HHS Secretary Kathleen Sebelius may lose the most from the Senate’s rule change on the filibuster—and the Affordable Care Act may be healthier for it. I wrote last month on the FixGov blog that “Republicans are the Reason Secretary Sebelius Won’t Resign” (or be fired). That argument is no longer valid. My claim—the president’s inability to get her successor confirmed because of filibustering Republicans—is nullified by the Senate’s rule change, and the benefits may reach far beyond Obamacare.

The Implications of Filibuster Reform for Healthcare

Problems exist in HHS. No one denies it. However, for many appointees in the Department, the Senate rules served as a life preserver in a torrent of poor implementation, managerial failures, and bad PR. So long as the president faced the prospect of long-term vacancies among appointees overseeing ACA, the HHS leadership would be spared.

Today, that all changed. Moving forward, President Obama needs the support of only 51 Senate Democrats to replace top-level political appointees throughout the executive branch. This offers the president substantial breathing room. Nominees no longer need the support of every Democrat and a scarcely identifiable five Republicans. Instead, nominees can draw the ire of as many as four Democrats and still be confirmed.

Maybe Kathleen Sebelius is not to blame for the botched healthcare marketplace roll out. Maybe her Office did not give the thumbs up for the President to repeat “if you like your plan you can keep it.” Maybe she did not contribute to the poor salesmanship of the legislation from the start. However, if she was to blame (and perhaps if she wasn’t), her days in the president’s cabinet may well be numbered. The same may be true for deputies and other administrators in the Department who oversaw the weaker areas of the roll out of this law.

By repositioning HHS personnel or breathing new life into a Department facing continued struggles, the president may well ensure the administration of his signature legislation accomplishment improves. The right appointees can coordinate and communicate policy needs and goals up and down the bureaucratic hierarchy. Rather than settling for a program that meets or falls short of expectations, there is an opportunity to build an effective ACA.

Good Governance beyond Obamacare

The first half of October showed us that political actors in Congress contributed to a broken legislative branch. The second half of October showed us that political actors in the Administration contributed to a broken executive branch. Now is the time for the president to start anew and fix one branch, in the shadow of a Senate trying to fix itself.

In my piece from last month, I also argued that the filibuster rules in the Senate allow for the continuation of poor management and governance. If weak appointed personnel are causing policy problems, communication miscues, and other headaches for the president, the ability to replace them with something other than the word “ACTING” was limited by the 60-vote threshold.

President Obama, who has faced a string of personnel and management issues over the past year, now has greater freedom not simply to oust problematic appointees, but to install talented, effective leaders. With this ability comes a tremendous opportunity to jumpstart an administration that is sputtering.

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The world’s top economies had much to discuss at the G-20 summit in Brisbane, Australia last month, including reinvigorating global growth, the reduction of trade barriers, financial regulation reforms, and global infrastructure. The G-20 meeting took place at a key time for U.S. international economic policy, as it came on the heels of President Obama’s prior stops at the APEC summit and the ASEAN summit. As the U.S. joins its G-20 colleagues in aiming to boost G-20 GDP by an additional 2 percent by 2018, there remain many questions about how G-20 countries will follow through with the goals set in Brisbane.

On December 3, the Global Economy and Development program and the Economic Studies program at Brookings welcomed U.S. Treasury Undersecretary for International Affairs Nathan Sheets in his first public address since being confirmed in September. Following the recent G-20 meeting, Sheets discussed his perspectives on priorities for international economic policy in the years ahead across key areas including trade, the international financial architecture, and the United States’ evolving economic relationships.

Join the conversation on Twitter using #GlobalEconomy

Video

• U.S. Economic Engagement on the International Stage: A Conversation with U.S. Treasury Undersecretary Nathan Sheets

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• U.S. Economic Engagement on the International Stage: A Conversation with U.S. Treasury Undersecretary Nathan Sheets

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20141203_sheets_international_economic_engagement_transcript

“Although we are seeing a strengthening recovery in the United States, the overall performance of the global economy continues to fall short of aspirations,” said Treasury Undersecretary for International Affairs Nathan Sheets to a Brookings audience yesterday. In the event, hosted by the Global Economy and Development program and the Economic Studies program at Brookings, Undersecretary Sheets described six “pillars” that form his offices “core policy agenda for the years ahead” to support “a growing and vibrant U.S. economy.”

