making government cool.” But what about Matt Damon? This fall’s action film The Martian (which raked in some $50 mil on opening weekend) is likely to do more for NASA’s image than a barrelful of POTUSes. Not only do Damon and his fellow astronauts deliver thrills with their MacGyver-esque plan to rescue Damon from the red planet, the support team members back on earth wield their science skills like a bunch of nerd ninjas. Not one of the bunch is stupid or venal or incompetent. Never have government geeks looked so good. (And FWIW, my middle school son and his friends thought the book was even better.)

Judge not, lest you be judged

I take backseat to no one in my conviction that Donald Trump is a toxic, narcissistic rodeo clown. That said, I genuinely felt for the guy when Ben Carson started taking passive-aggressive shots at Trump’s faith. Asked at a late-summer campaign stop in Iowa what he thought was the chief difference between him and the Donald, Carson primly offered up that he recognizes that success comes from God. As to whether Trump’s faith is sincere, Carson whipped out Proverbs 22:4. “ ‘The reward for humility and fear of the Lord is riches and honor and life,’ ” he quoted. “That’s a very big part of who I am: humility, and fear of the Lord. I don’t get that impression with him. Maybe I’m wrong.”

Trump promptly fired back: “Who is he to question my faith? When I am—I mean, he doesn’t even know me.”

Now, I neither know nor care who is the truer Christian, Trump or Carson. I am, however, suspicious of any aspirant for high office who talks down the opposition by trumpeting his own biblically inspired humility.

Just ask JFK

In light of Ben Carson’s self-congratulatory piety, I wasn’t surprised when, not long after questioning Trump’s faith, the good doctor caused a kerfuffle by drowsily asserting that America should not elect a Muslim president because Islam does not jibe with the U.S. Constitution. (Presumably Carson is not referring to Article VI of said Constitution, which forbids religious litmus tests.) Everyone is entitled to his preferred brand of bigotry, I suppose. So perhaps we shouldn’t have been surprised that most of Carson’s fellow candidates greeted his remarks with little more than a yawn.

Still, one wonders what the seven Catholic candidates (6 R, 1 D) running for president really thought of Carson’s casual Islamophobia, given that their faith elicited similar antireligious sentiments in the ’60s. And what about Mitt Romney, who faced a lingering anti-Mormon bias in his 2012 run? The impulse to politicize religion and fuel faith-based anxiety never really goes out of style. And it invariably reminds me of the Max von Sydow line from the 1986 Woody Allen classic, Hannah and Her Sisters: “If Jesus came back and saw what’s going on in his name, he’d never stop throwing up.”

Full of hot air

When trying to make sense of a complicated, contentious policy debate, how do you know which side is talking rubbish? Easy. Whichever side Betsy McCaughey is on. A former lieutenant governor of New York and veteran of the conservative think tank world, McCaughey became a darling of the right in 1994, with a long piece in the New Republic dissecting—and decimating—Hillarycare. The piece was later shown to be a load of bunk, but not before supplying juicy talking points to reform critics. McCaughey subsequently served a term as lieutenant governor of New York, but thanks to several subsequent missteps (fueled by a fair amount of personal nuttiness), McCaughey’s political career short-circuited and she faded from public view. In 2009, however, she came roaring back as one of the most outspoken, apocalyptic critics of Obamacare. Admittedly, the competition was steep. But it was McCaughey who first floated the specter of death panels (though props to Sarah Palin for actually coining the phrase). Even some of McCaughey’s fellow conservatives started slapping her for her dishonest scaremongering.

McCaughey recently hit my radar screen again with a September op-ed in the New York Post, this time on the hot topic of climate change. Taking aim at President Obama’s Alaska visit, McCaughey mocked him for not understanding that “climate change has been happening forever.” This is, to be sure, one of the favorite arguments of climate change skeptics (and one that climate scientists will be happy to dismantle for you). Though, to be fair, McCaughey brings a tone of self-righteous hysteria to her scolding that few can match:

It’s a demonstration of Obama’s appalling lack of priorities. The president told his Alaska audience that “few things will disrupt our lives as profoundly as climate change.” Really, Mr. President? How about the epidemic of cop shootings in the United States, or the drowned toddlers washing up on Mediterranean shores as families flee the Middle East, or ISIS beheading thousands of Christians?
Obama says that with climate change, more than any other issue, “there is such a thing as being too late.” Tell that to a cop’s widow or the father who watched his family drown.

Reading the piece—part statistical cherry picking, part diatribe, and 100 percent McCaughey—all I could think was: Climate change skeptics really should be more careful about the company they keep.

How Tea Partiers could learn to stop worrying and love solar power

My husband and I are aiming to get solar panels installed on our home early next year. I’d like to tell you that this is all part of my deep commitment to being a good environmental steward, but that would be a lie. For me, a huge part of the appeal of solar power involves loosening the chokehold of the utilities. Now, my electricity provider happens to be Pepco, which earned the distinction of being the most hated company in America just a few years ago. But even disregarding the specialness of my particular provider, I simply don’t like monopolies and quasi monopolies. They tend to grow sloppy and lazy and greedy and entitled. (Just look at telecom giants like Comcast and Verizon, whom pretty much everyone hates.) And news reports of competition-phobic utilities laboring to find ways to block consumers from installing solar panels does terrible things to my blood pressure.

Which makes me wonder: With populist anger inflaming both ends of the U.S. political spectrum, is there an opening for green-energy advocates to fire up folks typically ambivalent about enviro issues with a stick-it-to-the-fat-cats-who-are-sticking-it-to-you message? Some solar supporters have been flirting with this approach for a while now (notably Barry Goldwater Jr. out in Arizona). But the presidential race could offer even more opportunities. Polarizing phrases like “climate change” or “greenhouse gases” or “renewable energy” need not ever be uttered. Someone just needs to find a clever way to remind fed-up voters—especially Tea Party conservatives—that Big Energy is conspiring with elements of Big Government to keep them tied to the grid forever. Just think of how much fun Donald Trump could have irking the Koch brothers with this issue if only he’d abandon his current “energy plan” of seizing all the Mideast oil fields.

If you can’t beat ’em, run against ’em

Perhaps the thing I find most troubling about the Republican approach to elections is not the attempts of money men like Sheldon Adelson or the Koch brothers to buy races. (Post-Citizens United, this is pretty much the way the game is played on both sides.) It’s all the energy the party is expending on curtailing voting rights (stricter voter ID laws, tighter registration guidelines, reduced early voting …). This strikes me as depressing not only because of its practical impact but also because it smells like a strategic surrender by the GOP—an acknowledgment that it is losing the demographic battle, but, rather than working to broaden its appeal, it’s instead working to make voting as onerous as possible for Americans who fall outside its shrinking base (i.e., anyone who isn’t old and white).

For this reason, I’m cheered when I learn of groups working on creative ways to increase participation in the system. Case in point: Jim Cupples and the folks at the BallotPath Project are looking to improve what they call the “candidacy turnout” side of the equation. With an eye toward facilitating access, the group is creating a giant database containing info on local offices around the country and what it takes to run for them. Politically interested citizens will be able to enter their address into the site and pull up a list of all the elective positions available in their area—from school board member to parks & rec director to utility commissioner to justice of the peace—along with the requirements for getting on the ballot. Originally launched with money from the Sunlight Foundation, Cupples’s project was taken up by the engineers and developers at NationBuilder in January 2015. The goal is to have data for the nation’s 100 most populous counties ready to roll before the site’s planned launch in January.

Who knows how much impact a project like this will have. I can think of a couple dozen hundred very good reasons why decent, sensible people might not want to run for office. But at least this is a push in the direction of more, rather than less, engagement.

“Please, make them leave”—Iowa voters

One thing I find encouraging about the GOP’s election thinking: RNC chairman Reince Priebus’s suggestion that maybe, just maybe, Iowa and New Hampshire shouldn’t always go first in presidential nominating contests. Not that he has anything against the first-in-the-nation voters, Priebus told National Journal, it’s just that “the party would benefit from bringing new ideas and fresh blood into the process.” Amen, brother.

Both parties could, in fact, do without having to suck up to the same subset of folks every single election cycle. I have long argued that Iowa has no business wielding so much power. The state’s electorate is too old, too white, too rural. But mostly, it is too entitled after so many years of having presidential wannabes grovel after the sliver of voters who bother to caucus. ’Tis well past time to work out a rotating schedule that would give other states’ voters a chance to have candidates cater to their pet issues. Fair is fair.

Hate the player, change the game

It was a rough autumn for Martin Shkreli, the hedge fund trader and founder of Turing Pharmaceuticals. When the news broke in mid-September that Shkreli had been engaged in some friendly price gouging—in August, Turing bought the drug Daraprim, a sixty-two-year-old antiparasitic used to treat toxoplasmosis, and promptly jacked up the per-pill price from $13.50 to $750—the thirty-two-year-old Shkreli became the smirking global face of corporate profiteering and all-around scumbaggery.

Social media promptly jumped on Shkreli with both feet, while politicians, including presidential hopefuls Hillary Clinton and Bernie Sanders, vowed to investigate. Within seventy-two hours, Shkreli had taken his Twitter account private, deactivated his OKCupid profile (poor guy), and announced that Turing would dial back its price hike.

Shkreli is the kind of guy you love to hate. He likes to boast about how rich he is, and his immediate response to criticism of Turing was to tweet out defiant, Trump-style insults. More notably, he has an impressive history of corporate sleaziness for someone so young. According to the New York Times, pre-Turing, Shkreli headed another drug start-up, Retrophin, whose core business strategy was to buy up older, lesser-prescribed drugs, repackage them as “specialty” meds, and slap a boutique price tag on them. A year ago, Shkreli was fired from Retrophin, after board members accused him of using the company to cover losses from his hedge fund. A Wall Street denizen since the age of seventeen, Shkreli’s even more youthful shenanigans include being sued by Lehman Brothers for refusal to honor a put option (he and his hedge fund were ordered to pay Lehman $2.3 million) and pressing the FDA not to approve drugs made by firms whose stock he was shorting.

But it may be that Shkreli winds up doing us all a favor. The repackaging—and up-pricing—of older drugs, including generics, is part of a growing industry trend. Among other cases spotlighted by the Times was that of cycloserine, a treatment for multi-drug-resistant tuberculosis that, after being acquired by Rodelis Therapeutics this summer, shot from $500 to $10,800 for thirty pills. In response to the Turing uproar, Rodelis Therapeutics agreed to return cycloserine to its previous owner, a nonprofit group with ties to Purdue University, which pledged to bring the cost back down to earth.

But addressing the macro problem requires more than the occasional public shaming. It calls for changing the way drug companies are allowed to set prices, which currently happens with close to zero accountability. At the very least, greater transparency is needed regarding how prices are set. Patient advocates and some politicians—including Bernie Sanders, Senators Chuck Grassley and Ron Wyden, and Representative Elijah Cummings—have been looking into the issue for a while now. (On the local level, six states are considering transparency legislation.) But it took a figure as grotesque as Shkreli to provoke widespread public outrage—which, hopefully, will move this issue up the to-do list for more leaders. For that, at least, we can thank him.

The post Jesters want the throne … Bureaucrats with jet packs … Just ask JFK appeared first on Washington Monthly.

A selection of political cartoons from the past few weeks.

The post Talk of the Toons appeared first on Washington Monthly.

He died on a Saturday.

My mother and I had planned to pick my dad up from the hospital for a trip to the park. He loved to sit and watch families stroll by as we chatted about oak trees, Kona coffee, and the mysteries of God. This time, the park would miss him.

His skin, smooth and brown like the outside of an avocado seed, glistened with sweat as he struggled to take his last breaths.

In that next year, I graduated from grad school, got a new job, and looked forward to saving for a down payment on my first home, a dream I had always had, but found lofty. I pulled up a blank spreadsheet and made a line item called “House Fund.”

That same week I got a call from my mom—she was struggling to pay off my dad’s funeral expenses. I looked at my “House Fund” and sighed. Then I deleted it and typed the words “Funeral Fund” instead.

My father’s passing was unexpected. And so was the financial burden that came with it.

For many Millennials of color, these sorts of trade-offs aren’t an anomaly. During key times in their lives when they should be building assets, they’re spending money on basic necessities and often helping out family. Their financial future is a rocky one, and much of it comes down to how much—or how little—assistance they receive.

A seminal study published in the Journal of Economic Perspectives on wealth accumulation estimates that as much as 20 percent of wealth can be attributed to formal and informal gifts from family members, especially parents. And it starts early. In college, black and Hispanic Millennials are more likely to have to work one or two jobs to get through, missing out on opportunities to connect with classmates who have time to tinker around in dorm rooms and go on to found multibillion-dollar companies together. Many of them take on higher levels of student debt than their white peers, often to pay for routine expenses, like textbooks, that their parents are less likely to subsidize.

“Student debt is the biggest millstone around Millennials, period, and an even larger and heavier one around the necks of black Millennials,” said Tom Shapiro, director of the Institute on Assets and Social Policy. “It really hits those doing the right thing. [They’re] going through all the hoops.” He explained that, unlike in previous decades, when college tuition was drastically lower, the risks of educational costs are now passed down to the individual.

Recent polls indicate that a large portion of Millennials receive financial help from parents. At least 40 percent of the 1,000 Millennials (ages eighteen to thirty-four) polled in a March USA Today/Bank of America poll get help from parents on everyday expenses. A Clark University poll indicated an even higher number, with almost three-quarters of parents reporting that they provide their Millennial children with financial support. Another survey saw nearly a third of Baby Boomers paying for Millennials’ medical expenses. A quarter of Boomers subsidized “other expenses” so their Millennial offspring could save money. Black and Hispanic Americans are less likely to be the recipients of this type of support.

Ironically, even though black and Hispanic Millennials are less likely to receive financial support from parents, their parents are more likely than white parents to expect their kids to help financially support them later on. According to the Clark poll, upward of 80 percent of black parents and 70 percent of Hispanic parents expect to be supported. And most studies show that a primary reason why people of color are unable to save as adults is because they give financial support to close family. This is important because when life emergencies happen, many Millennials won’t have the reserve money to cover it.

