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Contemporary Issues in American Politics Custom Edition

A Custom Book Compiled by

Lee Ryan Miller


College of San Mateo PLSC 215: Contemporary Issues in American Politics Spring 2012

CQ Press Custom Books 2300 N Street, NW, Suite 800 Washington, DC 20037 Phone: 202-729-1900; toll-free, 1-866-4CQ-PRESS (1-866-427-7737) Web: www.cqpress.com CQ Press content included in this publication is copyrighted. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher.

CONTENTS

1. SCHOOL REFORM
Marcia Clemmitt. From CQ Researcher.

2. ENERGY AND CLIMATE


Marcia Clemmitt. From CQ Researcher.

23

3. NUCLEAR POWER
Marcia Clemmitt. From CQ Researcher.

45

4. WIND POWER
David Hosansky. From CQ Researcher.

67

5. REVIVING MANUFACTURING
Peter Katel. From CQ Researcher.

89

6. HOUSING THE HOMELESS


Peter Katel. From CQ Researcher.

111

7. AGING POPULATION
Alan Greenblatt. From CQ Researcher.

133

8. CAMPAIGN FINANCE DEBATES


Kenneth Jost. From CQ Researcher.

155

Page iii

9. INCOME INEQUALITY
Marcia Clemmitt. From CQ Researcher.

177

10. STRAINING THE SAFETY NET


Peter Katel. From CQ Researcher.

199

11. THE NATIONAL DEBT


Marcia Clemmitt. From CQ Researcher.

221

Page iv

CHAPTER

SCHOOL REFORM
BY MARCIA CLEMMITT

Excerpted from Marcia Clemmitt, CQ Researcher (April 29, 2011), pp. 385-408.

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School Reform
BY MARCIA CLEMMITT
ford University in California. While many people want to be reassured that things are aren Caruso, a thirdgoing just fine, ignoring the grade teacher in Los real message of these comAngeles, read the emparisons actually imperils our barrassing news last August economic future, he wrote. 3 in the Los Angeles Times: She Key to gaining elusive pubwas in the bottom 10 perlic support for large-scale educent of city elementary cational changes is persuading teachers, according to the families, who generally support papers analysis of seven years their local schools, that past of students performance on strategies have been costly failstandardized math and Engures. Reformers have not been lish tests. shy about making that case. Yet, that poor showing Over the past four decades, didnt fit Carusos profile. A the per-student cost of running 26-year classroom veteran, our K-12 schools has more she was among the districts than doubled, while our stufirst teachers certified by the dent achievement has remained prestigious National Board virtually flat, Gates wrote refor Professional Teaching cently. To build a dynamic Standards, and her principal 21st-century economy . . . we had named her one of the need to flip the curve. 4 best teachers at Hancock But teachers and many Park Elementary School, education scholars argue that Thousands of young college graduates teach in urban which serves a mainly upperreformers seek a simple fix schools through Teach for America, a nonprofit group middle-class neighborhood. for a complex problem. that receives support from venture philanthropy groups such as the Bill & Melinda Gates Foundation. Above, Caruso was taken aback Low-performing students are Erin Gavin conducts a discussion with her seventhby the Times findings but concentrated in the lowestgraders in Brooklyn Center, Minn., on Feb. 4. told the newspaper she income districts, where inwas determined to do betadequate funding, teacher ter. If my student test scores show they are joined by Democratic politi- turnover and the ravages of poverty Im an ineffective teacher, she said, cians, including President Barack make it difficult for students to excel, Id like to know what contributes Obama, and venture philanthropists, critics of market-based reforms say. to it. What do I need to do to bring led by Microsoft cofounder Bill Gates, Achievement differences between who are bringing the ideas they used students are overwhelmingly attributmy average up? 1 Its a question teachers nationwide to achieve business success to the do- able to factors outside of schools, wrote may soon be asking. With international main of public education. Gates, Los Matthew Di Carlo, a senior fellow at tests showing that the United States Angeles insurance magnate Eli Broad the Albert Shanker Institute, a research no longer leads in K-12 learning, an and other wealthy donors have poured and advocacy group affiliated with emerging coalition of reformers is aim- billions of dollars into market-oriented the American Federation of Teachers ing to use market-based ideas to im- reform efforts, arguing that failing schools (AFT), the nations second-largest prove the nations 99,000 public jeopardize the nations economic com- teachers union. Research shows that schools. 2 The ideas include paying petitiveness in the global market. about 60 percent of variation in students International data comparing K-12 school achievement is explained by teachers based on student performance and creating more publicly funded, student achievement across many na- student and family background characprivately run, charter schools to com- tions clearly show that U.S. schools are teristics, many related to income, Di failing, according to Eric Hanushek, a Carlo wrote. Only 10 or 15 percent of pete with public institutions. Conservative analysts have long rec- senior fellow at the Hoover Institution, achievement differences can be laid to ommended such measures. But now a conservative think tank based at Stan- teachers, he argued. 5

THE ISSUES

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AP Photo/Andy King

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U.S. Lags Behind Asia in Math Scores
U.S. eighth-graders rank ahead of those in several European countries but behind students in England, Japan, South Korea and Taiwan. Average Math Scores of 8th-Grade Students by Selected Countries, 2007*
Test score

600 500 400 300 200 100 0


Taiwan

598

597

570

513

508

504

496

491

480

464

South Korea

Japan England United Czech Aus- Sweden States Republic tralia

Italy

Bulgaria

* Scores are based on an 800-point scale. Top-scoring countries average about 600. Source: Patrick Gonzales, et al., Highlights From Trends in International Mathematics and Science Study 2007: Mathematics and Science Achievement of U.S. Fourth- and Eighth-Grade Students in an International Context, National Center for Education Statistics, September 2009, nces.ed.gov/pubs2009/2009001.pdf.

Reform critics also argue that the emphasis on rising educational costs is misplaced. For one thing, said Richard Rothstein, a research associate at the liberal Economic Policy Institute, a large chunk of the cost increase Gates mentions has been used to educate children with disabilities. That segment of K-12 school spending has swelled from 4 percent to 21 percent over the past four decades, he said. Previously, schools largely ignored the special needs of children with disabilities, he said. 6 Henry Levin, a professor of economics and education at Columbia University in New York, says, too, that no other country has to include [teachers] health-care costs and pensions in school-cost calculations. (Health insurance and retiree benefits add at least 20 percent in costs beyond salary for a public-sector worker, such as a teacher, according to the Bureau of Labor Statistics.) 7 Our per-pupil expenditures are the highest in the world, Levin acknowl-

edges. But he argues that it isnt fair to criticize schools for this because of the vast difference in employee costs between countries. None of these arguments, however, are persuasive to reform proponents, who say ample evidence exists to show that parental choice, school competition and data-based decision-making are needed to drive improvement. New York Federal Reserve Bank economist Rajashri Chakrabarti found unambiguous improvement in public school performance in Florida and Wisconsin as a result of offering parents a choice of schools, according to the Center for Education Reform, in Washington, D.C. The center also cites research by the Manhattan Institute, a conservative think tank in New York, concluding that all students in a Florida program that offered wide school choice to students with disabilities made greater academic improvements as their school options expanded and that included students who stuck with their neighborhood schools. 8 In recent school-reform battles, such as last winters hot dispute in Wis-

consin over newly elected Republican Gov. Scott Walkers plan to drastically limit teachers collective-bargaining rights, unions have been heavily criticized for running up costs while allowing poor teaching to flourish. 9 The unions have been pushing the case that there is a war against teachers, but I dont think thats true, says the Hoover Institutions Hanushek. There is a war against teachers unions that unions have brought on themselves by opposing reform proposals such as basing firing decisions on student achievement, he says. Linking teacher evaluations and student performance on standardized tests is indeed among the most contentious topics in public education. Earlier this month, the Los Angeles Unified School District announced that it will privately inform individual teachers of their ratings on a so-called valueadded success scale that it uses to link teacher performance and test scores. The approach is a favorite of many reform advocates, and it was the L.A. districts data that the Los Angeles Times plumbed to create its rankings of Caruso and other teachers in the city. The district is negotiating with the local teachers union, the United Teachers Los Angeles, which is affiliated with both the AFT and the nations largest teachers union, the National Education Association, to include the measurements in formal performance reviews, a move the union strongly opposes. 10 Times reporters argue that opposition is unwarranted because a valueadded analysis compares teachers by evaluating the progress of each individual student in their classrooms against that students own progress in earlier school years. By comparing a students achievement only to his or her own record, the value-added approach takes into account such factors as poverty and learning disabilities, over which an individual teacher has no control. Thus, it is a fair way to judge teachers success, the Times argued. 11

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Opponents maintain, however, that inciting teachers to compete with one another for pay is the wrong way to go about improving education. Diane Ravitch, a research professor of education at New York University who recently disavowed her longtime support for market-based reforms, noted that legendary business-improvement consultant W. Edwards Deming believed that merit pay for workers was even bad for corporations. It gets everyone thinking about what is good for himself, Ravitch wrote, and leads to forgetting about the goals of the organization. 12 Columbias Levin argues that teaching requires collaboration more than competition. For example, he says, teachers who want their students to improve need to talk to the teachers at lower grades about whether theyre teaching skills on which higher grades lessons are based and seek their cooperation to do so, he says. Its hard to say that the future really is in competition. As policymakers, schools and families debate how to improve schools, here are some questions they are asking: Are the public schools failing? Behind the push to reform K-12 education lies the proposition that widescale failure of American schools bears significant responsibility for a lagging economy. But critics of that view argue that reform enthusiasts ignore data showing progress alongside problems. Whats more, they argue, it makes no sense to hold schools responsible for the nations economic woes. American education is in a state of crisis, according to the Heritage Foundation, a conservative think tank in Washington. Millions of children pass through Americas schools without receiving a quality education that prepares them . . . to compete in the increasingly competitive global economy. 13 Reform critics cite international PISA (Programme for International

Reading Prociency Highest in Northeast


Connecticut ranks rst in eighth-grade reading ability followed closely by other Northeastern states, including Massachusetts and New Jersey. The District of Columbia ranks below all 50 states. State Rankings by 8th-Grade Reading Level, 2009
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Connecticut Massachusetts New Jersey Vermont Pennsylvania New Hampshire Minnesota Montana Ohio South Dakota Maryland Washington Maine Nebraska Missouri North Dakota Wisconsin 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. Wyoming Idaho Illinois Kansas Kentucky New York Oregon Utah Colorado Florida Indiana Iowa Virginia Delaware Michigan North Carolina Rhode Island 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. Tennessee Alaska Arizona Arkansas Georgia Texas Oklahoma Alabama South Carolina California Hawaii Nevada New Mexico West Virginia Louisiana Mississippi District of Columbia

Source: 8th Grade Reading 2009 National Assessment of Education Progress, Federal Education Budget Project, New America Foundation, febp.newamerica. net/k12/rankings/naep8read09.

Student Assessment) tests, which compare student performance in dozens of countries, in arguing that U.S. teachers are, by and large, doing a good job. But the Hoover Institutions Hanushek dismisses that claim as largely wrong. Its true, Hanushek wrote, that recent PISA tests find U.S. 15-year-olds above the developed-country average in reading, at the average in science, and below average in math, results that make it seem that perhaps we are not doing so badly. But thats a faulty conclusion, he argued, because reading is very difficult to assess accurately in the international tests. And reading scores have proven less important than math and science for both individual and national success. 14

Furthermore, international performance on these tests is very closely related to . . . economic growth, so that small score differences among countries may add up to big differences in economic well-being over time, Hanushek wrote. 15 In an article co-authored with two other scholars, one of them German, Hanushek argued that economic productivity depends on developing a highly qualified cadre of scientists, engineers, entrepreneurs and other professionals. International tests show, for example, that the United States produces fewer top scorers in math than countries it competes with, the scholars said. (See graphs, pp. 388 and 392.) 16 Furthermore, school failure is not confined to low-income neighborhoods,

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Putting Teachers to the Effectiveness Test


Whether someone is capable or not is way more complex than it may seem.
arlier this year, the Bill & Melinda Gates Foundation one of the nations biggest funders of school-reform projects announced it would use the Memphis and Pittsburgh school districts, among others, as laboratories for developing teacher effectiveness programs using data on student achievement and teachers classroom behaviors. The idea is to figure out the connection between student achievement and actions of individual teachers and use the linkage to make high-stakes educational decisions decisions, for example, on which teachers to fire, which to reward with merit pay or other recognition and which teaching practices to replicate. 1 Microsoft cofounder Bill Gates told The Wall Street Journal that he will deem the project a success if 10 years from now . . . we have a very different personnel system thats encouraging effectiveness [in teaching] and our spending has contributed to that. He went on to say that education-improvement efforts have suffered because data on teacher and school performance havent been available. Contrast that situation, he said, to professions like long-jump or tackling people on a football field or hitting a baseball, where the average ability is so much higher today because theres this great feedback system, measurement system. 2 Many education analysts agree that traditional teacher-evaluation practices havent been of much use. A principal sitting in the back of the room checking off things on a list of recommended teacher behaviors made almost no sense, partly because its bound to involve many very subjective judgments, says Aaron Pallas, a professor of sociology and education at Columbia University in New York. Almost everybody does well on such evaluations, proving that the approach isnt very accurate or useful, he says. Nevertheless, Pallas maintains, while old-style evaluations provide almost no guidance about what to do to improve ones teaching, new data-oriented evaluation systems dont either at least so far. Yet, rejecting the data approach means sticking our heads in the sand, says Valerie E. Lee, an education professor at the University of Michigan in Ann Arbor. These things can be good so long as theyre done right, she says. That means including other measures besides standardized-test scores and being careful not to jump at untested teacher-evaluation approaches, she says. If developed and used judiciously, Lee says, a good system could control for individual differences in students, such as

attendance and home life, over which a teacher has no influence. And that, she says, would make for fairer teacher-to-teacher comparisons than those that simply look at student test scores. Donald B. Gratz, an education professor at Curry College in Milton, Mass., cited a bit of history in arguing that programs linking teacher merit pay and student test scores are ill-conceived. In the mid-1800s, British schools and teachers were paid on the basis of the results of student examinations, for reasons much like those cited by todays reformers, Gratz wrote. After about 30 years, however, the testing bureaucracy had burgeoned, cheating and cramming flourished and, with public opposition swelling dramatically, the practice was abandoned as a failure. 3 Basing pay on test scores poses another problem, too, Gratz says: Fewer than half of teachers teach subjects whose material is contained in standardized tests. Furthermore, Gratz notes, at grades six and up, students typically have six or seven different teachers during a given year. Who gets the credit or the blame for a students success or failure? he asks. It looks like a field day for labor lawyers. Offering merit pay for good teaching hasnt been shown to improve instruction either, Gratz argues. Instituting merit-pay programs assumes that teachers know what to do and just arent doing it, but thats likely not the case, he says. We do know a lot about how to teach, but teaching is an extremely complex task, and its not as easy as it may seem for teachers to change their behavior to incorporate research findings about student learning, for example, he says. Complicating matters is the fact that educators and education administrators ability to succeed relates to the situation in which theyre working, says Jeffrey Henig, a professor of education at Columbia. We have superintendents and principals, for example, who succeed in one school, then go somewhere else and fail, he notes. So the question of whether someone is capable or not is way more complex than it may seem on the surface. Marcia Clemmitt
1 Stephanie Banchero, Bill Gates Seeks Formula for Better Teachers, The Wall Street Journal online, March 22, 2011, http://online.wsj.com/article/SB1000 1424052748703858404576214593545938506.html. 2 Quoted in ibid. 3 Donald B. Gratz, The Problem with Performance Pay, Educational Leadership, November 2009, pp. 76-79.

Hanushek says in an interview. Some suburban schools seem to be great, he says, but its because of things parents are providing for their children,

which may mask the fact that the schools themselves do a poor job. But many education scholars say that while some individual schools are

in trouble, claims of widespread failure in American education are false. The Economic Policy Institutes Rothstein wrote that the National Assessment

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of Educational Progress (NAEP), which tracks math and reading skills by following groups of students from fourth through 12th grades, shows that American students have improved substantially, in some cases phenomenally, over the past two decades. 17 Both black and white fourth- and eighth-graders have improved in math, the Economic Policy Institutes Rothstein wrote. Whats more, he said, African-American students have, at the fourth-, eighth- and 12th-grade levels, improved their math and reading skills the most, achieving a rate of progress that would be considered extraordinary in any area of social policy. 18 The Organisation for Economic Cooperation and Development (OECD), an international intergovernmental group that manages the PISA tests, also cites U.S. educational improvement. Since 2006, the United States has seen significant performance gains on international science assessments, mainly because Americas lowest-scoring students have been closing the gap that separates them from the top scorers, the OECD said. 19 Overall, the American public school system is pretty decent, says Katrina Bulkley, an associate professor of education at New Jerseys Montclair State University. Its just that in pockets, its served badly. Those pockets are mainly in urban and rural districts with the greatest poverty. 20 In low-poverty schools where fewer than 10 percent of students qualify for free or reduced-price lunches 15-year-old American students score above the international average in reading on the PISA assessment, according to Stephen Krashen, a professor emeritus of education at the University of Southern California. By contrast, in schools where low-income students make up more than 75 percent of enrollment, 15-year-old students scored second to last among the 34 OECD nations. 21

The U.S. education system doesnt provide enough classroom resources to overcome the disadvantages wrought by poverty, analysts from the OECD argue. The United States is one of only three OECD countries in which class sizes in high-poverty schools are routinely much larger than in schools in higher-income districts, said a recent report. As a result, disadvantaged American students are at risk of receiving fewer educational resources, including teacher time, than richer students, the analysts said. 22 Poverty imposes often-overlooked handicaps. I can guarantee you right now that at least 20 percent of our kids need glasses, said Ramn Gonzlez, principal of a public middle school in New York Citys South Bronx who struggles to get private funding for vision tests and glasses. Theyre in their classrooms right now, staring at blackboards with no idea what theyre looking at, said Gonzlez. You can have the best teachers, the best curriculum and the greatest after-school programs in the world, but if your kids cant see, what does it matter? 23 Educational reformers such as former New York City school Chancellor Joel Klein have said that to fix poverty you have to fix education, says Aaron Pallas, a professor of sociology and education at Columbia University. Schools can partner with others to help do this, Pallas says. But the idea that schools are going to transform poverty on their own is just giving schools too much credit. Many school reformers argue that Americans are losing jobs to oversees competition because the United States isnt adequately educating its students, says Donald B. Gratz, an education professor at Curry College in Milton, Mass. But the real reason is that American workers are expensive, he says. American workers productivity has soared in the past 20 years, demonstrating that graduating good employees is not the problem, he says.

At the same time, universities not the public schools are the real culprits in failing to prepare students to compete in the emerging globalized economy, some critics contend. The quality of teaching in higher education is worse than at the lower levels, terrible, but thats going unnoticed, says Richard Ingersoll, a professor of education and sociology at the University of Pennsylvania. Professors lead the ranks of those who want to impose [standardized-testbased] evaluations on K-12 teachers, but nobodys asking for similar tests to be used on them. The double standard is striking. But the higher-education scene is changing. In a study of 2,300 students at 24 U.S. universities, Richard Arum, a New York University professor of sociology and education, found that more than a third showed no improvement in critical thinking and writing skills after four years of college. 24 Their professors may soon find themselves on the test-score hot seat, Arum said. Beginning in 2016, the OECD will use the same test he used to compare college achievement internationally. Said Arum, The U.S. higher-education system has been living off its . . . reputation, but professors will increasingly be held accountable. 25 Are teachers unions a major barrier to improving schools? Many reform advocates say teachers unions are blocking change by being obsessed with job protection. They point to sensational cases, such as the infamous rubber rooms in which hundreds of New York City teachers deemed unfit for the classroom by school administrators sat for months, or even years, drawing their salaries, while their cases awaited due-process hearings. 26 But teacher advocates argue that, despite their flaws, such due-process protections are needed to shield teachers from politically motivated firings or firings based on prejudice. They also

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Lower Math Scores Tied to Poverty
Students who qualify for free or reduced-price lunches tend to score lower in mathematics than those whose family income is high enough to make them ineligible for subsidized lunches. The correlation suggests poverty contributes to lower achievement. Average Mathematics Scores of 8th-Grade Students Eligible for Free or Reduced-price Lunches, 2007*
(Score)

600 500 400 300 200 100 0

557

543

514

482

465

508

Less than 10% 10-24.9%

25-49.9%

50-74.9%

75% or more U.S. average

(Percentage of Students Eligible for Subsidized Lunches) * Scores are based on an 800-point scale. Top-scoring countries average about 600. Source: Patrick Gonzales, et al., Highlights From Trends in International Mathematics and Science Study 2007: Mathematics and Science Achievement of U.S. Fourth- and Eighth-Grade Students in an International Context, National Center for Education Statistics, September 2009, nces.ed.gov/pubs2009/2009001.pdf.

say that reform proposals are drastic enough to warrant caution. Whats more, they point out that unions are not uniformly opposed to reforms. Because of union contracts, it takes two years, $200,000 and 15 percent of the principals total time to get one bad teacher out of the classroom, said Terry M. Moe, a senior fellow at the Hoover Institution. If we figure that maybe 5 percent of the teachers . . . are bad teachers nationwide, that means that 2.5 million kids are stuck . . . with teachers who arent teaching them anything, said Moe. The unions are largely responsible. 27 School systems in cities such as Chicago that have tried to pioneer substantial reforms have not been able to produce evidence confirming their value because unions and others have nipped them in the bud, said Hanushek. 28 In districts with strong unions, policy change takes longer, according to

Katharine O. Strunk, an assistant professor of education and policy at the University of Southern California, and Jason A. Grissom, an assistant professor of public affairs at the University of Missouri. Stronger unions are better able . . . to negotiate contracts that constrain districts flexibility in policy setting, they wrote. 29 Yet, unions arent the only ones who make it hard to implement change in schools, some analysts argue. They point to resistance by school boards to expanding charter schools, which compete with regular public schools but are exempt from many regulations public schools must follow. (See sidebar, p. 396.) Local school boards have been as great a roadblock, and in some cases even fiercer opponents of reforms, than unions, wrote PBS education reporter John Merrow. They go to court to keep charter schools from opening or expanding. Why? Its about money and control. 30

Blasting unions as driven solely by self-interest ignores facts, union supporters say. For one thing, there is no research . . . that correlates student achievement to collective bargaining rights, despite many reformers claims that ending bargaining rights will improve schools, said Kate McLaughlin, executive vice president of the United Teachers of Lowell, the AFT local in Lowell, Mass. Massachusetts students, for example, perform higher than anybody else in this country academically. Yet we have the strongest collective bargaining rights, she said. 31 Massachusetts teachers bargained for and won the right of every teacher to have a qualified and trained mentor during the first three years on the job to help them improve, a clear instance of unions working for students, McLaughlin said. 32 Even many teachers agree that the most commonly used method of teacher evaluation classroom evaluation by a school administration usually doesnt work well, and some unions are trying to lead development of new methods, says Gratz of Curry College. The Massachusetts Teachers Association (MTA) proposes basing evaluations on multiple measures that can be validated against one another. Under the plan, the MTA says, no high-stakes decisions such as firing or raising pay would be based solely on test scores or any other single factor, such as expert evaluation of teachers classroom and planning practices. Instead, if apparently good practices arent matched by good scores or vice versa, evaluators would be required to find out why before acting. 33 Union-management partnerships have fostered reform in places such as Toledo, Ohio, and Norfolk, Va., according to researchers led by David Lewin, a management professor at the University of California, Los Angeles. In those cities, administrators and unions emphasize professional development, teacher evaluation and mentoring to

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improve teacher quality. As an apparent result, school districts experience very low levels of voluntary teacher turnover, the group wrote. Unions and administrators collaboratively make difficult decisions to not retain ineffective teachers, they reported. 34 Countries whose students regularly surpass U.S. students on international tests without exception have strong unions, observed Dennis Van Roekel, president of the National Education Association (NEA). Teachers must implement administrators policies, so a collaborative environment matters, he said. 35 Green Dot, a nonprofit organization founded in 1999, operates 17 charter high schools and one middle school in high-poverty areas of Los Angeles and one high school in New York City, all unionized. Ive seen what happens to working people when they dont have . . . somebody fighting for them, said founder Steve Barr, a Democratic political activist and fundraiser who in 1990 cofounded the nonprofit, nonpartisan Rock the Vote group that aims to increase young peoples political participation. When disagreements surface, Barr recommends that administrators and unions ask, Is there 75 percent of this issue we all agree on? 36 The University of Pennsylvanias Ingersoll says that while the current reform movement has a punitive cast toward teachers that unions understandably resent, he doesnt absolve unions altogether. Many unions arent helping much, he says. It would be good for them to get out in front on defining what a good, medium and bad teacher is, but unions have done little of that. Sometimes I think the unions are their own worst enemies. Whatever the case, school management plays a huge role negative or positive in improving schools, says David Menefee-Libey, a professor of politics at Pomona College, in Claremont, Calif. There is very strong research support for five specific factors that underlie school improvement,

How U.S. Teacher Salaries Compare


Compared with salaries of other college-educated workers, U.S. teacher salaries are further behind than teacher salaries in many other countries. Ranking of Selected Countries in Teacher Pay Compared with Other College-educated Workers

Safe, orderly environments, and Principals who prioritize learning. 37 Is business-style competition a good model for improving schools? Evidence shows that market-style competition and performance-measurement statistics can improve education, reform advocates say. But skeptics argue that reshaping education to operate like a business is, at best, an unproven strategy that may in fact be contrary to the goals of schooling. Using data to figure out who is best at vital tasks such as educating teachers is crucial, says Gregory McGinity, managing director for education policy at the Los Angeles-based Broad Foundation, one of a small group of philanthropies making grants aimed at spurring education reforms and measuring their results. Rather than propping up all teacher-training programs, he says, governors and school superintendents must be more aggressive in using data to determine which schools of education are doing a good job and then put the dollars into the schools that provide the best teachers. Critics focus too much on proposals for firing unsuccessful teachers while ignoring plans to use merit pay and public recognition to reward teachers whose students improve, McGinity says. Some researchers have found data that links improved education to marketoriented changes, such as providing families with a wider choice of schools. For example, a school-choice program in Chicago produced modest improvement in on-time high-school graduation rates for students who exercised the option to switch from their assigned neighborhood schools, reported Douglas Lee Lauen, an assistant professor of public policy at the University of North Carolina, Chapel Hill. Students who were high achievers and those from neighborhoods with low poverty rates benefited most, Lauen found. 38 In a school system overhauled along market lines, schools would be

Spain Germany Australia Finland Sweden France England South Korea United States Italy
Source: Building a High-Quality Teaching Profession: Lessons From Around the World, Organisation for Economic Co-operation and Development, 2011, www2.ed.gov/about/inits/ ed/internationaled/background.pdf.

and, surprise! Those five factors frequently arent present in schools where low-income students are, he says. The five factors which were validated in research by Anthony S. Bryk, president of the Carnegie Foundation for the Advancement of Teaching are, according to Menefee-Libey: Support systems to guide teachers in what and how to teach; Good working conditions; Strong ties between the school and community;

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closed and replaced rather than tinkered with in hopes of improvement, wrote Andy Smarick, a visiting fellow at the conservative Thomas B. Fordham Institute, an education-policy think tank. In other words, schools would be treated like businesses those that fail or consistently produce losses are shuttered, and competition fills the gap. Once persistently low performing, the majority of schools will remain low performing despite being acted upon in innumerable ways, Smarick said. In what he calls an alarming record, only 14 percent of California schools restructured under the 2002 No Child Left Behind Act (NCLB), a major educationreform measure signed into law by President George W. Bush, achieved adequate yearly progress in the first year after the changes. The proportions for schools in Maryland (12 percent) and Ohio (9 percent) were even worse, Smarick wrote. 39 (Under NCLB, restructuring means firing and replacing a schools principal and most of its teachers and/or reopening the school as a charter school or under the management of a private school-management company or the state government.) 40 Frederick M. Hess, director of education policy at the conservative American Enterprise Institute, argues that the public-school system is too stodgy, rule-burdened and old-fashioned to improve. Furthermore, efforts to scale up and apply small improvements to many schools routinely fail, he says. Thus, he argues, instead of taking this 19th-century box called school and making it better, we ought to scrap the traditional school system altogether and think about how to help people get what they need. The way to do that, Hess says, is by harnessing entrepreneurs energy to provide students and teachers with education products and services geared to their individual needs, such as instructional computer programs based on new brain research, and creating virtual schools that students can attend online. But New York Universitys Ravitch said she saw no reason to believe that closing a school and opening a new one would necessarily produce superior results. In fact, she wrote, half of New York Citys 10 worst-performing schools on 2009 state math tests were new schools that had been opened to replace failing schools. 41 Firing teachers is also a dicey strategy, says Columbias Pallas. We know that new teachers, no matter where they come from, often are foundering for at least a few years, he says. A more realistic approach would be to focus on improving how we prepare teachers, both in school and once they get on the job, he contends. Do reformers think theres a huge army of new teachers to jump in to replace those who are pushed out? asks Menefee-Libey, of Pomona College. We havent seen them. Kenneth J. Saltman an associate professor of education at DePaul University in Chicago, worries that in the race to require schools to produce measurable outcomes, the value of intellectual curiosity, among other things, will be lost. What happens to the country when the curriculum gets narrowed to exclude skills like deep reading and detailed debate of issues because these skills arent easily testable? he asks. All of these reforms have been advanced as accomplishing really big stuff bringing low-income kids fully into the mainstream, where theyll achieve on a par with higher-income students, says Columbias Levin. But even studies that show positive effects of market-oriented strategies show quite small effects, he says. In Washington, D.C., schools recorded gains in test scores under the direction of Chancellor Michelle Rhee, a hardnosed reformer best known for firing hundreds of low-performing teachers before resigning possibly under pressure from a newly elected mayor a mere three years into her tenure. But as Levin says, reading scores that apparently soared in the second year of Rhees tenure disappeared in the third year. He adds, If youre only looking for tiny gains, then youve evaded the original argument for market-based reform.