1. Strengthening and rebalancing global growth. Undersecretary Sheets noted the “persistent and deeper asymmetry in the international economic landscape,” and called for policymakers to “work together toward mutually beneficial growth strategies” such as boosting demand.
2. Deepening engagement with emerging-market giants, such as China, India, Mexico, and Brazil. On India, for example, the undersecretary noted that “faster growth, deeper financial markets, and greater openness to trade and foreign investment promise to raise incomes, reduce poverty, and bring many more Indians into the global middle class.”
3. Framing a resilient global financial system. “To be sustained,” he said, “growth must be built on a resilient financial foundation.” (See also Federal Reserve Governor Lael Brainard’s remarks yesterday on the Fed’s role in financial stability.)
4. Enhancing access to capital in developing countries. “Expanding access to financial services for the over 2 billion unbanked people in the world promises to open new possibilities as the financial wherewithal in these populations grows,” he said.
5. Promoting open trade and investment. Undersecretary Sheets explained that “Increased U.S. access to foreign markets, and the consequent rise in exports of our goods and services, is an important source of job creation in the United States.” He described current trade priorities, including the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the Information Technology Agreement (ITA) concerning China, and the Trade Facilitation Agreement (TFA) concerning India.
6. Enhancing U.S. leadership in the IMF. Undersecretary Sheets said that Treasury and the Obama administration “are firmly committed to securing approval for the 2010 IMF quota and governance reforms.” Citing the widespread support already in place for these policies, Sheets argued that “without these reforms, emerging economies may well look outside the IMF and the international economic system we helped design, potentially undermining the Fund’s ability to serve as a first responder for financial crises around the world, and also our national security and economic well-being.” He also called on the Senate to confirm six administration nominees as executive directors or alternate executive directors at the IMF and multilateral development banks.

Watch the video here:

Get a transcript of Undersecretary Sheets’ prepared remarks here.

Brookings expert Donald Kohn, the Robert S. Kerr Senior Fellow, moderated the discussion. The speaker was introduced by Senior Fellow Amar Bhattacharya.

Missouri's population is spreading out, adding to the costs of providing services and infrastructure across the state, according to a new study released today by the Brookings Institution Center on Urban and Metropolitan Policy.

The 84-page study, Growth in the Heartland: Challenges and Opportunities for Missouri, reports that Missouri's population is quickly dispersing, with smaller metropolitan areas experiencing some of the state's fastest growth and residency in unincorporated areas on the rise. Though new residents and jobs fueled prosperity in the 1990s, the report finds that growth has slowed in the past year, and suggests that the state's highly decentralized development patterns could become troublesome as Missouri contends with a slowing economy and serious budget deficits.

Sponsored by the Ewing Marion Kauffman Foundation, Growth in the Heartland provides the most comprehensive and up-to-date body of research and statistics yet assembled analyzing the direction, scope, and implications of development in Missouri. In addition to assessing the consequences of those trends for the state's fiscal health, economic competitiveness, and quality of life, the report addresses the potential role of state and local policy in shaping those trends in the future. Specific findings of the report conclude that:

• Growth in the Columbia, Springfield, Joplin, and St. Joseph metropolitan areas strongly outpaced that of the Kansas City and St. Louis metropolitan areas in the 1990s. Altogether the four smaller areas captured fully one-quarter of the state's growth and doubled the growth rate of the Kansas City and St. Louis areas.
  
  
• Population and job growth also moved beyond the smaller metro areas and towns into the state's vast unincorporated areas. Overall, residency in these often-outlying areas grew by 12.3 percent in the 1990s—a rate 50 percent faster than the 8.1 percent growth of towns and cities.
  