A Millennial who gets regular financial gifts and support from parents will either have the money to cover an emergency themselves, or (more likely) have a parent or grandparent cover it so there’s no damage to their credit. They won’t have to borrow from predatory lending institutions, move into unsafe neighborhoods to save on rent, or start from financial scratch each time.

It doesn’t even have to be a life emergency. If you have to decide between paying for a professional networking event or a cell phone bill, the latter is likely to win out. It should come as no surprise that Millennials who are free to choose career development activities over routine expenses are likely to benefit more in the long run. When this happens once or twice on a small scale, it’s not a big deal. It’s the collective impact of a series of decisions that matters, the result of which is displayed among ethnic and class lines and grounded in historical privilege.

And the help doesn’t end when Millennials enter the next stage of adulthood. It’s not just young, out-of-work Millennials who get help from parents or family members, according to the USA Today poll: even Millennials making $75,000 or more said they had gotten money from their parents for basic necessities. Twenty percent of parents paid for their children’s groceries, and more than 20 percent contributed money for clothing. Even 20 percent of cohabitating Millennials still had a parent paying for expenses like cell phone bills, according to the poll.

Shapiro said the numbers of Millennials receiving support from family are “absolutely underestimated” because many survey questions are not as methodical and specific as those a sociologist might ask. “As much as 90 percent of what you’ll hear isn’t picked up in the survey,” he said.

Shapiro’s work pays special attention to the role of intergenerational family support in wealth building. He coined the term “transformative assets” to refer to any money acquired through family that facilitates social mobility beyond what their current income level would allow for. And it’s not that parents and other family members are exceptionally altruistic, either. “It’s how we all operate,” Shapiro said. “Resources tend to flow to people who are more needy.”

Racial disparity in transformative assets became especially striking to Shapiro during interviews with middle-class black Americans. “They almost always talk about financial help they give family members. People come to them,” Shapiro said. But when he asked white interviewees if they were lending financial support to family members, he said, “I almost always get laughter. They’re still getting subsidized.”

These small savings add up over time. Commentary often centers on the dire circumstances Millennials inherited (“It’s the recession, stupid!”) or the defective attributes of recipients (“Millennials are too entitled!”). But these oversimplified viewpoints miss the point of how some Millennials and their parents are able to weather tumultuous financial terrain in the first place—and more, how intergenerational financial support contributes to these Millennials’ long-term wealth-building capacity.

To many Millennials, the small influxes of cash from parents are a lifeline, a financial relief they’re hard pressed to find elsewhere. To researchers, however, it’s both a symptom and an exacerbating factor of wealth inequality. In a 2004 CommonWealth magazine interview, Shapiro explained that gifts like this are “often not a lot of money, but it’s really important money. It’s a kind of money that allows families to obtain something for themselves and for their children that they couldn’t do on their own.”

To be sure, gift-giving parents see it as a step in helping their Millennial children reach financial independence. But the bigger picture is that their support acts as a stabilizing factor now, and an inheriting factor later. The Institute on Assets and Social Policy’s “The Roots of the Widening Racial Wealth Gap” found that every dollar in financial family support received by a white American yielded 35 cents in wealth growth. For a black individual, family support is much more essential to their financial trajectory: every one dollar received yielded 51 cents in wealth growth. Millennials of all backgrounds would certainly benefit from increased financial family support, but where you wind up depends a lot on where you started from.

You can’t discuss wealth inequality without talking about race; within the American context, they are inseparable. So the fact that Millennials of color feel the impact of a precarious financial foundation more acutely is not a surprise. For black Millennials in particular, studies point to a legacy of discrimination over several centuries that contributed to less inherited wealth passed down from previous generations. This financial disparity stems from continuous shortfalls in their parents’ net worth and low homeownership rates among blacks, which works to create an unlevel playing field.

As a result, the median wealth of white households is thirteen times the median wealth of black households. In addition, the most recent housing bust is estimated to have wiped out half of the collective wealth of black families—
a setback of two generations.

“It was just incredible,” Shapiro said. “It hit hardest those groups latest to becoming home buyers.” Homeownership makes up a large amount of black families’ wealth composition, accounting for over 50 percent of wealth for blacks, compared with just 39 percent for whites. Shapiro also pointed out that the people impacted by the housing crisis were likely to be the parents of Millennials.

Even with equal advances in income, education, and other factors, wealth grows at far lower rates for black households because they usually need to use financial gains for everyday needs rather than long-term savings and asset building. Each dollar in income increase yields $5.19 in wealth for white American households, but only 69 cents for black American households. In addition, while many Americans don’t have adequate savings, the rate is far higher for families of color: 95 percent of African American and 87 percent of Latino middle-class families do not have enough net assets to meet most of their essential living expenses for even three months if their source of income were to disappear. If Millennials of color aren’t getting as much financial help, it’s because there’s just not as much help for their families to give.

It’s more than just lack of “pocket money” from parents that impacts Millennials of color. The last significant stop on life’s journey is often an economically definitive one too, when parents and grandparents pass away and leave an inheritance.

According to the Institute on Assets and Social Policy, white Americans are five times more likely to inherit than black Americans (36 percent to 7 percent, respectively). And even when both groups received an inheritance, white Americans received about ten times more. “It’s really a double whammy,” Shapiro said. On the flipside, black Millennials and other low-asset groups are much more likely to go into debt when a family member passes away. It’s not uncommon for some families to throw bake sales and engage in other fund-raising activities to bury their relatives.

A 2013 Washington Post article also noted that “black families rarely benefited from inheritances and gifts to help them make down payments on homes. The result was that black families typically bought homes eight years later than whites, giving them less time to build equity.”

“That’s an eight-year window of not paying rent and building equity,” Shapiro said.

And the life cycle of homeownership-related matters is an onerous one for black Americans to begin with. The researchers Kerwin Charles and Erik Hurst found that black mortgage applicants were almost twice as likely to be rejected for a loan in the first place, even when credit profile and household wealth were controlled for.

The same study found that almost half of white Americans got money from a family source for a home down payment, while nine in ten black Americans had to came up with their entire down payment on their own—which had the effect of disincentivizing younger black renters from buying. “Even when they were able to buy a home,” the Post article said, “the typical black family did not see that property appreciate as much as did the typical white family.”

It all adds up to a slice of the racial wealth gap that’s hard to grasp because it’s made up of many smaller inequalities instead of one massive one. It’s not the difference between a silver spoon and a dirt floor, it’s the one between textbook money and a campus job. It’s not the difference between the 1 percent and the destitute, it’s the one between a birthday card from Grandma and paying her hospital bill. The gap in gifts, debts, and inheritances creates a vicious cycle with large ramifications for many black Millennials and their financial future—and when combined with redlining and unequal returns on income and education, the odds are stacked in a terrible way.

My father left me with many things of value: a love of creation, an affinity for literature, a deep sense of integrity, and a penchant for easily making friends out of strangers. He loved America, despite the times it relegated him to the back doors of its restaurants as a “colored man.” He placed glossy graduation photos of me from high school and college in nooks around the house like prized medallions. They symbolized his version of the “American Dream,” where his children—his Millennials—would accomplish more than he ever could.

For his sake and mine, I hope he’s right.

The post The Second Racial Wealth Gap appeared first on Washington Monthly.

Back in 2009, I had a job with a Washington, D.C.-based newsletter called Water Policy Report. It wasn’t exactly a household name, but I was covering Congress, the federal courts, and the Environmental Protection Agency—a definite step up from the greased-pig-catching contests and crime-blotter stories I had chased at a community newspaper on Maryland’s Eastern Shore, my first job out of college.

One of my responsibilities at the newsletter was to check the Federal Register—the official portal that government agencies use to inform the public about regulatory actions. In December of that year I noticed an item that said that the Environmental Protection Agency had decided that existing pollution controls for offshore oil-drilling platforms in the Gulf of Mexico were adequate, and that there wasn’t enough pollution coming from those platforms to warrant further review or action.

Curious about that finding, I called Richard Charter, an environmentalist, oil-drilling expert, and senior fellow at the Ocean Foundation to ask him what he thought. Charter told me that the use of a general permit to cover discharges over a broad area like the Gulf of Mexico is ridiculous, and, more specifically, that there were ways in which the EPA went about reissuing the old permit that might not be totally legal under the National Environmental Policy Act.

But the more important issue, Charter said, was the hopeless inadequacy of the government’s oversight of offshore oil drilling. Federal oversight agencies had been documenting shortcomings and conflicts of interest at the Minerals Management Service for years, he said, and in 2003 the House Energy and Commerce Committee heard testimony outlining the ways in which response agencies and drilling companies were unprepared to handle a blowout if it got out of hand.

The dangers were not hypothetical, Charter said. The Montara blowout in Western Australia had just that August spilled more than one million gallons of oil into the Timor Sea and took seventy-four days to cap. Closer to home, if not in more recent memory, was the Ixtoc blowout in 1979, which spilled more than three million barrels into the Gulf of Mexico and took almost a year to cap.

I thanked Charter for his time and wrote my story about the EPA permit, ignoring the broader issue of oil platforms or their environmental risks. Five months later, BP’s Deepwater Horizon drilling platform exploded forty miles off the coast of Louisiana, killing eleven people and setting off the biggest environmental disaster in U.S. history.

By any measure, Deepwater Horizon was the most important environmental catastrophe of the decade, and it illustrated deep and profound shortcomings in the U.S. regulatory approach to offshore drilling. And when it happened, I knew that I had been handed a credible lead and had blown it.

But I couldn’t have followed that lead even if I had wanted to. Offshore drilling safety was tangential, at best, to the core issues covered by the newsletter I was writing for. The law firms and companies that subscribed to us paid thousands of dollars each for a subscription, and they paid that much because we helped them stay abreast of every bit of policy minutia that came out of the government in order to identify threats to their existing investments and potential new investments, or to keep their current clients informed and attract new clients. They paid for the story I wrote, not the story I missed.

On some level, I thought that if what Charter was telling me was that big a deal, it would already have been reported in the New York Times, or on 60 Minutes, or—more likely—in one of the regional newspapers like the Houston Chronicle or the New Orleans Times-Picayune, which report on areas where offshore oil drilling is a big part of the local economy and readers have a keener-than-average interest in the possibility of catastrophic oil accidents. I probably would have been right had it been twenty years earlier. But by 2009, newspapers in general, and the big regional papers especially, were in the midst of a colossal wave of downsizing brought about by the collapse of their business model. With internet outlets like Craigslist siphoning away their classified ads, newspapers could no longer afford to subsidize their large D.C. bureaus, with teams of reporters covering Congress and the agencies and writing stories about the intersection of government policy and issues important to their readers back home. According to a 2009 study by the Pew Research Center, the number of newspapers with bureaus in Washington fell by more than half from the mid-1980s to 2008. The number of newspaper reporters accredited to cover Congress fell by 30 percent between 1997 and 2009. The Center is currently working on research to update those numbers.

Political reporting, however, has not declined at all—quite the contrary. Campaigns, scandals, and fights within and between the parties are covered today with an alacrity that borders on obsession. Growing partisanship and divided government have made the stakes of each day’s political news seem immense, as anyone can see by watching the endless flow of scooplets from Politico and Talking Points Memo, or who watch hour after hour of commentary on FOX News or MSNBC. But while political news is everywhere, coverage of the day-to-day inner workings of government—the slow, steady development of policy in Congress, in the administration, and in the independent regulatory agencies, and how those policies are implemented—has become increasingly scarce in the media that average citizens historically have relied upon.

The opposite, however, is true of the “paywall press”—that is, high-subscription, insider-oriented news organizations like the one I worked for in 2009 and the ones I have worked for since. This sector of the Fourth Estate is booming, and its coverage of government has never been more robust. Trade outlets are steadily adding to their staffs in Washington. New entrants like Bloomberg Government and Politico Pro are experimenting with newer and faster ways to get their coverage to consumers. Long-standing trade publications are merging or being bought up for unbelievable prices.

The audiences for these publications are lobbyists, corporate executives, Hill staffers, Wall Street traders, think tank researchers, contractors, regulators, advocacy group and trade association policy wonks, and other insiders who have a professional interest in up-to-the-second news on the policy issues and whose institutions can afford subscription prices that run thousands of dollars per year. That’s not to say that trade journalists are shills for corporate interests. They are typically smart, energetic professionals with the same ethical standards and passion for digging as their mainstream colleagues. Indeed, with the mainstream press’s shrinking attention to government, trade reporters are often the only ones regularly covering important federal beats. But because of the nature of its business model, the trade press encourages its reporters to pursue the stories its elite readers most want, not necessarily the stories the public most needs—as I saw in my own experience covering offshore drilling.

The rise of the paywall press and the decline of mainstream media coverage of government aren’t causally connected. But the two trends coincide with a palpable populist outrage, in which average Americans are suspicious of how their tax dollars are being spent and observe Washington insiders operate at ever-greater levels of power and secrecy. The irony is that policy journalism in Washington is thriving. It’s just not being written for you, and you’re probably never going to read it.

A Senate gallery reporting credential is the gateway to reporting in Washington. Officially, a Senate press pass allows reporters to wander unaccompanied throughout the Capitol complex. Unofficially, it serves as an official press credential at conferences, agencies, and events around town. It is the solid-gold bona fide that separates the bearer from the public.

In pursuing this story, I analyzed the Congressional Directory from the 101st Congress (1989-1991) through the 113th Congress (2013-2015), counted how many reporters were listed in each bureau, and categorized each bureau as either a newspaper, newswire, trade publication, foreign bureau, or online publication.

What I found was that there are roughly the same number of accredited reporters in Washington today as there were twenty-five years ago, but that more of them are working for trade publications and fewer are working for newspapers and newswires.

The division between the Senate’s two press galleries—the Senate Daily Press Gallery, traditionally home only to daily newspapers, and the Senate Periodical Press Gallery, traditionally home to everything else, especially the trade press—has also been breaking down. More trade publications are sprouting up in the Daily Gallery, while trades in the Periodical Gallery are consolidating into fewer publications with larger staffs. While that consolidation is most pronounced among the trades, it is true among all publications in both Galleries—the number of outlets in the Daily Gallery shrank by roughly a fifth (411 in 2013 versus 515 in 1989) and the number of outlets in the Periodical Gallery shrank by roughly a third (224 total outlets in 1989 compared to 160 in 2013).