BACKGROUND
Engine of Opportunity
odays school-reform debates are the latest in a long line of disputes over public education dating back to the 19th century. For two centuries, many have hoped that the public schools could help the United States break the historical mold of nations stratified by class. Americas excellent universal education promises that the rail-splitter . . . at 20 years of age may become the chief magistrate of 50 millions of free people before he is 50, declared William A. Mowry (1829-1917), a school administrator in Rhode Island and Massachusetts. 42 Expectations for what schools should accomplish have continuously risen. In 1870, only 2 percent of Americans graduated from high school, and 30 years later the rate was only 6.4 percent. 43 By 1940, however, fully half of American students graduated from high school, and in 1969 the graduation rate peaked at 77 percent. 44 Despite the seemingly much greater progress made by American schools than in the past, however, the 20th century also saw virtually constant calls for improvement and reform, according New York Universitys Ravitch. Notwithstanding the remarkable gains in American students educational attainment, it is impossible to find a period in the

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Chronology
1990s
Interest in school-reform grows, with limited results. Republicans push for expanded school choice; Democrats support developing compatible curriculum and nationwide learning standards. 1990 Wisconsin legislature establishes nations first school-voucher pilot program, to help 1,100 low-income Milwaukee students attend nonreligious private schools. . . . Princeton graduate Wendy Kopp turns her 1989 senior-thesis idea on eliminating education inequities into Teach for America, which recruits elite-college graduates to teach for two years in low-income districts. 1991 Minnesota enacts first charterschool law. 1992 First charter school opens in St. Paul, Minn. . . . California enacts second charter law. 1993 Tennessee adopts value-added assessment system to measure how much individual teachers increase or decrease students test scores. 1994 President Bill Clinton signs Goals 2000: Educate America Act, creating the National Education Standards and Improvement Council with authority to approve states academic standards; short-lived effort effectively ends when Republicans win control of the House in November. . . . Microsoft cofounder Bill Gates and his wife establish Bill & Melinda Gates Foundation, soon to become a major funder of school-reform projects. 1995 Teach for America alumni Michael Feinberg and David Levin launch Knowledge Is Power Program (KIPP) charter schools. . . . Ohio state legislators pilot a voucher program for low-income Cleveland students to use at either religious or nonreligious schools. . . . Illinois legislature hands control of Chicago public schools to Democratic Mayor Richard Daley. 1999 Florida establishes first statewide school voucher program.

chancellor. . . . New York City school Chancellor Joel Klein says he will fire principals of schools with lagging test scores. . . . Teach for America, which placed 500 teachers its first year, receives 18,000 applications for 2,900 positions. 2009 Citing disappointing results, Gates Foundation ends small-school program after awarding $2 billion in grants. . . . President Barack Obama announces Race to the Top grants for states to develop student-achievement databases, expand charter schools and improve teacher retention and recruitment. 2010 Using previously confidential school data, Los Angeles Times names L.A. elementary-school teachers who score high and low on value-added teacher assessments. . . . Fenty loses re-election after many residents protest Chancellor Rhees teacher and principal firings; Rhee resigns. . . . Gates Foundation will fund development of databases to assess teachers achievement. 2011 Newly elected Republican governors and legislators in states including Wisconsin, Ohio, Indiana, Idaho, New Jersey and Florida propose bills to lower costs and improve education by ending tenure, limiting teachers union collective bargaining rights, instituting merit pay and firing teachers based on student-achievement assessments. . . . USA Today reports possible evidence of cheating on standardized tests at D.C. schools that former Chancellor Rhee praised as successful examples of school reform.

2000s

No Child Left Behind law focuses attention on failing schools. Reformers seek to weed out teachers who dont raise students achievement scores and reward those who do. 2002 U.S. Supreme Court rules in favor of Ohios voucher program. . . . Broad Foundations first annual Broad Prize of $1 million, for an urban district that reduces achievement gaps for low-income students, goes to Houston. 2003 Gates Foundation awards millions to Boston and other cities to break large high schools into smaller units, based on the theory that a more personal environment aids learning. 2007 Newly elected Democratic Mayor Adrian Fenty of Washington is the latest official to wrest control of schools from the local school board; he appoints high-profile reformer Michelle Rhee as school

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Charter Schools Draw Mixed Reviews


Education experts say only a few have merit.
he nations 5,000 charter schools taxpayer-funded institutions freed of some rules that public schools must follow figure big in school reformers plans to improve American education. But education experts say that while some individual charter schools have merit, the charter movement as a whole is not a panacea for what ails the nations public-school system. That assessment has not discouraged education-reform advocates from embracing charter schools. So-called venture philanthropies such as the Bill & Melinda Gates Foundation generously fund charter school-management organizations, such as San Francisco-based Knowledge Is Power Program (KIPP). Moreover, the Obama administrations school-reform funding program, Race to the Top, encourages states to make their school laws friendlier to charter development. But information on how well charter schools perform is only gradually emerging. So far, the results are mixed, with some charter schools producing impressive learning results compared with demographically similar public schools, some lagging at the bottom on many measures and most ensconced somewhere in the middle of the pack on student achievement. Valerie E. Lee, a professor of education at the University of Michigan in Ann Arbor, says that only a few charter schools are really good at improving student achievement, while a few are absolutely awful, and the rest are no different from traditional public schools. Is this research solid enough to use as a basis for a large expansion of many of these schools? she asks. Id probably say, No. Charter schools are not covered by laws in some states that require a unionized teaching staff. Whats more, they do not have to follow state and school-district requirements on curriculum and mode of instruction. While most charter schools

operate similarly to traditional public schools, others use longer school days or avant-garde teaching methods, such as curricula built around music education or experiential learning. While reformers interest in charter schools has grown sharply in recent years, the charter-school movement isnt new. Minnesotas charter-school law, the first in the nation, is 20 years old this year. And with charter-school laws in effect in 40 states and the District of Columbia, the number of students enrolled in such schools tripled to 1.3 million between 2000 and 2008. 1 Some of the newest research shows that while few charter schools seem to substantially improve students test scores, they do produce much higher graduation rates in other words, they instill students with motivation, says John Witte, a professor of public affairs and political science at the University of Wisconsin, Madison. This parallels the old research on Catholic schools, showing that their students also were more likely than comparable public-school students to persist through graduation, Witte says. In a 2010 analysis of 22 of the 99 schools managed by the San Francisco-based KIPP charter school-management organization, most of the schools had positive, statistically significant and educationally substantial effects on students scores on state mathematics and reading tests. Furthermore, while KIPP schools serve smaller numbers of students for whom English is a second language and fewer special-education students, they also enroll a disproportionate share of low-income students compared to other local schools, analysts wrote. 2 A 2009 Stanford University study, meanwhile, found that charter-school students outperformed their public-school counterparts in Arkansas, Louisiana, Missouri, Denver and Chicago. But charter students significantly lagged in achievement in Arizona,

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20th century in which education reformers, parents and the citizenry were satisfied with the schools, although few agreed about what should be done to improve them, she wrote. 45 Beginning in the 1970s, oil shocks, recessions and a globalizing economy shook Americans confidence in what had seemed an endlessly bright economic future. The schools came under new criticism as the United States found its world-beating school-completion rates surpassed by other nations. By the late 1980s, high-school graduation rates declined to just under 70 percent

and leveled off. In 2007, the rate stood at 68.8 percent. 46 Current reform projects aimed at retooling schools as an engine of economic prosperity trace their history at least as far back as 1957, when the Soviet Union launched Sputnik, the first spacecraft to orbit the earth, says Curry Colleges Gratz. Sputnik, he says, sparked worries that the United States might be losing its global technological superiority, and schools came under sharp criticism for not doing enough to prepare students in math and science. But he says efforts to blame the schools for the nations large economic and tech-

nological challenges have an air of unreality because schools cant possibly be held responsible for globalization, growing income inequality and other such factors that shape the economy. Even as Americans have had high hopes for schools, theyve been skeptical about teachers. Over the 20th century, national magazines regularly fretted about teacher hygiene, perversion, patriotism and competence, wrote Hess of the American Enterprise Institute. 47 The first U.S. teachers union, the Chicago Teachers Foundation, was established in 1897. 48 At the time, many teachers

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Florida, Minnesota, New Mexico, Ohio and Texas and performed on a par with public-school students in California, Georgia, North Carolina and the District of Columbia. Nationwide, 17 percent of charter schools improved students math achievement significantly, compared with public schools, but 37 percent lagged behind public schools on math achievement, according to the analysis. 3 Furthermore, while reformers push to close low-achieving public schools, researchers have also found that, like public schools, low-achieving charter schools are extremely difficult to shut down. Are bad schools immortal? lamented researchers at the conservative Fordham Institute in a 2010 analysis. In follow-up research on both public and charter schools found to be low achievers in 2003-2004, a foundation analyst found that 72 percent of the low-achieving charters were still operating and still bad five years later. (Eighty percent of low-achieving public schools in the study also remained in operation.) 4 The bottom line, say many scholars: Dont count on charter schools to drastically improve education. Originally, many hoped that the freedom granted to charter schools would allow them to develop new modes of instruction that other schools could adopt. But so far, theres not much evidence of charters serving as incubators for innovation, says Aaron Pallas, a professor of sociology and education at Columbia University in New York. I cant say theres one reform thats come out that can be widely adopted, he says. Some charter-management organizations such as KIPP have significantly raised student achievement after lengthening the school day and school year, he says. But when it comes to the curriculum and ways of teaching, theyre not looking much, if any, different from the public schools.

The number of charter schools is always going to be limited because they require entrepreneurial people at the center, says Wisconsins Witte. That means that the existence of even the best charter schools in low-income districts does not let the community off the hook for making its public schools as good as they can be, says Lee. She says many families lack the time or knowledge to compete for the limited number of slots typically available in local charter schools. Parents usually must participate in a lottery for available seats. Concern also exists among civil rights groups about the very large numbers of minority children enrolled in charter schools, which often dont have the same ties to the community or public accountability as do public schools, says Janelle Scott, an assistant professor of education at the University of California, Berkeley. Civil rights organizations and charter-management organizations havent been terribly involved with each other, she says. So theres some concern about whos shaping education for people of color. Marcia Clemmitt
1 Fast Facts, National Center for Education Statistics, U.S. Department of Education, http://nces.ed.gov/fastfacts/display.asp?id=30. 2 Christina Clark Tuttle, et al., Student Characteristics an Achievement in 22 KIPP Middle Schools, Mathematica Policy Research, Inc., June 2010, www.mathe matica-mpr.com/publications/pdfs/education/kipp_fnlrpt.pdf. 3 Multiple Choice: Charter School Performance in 16 States, CREDO, Stanford University, 2009, http://credo.stanford.edu/reports/MULTIPLE_CHOICE_ CREDO.pdf. 4 David A. Stuit, Are Bad Schools Immortal? Fordham Institute, December 2010, www.edexcellence.net/publications-issues/publications/are-bad-schoolsimmortal.html.

faced unfair treatment, wrote Ravitch. The New York City Board of Education fired female teachers if they married and, after teachers successfully fought for the right to wed, it fired those who became pregnant. As late as the mid-20th century, in Texas, a right to work state where teachers unions have had little success in organizing and thus enjoy little clout, an ultraconservative group called the Minute Women . . . would drop in unannounced to observe classes . . . to find out whether teachers expressed any unacceptable political opinions, such as support for desegregation, Ravitch wrote. 49

Organized teachers won passage of the first tenure law in 1909, in New Jersey, to protect against firings based on race, gender or unpopular political opinions or to make way for cronies of school management. 50

Public and Private


s early as the mid-19th century, charities used private money to try to reshape the nations public schools. After the Civil War, abolitionist charity groups who feared that Southern states would not provide education to freed

slaves took on the job themselves, notes Janelle Scott, an assistant professor of education at the University of California, Berkeley. For example, the American Missionary Association, a nondenominational Protestant group, opened more than 500 schools for freed slaves. 51 Many private fortunes have helped shape U.S. education. The Carnegie Foundation for the Advancement of Teaching, established in 1905 by industrialist Andrew Carnegie, helped found the Educational Testing Service (ETS), for example. The ETS developed and to this day manages standardized tests that include the SAT. In addition,

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Teaching Is a Prestige Profession in Some Countries


There are few occupations with higher status in Finland.
odays U.S. school reformers, alarmed at what they see as widespread failure in the classroom, tend to focus on removing bad teachers, reducing the collective bargaining power of teacher unions and reducing the authority of teachers to stray from standardized curricula. But in some other countries where students outpace American pupils on international tests, the focus is on giving teachers greater autonomy and elevating them to a professional status often reserved for lawyers and doctors. Finland has raised the social status of its teachers to a level where there are few occupations with higher status, states a report prepared for an international education summit organized by U.S. Education Secretary Arne Duncan in March. 1 Test scores in Finland were below the international average 25 years ago but have recently risen to the top of the global rankings. Finland focuses on bringing the best students into teaching and ensuring that the job confers respect in society, according to the report, prepared by the Organisation for Economic Cooperation and Development (OECD). In contrast to the United States, where elementary-school teachers, especially, come from the lower half of college classes, top students in Finland battle for primary-school teaching spots. In 2010, for example, over 6,600 applicants competed for 660 available slots in primaryschool preparation programs . . ., making teaching one of the most sought-after professions, the OECD said. 2

Finnish teachers unions play a key role in shaping education policy, too. Its a totally different situation in Finland than in the United States when it comes to the relationship between unions and school administrators, said Henna Virkunnen, the countrys minister of education. Our teachers union has been one of the main partners We are working very much together with the union, she said. Nearly all of the teachers are members. I think we dont have big differences in our thinking. 3 Virkunnen acknowledged that comparing education policies is not easy. Schooling is very much tied to a countrys own history and society, so we cant take one system from another country and put it somewhere else, she said. Still, national differences aside, paying close attention to teachers pre-service and in-service training, developing teachers who are experts of their own work, respecting their professional autonomy and knowledge and providing good workplace conditions are key, Virkunnen said. 4 Singapore also assigns high status to the teaching profession. It carefully selects young people from the top onethird of the secondary-school graduating class whom the government is especially interested in attracting to teaching and offers them a monthly stipend, while still in school, the OECD said. The stipend, it said, is competitive with salaries for new graduates in other professional fields. In exchange, recipients must make a three-year commitment to teaching.

the Carnegie Foundation led the fight for federal Pell grants for low-income college students. 52 In 1955, Milton Friedman, a University of Chicago libertarian economist and 1976 Nobel Prize winner, introduced a new twist to the idea of linking the public and private sectors on schooling. As part of his overarching theory that all public-sector enterprises overspend and underperform because they are not disciplined by market supply and demand, Friedman proposed that public funds should be directed to private schools. The government should fund education but should not, in general, run schools, because government, by nature inefficient, should run as few institutions as possible, Friedman theorized. His plan would offer parents

vouchers equal to the estimated cost of . . . a government school to send children to private schools. Such a scheme would permit competition to develop and not least . . . , make the salaries of school teachers responsive to market forces, Friedman wrote. 53 Little noticed at first, the idea was promoted in the 1980s by a burgeoning network of conservative think tanks such as the American Enterprise Institute. 54

The New Reformers


wealth boom in the 1990s built fortunes for entrepreneurs in such fields as electronics and finance and gave rise to a new breed of school reformers, typified by Gates, the Microsoft

cofounder, and Broad, who made his first fortune in Detroit real estate development before turning to insurance. This group has been dubbed venture philanthropists for their efforts to fuse business methods with their social activism. Venture philanthropists critique of traditional philanthropy is that its been far too incremental in achieving goals, says the University of Californias Scott. As a result, while old-style foundations generally announced broad funding areas, then solicited grant applications from experts in those fields, venture philanthropists often dont ask you to apply. Instead, they seek you out, if youre doing specific work that they support, because they tend to believe they already know what works in a given field, Scott says. But the venture philanthropists ideas dont always pan out in practice.

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teacher unions that work in They get a choice of catandem with local and nationreer paths: becoming masal authorities to boost student ter instructors who train achievement, they said. These others, curriculum and rehigh-performing nations illussearch specialists or future trate how tough-minded coladministrators. 5 laboration more often leads to Some have noted an educational progress than irony in the fact that Edutough-minded confrontation. 6 cation Secretary Duncan not only organized the in Marcia Clemmitt ternational summit but coFinland focuses on bringing the best students into teaching. authored a newspaper col1 Building a High-Quality Teaching Above, a second-grade class in Vaasa. umn with the top official of Profession: Lessons from Around the the events host: Fred van World, Organisation for Economic Leeuwen, general secretary Co-operation and Development, 2011, of 30-million-member Education International, the largest inter- p. 11, www.oecd.org/document/53/0,3746,en_21571361_44315115_47386549_ 1_1_1_1,00.html. national teachers union. 2 Ibid. The Obama administration has vocally supported many of 3 Quoted in Justin Snider, An Interview With Henna Virkunnen, Finlands the principles of the U.S. school-reform movement, including Minister of Education, The Hechinger Report, March 16, 2011, http://hechingerthe championing of charter schools, most of which employ report.org/content/an-interview-with-henna-virkkunen-finlands-minister-ofeducation_5458. nonunionized teachers and are intended to compete with tra- 4 Quoted in ibid. ditional public schools. 5 Building a High-Quality Teaching Profession, op. cit., p. 9. Yet Duncan and his co-authors wrote that increasing 6 Arne Duncan, Angel Gurra and Fred van Leeuwen, Uncommon Wisdom teacher autonomy is vital for improving the schools. Con- on Teaching, Dept. of Education website, March 16, 2011, www.ed.gov/ trary to arguments of many current U.S. school reformers, blog/2011/03/uncommon-wisdom-on-teaching. many of the worlds top-performing nations have strong

For example, one of the Gates Foundations early initiatives running from 2001 to 2009 funded the breakup of large high schools into small ones of a few hundred pupils each, on the theory that better education occurred in a more personal environment, Scott says. At the time, research showed that medium-sized high schools of 500 to 1,200 students got the best results. But Gates poured money into tiny schools anyway. Then, after several years, when the small schools didnt produce improvement, the foundation quietly dropped the program, says Scott. One person involved with the initiative told Scott that researchers had told us that medium-sized, rather than very small, high schools showed the best results, but we didnt listen, she says.

On the positive side, the episode demonstrates that the Gates Foundation, at least, is willing to learn from poor results, says Scott. But it also illustrates the potential danger of privately funding a crucial public resource, she says. What happens to schools created with private dollars when that money is withdrawn? Should taxpayers support them? Scott asks. Still, venture philanthropists are gaining power as they support mainly market-oriented school reforms in concert with like-minded politicians, such as New York City Mayor Michael Bloomberg and Chicago Mayor Richard Daley. Also working with the philanthropists are education entrepreneurs such as Wendy Kopp, the Princeton graduate who founded Teach for America, a nonprofit group that has placed thousands of young

graduates of elite colleges into temporary teaching slots in urban schools. Scott says venture philanthropists have followed the lead of conservative funders who in the 1970s began to build a network of professors, academic research centers and think tanks that today buttresses the powerful conservative movement. By funding multiple groups and individuals and providing multiyear funding to cover operating costs, rather than making single-project grants, the venture philanthropists have formed a coherent philosophical network with lasting power, she says. Theres power because people arent working at cross-purposes. In recent years, joint grant making by education funders has increased, says Sarah Reckhow, an assistant professor of education at Michigan State University

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in East Lansing. While many cities and organizations get no venture-philanthropy cash, those that do including the New York City and Los Angeles school districts and groups such as Teach for America get a lot, from multiple sources, which helps them make largescale, high-profile changes, Reckhow says. Historically, education politics has been local, with reformers focusing on change in a single district, says Jeffrey Henig, a professor of political science and education at Columbia University. Todays coalition is focused on changing the national system, such as by persuading the federal government to add public dollars for programs that echo foundation initiatives. I dont think this would have been possible without the growing role that states and the federal government have played in education policy, Henig says. (Beginning in the 1970s, most states began creating statewide school-funding formulas to replace purely local ones. The 2002 No Child Left Behind law helped increase federal involvement in assessing student achievement.) Compared to a school systems annual budget, philanthropy dollars are a drop in the bucket, says Reckhow. However, since most school-district money is tied up in salaries, the funding actually provides powerful leverage because its nearly the only money available for new initiatives. Wealthy investment-fund managers who pump money into school-reform efforts such as charter schools honestly think theyre doing good. Plus, its a very strong goodwill builder for an industry whose reputation has suffered from the financial crash and recession, says Columbias Levin. A few million dollars is a rounding error for a wealthy investor. But it is huge for a school. Such funding, Levin says, can make a school highly influential by providing extra resources that may help achieve better results and allow adoption of interesting programs that gain public and media attention.

Education Entrepreneurs
onservative reformers and venture philanthropists tend to stress different aspects of and reasons for school reform, says Montclair States Bulkley. Conservatives, who tend to be skeptical of public systems of any kind, often argue that reforms greatest value is to offer families free choice and to create a market where none existed, she says. By contrast, she continues, venture philanthropists tend to believe in public purposes for schools and often stress the importance of building a public system better equipped to produce a skilled workforce. The Broad Foundation, for example, awards an annual prize to districts that improve disadvantaged students achievement, citing as a key motivation the need to restore the publics confidence in . . . public schools by highlighting success. 55 With their focus on freedom and individual choice, many conservative reformers are as supportive of small oneof-a-kind charter schools as they are of multischool charter-school groups, says Bulkley. But venture philanthropists have their DNA in entrepreneurship having launched small companies that grew into giants and this background translates into a strong interest among venture philanthropists in socalled charter-management organizations that seek to run many individual schools based on a single school-management philosophy, Bulkley says. Venture philanthropy dollars have spurred development of numerous entrepreneurial groups. New Leaders for New Schools is a New York Citybased private training program for aspiring urban-school principals. The Brooklyn-based New Teacher Project founded in 1997 by Rhee before she became D.C. school chancellor aims to change school practices to allow more hiring of teachers without traditional certifications. 56

Venture philanthropists favor working with cities where mayors, not school boards, are in control. Both Chicago and New York, where schools have been under mayor control since 1995 and 2002, respectively, receive substantial private funding. 57 Old-style industrial-based foundations tended to work within institutional constraints, taking local politics into account, for example, Henig says. But Silicon Valley-influenced philanthropists inhabit a fast-moving world. I do understand the frustration that leads them to prefer the one-stop shop of mayoral control, Henig says. Why would you want to wait two generations to implement change incrementally, in part because its hard to get top-heavy bureaucracies to move? Nevertheless, incremental change that seeks widespread buy-in is probably the best path to lasting improvement, he suggests.

CURRENT SITUATION
Budget Battles

everal newly elected conservative governors are bringing school reform to the front pages this spring. Recession-triggered budget problems in such states as Wisconsin, Ohio, Idaho, Florida and New Jersey have opened the way for battles over teachers benefits and unions cherished right to bargain collectively. Conservative reformers, especially, have welcomed the reform efforts. Except for one year during the Great Depression, public-school funding has gone up every year for 100 years, says the Hoover Institutions Hanushek. Much of the money went into salaries and retirement plans for teachers and for reContinued on p. 402

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At Issue:
Has spending on public schools risen too high?
yes

ADAM B. SCHAEFFER
POLICY ANALYST, CATO INSTITUTE
WRITTEN FOR CQ RESEARCHER, APRIL 2011

RICHARD ROTHSTEIN
RESEARCH ASSOCIATE, ECONOMIC POLICY INSTITUTE
WRITTEN FOR CQ RESEARCHER, APRIL 2011

eal, per-pupil spending, adjusted for inflation, has more than doubled over 40 years, while test scores have remained flat at the end of high school. Thats around $12,000 or $13,000 per student every year. Weve spent more every decade with no return in student performance. Thats not investment defined as getting a positive return on your money. Its just spending. This poses a particularly difficult problem for state and local governments who bear most of the burden. State and local education spending consumes 46 percent of all tax revenue, or two-and-a-half times whats spent on Medicaid/CHIP. Its also taking a bigger share of tax revenue. State education spending as a share of tax revenue has increased 90 percent in two decades. Its increased over 70 percent as a share of local revenue. Its time to replace the spending model of education policy with an investment model. We can make public education a lot more efficient. The number of public school staff per student increased 70 percent since 1970; cutting back on unnecessary personnel will bring significant savings. But school choice, particularly through education tax credits, is the best way to invest in education. Its a proven way to improve public school performance, save money and increase choice. Its an effective, efficient investment in education. Choice is the most intensively studied education reform there is, and the verdict is clear: It works. Decades of evidence and dozens of studies provide proof. It works in Chile and Sweden, and it works in Florida and Wisconsin and a dozen other states. The vast majority of studies analyzing private choice policies demonstrate positive impacts on participants and children who remain in public schools. None have shown negative impacts. And choice programs are far less costly to taxpayers. According to a 2008 fiscal analysis by the state Office of Program Policy Analysis and Government Accountability in Florida, the state gained $1.49 in savings for every $1 it lost in tax revenue to its education tax credit program. David Figlio, a Northwestern University researcher and official analyst of the program, found it significantly boosted performance in Floridas public schools. Citizens and businesses want to invest directly in our education system. We should encourage them to do so. Lets stop just spending money on education. Lets really start investing in it.
no

yes no
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tates education spending varies widely, even after adjustment for purchasing-power differences. Real costs also vary, because disadvantaged students need more support than those whose early-childhood, after-school, home-literacy and cultural experiences supplement their schooling. For decades, spending nationwide increased, largely for children with disabilities. Their individualized attention accounts for much of the staff increases. Nonetheless, achievement for regular students also improved, substantially so for the disadvantaged: On the gold standard National Assessment of Educational Progress, black 12th-graders gained nearly two-thirds of a standard deviation in math and reading since 1980. Some states clearly spend too little. Others may spend more than needed for graduates workplace success, because wealthier taxpayers choose to provide more fulfilling (and expensive) experiences for their children. Mississippi spends less per pupil about $8,500 than almost any state. Its percentage of lowincome children is higher, test scores are lower and capacity to fund education (per-capita personal income) is less. Massachusetts spends more about $14,500 with proportionally fewer low-income children than elsewhere. Its test scores are highest of all. Its fiscal capacity is greater than most states. Then there is California, spending less about $10,000 than most, with many low-income children, low scores and high income. It chooses not to tax itself to educate disadvantaged youth well, spending instead on prisons for those who fail. More money should not be spent unwisely, but Mississippi cannot spend whats needed without greater federal aid. California should spend more, but with greater state effort. Both should invest in early childhood. Children from less literate homes have worse verbal skills than middle-class children by age 3. This early gap cannot be overcome by more spending later, but better schools can sustain benefits from early investments. Well-qualified (and better-paid) teachers in smaller primary-grade classes for low-income children would be wise. Massachusetts should also invest more in early childhood for disadvantaged students, but it need not boost average spending. Wealthy taxpayers should contribute more, choosing whether to do so by reducing suburban expenditures. Today, federal aid exacerbates inequality. Subsidies for lowincome students are proportional to existing state spending, so Massachusetts inexcusably gets more federal dollars per child than Mississippi. The question is not whether we overspend but whether we spend on the right programs for children most in need. The answer is no.

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ducing class sizes, neither of which improves education, he argues. The budget battles provide an entry point for ensuring accountability for every dollar and every child, wrote former Washington school chancellor Rhee, who continues to enjoy heavy venturephilanthropy backing. To save money, wrote Rhee, districts must shift new employees from defined-benefit pension programs traditional pensions that promise retired workers a specific benefit level for the rest of their lives to portable, defined-contribution plans whose payout depends on investment returns. And because the budget crisis inevitably requires layoffs, she said, states can take the opportunity to begin basing firing decisions on teachers effectiveness, not on their seniority, as most districts do today. 58 In March, Florida Republican Gov. Rick Scott, who has hired Rhee as a consultant, signed legislation to gradually eliminate tenure and base firings and pay raises on teachers performance in raising student test scores. 59 In April, Republican Gov. C.L. Butch Otter of Idaho signed a measure ending tenure for new teachers, instituting merit pay and banning unions from bargaining over workload and class size. 60 There have also been lots of statelaw proposals for school choice this year, says John Witte, a professor of public affairs and political science at the University of Wisconsin, Madison. In the past, Republican lawmakers have pushed bills to bolster charter schools but havent often sought voucher expansions, partly because their mostly suburban constituents like their local schools and wouldnt seek vouchers. But now something on the right has changed, and voucher-expansion proposals are on the table all around the country, Witte says. Wisconsins Gov. Walker has proposed repealing enrollment caps both for vouchers and for the number of students who can attend so-called virtual or online

schools. He also wants to phase out income limits for voucher eligibility. 61 Thats a huge change because voucher programs have previously assisted only the poor, says Witte. Walker also proposes ending a requirement that students who use vouchers at private and online schools take state achievement tests. But that would be contrary to the stated principles of some venture-philanthropy reformers. If youre going to have a system of choice, then a common set of learning and achievement standards preferably nationwide is crucial for all schools, not just public ones, says Broad Foundation policy director McGinity. Otherwise, youre not going to have a transparent market in which people can make comparisons. Ultimately, the standards would include both test scores and comparative information to help parents choose a school with the best arts program, for example, he says. Such developments cast doubt on just how much reforms backed by conservatives and venture philanthropists actually coincide, says Columbias Henig. Theres also cleavage on how much money should be spent, he says. Venture philanthropists have learned from charters and cities with mayoral control that its expensive to do this, while conservatives stress cutting education spending.