  
• Most rural counties reversed decades of decline in the 1990s, with eight in ten rural counties experiencing population growth and nine in ten adding new jobs. By 2000, more rural citizens lived outside of cities and towns than in them, as more than 70 percent of new growth occurred in unincorporated areas.

"Missouri experienced tremendous gains during the last decade, but the decentralized nature of growth across the state poses significant fiscal challenges for the future," said Bruce Katz, vice president of Brookings and director of the policy center. "The challenge for Missouri is to give communities the tools, incentives, and opportunities to grow in more efficient and fiscally responsible ways."

The Brookings Institution Center on Urban and Metropolitan Policy is committed to shaping a new generation of policies that will help build strong neighborhoods, cities, and metropolitan regions. By informing the deliberations of state and federal policymakers with expert knowledge and practical experience, the center promotes integrated approaches and practical solutions to the challenges confronting metropolitan communities. Learn more at www.brookings.edu/urban.

As I anticipated in my post on Tuesday, the Hong Kong government on Wednesday announced the details for the 2017 election of the Chief Executive (CE). Based on press commentary from China, it is clear that the PRC government, which has sovereignty over Hong Kong, approves the package. But to understand the implications for democracy in Hong Kong, it is important to look at the details of the proposal.

Since Hong Kong became a special administrative region of China in 1997, the CE has been chosen by an election committee of between 800 and 1,200 individuals. Beijing had promised that starting in 2017 the CE would be elected by the voters of Hong Kong through universal suffrage. Yesterday’s proposal is the latest step in a transition process toward that system. (For all of the recommendations, see the speech of Chief Secretary Carrie Lam to the Legislative Council.) As I outlined in Tuesday’s post, the principal point of controversy for more than a year has been Beijing’s insistence that a nominating committee choose who gets to stand for election. Hong Kong’s democratic camp believes that the nominating committee will give China an opportunity to “screen out” individuals it does not like.

The most prominent element of the Hong Kong government’s proposal yesterday is a recommendation on the procedural mechanism by which the Nominating Committee (NC) would review candidates. This was important for two reasons. One, under the plan the NC will have the authority to pick two or three final candidates to actually run in the election. Two, Mrs. Lam made clear that that the NC’s membership would be similar to the 1,200-person election committee that has picked the CE up until now and is weighted in favor of people who are biased toward Beijing.

Thus, who the NC considers before making its final nominations becomes critical. That will determine whether the election will provide a choice between the majority who have long favored a quick transition to democracy, and those who have preferred to move slower; and also between those who believe that the current economic system benefits only the rich and should be reformed, and those who are happy with current policies.

The proposed procedural mechanism mandates that any individual who can get recommendations from one-tenth to one-twentieth of the NC will be a “potential candidate” and have the opportunity to articulate his/her policy views to the NC and the public in a transparent way. In effect, this means that the NC will likely consider between five to ten individuals for final nomination. And because pan-democrats will have be at least a minority of the NC membership, as they do in the election committee, they will be able to recommend at least one democrat as a potential candidate. That in turn creates the possibility that a democrat could become a final nominee and compete to become CE. In that case, voters who have supported democracy and believe current economic policies are flawed would have a candidate who shares their general outlook. This mechanism would seem to be consistent with what the spokesman of the U.S. Consulate-General said earlier today: “The legitimacy of the chief executive will be greatly enhanced if the chief executive is selected through universal suffrage and Hong Kong’s residents have a meaningful choice of candidates.”

Let me be clear: the pan-democrats do not like this proposal. They do not like a mechanism that amounts to screening by China, and this one certainly opens a backdoor for Beijing to veto candidates it doesn’t like. In addition, the pan-democrats would like to have a promise from Beijing that this is not the end of the reform process when it comes to electing the CE, but Mrs. Lam gave no hope on that score, even though she said future circumstances might require more change.