These numbers don’t tell the entire story, however. Trade publications and outlets have increasingly been targeted for high-dollar acquisitions and expansions, while mainstream news outlets are being bought out of pity and for fractions of what they used to be worth. One of the highest-profile acquisitions came in 2011 when Bloomberg—already a behemoth in the business intelligence sphere—bought longtime employee-owned trade outlet the Bureau of National Affairs. BNA, as it is known, went for $990 million.

More recently, McGraw Hill Financial—which owns Platts, an energy trade outlet that has been active in Washington for decades—announced its bid to buy SNL Financial, a financial and business intelligence trade outlet that has in recent years expanded its footprint in energy and climate reporting. McGraw Hill agreed to buy SNL for $2.23 billion in cash.

Contrast that with the recent sales and acquisitions of more household names in journalism. The Washington Post was sold to Amazon founder Jeff Bezos in 2013 for $250 million. The Boston Globe sold in 2013 for $70 million. The international education firm Pearson sold its 50 percent stake in the Economist for $731 million, valuing the 172-year-old institution at around $1.4 billion. Even the New York Times’s market capitalization is about $2 billion. This demonstrates that the market is convinced of the business case for trade journalism and its potential for growth, and that it is not similarly assured of the future of newspapers.

Trade reporting has been in Washington almost as long as professional reporters have. The first reporters to cover Congress in the new capital city in the early 1800s were mostly working for local D.C. publications, but by the 1820s newspapers around the nation began sending dedicated correspondents to cover the federal government. Many of those early reporters also moonlighted for foreign newspapers and sent specialized dispatches to Boston shipping interests and southern planters who were eager to learn more about the national tariff for business reasons because the existing coverage was inadequate, acting as a kind of first-generation trade press.

There were also specialized trade publications in the nineteenth century, including American Banker (where I now work), which was founded in 1835, and the Journal of Commerce, which ran its own ad hoc postal service to get news to Washington in the 1830s. But the scene really grew as government programs and spending exploded after World War II. The demand for specialized coverage over a variety of new topics—environmental policy, health care, defense, education, transportation, and more—drove the steady growth of the trade press, which gradually came to take over the Senate Periodical Gallery.

“For years it was five or six newsmagazines that dominated that room,” the retired Senate historian Don Ritchie said. “All of a sudden it became dozens of trade publications.”

For much of the twentieth century, trade publications worked alongside newspapers with Washington bureaus, the latter providing coverage of federal agencies and congressional committees that affected whatever local industries might be prevalent in each paper’s city or state—energy and shipping issues in New Orleans, for example, agricultural issues in Iowa, mining concerns in Nevada, the space program in Houston, and so on. Indeed, one of the most successful trade publications, Congressional Quarterly (known today as CQ Roll Call after merging with that highly profitable insider newspaper), was founded in 1945 by the owners of the St. Petersburg Times as a way for reporters from local papers in D.C. to keep track of the complex goings-on of Congress.

But in the late twentieth century, just as newspapers were beginning to lose their foothold, the trades were entering into a new era of ascendance and consolidation. One of the big reasons for the trade paper explosion is the massive increase in lobbying over the past few decades. In 1975, according to David C. Johnston’s book Free Lunch, Washington lobbyists together made less than $100 million a year in fees. Thirty years later, they were raking in $2.5 billion, a growth rate ten times faster than the economy as a whole. Opensecrets.org, a website operated by the Center for Responsive Politics that tracks lobbying spending, estimated the size of the lobbying market at $3.24 billion last year, and that’s not counting the money many of the largest industry trade groups spent on advertising and public relations consultation.

It’s not just lobbyists who are willing to pay for that insider info. The amount of money spent on federal contracting more than doubled in less than a decade, from $206 billion in fiscal year 2000 to $537 billion in 2011. Another big customer base—one more squarely in the targets of populist outrage—is Wall Street trading. The sector’s growth in the 1990s and 2000s meant that there was a considerably bigger pool of potential readers willing to pay for reporting on the latest information on, say, regulatory filings by the Federal Communications Commission—intelligence that might enable them to make smarter trades on communication company stocks.

At the same time, the amount of primary information available online has exploded. The Federal Register, Congressional Record, all bills offered in Congress, and every proposed rule and comment are available online. Almost all congressional hearings are live-streamed on the committee websites, on CSPAN, or on both. Even press conferences with the White House and the State Department are available online. Everyday Americans might not know or care to look this stuff up, but for trade reporters—or all reporters, for that matter—the pool of source material from which stories can be drawn has broadened and deepened immensely.

With an almost unlimited amount of source material to draw on, a rapidly growing set of potential elite readers, and fewer competitors in the form of newspapers and newswires, it’s no surprise that the paywall press would blow up while newspapers faltered. “It’s just simple economics, it makes total sense,” says Nicholas Lemann, dean emeritus at the Columbia Journalism School.

As demand for well-reported insider news has grown, new players have entered the market. One is Bloomberg Government, a subsidiary of Bloomberg LP, the media giant founded by Michael Bloomberg and best known for providing market data to Wall Street traders via proprietary terminals. Bloomberg Government, or BGOV, was established in 2011 to provide subscribers—lobbyists, contractors, and investors—with the kind of fine-grained data and analytics about government that Bloomberg’s other operations provide about companies and markets.

The company also has free web products, like Bloomberg News and Bloomberg/Businessweek, with reporters in D.C. All told, Bloomberg has increased its news operations from seven correspondents in 1991—when it first applied for accreditation in the Senate Daily Press Gallery—to 193 in 2013, not including the additional 185 employees of Bloomberg BNA.

The same year, 2011, that Bloomberg entered the D.C. trade market with BGOV, another new player emerged: Politico Pro. The subscription-only arm of the upstart political news outlet Politico, Politico Pro has grown to twelve separate verticals—including technology, agriculture, and energy—and to eighty-one dedicated reporters and editors in just under five years. Each vertical offers three kinds of products: a morning news tip sheet modeled after the Politico reporter Mike Allen’s hugely popular Playbook; short and quick dispatches of news throughout the day, called “Whiteboards”; and occasional lengthier, more in-depth pieces. Politico Pro has quickly become a major source of revenue for the company, which projected in a 2013 memo that subscriptions would account for nearly half of the company’s revenue by 2016.

What Bloomberg and Politico have facilitated, to a large degree, is the efficient delivery of targeted news, and have sold that efficiency for a premium. But the news itself—and this is true of the majority of trade reporting, regardless of venue—would not excite the average reader. It is, in a word, boring. The stories tend to be about modest turns of the screws of government that would be of interest only to specialized audiences: a subcommittee chairman’s announcement of an upcoming vote on a tax provision affecting depreciation schedules for paper mill equipment; what a proposed tweak in an EPA regulation might mean for asphalt futures. The former Washington Post reporter Jeffrey Birnbaum, who now heads the public relations division of the lobbying firm BRG Group, is an avid reader of Politico Pro. He describes its coverage as “not just inside baseball, but inside the baseball.”

A viable and growing market for such minutia exists because trade advocates and lobbyists are expected to know everything—and I mean everything—that is going on in Washington that affects their world. Several sources I spoke with admitted that they read Politico Pro’s morning updates before they get out of bed in the morning (I am also guilty of this). “These lobbyists live in constant fear of being caught flat-footed not knowing something,” said one editor at Politico Pro, who was not authorized to speak on the record. “They want to know before everyone else. They need to know before their morning call with their client.”

By sheer numbers, this is the growth sector in Washington coverage today—hyper-granular coverage consumed mostly by business interests and their handlers. But the trade press also breaks news stories of broader importance before the mainstream press. In 2011, American Banker published a leaked copy of the Volcker Rule, a controversial provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that bars banks from making trades simply to benefit the bank, rather than its customers. Other mainstream outlets jumped on the story and passed on the leaked document, with varying levels of attribution (some didn’t cite at all, others cited the origin of the leak in the bottom of their stories). In November 2009, Stephen Colbert did a bit on his news-comedy show about business lobbies pushing back against rules barring child labor, citing as his source a story from Inside U.S. Trade, an international trade-focused newsletter published by Inside Washington Publishers (parent of my former publication, Water Policy Report). Last December the nationally syndicated public radio show This American Life did a segment about a company cutting its CEO’s pay that was based on a story published by the investment trade newsletter Institutional Investor.

Trades are not entirely passive in their ability to reach a more mainstream audience. Most have public-facing websites they can use to publicize stories that originate with their subscription services that are broadly newsworthy or enterprising. For instance, the Politico Pro reporter Jon Prior reported a story on Politico’s main site in September outlining how some of the nation’s largest banks and mortgage lenders are continuing to accept payments for mortgages that they later filed for foreclosure—violating the terms of a $25 billion settlement with the Justice Department—and getting away with it because of lax government oversight.

Unfortunately, some of the best trade reporting is never seen by the public. In 2013, for instance, Bloomberg Government published an astute analysis of an emerging conservative legal argument against the Affordable Care Act, months before the mainstream press took note. The story predicted that the case would go all the way to the Supreme Court. But because the analysis stayed behind the BGOV paywall, it never became part of the broader Washington conversation about Obamacare, and public advocates of the law were unprepared when the case was, in fact, taken up by the Court.

Ironically, as the trade press has gotten bigger and better resourced, its inclination to do longer, deeper enterprise journalism appears to be declining. That’s largely because readers of paywall journalism—like readers everywhere—are being deluged with news. “The information overload is very difficult to cope with,” says a K Street lobbyist who subscribes to dozens of trade and mainstream publications. “It used to be you’d get your information periodically, from Newsweek, etc. Now it’s instantaneous, a rush.”

To help their customers cope, trade outlets are delivering their products in shorter and shorter form. When BGOV first came on the scene, it was putting out long, data-rich reports on key policy issues. But when internal metrics showed that most customers weren’t reading the longer stories, says one former BGOV editor, the reports were reduced in size to six pages, then to one, with a couple of charts and a paragraph or two of text. Not all readers were pleased with the slimming down. “I actually used to like Bloomberg Government,” says a D.C.-based reporter for a mainstream magazine that subscribes to the service. “They had teams of quants writing plain-English white papers about issues.” But in general, concedes the former BGOV editor, the shorter-form content is “what the market wants.” The same market pressures are being felt elsewhere. An editor at Politico Pro reports that the longer-enterprise pieces he and his team produce (and are most proud of) are the least read, while the shortest products, like the morning news summaries, are far more popular.

In a concession to the market demand, National Journal, the insider publication founded in 1969 that is now part of the Atlantic Media Group, announced in July that it is ending its much-admired long-form print publication and moving editorial staff and resources to its “higher velocity” digital publications. But it has also promised to bring greater analytic depth to its digital offerings. “People are fearful of missing out, so they do want the nuggets,” copresident and publisher Poppy MacDonald told me, but they are also “looking for somebody to really put some context around it and help them understand that fire hose of information.”

The pressure of competition has also led paywall outlets to create business lines that serve almost as consultancies to their corporate and lobbyist customers. National Journal, for instance, earns much of its revenue from “membership” services that include specially produced D.C. reporting tailored to the needs of an individual corporation, trade association, or lobbying firm. “Break down the latest developments on the Hill for your C-suite and Board—and demonstrate your D.C. team’s ROI,” reads the Membership Services page on National Journal’s website under the heading “Corporate Government Relations Teams.”

Similarly, Bloomberg Government sales reps have been hawking new data analytics designed to help lobbying firms expand their business—showing, for example, which competing lobbying shops have recently lost which corporate contracts. National Journal, Politico, and other trade outlets, along with many mainstream publications like the Washington Post, also do a lucrative business in sponsored conferences, where lobbyists and corporate clients pay big money to rub elbows with government policymakers and their staffs.

Even with all its eyebrow-raising revenue schemes, an ascendant trade press is preferable to the only probable alternative, which is no press coverage at all (an increasingly common situation in many state capitals). And from my own experience and interviews I did for this story, I can say with confidence that trade press reporters are not brainwashed by the industries they cover or blind to the public responsibilities they have to find the truth and report it. No one I spoke to thought that a trade reporter held a distinct disadvantage over any other mainstream reporter to run down a great story and to have it make its way into the public consciousness. But the fact remains that on a day-to-day basis more and more information is flowing to Washington’s elite while less trickles out to the American public. And while trades vie zealously for a larger slice of that Washington Insider market, publications that appeal to a wider audience are either struggling to keep their lights on or leaving traditional reporting about government behind altogether.

I don’t want to be overly sentimental about the demise of newspapers, but they did at least make an effort to inform the public about the goings-on within public institutions. Through an accident of history, there was a unique period in the twentieth century when advertisers subsidized news gathering by D.C.-based reporters, who in turn gave readers back home information and insight about what their congressional delegations were doing—good and bad—and how federal policies were affecting the issues and industries most important to them.

Advertising—formerly the cornerstone of news funding—hasn’t gone away, of course, and it still pays for much of the mainstream coverage of government that exists. But it doesn’t buy what it used to, so mainstream newspapers and magazines are trying to rework their business models to stay afloat. The Wall Street Journal was among the first to put up a paywall for its stories on the web, and the New York Times reportedly now earns about half of its revenues through paid digital subscriptions, while still allowing free access to twenty stories per month. Other outlets like Slate are toying with so-called “freemium” models, where paid subscribers have access to certain content that nonsubscribers do not. And many publications have begun to bring in significant revenues via advertorials and other “sponsored content.”

Reporting about government hasn’t entirely disappeared from the mainstream press, either. Big national papers like the New York Times and the Wall Street Journal still do a decent, and occasionally excellent, job. Some newer digital publications have also stepped in to fill part of the reporting void. BuzzFeed, Huffington Post, Slate, and Salon all have Senate Press Gallery credentials. And thanks to the internet, this reporting is available to anyone anywhere in the country or the world. But journalists at big national papers and newer digital sites tend to write for national audiences. What has not emerged is a class of news outlets that customize their coverage to the needs and interests of local readers the way the old bureau system used to.