Racing to the Top?


he Obama administration has worked in concert with reformers since taking office in 2009. Obamas Secretary of Education, Arne Duncan, was CEO of Chicagos public schools and gained reformers favor through his strategy of closing down chronically low-performing schools and reopening them with new staff. 62 Under Obamas Race to the Top program, states have pledged to: Adopt statewide learning standards and assessments;

Build data systems to measure achievement; Recruit, retain and reward effective teachers and principals through measures such as merit pay and retention bonuses; Foster education innovation through such means as laws encouraging charter-school development; and Focus on turning around the lowest-performing schools. Last year, 11 states and the District of Columbia won $4.35 billion in Race to the Top grants, including $350 million to support joint work among states on student assessment. 63 This year, states are pushing forward with these projects. For example, Rhode Island is field-testing a teacher-evaluation program in two districts and a charter school. Delaware will pilot in-school expert coaches to help staff members analyze achievement data and adjust instruction to individual needs. Massachusetts will establish career ladders to encourage teachers to remain in the profession. 64 Yet, some reformers have hit bumps in the road in recent months, at least partly because of public skepticism. Last October, Rhee resigned from her post in Washington after thenmayor Adrian Fenty, who appointed her in 2007, lost his reelection bid, in large part because many city residents were fed up with Rhee. Some teachers and parents complained, for example, that teacher firings Rhee claimed she based on merit actually occurred before her new teacherassessment plan had even gone into operation. 65 Much of Rhees impatience was merited, says Columbias Levin. The idea that the school system is an employment agency for my friends is a bad feature of many districts, including Washington, and needs changing, he says. But I would try to build community support before doing that, he says. Rhee has a big ego, and she instead took pride in her tactics.

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Levin and others also say that Rhees so-called IMPACT teacher-evaluation plan has merit. The plan is a useful, multifaceted attempt to produce an overall picture of teachers, including not just test scores but evaluations by master teachers, who would seek to recognize good teacher practices both in the classroom and in planning lessons, says Columbias Pallas. Ultimately, external funders helped cause the mischief in Washington, says Levin. Through their venture-philanthropy ties, Rhee and Fenty were getting national attention, funding and chances to air their views, so they took their eye off the local population and viewed funders as their constituency, Levin says. They failed to strike the needed balance between getting external funding and then using it to build capacity for improvement from within, he says. Earlier this month, New York City Mayor Bloombergs hand-picked chancellor, Cathleen P. Black, resigned under pressure after less than four months on the job. Black had been a top publishing executive, heading both Hearst Magazines (publisher of Cosmopolitan and Popular Mechanics, among others) and USA Today. But she had no education-management or teaching experience. 66 Black quickly ran afoul of teachers and parents by making what many considered insensitive jokes about school problems. Could we just have some birth control for a while? It could really help us all out a lot, Black quipped at a parents meeting to discuss school overcrowding. 67 Those kinds of comments show a lack of understanding of what parents are going through, said one parent. 68 But McGinity, of the Broad Foundation, argues that Blacks ouster actually makes a great case for one school-management principle reformers consider key mayoral control. Unlike in districts where schoolboard politics dominate, Black and Bloomberg could see that the situa-

tion wasnt working and made a change quickly before problems worsened, he points out.

OUTLOOK
Common Standards
merican education will change in the coming decades, but the shape of whats to come is hard to discern. Some reform critics fear that private interests could dismantle the public schools Americans once prized. The United States has long had a two-tier system, with schools in higherincome areas having many more resources, observes DePauls Saltman. But what youre seeing now is a new kind of two-tier system being created, in which schools in the bottom tier will be privately managed, he predicts. In poor city and rural areas, reform advocates are quickly turning public distrust into short-term profitmaking industries that will seek some quick bucks from taxpayer-supported schools and get out, he warns. Most Americans dont realize how far along this privatization agenda has gone. But with many Democratic politicians now agreeing that public schools need to compete with the private sector, privatization has largely won, he says. Theres little doubt that databases tracking student performance will be established everywhere fairly soon. But while unions fear that teachers will lose their job security to overly simplified interpretation of standardized test scores, even some reform critics see possible long-term upsides to data tracking. Databases now under construction will include school data only, but down the line databases from multiple socialservice agencies might link information about health, poverty, homelessness and more to school records, muses Colum-

bias Henig. Such data could be revolutionary in revealing all factors that contribute to students achievement, or lack thereof, and help propel holistic solutions, he says. With Republicans and many Democrats now backing school choice, the national learning standards some have recommended for decades will appear at last, some analysts say. 69 Prior to 2002s No Child Left Behind law, everybody said they met standards because they could make up their own rules, says Kenneth K. Wong, an education professor at Brown University. But as assessments increasingly become comparable across state lines, this convenient mode of hiding failure is evaporating, he says. In addition, while accountability requirements so far apply only to public schools, with nearly 5,000 charter schools now in operation, we must think about how we know they are meeting standards, too, Wong says. If we are going to move toward school choice, the nation must confront the highly contentious question of whether were going to have something like a national examination, he says. My hope is that there will soon be a strong set of core [learning] standards with a common assessment for all schools nationwide, says the Broad Foundations McGinity. Expansion of school choice to allow out-of-district enrollments and virtual schools will accelerate a revolutionary trend delinking schooling from ones neighborhood, says Wisconsins Witte. For a hundred years people went to their neighborhood schools, and 90 percent still do. But until 20 years ago, everybody did, he says. Ultimately, this change will affect everything in schools, he says. For example, We govern public schools through an elected school board, so should open-enrollment people [from outof-district] also have seats on the board? Before the nation simply lets such large changes happen, however, I think people need to ask themselves, What are our goals for our children? says Curry Colleges Gratz.

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Notes
Jason Felch, Jason Song and Doug Smith, Whos Teaching L.A.s Kids? Los Angeles Times, Aug. 14, 2010, www.latimes.com/news/ local/la-me-teachers-value-20100815,0,258862, full.story, p. A1. 2 Public elementary and secondary schools by type of school, Digest of Education Statistics, National Center for Education Statistics, http://nces.ed.gov/programs/digest/d09/tables/ dt09_093.asp. 3 Eric A. Hanushek, Feeling Too Good About Our Schools, Education Next website, Jan. 18, 2011, http://educationnext.org. 4 Bill Gates, How Teachers Development Could Revolutionize Our Schools, The Washington Post, Feb. 28, 2011, www.washingtonpost.com. 5 Matthew Di Carlo, Teachers Matter, But So Do Words, Shanker blog, July 14, 2010, http://shankerblog.org/?p=74. 6 Richard Rothstein, Fact-Challenged Policy, Economic Policy Institute website, March 8, 2011, www.epi.org/analysis_and_opinion/entry/factchallenged_policy. 7 Employer Costs for Employee Compensation, press release, Bureau of Labor Statistics, March 9, 2011, www.bls.gov/news.release/ecec.nr0.htm. 8 Fact-Checking School Choice Research, The Center for Education Reform, October 2010, www.edreform.com/_upload/No_More_Wait ing_School_Choice.pdf. 9 For background, see Kenneth Jost, PublicEmployee Unions, CQ Researcher, April 8, 2011, pp. 313-336. 10 Jason Song and Jason Felch, L.A. Unified Releases School Ratings Using Value-Added Method, Los Angeles Times, April 12, 2011, www.latimes.com, p. A1. 11 Ibid. 12 Diane Ravitch and Deborah Meier, Bridging Differences, Education Week blogs, March 29, 2011, http://blogs.edweek.org.
1

Education, Leadership for America, Heritage Foundation website, www.heritage.org/Initia tives/Education. 14 Hanushek, op. cit. 15 Ibid. 16 Eric A. Hanushek, Paul E. Peterson and Ludger Woessmann, Teaching Math to the Talented, Education Next, Winter 2011, http:// educationnext.org. Peterson is a government professor at Harvard University; Woessmann is an economics professor at the University of Munich. 17 Rothstein, op. cit. 18 Ibid. 19 Strong Performers and Successful Reformers in Education: Lessons from PISA for the United States, Organisation for Economic Cooperation and Development, 2011, p. 26, www. oecd.org/dataoecd/32/50/46623978.pdf. 20 For background, see Marcia Clemmitt, Fixing Urban Schools, CQ Researcher, April 27, 2007 (update, Aug. 5, 2010), pp. 361-384. 21 Cited in Richard Kahlenberg, Debating Michelle Rhee, Taking Note blog, Century Foundation, Feb. 25, 2011, http://takingnote.tcf.org/ 2011/02/debating-michelle-rhee.html. 22 Strong Performers and Successful Reformers in Education, op. cit., p. 28. 23 Quoted in Jonathan Mahler, The Fragile Success of School Reform in the Bronx, The New York Times Magazine, April 6, 2011, p. 34. See also Joe Nocera, The Limits Of School Reform, The New York Times, April 26, 2011, p. A23. 24 A Lack of Rigor Leaves Students Adrift in College, NPR website, Feb. 9, 2011, www.npr.org. 25 Quoted in Timothy J. Farrell, Arum Research Calls Out Limited Learning on College Campuses, New York University blogs, March 25, 2010, http://blogs.nyu.edu/blogs/dbw1/ata glance/2010/03/arum_research_calls_out_limite. html. 26 For background, see Jennifer Medina, Teachers Set Deal with City on Discipline Process, The New York Times, April 15, 2010, www.ny

13

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Health-Care Reform.

times.com/2010/04/16/nyregion/16rubber.html. Dont Blame Teachers Unions for our Failing Schools, debate transcript, Intelligence Squared U.S., March 16, 2010, http://intelligencesquaredus. org/wp-content/uploads/Teachers-Unions-031610. pdf. 28 Quoted in Carlo Rotella, Class Warrior, The New Yorker, Feb. 1, 2010, p. 28. 29 Katharine O. Strunk and Jason A. Grissom, Do Strong Unions Shape District Policies?: Collective Bargaining, Teacher Contract Restrictiveness, and the Political Power of Teachers Unions, Educational Evaluation and Policy Analysis, December 2010, p. 389. 30 John Merrow, The Road Not Traveled: Tracking Charter Schools Movement, Taking Note blog, Dec.1, 2009, http://takingnote.learning matters.tv. 31 Dont Blame Teachers Unions for our Failing Schools, op. cit. 32 Ibid. 33 A Stronger Evaluation System, Massachusetts Teachers Association, March 22, 2011, http://mass teacher.org/news/archive/2011/03-22.aspx; MTAs Reinventing Educator Evaluation: Answers to Frequently Asked Questions, www.seateachers.com/ HTMLobj-1742/MTAReinventing_EducatorEval120 11.pdf. 34 David Lewin, et al., Getting It Right: Empirical Evidence and Policy Implications from Research on Public-Sector Unionism and Collective Bargaining, Employment Policy Research Network, March 16, 2011, www.employ mentpolicy.org/sites/www.employmentpolicy. org/files/EPRN%20PS%20draft%203%2016%2011 %20PM%20FINALtk-ml4%20edits.pdf. 35 Quoted in Liana Heitin, 16 Nations Meet to Discuss Improving Teaching, Education Week blogs, March 17, 2011, http://blogs.eduweek.org. 36 Quoted in Bill Turque, Green Dots Barr: Unions Part of Solution, The Washington Post, Sept. 8, 2009, http://voices.washingtonpost.com. 37 For background, see Anthony S. Bryk, Organizing Schools for Improvement, Phi Delta Kappan, April 2010, pp. 23-30. 38 Douglas Lee Lauen, To Choose or Not to Choose: High School Choice and Graduation in Chicago, Educational Evaluation and Policy Analysis, September 2009, p. 179. 39 Andy Smarick, The Turnaround Fallacy, Education Next, Winter 2010, http://education next.org/the-turnaround-fallacy; For background, see Kenneth Jost, Revising No Child Left Behind, CQ Researcher, April 16, 2010, pp. 337-360. 40 School Restructuring Options Under No Child Left Behind, Education.com, www.edu
27

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cation.com/reference/article/Ref_School_Re structuring. 41 Diane Ravitch, The Death and Life of the Great American School System (2010), pp. 86-87. 42 Quoted in Diane Ravitch, Left Back: A Century of Battles Over School Reform (2000), p. 19. 43 Christopher B. Swanson, U.S. Graduation Rate Continues Decline, Education Week online, June 2, 2010, www.edweek.org/ew/articles/ 2010/06/10/34swanson.h29.html?qs=historical+ graduation+rates. 44 Ibid. 45 Ravitch, The Death and Life, op. cit., p. 13. 46 Swanson, op. cit. 47 Frederick M. Hess, A Policy Debate, Not an Attack, Room for Debate blogs, The New York Times online, March 6, 2011, www.nytimes.com. 48 Chicago Teachers Federation, Encyclopedia of Chicago, www.encyclopedia.chicagohistory. org/pages/271.html. 49 Ravitch, The Death and Life, op. cit., p. 174. 50 Trip Gabriel and Sam Dillon, Teacher Tenure Targeted by GOP Governors, The New York Times, Jan. 31, 2011, p. 1, www.nytimes.com/ 2011/02/01/us/01tenure.html. 51 American Missionary Association, Encyclopedia Britannica online, 2011, www.britannica. com/EBchecked/topic/19996/American-Mission ary-Association. 52 About Carnegie, Carnegie Foundation for the Advancement of Teaching website, www. carnegiefoundation.org/about-us/about-carnegie. 53 Milton Friedman, The Role of Government in Education, School Choices website, www.schoolchoices.org/roo/fried1.htm. 54 For background, see Kenneth Jost, School Voucher Showdown, CQ Researcher, Feb. 15, 2002, pp. 121-144, and Charles S. Clark, Charter Schools, CQ Researcher, Dec. 20, 2002, pp. 10331056. 55 For background, see Frequently Asked Questions, The Broad Prize for Urban Education website, www.broadprize.org/about/FAQ.html#2. 56 Overview, The New Teacher Project website, http://tntp.org/about-us. 57 For background, see Ruth Moscovitch, Alan R. Sadovnik, et al., Governance and Urban School Improvement: Lessons for New Jersey from Nine Cities, Institute on Education Law and Policy, Rutgers University at Newark, 2010, http://ielp.rutgers.edu/docs/MC%20Final.pdf. 58 Michelle Rhee, In Budget Crises, an Opening for School Reform, The Wall Street Journal Online, Jan. 11, 2011, http://online.wsj.com/ article/SB10001424052748704739504576068142 896954626.html. 59 Isabel Mascarenas, Student Teachers Speak

FOR MORE INFORMATION


Albert Shanker Institute, 555 New Jersey Ave., N.W., Washington, DC 20001; (202) 879-4401; www.ashankerinst.org. An arm of the American Federation of Teachers that brings together experts to discuss education issues. Annenberg Institute for School Reform, Brown University, Box 1985, Providence, RI 02912; (401) 863-7990; www.annenberginstitute.org. Analyzes school-system issues, works with community partners to improve school districts and publishes the quarterly journal Voices in Urban Education. Economic Policy Institute, 1333 H St., N.W., Suite 300, East Tower, Washington, DC 20005-4707; (202) 775-8810; www.epi.org/issue/education. Examines school reform from a liberal viewpoint. Education Next, Program on Education Policy and Governance, Harvard Kennedy School of Government, 79 JFK St., Cambridge, MA 02138; (877) 4765354; http://educationnext.org/sub/about. A reform-oriented online publication that examines all aspects of K-12 education. The Hechinger Report, http://hechingerreport.org. A nonprofit online news organization based at the Teachers College of Columbia University that publishes in-depth reporting and commentary on education issues. Hoover Institution, 434 Galvez Mall, Stanford University, Stanford, CA 943056010; (650) 723-1754; www.hoover.org. Studies and publishes reports on school reform and other topics from a conservative perspective. National Center for Education Statistics, U.S. Department of Education, 1990 K St., N.W., Washington, DC 20006; (202) 502-7300; http://nces.ed.gov. Provides statistics on every aspect of American education. Thomas B. Fordham Institute, 1016 16th St., N.W., 8th Floor, Washington, DC 20036; (202) 223-5452; www.edexcellence.net. A think tank dedicated to improving school performance through accountability and expanded options for parents.
Out on SB 736 on Teacher Merit Pay, WTSP News website, March 25, 2011, www.wtsp. com/news/article/183421/250/Student-teachersspeak-out-on-teacher-merit-pay; Michael C. Bender, Rick Scott Names Michelle Rhee, Patricia Levesque to Education Transition Team, Miami Herald blogs, Dec. 2, 2010, http://miami herald.typepad.com/nakedpolitics/2010/12/rickscott-names-michelle-rhee-patricia-levesque-toeducation-transition-team.html. 60 Laura Zuckerman, Idaho Governor Signs Education Overhaul Into Law, Reuters, April 8, 2011, www.reuters.com/article/2011/04/09/usidaho-education-idUSTRE7380GA20110409. 61 Amy Hetzner and Erin Richards, Budget Cuts $834 Million from Schools, [Milwaukee] Journal Sentinel online, March 1, 2011, www.js online.com/news/statepolitics/117192683.html. 62 Rotella, op. cit. 63 Nine States and the District of Columbia Win Second Round Race to the Top Grants, press release, U.S. Dept. of Education, Aug. 24, 2010, www.ed.gov/news/press-releases/ninestates-and-district-columbia-win-second-roundrace-top-grants. For background, see Michele McNeill, Race to Top Winners Work to Balance Promises, Capacity, Education Week, March 30, 2011, www.edweek.org/ew/articles/2011/03/30/26rtt -states_ep-2.h30.html?tkn=RMOFJADRisIf48B KX1kxGbHNaOeVRca26WD1&print=1. 65 Andrew J. Rotheram, Fentys Loss in DC: A Blow to Education Reform? Time, Sept. 16, 2010, www.time.com/time/nation/article/0,8599, 2019395,00.html. 66 Cathie Black, Executive Profiles, Bloomberg/ Business Week, http://investing.businessweek. com/businessweek/research/stocks/private/ person.asp?personId=79286149&privcapId=23 675200&previousCapId=4160895&previousTitle =Bill%20&%20Melinda%20Gates%20Foundation. 67 Yoav Gonen, Parents Fume Over Blacks Birth Control Quip About Overcrowding, New York Post online, Jan. 15, 2011, www.ny post.com/p/news/local/black_wisecrack_on_ birth_control_a0EUsHTDjVvWAMvA5qf6KI. 68 Ibid. 69 For background, see Kathy Koch, National Education Standards, CQ Researcher, May 14, 1999, pp. 401-424.
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405

Bibliography
Selected Sources
Books
Hess, Frederick M., Education Unbound: The Promise and Practice of Greenfield Schooling, Association for Supervision and Curriculum Development, 2010. An analyst at the conservative American Enterprise Institute argues that todays schools shouldnt be reformed so much as scrapped so education entrepreneurs can devise specific solutions for different educational needs. Merrow, John, The Influence of Teachers: Reflections on Teaching and Leadership, LM Books, 2011. Based on his reporting throughout the country, a longtime PBS education reporter explores issues such as teaching quality, payment and evaluation of teachers. Ravitch, Diane, The Life and Death of the Great American School System: How Testing and Choice Are Undermining Education, Basic Books, 2010. A longtime education policymaker explains why she now rejects the market-oriented education-reform theories she helped to develop for President George H. W. Bush. Weber, Karl, ed., Waiting for Superman: How We Can Save Americas Failing Public Schools, PublicAffairs, 2010. The companion book to the acclaimed 2010 school-reform documentary Waiting for Superman includes essays on how to improve U.S. education by charter-school leaders, education journalists and a teachers union leader. Bryk, Anthony S., Organizing Schools for Improvement, Phi Delta Kappan, April 2010, www.kappanmagazine. org/content/91/7/23.abstract, p. 23. The president of the Carnegie Foundation for the Advancement of Teaching describes his research on Chicagos schools, showing that several critical aspects of a schools organization and leadership are major determinants of whether that school can improve. Pellissier, Hank, The Finnish Miracle, Great Schools website, www.greatschools.org/students/2453-finlandeducation.gs. Finlands schools, which rose from mediocre to outstanding over the past quarter-century, have lessons for schools, teachers and parents. Notably, teaching is among Finlands most respected professions. Rotella, Carlo, Class Warrior: Arne Duncans Bid to Shake Up Schools, The New Yorker, Feb. 1, 2010, p. 24. President Obamas Secretary of Education is the former CEO of Chicagos public schools, with a reputation for closing low-achieving schools and reopening them with new staffs.

Reports and Studies


Building a High-Quality Teaching Profession: Lessons from Around the World, Organisation for Economic Cooperation and Development, 2011, www.oecd.org/dataoecd/ 62/8/47506177.pdf. Analysts for the international organization find that most countries with high-achieving schools recruit the best students as teachers, provide extensive on-the-job training and mentoring and involve teachers closely in efforts to improve schools. Corcoran, Sean P., Can Teachers be Evaluated by their Students Test Scores? Should They Be? The Use of ValueAdded Measures of Teacher Effectiveness in Policy and Practice, Annenberg Institute for School Reform, 2010, www.annenberginstitute.org/products/Corcoran.php. A Columbia University assistant professor of economics explains how value-added evaluations of teacher quality work and examines the evidence on their reliability and implications for schools. Suffren, Quentin, and Theodore J. Wallace, Needles in a Haystack: Lessons from Ohios High-performing, High-need Urban Schools, Thomas B. Fordham Institute, May 2010, www.scribd.com/doc/31987794/Needles-in-a-Haystack-FullReport. Analysts for a research organization supportive of school choice examine a group of public, magnet and charter schools in low-income urban areas in search of factors that help the schools improve student achievement.

Articles
Grading the Teachers: Value-Added Analysis, Los Angeles Times online, www.latimes.com/news/local/teachersinvestigation. An ongoing series of investigative articles from 2010 and 2011 explores the effectiveness of teacher evaluations based on students standardized test scores. Includes a database with rankings of individual teachers and schools. Banchero, Stephanie, Bill Gates Seeks Formula for Better Teachers, The Wall Street Journal online, March 22, 2011, http://online.wsj.com/article/SB10001424052748703858404 576214593545938506.html. Microsoft cofounder and philanthropist Bill Gates explains how hes trying to develop better teacher evaluations and argues that cutting education budgets is probably unwise. Barkan, Joanne, Got Dough? How Billionaires Rule Our Schools, Dissent, winter 2011, www.dissentmagazine.org/ article/?article=3781. A writer for a left-leaning magazine argues that venture philanthropists like Bill Gates are gaining too much power.

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CHAPTER

ENERGY AND CLIMATE


BY MARCIA CLEMMITT

Excerpted from Marcia Clemmitt, CQ Researcher (July 24, 2009), pp. 621-644.

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Energy and Climate


BY MARCIA CLEMMITT
sponsors struck compromises with business and regional interests, including an agreement hen the House Ento give away most of the emisergy and Comsions permits free. merce Committee As a result, many environapproved the first-ever House mentalists say the measure energy bill focusing on climate (HR 2454), which passed the change on May 21, the hisfull House by a slim 219-212 toric vote did not come withvote on June 26, compromises out controversy. too much. Environmental groups Obama in February said have long called for phasing he wanted a 100 percent aucout carbon-based fuels like oil tion of carbon-emission perand coal which, when mits and to give a significant burned, emit greenhouse amount of the money back gases (GHGs) that scientists to the public, but weve gone believe contribute to rapid, from that to an 85 percent potentially devastating climate giveaway, which translates change. But some environto much less pressure on mentalists say the proposed emitting industries to change American Clean Energy and their ways, says Tidwell. Security Act of 2009 known But others are skeptical of as Waxman-Markey after its the bill on other grounds. In chief authors, Reps. Henry A. Europe, says Peter Dorman, an Waxman, D-Calif., and Edeconomics and environmental Members of the Chesapeake Climate Action Network ward J. Markey, D-Mass. is policy professor at Evergreen protest outside the Capitol Hill office of Rep. Rick less a boon for the environState University in Olympia, Boucher, D-Va., who got aid for the coal industry included in the recently passed House energy bill. ment than a giveaway to Wash., a similar cap-and-trade President Obama and many congressional Democrats GHG-emitting industries. system has been an abject failwant to make climate change a key focus of U.S. energy This is a climate mugging ure, and has not significantly policy, but critics say the proposed legislation of the American people and cut emissions at all. 3 I see will hurt the economy and destroy jobs. a coal industry welfare bill, no evidence that WaxmanThe dispute between Boucher and Markey will lead to a reduction of carsaid Mike Tidwell, director of the advocacy group Chesapeake Climate Action CCAN protesters epitomizes the struggle bon emissions in the next few years. Network (CCAN). Tidwell was arrested being waged in Washington this sumTidwell attributes the current legisalong with 14 other CCAN members mer as President Barack Obama and lation to a widespread belief that the in a protest outside the Capitol Hill of- many congressional Democrats try to U.S. has been so bad on climate change fice of Rep. Rick Boucher, D-Va., who make climate change a key focus of for so long that we simply need a bill, had successfully fought to get assis- U.S. energy policy. any bill, as soon as possible, and that Both Obama and Waxman had orig- anything is better than nothing. But tance in the bill for the coal industry, an important economic player in his inally proposed strict phaseout plans for many scientists say that just any bill carbon-based fuels, with rapidly tighten- wont do and whats needed are much rural district. 1 We will inevitably have controls on ing caps on the amount of GHG emis- bigger cuts in GHG emissions. greenhouse gases, said Boucher. But sions allowed to be spewed into the Proponents of the measure argue that Ive been working extensively to fash- Earths atmosphere. Obama also advo- compromise is the only way to take an ion a . . . program that . . . will pre- cated creating permits to emit carbon all-important first step. serve coal jobs, create the opportuni- and then selling the permits to pollutionIf we cap greenhouse-gas emissions, ty for increasing coal production and emitting companies, with the proceeds were essentially going to put [fossil-fuelkeep electricity rates in regions like returned to the U.S. government. But in based industries] out of business as they order to line up votes for the bill, the know it, says Victor Flatt, a professor of Southwest Virginia affordable. 2

THE ISSUES

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Chesapeake Climate Action Network/Chris Eichler

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Most States Have Renewable Portfolio Standards
Thirty states and the District of Columbia have mandatory renewable portfolio standards (RPS) that require electric utilities to generate a certain amount of electricity from renewable energy sources like wind. An additional ve states have voluntarily renewable goals.
Environmentalists say it will create jobs, and there is some truth to that, says Bryan K. Mignone, a fellow at the centrist Brookings Institution think tank in Washington. There will be winners and losers, with jobs lost in some industries and gained in others. Some studies suggest there may be a net gain, but the energy bill shouldnt be expected to be a huge job creator, he says. The rhetoric can get a little out of control, says Mignone. Many industries will fare poorly, and many of them are in parts of the country that are already struggling. Theres a real price in the economy a carbon price that wasnt there before, and that will have consequences, Mignone says. Industries like coal mining will obviously suffer, as well as manufacturing industries that compete globally, although some green industries might expand their international markets, he says. Conservative commentators, however, say the bill would destroy both the economy and jobs. Entire regions of coal-producing states will see their local economies tank and thousands of jobs lost as carbon-fuel prices rise, and manufacturers . . . relocate to countries that dont adopt business-busting, draconian schemes, said Rep. Darrell Issa, R-Calif. 5 Waxman-Markey would be the biggest tax increase in the history of the world and the biggest government intervention in peoples lives since the Second World War, said Myron Ebell, director of Energy and Global Warming Policy at the Competitive Enterprise Institute, a free-market think tank that has argued the evidence on humancaused climate change is weak. 6 But supporters of climate-focused energy policy say the costs of doing nothing would be far worse. Climate change is already affecting the United States and will increase its economic and environmental toll if left unchecked, said a U.S. Global Change Research Program report released at a June 16 White House press conference.

Renewable Portfolio Standards (RPS) in the States


Wash. Mont. N.D. S.D. Idaho Wyo. Neb. Nev. Calif. Okla. Ariz. N.M. Ark.
Miss.

Minn. Wis. Mich. Iowa Ill. Ind. Ohio W.Va. Ky. Tenn. Ala. Pa.

Vt.

N.H. Maine

Ore.

N.Y. Conn. Va. Md. D.C. N.J. Del.

Mass. R.I.

Utah

Colo.

Kan.

Mo.

N.C. S.C. Ga.