The pan-democrats were likely unhappy about the government’s refusal to propose changes on two specific issues. Both concern the sub-sectors that will make up the NC, which will be copied from the current election committee. These subsectors represent different parts of the Hong Kong community, but the balance of voting power favors subsectors that 1) represent various business interests, 2) support Beijing on most issues, and 3) are afraid of populist movements. Back in December, the government floated the idea of shifting the balance of power among the existing subsectors so that under-represented groups got more votes, but on one condition, that the existing subsectors agreed. In the end, no change was made here, perhaps due to the stated reasons that there was no social consensus to make this change and that doing so would only create more political controversy. The more likely reason is that the subsectors that stood to lose their relative power were not willing to have their oxen gored.

The second issue had to do with “corporate voting” within subsectors. In some subsectors the constituent members decide their choices based on the preference of the leader of the member organizations. For example, in a subsector made up of commercial firms, the CEO of each member firm decides how to cast the firm’s vote. The alternative would be to have a larger number of people associated with the firm contribute to the decision, up to all the employees. As a matter of principle, the pan-democratic camp has long called for an end to corporate voting, and while there was an opportunity to do so on this occasion, the government didn’t take it.

So, the pan-democratic bloc in the Legislative Council walked out during Mrs. Lam’s presentation to the Legislative Council and has vowed to vote against this proposal. And if all of them did vote against, that would kill the proposal, because it must pass the Legislative Council by a two-thirds margin and the establishment caucus does not have enough votes on its own. On the other hand, Beijing and the Hong Kong government do not need to win over the whole of the disparate democratic camp. They just have to peel off four opposition legislators to secure the necessary majority. Presumably these would be more moderate politicians who might conclude that the reform package is “good enough” compared to the alternative. That is, Beijing and the Hong Kong government say that if the package is vetoed, election of the CE would revert to the 1,200-member election committee, delaying a one-person, one-vote election for some time. The danger for these moderates in voting for the proposal is that they will be excoriated by their colleagues for defecting and betraying principles, to the point of facing a challenge from within their camp in the next legislative election.

Hong Kong public opinion and legislators in particular have to face a couple of critical questions. The first is whether a system that produces a contest between at least one establishment candidate and one democratic candidate is indeed “good enough.” The recommended system could be improved upon in several ways, of that there is no doubt. On the other hand, if this system works as optimists think it could, then Hong Kong voters will have a real choice in picking their leader, for the first time in history.

Second, would this mechanism indeed produce an election contest between at least one establishment candidate and one democratic candidate? Is there a way in which members of the establishment could nominally consider a democratic potential candidate and then deny him or her the nomination? In fact there is. The government’s proposal specifies that after all the potential candidates have been heard from, the NC members then select two or three nominees. Each NC members get two votes, and nomination requires 50 percent. So establishment members of the NC, after going through the motions of considering a pan-democrat, could simply not give that person the majority needed for nomination. The procedure and their numerical majority give them the power to do so.

But is such a bait-and-switch tactic wise politically? If this mechanism is sold both to the public and moderate democrats as a “good enough” way to produce a competitive election but the result is a contest between two individuals associated with the establishment and the status quo, how much legitimacy will the process itself and the person ultimately selected have? Will the polarization, obstructionism, and protests that have come to mark Hong Kong politics subside or grow? Will Beijing face more stability in Hong Kong or less?

In short, does this mechanism not put the establishment in a position that it almost has to nominate a moderate democrat if it is to enjoy broad community respect? And if the establishment is being challenged to do the right thing, so are the democrats. As imperfect as they see the current package, if it creates a good enough chance of electing one of their own, would the democrats not lose community respect if they reject it and deny voters a choice (they already know that Beijing and others will blame them for reverting to the old system)?

This dual challenge creates the possibility of a compromise. The missing ingredient, of course, is the mistrust that each camp has about the intentions of the other, mistrust born of the decades-long struggle over whether Hong Kong should have a genuinely democratic system. Providing that ingredient will be a challenge itself. 

Stock buybacks are an important explanation for both the concentration of income among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades. Over this period, corporate resource-allocation at many, if not most, major U.S. business corporations has transitioned from “retain-and-reinvest” to “downsize-and-distribute,” says William Lazonick in a new paper.