Gathering news costs money, and that money has to come from somewhere. If there is sufficient demand for information, someone will gather it, as the rise of the trade press has demonstrated. The problem is that despite the struggle and innovation that has been taking place in the news media since the internet disrupted its business model, no one has come up with a profitable way to provide information about government to average Americans in ways they care about.

That vacuum provides an opening for outlets that peddle in the kind of bias, treachery, and quackery that we have always been afraid of. Conspiracy theory blogs, pseudoscience sites, white supremacy forums, and all manner of senseless bullshit are trading at face value because, for many, there’s no credible alternative. I don’t mean to overstate my case— deepening ideological rifts in America are not the fault of declining newspaper revenues. But misleading or conspiratorial ideas about government activities can spread more easily when the public lacks credible information to counter it. And instead of solving that problem, the market is directing more and more journalistic resources and talent toward figuring out how to keep insiders better informed and at a greater convenience.

Columbia’s Nicholas Lemann suggests that with for-profit solutions failing to materialize, some nonprofit media—ProPublica, the Washington Monthly—and semipublic news outlets like National Public Radio and the Public Broadcasting System have gone part of the way toward filling that informational gap. But he proposes a more aggressive, if unpopular solution: directly subsidizing news gathering with government funds. Lemann cites a 2009 Columbia Journalism School report by the former Washington Post executive editor Leonard Downie Jr. and the Columbia Journalism School professor Michael Schudson that laid out the case for how a government-subsidized news enterprise could work. News outlets—either established newspapers or startups or blogs—could compete for government contracts to provide local news for a specified period of time, much the way arts funding is distributed.

But the journalism profession and the public would almost never accept that kind of arrangement, Lemann said. “American journalists are so libertarian, that what I just proposed is considered insane. A research university gets a third of its funding from the U.S. government to conduct scientific research. According to the theory of my fellow journalists, that shouldn’t work. But it works pretty damn well.”

Richard Charter, the environmentalist who tipped me off to the lax regulations in offshore drilling just before Deepwater Horizon, said that for all the attention that disaster received, he feels that the public is no more protected from the risk of a well blowout today than they were when we first spoke in 2009. The Minerals Management Service was disbanded in 2011 and its duties split between two new agencies. A handful of safety rules, based on voluntary best practices already observed within the industry, were adopted. But the public seems to have moved on.

“Information is power, and how that information is framed and how that is transmitted—but more importantly, how that information is gathered and organized by the media—that chain of events influences public policy,” Charter said. “If public policy fails—and I consider the Deepwater Horizon blowout to be an obvious failure of public policy—then the consequences can be very great.”

I told him I still felt a little guilty about not following up on his lead back then, and I wanted him to let me off the hook.

“Deepwater Horizon is not your fault,” he said. “There was not really a place for it in your publication.”

The post Confessions of a Paywall Journalist appeared first on Washington Monthly.

A hundred years ago, American government was in similar crisis. Civic leaders responded to social inequalities and toxic politics by building the Progressive Movement. Reformers from the right and the left sought to overhaul machine politics and address the tremendous social challenges created by the economic transformations of the Industrial Age. It was in this context that the nation’s first policy research organizations, later known as “think tanks,” were created. Their contribution to the cause of good government was to offer nonpartisan, independent analysis to policymakers. The outputs of these “idea factories” enabled progressive reform for decades by delivering expert counsel and innovative ideas. From the Marshall Plan to USAID to the end of don’t ask, don’t tell, think tanks have helped shape modern America.

Today, it is not enough. Objective research from think tanks can still play an important role in federal policymaking. But the think tank as a policy institution has not adapted fast enough to escape the dysfunction of Washington. Even superb policy analysis seldom results in policy change. One reason is that expert positions in many debates are alien to the mobilized bases of both parties. (Technocratic insiders in D.C. gravitate toward compromise positions that can achieve a result within realistic political constraints.) Another is that the desire to score partisan points trumps the effort to get something done irrespective of whether the “right answer” is served up on a silver platter. Meanwhile, a plethora of specialized research institutions funded by trade associations, corporations, and partisan donors on both right and left have led many to question the objectivity of the policy positions adopted.

It is time to propose rethinking the think tank to meet these evolving challenges. The central mission is the same—to help solve public problems—but the form and function of the work must adapt. The theory of action of the traditional think tank is that change comes from the top-down adoption or abolition of laws and regulations. Papers and reports advocating specific changes are, of course, directly influenced by bottom-up political movements, from labor organizing to interest group coalitions. But the energy of such movements is typically harnessed to pass or block laws in a legislative process that is removed from direct engagement with people. Today, that model is too elitist, too narrow, and too slow.

People no longer feel included in self-government. Government is something that happens to citizens, not because of them. The dysfunction in the relationship between politicians and their constituents yields alienation, skepticism of even the best-intended Washington solutions, and a poisonous irrationalism in the political culture. We need a new process of public problem solving that can reconnect government to citizens by getting outside the Beltway, engaging with the problems of communities in those communities, and working to develop ideas together and turn them into action.

We propose a new model of civic enterprise. “Civic” because it engages citizens as change makers—conscious members of a self-governing polity that expects government to be at least part of the solution to problems that individuals cannot solve on their own. And “enterprise” because of the energy and innovation involved in actually making change on the ground. Civic enterprise blends conventional policy research with local organizing, coalition building, public education, advocacy, and bottom-up projects that generate and test ideas before, during, and after engagement in the policymaking process with government. It is a heady brew of what makes America great—a deep commitment to self-government plus an insatiable spirit of private enterprise to invent solutions without waiting for permission or help.

The concept of civic enterprise is built on a century of history and tradition. The first think tanks were founded by elite members of American society and dealt with multiple issues. They were formed with the intent to build consensus on national strategy and to fill the gap in expertise for a growing government that was taking on new and wider responsibilities. For example, in 1916, the first full-service think tank, the Institute for Government Research (later the Brookings Institution), formed to help prepare the American economy for World War I. Similarly, in 1921 the Council on Foreign Relations emerged from a group of scholars, journalists, and business leaders originally tasked with advising President Woodrow Wilson on a foreign policy strategy for the postwar world. These organizations became key hubs in the system for political appointees moving in and out of a growing American governmental bureaucracy.

The second wave focused more on directed policy research. The RAND Corporation—which took its name from “research and development”—got its start from a project undertaken by the Douglas Aircraft Company to connect military planning with R&D. It then spun off as a separate organization producing mostly private, requested reports to policymakers on focused research topics ranging from nuclear strategy to monetary policy. RAND is far from alone in that space, and many of its contemporary brethren were university-based policy centers. The Center for Strategic and International Studies, for instance, which started life in 1962 as part of Georgetown University and became an independent think tank in 1987, has made its mark by hosting blue-ribbon commissions often requested by some part of government to provide answers to thorny problems.

The underlying theory of public problem solving that animates these institutions was captured by John F. Kennedy in his 1962 Yale commencement address. He declared—perhaps with some wishful thinking—that “the central domestic issues of our time … relate not to basic clashes of philosophy or ideology, but … [are] subtle challenges for which technical answers, not political answers, must be provided.” Not surprisingly, Republicans had a different view of what JFK saw as “technical answers”: the 1970s saw the creation of the conservative Heritage Foundation and the libertarian Cato Institute, explicitly founded to provide an intellectual base for their respective political ideologies and parties and to influence legislation more directly. At the same time, a wave of issue-oriented advocacy organizations emerged, including Human Rights Watch, the Environmental Defense Fund, and Public Citizen, many of which produce high-quality reports aimed at policymakers. The ideal form of “independent, nonpartisan research” increasingly depended on the eye of the beholder.

In the 1980s and ’90s, yet a third wave of research organizations emerged: boutique think tanks dedicated to specific clusters of issues, such as education policy, budget policy, trade policy, environmental policy, and so on. These specialized think tanks have been instrumental in developing innovative policy solutions, including contributions to reforming health care, reducing greenhouse gas emissions, and expanding access to technology. Meanwhile, the private sector entered the lists of think tanks. The McKinsey Global Institute launched in 1990 with the mission “to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions.” It has spawned a number of imitators sponsored by banks and private equity funds. This proliferation of research institutions with high fixed costs (buildings, fellowships, and faculty “chairs”) has also meant a ferocious competition for a relatively limited funding pool. New funding models lean more heavily on corporations and foreign donors to provide those all-important unrestricted funds, opening the door to accusations of corruption and bias.

The decades of growth and expansion in the think tank sector have resulted in an explosion of production— multiple policy white papers are released virtually every day in Washington—some of it extraordinary in quality and depth. But inevitably, our think tanks reflect (and sometimes amplify) the partisanship, compartmentalization, and money in politics that cut against the mission of these organizations to support evidence-based good government. And even the best of us are disconnected from the communities our ideas are developed to serve. As such, the Progressive Era model of think tanks as extensions of technocratic governance is no longer sufficient to make meaningful, large-scale progress in resolving public problems. Policy reports for a specialized Washington audience can still influence executive orders and occasionally actual legislation if the congressional stars align, an increasingly rare event. Some of these decisions can be historic, but those are exceptional.

We find that in today’s America, a great deal of the most meaningful change is happening far outside Washington, in cities and towns across the country. It is happening in places that are tackling the deeper problem of democratic distrust and disaffection by re-forging the links between citizen demand and government response. It is this spirit that animates the new forms of public work and institution building that we characterize as civic enterprise. These new forms of public problem solving bring the business of needs assessment, deliberation, and policy development into communities and then seek to deliver the results back to decision-makers at the local, state, and federal levels.

Civic enterprise describes a broad way of working, but a number of existing organizations exemplify, at least partially, what we have in mind. The Lown Institute, for instance, is a hybrid think tank/advocacy group that is tackling the problem of overtreatment and poor quality in the health care delivery system by mobilizing doctors, nurses, faith groups, and others to create grassroots pressure for reform. Another example is Voice of the People, a nonprofit promoting “deliberative democracy.” VOP pulls together representative panels of average citizens who, aided by technology and a bipartisan group of experts and facilitators, think through solutions to thorny public policy problems and present their collective ideas to decisionmakers and the public. At New America we have our own experiment in civic enterprise, Opportunity@Work, which is aimed at “rewiring” the job market by rethinking traditional ideas of hiring by credentials in order to implement new methods for matching talent to jobs.

Opportunity@Work will research the problem, prototype solutions, test them in the field with partners in companies and job centers, and accelerate the process of policy change by demonstrating what is possible.

Civic enterprise does not replace independent policy research—on the contrary, it is an incubator to engage community stakeholders to refine the ideas and turn them into action. In the hyper-partisan, pay-for-play environment of Washington policy development, civic enterprise is a way for the best ideas to get traction.

Civic enterprise can also take the form of coalitions, networks, and partnerships among different kinds of policy research institutions, advocacy organizations, community organizers, social enterprise, and more traditional service organizations working directly with clients. But we see three hallmarks that will distinguish the work. The first is the engagement and amplification of new voices. If we are going to reconnect government to the people, the participants in the process of policy change must reflect the diversity of the public. Even at an institution called New America, we look much more like old America: largely white, majority male, and almost entirely upper middle class. Think tanks operate with career ladders that recruit in elite universities, privilege advanced degrees, leverage political connections to move people up the ranks, and ultimately perpetuate institutions that look nothing like the rest of America. The problem is evident across the Washington policy ecosystem: the people most engaged in thinking, regulating, and legislating do not actually represent the citizenry.

Connecting government to citizens requires filling the political stage with a more inclusive cast: ethnically, racially, geographically, and economically. A commitment to inclusivity will ensure that the policy deliberation is democratically robust and that local pilot projects are built with and not for the community. Of course, that doesn’t mean that civic enterprise is primarily about hiring all kinds of Americans to join Washington think tanks (although expanding diversity is critical). This is about taking policymaking out into the country and meeting people where they are. It is about convening people in their own communities to work on the issues that matter most to them. And it is about combining local knowledge and practical experience with the expertise, communications skills, and leadership networks of D.C. think tanks. The cross-pollination will enrich the ideas of both groups and help ensure that something happens (locally and nationally) that makes these meetings more than just talk.

Here’s an example. In 2012, the Berkman Center for Internet and Society at Harvard held a workshop on the public interest benefits of wireless technology designed for resilient, low-cost communications. Boston police and firefighters sat across the table from law professors, hackers, and D.C. policy wonks. Through a collaborative process of discussion and iteration, the group built proposals for using these technologies to support first responders. Some of these ideas have since been deployed in the field, and the results have informed policy decisions in Washington to promote these tools.

The second consistent feature of civic enterprise is the collaborative development of ideas. A system of self-government that requires people to come to politics will fail. We must create opportunities for participation, knowledge exchange, and learning that find citizens through a decentralized network. And taking a page from the innovator’s playbook, the civic enterprise policy development process will be intentionally iterative. The first step is to develop networks of trusted partners that stretch across sectors (business, civil society, academia, and government) and then to create collaborative processes to engage them. Getting all the players to come together is not always easy, but our experience is that people will play if they see a genuine chance to make a difference. The perceived value of that chance will be backed up by the reputation of the civic enterprise and its track record over time.

Part of showing participants that civic enterprise projects are worth their time is moving fast to produce useful ideas. The initial goal will be to put forward as quickly as possible a “minimum viable policy product” with a problem definition and hypothesis for change. That’s a meaningful bit of jargon that adapts a hugely successful Silicon Valley concept of bringing products to market just as quickly as they can be built in a semi-usable form. Spending years debating a policy problem without concrete proposals for change can alienate people. We have to be quicker to offer proposed solutions. But the virtue of this method lies not in the speed to production, but in the pace of adaptation. The basic idea is to offer up options for policy change and then adapt them rapidly once they are debated and piloted by the community. The purpose of the initial policy proposals is not to create supporters for a set of already developed ideas. It is instead to workshop an initial set of hypotheses, to discuss and refine them, and to co-create a better set of answers that reflect different public points of view and command a wider range of support.