La. Texas

Fla. Alaska

Have RPS Voluntary RPS goals


Hawaii

No RPS

Source: Pew Center on Global Climate Change, July 10, 2009

environmental law at the University of North Carolina in Chapel Hill. So until we give them incentives, why would they do anything? Severin Borenstein, a professor of business administration and public policy at the University of California at Berkeleys Haas School of Business, says although the bill would give away most of the emission permits, it will cut emissions over the lifetime of the measure and is not just a giveaway to industry. Im all for it, as opposed to doing nothing. To support efforts to combat climate change, its crucial to pass the climate bill by December, when the U.N. Climate Conference meets in Copenhagen, Denmark, to discuss new agreements on cutting global emissions, says Elizabeth Perera, Washington representative of the Union of Concerned Scientists (UCS), an envi-

ronmental research and advocacy group. Waxman-Markey is the best thing anybody in the world is currently looking at, she says, so if its enacted, the United States will have the moral authority to lead the negotiations there, and most countries will follow what we do. Legislation supporters say retooling the nations energy system will provide both jobs and a cleaner environment. The House energy bill will spur the development of low-carbon sources of energy everything from wind, solar and geothermal power to safer nuclear energy and cleaner coal, said Obama in his weekly radio address on June 17. Most importantly, it will make possible the creation of millions of new jobs. Make no mistake: This is a jobs bill. 4 Other bill supporters give more cautious assessments of the bills economic effects.

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The report cites falling catches from Alaskan fisheries; destruction of Pacific, Atlantic and Gulf Coast communities as sea levels rise; a drier, warmer climate that may leave the Northwest, Southwest and Great Plains with inadequate water supplies; and a hotter Midwest, plagued by heavier spring rains that could stress livestock and increase insect and weed infestations on farms. 7 We are subsidizing current energy prices at the expense of our progeny, the St. Louis Post-Dispatch editorialized May 28. Its as if we are financing our lifestyle with an interest-only mortgage, and theres a big balloon payment looming in our future. If we do not start reducing our global warming liabilities now, we will be overwhelmed with the debt later. 8 Convincing other nations to cut emissions including developing countries like China and India will greatly affect climate-change progress, says Borenstein, and the bill is needed to do that. To get international cooperation we have to overcome the reputation of a decade of not doing anything. Nevertheless, Borenstein and other proponents of the measure worry that the bill includes too little research-anddevelopment funding for alternative energy sources, which are crucial to achieving worldwide emissions cuts. Other analysts worry that, even as the climate bill advances, policy makers have not clearly outlined a new overall energy policy, which could compromise public support for tough measures down the line. Theres a huge amount of confusion about why we need an energy policy, says Flatt. A major reason is climate change, and the other major reason people talk about is energy security, by which some mean, Stop giving money to hostile nations by buying their oil. But the two goals often conflict, and hammering out a set of overarching policy priorities could help move past such conflicts, he says. If energy security were the sole concern, he says, You would just make a

How Emission Permits Would Be Allocated


The proposed American Clean Energy and Security Act of 2009 known as Waxman-Markey would allocate emission permits, or carbon credits, both to regulated industries and those not covered by the bill. If a company cuts its emissions so much that it has surplus permits, it can sell them to other companies or bank them for future use. If a company needs permits, it can buy more. Non-regulated entities, such as banks and individual investors, can also buy and sell permits. This is the trade part of the cap-and-trade program. Companies that emit more than their permits allow would be ned twice the value of the permits they should have purchased.
Some of the permits would be given away to industries regulated under the bill, including: 15% to energy-intensive industries such as iron, steel and cement 5% to producers of coal-generated electricity 2% to oil reneries 2% to electricity utilities

Some permits would be given to industries not covered under the bill, which would sell them and use the proceeds, including: 30% to local electricity distribution companies, which would use the proceeds to keep consumer electricity prices low 10% to state governments, for renewable-energy and transportation projects 9% to local natural-gas companies, for developing renewable energy and to keep consumer prices low (natural gas emits less carbon than oil and coal) 3% to the automobile industry from 2012 to 2017, to develop cleancar technologies
Source: Kate Sheppard, Everything You Always Wanted to Know About the Waxman-Markey Energy/Climate Bill, Grist.org, June 2009

huge investment in coal, which America has in abundance. But if the goal is to fight climate change, switching to coal or even ethanol, which U.S. farmers have long pushed as a solution to energy independence, actually becomes a disastrous thing to do. As lawmakers, environmentalists and businesses debate proposals for a clean energy policy, here are some of the questions being asked: Are climate-focused energy proposals too costly? As President Obama and many con-

gressional Democrats try to craft a U.S. energy policy that limits GHG emissions, critics say the proposals would damage the economy. 9 Since Jan. 1, 2005, when the European Union launched a carbon capand-trade mechanism similar to the one proposed in Waxman-Markey, power prices in EU countries have increased significantly, wrote researchers from the Energy Center of the Netherlands in a December 2008 report. 10 The legislation will raise prices across the economy for several decades and cost some jobs, on net, says an

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Many States Enacted Climate Initiatives


But new federal policy may disrupt regional schemes.

n 1998 and 1999, at least 16 states passed legislative resolutions criticizing international calls for mandatory greenhouse gas (GHG) emissions. Since then, however, growing concern about climate change has prompted many more states to control emissions. 1 By 2006, 21 states had enacted mandatory renewable portfolio standards requiring a portion of electrical power to be generated from renewable sources. And by this year, 30 states plus the District of Columbia had adopted mandatory standards and another five states had set goals for renewable use. 2 Up to now, the biggest push for energy efficiency and renewable energy has come from states, says Victor Flatt, a professor of environmental law at the University of North Carolina School of Law in Chapel Hill. The most visible state efforts involve groups of states, along with some Canadian provinces, which have launched regional cap-and-trade groups. Such alliances attempt to level the playing field, explains Ron Ezekiel, an energy lawyer in Vancouver. Otherwise, a state or province acting on its own to cap emissions could drive businesses into neighboring states without such restrictions. States and provinces in cap-and-trade alliances agree that the region as a whole will reduce its GHG emissions by a certain percentage over time. Emitting industries must either cut their carbon emissions by that amount or buy emissions credits or offsets from others whose emissions are below the agreed-upon targets.

Established in 2005, the Regional Greenhouse Gas Initiative (RGGI) in the Northeast was the first group. RGGIs cap-andtrade market was launched last September, when six of the states auctioned the first emission permits issued under the trading system. Electrical utility companies bought the permits for about $40 million, which the states will spend mainly on developing renewable energy and electricity demand-reduction programs. 3 The Western Climate Initiative (WCI), the second group to form, includes Arizona, California, Montana, New Mexico, Oregon, Utah, Washington and the Canadian provinces of British Columbia, Manitoba, Ontario and Quebec. Now nine Midwestern states Wisconsin, Minnesota, Illinois, Indiana, Iowa, Michigan, Kansas, Ohio and South Dakota and Manitoba have agreed to develop a third cap-and-trade market. 4 Within the groups, states are moving at different rates, wrote Ezekiel and Ivan Gold, an energy attorney in Portland, Ore. In the WCI, for example, California and British Columbia have already enacted legislation authorizing cap and trade, while Washington and Oregon have not. 5 The state groups plugged along until Obama got elected, but then, with the strong possibility of a federal cap-and-trade scheme on the horizon, everything ground to a halt, says Ezekiel. States were worried that the federal program would preempt regionally set targets and trading rules, he says. Some expect that U.S. climate legislation would preempt state standards initially but then allow states to pursue more

analysis prepared for the National Black Chamber of Commerce by CRA International, a Washington, D.C.-based consultancy. Gasoline prices would rise about 12 cents per gallon in 2015 the first year emissions are expected to decline and more in succeeding years as caps tighten. And despite substantial gains in green jobs, the authors predict that shifting resources to pay higher energy costs would cost 2.3 million to 2.7 million jobs annually between about 2015 and 2030. 11 Electric-utility costs would decline by about 0.5 percent through 2015, as energy-efficiency measures came into use, but then rise by 4 percent to 5 percent between 2020 and 2025 and more dramatically in ensuing years, the group projects. 12 The CRA report is very blunt that its

going to cost, and it has to cost, says William H. Babcock, director for energy and environment in the Cambridge, Mass., office of LECG, an Emeryville, Calif.-based international business consultancy. Go back to Economics 101. Theres something we havent valued before CO2 emissions. Now we value it, so well have to buy it. Any time were buying stuff we didnt have to buy before, thats going to hurt. Critics say the costs would be too high. This cap-and-trade legislation is . . . an economic declaration of war on the Midwest by liberals in Washington, D.C., and it must be opposed, says Rep. Mike Pence, R-Ind., chairman of the House Republican Conference. 13 The Midwest would be heaviest hit if carbon prices rise because coal the heaviest carbon emitter provides

up to 90 percent of the electrical power in the Midwest, explains former Sen. J. Bennett Johnston, D-La., longtime chairman of the Senate Energy Committee and now a lobbyist and policy consultant in Washington. On the nations coasts coal only provides about 10 percent of the electrical power. Furthermore, when President Obama recently declared that new U.S. automobiles must average 42 miles per gallon by the year 2016, analysts estimated the move would cost $1,300 per car, noted Ronald Bailey, science correspondent for libertarian Reason magazine. When prices go up, people buy less, leading to job loss across the economy, he wrote. 14 But supporters of action on climate change insist the financial pinch must be weighed against the consequences

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aggressive goals on their own, if they chose. If a federal law is enacted requiring preemption of state standards, the states in the WCI and the Midwestern group would spend their effort on the national plan, says Ezekiel. If the states pull out of regional schemes, efforts to set significant emissions cuts in Canada could be adversely affected. Several provinces are taking strong climate measures, wrote Liz Barrett-Brown, a senior attorney for the environmental advocacy group Natural Resources Defense Council. However, in Alberta carbon-based fuel extracted from tar sands sand or clay saturated with dense petroleum has become a valuable economic commodity. Canadas federal government and Alberta have made it clear that protecting tar sands development is more important than stemming global warming pollution, BarrettBrown said. Indeed, Its so important that Canada has repeatedly meddled in U.S. efforts to reduce its own carbon emissions, such as by opposing Californias low carbon-fuel standard regulations. 6 While regional carbon-trading schemes may be the highestprofile initiatives, some states and localities have undertaken many other energy-use programs. Some states and cities have hired sustainability managers to make government power use more efficient, for example. In 2007, the Supreme Court ruled, 5-4, in favor of 12 states that had jointly sued the federal Environmental Protection Agency to get the agency to regulate GHG emis-

sions. The court ordered the EPA to review whether greenhouse gases threaten public health and therefore fall under its regulatory purview. 7 California has also sought a waiver from the EPA to regulate tailpipe emissions on its own, which the Obama administration granted on June 30. Not all states have advanced equally, however, says Suzanne Watson, policy director of the American Council for an EnergyEfficient Economy. In general, the Northeast, the Northwest and California have taken the lead, and the Southeast has been slowest to adopt energy-efficiency measures.
For background, see Alan Greenblatt, Confronting Warming, CQ Researcher, Jan. 9, 2009, pp. 1-24. 2 Renewable Portfolio Standards, Pew Center on Global Climate Change Web site, www.pewclimate.org/what_s_being_done/in_the_states/rps.cfm. 3 Anne Polansky, Regional CO Cap-and-Trade Program (RGGI) Is Launched: 2 How Will Auction Revenues Be Spent? ClimateScienceWatch blog, Oct. 2, 2008, www.climatesciencewatch.org. Members are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. 4 Governors Sign Energy Security and Climate Stewardship Platform and Greenhouse Gas Accord, press release, Midwestern Governors Association. 5 Ron Ezekiel and Ivan Gold, Greenhouse Gas Cap-and-Trade Legislation and the Western Climate Initiative: Issues at Hand, bulletin, Fasken Martineau, May 2009. 6 Liz Barrett-Brown, Waxman-Markey Bill Ups the Ante on Tar Sands and Other Dirty Energy, Switchboard blog, Natural Resources Defense Council, May 15, 2009, http://switchboard.nrdc.org. 7 Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007).
1

of inaction. To find the arguments for an emissions cap convincing, you calculate whats going to happen if you dont do it, suggests UNCs Flatt. Unless aggressive measures are taken to halt global warming, the consequences of human . . . displacement in the form of climate refugees could . . . vastly exceed anything that has occurred before, according to the international charity CARE. The WaxmanMarkey bill is vital to efforts to begin to mitigate these negative impacts, such as heat, drought and rising sea levels that may deprive millions of their homes and agricultural livelihoods, says the group. 15 Some may ask, Whats the difference between raising the price of energy with carbon permits and having OPEC jack up oil prices? Theyre both

bad! says Dorman of Evergreen State, referring to the Organization of Petroleum Exporting Countries, a global oil producers cartel. But with a permit system we pay ourselves rather than paying OPEC, because emitters eventually will have to buy permits from the U.S. government to burn carbon fuels, he explains. So while utilities and other companies will charge consumers more to cover the cost of permits, the money comes right back to Americans, making the key question for lawmakers how to get that money back in the hands of the public as soon as possible, he says. Some analysts say the costs will be much less severe than critics contend. The average American will only pay an additional $30.89 per year in energyrelated spending in 2015 under a Waxman-Markey-style program, ac-

cording to the Massachusetts Institute of Technology (MIT) Joint Program on the Science and Policy of Global Change. 16 That cost level was verified by John Reilly, senior lecturer at MITs Sloan School of Management and a report author, when he was queried by PolitiFact, the political factchecking Web site run by the St. Petersburg Times, after the House Republican Conference began citing the MIT report as estimating the annual cost per U.S. household at $3,128. 17 Reilly said the GOP conferences analysis of his findings is wrong in so many ways its hard to begin to explain what is wrong with their analysis. While a cap-and-trade program is designed to push up prices for carbon-based fuels, other provisions such as greater energy efficiency and competition from

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Wealthier Americans Would Pay the Most
Critics have charged that the national cap-and-trade system proposed by House Democrats will cost American taxpayers thousands of dollars per year, while proponents say the cost to each household will be negligible. The nonpartisan Congressional Budget Ofce estimates the annual economy-wide cost of the program in 2020 will be $22 billion, or about $175 per household. The lowest income group would see an average net benet of $40; the highest cost would be $340. Annual Net Cost to Households of Proposed Energy Legislation, by Quintile*
$350 300 250 200 150 100 50 0 -50
$340 $235 $245

$40 -$40 Lowest quintile Second-lowest quintile Median quintile Second-highest quintile Highest quintile

vironmental policies, including climatechange policies. 23 A shift in energy use will cause upheaval, but jobs get created and destroyed all the time in response to technological and cultural changes, says Jim Fulton, a new-technology lawyer in Palo Alto, Calif. There is a case to be made that the shift to renewable energy will have benefits for our economy as a whole longer term because the old model is not sustainable. Similar initiatives like the Clean Air Act and a GHG cap-and-trade system formed in the past few years by a group of Northeastern states stirred up huge amounts of controversy before they were passed, but once they became law, the market adjusted, and now you dont hear a peep, says Perera of the Union of Concerned Scientists. Will the Waxman-Markey bill help reduce climate change? While conservatives blast climatechange policy as an economy killer, some environmentalists say the House-passed Waxman-Markey bill isnt strong enough. The current legislation is a nightmare, and very little carbon reduction will come from it, says Dorman of Evergreen State. I would urge environmentalists to oppose Waxman-Markey. Its great that Congress is looking at an actual cap, but the bill needs a stronger emissions-cuts target, says the Chesapeake Climate Action Networks Tidwell. If we dont reduce coal use, we will lose the ability to stabilize the climate. Under the current bill, if everything went perfectly, you might get an emissions level in the U.S. 20 percent below 1990 levels by 2020, which is completely inadequate, he says. Probably the biggest disappointment for environmentalists is the pace and target of reduction, wrote the University of North Carolinas Flatt. The original Waxman-Markey discussion draft called for a 20 percent reduction (from 2005 levels) in greenhouse gases from capped sources by 2020, and the new

* Each quintile represents 20% of the total group Source: Congressional Budget Ofce, June 19, 2009

alternative fuels would moderate the cost, he explained, and the government would give rebates to help consumers offset price increases. 18 After 2015, as the carbon-emission cap is lowered, cost to individual consumers would increase, but the average annual cost over time in todays dollars comes out to $85 per person, according to Reilly. 19 The nonpartisan Congressional Budget Office (CBO) estimates that the net annual economy-wide cost of the cap-and-trade program in 2020 would be $22 billion or about $175 per household. 20 Under Waxman-Markey about 15 percent of revenues from auctioning emission permits would be used to reimburse low-income households for higher prices on energy and manufactured goods, using rebates and tax credits, says the liberal Center on Budget and Policy Priorities. 21 As a result, the cost of the bill would vary among house-

holds, says the CBO. In 2020, for example, households in the lowest fifth of the income scale might see an annual net benefit of about $40; households in the second lowest fifth in income would spend $40 more; and households in the top three-fifths in income would spend between $235 and $340, due to increased energy costs, the CBO estimates. 22 The prospect of losing jobs to international competitors is real for energy-intensive industries such as aluminum, cement, fossil fuels, glass, iron and steel, and paper, said Robert Stavins, director of the Harvard University Environmental Economics Program. And while that issue must be addressed by policy makers, he said, the actual competitiveness impacts . . . would not . . . constitute a major economy-wide economic issue, because international differences in business environments, such as labor costs, swamp differences in costs due to en-

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bill only calls for a 17 percent reduction (though it still estimates that by using other policies besides cap and trade, the overall reduction might still approach 20 percent). . . . Most scientists estimate that we need larger reductions earlier to . . . avoid catastrophic changes to the environment. 24 Under the current bill, during the early years of cap and trade emitters can avoid cutting emissions altogether by buying offset credits from sources that reduce GHGs, such as a forest-planting project in the Midwest or a new renewableenergy project like a hydropower dam in a developing country. A company buys the offset and the government accepts the offsets effect in reducing global GHG emissions as a substitute for emission cuts by the business. Offsets are supposed to be new initiatives launched as a result of the new program. But skeptics arent sure it will be possible to ascertain whether thats the case. If as little as 15 percent of the offsets are bogus or are [projects] that actually would have been done anyway then the whole thing is wasted, says Washington lawyer N. Hunter Johnston, a son of former Sen. Johnston. The bill allows a billion tons of emissions to be offset by projects on U.S. soil and another billion abroad. But where would a billion tons of domestic offsets come from? asks William Bumpers, head of the global climate change group in the Washington office of the international law firm Baker Botts. He doubts there are enough agricultural projects in this country, such as lowtill farming or reforestation efforts, to offset a billion tons of carbon emissions. And overseas, its difficult to even verify who owns a plot of land in a country such as Brazil, says former Sen. Johnston. What if somebody sells the offsets? Whos going to follow up to see that they dont cut the trees down? Some business people say more offsets could be available more quickly than skeptics believe. For example, hydrofluorocarbons (HFCs) chemicals

Energy Plan Targets Carbon Emitters


Current environmental laws permit industrial polluters to emit carbon dioxide (CO2) without charge. The proposed American Clean Energy and Security Act of 2009 initially would raise the price to about $16 per ton of CO2 emitted but increase fourfold by 2050. Estimated Cost of Emitting a Ton of CO2
(in constant 2009 dollars) $80 70 60 50 40 30 20 10 0 $0 $16 $26-27 $69-70

2009

2020

2030

2050

Source: Pew Center on Global Climate Change

once used for refrigeration and other industrial purposes that were banned after they were found to deplete the Earths ozone layer are believed to also have a major role in climate change. In Waxman-Markey, projects to properly dispose of HFCs are considered offsets but are available only to a specific group of emitters. Were suggesting they be made available to the market at large, says Joe Madden CEO of EOS Climate, a Silicon Valley-based company developing emission-reduction programs to increase the number of quickly available offsets and to create green jobs such as refrigerator take-back programs. But every proposed offset raises its own questions, which often involve the issue of additionality verifying that an offset actually is a new program, an

addition to emissions-cutting activities that would have occurred without the cap-and-trade program. Additionality is always a huge question, and HFC disposal is a case in point, says Catherine Wolfram, associate professor of economics at the University of California at Berkeleys Haas School of Business. For instance, the Indian government wanted to establish a national standardized HFC-disposal program, Wolfram says. But they didnt do it because, if they had, people couldnt have gotten credit for doing [HFC disposal] as an offset because the climate-friendly program would already have been in progress. That failure to establish a program amounts to an unfortunate gaming of the offset idea, she explains, because it means projects may be counted as additional when, in fact, they would have been done anyway. But many analysts say the bill is necessary and that its many perceived flaws are provisions that were necessary to win support. For example, a gradual but inexorable ramp-up [to strict emission caps] is the right way to proceed, says Tufts University professor of economics Gilbert Metcalf. If we can provide a very strong signal that this will grow more stringent over time, that will make things more predictable for business and will help get international agreements. Metcalf prefers a tax on emissions over cap and trade but says a phase-in would be required for either. Instead of a utility starting out with efficiency measures which have a big cost to consumers they can plant a forest, which costs the consumers less and still gets the environmental benefit, says Eron Bloomgarden, president for environmental markets at Equator, a New York Citybased company that manages offsets. The emission targets are ambitious but reasonable, says Mignone at the Brookings Institution. The trajectory to an 80 percent reduction from todays levels by 2050 fits with what is known scientifically about what it takes to accomplish climate targets.

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And getting a U.S. policy in place before the U.N. Climate Conference tries to reach new agreements on cutting carbon emissions in Copenhagen in December is the absolutely critical thing, says UNCs Flatt. Ultimately China will go with a target for lower emissions once they see that the United States has declared one. But if the U.S. hasnt signaled, China will do nothing. Moreover, he says, Europes cap-andtrade scheme is beginning to work. The most recent data show a real drop in Western Europes emissions. Verifying whether offsets actually reduce emissions is not as squishy as you might think, though there are uncertainties, says energy lawyer Bumpers of Baker Botts. For example, Theres lots of information about how much carbon is sequestered in low- and no-till farming, and data about how forests and farms at particular longitudes and latitudes affect emissions, he says. The EPA has been running offset programs for sulfur dioxide and nitrous oxide, which cause acid rain, since the 70s, says Perera at the Union of Concerned Scientists, giving the government a lot of experience with offset validation. Non-governmental organizations will keep a close eye on offset validity, and Im sure there will be organizations willing to sue if the EPA and the [Department of Agriculture] dont do the job correctly, she says. In addition, the science on offsets will really begin to move, once cap and trade becomes established policy, says Equators Bloomgarden. Will Democrats alternative-energy policies produce enough energy? As carbon-intensive fuels are phased out, new energy sources will be needed, both in the United States and abroad. White House and congressional proposals, including Waxman-Markey, have provisions intended to build a new system, but critics call them inadequate. We like the Waxman-Markey bill for the fundamental reason that its a step in the right direction, says Matt Cheney, CEO of the San Francisco-based renewable-energy firm MMA Renewable Ventures. I think a better deal could be cut for renewable-energy producers, but who can blame people for at least trying to do something? Waxman and Markey deserve credit . . . for reserving some 16 percent of the cap-and-trade revenue for cleanenergy development and deployment, wrote Mark Muro, director of the metropolitan policy program at the Brookings Institution. He also applauds the bills allocation of 1 percent of capand-trade permit revenues to establish eight Clean Energy Innovation Centers regional R&D hubs. 25 Obama has also set out alternative energy as a goal and, in the near term, has put aside a ton of money to support it in the stimulus bill, says Califorina energy lawyer Fulton. Bumpers of the Baker-Botts law firm says he is kind of a fan of the Waxman-Markey bills establishment of a national standard for how much electricity must come from renewable sources, called the renewable energy standard. Currently, many states have their own individual standards, which makes it difficult for renewable-energy producers to operate, he says. Others praise the bills smart grid provisions, which would help modernize the nations electrical transmission system to accommodate the fluctuating nature of alternative-energy sources, such as wind and solar power, and allow consumers to monitor their own household energy use. Califorina energy lawyer Michael Hindus said the bills push for interoperability standards is vital because as alternative-energy sources come on line, the grid must operate like the Internet, with all kinds of power-generating and power-using devices hooked up to it in an interactive way. Hindus also likes the fact that the bill would allow energy efficiency to count toward the renewable standard. Time and time again, studies show that increasing energy efficiency is the cheapest way to convert to a cleaner system, he says. In California, we got into efficiency in the 70s, and as a result our electrical usage has not increased despite our incredible growth and the enormous growth in appliance use, making it easier for renewable sources which tend to be smaller than traditional coal-powered plants to meet demand, he says. Suzanne Watson, policy director of the American Council for an Energy-Efficient Economy (ACEEE), agrees. If you get enough efficiency in the mix, it makes renewables affordable, she says, because overall energy demand will be lower. Efficiency should be first on the agenda before a major switch-over to renewable power because the efficiency technologies are already available, she says. Nevertheless, Watson complains, the bill could have a much more aggressive efficiency target. Its been shown that improving national energy efficiency by 15 percent is doable by 2020, she says, but the bill proposes only 8 percent. And the Senate looks likely to propose an even lower goal, she says. Some say energy-conservation goals are unlikely to be met because WaxmanMarkey would not raise costs enough to spur customers to opt for them. The legislation will raise electricity costs by between 10 and 20 percent over a decade or so, estimates Babcock of the LECG consultancy. Thats not enough to spur big behavior changes. Legislative provisions to protect consumers by mitigating the cost increases end up cutting the incentive for people to change their behavior, he says. Renewable energy is a bit orphaned in the bill, says Cheney. A carbon tax, with revenues directed to supporting renewable energy, would have worked better, he argues. I think the electric-utility industry could do more and would do more [on renewables] if they were asked to, and
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Chronology
1970s-1980s
Two major oil shocks and fluctuating oil prices put focus on energy security and conservation. 1973 Arab oil producers embargo exports to U.S. for five months. 1977 President Jimmy Carter declares a national energy crisis and calls for measures to promote conservation and reduce demand. 1979 Reactor leak at Three Mile Island nuclear plant near Harrisburg, Pa., raises safety concerns that eventually end new U.S. nuclear-plant construction. . . . Hostage-taking at U.S. Embassy in Iran causes prices to skyrocket; Carter redoubles his conservation policies. 1986 Catastrophic explosion at a nuclear plant in Chernobyl, Ukraine, increases fears about nuclear power, eventually causes thousands of deaths. 1988 United Nations and World Meteorological Organization create the International Panel on Climate Change to assess scientific data on global warming.

Change, calling on industrialized nations to voluntarily reduce greenhouse gas (GHG) emissions to 1990 levels by 2000. . . . Energy Policy Act of 1992 increases investment in energy efficiency, renewable energy and alternative fuels. 1996 U.S. delegates to United Nations Framework Convention on Climate Change in Geneva agree to press for mandatory emissions cuts. 1997 Kyoto Protocol is adopted, calling for GHG emissions cuts averaging 5.2 percent below 1990 levels by 2009; Clinton administration signs the agreement, but the Senate refuses to ratify it because developing nations are not required to make cuts.

Act of 2006 establishes statewide GHG emissions cap for 2020. . . . California promises to cut emissions 25 percent by 2020 and start trading emissions in 2012. . . . Boulder, Colo., enacts carbon tax. 2007 Seven Western states Arizona, California, Montana, New Mexico, Oregon, Utah and Washington and four Canadian provinces British Columbia, Manitoba, Ontario and Quebec form Western Climate Initiative to establish a regional cap-andtrade system. . . . U.S. Supreme Court rules, 5-4, that the Environmental Protection Agency (EPA) can regulate carbon dioxide as a pollutant. 2008 A bipartisan bill to impose mandatory carbon-emissions cuts, sponsored by Sens. Joseph I. Lieberman, I-Conn., and John Warner, R-Va., is pulled after Senate leaders fail to garner 60 votes to override a filibuster. . . . Democratic presidential hopeful Barack Obama makes combating climate change a major campaign theme. . . . British Columbia enacts a carbon tax. 2009 Limits on carbon emissions take effect in Northeast. . . . Obama administration allows California to regulate tailpipe emissions. . . . EPA says it will regulate carbon dioxide as a threat to the environment. . . . The first House energy legislation to focus on climate change passes, 219212, on May 21; the American Clean Energy and Security Act of 2009 (HR 2454) is sponsored by Reps. Henry A. Waxman, D-Calif., and Edward J. Markey, D-Mass. . . . Senate scheduled to take up climate legislation in the fall. . . . In December, the U.N. Climate Conference meets in Copenhagen, Denmark, to sign new agreements for worldwide emissions cuts.

2000s

United States turns away from climate-change concerns after George W. Bush repudiates the Kyoto Protocol. 2005 President Bush signs Energy Policy Act of 2005, but critics say the bill does too little to promote energy efficiency and renewable energy in favor of oil drilling offshore and on public lands. . . . Kyoto Protocol takes effect when Russia provides the last needed signature. . . . Seven Northeastern states form Regional Greenhouse Gas Initiative (RGGI) to limit emissions. . . . Fifty-three U.S. senators support non-binding resolution stating that human-caused climate change is occurring and will require mandatory emissions cuts. . . . European Union activates its cap-andtrade system for controlling GHGs. 2006 California Global Warming Solutions

1990s

Concern that human activity is causing climate change begins to shift energy policies worldwide. 1992 World Environmental Summit in Rio de Janeiro establishes U.N. Framework Convention on Climate

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Can Current Technology Support a Low-Carbon Future?