Under retain-and-reinvest, the corporation retains earnings and reinvests them in the productive capabilities embodied in its labor force. Under downsize-and-distribute, the corporation lays off experienced, and often more expensive, workers, and distributes corporate cash to shareholders. Lazonick’s research suggests that, with its downsize-and-distribute resource-allocation regime, the “buyback corporation” is in large part responsible for a national economy characterized by income inequity, employment instability, and diminished innovative capability.

Lazonick also challenges many of the notions associated with maximizing shareholder value, an ideology that has come to dominate corporate America. Lazonick calls for a decrease, or even a ban, in stock buybacks so companies will be able to use these funds to finance capital expenditures but more importantly to attract, train, retain, and motivate its career employees. And some of the funds made available by a buyback ban can even flow to the government, he argues, as tax revenues for investments in infrastructure and human knowledge that can underpin the next generation of innovation.  

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• Download the paper

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In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, a far-reaching and still-controversial piece of legislation that was intended to reduce the odds of a repeat of the worst financial crisis in generations.  Five years later, is it working as hoped? Did it go too far—or not far enough? Are there parts that should be revisited? What remains on the U.S. and global financial-stability to-do list? 

On July 8, the Hutchins Center on Fiscal and Monetary Policy hosted a conversation with Treasury Secretary Jack Lew to address those and other questions about financial stability and the economy.

 Follow the conversation at @BrookingsEcon or #DoddFrank

Video

• Dodd-Frank at 5: A conversation with Treasury Secretary Jacob J. Lew
• Secretary Jack Lew on Dodd Frank
• Secretary Jack Lew on the $10 bill
• Secretary Jack Lew on Greece
• Secretary Jack Lew on China

Audio

• Dodd-Frank at 5: A conversation with Treasury Secretary Jacob J. Lew

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20150708_dodd_frank_lew_transcript

This week, Israeli Prime Minister Benjamin Netanyahu spoke at a joint meeting of Congress. His address sparked an intense debate among U.S. and Israeli lawmakers over the protocol issues raised by the invitation to speak, which came from the Republican speaker of the U.S. House of Representatives without consultation with the Obama White House, as well as the substance of the address — a broadside against Obama’s Iran policy — and its timing during the final days of a closely contested Israeli election.

Brookings scholars weighed in on the debate, through blog posts, op-eds and the media. These include:

Fellow Natan Sachs explained why Netanyahu’s speech was so controversial.  "Israelis, by and large, don't like it when their prime minister quarrels with the United States," Sachs told Vox. "For most voters, especially in the core base on the right and I think center right, here's Bibi doing something that opposition leaders cannot do: speak the way he does with his English and this reception from Americans.” Also read Sachs' blog post on the electoral implications of the speech as well as his Haaretz op-ed with recommendations for Israeli and American strategy toward the Iran nuclear talks.

Tamara Cofman Wittes, director of the Center for Middle East Policy (CMEP) at Brookings, appeared on Charlie Rose following the speech, and said, “I think the speech was very effective, as a speech, particularly at the end when Netanyahu was really playing to his domestic audience and political base more than anyone…I think that’s probably the video clip the Likud will be playing in  ads as the campaign winds down.”

Nonresident Senior Fellow Shibley Telhami looked at poll results examined U.S. public opinion related to Netanyahu’s speech. "Among Democrats, those holding favorable views of the Israeli prime minister declined from 25 percent in November to 16 percent in February, and among Independents from 21 percent to 14 percent. Correspondingly, unfavorable views increased from 22 to 26 percent among Democrats, and from 14 to 21 percent among Independents," he wrote in Foreign Policy.

A New York Times editorial examining Netanyahu's speech discussed American public opinion on the Iran nuclear deal, and cited Telhami’s poll results “show[ing] that a clear majority of Americans — including 61 percent of Republicans and 66 percent of Democrats — favor an agreement.” Telhami also organized and moderated the annual Sadat Forum earlier this week, featuring a discussion on the Iranian nuclear issue and the Netanyahu speech with Brookings Distinguished Fellow Ambassador Thomas Pickering, former president of the Carnegie Endowment for International Peace Jessica Matthews, and CMEP Senior Fellow Suzanne Maloney.