Think of it as “pre-partisan” activity that seeks to reestablish the lost arts of compromise and collaboration in American politics. These methods of cross-sectoral participation, transparent process, iteration, and co-creation of policy ideas has virtue beyond inclusivity. They are also far less susceptible to the appearance (or reality) of quid pro quo funding. Moreover, we believe the commitment to community engagement will make this work appealing to more and different kinds of foundations, adding the support of community and family philanthropists to the investments from national foundations and the coffers of corporate social responsibility.

The third major distinction of civic enterprise is dedication to broad public debate and education. This alters both the products that think tanks build and the markets they target for promotion. In our traditional business model, we publish specialized reports aimed at decisionmakers. They either take it or leave it. For a civic enterprise, content production is not an end in itself. Sharing content is a tool to help people move from being informed to being active. This argues for shorter, more frequent, and lower-density publications as interventions in policy debates tailored to reach diverse audiences. Long-form academic research still has its place, but why not publish best-selling books or articles in mass-circulation media? Similarly, a well-placed op-ed can still make a difference, but online videos, data visualization, social media, and creative live events are all increasingly important channels. The point is to expand beyond the language of politics and policy—the language that intimidates, bores, and thus excludes the majority of citizens. Good content should be published in whatever form is most likely to spark debate and encourage readers to keep reading or clicking—and, ultimately, to start responding.

The Progressive Era model of a think tank was a celebration of technocracy—the separation of an elite policy class dedicated to finding the “right answers” for a majority of citizens from a culture of backroom deals brokered by political bosses. The value of genuinely independent research remains, particularly in an era of broad access to big data. Moreover, political activists and direct service organizations typically do not have the time, skills, or inclination to step back and see their work in a larger context, much less make the connections to the policy experts and politicians so often needed to take their work to scale.

The pendulum of American political history is swinging toward “democratizing technocracy,” giving people more opportunity to participate in self-government. This is particularly powerful in an era when many citizens doubt the power and value of their vote. Civic enterprise is about knocking down the walls and partitions that have grown up between the policy class and the citizens we purport to serve. Most Americans have no idea what a “think tank” is; the formal name “policy research institute” does not help much in the explanation. But as consumers and business owners, they certainly understand the nature and power of private enterprise to provide for our private needs. As citizens, they can understand the value of civic enterprise to ensure that government provides for our public needs.

In the cracks of our broken system, we see people and organizations across the country taking matters into their own hands and working together to solve their community’s problems, from education to jobs to eldercare. These innovations can be institutionalized into civic enterprise to take new forms of public service to the next level of impact. It is an ambitious project—nothing short of rethinking the relationship between the people who make public policy and the people for whom they make it. At our most optimistic, we can see a bipartisan civic movement emerging with the same reach and impact the Progressive Movement once had. We cannot see all the ways that civic enterprise will evolve. But we are certain that thinking alone is not enough.

The post Rethinking the Think Tank appeared first on Washington Monthly.

Despite all the attention focused these days on the fortunes of the “1 percent,” our debates over inequality still tend to ignore one of its most politically destabilizing and economically destructive forms. This is the growing, and historically unprecedented, economic divide that has emerged in recent decades among the different regions of the United States.

Until the early 1980s, a long-running feature of American history was the gradual convergence of income across regions. The trend goes back to at least the 1840s, but grew particularly strong during the middle decades of the twentieth century. This was, in part, a result of the South catching up with the North in its economic development. As late as 1940, per capita income in Mississippi, for example, was still less than one-quarter that of Connecticut. Over the next forty years, Mississippians saw their incomes rise much faster than did residents of the Nutmeg State, until by 1980 the gap in income had shrunk to 58 percent.

Yet the decline in regional equality wasn’t just about the rise of the “New South.” It also reflected the rising standard of living across the Midwest and Mountain West—or the vast territory now known dismissively in some quarters as “flyover” America. In 1966, the average per capita income of greater Cedar Rapids, Iowa, was only $87 less than that of New York City and its suburbs. Ranked among the country’s top twenty-five richest metro areas in the mid-1960s were Rockford, Illinois; Milwaukee, Wisconsin; Ann Arbor, Michigan; Des Moines, Iowa; and Cleveland, Ohio.

During this period, to be sure, many specific metro areas saw increases in local inequality, as many working- and middle-class families, as well as businesses, fled inner-city neighborhoods for fast-expanding suburbs. Yet in their standards of living, metro regions as a whole, along with states as a whole, were growing much more similar. In 1940, Missourians earned only 62 percent as much as Californians; by 1980 they earned 80 percent as much. In 1969, per capita income in the St. Louis metro area was 83 percent as high as in the New York metro area; it would rise to 90 percent by the end of the 1970s.

The rise of the broad American middle class in that era was largely a story of incomes converging across regions to the point that people commonly and appropriately spoke of a single American standard of living. This regional convergence of income was also a major reason why national measures of income inequality dropped sharply during this period. All told, according to the Harvard economists Peter Ganong and Daniel Shoag, approximately 30 percent of the increase in hourly-wage equality that occurred in the United States between 1940 and 1980 was the result of the convergence in wage income among the different states.

Few forecasters expected this trend to reverse, since it seemed consistent with the well-established direction of both the economy and technology. With the growth of the service sector, it seemed reasonable to expect that a region’s geographical features, such as its proximity to natural resources and navigable waters, would matter less and less to how well or how poorly it performed economically. Similarly, many observers presumed that the Internet and other digital technologies would be inherently decentralizing in their economic effects. Not only was it possible to write code just as easily in a tree house in Oregon as in an office building in a major city, but the information revolution would also make it much easier to conduct any kind of business from anywhere. Futurists proclaimed “the death of distance.”

Yet starting in the early 1980s, the long trend toward regional equality abruptly switched. Since then, geography has come roaring back as a determinant of economic fortune, as a few elite cities have surged ahead of the rest of the country in their wealth and income. In 1980, the per capita income of Washington, D.C., was 29 percent above the average for Americans as a whole; by 2013 it had risen to 68 percent above. In the San Francisco Bay area, the rise was from 50 percent above to 88 percent. Meanwhile, per capita income in New York City soared from 80 percent above the national average in 1980 to 172 percent above in 2013.

Adding to the anomaly is a historic reversal in the patterns of migration within the United States. Throughout almost all of the nation’s history, Americans tended to move from places where wages were lower to places where wages were higher. Horace Greeley’s advice to “Go West, young man” finds validation, for example, in historical data showing that per capita income was higher in America’s emerging frontier cities, such as Chicago in the 1850s or Denver in 1880s, than back east.

But over the last generation this trend, too, has reversed. Since 1980, the states and metro areas with the highest and fastest-growing per capita incomes have generally seen hardly, if any, net domestic in-migration, and in many notable examples have seen more people move away to other parts of the country than move in. Today, the preponderance of domestic migration is from areas with high and rapidly growing incomes to relatively poorer areas where incomes are growing at a slower pace, if at all.

What accounts for these anomalous and unpredicted trends? The first explanation many people cite is the decline of the Rust Belt, and certainly that played a role. In 1978, per capita income in metro Detroit was virtually identical with that in the metro New York area. Today, metro New York’s per capita income is 38 percent higher than metro Detroit’s. But deindustrialization doesn’t explain why even in the Sunbelt, where many manufacturing jobs have relocated from the North, and where population and local GDP have boomed since the 1970s, per capita income continues to fall farther and farther behind that of America’s elite coastal cities.

The Atlanta metro area is a notable example of a “thriving” place where per capita income has nonetheless fallen farther and farther behind that of cities like Washington, New York, and San Francisco. So is metro Houston. Per capita income in metro Houston was 1 percent above metro New York’s in 1980. But despite the so-called “Texas miracle,” Houston’s per capita income fell to 15 percent below New York’s by 2011 and even at the height of the oil boom in 2013 remained at 12 percent below. It’s largely the same story in the Mountain West, including in some of its most “booming” cities. Metro Salt Lake City, for example, has seen its per capita income fall well behind that of New York since 2001.

Another conventional explanation is that the decline of Heartland cities reflects the growing importance of high-end services and rarified consumption. The theory goes that members of the so-called creative class—professionals in varied fields, such as science, engineering, and computers, the arts and media, health care and finance—want to live in areas that offer upscale amenities, and cities like St. Louis or Cleveland just don’t have them. But this explanation also only goes so far. Into the 1970s, anyone who wanted to shop at Barnes & Noble or Saks Fifth Avenue had to go to Manhattan. Anyone who wanted to read the New York Times had to live in New York City or its close-in suburbs. Generally, high-end goods and services—ranging from imported cars and stereos to gourmet coffee, fresh seafood, designer clothes, and ethnic cuisine—could be found in only a few elite quarters of a few elite cities. But today, these items are available in suburban malls across the country, and many can be delivered by Amazon overnight. Shopping is less and less of a reason to live in a place like Manhattan, let alone Seattle.

Another explanation for the increase in regional inequality is that it reflects the growing demand for “innovation” in “the market.” A prominent example of this line of thinking comes from the Berkeley economist Enrico Moretti, whose 2012 book, The New Geography of Jobs, explains the increase in regional inequality as the result of two new supposed mega trends: markets offering far higher rewards to “innovation,” and innovative people increasingly needing and preferring each other’s company.

“Being around smart people makes us smarter and more innovative,” notes Moretti. “Thus, once a city attracts some innovative workers and innovative com- panies, its economy changes in ways that make it even more attractive to other innovators. In the end, this is what is caus- ing the Great Divergence among Amer- ican communities, as some cities expe- rience an increasing concentration of good jobs, talent, and investment, and others are in freefall.”

Yet while it is certainly true that innovative people often need and value each other’s company, it is not at all clear why this would be any more true today than it has always been. Indeed, programmers working on the same project often are not even in the same time zone. The same digital technology similarly allows most academics to spend more time emailing and Skyping with colleagues around the planet than they do meeting in person with colleagues on the same campus. Major media, publishing, advertising, and public relations firms are more concentrated in New York than ever, but there is no purely technological reason why this is necessary. If anything, digital technology should be dispersing innovators and members of the creative class, just as futurists in the 1970s predicted it would.

What, then, is the missing piece? A major factor that has not received sufficient attention is the role of public policy. Throughout most of the country’s history, American government at all levels has pursued policies designed to preserve local control of businesses and to check the tendency of a few dominant cities to monopolize power over the rest of the country. These efforts moved to the federal level beginning in the late nineteenth century and reached a climax of enforcement in the 1960s and ’70s. Yet starting shortly thereafter, each of these policy levers were flipped, one after the other, in the opposite direction, usually in the guise of “deregulation.” Understanding this history, largely forgotten in our own time, is essential to turning the problem of inequality around.

Starting with the country’s founding, government policy worked to ensure that specific towns, cities, and regions would not gain an unwarranted competitive advantage. The very structure of the U.S. Senate reflects a compromise among the Founders meant to balance the power of densely and sparsely populated states. Similarly, the Founders, understanding that private enterprise would not by itself provide broadly distributed postal service because of the high cost of delivering mail to smaller towns and far-flung cities, wrote into the Constitution that a government monopoly would take on the challenge of providing the necessary cross-subsidization.

Throughout most of the nineteenth century and much of the twentieth, generations of Americans similarly struggled with how to keep railroads from engaging in price discrimination against specific places or otherwise favoring one town or region over another. Many states set up their own bureaucracies to regulate railroad fares—“to the end,” as the head of the Texas Railroad Commission put it, “that our producers, manufacturers, and merchants may be placed on an equal footing with their rivals in other states.” In 1887, the federal government took over the task of regulating railroad rates with the creation of the Interstate Commerce Commission. Railroads came to be regulated much as telegraph, telephone, and power companies would be—as natural monopolies that were allowed to remain in private hands and earn a profit, but only if they did not engage in pricing or service patterns that would add significantly to the competitive advantage of some regions over others.

Passage of the Sherman Antitrust Act in 1890 was another watershed moment in the use of public policy to limit regional inequality. The antitrust movement that sprung up during the Populist and Progressive era was very much about checking regional concentrations of wealth and power. Across the Midwest, hard-pressed farmers formed the “Granger” movement and demanded protection from eastern monopolists controlling railroads, wholesale grain distribution, and the country’s manufacturing base. The South in this era was also, in the words of the historian C. Vann Woodward, in a “revolt against the East” and its attempts to impose a “colonial economy.”

Running for president in 1912, Woodrow Wilson explicitly evoked the connection between fear of monopoly and fear of economic domination by distant money centers that had long dominated populist and progressive American politics. A month before the election, Wilson addressed supporters in Lincoln, Nebraska, asking,

Which do you want? Do you want to live in a town patronized by some great combination of capitalists who pick it out as a suitable place to plant their industry and draw you into their employment? Or do you want to see your sons and your brothers and your husbands build up business for themselves under the protection of laws which make it impossible for any giant, however big, to crush them and put them out of business, so that they can match their wits here, in the midst of a free country with any captain of industry or merchant of finance … anywhere in the world?

After winning the election, Wilson set out to implement his vision, and that of his intellectual mentor, Louis Brandeis, of an America in which the federal government used expanded political powers to structure markets in ways that maximized local control of local business. The Wilson-Brandeis program included, for example, passing the Clayton Antitrust Act, which targeted even incipient monopolies in the name of making the world safe for small business. It also included dramatic cuts in tariffs, which at the time were widely seen as propping up northern manufacturing monopolies at the expense of the rest of the country.

It also included establishment of the Federal Reserve System, which aimed to shift control of finance and monetary policy from private bankers in New York to a transparent public board, with voting power dispersed across twelve member banks headquartered in cities across the Heartland such as St. Louis, Minneapolis, and Kansas City. In the Wilson-Brandeis vision, effective government management of the economy meant maintaining equality of opportunity not only among firms but also among the different regions of the country.

These and similar public measures enacted early in the twentieth century helped to contain the forces pushing toward greater regional concentrations of wealth and power that inevitably occurred as the country industrialized. Standard Oil sucked wealth out of the oil fields of western Pennsylvania, and transferred it to its headquarters in New York City, for example, but the government broke up the colossus into thirty-four regional companies, ensuring that the oil wealth was widely shared geographically.