Putting a man on the moon skewed the debate.
lowing climate change will take more than phasing out carbon-based fuels. It will also require technology to replace them. Public opinion about the possibility of technology solving a problem is shaped by the shot to the moon, says former Sen. J. Bennett Johnston, D-La., now a lobbyist in Washington. The historic space flight took a mere eight years from President John F. Kennedys announcement of the Apollo program to the first moon landing. But, Johnston cautions, technological breakthroughs are always more expensive and take a lot longer than people think. Meanwhile, the Obama administration is trying to jump-start more federal energy research. We dont have a National Energy Institute [comparable to the National Institutes of Health], and the Department of Energy is trying to become one on very short notice, says Severin Borenstein, a professor of business administration and public policy at the University of California-Berkeleys Haas School of Business. Its not within their current capabilities, but to their credit theyre trying. The technologies being debated include: Carbon capture and sequestration Advocates of continued reliance on Americas large coal reserves put their faith in carbon capture and sequestration (CCS) which traps CO2 from burning fossil fuels and stores it under the Earth or ocean or chemically transforms it into a stable mineral form. CCS has had small-scale demonstrations, and debate remains heated. The barriers to large-scale CCS are huge and could increase the cost of electricity generation by 81 percent if added to existing power plants, said Michael Brune, executive director of the environmental group Rainforest Action Network. 1 Others say carbon-free coal can quickly become a viable technology. CCS technology is ready to begin deployment at large, commercial scale today, and would be in use already except that it makes no sense to invest in such a plant if there are no limits on carbon emissions, wrote George Peridas, a science fellow at the Natural Resources Defense Council, an environmental advocacy group. 2 Nuclear power For the first time since safety worries shelved its development in the 1980s, nuclear power is gener-

ating interest. The safest and most efficient way for utility companies to control carbon emissions is to increase their supply of nuclear energy, said Rep. Mike Pence, R-Ind., who advocates building new nuclear plants. 3 A key barrier to developing nuclear power has been concern over disposal of used reactor fuel rods. The rods contain radioactive elements, including uranium-235 and plutonium used in nuclear bombs. Critics argue that stored waste would tempt terrorists and endanger nearby populations by leaking into water supplies. Estimates for new nuclear power place these facilities among the costliest private projects ever undertaken, and independent studies have concluded new nuclear power is not economically competitive, compared to wind, biomass and landfill gas, wrote Craig A. Severance in an analysis published by the liberal group Center for American Progress. 4 But advocates say reprocessing solves the waste problem. France, for example, has generated 75 percent of its power from nuclear plants for three decades, said William Tucker, author of the 2008 book Terrestrial Energy: How Nuclear Power Will Lead the Green Revolution and End Americas Long Energy Odyssey. France, he wrote recently in The Wall Street Journal, completely reprocesses all of its nuclear material and stores all the unused remains . . . beneath the floor of a single room at La Hague, a nuclear-processing facility in the Normandy region of France. 5 Hydrogen, Solar, Wind Virtually all technologies that might replace carbon fuels have their skeptics. I dont think hydrogen fuel will ever work, says Johnston. Wind is a good technology, but its potential cannot be realized unless Congress solves the difficult problem of transmission, since wind does not blow steadily close to where people live. Solar power also has drawbacks, wrote Robert Glennon, a professor of law and public policy at the University of Arizonas James E. Rogers College of Law. Small-scale solar installations, like rooftop solar panels, have limited use because the sun doesnt shine consistently, and good storage options for the power havent been developed. 6

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if we had a plan to redirect money toward alternative-energy investment. The current Waxman-Markey renewable energy standard (RES) will not deploy significant amounts of solar, wrote Annie Carmichael, director of federal solar policy, and Jim Baak, director of utility-scale solar policy at the advocacy group Vote Solar Initiative. A Department

of Energy analysis found that even a somewhat more aggressive RES would lead only to a 35 percent increase in solar by 2025, and when youre starting at 0.001 percent, 35 percent growth doesnt amount to much. 26 The industry group American Wind Energy Association (AWEA) says its unfortunate that the current House bill sets such a low RES less than half the

level originally proposed by President Obama and in the original discussion draft of the Waxman-Markey bill. The low RES could severely blunt the signal to the private sector to invest billions of dollars and expand production, manufacturing and job creation, says the AWEA. 27 Bumpers explains that WaxmanMarkey sets up two different trading systems one to trade carbon-emission

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Meanwhile, large-scale solar power usually produced by a system called concentrating solar power (CSP) uses four times as much water as a natural gas plant and twice as much as a coal or nuclear plant, said Glennon. If CSP remains the dominant solar technology, a coming water shortage in the West could doom it, he said. 7 The Smart Electrical Grid The nations aging electricaltransmission grid needs a major upgrade to make it more efficient thus decreasing total power needs and to accommodate renewable sources like wind and solar power. Who will pay for new transmission lines is one dilemma. If a wind farm in North Dakota is to send power to Chicago, you want to make sure that the customers who benefit are the ones who pay, a principle that raises practical difficulties since electricity is mainly sold regionally, says San Franciscobased energy lawyer Michael Hindus. Wind-power producers themselves cant be expected to pick up the transmission tab, a point driven home earlier this month by Texas oilman and wind power enthusiast T. Boone Pickens, who scuttled highly touted plans for a massive wind-power facility in the Texas Panhandle after he couldnt raise the cash to build transmission lines to big cities. 8 Incorporating many small, widely distributed energy sources into the grid also requires upgrades. If we had a million plug-in hybrid cars, they could push power back into the grid and solve some energy-shortage problems, but today utilities wouldnt know what to do with such micro-power production, nor could current transmission mechanisms handle it, says Victor Flatt, a professor of environmental law at the University of North Carolina School of Law in Chapel Hill. Were 15 years behind other countries in this transformation to a smart grid with digital rather than mechanical switches that can adapt to fluctuating power supply and demand in an instant, says Kurt Yeager, executive director of the Galvin Electricity Initiative, a nonprofit that researches and advocates for modernizing the grid.

Because we live in a digital society, even a fraction of a seconds power outage results in lost productivity as data is lost and assembly lines may shut down, he says. U.S. households average four hours a year without power, while Western Europe averages an hour or two, Japan seven minutes, and Singapore under one minute; the unreliability costs our nation $150 billion a year. A complete transformation of the nations electrical grid into a so-called smart grid would cost $250 billion and allow incorporation of more renewable power sources, including smallscale sources, such as consumers selling back power to utilities from rooftop photovoltaics, Yeager says. Moreover, smart-grid technology would enable utilities to send minuteby-minute power prices to every home, and consumers could opt to have air-conditioning or other systems automatically shut off when energy prices were high. In the United States, various localities worried about power reliability are incorporating smart-grid technology, but the best solution would have federal leadership, such as a federal power-reliability standard all states would have to meet, Yeager suggests.
1 Mike Brune, There Is No Such Thing as Clean Coal, SolveClimate.com, Oct. 17, 2008, http://solveclimate.com. 2 George Peridas, Waxman-Markey: Breaking the Deadlock on CCS, Switchboard blog, Natural Resources Defense Council, April 3, 2009, http://switchboard.nrdc.org. 3 Mike Pence, American Energy Solutions Group Introduces Comprehensive Energy Plan Without Raising Taxes, statement, www.mikepence.house.gov. 4 Craig A. Severance, Business Risks and Costs of New Nuclear Power, Climate Progress Web site, http://climateprogress.org/wp-content/uploads/2009/01/nuclear-costs-2009.pdf. 5 William Tucker, There Is No Such Thing as Nuclear Waste, The Wall Street Journal, March 13, 2009, http://online.wsj.com/article/SB123690627522614525.html. 6 Robert Glennon, Is Solar Power Dead in the Water? The Washington Post, June 7, 2009, p. B2. 7 Ibid. 8 Andy Stone, What the Pickens Fiasco Means to Green, Forbes.com, July 8, 2009, www.forbes.com/2009/07/08/boone-pickens-wind-power-business-energypickens.html.

permits and the other to trade renewable energy credits (RECs) that companies can use to meet the RES standards. The idea is for renewable-energy producers to be rewarded for producing non-carbon-emitting power with RECs that they can sell to others who cant meet the RES on their own, he explains. However, they should allow a renewable-energy person to decide

whether they get a carbon credit or an REC, energy lawyer Bumpers says. Ironically, if we go beyond the RES generating more power from renewable sources than the law requires the REC prices will actually plummet, which would end up punishing renewables producers because with so many RECs available, their value will decrease, he says.

BACKGROUND
Energy Security

overnment efforts to ensure the United States has an adequate supply of affordable energy have intensified

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over the past 30 years, as global politics has threatened oil supplies and scientists have recognized that oil will eventually run out. 28 More recently, however, a competing environmental concern has complicated energy policy debates: the conviction among scientists that burning carbon-based fuels coal, oil, natural gas and ethanol is a prime culprit in potentially drastic climate change. 29 The tension between these competing concerns has turned debates over energy policy into fractious brawls and stalemates. Liberal Democrats have pushed for energy conservation and a switch to renewable energy like wind power to offset climate change, while some conservative Democrats and most Republicans have championed aggressive development of carbon-based fuels available in the United States, such as coal, offshore oil and ethanol, to make the country less dependent on foreign suppliers. 30 There is massive tension between the goals of energy security and climatechange action, says the University of Californias Borenstein. If energy security were all you cared about, the important thing would be to make a massive investment in coal. But if climate change is the top worry, increasing coal use would be the worst thing to do because clean coal simply doesnt exist today, he says. In the 1970s, two energy shocks made energy security a U.S. government priority. The first came in 1973, when Arab oil producers embargoed exports to the United States for five months in retaliation for U.S. support of Israel during the Yom Kippur War. President Richard M. Nixon responded by imposing price controls on oil and gas, and his successor, Gerald R. Ford, established the Strategic Petroleum Reserve an emergency stockpile of oil stored underground in states along the Gulf of Mexico. By 1977, newly elected President Jimmy Carter was warning Americans that energy security was the greatest challenge our country will face during our lifetimes. Carter created the Cabinet-level Department of Energy (DOE), which undertook conservation measures like nationwide home weatherization and efficiency standards for large appliances. The second oil shock hit in 1979 after Iranian revolutionaries seized the U.S. Embassy in Tehran on Nov. 4 and held 52 employees hostage for 444 days. World oil prices skyrocketed to record highs, and Carter redoubled his efforts to promote conservation and efficiency and began dismantling some of Nixons price controls to increase domestic supplies and lower prices. In 1980, Carter signed the Energy Security Act, which funded research on biomass, solar, geothermal and ocean-thermal energy. Soon after President Ronald Reagan took office in 1981 the world was awash in oil, thanks to huge, new non-OPEC supplies opening up in the North Sea and Alaskas Prudhoe Bay. World oil prices plummeted to record lows. New auto-efficiency standards also kicked in, helping to slow the growth of U.S. oil demand. Reagan chose to reduce funding for efficiency and renewable-energy programs, favoring instead encouraging greater use of plentiful U.S. coal supplies and nuclear power. However, two frightening accidents at nuclear-power plants in 1979 at the Three Mile Island plant near Harrisburg, Pa., and in 1986 in Chernobyl, Ukraine turned Americans against nuclear power, and the drive to develop it as a homegrown energy source largely fizzled. those who deem energy security the top concern and those who see climate change as the larger threat. Largely due to that ideological divide, U.S. energy policy remained stalemated after enactment of the 1992 Energy Policy Act, which deregulated electrical utilities and increased investment in alternative energy. Throughout the 1990s, many in the United States resisted acting on climate change, since capping GHG emissions would raise energy prices and likely force changes in Americans energy-dependent lifestyles, with gas-guzzling cars and aggressively airconditioned and heated buildings. Many in both political parties argued it would be unfair to force Americans to cut emissions when emissions were expected to rise dramatically in rapidly industrializing and urbanizing countries like China and India. Nevertheless, in 1993, in the wake of international meetings declaring humancaused climate change a catastrophic threat, the Bill Clinton administration unveiled its Climate Change Action Plan, recommending that U.S businesses take voluntary measures to stabilize emissions. Clinton also limited oil and gas exploration in U.S. wilderness areas, despite pressure from energy-security advocates to expand exploration on public lands. The Clinton White House supported international efforts on emissions caps and even signed the U.N. climatechange treaty, called the Kyoto Protocol. But Clinton never sent the treaty to the Senate for ratification, because the Republican-led Senate had voted 95-0 for a resolution opposing it. In 2000, Texas Gov. George W. Bush pledged to continue U.S. participation in the Kyoto discussions when he campaigned for president. But shortly after taking office in 2001, he repudiated the agreement. Gasoline was hovering at near $2 a gallon a record level and energy security once again became the publics top concern. Acting on the advice of an energy task force led by
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Climate Concerns
conomic boom times in the 1990s left Americans relatively unfazed by fluctuating oil prices, and for a time energy security faded from the national agenda. At the same time, however, worries about climate change were growing, setting up the policy struggle that continues today between

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Taxes vs. Cap and Trade: Which Works Best?


Both systems have advantages and problems.
conomists agree that raising the price of carbon-based fuels is the key to phasing them out. But they disagree over the best way to hike prices a tax or a so-called cap-and-trade system like the one in the Waxman-Markey energy bill currently moving through Congress. A tax is a time-honored way to brake unwanted behavior, such as the heavy federal tax on cigarettes to reduce smoking. Several countries and localities around the world including Sweden, the Canadian province of British Columbia and Boulder, Colo. use taxes to limit the use of some carbon-emitting fuels. In June the City Council in Boulder, which generates electrical power with a coal-fired plant, increased the carbon tax city voters first enacted in 2006. The city adds a charge to residents utility bills and uses the revenue to fund aggressive energy-efficiency measures, such as home visits by technicians to install programmable thermostats. The tax increase from about $11 per year to $21 per household, and from an average $43 per year to $94 for businesses is expected to provide an additional $810,000 annually to help the city reduce its greenhouse gas (GHG) emissions below 1990 levels within four years. 1 GHGs are thought to cause climate change. Many residents urged the council to raise the tax. I think that the more carbon tax we have, the better. This city has the opportunity to lead the nation in carbon reduction, said a resident at the June meeting. 2 The major argument for taxes is that theyre simpler they build on existing [revenue-collecting] structures, says Gilbert Metcalf, a professor of economics at Tufts University, near Boston. In addition, unlike a cap-and-trade market, a tax clearly sets the price of emissions, and from a business point of view, that would protect against the risk of changing carbon prices, he says. Under cap and trade, such as the system the European Union launched in 2005, lawmakers issue permits to businesses for a certain level of emissions that is deemed allowable under an emissions cap that gets increasingly restrictive over time. At the same time, a trading market is established enabling businesses with extra permits to sell them to businesses whose own emissions would otherwise exceed the cap. While a tax sets a price to drive emissions to the desired level, a cap-and-trade scheme sets an emissions limit and lets the resulting trading market set prices. Europes cap-and-trade scheme has produced short-term volatility in energy prices, Metcalf says. If the United States enacts cap and trade, if the prices go too high, Congress may just bypass the market and lower the prices, he says. That might be a boon to consumers but would be a misfortune for companies who had bought emissions permits under an earlier, higher price, he notes. Some economists argue that emissions caps should be applied to fuel-producing industries like coal mines and oil importers rather than to fuel-using industries, like electrical utili-

ties and manufacturing plants, as both the European Unions cap-and-trade scheme and Waxman-Markey do. Capping importation and production of carbon fuels is much easier to monetize and enforce than capping fuel-user emissions, partly because many fewer businesses would be directly involved, says Peter Dorman, a professor of economics and environmental policy at Evergreen State University in Olympia, Wash. Furthermore, it would apply to both large and small emitters because both use the fuel, and you would eliminate the unintended consequence of everybody currying favor with everybody to get special breaks for their industry, he says. In the Waxman-Markey bill, for example, only big-business emitters have their emissions capped, and even some big businesses, notably large agribusinesses, have successfully argued that their emissions should not be capped. Other analysts say emissions caps are better applied to fuel users. I prefer [capping] the utilities because thats where the change must come to switch the country off carbon fuels, says William Bumpers, an energy lawyer in Washington. The coal mine cant do anything about the fact that coal is a carbonbased fuel, while electrical utilities, manufacturers and other fuel users can launch energy-efficiency programs and search for alternative fuel sources to cut emissions, Bumpers explains. Theres been a very strong political constituency for cap and trade rather than a tax, says Bryan K. Mignone, a fellow at the centrist Brookings Institution think tank in Washington. For example, many environmental groups back cap and trade because you dont get the same emissions certainty with a tax, since, under a tax, the government specifies the price of emitting but not how much emission will be allowed, he explains. The affected industries also prefer cap and trade because those who make investments to cut emissions can get an immediate reward as they sell their unneeded emissions permits to others and thus recoup their investments in emission-limiting technologies, Mignone explains. Furthermore, once carbon-emission permits become a financial asset that companies can sell, buy and hold, they only have value as long as the system remains in place, so youre creating a constituency for the system, Mignone says. But others wonder whether strong support for cap and trade will continue when emissions caps really begin to lower, about a decade from now. The evidence is pretty thin that having a market creates a constituency, says Severin Borenstein, a professor of business administration and public policy at the University of California-Berkeleys Haas School of Business.
1

Heath Urie, Falling Short of Kyoto Goals, Boulder Raises Carbon Tax, [Boulder] Daily Camera online, June 4, 2009, www.dailycamera.com/news/2009/ jun/04/kyoto-boulder-raises-carbon-tax/. 2 Quoted in ibid.

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Continued from p. 634

Vice President Dick Cheney, Bush launched an energy policy centered on increasing domestic supply, including reversing Clintons ban on oil and gas exploration on public lands. The Bush administration eventually acknowledged that human activity played a role in climate change but argued that taxing or capping emissions would cripple the economy. The Republicandominated Congress approved Bushs budget, which called for increased money to develop so-called clean coal technology but severe cuts in energyconservation programs and research on renewable-energy sources. With the United States focusing on energy security, the Kyoto treaty went into effect in 2005 after being ratified by a majority of U.N. member countries. The European Union immediately launched its mandatory cap-and-trade system to try to limit emissions. 31 By then, a growing number of U.S. senators, including some Republicans, became convinced that human activities drive climate change and that government action might be warranted. The Senate, though not the House, has debated several measures to address climate change. In 2008, a bill that would impose mandatory emissions cuts sponsored by Sens. Joseph I. Lieberman, I-Conn., and John Warner, R-Va. gained support of a bipartisan majority. Ultimately, however, the bill was pulled from consideration after supporters failed to gain the 60 votes needed to override a filibuster.

CURRENT SITUATION
Seismic Change

f Congress passes climate-focused energy legislation in 2009, the event

will constitute a seismic shift in U.S. energy policy. Signs of change began in 2008, as then Democratic presidential hopeful Barack Obamas candidacy began picking up steam. During his campaign, Obama pledged to promote a national cap-and-trade system and to be a strong partner to states and companies pursuing energy efficiency and non-carbon energy sources. The new administration quickly put climate change on its agenda. The economic-stimulus package that Obama called for upon inauguration and signed into law Feb. 17 had provisions aimed at developing a low-carbon energy system. It called for doubling U.S. production of renewable energy over three years, making federal buildings and millions of homes more energy efficient and putting a million plug-in hybrid cars on the road by 2015. 32 The provisions were an important down payment on tackling climate change and long overdue, climatechange advocate and former Vice President Al Gore told the Senate Foreign Relations Committee. 33 The administration took a bigger step toward limiting GHG emissions when the EPA announced on April 17 that a scientific review ordered by a 2007 Supreme Court decision found GHGs contribute to air pollution that may endanger public health or welfare. 34 Based on that finding the EPA has begun the process of issuing federal rules to limit emissions. Nevertheless, its unclear how much the agency can do on emissions caps, given the scope of its legal authority. I believe that EPA can do a trading regime for carbon under the Clean Air Act, says UNCs Flatt. But can it set the level of allowable carbon? Not so much. Nevertheless, the agency could effectively set a temporary limit because it would take four or five years [for cases challenging the move] to percolate up through the courts. Perhaps more important, the EPAs

promise to regulate emissions spurred the utility industry to support a legislatively based cap-and-trade system, hoping that lawmakers would be more sensitive to their concerns than the agency rulemaking process, Flatt says. The Obama administrations energy-policy staff is clearly focused on climate change, observers note. The impacts of climate change are not just life and death, but they are economic costs that are hard to extrapolate into the future, EPA Administrator Lisa Jackson told ABC News. 35 But some industry observers say the energy team lacks technological expertise. In the previous administration, as much as they were all about putting politics over policy, they did employ a lot of people from the private sector, says Cheney of MMA Renewable Ventures. The new administration is just the other way, and we need more ideas from the private sector, because while the staff is great in many ways, theyre somewhat out of touch with where environmental technology is. I think the Obama administration is listening to concerns from the renewable-energy sector, for example, but they have an in-box thats eightyears deep, Cheney says.

Waxman-Markey Bill

ast Novembers election was a game changer in Congress as well as in the White House. Democrats strengthened their majorities in the House and Senate, and climate-legislation proponent Waxman challenged longtime Chairman Rep. John Dingell, D-Mich., for leadership of the Committee on Energy and Commerce. Waxman ultimately won the member vote, defeating Dingell, a champion of his home states carbon-emitting auto industry. The switch left many analysts predicting that Waxman would take a tough stance on global warming. Waxman is
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At Issue:
Will the Waxman-Markey bill harm the economy?
yes

REP. FRED UPTON, R-MICH.


RANKING MEMBER, ENERGY AND COMMERCE SUBCOMMITTEE ON ENERGY AND ENVIRONMENT
WRITTEN FOR CQ RESEARCHER, JULY 2009

DANIEL A. FARBER
PROFESSOR OF LAW, UNIVERSITY OF CALIFORNIA BERKELEY SCHOOL OF LAW
WRITTEN FOR CQ RESEARCHER, JULY 2009

ur economy continues to struggle. We shed 467,000 jobs in June and have hemorrhaged 3.2 million since Jan. 1. In Michigan, unemployment has soared to 15.2 percent. Yet, despite our economic maladies, Democratic leaders are pursuing a reckless climate bill that would bankrupt Americas working families with no guarantee of helping the environment. The carbon mandates under cap and tax would mean the United States could not emit more in 2050 than we emitted in 1910, essentially requiring us to scale back emissions to a per capita level equivalent to those of the tiny coastal nation of Belize. Study after study has predicted cap-and-tax will result in skyrocketing energy bills and massive job losses. The Congressional Budget Office conservatively estimated that meeting the mandated reductions would cost $864 billion, while some anticipate closer to $1.5 trillion. CBO predicted gasoline costs would increase by 77 cents per gallon and diesel by 88 cents. It is not just inside-the-Beltway analysts forecasting exorbitant costs to families. In Michigan, Consumers Energy predicts hefty rate increases in excess of 38 percent over the next 15 years just to comply with cap and tax. The increases will surely be higher as Consumers did not take into account inflation or rising fuel and construction costs. Some Michigan manufacturers say they will solely operate at night, when electric rates are cheaper. Efforts to improve the legislation with constructive amendments were blocked every step of the way. We sought to add consumer protections to safeguard working families, but were rebuffed. Efforts to include the worlds leading emitters in the legislation were also thwarted. Meaningful climate legislation requires global participation, especially by India and China. According to the July 16 edition of The New York Times, Energy Secretary Steven Chu said that if Chinas emissions of global warming gases keep growing at the pace of the last 30 years, the country will emit more such gases in the next three decades than the United States has in its entire history. Without international participation, jobs and emissions will simply shift overseas to countries that require few, if any, environmental protections, harming the global environment as well as the U.S. economy. We should take an all of the above approach to reducing emissions, with an emphasis on renewable sources of energy like wind and solar, as well as nuclear power. We can simultaneously preserve our environment and create jobs.
no

yes no
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n the short term, climate-change legislation will cause modest increases in energy costs but will help cut the federal deficit a bit. In the long run, it will safeguard us against dangerous changes in climate and help Americans become leaders in the emerging clean-tech industry. One reason for the modest cost is that the legislation will create a cap-and-trade system rather than directly telling companies how much to reduce their emissions. Cap and trade is the brainchild of economists who believe conventional environmental regulation is too expensive. The whole purpose is to cut industries costs. Companies will get allowances for each ton of carbon dioxide they emit. The total number of allowances is the cap. Companies can use the allowances themselves or sell them to other companies. Thats the trade part of cap and trade, and it makes the program more cost-effective. Under the bill that passed the House of Representatives, most allowances would be given away, but some would be auctioned. Auction proceeds would pay for government programs like vouchers for buying fuel-efficient vehicles and energy rebates for low-income consumers. How much would this cost? The most reliable cost estimates come from the nonpartisan Congressional Budget Office rather than ideological advocates like the American Enterprise Institute. A few weeks before the House passed the climate-change bill, the CBO estimated utilities would pay $15-$26 per allowance from 2010-2019. The impact on consumers would be small a $20 charge per ton of emissions amounts to 1.4 cents per kilowatt-hour of electricity. CBO later admitted that its cost estimate had been on the high side, because it ignored other ways that companies could reduce their compliance costs. When CBOs original report was released, opponents of the legislation squawked that the legislation would cost the government over hundreds of billions of dollars. It turns out that what the CBO meant was simply that the government was losing out on potential revenue by giving most of the allowances away instead of auctioning them. According to economists, auctioning permits is better. And what about the deficit? CBO estimates that climate legislation would decrease the national debt by $24 billion over the next decade by allowing the federal government to earn income from auctioning allowances. In short, climate-change legislation is not the huge economic burden claimed by opponents. Its a cost-effective way of combating a serious threat to our long-term well-being.

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an avid environmentalist with a combative stance on climate change that could alienate Republicans and moderate Democrats, wrote Associated Press reporter Andrew Taylor. 36 Ironically, however, the bill that emerged from Waxmans committee not only has drawn criticism from congressional Republicans but is strongly opposed by some environmentalists as a giveaway to GHG-emitting industries. In the House, eight Republicans voted for the measure and 44 Democrats voted against, with a handful of the Democrats Reps. Pete Stark, Calif., Peter DeFazio, Ore., and Dennis Kucinich, Ohio demurring on the grounds that the bill is an insufficient response to climate change. The bill sets [emission] targets that are too weak, especially in the short term, and sets about meeting those targets through Enron-style accounting methods such as allowing emitters to purchase offsets, said Kucinich. It gives new life to one of the primary sources of the problem that should be on its way out coal by giving it record subsidies. 37 Republican critics, meanwhile, call the bill a liberal economy killer. The cost of this policy will be certain, massive and immediate, said Gov. Mitch Daniels, R-Ind. The benefits . . . will be dubious, minuscule and decades in the distance. 38 Among HR 2454s provisions are these: 39 A national requirement for major GHG emitters to reduce emissions by 17 percent from 2005 levels by 2020 and by 80 percent by 2050; Development of a cap-and-trade market in which heavy emitters can meet emission-cut targets by buying credits from businesses whose emissions already meet target levels as well as emission offsets, such as a newly planted forest. In the markets early years, the government would give permits free to businesses, but later per-

mits would be auctioned and the government would get the proceeds; A national requirement for electric utilities to produce 20 percent of their demand using energy-efficiency improvements and renewable-energy sources like biomass, wind and landfill gas by 2020; Federal investments in technology development including for energy efficiency; renewable-energy sources; carbon capture and sequestration to cut GHG emissions from burning coal; an electrical-transmission smart grid to accommodate new, variable sources like wind and solar and new users like hybrid cars; and electric and other advanced vehicles; National energy-saving standards for buildings and appliances; Monetary rebates to help protect industries hit hardest by the shift from carbon fuels; Training to prepare workers for jobs in a low-carbon economy, such as green building construction, water and energy conservation and agriculture techniques like low- and no-till farming that offset GHG emissions; and Monetary rebates to consumers to help offset energy price increases.