According to Ambassador Martin Indyk, who has served as director of the Foreign Policy program and was just named Brookings Executive Vice President, Netanyahu remained against any agreement. “He was pretty clear about his opposition to the deal,” Indyk told Foreign Policy. “I believe he wants to sink it, not modify it.”

Prior to the speech, Robert Einhorn, senior fellow in the Center for 21st Century Intelligence and Security and the Arms Control and Nonproliferation Initiative, wrote an op-ed published in the International New York Times discussing Netanyahu’s angle on the Iran talks. After Netanyahu’s speech, Einhorn appeared on Christiane Amanpour and argued that the deal was “not an ideal deal, but it’s a good deal, and one that’s better than any realistic alternative.” Einhorn, who formerly participated in the negotiations with Iran as a senior State Department official, was quoted in coverage of the speech published in the Washington Post and Politico, among others.

In an op-ed on U.S. News and World Report, Maloney argued that when it comes to a deal with Iran, “The ever-present illusion of a more perfect deal is not worth risking an imperfect, but minimally sufficient, bargain.”

With the prospect of a nuclear deal between Iran and the P5+1 looking increasingly likely and with the caveat that, “as always, Iran’s future behavior is hard to predict because its motives going into the nuclear negotiations are unclear and its decision-making is always opaque,” Senior Fellow Kenneth M. Pollack examined the possible scenarios and offered his thoughts on whether a nuclear deal would likely make Iran more or less aggressive — or neither. 

Bruce Riedel, senior fellow and director of the Brookings Intelligence Project, wrote about Netanyahu’s address in contrast to Saudi Arabia’s diplomacy. “As Israeli Prime Minister Benjamin Netanyahu plays center stage at the Congress this week to slam the Iran deal-in-the-making, the Saudis are playing a more subtle game,” Riedel wrote. “Iran is priority number one. It's more than just the nuclear issue.” The pot was also quoted in a Bloomberg News analysis of Gulf reaction to the state of play on Iran.

Last week, William Galston, who holds Brookings' Ezra K. Zilkha Chair in Governance Studies, wrote about the implications of Netanyahu’s speech, warning that “[t]he last thing he should want is a negative reception in the United States that fuels Israeli swing voters’ doubts about his capacity to manage Israel’s most important relationship.” And in his Washington Post column last week, Senior Fellow Robert Kagan argued that “there is no doubt that the precedent being set is a bad one” and regretted that “bringing a foreign leader before Congress to challenge a U.S. president’s policies…will be just another weapon in our bitter partisan struggle.”

And finally, for anyone wanting to see what our scholars were tweeting during Netanyahu’s speech, and reaction afterward, here’s a round-up.

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A conversation with U.S. Secretary of Commerce Penny Pritzker

Video

• Economic opportunities and the liberal international order

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The financial crisis is now eight years behind us, but its legacy lingers on. Many Americans are concerned about their financial security and are particularly worried about whether they will have enough for retirement. Guaranteed benefit pensions are gradually disappearing, leaving households to save and invest for themselves. What role could equities play for retail investors?

Another concern about the lingering impact of the crisis is that business investment and overall economic growth remains weak compared to expectations. Large companies are able to borrow at low interest rates, yet many of them have large cash holdings. However, many small and medium sized enterprises face difficulty funding their growth, paying high risk premiums on their borrowing and, in some cases, being unable to fund investments they would like to make. Equity funding can be an important source of growth financing.

On Friday, April 15, the Initiative on Business and Public Policy at Brookings examined what role equity markets can play for individual retirement security, small business investment and whether they can help jumpstart American innovation culture by fostering the transition from startups to billion dollar companies.

You can join the conversation and tweet questions for the panelists at #EquityMarkets.

Video

• Keynote address by Richard G. Ketchum
• Panel Discussion
• Keynote address by Roger Ferguson

Audio

• Not just for the professionals? Understanding equity markets for retail and small business investors

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• Equity Markets Retirement Security 2016 Apr 15 (2)
• 20160415_equity_markets_transcript