Working toward the same end were laws, mostly enacted in the 1920s and ’30s, that were explicitly designed to protect small-scale retailers from displacement by chain stores headquartered in distant cities. Indiana passed the first of many graduated state taxes on retail chains in 1929. In 1936, overwhelming majorities in the U.S. House of Representatives and Senate joined in by passing federal anti-chain store legislation known as the Robinson-Patman Act.

Sometimes referred to by its supporters as “the Magna Carta of Small Business,” Robinson-Patman prevented the formation of chain stores even remotely approaching the scale and power of today’s Walmart or Amazon by cracking down on such practices as selling items below cost (a practice known as “loss leading”). The legislation also prohibited the chains from using their market power to extract price concessions from their suppliers, Similarly, the Miller-Tydings Act, enacted by Congress in 1937, put a floor on retail discounting, thereby ensuring that large chains headquartered in distant cities didn’t come to dominate the economies of local communities. This did not prevent innovation in retailing, such as the emergence of brand-spanking-new supermarkets to replace small-scale butcher shops and green grocers. But into the 1960s, these and similar laws would ensure that no supermarket chain would control more than about 7 percent of any local market.

Another powerful policy lever used to limit economic concentration attacked patent monopolies. Starting in his second term in office, Franklin Delano Roosevelt dramatically stepped up antitrust enforcement, including by repeatedly forcing America’s largest corporations to license many of their most valuable patents. This policy took the form of consent decrees that, for example, resulted in General Electric having to license the patents on its light bulbs, and, perhaps most consequentially, in AT&T having to share its transistor technology, which became the basis for the digital revolution. (See Barry C. Lynn, “Estates of Mind,” Washington Monthly, July/August 2013.)

In 1950, Congress significantly strengthened antitrust laws again by passing the Celler-Kefauver Act. In explaining the need for such legislation, Representative Emanuel Celler emphasized its effect on the regional distribution of wealth and power, noting that “the swallowing up of … small-business entities transfers control from small communities to a few cities where large companies control local destinies. Local people lose their power to control their own local economic affairs. Local matters are within remote control.”

Or, as Senator Hubert Humphrey put it in a debate on the Senate floor in 1952, “We are talking about the kind of America we want.… Do we want an America where the economic marketplace is filled with a few Frankensteins and giants? Or do we want an America where there are thousands upon thousands of small entrepreneurs, independent businessmen, and landholders who can stand on their own feet and talk back to their government or to anyone else?”

By the 1960s, antitrust enforcement grew to proportions never seen before, while at the same time the broad middle class grew and prospered, overall levels of inequality fell dramatically, and midsize metro areas across the South, Midwest, and Far West achieved a standard of living that converged with that of America’s historically richest cites in the East. Of course, antitrust was not the only cause of the increase in regional equality, but it played a much larger role than most people realize today.

To get a flavor of how thoroughly the federal government managed competition throughout the economy in the 1960s, consider the case of Brown Shoe Co., Inc. v. United States, in which the Supreme Court blocked a merger that would have given a single distributor a mere 2 percent share of the national shoe market.

Writing for the majority, Supreme Court Chief Justice Earl Warren explained that the Court was following a clear and long-established desire by Congress to keep many forms of business small and local: “We cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned business. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization. We must give effect to that decision.”

In 1964, the historian and public intellectual Richard Hofstadter would observe that an “antitrust movement” no longer existed, but only because regulators were managing competition with such effectiveness that monopoly no longer appeared to be a realistic threat. “Today, anybody who knows anything about the conduct of American business,” Hofstadter observed, “knows that the managers of the large corporations do their business with one eye constantly cast over their shoulders at the antitrust division.”

In 1966, the Supreme Court blocked a merger of two supermarket chains in Los Angeles that, had they been allowed to combine, would have controlled just 7.5 percent of the local market. (Today, by contrast there are nearly forty metro areas in the U.S where Walmart controls half or more of all grocery sales.) Writing for the majority, Justice Harry Blackmun noted the long opposition of Congress and the Court to business combinations that restrained competition “by driving out of business the small dealers and worthy men.”

During this era, other policy levers, large and small, were also pulled in the same direction—such as bank regulation, for example. Since the Great Recession, we have all relearned the history of how New Deal legislation like the Glass-Steagall Act served to contain the risks of financial contagion. Less well remembered is how New Deal-era and subsequent banking regulation long served to contain the growth of banks that were “too big to fail” by pushing power in the banking system out to the hinterland. Into the early 1990s, federal laws severely limited banks headquartered in one state from setting up branches in any other state. State and federal law fostered a dense web of small-scale community banks and locally operated thrifts and credit unions.

Meanwhile, bank mergers, along with mergers of all kinds, faced tough regulatory barriers that included close scrutiny of their effects on the social fabric and political economy of local communities. Lawmakers realized that levels of civic engagement and community trust tended to decline in towns that came under the control of outside ownership, and they resolved not to let that happen in their time.

In other realms, too, federal policy during the New Deal and for several decades afterward pushed strongly to spread regional equality. For example, New Deal programs like the Tennessee Valley Authority, the Bonneville Power Administration, and the Rural Electrification Administration dramatically improved the infrastructure of the South and West. During and after World War II, federal spending on the military and the space program also tilted heavily in the Sunbelt’s favor.

The government’s role in regulating prices and levels of service in transportation was also a huge factor in promoting regional equality. In 1952, the Interstate Commerce Commission ordered a 10 percent reduction in railroad freight rates for southern shippers, a political decision that played a substantial role in enabling the South’s economic ascent after the war. The ICC and state governments also ordered railroads to run money-losing long-distance and commuter passenger trains to ensure that far-flung towns and villages remained connected to the national economy.

Into the 1970s, the ICC also closely regulated trucking routes and prices so they did not tilt in favor of any one region. Similarly, the Civil Aeronautics Board made sure that passengers flying to and from small and midsize cities paid roughly the same price per mile as those flying to and from the largest cities. It also required airlines to offer service to less populous areas even when such routes were unprofitable.

Meanwhile, massive public investments in the interstate highway system and other arterial roads added enormously to regional equality. First, it vastly increased the connectivity of rural areas to major population centers. Second, it facilitated the growth of reasonably priced suburban housing around high-wage metro areas such as New York and Los Angeles, thus making it much more possible than it is now for working-class people to move to or remain in those areas.

Beginning in the late 1970s, however, nearly all the policy levers that had been used to push for greater regional income equality suddenly reversed direction. The first major changes came during Jimmy Carter’s administration. Fearful of inflation, and under the spell of policy entrepreneurs such as Alfred Kahn, Carter signed the Airline Deregulation Act in 1978. This abolished the Civil Aeronautics Board, which had worked to offer rough regional parity in airfares and levels of service since 1938.

With that department gone, transcontinental service between major coastal cities became cheaper, at least initially, but service to smaller and even midsize cities in flyover America became far more expensive and infrequent. Today, average per-mile airfares for flights in and out of Memphis or Cincinnati are nearly double those for San Francisco, Los Angeles, and New York. At the same time, the number of flights to most midsize cities continues to decline; in scores of cities service has vanished altogether.

Since the quality and price of a city’s airline service is now an essential precondition for its success in retaining or attracting corporate headquarters, or, more generally, for just holding its own in the global economy, airline deregulation has become a major source of decreasing regional equality. As the airline industry consolidates under the control of just four main carriers, rate discrimination and declining service have become even more severe in all but a few favored cities that still enjoy real competition among carriers. The wholesale abandonment of publicly managed competition in the airline sector now means that corporate boards and financiers decide unilaterally, based on their own narrow business interests, what regions will have the airline service they need to compete in the global economy. (See “Terminal Sickness,” Washington Monthly, March/April 2012.)

In 1980, President Carter signed legislation that similarly stripped the government of its ability to manage competition in the railroad and trucking industries. As a result, midwestern grain farmers, Texas and Gulf Coast petrochemical producers, New England paper mills, and the country’s mines and steel, automobile, and other heavy-industry manufacturers, all now typically find their economic competitiveness in the hands of a single carrier that faces no local competition and no regulatory restraints on what it charges its captive shippers. Electricity prices similarly vary widely from region to region, depending on whether local utilities are held captive by a local railroad monopoly, as is now typically the case.

Since 1980, mergers have reduced the number of major railroads from twenty-six to seven, with just four of these mega systems controlling 90 percent of the country’s rail infrastructure. Meanwhile, many cities and towns have lost access to rail transportation altogether as railroads have abandoned secondary lines and consolidated rail service in order to maximize profits.

In this era, government spending on new roads and highways also plummeted, even as the number of people and cars continued to grow strongly. One result of this, and of the continuing failure to adequately fund mass transit and high-speed rail, has been mounting traffic congestion that reduces geographic mobility, including the ability of people to move to or remain in the areas offering the highest-paying jobs.

The New York metro area is a case in point. Between 2000 and 2009, the region’s per capita income rose from 25 percent above the average for all U.S. metro areas to 29 percent above. Yet over the same period, approximately two million more people moved away from the area to other parts of the country than moved in, according to the Census Bureau. Today, the commuter rail system that once made it comparatively easy to live in suburban New Jersey and work in Manhattan is falling apart, and commutes from other New York suburbs, whether by road or rail, are also becoming unworkable. Increasingly, this means that only the very rich can still afford to work in Manhattan, much less live there, while increasing numbers of working- and middle-class families are moving to places like Texas or Florida, hoping to break free of the gridlock, even though wages in Texas and Florida are much lower.

The next big policy change affecting regional equality was a vast retreat from antitrust enforcement of all kinds. The first turning point in this realm came in 1976 when Congress repealed the Miller-Tydings Act. This, combined with the repeal or rollback of other “fair trade” laws that had been in place since the 1920s and ’30s, created an opening for the emergence of super-chains like Walmart and, later, vertically integrated retail “platforms” like Amazon. The dominance of these retail goliaths has, in turn, devastated (to some, the preferred term is “disrupted”) locally owned retailers and led to large flows of money out of local economies and into the hands of distant owners.

Another turning point came in 1982, when President Ronald Reagan’s Justice Department adopted new guidelines for antitrust prosecutions. Largely informed by the work of Robert Bork, then a Yale law professor who had served as solicitor general under Richard Nixon, these guidelines explicitly ruled out any consideration of social cost, regional equity, or local control in deciding whether to block mergers or prosecute monopolies. Instead, the only criteria that could trigger antitrust enforcement would be either proven instances of collusion or combinations that would immediately bring higher prices to consumers.

This has led to the effective colonization of many once-great American cities, as the financial institutions and industrial companies that once were headquartered there have come under the control of distant corporations. Empirical studies have shown that when a city loses a major corporate headquarters in a merger, the replacement of locally based managers by “absentee” managers usually leads to lower levels of local corporate giving, civic engagement, employment, and investment, often setting in motion further regional decline. A Harvard Business School study that analyzed the community involvement of 180 companies in Boston, Cleveland, and Miami found that “[l]ocally headquartered companies do most for the community on every measure,” including having “the most active involvement by their leaders in prominent local civic and cultural organizations.”

According to another survey of the literature on how corporate consolidation affects the health of local communities, “local owners and managers … are more invested in the community personally and financially than ‘distant’ owners and managers.” In contrast, the literature survey finds, “branch firms are managed either by ‘outsiders’ with no local ties who are brought in for short-term assignments or by locals who have less ability to benefit the community because they lack sufficient autonomy or prestige or have less incentive because their professional advancement will require them to move.” The loss of social capital in many Heartland communities documented by Robert Putnam, George Packer, and many other observers is at least in part a consequence of the wave of corporate consolidations that occurred after the federal government largely abandoned traditional antitrust enforcement thirty-some years ago.

Financial deregulation also contributed mightily to the growth of regional inequality. Prohibitions against interstate branching disappeared entirely by the 1990s. The first-order effect was that most midsize and even major cities saw most of their major banks bought up by larger banks headquartered somewhere else. Initially, the trend strengthened some regional banking centers, such as Charlotte, North Carolina, even as it hollowed out local control of banking nearly everywhere else across America. But eventually, further financial deregulation, combined with enormous subsidies and bailouts for banks that had become “too big to fail,” led to the eclipse of even once strong regional money centers like Philadelphia and St. Louis by a handful of elite cities such as New York and London, bringing the geography of modern finance full circle back to the patterns prevailing in the Gilded Age.

Meanwhile, dramatic changes in the treatment of what, in the 1980s, came to be known as “intellectual property,” combined with the general retreat from antitrust enforcement, had the effect of vastly concentrating the geographical distribution of power in the technology sector. At the start of the 1980s, federal policy remained so hostile to patent monopolies that it refused even to grant patents for software. But then came a series of Supreme Court decisions and acts of Congress that vastly expanded the scope of patents and the monopoly power granted to patent holders. In 1991, Bill Gates reflected on the change and noted in a memo to his executives at Microsoft that “[i]f people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today.”

These changes caused the tech industry to become much more geographically concentrated than it otherwise would have been. They did so primarily by making the tech industry much less about engineering and much more about lawyering and deal making. In 2011, spending by Apple and Google on patent lawsuits and patent purchases exceeded their spending on research and development for the first time. Meanwhile, faced with growing barriers to entry created by patent monopolies and the consolidated power of giants like Apple and Google, the business model for most new start-ups became to sell themselves as quickly as possible to one of the tech industry’s entrenched incumbents.

For both of these reasons, success in this sector now increasingly requires being physically located where large concentrations of incumbents are seeking “innovation through acquisition,” and where there are supporting phalanxes of highly specialized legal and financial wheeler-dealers. Back in the 1970s, a young entrepreneur like Bill Gates was able to grow a new high-tech firm into a Fortune 500 company in his hometown of Seattle, which at the time was little better off than Detroit and Cleveland are today—a depopulating, worn-out manufacturing city, labeled by the Economist as “the city of despair.” Today, a young entrepreneur as smart and ambitious as the young Gates is most likely aiming to sell his company to a high-tech goliath—or will have to settle for doing so. Sure, high-tech entrepreneurs still emerge in the hinterland, and often start promising companies there. But to succeed they need to cash out, which means that they typically need to go where they’ll be in the deal flow of patent trading and mergers and acquisition, which means an already-established hub of high-tech “innovation” like Silicon Valley, or, ironically, today’s Seattle.