Something for Everyone?


nvironmentalists pent-up desire for climate action and businesses trepidation about a major change in the energy system have attracted floods of Washington lobbyists eager to shape the new policies. If enacted, the bill will be a major departure from all previous energy legislation, moving from an incentivebased energy policy to one that actually creates penalties over time for GHG emissions, says Washington energy lawyer Hunter Johnston. Every line of the text has billions and billions of dollars riding on it, and people will do and say anything to get a share of the money, including environmentalists who hope fed-

eral revenues from eventual auction of emissions permits will help their cause, says Evergreen States Dorman. In the first quarter of 2009 alone, 140 additional businesses and organizations joined the crowd lobbying on energy and climate change, a 14 percent increase over a year ago, according to a Washington-based nonprofit investigative group, the Center for Public Integrity. 40 Large food producers, represented by the American Beverage Association and the American Meat Institute, for example, want some of the free emission permits the Waxman-Markey bill is handing out to other industries, such as electrical utilities. Companies with energy-saving products to sell, such as the Santa Clara, Calif.-based computer company Sun Microsystems, which has developed more energy-efficient computer servers, have lined up to lobby for stringent national energy-efficiency standards to give businesses incentive to buy their products. 41 Members of Congress have also sought provisions favoring their home regions. Waxman and Markey won the undecided vote of Rep. Marcy Kaptur, D-Ohio, when they added a loan program for renewable-energy and economic-development projects in the Midwest. 42 The bill owes its momentum to many groups who sought and got provisions they wanted, says Johnston. For example, he says, feeling that it was inevitable that there would be some kind of carbon policy, utilities had the foresight to work out agreements that would put them in a strong position in the bill. The bill is complicated, in large part to ensure that the burden is shared in such a way that it can pass, says Metcalf of Tufts. You could lop out about 400 pages by setting a comprehensive cap on GHG emissions and charging emitters via a tax for emissions beyond the cap, a plan many economists, including Metcalf, favor. Waxman-Markeys complications come partly because the Energy and Commerce Committee is full of people from coal states, who sought and won

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many provisions to help industries in their home districts, says Metcalf. Then other industries lined up for assistance, too. The wind people say that wind power is more expensive today, so they need a [renewable-energy] credit to incentivize development of more wind power. But wind is only a little more expensive than [natural] gas, and once we put in the carbon price, itll raise the price of gas and make it comparable with wind, so wind power probably doesnt need extra help, Metcalf says. Nevertheless, once the wind developers are in there, the biomass people want in too, and so on. In the end, were picking winners and losers, which is always more expensive than simply imposing a tax on carbon and letting more expensive, less-effective technologies fall by the wayside as the market sorts things out, Metcalf says. Waxman and Markey steered a course between the bill they wanted and a bill that can realistically pass, supporters say. Theres simply nobody else in Congress whose record of progressive legislative accomplishments can hold a candle to Waxmans, wrote Matthew Yglesias, a blogger at the liberal Center for American Progress. When you draw intersecting curves of what needs to be done and what can realistically be done, Waxman has time and again put himself at the intersection, and I think it involves a fair amount of hubris to think that you know better than [he] what the best feasible legislative outcome is. 43 Cosponsor Markey also has been a passionate champion of environmental and clean energy, wrote David Corn, Washington bureau chief for the liberal magazine Mother Jones. Like Waxman, he gives a damn about this and truly wants to pass the toughest bill possible. 44

More to Come
s Waxman-Markey continues its journey through Congress eventually to be taken up by the Sen-

ate lawmakers continue to push for amendments. After committee passage and before the bill came to the House floor, Chairman Waxman reached an agreement with House Agriculture Committee Chairman Collin Peterson, D-Minn., to explicitly exempt the agriculture and forestry industries from emissions caps. Earlier drafts had left open the possibility that large factory farms might be subject to caps. The revised bill also removes jurisdiction over offsets projects like forest planting and no-till farming that carbon-heavy industries can buy to offset their GHG emissions from the EPA and gives it to the U.S. Department of Agriculture (USDA), a move that makes environmentalists wary because, unlike the EPA, the USDAs mission is promoting agriculture, not protecting health and the environment. 45 Among Senate proposals on the table is an energy bill approved June 17 by the Senate Energy and Natural Resources Committee that would set much less stringent national energyefficiency and renewable-energy requirements than the House bill. 46 House Republicans are promoting a plan to revamp nuclear-power regulation to encourage licensing of 100 new reactors over the next 20 years. The plan also calls for exploration for offshore oil and for oil shale sedimentary rock from which organic chemicals can be extracted and turned into synthetic crude oil in the mountain West, said GOP House Conference Chairman Rep. Pence. 47 Some Democrats continue to oppose giving away emissions permits free. Under a plan advanced by Rep. Christopher Van Hollen, D-Md., all permits would be auctioned with proceeds returned to the public in the form of a monthly dividend to every legal U.S. resident. To succeed, a climate bill must attract and retain . . . popular support, and a dividend offers the best chance to get the job done, Van Hollen said. 48

Despite the wheeling and dealing, however, I still dont see any real coalescence around an energy policy for the country, says UNCs Flatt. We havent really decided what we want less GHG emission? Energy security? Lower cost? We want all three, and we assume we can get there, but they sometimes conflict.

OUTLOOK
On to Copenhagen
he fate of climate-change legislation in the 111th Congress is undecided, but what happens has huge implications for struggling international efforts to halt climate change. It will be a challenge to get to 60 [veto-proof] votes in the Senate, largely because regional interests play such a large role, says former Sen. Johnston. Midwestern states, for example, rely heavily on coal, while Southeastern states have little access to renewableenergy sources. But the Union of Concerned Scientists Perera thinks Senate passage is likely. Numerous Senate committees have jurisdiction over parts of the legislation, and so many people will have a hand in the bill that theyll feel as if they have a stake in it, as if theyre part of the final product, she says. In addition, the Senate has regularly debated climate bills and resolutions for several years and is much more educated and concerned about the issue than the House, Perera says. She attributes the Houses narrow margin of passage to the shorter time the House has had to assimilate climatechange issues. The House is at the high-school level, and the Senate is at the college level in understanding climate change, she says.

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If passed, the bill will make possible an international deal in Copenhagen on global emissions cuts as well as a bilateral deal with China, hopefully sooner, said Joseph Romm, a senior fellow at the liberal Center for American Progress. 49 Rising emissions from developing countries, especially China and India, are often cited as an argument for the United States to hold off on passing a carbon ban, on the grounds that an emission ban here and the resultant higher energy costs would give those countries unfair competitive advantage in manufacturing. And not everyone is convinced that passing WaxmanMarkey would get China to make its own cuts. Its going to be difficult to get to China. They understand the problem, but theyve got tens of millions of peasants the government hopes to urbanize, and employing them depends on cheap energy, says Johnston. Farther down the line, its not clear the United States will have the will to continue the strict phase-out of carbon fuels, some analysts warn. For Americans, right after the right to buy a gun comes the right to buy gas at cheap prices, so Im worried that we wont stick with the gasoline, coal and natural-gas price increases that the Waxman-Markey bill will impose a decade or so from now, when carbon prices really begin to bite, the University of Californias Borenstein says.

Notes
Quoted in Alex Pasternack, WaxmanMarkey Bill Moves Forward, After Arrests and a Speed Reading, Huffington Post, May 21, 2009, www.huffingtonpost.com. 2 Quoted in Charles Owens, Boucher: Cap and Trade Deal Preserves Coal Jobs, Bluefield [W. Va.] Daily Telegraph, May 16, 2009, www.bdt online.com/local/local_story_136191739.html. 3 For background, see Jennifer Weeks, Carbon Trading, CQ Global Researcher, Nov. 1, 2008, pp. 295-320. 4 Prepared Remarks of President Barack Obama, weekly address, The White House, June 27, 2009, www.whitehouse.gov/the_press_ office/UPDATED-and-FINAL-WEEKLY-ADDRESSPresident-Obama-Calls-Energy-Bill-Passage-Criti cal-to-Stronger-American-Economy/. 5 Darrell Issa, Climate Bill a Pain in the Gas, Politico, June 5, 2009, www.politico.com/news/ stories/0609/23356.html. 6 Myron Ebell, Waxman-Markey EnergyRationing Bill, press release, Competitive Enterprise Institute, June 23, 2009, http://cei.org/ pubsbytype/news_release. 7 Global Climate Change Impacts in the United States, U.S. Global Change Research Program, May 2009, www.globalchange.gov/pub lications/reports/scientific-assessments/us-impacts/ download-the-report. 8 Wallowing in Denial: Inaction Is No Option on Global Warming, St. Louis Post-Dispatch, May 29, 2009, p. A16. 9 For background, see Marcia Clemmitt, Climate Change, CQ Researcher, Jan. 27, 2005, pp. 73-96. 10 J.P.M. Sijm, et al., The Impact of the EU ETS on Electricity Prices: Final Report to the DG Environment of the European Commission, ECN Policy Studies, Dec. 19, 2008, www.ecn.nl/ docs/library/report/2008/e08007.pdf.
1

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high-school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Preventing Cancer and Public-Works Projects.

David Montgomery, et al., Impact on the Economy of the American Clean Energy and Security Act of 2009 (H.R. 2454), CRA International/National Black Chamber of Commerce, May 2009, p. 4, www.nationalbcc.org/images/ stories/documents/CRA_Waxman-Markey_%20520-09_v8.pdf. 12 Ibid. 13 Pence Says Democrats Need to Come Clean About the Cost of Cap and Trade, press release, GOP.gov, April 23, 2009, www.gop.gov/pressrelease/09/04/23/pence-says-democrats-need-to. 14 Ibid. 15 Climate Change Bill House to Vote Friday, press release, CARE, June 24, 2009, www. care.org/newsroom/articles/index.asp?articletype =pressrelease&s_src=170920500000&s_subsrc=. 16 For background, see Sergey Paltsev, et al., Assessment of U.S. Cap and Trade Proposals, MIT Joint Program on the Science and Policy of Global Change, April 2007, web.mit.edu/global change/www/MITJPSPGC_Rpt146.pdf. 17 Quoted in GOP Full of Hot Air About Obamas Light Switch Tax, PolitiFact.com, March 24, 2009, www.politifact.com. 18 Ibid. 19 Ibid. 20 The Estimated Costs to Households of the Cap-and-Trade Provisions of H.R. 2454, Congressional Budget Office, June 19, 2009, www.cbo.gov/ftpdocs/103xx/doc10327/06-19CapAndTradeCosts.pdf. 21 Chad Stone, Sharon Parrott and Dottie Rosenbaum, Waxman-Markey Climate Change Bill Fully Offsets Average Purchasing Power Loss for Low-Income Consumers, Center on Budget and Policy Priorities, May 20, 2009, www.cbpp.org. 22 The Estimated Costs to Households of the Cap-and-Trade Provisions of H.R. 2454, op. cit., p. 2. 23 Robert Stavins, Worried About International Competitiveness? Another Look at the WaxmanMarkey Cap-and-Trade Proposal, Huffington Post, June 19, 2009, www.huffingtonpost.com. 24 Victor Flatt, Waxman-Markey Climate Change Bill Not a Disaster for the Environment, University of Houston Law Center Faculty blog, May 26, 2009, www.uhlawblog.com. 25 Mark Muro, Waxman-Markey: What About Innovation? Brookings Institution, June 8, 2009, www.brookings.edu. 26 Annie Carmichael and Jim Baak, Solar Takes a Backseat in National Climate and Energy Bill, Thinking Green, Speaking Green blog, June 10, 2009, www.votespisak.org. 27 Wind Industry Praises Chairmen Waxman

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and Markey for Upholding Renewable Electricity Standard in House Climate and Energy Bill, press release, American Wind Energy Association Web site, May 22, 2009, www.awea.org. 28 For background, see Mary H. Cooper, Energy Security, CQ Researcher, Feb. 1, 2002, pp. 73-96. 29 For background, see Peter Katel, Oil Jitters, CQ Researcher, Jan. 4, 2008, pp. 1-24. 30 For background, see the following CQ Researcher reports: Barbara Mantel, Energy Efficiency, May 19, 2006, pp. 433-456; Mary H. Cooper, Alternative Energy, Feb. 25, 2005, pp. 173-196; Mary H. Cooper, Energy Policy, May 5, 2001, pp. 441-464; and Mary H. Cooper, The Politics of Energy, CQ Researcher, March 5, 1999, pp. 185-208. 31 For background, see Jennifer Weeks, Carbon Trading, CQ Global Researcher, November 2008, and Colin Woodard, Curbing Climate Change, CQ Global Researcher, February 2007. 32 For background, see Recovery.gov, www. recovery.gov. 33 Quoted in Eoin OCarooll, Gore: Stimulus Package Will Help Curb Climate Change, Bright Green Blog, The Christian Science Monitor, Jan. 28, 2009, http://features.csmonitor.com. 34 EPA Finds Greenhouse Gases Pose Threat to Public Health, Welfare/Proposed Finding Comes in Response to 2007 Supreme Court Ruling, press release, Environmental Protection Agency, April 17, 2009, http://yosemite.epa.gov. 35 David Kerley and Huma Khan, EPAs Greenhouse Gas Mandate Causes Both Joy and Concern, ABC News, April 17, 2008, http://abcnews.go.com. 36 Andrew Taylor, Waxman Ousts Dingell from Energy Chair in Bruising Dem Fight, The Associated Press, Nov. 20, 2008, www.huffington post.com/2008/11/20/waxman-beats-dingell-ind_n_145178.html. 37 Quoted in Muriel Kane, Dennis Kucinich Votes Against Climate Change Bill, Raw Story blog, June 26, 2009, http://rawstory.com/08/news/ 2009/06/26/dennis-kucinich-votes-against-climatechange-bill/. 38 Quoted in Brian A. Howey, Hoosier GOP Sound Alarm Over Cap & Trade, Howey Politics Indiana blog, May 27, 2009, www.howeypolitics.com. 39 For background, see The American Clean Energy and Security Act (HR 2454), summary, House Committee on Energy and Commerce Web site, June 23, 2009, http://energy commerce.house.gov/Press_111/20090623/hr2454_ rulessummary.pdf. 40 Marianne Lavell, The Climate Lobbys Non-

FOR MORE INFORMATION


American Enterprise Institute, 1150 17th St., N.W., Washington, DC 20036; (202) 862-5800; www.aei.org. Free-market-oriented think tank that analyzes energy and environmental policy. Center for American Progress, 1333 H St., N.W., 10th Fl., Washington, DC 20005; (202) 682-1611; www.americanprogress.org. Liberal think tank that analyzes energy policy from an environmental standpoint. Heritage Foundation, 214 Massachusetts Ave, N.E., Washington DC 20002-4999; (202) 546-4400; www.heritage.org. Conservative think tank that analyzes energy and environmental policy, including current legislation. Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change, 77 Massachusetts Ave., E19-411, Cambridge, MA 02139-4307; (617) 253-7492; http://globalchange.mit.edu. Provides research and analysis on environmental change and energy use and policy. Mayors Climate Protection Center, U.S. Conference of Mayors, 1620 I St., N.W., Washington, DC 20006; (202) 961-6700; www.usmayors.org/climateprotection/revised/. Provides assistance to localities on reducing greenhouse gas emissions. The Oil Drum blog, Institute for the Study of Energy and Our Future, P.O. Box 270762, Fort Collins, CO 80527-0762; (303) 942-6209; www.theoildrum.com. Web site staffed by energy analysts and academics who analyze energy policy. Pew Center on Global Climate Change, 2010 Wilson Blvd., Suite 1550, Arlington, VA 22201; (703) 516-4146; www.pewclimate.org. Supports and disseminates research on climate change. Regional Greenhouse Gas Initiative, 90 Church St., 4th Fl., New York, NY 10007; (212) 417-7327; www.rggi.org. A carbon-emissions cap-and-trade program established by 10 Northeastern states. U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-4403; www.energy.gov/about/timeline1939-1950.htm. Provides a timeline of U.S. energy policy.
stop Growth, Center for Public Integrity Web site, May 19, 2009, www.publicintegrity.org. 41 Ibid. 42 Edward Felker, Rep. Kaptur Gets $3.5 Billion Sweetener in Climate Bill, The Washington Times, July 1, 2009, www.washingtontimes.com/ news/2009/jul/01/sweetener-helped-sway-voteon-house-climate-bill/. 43 Matthew Yglesias, Waxman, Peterson Reach Deal; Climate/Energy Bill Set to Move Forward, Yglesias blog, Center for American Progress Web site, June 24, 2009, http://yglesias.think progress.org/archives/2009/06/waxman-petersonreach-deal-climateenergy-bill-set-to-move-forward. php. 44 David Corn, Mick Jagger and the Climate Change Bill, Kevin Drum blog, Mother Jones Web site, June 24, 2009, www.motherjones.com/ kevin-drum/2009/06/mick-jagger-and-climatechange-bill. Meredith Niles, Petersons Waxman-Markey Amendment: The Nity Gritty and What It Means, Grist online, June 25, 2009, www.grist.org. 46 Kate Sheppard, Enviros Cringe as Senate Committee Approves Energy Bill, Grist online, June 17, 2009, www.grist.org. 47 Mike Pence, American Energy Solutions Group Introduces Comprehensive Energy Plan Without Raising Taxes, statement, www. mikepence.house.gov. 48 Van Hollen Introduces the Cap and Dividend Act of 2009, press release, April 1, 2009, http://vanhollen.house.gov. 49 Joseph Romm, The U.S. House of Representatives Approves Landmark (Bipartisan!) Climate Bill, 219-212, Climate Progress blog, June 26, 2009, http://climateprogress.org/2009/ 06/26/house-approves-landmark-bipartisan-cleanenergy-and-climate-bill-final-vote-waxmanmarkey/.
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Bibliography
Selected Sources
Books
Bryce, Robert, Gusher of Lies: The Dangerous Delusions of Energy Independence, PublicAffairs Books, 2008. A Texas energy reporter argues that U.S. energy-independence is an unrealistic and dangerous dream. Giddens, Anthony, Politics of Climate Change, Polity Press, 2009. A professor emeritus of sociology at the London School of Economics and House of Lords member argues that climate change demands a rethinking of how we make political decisions and engage the public in policy dialogue. Randolph, John, and Gilbert M. Masters, Energy for Sustainability: Technology, Planning, Policy, Island Press, 2008. A professor of environmental planning at Virginia Polytechnic Institute (Randolph) and a Stanford University professor emeritus of civil and environmental engineering trace the historical development of energy use and describe technologies available for creating a sustainable energy future. Shaffer, Brenda, Energy Politics, University of Pennsylvania Press, 2009. A professor of political science at Israels University of Haifa examines how the need to obtain energy, along with concerns about national security and climate change, shape national politics and international alliances. Economy, Union of Concerned Scientists, May 2009, www.ucsusa.org/global_warming/solutions/big_picture_ solutions/climate-2030-blueprint.html. An environmental group argues that investments in energy efficiency can cut GHG emissions while largely offsetting increased carbon-fuel prices. The Estimated Costs to Households from the Cap-andTrade Provisions of H.R. 2454, Congressional Budget Office, June 19, 2009, www.cbo.gov/ftpdocs/103xx/doc 10327/06-19-CapAndTradeCosts.pdf. Congress budget agency estimates overall net costs per household of the Waxman-Markey bill would average 0.2 percent of after-tax income. Impact on the Economy of the American Clean Energy and Security Act of 2009, National Black Chamber of Commerce/CRA International, May 2009, http://epw.sen ate.gov/public/index.cfm?FuseAction=Files.View&FileStore_ id=8230a041-2d13-4812-b5ed-ea9b2965faa0. An international economics consultancy argues the cost of switching to renewable energy should be weighed against the possible benefits. Potential Impacts of Climate Change in the United States, Congressional Budget Office, May 2009, www.cbo.gov/ftp docs/101xx/doc10107/05-04-ClimateChange_forWeb.pdf. Congress nonpartisan budget agency finds human activities are potentially leading to serious and expensive changes in regional climates and ocean and shore conditions. Eldridge, Maggie, et al., The 2008 State Energy Efficiency Scorecard,American Council for an Energy-Efficient Economy, Report Number E086, October 2008, http://aceee.org. Analysts for a nonprofit advocating energy efficiency report on state efficiency programs. Orszag, Peter R., Containing the Cost of a Cap-and-Trade Program for Carbon Dioxide Emissions, Congressional Budget Office, May 20, 2008, www.cbo.gov/ftpdocs/92xx/ doc9276/05-20-Cap_Trade_Testimony.1.1.shtml. The former chief of the Congressional Budget Office now director of the White House Office of Management and Budget says cap-and-trade programs to lower GHG emissions have costs for consumers, as do other such mechanisms. Pollin, Robert, et al., Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy, Center for American Progress/University of Massachusetts (Amherst) Political Economy Research Institute, September 2008, www.peri.umass.edu/green_recovery/. Liberal analysts argue that green policies can bolster the economy through job creation.

Articles
Kane, Paul, Push and Pull in Senate May Recast Climate Bill, The Washington Post, July 7, 2009, p. A3. Senators bring their own regional and economic concerns to energy policy. Lavelle, Marianne, The Climate Lobbys Nonstop Growth, Center for Public Integrity, May 19, 2009, www.public integrity.org. A writer for a nonprofit investigative group examines the industries with a stake in energy legislation.

Reports and Studies


Bad Deal for the Planet: Why Carbon Offsets Arent Working and How to Create a Fair Global Climate Accord, International Rivers, 2008, www.internationalrivers.org/ node/2826. A river advocacy group argues the World Banks carbonemissions offset program is not reducing emissions. Climate 2030: A National Blueprint for a Clean Energy

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CHAPTER

NUCLEAR POWER
BY MARCIA CLEMMITT

Excerpted from Marcia Clemmitt, CQ Researcher (June 10, 2011), pp. 505-528.

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Nuclear Power
BY MARCIA CLEMMITT
liberately released to vent the plant. Some nuclear power exefore a powerful earthperts contend that Japanese govquake and tsunami ernment regulators comprotriggered a catastrophe mised safety. The governments at Japans Fukushima Daiichi nuclear-plant inspections and nuclear plant on March 11, the safety standards are deliberately U.S. nuclear industry was ridlenient so that Tokyo Electric ing a bit of a popularity wave. Power, Fukushimas operator, Public support for nuclear and other power companies power was at 71 percent. 1 can save money on safety President Barack Obama had measures, charged Satoshi Sato, called for a new generation a consultant with 30 years exof nuclear plants as part of perience in the U.S. and Japanhis clean energy strategy. And ese nuclear industries. 4 although it had been three In the United States, Presdecades since any company idents George W. Bush and had broken ground for a U.S. Obama have sought increased nuclear plant, some 30 profederal aid to help utility composals for new reactors were panies build nuclear plants, in the works. 2 The 1979 parwhose high initial costs put tial meltdown at the Three them at a competitive disadMile Island nuclear plant near vantage with greenhouse gasHarrisburg, Pa., was a fading emitting power sources, such Technicians monitor operations at the Browns Ferry Nuclear Plant in Athens, Ala., which was shut down by memory. as coal and natural-gas plants. severe storms that lashed the Southeast in April. The In Fukushimas aftermath, When all expenses are countplant is among 23 U.S. nuclear facilities that are however, anxiety revived worlded and presuming a plant similar in design to Japans crippled Fukushima plant. wide about health risks from has 30 years to recover its ininuclear-powered electricity tial construction expenses, a An accurate assessment of the conservative time frame in the nuclear plants. Nonetheless, many analysts say that planned nuclear projects in East Asia, severity of Japans disaster wont ap- energy industry it costs an advanced India and the Middle East will ultimately pear for months or even years. Re- nuclear plant about $114 to generate a go forward. But in the United States, cently, for example, Japanese author- megawatt hour of electricity. That comwhere public support for nuclear power ities have raised their estimate of how pares with $66 using natural gas and plunged to around 50 percent after the much radiation leaked from the plant $95 for coal, the federal government Japanese disaster, experts say the high immediately after the tsunami. 3 says. 5 (See table, p. 509.) The plants automatic-shutdown cost of nuclear-plant construction will Mainly because of cost issues and do more than safety worries in limiting mechanisms seem to have worked after investors fears of liability, expansion the earthquake, and emergency gen- of nuclear power in the United States nuclear powers growth. Details are slowly emerging from erators started up to pump water has virtually stopped since the 1970s. Fukushima, where at least four of the needed to keep the nuclear fuel from Conventional wisdom has long sugplants six reactors were damaged, with overheating the most crucial mea- gested that the Three Mile Island accimost destruction probably coming not sure to prevent a meltdown. But the dent, caused by a chain of events stemfrom the earthquake but the ensuing massive tsunami flooded the plant and ming from poor maintenance, explains tsunami. Exactly what kind of damage shut down the emergency-power sys- the lack of new U.S. nuclear-energy plants. was done by the earthquake is largely tem, leading to a series of explosions, The episode was the nations worst still unknown, says Richard K. Lester, partial fuel meltdowns and fires that nuclear-power accident and one of three head of the Nuclear Science and Engi- dispersed deadly radiation. Moreover, worldwide that released into the envineering Department at the Massachu- to prevent more explosions from an- ronment so-called ionizing radiation other gas buildup, radiation was de- tiny particles or electromagnetic waves setts Institute of Technology (MIT).

THE ISSUES

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Nuclear Power in the United States
The nations 65 nuclear plants powered by total of 104 nuclear reactors are in 31 states scattered across the country, most east of the Mississippi River and many in populated areas. Illinois has 11 reactors, the most; Pennsylvania has nine, and North and South Carolina have a total of 12.
vinced that nuclear plants should be part of the U.S. energy future, he concludes. Nuclear-power advocates argue that the nations 104 active reactors have operated largely accident-free, most for about 40 years, and deserve a reputation for safety. Were very proud of our operating record, says Anthony Pietrangelo, senior vice president at the Nuclear Energy Institute, the industrys main lobbying group. In only one U.S. accident Three Mile Island was a reactors fuel core damaged. And even there, Pietrangelo says, damage was largely contained, with only a limited release of ionizing radiation. Nuclear energys association with unimaginably powerful bombs and invisible, cancer-causing radiation the spooky factor makes public fear of nuclear power difficult to overcome, says Glenn E. Sjoden, a professor of nuclear engineering at the Georgia Institute of Technology. And the fear goes far beyond those living in the vicinity of a reactor. Jeff Patterson, immediate past president of Washington, D.C.-based Physicians for Social Responsibility, maintains that there is no safe level of exposure to ionizing radiation, whether from food, water or other sources. 7 (See chart, p. 512.) Many on both sides of the debate question whether the United States is adequately prepared for a Fukushimamagnitude disaster. Regulators and the industry have tried to ensure that plants themselves are better prepared, says Denis Beller, a research professor in nuclear engineering at the University of Nevada, Las Vegas. For example, he says, U.S. plants regularly conduct drills on how to respond to losses of electrical power that can leave a facility unable to cool its nuclear fuel, as occurred in Japan. Yet public-health needs in the event of a radiation release have received less attention, many say. U.S. healthcare facilities and public-health agencies are equipped to handle only a few radiation injuries at one time,

Nuclear-Power Plants in the United States

Source: Nuclear Energy Institute, www.nei.org/lefolder/u.s._nuclear_plants_ country-wide_map.jpg

energetic enough to knock electrons out of atoms, damage living cells and cause cancer. 6 Fukushima and a catastrophic meltdown at the Chernobyl nuclear power plant in Ukraine in 1986 were the others. But analysts say the key factor in the dearth of new U.S. plants is money. Because utility companies are relatively small compared to large-scale, assetrich multinational firms, the $8 billion to $10 billion cost of a nuclear plant can put your whole company at risk, explains Raymond Ohrbach, director of The Energy Institute at the University of Texas, Austin, and Department of Energy undersecretary for science in the George W. Bush administration. Still, with the Fukushima disaster raising anew public worries about health risks, the focus of debate has shifted from cost to safety, at least temporarily.

As in Japan, critics argue that the Nuclear Regulatory Commission (NRC) the federal watchdog agency over the U.S. nuclear power industry has not done enough to safeguard Americans from a nuclear accident and its aftermath. The five-member NRC is made up mostly of industry apologists who are inclined to soften regulations if utility companies complain, says Jim Riccio, director of nuclear policy for the environmental group Greenpeace. Dale Klein, NRC chairman from 2006 to 2009 and now a professor of nuclear engineering at the University of Texas, Austin, defends the agency, however, saying public safety is its No. 1 goal. I get pretty offended by those who say that the NRC is in bed with the industry, he says. Those who are opposed to nuclear power are unlikely to ever be con-

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warns a 2010 Department of Homeland Security analysis. 8 Alongside the controversy over safety are debates about nuclear powers role in energy policy. Nuclear-power advocates argue that to reduce the impact on climate change from greenhouse gas-emitting fuels such as coal and natural gas, many forms of power, including nuclear, are needed. 9 Nuclear is not the only solution, nor is any other single power source, says Joshua Freed, director of the cleanenergy program at Third Way, a centrist Democratic think tank in Washington. If we do this right, were going to see a robust nuclear sector, alongside other technologies, such as thinfilm solar power and advanced energystorage technologies, he says. But Greenpeaces Riccio says that because large strides are being made in wind power, he sees no reason to build more nuclear plants. Whats more, he rejects the argument that nuclear energy is a safe alternative to fossil fuel, such as coal. Coal kills a lot of people in mine accidents and from air pollution, but that doesnt mean that we have to accept another power source nuclear that kills too, just more slowly and insidiously, he says. Advocates on both sides of the nuclear debate generally agree on one thing: Its past time for the United States to have a full-scale, open policy debate on the tradeoffs involved in meeting future energy needs. At present, the country has no overarching energy policy, so we dont have a view of the merits or problems of different ways of providing energy with respect to the other ways, says MITs Lester. We make decisions in a very narrow and uninformed way. As lawmakers and the public mull the future of nuclear power, here are some of the questions under discussion: Is nuclear power too dangerous? Even critics of nuclear power are split: Some argue that because every expo-

Nuclear Energy Cheaper Than Renewable


The estimated cost of nuclear energy per megawatt hour from advanced new plants is predicted to be $114 by 2016. Although more expensive than conventional gas- and coal-red power without carbon-capture systems, nuclear energy is expected to cost about half as much as offshore wind and solar-energy generation. The cost of coal and gas power rises signicantly when carbon capture and other anti-pollution systems are installed. Estimated Cost of Energy Generation, 2016
(in $ per megawatt hour)

$250 200 150


136.2

243.2 210.7

100 50 0

124.5 66.1

94.8

113.9

97.0

101.7

112.5 86.4

Coalfired

Natural New gas- nuclear fired

Wind

Wind Solar offshore

Geo- Biomass Hydro thermal

Source: Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, U.S. Energy Information Administration, December 2010, www.eia.gov/oiaf/aeo/pdf/2016levelized_costs_aeo2011.pdf

sure to ionizing radiation increases ones risk of cancer, nuclear plants are impossible to accept under any circumstance. Others remain open to nuclear plants as long as industry and government take tough safety measures. Meanwhile, nuclear-power advocates contend that accidents involving major radiation releases have been rare worldwide. You will never eliminate all risk, but there is tremendous work being done in reducing that risk, says Neil Wilmshurst, vice president for nuclear activities at the power industrys Electric Power Research Institute. Because its widely expected that most U.S. power reactors will receive extensions on their operating licenses rather than be replaced by newer designs, the groups current research mainly focuses on safely extending the life of older plants, such as determining how construction materials degrade with age, he explains.

Nuclear engineers are extremely conscientious, and we teach the culture of safety, says Georgia Techs Sjoden. None of us wants to be the person out there with our name in lights for allowing a major problem to happen. Pietrangelo of the Nuclear Energy Institute (NEI) says the industry takes a systemwide approach to safety. We are all inextricably linked together because the power industry knows that a problem at one nuclear plant raises public fears about all plants, he says. U.S. nuclear plant operators now spend one week in every six in training, he points out. If 80 percent of NEIs member companies agree that a safety action is of top priority and relates to all plants, it becomes binding on everybody, he says. Consolidation in the power industry has increased safety because with fewer companies managing the same

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Radiation Comes From Many Sources
The average annual radiation dose per person in the United States is 620 millirem, according to the National Council on Radiation Protection and Measurement. Many sources emit much more radiation than nuclear-power plants.
Radiation source Living near a nuclear power station (annual) Chest X-ray (single procedure) Cosmic radiation living at sea level (annual) Cosmic radioactivity (annual) Terrestrial radioactivity (annual) Mammogram (single procedure) Natural radioactivity in body (annual) Diagnostic radiology (annual) Cosmic radiation living in Denver (annual) Radon in average home (annual) Gastrointestinal series (single procedure) Average dose <1 millirem 4 millirem 24 millirem 27 millirem 28 millirem 30 millirem 40 millirem 50 millirem 50 millirem 200 millirem 1,400 millirem

Source: Radiation Doses in Perspective, Environmental Protection Agency, March 2011, www.epa.gov/rpdweb00/understand/perspective.html

number of reactors, the companies are better able to accrue the human infrastructure, the software, the knowledge about exactly whats going on that aids safe operation, says Paul Joskow, a professor emeritus of economics at MIT and a board member at Exelon, the nations largest operator of nuclear power reactors. I dont think theres any question that things are safer than they were 15 to 20 years ago, says David A. Lochbaum, director of the Nuclear Safety Project at the Union of Concerned Scientists (UCS), an environmental research and advocacy group. Near misses, such as small mechanical breakdowns that could lead to radiation-releasing accidents if they worsened, are way down in recent years, he says. Reforms that followed both the Three Mile Island accident and 2001 terrorist attacks have made nuclear power safer in the United States, some analysts say. Most changes involve how employees manage plants, says Per F. Peterson, a professor of nuclear engineering at the University of California,

Berkeley. Today, workers report in writing every problem they notice, such as a slightly sticking valve, and share it with all the other plants in the country, he says. Furthermore, you record why you did a fix in a certain way so that down the line you dont make some other change that inadvertently regenerates an earlier problem. Many analysts point out that while nuclear power arouses public dread, other power sources also have dangers including radiation, which, for example, coal-burning power plants regularly release in small quantities in the form of fly ash. 10 The global intergovernmental group Organisation for Economic Co-operation and Development (OECD) estimates that in 2000 alone, 960,000 people around the world died prematurely from lung and heart problems and other diseases caused by airborne particulates, some 30 percent of which came from coalburning power plants and other energy sources. 11 Furthermore, OECD argues, humans already face a relatively high risk of

cancer from naturally occurring background radiation from the sun, foods such as bananas, medical procedures such as X-rays and CT scans and other sources, so that the additional risk incurred from nuclear power is modest. OECD analysts calculated that about 33,000 people will ultimately die because of radiation released by the 1986 Chernobyl catastrophe. But they also calculated that natural background radiation will cause about 50 million cancer deaths over the same period. 12 But none of these arguments is persuasive for nuclear powers staunchest critics. The idea that the atom is safe is just a public-relations trick, says Greenpeaces Riccio, quoting a quip often attributed to James Watson, codiscoverer of DNA. If it were safe, you wouldnt need a whole agency to regulate it, you wouldnt need to try to ensure protection out to 250,000 years or evacuate people out to 50 miles to avoid it, Riccio says. Since 1972 the National Academy of Sciences has issued seven reports dubbed the BEIR, or Biologic Effects of Ionizing Radiation, reports which make clear that you want to avoid doses of radiation, period, says Riccio. He charges that the NRC has a disturbing record of rewriting the rules to make it easier for plants to meet safety standards. Thats especially troubling today because U.S. nuclear plants are aging, he argues. As they get older, oversight should increase, he says. In his 1982 book Killing Our Own: The Disaster of Americas Experience with Atomic Radiation, environmentalist and investigative reporter Harvey Wasserman argued that any breach of safety in a nuclear plant poses a dire health threat. No matter how small the dose, the human egg . . . or embryo or fetus in utero, or newborn infant, or weakened elder has no defense against even the tiniest radioactive assault, he wrote. Science has never found such a safe threshold, and never will. 13

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After Three Mile Island, infant death rates soared in nearby Harrisburg, and an increase in the death and mutation rate among farm and wild animals was also thoroughly documented by the Pennsylvania Department of Agriculture, Wasserman wrote. 14 Pennsylvanias Health and Agriculture departments verified the increases but did not conclude that they were linked to the nuclear accident, however. 15 Many analysts are somewhere in the middle, saying the picture of nuclearpower safety is mixed. Countries vary in the level of attention they pay to safety issues, says MITs Lester. Lots of communication and lots of learning goes on across national borders, but its voluntary, and some countries pay more attention [to lessons from abroad] than others, he says. Lochbaum of the Union of Concerned Scientists says different U.S. power companies have very different safety records and, surprisingly, the most financially efficient managers tend to be safest. We had thought that costefficiency might result from cutting corners on safety, but a UCS study found that, in fact, the most cost-effective plants were very aggressively looking at safety problems. It appears that other owners may have let the same problems slide until they worsened, thus likely costing them more to fix while also compromising plant safety, just as a small faucet drip that a homeowner doesnt fix can end up causing extensive damage, he says. Is the United States prepared for a nuclear-plant emergency? The U.S. nuclear-power industry and public-health system have safeguards to protect the public against radiation exposure if power plants are hit by an earthquake, tsunami or terror attack. But nuclear-power skeptics say the safeguards would likely prove inadequate. The way U.S. nuclear plants are managed ensures a speedier response than in Japan, and a speedy response can

U.S. and France Have Most Nuclear Reactors


The United States leads the world in the number of nuclear reactors, but only 20 percent of its electricity is generated by nuclear power. Nuclear energy generates at least 50 percent of the electricity in Belgium, Slovakia, France and Lithuania. China and India currently get little electricity from nuclear power but are aggressively building reactors to satisfy their growing energy needs. Nuclear-Power Status for Selected Countries, as of November 2009
Country Nuclear power as a share of electricity Nuclear reactors under construction or planned Nuclear reactors in operation

Belgium China France India Lithuania Russia Slovakia South Korea Sweden Ukraine United States

54% 2% 76% 2% 73% 17% 56% 36% 42% 47% 20%

0 45 2 16 0 16 2 12 0 2 12

7 11 58 17 1 31 4 20 10 15 104

Source: Mycle Schneider, et al., 2009 World Nuclear Industry Status Report, Bulletin of the Atomic Scientists, November 2009

shut and cool a reactor before dangerous radiation is released, says NEIs Pietrangelo. It appears that Japanese plant operators couldnt take some vital emergency-control actions such as flooding reactors with seawater to cool them down until theyd received clearance from company and perhaps even government officials, he says. At our plants the responsibility and authority to take such action is on-site; we dont defer it up the chain. After the 2001 terrorist attacks in New York and Washington, nuclear plants in North America installed operations centers in hidden, off-site locations to block terrorists from taking control of plants. But such centers also could help in emergencies such as floods that damage or block technicians access to on-site controls, says

MITs Joskow. I visited a nuclear plant in Canada and asked where their second control room was, Joskow says. The operator jokingly responded, If I told you, Id have to kill you. On the public-health front, most states responding to a Council of State and Territorial Epidemiologists survey last year said they had written plans for responding to radiation emergencies, including detailed procedures for managing communications among emergency agencies, government officials and the public. 16 But many gaps in U.S. preparedness remain. Sites for existing nuclear power plants were chosen with relatively limited seismic information in hand, but scientists today know much more about how earthquakes behave in different regions. That

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Millions Live Near Nuclear Plants
More than 17 million people live within 50 miles of the Indian Point Nuclear Power Station, north of New York City. About 8.5 million people reside within 50 miles of the San Onofre nuclear station near San Diego, and almost 8 million live near Pennsylvanias Limerick plant, northwest of Philadelphia. U.S. Nuclear-Power Plants With Highest Populations Within 50 Miles
Indian Point Nuclear Power Station (Buchanan, N.Y.) San Onofre Nuclear Generating Station (San Diego County, Calif.) Limerick Generating Station (Limerick Township, Pa.) Dresden Generation Station (Goose Lake Township, Ill.) Peach Bottom Atomic Power Station (Peach Bottom, Pa.) Salem and Hope Creek Generating Stations (Lower Alloways Creek Township, N.J.) Braidwood Generating Station (Reed Township, Ill.) Enrico Fermi Atomic Power Plant (Frenchtown Charter Township, Mich.) Pilgrim Nuclear Station (Plymouth, Mass.) Oyster Creek Generating Station (Lacey Township, N.J.) 17,310,391 8,509,157 7,907,943 5,968,730 5,406,288 5,348,293 5,058,878 4,921,862 4,536,218 4,346,015

Source: Thomas B. Cochran, Statement on the Fukushima Nuclear Disaster and Its Implications for U.S. Nuclear Power Reactors, Joint Hearings of the Senate Subcommittee on Clean Air and Nuclear Safety and the Senate Committee on Environment and Public Works, Natural Resources Defense Council, April 2011, www.nrdc.org/ nuclear/les/tcochran_110412.pdf.

information should be closely examined as the NRC mulls relicensing the aging fleet of U.S. reactors, said Thomas B. Cochran, senior scientist in the nuclear program at the Natural Resources Defense Council, an environmental advocacy group in Washington. For example, recent information suggests that the Diablo Canyon reactor in San Luis Obispo, Calif., may sit directly atop an earthquake fault, he noted. 17 Because the United States does not have a central repository for used nuclear fuel, U.S. power plants store spent fuel used, but still radioactive near reactors in storage pools, as was the practice at Fukushima. And, as apparently happened in Japan, a reactor accident would lead to a spentfuel pool accident, heightening the risk of radiation release, said Lochbaum.

The NRC hasnt taken this fact seriously enough, he wrote. While fixes have been made at some plants, little to nothing has been done at most of the U.S. reactors that are similar to the Fukushima reactors, he wrote. 18 Only 11 percent of states responding to the epidemiologists survey said they had the resources to collect publichealth data to guide decision-making after a radiation accident. And only a handful said they had the resources to respond adequately to public-health needs in such an emergency. Asked to rate their preparedness for a radiation emergency, the states awarded themselves an average of 4.54 on a 10-point scale. 19 Department of Homeland Security analysts said last year that government officials are poorly prepared to commu-

nicate with the public about a radiation emergency. Whats more, DHS said, the United States has limited treatment options for radiation exposure, and staff and resources arent available to carry out mass evacuations. 20 Most U.S. nuclear plants are near major population centers because thats where power is needed most. All told, some 108 million Americans live within 50 miles of a nuclear plant, according to Karl Grossman, a journalism professor and environmental reporter at the State University of New York College at Old Westbury. (See chart, this page.) The largest concentration is the 17 million people who live within a 50-mile radius of the tworeactor Indian Point plant in suburban Westchester County, just north of New York City. A 50-mile evacuation zone for the plant, which sits at the intersection of two earthquake faults, would cover all of Manhattan and much of the rest of New York City and Long Island, as well as large portions of Connecticut and New Jersey, Grossman wrote. 21 Winds often blow from Indian Point toward Manhattan, thus potentially sending radiation straight toward the fleeing population, Grossman wrote. If electricity stopped flowing, people would be trapped in elevators . . . [and] frozen in place as the radiation descended. There would be complete gridlock as attempts were made to evacuate through the [Holland and Lincoln] tunnels and on the George Washington Bridge, the only egress from Manhattan in the direction of where people would need to flee. 22 After the Fukushima accident, many local medical workers simply fled when they heard about the radiation release, and U.S. hospital workers have expressed fears similar to their Japanese counterparts, wrote ProPublica reporter Sheri Fink, a physician. 23 Health-care workers have little baseline knowledge of how to treat radiation victims, said William Fales, an

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associate professor of emergency medicine at Michigan State University. Typically, they drop everything, run the patients outside and decontaminate them, when, in fact, medical workers should treat a patients other injuries, such as from burns or an explosion, before worrying about radiological contamination, said Fales. 24 While the United States has paid more attention to security concerns since the 2001 terrorist attacks, securing power plants against terrorist, criminal or enemy attacks is still something most people in the nuclear industry might get a half-hour briefing on once a year, wrote Matthew Bunn, an associate professor of public policy at Harvard Universitys Kennedy School of Government. 25 Intelligent adversaries could disable a plants main power and its backup power, thus crippling every fuelcooling safety device at a plant, said Bunn. Security precautions at the worlds nuclear plants are much less well-developed than safety precautions, and that applies to theft of nuclear material as well as sabotage. 26 Is nuclear power needed to meet future energy needs? In a bid to slow human-triggered climate change, most countries aim to reduce or eliminate future use of carbonbased energy, such as coal-fired plants. But debate rages over whether nuclear powers risks make it a suitable alternative. Energy in any form has a cost, says Georgia Techs Sjoden. The question always is, What risks are we willing to accept? What about our lifestyles would we be willing to change to have less risk? There is no free lunch with any kind of energy. They all have problems, adds Allison MacFarlane, an associate professor of environmental policy at George Mason University, in Fairfax, Va. Furthermore, you must take into account the full life cycle of each technology to calculate the fi-

nancial, health and environmental costs, says MacFarlane. For example, some of the chemicals in photovoltaic cells used to generate solar power are toxic and pose a significant waste-disposal problem, she says. Many Americans embrace natural gas because it is plentiful, cheap and, arguably, less harmful to the environment than coal and oil, the Third Ways Freed says. But, he adds, relying on it or any other single power source is a mistake. What happens when we see the price of natural gas spike? Freed asks. Nuclear power, among other options, should be expanded, he says, noting that one of its advantages is that it is a domestic technology, with lots of jobs. The NEIs Pietrangelo says a compelling case can be made for nuclear power. Plants run nearly full time whereas solar cells and wind turbines produce no power when the sun isnt shining or the wind isnt blowing, he notes. In the late 1980s, nuclear plants operated at about 58 percent of their full theoretical capacity, and today they run at more than 90 percent, he says. Solar is great, but the problem with solar and wind is that they wont be the be-all, end-all, adds Sjoden. On a really good day, solar power is produced for about 50 percent of the 24hour period, for example, and our technology for storing the energy still isnt very efficient. Are you going to want your television to go on and off as the power supply fluctuates? We also dont have enough real estate to place enough solar to power many areas, he says. Nuclear plants high construction costs are offset by long lifetimes 60 to 80 years which over the long run make them among the lowestcost ways of producing power, says Sjoden. By contrast, while theyre cheaper to produce, even the longestlasting solar power-producing photovoltaic cells only last 10 years before needing replacement, he says.

Many analysts say that current nuclearpower plants can and should remain in operation. You dont throw away a multibillion-dollar facility as energy needs rise, says Beller, of the University of Nevada. The virtual certainty that most U.S. reactors will be licensed for at least 20 more years underscores the importance of funding research on questions such as the way high-energy radiation may, over time, weaken materials used to build reactors, he says. Every time we shut down a nuke plant, were not closing a coal plant, so which do you want? asks Berkeleys Peterson. When you look at environment and health, its unlikely that you would get more benefit from shutting down nukes first. Nevertheless, renewables such as solar and wind are coming on strong in some countries, says Harold A. Feiveson, senior research policy scientist in the Science and Global Security Program at Princeton University. Germany, which recently announced plans to shut down its nuclear plants, envisions the bulk of its electricity coming from renewables and natural gas by 2030, he says. A 2011 report by the United Nations Intergovernmental Panel on Climate Change predicts that costs for renewable energy such as wind and solar power will soon fall, resulting in more-rapid-than-expected spread of these power sources. 27 Renewableenergy use will increase between threeand twentyfold by 2050, the panel said. By then, it said, renewables will likely provide more power than either nuclear plants or plants now in development that use so-called clean technology to burn fossil fuels, such as coal, mainly by capturing and burying their greenhouse-gas emissions. 28 In 2009 alone, the U.S. wind industry installed enough new wind-power capability to equal the generating capacity of three nuclear power plants. 29 Worldwide, in 2010 solar photovoltaic power doubled its 2009 growth rate, and solar panel prices are half what

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they were in 2007, another factor that may boost solars growth. 30 Researchers from Stanford University and the University of California, Davis, last year calculated that it would be possible, though a staggering task, to meet the worlds electrical demands in 2050 using currently developed renewable sources mostly solar and wind rather than nuclear power or new renewables such as biodiesel fuel derived from algae. Meeting the goal would require 90,000 large-scale solar farms up from approximately three dozen currently; 4 million wind turbines, each twice as big as turbines currently available; and 1.7 billion small, rooftop solar systems. Still, its doable, with the main challenge . . . mining enough rare-earth metals to build the devices, wrote Time energy reporter Bryan Walsh. 31 power plants would need to be shielded behind heavy concrete walls to guard against accidental release of dangerous radiation. 34 Not only scientists but political leaders were captivated by the idea of peaceful uses for nuclear energy. The U.S. stockpile of atomic weapons . . . exceeds by many times the explosive equivalent of . . . all bombs and all the shells . . . of World War II, President Dwight D. Eisenhower, Supreme Allied Commander during the war, told the United Nations General Assembly in 1953. But it is not enough to take this weapon out of the hands of the soldiers. It must be put into the hands of those who will know how to . . . adapt it to the arts of peace. 35 In 1954, ground was broken in tiny Shippingport, Pa., near the Ohio River about 25 miles from Pittsburgh, for the worlds first commercial-sized peacetime nuclear reactor. The Shippingport Atomic Power Station, which powered 100,000 homes, opened in 1957 and closed in 1982, after larger reactors opened nearby. 36 The Atomic Energy Commission (AEC) was the first government agency to oversee nuclear power. The AEC was founded in 1946 to develop nuclear technology, and in 1954 Congress charged it with both encouraging the use of nuclear power and regulating safety. But many feared conflicts of interest from that arrangement, and complaints grew that the AEC was lax in setting radiation-protection standards, overseeing reactor safety and protecting the environment. 37 Eventually, Congress disbanded the AEC and in 1974 created the Nuclear Regulatory Commission (NRC) for industry oversight and the Energy Research and Development Administration (ERDA) to foster energy-industry growth. In 1977, as U.S. energy consumption skyrocketed, foreign oil supplies grew shaky and environmentalists pressed for alternative, nonpolluting power sources, President Jimmy Carter created the Department of Energy, which took over ERDAs duties, while the NRC remained a separate agency. 38

Nuclear Accidents
hroughout the nearly 60-year history of nuclear power, the public has feared that an explosion or other mishap at a nuclear-power plant would release large amounts of the damaging radiation Fermi had warned about. Those fears were nearly realized on March 28, 1979, when the United States experienced its most serious nuclear-power accident: the failure of the cooling system at the Three Mile Island reactor in a densely populated area near the Pennsylvania capital. After several mechanical failures, which are still not fully understood, plus operator errors, the reactors fuel partially melted down but did not penetrate concrete containment walls to enter the ground. A small amount of radiation escaped, mainly in the form of radioactive gas vented from the building to prevent an explosion. 39 One of the plants two reactors, in operation only 13 months, was subsequently shut down permanently. The second was reopened in 1985. Full cleanup of the site took 14 years at a cost of $1 billion. 40 In the year preceding the accident, valves in the plants cooling system had malfunctioned 10 times. But instead of replacing them, workers operated them manually to keep the plant running, a practice the NRC did not stop, according to Lochbaum of the Union of Concerned Scientists. An eleventh valve failure, in the early morning of March 28, overwhelmed the plants inexperienced operators and led to the disaster, he said. 41 The most serious nuclear-plant accident in history occurred on April 26, 1986, at the Chernobyl nuclear power plant in Ukraine, then part of the

BACKGROUND
Atoms for Peace
n Dec. 20, 1951, the first nuclear reactor to produce a usable amount of electricity set four light bulbs aglow at the governments National Reactor Testing Station in Idaho Falls, Idaho. 32 The experiment was a triumph for physicists. 33 But the safety and cost concerns that dog present-day advocates of nuclear power loomed large from the technologys beginnings. When the nuclei of uranium atoms are split in a process called nuclear fission, the amount of energy released is roughly 3,000,000 times that of an equal weight of coal, wrote Enrico Fermi, an Italian-American physicist who helped develop both the atomic bomb and the first nuclear power reactor. Fermi noted that nuclear reactors could be a powerful energy source in the future but that nuclear-

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Chronology
1940s-1970s Use of nuclear energy for electricity production grows. 1942 Physicist Enrico Fermi sets off first manmade, sustained nuclear chain reaction in a primitive reactor at the University of Chicago (Dec. 2). 1951 Nuclear reactor at government lab in Idaho produces usable amount of electricity for the first time. 1953 President Dwight D. Eisenhower proposes Atoms for Peace program. 1954 Congress creates Atomic Energy Commission (AEC) to both promote and regulate nuclear power, leading to conflict-of-interest complaints. 1957 First commercial reactor, jointly operated by the government and a private utility company, opens in Shippingport, Pa., to power 100,000 homes. . . . Price Anderson Act establishes industry-funded liability insurance program for nuclear power. 1960 Dresden Nuclear Generating Station, first full-scale U.S. nuclear power plant built with private financing, opens in northern Illinois. 1974 Years of complaints about AECs industry ties prompt Congress to create Nuclear Regulatory Commission (NRC) to oversee nuclear safety. 1976 Humboldt Bay nuclear plant in Northern California closes, 13 years after geologists discovered it was built on an earthquake fault. 1979 Partial core meltdown at Pennsylvanias Three Mile Island nuclear plant undermines support for nuclear power. . . . Institute of Nuclear Power Operations (INPO) is founded to monitor plant operation and operator training.

2002 In the worst near miss in U.S. nuclear-power history, a chemical leak is found to have eaten nearly all the way through a reactor fuel vessel at Davis-Besse plant in northwest Ohio. 2005 Energy Policy Act of 2005 provides loan guarantees, tax credits and expanded liability protection for nuclear power plants. 2009 House passes legislation to charge energy producers for greenhousegas emissions, but the issue dies in the Senate, worsening the financial outlook for nuclear power and other alternative-power sources. 2010 Department of Homeland Security reports United States is unprepared to provide medical help in a large-scale radiation accident. 2011 Earthquake and tsunami off Japans northeastern coast lead to fuel meltdown at Fukushima Daiichi nuclear plant. . . . In response, Germany will shut all reactors by 2022; Swiss lawmakers vote to phase out nuclear power by 2034; Japan may require solar panels on all new buildings by 2030; power-hungry China and India continue nuclear-power expansion. . . . U.N. Intergovernmental Panel on Climate Change predicts renewables such as solar and wind will grow faster than nuclear power worldwide in the next four decades. . . . NRC launches safety review of all 104 U.S. reactors. . . . With power demand growing and few new reactors being proposed, more than 60 U.S. reactors have already received 20-year extensions of their operating licenses; construction at several planned reactors is on hold, partly because of safety concerns.

High costs and public anxiety thwart efforts to build new U.S. nuclear plants. 1980 NRC bars operating licenses for new nuclear power plants lacking satisfactory emergency-response plans. 1983 Nuclear Waste Policy Act requires federal government to take charge of used nuclear fuel by 1998. 1986 Catastrophic explosion at nuclear plant in Chernobyl, Ukraine, increases fears about nuclear power, causes thousands of cancer deaths in region in following decades. 1987 Congress names Nevadas Yucca Mountain as the future sole depository for nuclear waste; political pressure blocks completion of construction.

1980s

2000s

Climate-change fears revive attempts to make nuclear power economically viable, but discovery of new natural-gas supplies and Congress unwillingness to charge utilities for greenhouse-gas emissions halt the effort.

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Whos Minding the Reactors?