They may also need to maintain a Washington office, the better to protect and expand the policies that have allowed the concentration of wealth and power in a few imperial cities, including intellectual property protections, minimal antitrust enforcement, and financial regulations that benefit behemoth banks. The spectacular rise in the affluence of the D.C. metro area since the 1970s belies the idea that “deregulation” has brought a triumph of open and competitive markets. Instead, it is the result of a boom in what our libertarian friends in other contexts like to call “rent seeking,” or the enrichment of a few through the manipulation of government and the cornering of markets.

Inequality, an issue politicians talked about hesitantly, if at all, a decade ago, is now a central focus of candidates in both parties. The terms of the debate, however, are about individuals and classes: the elite versus the middle, the 1 percent versus the 99 percent. That’s fair enough. But the language we currently use to describe inequality doesn’t capture the way it is manifest geographically. Growing inequality between and among regions and metro areas is obvious to all of us. But it is almost completely absent from the current political conversation. This absence would have been unfathomable to earlier generations of Americans; for most of this country’s history, equalizing opportunity among different parts of the country was at the center of politics. The resulting policies led to the greatest mass prosperity in human history. Yet somehow, about thirty years ago, we forgot our history.

The post Bloom and Bust appeared first on Washington Monthly.

The cities that made the Forbes list were not very surprising. They were more or less the same names you’ll find on similar “hot cities” lists published by other media outlets, such as Bloomberg and Money magazine: Houston, Raleigh, Denver, Phoenix, Salt Lake City, Nashville, and so on.

Like other publications, Forbes took a stab at trying to explain why certain cities made it onto their list. It noted that the fracking-based oil and gas boom helped put five Texas cities in the top twenty, while thriving tech sectors explained why Seattle and the three California cities made the cut.

One commonality, however, that the editors of Forbes apparently did not notice is that more than a third of the cities on their list are state capitals (see Table 1). This was not a one-time lapse: cities that are home to their state’s governments have been overrepresented on Forbes’s and other media-generated lists for years, without, as far as I can tell, any of these publications ever mentioning the fact. The stories that accompany these lists typically include quotes from economists and economic development experts who try to make sense of the numbers. Factors such as tax rates, regulatory burdens, region, education levels, venture capital investment, housing prices, the existence of top-tier universities, proximity to seashores and mountains, and the percentage of workers who are in “creative” fields are usually discussed. But the idea that being home to a state’s politicians, lobbyists, bureaucrats, and tens of billions of dollars in tax revenues might give a city a significant advantage in garnering wider economic growth seems to be not widely held, nor even considered.

Which is weird when you think about it. After all, when Washington, D.C., makes it onto these kinds of lists, the first thing people say is, Well, of course it’s booming, thanks to all the government money flowing through it. State capitals don’t command as much tax revenue, obviously, as Washington does. But why shouldn’t the same basic connection—between being the seat of government and enjoying robust economic growth—apply?

In fact, it does apply, almost without fail. To be sure, not every city that is booming is a state capital. Nor is every city that is a state capital booming. Plenty of small capitals (Lansing, Michigan, and Jefferson City, Missouri, to name two) are in the doldrums. But as Table 2 shows, all but one of America’s eighteen medium to large state capitals—those with a municipal population greater than 250,000 (except for Boise, with 214,00) and a metro-wide population greater than 300,000—are flourishing economically. The only exception is Sacramento, which is in California’s Central Valley, the epicenter of the 2008 collapse of real estate prices (before that, it was booming). These seventeen cities are hubs not just, or even mostly, of government but also of entrepreneurial innovation in fields ranging from biotech to finance, aquiculture to health care.

Correlation, as they say, is not causality. I can’t prove that the presence of state governments is the reason these cities are doing well. But seventeen out of eighteen is a lot of correlation! So it’s certainly worth speculating what the causality might be. I can think of several reasons, many of them overlapping, none of them wholly satisfying.

The first I’ve alluded to. Cities that are state capitals exist, in part, to collect, process, and redistribute tax revenues. A percentage of that money goes to pay the salaries of elected officials, government employees, and contractors. Meanwhile, additional funds flow in from private entities (corporations, trade associations, unions) hoping to influence government decisions—money that supports the salaries of lobbyists, consultants, dry cleaners, steak house waiters, and so on.

But while this importation of other people’s money is certainly a factor, it’s not enough of an explanation. Otherwise, smaller state capitals, especially those in big, populous states like New York and Florida that are awash in tax and lobbying revenues, ought to be thriving too. In reality, places like Albany and Tallahassee are economic backwaters where (not to put too fine a point on it) almost nobody chooses to live if they don’t have to.

* State capital~ While Cambridge is not a capital, it enjoys many of the same benefits, thanks to its proximity to Boston

A second explanation is that state capitals never relied as heavily as many other cities did on manufacturing, and so weathered better the deindustrialization process. This certainly seems to be the case for many booming state capitals in Table 2—Raleigh, Denver, Austin, and so on. Still, several now-thriving state capitals, such as Boston, Columbus, and Indianapolis, were dependent on manufacturing into the 1950s and beyond, and suffered major declines in the 1960s through the 1980s before bouncing back.

A third explanation, a more nuanced version of the first two, was suggested to me by the Governing magazine contributing editor and author Alan Ehrenhalt and has to do with downtowns. It’s a truism in economic development circles (David Rusk’s research best shows it) that metro areas with blighted, lifeless downtowns tend not to grow as robustly as those with downtowns that have retained or gained jobs and residents. In state capitals, the centers of government—the legislative buildings, the governor’s mansion, the major agencies, and the buildings where lobbyists and contracting companies have their offices—are almost always located in or near their downtowns. What may have happened is that during the second half of the twentieth century, when so many downtown areas were emptying out, downtowns in state capitals retained a certain amount of vitality. This had an effect not unlike what happens when an anchor retailer signs a long-term lease in a mall: the government sector brings enough predictable foot traffic and economic activity that other economic actors (large and small companies and real estate investors, for example) feel comfortable investing in or near the downtowns too. It’s a plausible theory, and sounds true to me, but it’s worth noting that at least one city in Table 2 defies the theory: Phoenix, which until recently had no downtown to speak of.

This hardly exhausts the scope of possible explanations for why nearly every medium to large state capital in America is thriving. Maybe it has to do, in part, with a city’s political leaders being able to rub elbows with the state’s political leaders and using that clout to entice companies and secure advantageous policies. Perhaps it has to do with public transparency: until quite recently, newspapers in state capitals provided some of the best coverage of both state and municipal government. And there may be a connection between the knowledge-based skills and operations associated with state government and the information- and technology-based industries that have transformed the American urban landscape. There are certainly more possible explanations. Only serious research could determine which best explain the phenomenon.

If so many observers have missed the obvious-when-you-think-about-it connection between state capitals and economic growth, it may be because it’s not, at first glance, a terribly useful observation. It’s not as if struggling cities have the option of moving their state capitals there (though, on reflection, that may not be a bad idea).

But a perhaps more practical lesson to be drawn is suggested in the column in Table 2 labeled “State Revenue from Federal Funds.” It shows that somewhere between a quarter and a third of the tax dollars that flow through state capitals comes from Washington. In other words, these hot, hip havens of high tech—the Austins and Denvers, Bostons and Boises—are being significantly propped up with federal funds. And that’s just the straight government part. As the column labeled “major universities” shows, these cities are also home to centers of higher learning, which receive billions of dollars in research grants and student aid from the federal government. One could add another column on hospitals to make the same point.

Whenever a discussion arises about federal money being used to help spur specific areas of economic growth, a cry goes up from politicians and commentators across the land that Washington shouldn’t be “picking winners and losers.” But in effect that’s what’s happening with our cities. Some, by virtue of being the seats of state government, have a pipeline to federal dollars that other cities can only dream of. And that pipeline may determine which American cities thrive and which don’t.

Should leveling the playing field be a goal of public policy? If so, how might that be achieved? The obvious conservative answer would be to cut federal spending across the board—though how that would lead to more thriving cities is hard to see. The obvious liberal answer would be to spend more federal money on the cities that are not state capitals. But spending for what? After all, expensive federal programs, like urban renewal, the building of the interstate highway system, and mortgage and infrastructure policies that favored suburban growth, helped destroy American cities in the first place.

While I can’t pretend to have the answers, some experiences I recently had in my hometown of St. Louis might at least suggest a way forward. I was there visiting a half-dozen start-up firms in the nascent but growing biotech and agtech sectors of that city, which hitherto has not been know as a start-up haven. One company was attempting, through genetic engineering, to transform a common weed with highly oily seeds into a crop that farmers could plant and harvest between rotations of soybeans and corn and thus produce environmentally friendly biofuels without displacing other food crops. Another had devised a way to regrow cartilage in human joints and was in Phase II trials with the FDA. Yet another was providing quick-turnaround genomic testing to pharmaceutical companies to speed the drug discovery and development process. I came away thinking that all of these companies have the potential not only to help mankind but also to grow into sizable enterprises employing hundreds of St. Louisans.

But another commonality I discovered is this: each of these firms would simply not exist without the federal government. I mean that not in the way that Massachusetts Senator Elizabeth Warren made famous—that they benefited historically from federally funded roads, police protection, and other common provisions of government. I mean that much of their start-up money came in the form of federal grants—from the National Institutes of Health, the National Science Foundation, and other agencies. The specific high-level training of the founders was paid for by the federal government. The nonprofit lab facilities they rented at far below cost were subsidized by federal grants. The equipment in their labs was paid for by federal tax credits that flowed through the city’s economic development office. The money they took in from clients and customers came, in part, from federal grants. It was unquestionably private enterprise, and yet the vast bulk of it was underwritten by the federal government.

These are anecdotal observations, and they may mean nothing. But I can’t help shake the idea that I was glimpsing something important about the nature of innovation, entrepreneurship, and city revival in America right now: that all three are dependent, to a far greater extent than most of us appreciate and many don’t want to admit, on generous research and other funding from Washington. If we want struggling cities to have the same chance to thrive as state capitals, a lot more such federal spending may be the only way to make it happen.

*A version of this story was written for the Kauffman Foundation’s New Entrepreneurial Growth conference held in June, 2015.

The post Why Denver, Nashville, and Boston Are Booming appeared first on Washington Monthly.

Such was the way that Dickens described the cities of Paris and London during the French Revolution. In his book America Ascendant: A Revolutionary Nation’s Path to Addressing Its Deepest Problems, the Democratic pollster and political strategist Stanley B. Greenberg posits that the United States is facing a moment much like the one Dickens described.

America Ascendant: A Revolutionary
Nation’s Path to Addressing Its Deepest
Problems and Leading the 21st Century
by Stanley B. Greenberg
Thomas Dunne Books, 416 pp.

Greenberg does an excellent job highlighting why this is “the best of times.” He identifies revolutions that are about both America’s economic ascendancy and our cultural exceptionalism. With the advent of renewable energy sources and natural gas, we are in the midst of an energy revolution. Our immigration revolution is key to America’s economic vitality, competitiveness, and growth. As home to the great research universities, we are leading the world in high-tech, aerospace, and creative industries. The growth of metropolitan areas in this country has made them the engines of economic prosperity and social transformation. In the vanguard of our metropolitan areas are the Millennials, the generation that is driving transformative change. Finally, Greenberg notes that “America is racially blended, immigrant, multinational, multilingual, and religiously pluralistic, and that is becoming more and more central to our national identity.”

But revolutions are all about change. And it is in that change that “the worst of times” materializes—both because of its demands for adaptation and the backlash that is sparked.

And so, Greenberg notes that globalization has led to a loss of American manufacturing jobs, which has marginalized working-class men. Marriage is on the decline, and more women are raising children on their own. With growth in metropolitan areas, the divide between urban and rural has widened. With increasing diversity has come the fear among white conservatives that “racial minorities will use their hold over government to discriminate against whites.” He posits that these changes challenge our values and have therefore ignited a counterrevolution—thus providing an explanation for our current political polarization. Rather than adapt, the Republican Party has drilled down on appeals that animate an ever-shrinking portion of the electorate.

“The Republican Party is in a death spiral that will mean the end of the Grand Old Party as we know it,” writes Greenberg. “The party will feverishly put off the end by entrenching itself in the most rural, religious, and race-conscious parts of the country by exploiting the constitutional bias in favor of small rural states, but the Republican Party will face shattering losses at some point.” That means that it will be up to the Democrats to produce a reform agenda that can help unleash the potential of an ascendant America.

Greenberg provides polling and focus group data to show strong support from Americans (not just Democrats or Republicans) for the following items: Americans want to protect Medicare and Social Security. They want paid sick days, and access to affordable child care for working mothers and families. They want equal pay for women. They want an affordable college education. And, finally, they want long-term infrastructure investment to rebuild America and create middle-class jobs, while raising taxes on the very rich so they pay their fair share.

But Greenberg also points out that in order for Americans to support that agenda, they must believe that government investments are worth it. And so those six items must be preceded by commitments to do something about big money in politics as well as waste and abuse in government programs.

Greenberg’s hypothesis is that the above agenda will allow the Democrats to repeat Bill Clinton’s electoral success. “Bill Clinton’s formula for winning the national vote and the Electoral College lay in reclaiming the votes of enough of the declining white industrial male workers,” writes Greenberg, “and combining that with the votes from the Democrats’ growing liberal cultural coalition—a product of the civil rights and women’s movements, the influx of immigrants, and the protests against the Vietnam and Iraq wars.” Barack Obama expanded the Democratic coalition by inspiring people of color and young voters—the very ones who are driving the new revolution in America. But considering the 2010 and 2014 midterm losses, Greenberg suggests that

[t]he new political formula for a real national electoral majority does not depend on winning the “Reagan Democrats” or a “forgotten middle class.” But we now know that identifying with the emergent trends and joining the battle for American values will still leave the Democrats short of the momentum they need to bring change. Democrats have to show that they get it and finally join the battle over the central contradictions of our times and advance a reform agenda. Then, they will have a majority that defends its gains year in and year out.

That is Greenberg’s answer to the question that is currently dogging Democratic strategists: the fact that the Democratic coalition as it stands right now is capable of succeeding in presidential elections, but looses badly in midterms due to lower voter turnout. He suggests that the answer is to grow the overall coalition by embracing a reform agenda that appeals to white working-class voters. As he says,

The white working-class voter has the chance to play in the Democrats’ game because the working class itself is being profoundly changed by America’s economic and cultural transformations, and they are among the voters waiting for the political class to step up and address the emerging problems.

When it comes to the specific reform agenda items Greenberg proposes, it is hard to see how they differ from what the Democrats have been embracing for the last several years—especially President Obama. It is an agenda that obviously appeals as strongly to the current Democratic coalition as it does to white working-class voters. Therefore, continuing to propose such an agenda—added to the need to address issues like immigration reform, criminal justice reform, and climate change—will be important for all Democrats going forward.

What is unique to white working-class voters, as Greenberg points out, is their distrust that the government can act on that agenda in a way that benefits them. When it comes to the solutions he proposes to address that mistrust, dealing with the problem of big money in politics is something that is also embraced by the voters who are currently part of the Democratic coalition. I would suggest that, due to the seemingly intractable nature of this problem, most all voters (not just white working-class voters) have become skeptical of politicians who promise to do something about it. Therefore, the more specific and practical Democrats can be about potential solutions, the better.

It is Greenberg’s suggestion about the need to reform government programs that is the most controversial. But he is likely correct that this is the issue that lies at the heart of the distrust white working-class voters have in the government. It is disappointing that he doesn’t provide any specifics, but simply refers to “out-of-date programs that don’t work.”

If we are going to test Greenberg’s hypothesis about the possibility of growing the Democratic coalition by attracting more white working-class voters, it is imperative that we answer some questions that this recommendation raises.

First of all, it would be important to know whether white working-class voters think that no government programs work, or whether their concerns are limited to certain areas. We know from Greenberg’s focus groups that voters want politicians to protect Social Security and Medicare. Those two programs—which together make up over 35 percent of the federal budget—would therefore appear to be excluded from the category of “programs that don’t work.” The next biggest category of federal programs is defense, which comes in at 18 percent of the budget. When people talk about waste and abuse in government programs, however, they are often referring to the 11 percent that is spent on safety net programs. Of that amount, less than half (approximately 5 percent) is spent on benefits to the nonworking poor.

Going back to the post-civil rights 1970s, Republicans have attempted to fuel a divide between white working-class voters and African Americans by suggesting that government benefits were going primarily to the “undeserving poor,” i.e., those who had no work ethic. That message continues to this day when Republicans refer to Obama as the “food stamp president” and suggest that the Democrats are giving away free stuff to garner African American votes. To the extent that this is what fuels the mistrust that white working-class voters have for government, Democrats are unlikely to find a way to appeal to them.

To be clear, Greenberg acknowledges the racial component of this mistrust and is not suggesting that Democrats attempt to woo working-class voters in the Republican strongholds of the South and Mountain West. As he writes, “It is important to remember … that three-fourths of American voters live outside this GOP conservative heartland. In the rest of the country, the battle for the swing white working class and downscale voters is very much alive.” In other articles Greenberg has written on this topic, he has zeroed in on white working-class women in the East and Midwest.

But given that, it is important for Democrats to recognize that validating the concerns voters have when government programs don’t work for them is important, but insufficient. Democrats must provide voters with a message that they not only understand the problem but also have solutions. Otherwise we reinforce the Republican mantra that government is the problem, undermining our ability to implement the reform agenda Greenberg outlines.

Many of the worst government breakdowns occur in programs paid for with tax dollars but administered by contractors. You see this in overpriced and underperforming weapons and IT projects. These boondoggles are often the result of politicians foolishly thinking they are going to save the public money by relying on the “private sector,” a notion encouraged by lavish campaign contributions by contractors. But they also arise because the government frequently lacks enough smart, talented, experienced people on its payroll to manage the contracts. As someone who ran a nonprofit social services firm, I can attest to the fact that the quality of people we worked with in government made all the difference. A Kennedyesque call to public service combined with a renewed drive for campaign finance reform could give Democrats a potent agenda for reforming both politics and government.

It is also important to note the media’s role in fueling the idea that government doesn’t work. If you remember the obsessive fear-mongering that was such a highlight during the Ebola outbreak and combine it with the lack of stories about how it was stopped, you begin to get the picture. Even when government reform efforts are undertaken, Americans rarely hear about it.

What I find lacking in Greenberg’s analysis is that he completely ignores the impact of Republican obstruction on the state of politics and the economy today. As we all know by now, on the day President Obama was inaugurated in 2009, Republican leaders met to craft a strategy for how to respond to the fact that not only had they lost the White House, but Democrats were also in control of Congress. Their decision that day was to unite in obstructing anything Democrats tried to do—even if they were issues Republicans had previously supported.

An example of how things might be different today if they had not settled on that strategy is that we might have an infrastructure bank in place (one of the priorities on Greenberg’s agenda), as Obama proposed. We might have even gotten parts of the American Jobs Act that Obama proposed in 2011 passed and signed into law. Who knows what might have become of his proposals for universal pre-K, free community college, and immigration reform.

But perhaps the havoc that obstruction has caused in our politics is even more damaging than what it did to our economy. Former Republican congressional staffer Mike Lofgren gave us some insight about how that worked when he wrote, “A couple of years ago, a Republican committee staff director told me candidly (and proudly) what the method was to all this obstruction and disruption. Should Republicans succeed in obstructing the Senate from doing its job, it would further lower Congress’s generic favorability rating among the American people. By sabotaging the reputation of an institution of government, the party that is programmatically against government would come out the relative winner.” Much of the reason why voters feel like the government doesn’t work is because Republicans have spent the last seven years trying to ensure that our politics don’t work. The result has been gridlock and dysfunction.

When it comes to the question of how to build a Democratic majority that can prevail, especially in midterm elections, one of the questions we can’t ignore is whether or not we should be satisfied with a democracy in which only slightly more than a third of eligible voters show up at the polls for midterms. Back in the 1960s, that number was beginning to get close to 50 percent (still not great, but light years better than today). A lot has changed since then. But much of it has simply led us to be a more cynical electorate—from Vietnam and Watergate to the Iraq War and the Great Recession. The anger and fear-mongering that Republicans fueled in order to justify their strategy of total obstruction and gridlock has driven that cynicism even deeper.

In the end, Democrats might improve their electoral results by broadening their coalition with a segment of white working-class voters. But the question of how the country builds back trust in government as a democratic expression of “we the people” is much bigger and more complex than that. Beyond the money in politics and the effectiveness of government programs, it means developing an engaged electorate via a news media that is more focused on informing than entertaining.

The post One-Party Fate appeared first on Washington Monthly.

Phishing for Phools:
The Economics of
Manipulation and Deception
by George A. Akerlof and
Robert J. Shiller
Princeton University Press, 288 pp.

Smith himself was less of a pure free marketeer than is commonly remembered; he was acutely aware, for instance, that markets have a tendency to be taken over by rent-seeking monopolists. And economists have long debated how and when government must intervene to deal with negative externalities like pollution or income inequality. During the Great Depression, John Maynard Keynes offered his own rebuttal, writing that major government intervention was sometimes needed to jolt an economy back to life. His ideas dominated the economics profession and government policymaking until the Keynesian consensus collapsed in the face of a 1970s stagflation it could neither explain nor fix.

In its place, a new generation of free market thinkers came to prominence, epitomized by people like the former Federal Reserve chairman Alan Greenspan. Greenspan, along with countless others, ignored growing risks to the mortgage and securities markets and eschewed calls for more regulation, instead pumping up the housing market with low interest rates. The subsequent financial collapse in 2008 went a long way toward dethroning free market purists—even Greenspan, an Ayn Rand acolyte, conceded to “a flaw” in his vision of how markets work. But a new consensus vision of how the economy operates has yet to emerge.

One contender for that role, a school of thought that has been building since the 1960s, is behavioral economics. The convergence of psychology and economics provides a much richer—if inherently more complicated—understanding of the decisionmaking that underlies markets. Over time, researchers have found a growing number of cases where we fail to act as rationally as economists might hope. For example, we’re loss averse—the pain of losing $100 is twice as bad as the happiness from gaining $100. Similarly, to save mental energy, we’re inclined to stick with a default choice—economists have found, for instance, that people are much more likely to participate in posthumous organ donation if they have to “opt out” of the program rather than “opt in.” This has important implications for all manner of decisions—from the web browser we use to how much we save for retirement, if we save at all.

And now, two of the country’s foremost economists, George Akerlof and Robert Shiller, are striking yet another blow to the theory of the perfectly rational man and the viability of purely free markets. In their new book, Phishing for Phools, the Nobel Prize-winning duo endeavors to explain why both a shortage of information and our own psychological weaknesses are not just anomalies to be studied in isolation but are at the heart of the market system. According to Akerlof and Shiller, economists “systematically ignore or downplay the role of trickery and deception in the working of markets,” to the detriment of society at large.

The authors use the metaphor of internet “phishing”—a process in which online perpetrators “angle” for information—to describe a broader phenomenon at play in the markets. (One example of phishing is the “Nigerian prince” who emails that he wants to share a large sum of his fortune with you in return for your bank account password and a small up-front fee.) The analogy suggests that all across the economy, and even within the political system, regular people play the “phools” who are repeatedly bilked.

Phishing for Phools is not a morality tale about unscrupulous actors or corporations. It’s a warning about the impact of market pressures when there’s money to be made.

Free markets are based on the concept of maximizing profit; some will use forms of manipulation to secure that end. Markets still reach a balance—what economists call equilibrium—but that balance is predicated on deception. “Free markets produce good-for-me/good-for-you’s; but they also produce good-for-me/bad-for-you’s,” Akerlof and Shiller note. “They do both, so long as a profit can be made.” Indeed, what if we thought about the rise of unscrupulous online universities or the recent blowup at Volkswagen for cheating on its emissions tests not as aberrations, but as consequences baked into the market system?

The argument is profound in part because it borders on the obvious. Exploitation and chicanery are at least as old as humankind. And most consumers already have an inkling that businesses are not uniformly operating with the best of intentions. But what the authors provide is a sort of unifying theory for all kinds of trickery, an economic explanation for why deception is so rampant. It takes many of our scattered findings about humanity’s blind spots—both psychological weakness and a lack of perfect information—and weaves them into a comprehensive framework that has the potential to be devastating for free market fundamentalists.

The heart of this slim and generally accessible volume is a series of examples in which phishing has hooked individuals and society at large. The stories they tell are not novel—they examine manipulation in everything from the advertising market to the sale of alcohol and tobacco to the role of money in politics. But the vast cross-section of examples helps to build the case that the exploitation they describe takes many diverse forms. Cheating is common, extensive, and inevitable.

The seriousness of the thesis is underscored by the pedigree of its messengers—two of the most influential economists in the modern era. The authors are not lefties with a political ax to grind, though they do have a history of exposing shortcomings in the neoclassical, free market thinking that dominated the decades leading up to the financial crisis. Akerlof, who is married to Fed chair Janet Yellen, won the Nobel Prize in 2001 for his groundbreaking work on asymmetrical information and what happens in markets when sellers hold more information than buyers. Shiller, meanwhile, won the top prize in the field in 2013 for his earlier work on asset bubbles and market prices. The two previously teamed up on a 2009 book, Animal Spirits, that examined the failure of economists to account for the role of human emotions in decisionmaking. Shiller and Akerlof describe themselves as “admirers of the free market system,” despite their repeated efforts to shine a light on its flaws.

One of the authors’ favorite examples is the case of Cinnabon, which expertly places storefronts at shopping malls and airports, where consumers are often harried and short on time. The doughy blend of sugar and fat is designed to tempt; the company’s president has proudly proclaimed it an “irresistible indulgence.” The market’s “insistent equilibrium”—its drive for profit—ensures that “if there were no stall selling Cinnabons, or the like, at the airport or at the mall, one would open soon.”

Indeed, it would seem that the comedian Louis C.K. stumbled upon this weighty economic truth in his infamous bit about the cinnamon rolls:

I’m buying a Cinnabon at the airport that I arrived at. You understand why that’s extra disgusting, right? Because when you’re at the airport you’re leaving from, you can go, “Oh, I gotta eat. I need some food, because I might be trapped in the sky forever, so I should eat right now.” But … I’ve landed. The trip is over. I’m twenty minutes from my house, where I got bananas and apples and shit. And I’m sitting on my luggage just fucking eating a Cinnabon with a fork and knife.

Of course, when it goes undetected, manipulation can have much more catastrophic consequences than an attack on our waistlines. For evidence of that, we have to look back just a few years at the financial crisis and its devastating effects on homeowners, workers, and the overall economy. The authors are clearly troubled by the lack of critical questioning that preceded the mortgage meltdown. “It is truly remarkable that so few economists foresaw what would happen,” they write. “Had we economists appropriately seen free markets as a two-edged sword, we would all but surely have delved into the ways in which financial derivatives and mortgage-backed securities, and also sovereign debt, would turn out badly. More than a handful of us would have sounded the alarm.”

It’s unfortunate that the book covers such a broad swath of examples, many of them dated, aiming for breadth instead of depth. It’s written for a general audience—market equilibrium is discussed with a story about shopping lines at the grocery store—and perhaps loses some of the nuance needed to rigorously explain this important thesis and its consequences in more theoretical terms.

But if the book is a warning for consumers and students, it’s also a damning critique of free markets that I hope will be explored at length in the future. For example, the authors shy away from delving into some of the serious macro-
economic implications of their findings. How much GDP produced every year is based not on real economic growth but on various forms of trickery— pharmaceuticals and medical procedures that, for instance, don’t enhance our well-being any more than cheaper alternatives but that the FDA has no power to block? And what has this baseline of manipulation done to public trust? Perhaps these are questions for the next generation of economists to take up, building on the shoulders of Akerlof and Shiller, as well as the many who came before them. For now, the rest of us must remain on guard, because there’s always more “phish” in the sea.

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