Critics say regulators ignore safety risks.

id Japans nuclear-power plant disaster in March occur partly because the Japanese government ignored safety risks as a favor to the power industry? Critics say thats indeed what happened. Two months after the accident, The Economist magazine said, Despite several low-level nuclear accidents, Japans power generators such as Tokyo Electric Power, owner of the Fukushima plant, have sworn blind that their safety records are exemplary and there is no danger of any meltdowns. This safety mythology has been used by utilities to bypass domestic opposition to nuclear energy and was tacitly endorsed by the government, media, and public at large. 1 Some American nuclear-power opponents say that U.S. regulators also are too lenient toward the industry they oversee. Currently, the federal Nuclear Regulatory Commission (NRC) is deciding whether most of the 104 reactors in the United States should be relicensed for another 20 years of operation and, if so, under what conditions. According to Jim Riccio, director of nuclear policy for the environmental group Greenpeace, the NRC should be strictly scrutinizing the effects of aging on each of those reactors, especially those that have had maintenance problems in the past. But for the most part, he says, thats not happening. All you have to do is show you have a program in place to manage aging, Riccio says. Increasingly over the past two decades, the burden of proof has been put onto the NRC to show that plants have violated safety rules rather than on industry to show that its done the right thing, says Riccio. You had a more substantive process in the past, he says. The power industry touts the fact that nuclear plants have operated much closer to their peak powerproduction capacity in recent years, meaning, among other things, plants spent less time shut down to fix problems. But

Riccio argues that the capacity factors are mainly up because NRC wiped out 40 percent of the stop signs in the plantoversight process that forced shutdowns. Other critics judge the NRC somewhat less harshly. Most of the time its not that we feel the regulations set too low a standard for safety, but that one or more plants is getting away with limboing beneath it, says David A. Lochbaum, director of the nuclear power project at the Union of Concerned Scientists, an environmental research and advocacy group. The good news is that the regs are pretty good. But there are owners that fall short, and thats where were concerned. The NRC needs to step in sooner in such cases, Lochbaum says. Part of the problem stems from Congress, who, in their eagerness to promote nuclear power, have sometimes accused NRC of overregulating and pushed the agency to change how it did business, in favor of lighter oversight, Lochbaum says. Nevertheless, in 2000 NRC introduced a revised inspection regimen that makes catching problems before they worsen somewhat more likely, Lochbaum says. Under the old system, plants were issued report cards stating NRC findings in four large categories at 18- to 24-month intervals. Today, plants get grades every three months in some 20 categories. This process allows safety problems to be flagged before they get big. Its not perfect, but its way better than the old method, Lochbaum says. Workers write up all problems they spot, and now NRC looks at every one thats written rather than just at a sample, as in the past, he says. The agency tries to learn from past mistakes, Lochbaum says. A serious close call at northwestern Ohios Davis-Besse plant in 2002 occurred partly because the NRC had pulled its scant oversight manpower away from the plant, which it had recently found to be well-functioning, to focus on plants with

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Soviet Union. While plant staff prepared for a test to determine how long the installations cooling mechanisms would run if the main external power supply were shut off, a sudden electricpower surge, apparently caused by a flawed reactor design, led to a series of explosions and fires in one of the plants four reactors. Unlike most others, the Chernobyl reactors were not shielded by hard containment walls, and when the reactor vessel burst, the explosions shot radiation high into the atmosphere. 42

The Union of Concerned Scientists recently concluded that between 27,000 and 108,000 cancers, leading to between 12,000 and 57,000 deaths, will ultimately be attributable to the accident. 43 Those numbers exclude thyroid cancers, the single most likely type of cancer to result from the event. The Chernobyl meltdown released large quantities of radioactive iodine, which concentrates in the thyroid gland. As of 2005, about 6,000 cases of thyroid cancer had been diagnosed in children up to age 18 in Ukraine, Belarus and Russia, and the number will rise over

time, according to the World Health Organization. 44 After Chernobyl and Three Mile Island, the worlds electric-power reactors operated without a radiation release until the Fukushima disaster in March. However, a multitude of close calls have occurred over the years. Perhaps the most serious ones in the United States have occurred at the Davis-Besse Nuclear Power Station in northwestern Ohio. 45 The plant suffered two frightening episodes involving potential loss of cooling ability, in 1977 and 1985. In the latter case, a

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senior vice president at the more problems, he says. Nuclear Energy Institute, an Since then, NRC does not industry membership organilet past laurels dictate how zation. closely to scrutinize a plant, INPO sets worker-training he says. standards and comes around The NRC is the sole govevery 18 months to two years ernment agency that investo evaluate each plant, says tigates accidents and overLochbaum. And whereas NRC sees safety. In the airline judges on a standard of adeindustry, by contrast, plane quacy, INPO judges on a stancrashes are investigated by NRC inspectors examine an emergency core-cooling pump dard of excellence. So even both the Federal Aviation at Californias Diablo Canyon nuclear plant. if youre perfectly adequate by Administration and the National Transportation Safety Board. The dual authority may allow NRC standards, a plant may not score a top INPO rating. And a more objective assessment of whether lax regulation plays a INPO standards matter because insurers rates [for nuclear role in incidents, says Lochbaum. However, NRC routinely plants] are based on them, not on NRC inspection findings, points the finger at themselves when things go wrong, he Lochbaum says. While INPO works quite well in the United States, a matchsays. After the Davis-Besse incident, for example, they found 49 problems that they had helped to cause. They were very ing international organization the World Association of Nuclear Operators, WANO is no good because many councritical of themselves. Perhaps the U.S. nuclear industrys most important safety tries dont take it seriously, says Paul Joskow, a professor mechanism is the Institute of Nuclear Power Operations (INPO), emeritus of economics at the Massachusetts Institute of Techfounded in response to the 1979 partial meltdown at Pennsyl- nology and board member of Exelon, the nations biggest nuvanias Three Mile Island nuclear plant. The membership group, clear-plant operator. When was the Fukushima plant last subwhich encompasses all U.S. companies that operate nuclear ject to a WANO inspection? The Russians dont even let you plants, conducts regular evaluations of all American nuclear visit their reactors, he says. Other countries are secretive about plants, sets industrywide performance criteria and management their nuclear operations as well, he says. guidelines and facilitates information sharing among plants. Marcia Clemmitt Initially, people thought [Three Mile Island] occurred because of a design problem, but when the big lesson came out that operator error was heavily involved, INPO was cre- 1 Nukebots, The Economist, May 5, 2011, www.economist.com/node/186521 ated to improve plant management, says Anthony Pietrangelo, 85?story_id=18652185&fsrc=rss.

fuel melt was barely averted after plant personnel . . . sprint[ed] through darkened corridors with bolt cutters . . . to cut through chains securing valves, so they could manually open them to restore water to cool the fuel, according to Beyond Nuclear, an antinuclear activist group. 46 In 2002, the same plant suffered the worst breach of a reactors containment vessel since Three Mile Island. Workers found that boric acid from the cooling system had leaked onto the reactors fuel vessel, eating out a 6-inch-deep, football-

sized crater. A mere three-eighths of an inch of steel remained to hold back the high-pressure fluid. If the steel had burst, the reactor could have experienced a disastrous meltdown. 47 Davis-Besses owner, the FirstEnergy Nuclear Operating Co., paid a record $28 million fine in 2006 to avoid criminal prosecution of the company. 48 More costly, however, was the twoyear shutdown of the plant, which resulted in billions of dollars in lost revenues plus the expense of mandated fixes, says Lochbaum. Many think the

fine should have been larger, but a $5 billion fine would just go into the federal Treasury, while all the things that they were required to fix at the plant will help the people who live nearby, he says. Perhaps the publics biggest safety fear is that nuclear waste spent reactor fuel will leak into the environment from its supposedly temporary storage areas at reactor sites nationwide. In 1987, Congress designated Yucca Mountain, Nevada, as the sole location for a long-term underContinued on p. 519

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Nuclear Regulatory Commission

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Calculated Risks: Running a Nuclear Plant


It is impossible to build a reactor immune from any threat whatsoever.
he same thing that makes nuclear energy devastatingly effective as a weapon makes harnessing it for peaceful purposes both tempting and difficult. Splitting the nuclei of large, relatively unstable atoms results in an enormous but very hard to control release of energy. Figuring out how to turn that process to practical use in an energy-hungry world without endangering bystanders has been on the minds of nuclear scientists and technicians since the first atom was split nearly 80 years ago. When the nuclei of uranium atoms are split in the process called nuclear fission, the amount of energy is roughly 3,000,000 times that of an equal weight of coal, a potential energy bonanza for humanity, wrote Enrico Fermi, the Nobel Prize-winning physicist who helped develop both the atomic bomb and the first nuclear power reactor, in the early 1940s. 1 But theres a downside, wrote Fermi, who emigrated from Mussolinis Italy to the United States in 1938. During the process of fission . . . radiation of various kinds, particularly neutrons and gamma rays, are produced. Unless they are prevented from doing so by a shield, these radiations would escape . . . and their intensity would be so terrific that they would kill in a very short time any living being who were to approach an unshielded operating unit, he said. 2 Nevertheless, 20 or 30 years from now . . . there will be large central installations in which very great amounts of power will be produced [by nuclear fission] and transformed into electrical energy . . . for local power consumption, the physicist predicted, because it is sufficient . . . to surround the fission apparatus with a concrete wall of several feet thickness in order to eliminate completely any danger. 3 Fermi himself set off the first manmade, sustained nuclear chain reaction in history on Dec. 2, 1942, in a primitive prototype reactor set up in the squash courts at the University of Chicago. He surrounded the experiment with numerous though rather primitive safeguards for participants. The worlds first reactor included several mechanical devices that could change the shape and size of the so-called nuclear pile and thereby slow the fission reaction. Because fission requires a critical mass of uranium or other radioactive fuel squeezed into a small space, the process could be stopped by pulling some fuel away from the pile if the energy release threatened to get out of control. If the mechanical systems failed to halt a runaway reaction, a suicide squad of physicists would dump onto the reactor a liquid containing the element cadmium, which absorbs some of the energetic particles that keep a fission reaction going, explained physicist Warren Nyer, who was present at the historic test. 4 Finally, recognizing the deadly consequences to humans of a runaway nuclear reaction, Fermi gave a last, simple instruction:

If the cadmium didnt work, observers were to immediately scram out of the area, Nyer recalled. So important was that instruction that todays nuclear engineers memorialize it in their technical vocabulary. In nuke-speak, scram means the sudden emergency shutdown of a reactor, when sensing devices or plant workers detect a problem that might allow the reactor to overheat and its nuclear process to go out of control. Like Fermis experimental reactor, todays nuclear plants are hedged about with devices and management routines intended to head off problems, from unexpected floods to small mechanical failures such as broken valves, that could interfere with a reactors all-important fuel-cooling devices or otherwise allow an uncontrolled nuclear reaction and radiation-scattering fires, explosions or meltdowns of radioactive fuel into the earth. Nevertheless, it is impossible to build a reactor that is immune from any threat whatsoever, even if engineers encase it in colossal containment walls, bury it in a watertight vault and hire an army of psychics to predict the future, notes a recent Scientific American report on advanced reactor designs. 5 Indeed, nuclear reactions at electric-power plants have gone out of control, melting nuclear fuel and scattering some radiation, three times: in 1979, at the Three Mile Island plant near Harrisburg, Penn.; in 1986, at the Chernobyl plant in Ukraine; and this year in 2011, at the Fukushima Daiichi plant in northeastern Japan. Fission reactions also have gone out of control at a few reactors at scientific and technical laboratories, at one power reactor under construction and on at least one Soviet nuclear submarine. Several of the incidents caused fatalities. 6 The fact that even the most ardent nuclear-power supporter cant promise that technology can prevent any and all radiation releases is what leads opponents to call for simply ending the attempt to harness nuclear energy to produce electricity. Greenpeace has always fought and will continue to fight vigorously against nuclear power because it is an unacceptable risk to the environment and to humanity, says that environmental group. The only solution is to halt the expansion of all nuclear power, and for the shutdown of existing plants. 7 Nuclear-power advocates, on the other hand, argue that no technology is risk free. And, they say, nuclear power engenders far greater public dread than other technologies mainly because radiation releases, while rare, are usually spectacular, as were the reactor meltdowns at Chernobyl and Fukushima Daiichi. The industrial world exposes humans to multiple carcinogens materials and processes that raise the risk of developing cancer says Peter F. Caracappa, a clinical assistant professor at the Rensselaer Polytechnic Institutes School of Engineering in Troy, N.Y. Theres no reason not to minimize that risk when youre able to do so, but that principle applies to

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ploy gravity, not human action everything, not just nuclearor electricity, to cool the fuel. 8 power plants, he says. The average chemicals under your After the Fukushima accisink likely pose at least as dent, however, much of the inmuch risk of cancer producnovation in the nuclear-power tion as most peoples exposector including improvesure to radiation does, he says. ments aimed at safety is But radiation as a conlikely to be put on hold, says cept gets an inflated response Richard K. Lester, head of the in public dread, compared to nuclear science and engineermost other carcinogens. ing department at the MassaBecause theres no way to chusetts Institute of Technoloeliminate 100 percent of nugy. That is more likely to happen clear powers risk, there are in nuclear-wary countries such opportunities to spend milas the United States than in A resident who lived near the Fukushima nuclear plant lions and millions of dollars places such as France that emprays for victims of the earthquake and tsunami each day to make incremental brace nuclear power, he says. that hit the plant in March. changes to nuclear plants, The climate for innovation most of which would do little to actually improve safety, says . . . is difficult when theres profound distrust, Lester says, Neil Wilmshurst, vice president for nuclear power at the Electric although you could argue thats exactly when innovation is Power Research Institute, an industry research group. needed. To zero in on the measures that will most effectively im Marcia Clemmitt prove safety, industries at risk for rare but high-profile, highcasualty accidents, such as the airline and nuclear-power industries, use a process called probabilistic risk assessment. 1 Enrico Fermi, The Future of Atomic Energy, Technical Information DiviThats a systematic method of ranking potential dangers ac- sion, Oak Ridge Directed Operations, U.S. Atomic Energy Commission, www.osti.gov/accomplishments/documents/fullText/ACC0043.pdf. cording to both their likelihood of occurrence and their po- 2 Ibid. tential for causing serious harm, and it allows the industry to 3 Ibid. make targeted changes that will have the biggest effect on 4 Quoted in Tom Wellock, Putting the Axe to the Scram Myth, Nuclear Regulatory Commission blog, May 17, 2011, http://public-blog.nrc-gateway. making power plants safer, Wilmshurst says. For example, the most dangerous reactor damage occurs when gov/2011/05/17/putting-the-axe-to-the-scram-myth. 5 Adam Piore, Planning for the Black Swan, Scientific American, June 2011, the nuclear fuel overheats. To avert that danger, all reactors have p. 49. cooling systems and backup electrical power, such as batteries, to 6 For background, see The Accidental Century: Prominent Energy Accidents keep flooding overheating fuel with cooling liquid in an emer- in the Last 100 Years, Exploration & Production: The Oil and Gas Review, Vol. gency. Based on experience that reveals human error and loss of 7 7, Issue 2, 2009, p. 132. End the Nuclear Age, Greenpeace website, www.greenpeace.org/interna electrical power as the likely causes of many overheating acci- tional/en/campaigns/nuclear. dents, new reactors are designed to use passive systems that em- 8 For background, see Piore, op. cit.
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ground depository for the waste. But stymied by an intense not-in-my-backyard response, federal lawmakers have neither pushed ahead with construction at Yucca Mountain nor pursued alternatives. 49 Thats led to 25 years in which the technology for waste disposal has been frozen, says MITs Lester. Congress has simply neglected its responsibility.

The Money Pit

igh costs and financial risk, not safety concerns, pose the biggest barrier to using nuclear power. The size and complexity of new plants drive up construction costs. And lenders often are reluctant to supply the capital, partly because they fear that a radiationreleasing accident will encumber the

project with high liability costs. Nevertheless, the nuclear industry for decades has expressed optimism that the day was just around the corner when private investors would step up to finance expansion of U.S. nuclear capabilities. A 1954 advertisement by General Electric, a designer and manufacturer of nuclear plants, including Fukushima, confidently predicted that in five years certainly within 10, power reactors

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would be privately But the demise of financed, built withclimate-change legislation o u t g ove r n m e n t in 2009 and 2010 dealt subsidy. 50 a major blow to this With that hopedmovement. Congressional for day looking inDemocrats had hoped to creasingly unlikely, place some sort of price however, President on greenhouse-gas emisEisenhower in 1957 sions, to provide a cost signed the Price-Anincentive to shift from derson Nuclear Incarbon-based fuels to dustries Indemnity nuclear and other alterAct. The law, which natives. The then-Demohas been revised crat-led House passed a several times, most bill, and a companion recently in 2005, esbill was introduced in the Senate, but the Senate tablishes a power New seismic data suggest that Californias Diablo Canyon nuclear never took up the bills industry-funded liapower plant, overlooking the Pacific Ocean near San Luis Obispo, may because of staunch opbility-insurance syssit directly atop an earthquake fault. In view of the new information, the plants license-renewal application to the Nuclear Regulatory position from Republitem to cover the Commission has been put on hold while Pacific Gas & Electric, first $12.6 billion (as cans and some conserowner of the 30-year-old facility, conducts additional tests. vative Democrats. 56 of 2011) in liability Making financing even more diffiRepublicans have traditionally been damages for an accident. If there were no Price-Anderson cult has been the gradual shift of U.S. strong backers of nuclear power, but act, there would be no nukes, says power markets from a price-regulated, by blocking Democrats attempts to regional-monopoly system to a mar- exact a price for greenhouse-gas emisGeorge Masons MacFarlane. Even with liability protection, the ket-based competitive model, noted sions, the GOP now likely constitutes cost barrier is high, Deputy Assistant Peter A. Bradford, a former NRC com- the biggest barrier to nuclear energys Secretary of Energy John Kelly recently missioner who teaches energy policy development, says the Third Ways Freed. We dont have an energy policy, told the NRC. Typical [utility] compa- at the Vermont Law School. 53 Cusnies have [annual] revenues on the order tomers faced with higher-priced power and its kind of stupid, says Princetons of $13 billion and around $17 billion from a company building an expen- Feiveson. There should be a tax on in market capitalization a commonly sive nuclear plant could simply shift carbon to encourage movement toused measure of a companys total worth, to a different power supplier, thus di- ward other fuels. Even if there were equal to the stock price multiplied by minishing their former suppliers rev- a carbon tax, though, people would the number of shares that have been enues, Bradford explained. For this still be wary of nuclear. issued. For businesses of that size, the reason, no new nuclear plant has ever $5 billion to $10 billion or higher cost bid in a truly competitive electricof even a single-reactor nuclear plant power market anywhere in the world, is a bet-the-farm kind of decision, he said. 54 Nevertheless, beginning around Kelly said. 51 From the late 1960s on, over half 2002, interest in spurring a nuclear of the nuclear plant orders in the U.S. renaissance increased in Washington, were canceled, and almost 90 per- partly out of concerns about humancent of the projected plants globally caused climate change. President Bush were never built, mainly because signed the Energy Policy Act of 2005, cheaper power options presented offering tax credits to companies for resident Obama is seeking exthemselves, said Henry D. Sokolski, building new nuclear plants and guarpanded federal subsidies to enexecutive director of the Washington- anteed government reimbursement based Nonproliferation Policy Educa- so-called loan guarantees to lenders, courage development of nuclear power tion Center, which studies weapons should a utility default on a nuclear- and other alternatives to carbon-based construction loan. 55 proliferation. 52 Continued on p. 522

CURRENT SITUATION
Fears Renewed

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AFP/Getty Images/Mark Ralston

At Issue:
Should the NRC do more to revamp its oversight procedures after Fukushima?
yes

EDWIN LYMAN
SENIOR SCIENTIST, GLOBAL SECURITY PROGRAM, UNION OF CONCERNED SCIENTISTS
TESTIMONY BEFORE THE HOUSE ENERGY AND COMMERCE OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE, APRIL 6, 2011.

MARTIN VIRGILIO
DEPUTY DIRECTOR FOR REACTOR AND PREPAREDNESS PROGRAMS, U.S. NUCLEAR REGULATORY COMMISSION
TESTIMONY BEFORE THE HOUSE ENERGY AND COMMERCE OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE, APRIL. 6, 2011.

he Nuclear Regulatory Commission has announced that it will conduct both short- and longer-term reviews of its regulations and procedures. To that end, it announced last week that it had formed an internal task force to conduct a 90day comprehensive examination of issues raised by the Fukushima accident, including station blackout risks and emergency preparedness. We believe that the task force has identified many of the right issues for scrutiny. However, we question whether the NRCs review will be sufficiently thorough without stringent oversight by Congress and entities such as the National Academies of Science. The defensive public posture the NRC has taken since March 11 raises concerns [it] remains too complacent to conduct a critical self-examination of its past decisions and practices. The NRC must confront the overarching question of whether it has allowed safety margins to decline to unacceptably low levels, based on a perception that severe accidents resulting in core damage are so infrequent that they do not require a high level of regulatory attention. It must adjust this perception in light of Fukushima. We are also concerned about whether the NRC can adapt quickly to changed circumstances. Following the 9/11 attacks, the NRC undertook what it called a top to bottom review of its regulations for protecting nuclear-power plants against radiological sabotage. Although the review uncovered serious shortcomings in the NRCs security requirements, the process of fixing them has been so slow that today nearly 10 years after 9/11 some nuclear plants still have not completed required security upgrades. U.S. nuclear plants have severe-accident management plans, but these plans are not required by regulations and are not evaluated by the NRC or tested for their effectiveness. These plans must now be re-evaluated to judge whether they can be realistically carried out in every circumstance under which the NRC takes credit for them, such as the extreme conditions now being encountered at Fukushima. The regulatory concept of defense in depth means that efforts must be made both to prevent accidents from occurring and to mitigate them should they occur. We believe that the Fukushima experience indicates that mitigation is extremely challenging and may be impossible in some circumstances. NRC should place far greater emphasis on preventing accidents and terrorist attacks from disabling multiple safety systems and disrupting core cooling by increasing safety margins, rather than trying to control events after core damage has occurred.
no

yes no
t
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he NRC is mindful that our primary responsibility is to ensure the adequate protection of the public health and safety of the American people. We have, since the beginning of the regulatory program in the United States, used a philosophy of defense in depth, which recognizes that nuclear reactors require the highest standards of design, construction, oversight and operation and does not rely on any single layer for protection of public health and safety. We begin with designs for every individual reactor in this country that take into account site-specific factors, such as earthquakes, tornadoes, hurricanes, floods and tsunamis, as they relate to that site. There are multiple physical barriers to radiation in every reactor design. Additionally, there are both diverse and redundant safety systems that are required to be maintained in operable condition and frequently tested to ensure that the plant is in a high condition of readiness [for] any scenario. Today, there are at least two resident inspectors at each nuclear-power plant. The inspectors have unfettered access to all licensees activities and serve as NRCs eyes and ears. Our program of continuous improvement based on operating experience will include evaluation of the events in Japan as well as what we can learn from them. We already have begun enhancing inspection activities through temporary instructions to our inspection staff to look at licensees readiness to deal with both the design-basis accidents and the beyonddesign-basis accidents. The information that we gather will be used for an additional evaluation of the industrys readiness for similar events. . . . NRC has also issued an information notice to the licensees to make them aware of the events in Japan and the kinds of activities we believe they should be engaged in to verify their readiness. In response, licensees have voluntarily verified their capabilities to mitigate conditions that result from severe accidents, including the loss of significant operational and safety systems. The [NRC] chairman, with the full support of the commission, directed the NRC staff to establish a senior-level agency task force to conduct a methodical and systematic review of our regulatory processes. The task force will evaluate all technical and policy issues related to the event [in Japan] to identify additional potential research, generic issues, changes to the reactor-oversight process, rulemakings and adjustments to the regulatory framework that should be pursued.

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Continued from p. 520

energy. But Americas vast supplies of coal, along with newly discovered, massive underground natural gas repositories in the Eastern United States and western Canada, make those carbonbased fuels so cheap for the foreseeable future that many economists see little chance for a nuclear revival. Before Fukushima, there had been a lot of talk about expanding nuclear power in the United States, Europe and Asia, says MITs Joskow. But in terms of new reactors in the United States, there really was very little action going on, even before the accident, he says. In Europe, too, the only serious movement to increase nuclear capability recently has been in France, which already gets about three-quarters of its electricity from nuclear plants, Joskow says. In Japan, which had planned to expand its already significant nuclear capability, Prime Minister Naoto Kan is now mulling a plan to require all new buildings to install solar paneling by 2030. 57 Even in France, where the rise of green political parties spurred some strong though temporary antinuclear sentiment about a decade ago, a greater portion of the population is calling for caution since Fukushima, according to the Chicago-based investment-analysis firm Morningstar Global Equity Data. 58 To quell fears, Frances sole electric-utility company which is the worlds largest utility and provides power to other countries besides France announced new safety precautions, including creation of a rapid-reaction force to respond to accidents. 59 The Italian government, which had been debating building more nuclear capacity, decided to shelve deliberations for a year. 60 Meanwhile, Germans had already decided that they would close nuclear plants while pushing renewables such as solar and wind. Now, theyll speed that up, says the University of Texas Ohrbach.

Chile an earthquake-prone nation undergoing rapid industrialization and development has decided to continue research into nuclear power as it seeks means to meet its increasing power needs. (Chile experienced a magnitude 8.8 earthquake just off its coast in 2010.) But in adjacent Peru another rapidly developing, earthquake-prone nation officials recently declared they will not develop nuclear power. 61 Around the world, most of the construction is in China, Russia and India, with some interest in the Gulf countries, a trend likely to continue, says Joskow.

Finances Shaky
n the United States, some planned reactor projects have been canceled recently, for what economists say are financial reasons. In April, the New Jersey-based power producer NRG canceled plans to build two large reactors in south Texas. Financial backers said they wouldnt continue to support the project unless the government set quotas for nuclearpower use under a clean energy standard such as those that some states have adopted, said David Crane, NRGs chief executive. Under such standards, the government requires a certain proportion of power production, for example, to come from non-greenhouse gas-emitting or otherwise non-airpolluting sources, such as solar or nuclear, in order to shift energy use toward such sources. 62 Last October, Baltimore-based Constellation Energy canceled plans to build a new reactor at its Calvert Cliffs nuclear plant in Maryland, even though the Obama administration had awarded the project a $7.5 billion loan guarantee. Just a few years earlier, Constellation had envisioned the reactor as the first in a fleet of new reactors it would build around the country. 63 Meanwhile, the NRC is considering 20-year operating-license renewals for

most of the countrys reactors, with more than 60 applications already approved. Owners are expected to seek renewals for most of the remaining reactors as well. 64 President Obama has called for building a new generation of safe, clean nuclear power plants as a major part of his greenhouse gas-quelling energy program. 65 Current disputes about whether its appropriate to back nuclear power on the same generous terms as renewable sources such as wind and solar power make his proposals fate uncertain, however. In the past, nuclear energy has been seen as a partisan issue, with Republicans for it and Democrats against it, the Third Ways Freed says. But, he adds, some political leaders, such as Obama and Sen. Mark Udall, D-Colo., have changed that. Among other measures, Obama has proposed nearly tripling the loan-guarantee program for nuclear-plant construction. 66 But expansive loan-guarantee programs . . . are fraught with problems, said Jack Spencer, a research fellow in nuclear energy at the Heritage Foundation, a conservative think tank in Washington that opposes the expansion. At a minimum, they create taxpayer liabilities, give recipients preferential treatment and distort capital markets. 67 Rather than beefing up nuclear power, we should be going after the low-hanging fruit increasing energy efficiency while phasing out both carbon-creating and nuclear plants, says Riccio of Greenpeace.

OUTLOOK
New Designs
s todays reactors reach the end of their original 40-year operating licenses, nuclear engineers would

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like to see new designs gradually replace the old ones. The engineers say the new units would be safer than those in use today, but anti-nuclear groups dispute that. And, as new methods to extract natural gas from layers of rock far below the surface keep that fuel plentiful and relatively low-priced, few expect the cost equation to shift in favor of nuclear power. Power-producing portions of new nuclear plants now in the design stages will have a much greater degree of technical standardization, which will enhance safety, says Wilmshurst, of the industry research group EPRI. Greater standardization will allow nuclear technicians to build expertise that would be precisely transferable from one plant to another and allow regulators to focus intensely on a single set of design issues, for example, he says. Contemporary reactor design focuses on making plants inherently safe through innovations such as using gravity, rather than electric pumps, to pull cooling water down to flood overheating fuel, says Georgia Techs Sjoden. Such new passive safety systems avoid the risks of an electrical-power shutdown that renders pumps useless, he says. On May 20, the NRC announced that its continuing review of the first next-generation reactor to move through NRCs approval process the Westinghouse AP1000 has turned up new safety concerns. 68 Several of the reactors are under construction in China, and U.S. plants in Georgia and Florida that want new reactors also plan to build AP 1000s. But final approval for U.S. construction is now on hold in the wake of safety concerns raised by outside experts, the agencys own lead structural reviewer and by an anonymous whistleblower, reported The Miami Herald. The main concern is whether a reactor-shield building intended to be the first line of defense from radiation release is strong enough to withstand plane strikes, earthquakes, tornados or hurricanes, the paper reported. 69

Nuclear power opponents point to the NRC finding as evidence that new designs dont ensure safety. The finding is another nail in the coffin for nuclear power since this is only the latest problem with the reactor design, wrote Greenpeace field organizer Jarred Cobb. 70 Nuclear-power advocates, on the other hand, argue that rejecting new designs while extending the licenses of old plants is the real mistake. Many modern reactor designs . . . are physically incapable of a traditional meltdown/partialmeltdown like occurred at Fukushima and Chernobyl, said technology writer Jason Mick in the online magazine DailyTech. Thus, you could tear down every legacy nuclear power plant in the U.S. and Japan and then rebuild brand new plants. Not only would you get much more energy; youd also dramatically improve your safety. 71 That wont happen, though, mainly because large, new supplies of natural gas make gas-powered electrical plants much cheaper than all alternatives, including nuclear. That fact effectively dooms nuclear powers U.S. expansion hopes, for now at least, says MITs Joskow. I wouldnt be surprised if, were we ever to come back to building nuclear plants in the United States, a lot of the expertise would come from China, Japan and South Korea, where building will go on, he says.

Notes
Matthew Wald, Staying the Course, PostFukushima, The New York Times, May 10, 2011, http://green.blogs.nytimes.com/2011/05/10/ staying-the-course-post-fukushima/?partner= rss&emc=rss. 2 Mark Holt, Nuclear Energy Policy, Congressional Research Service, Oct. 21, 2010, www.fas. org/sgp/crs/misc/RL33558.pdf. 3 For background, see Japan Unprepared for Fukushima Nuclear Disaster, BBC, June 7, 2011, www.bbc.co.uk/news/world-asia-pacific-1367 8627; and Fukushima Nuclear Accident Update Log, International Atomic Energy Agency, www.iaea.org/newscenter/news/tsunamiup
1

date01.html. 4 Norimitsu Onishi and Ken Belson, Culture of Complicity Tied to Stricken Nuclear Plant, The New York Times, April 26, 2011, www.ny times.com/2011/04/27/world/asia/27collusion. html. 5 Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, U.S. Energy Information Administration, www. eia.gov/oiaf/aeo/electricity_generation.html. 6 For background, see Ionizing Radiation, Idaho National Laboratory website, www.stollereser.com/FactSheet/direct.htm. 7 Physicians for Social Responsibility Deeply Concerned About Reports of Increased Radioactivity in Food Supply, press release, Physicians for Social Responsibility, March 23, 2011, www.psr.org/news-events/press-releases/ psr-concerned-about-reports-increased-radio activity-food-supply.html. 8 Sheri Fink, U.S. Health Care System Unprepared for Major Nuclear Emergency, ProPublica, April 7, 2011, www.propublica. org/article/us-health-care-system-unpreparedfor-major-nuclear-emergency/single. 9 For background, see Marcia Clemmitt, Energy and Climate, CQ Researcher, July 24, 2009, pp. 621-644; Jennifer Weeks, Energy Policy, CQ Researcher, May 20, 2011, pp. 457-480. 10 For background, see Mara Hvistendahl, Coal Ash Is More Radioactive than Nuclear Waste, Scientific American, Dec. 13, 2007, www. scientificamerican.com/article.cfm?id=coal-ashis-more-radioactive-than-nuclear-waste. 11 Comparing Nuclear Accident Risks with Those from Other Energy Sources, Organisation for Economic Co-operation and Development Nuclear Energy Agency, 2010, www.oecd-nea.org/ ndd/reports/2010/nea6862-comparing-risks.pdf. 12 Ibid. 13 Harvey Wasserman, Safe Radiation Is a Lethal Three Mile Island Lie, Common Dreams website, March 28, 2011, www.commondreams. org/view/2011/03/28-1. 14 Ibid. 15 Report Doubts Infant Death Rise from Three Mile Island Accident, United Press International/New York Times, March 21, 1981, www.nytimes.com/1981/03/21/us/report-doubtsinfant-death-rise-from-three-mile-island-mishap. html, and Health Studies Find No Cancer Link to TMI, American Nuclear Society website, www. ans.org/pi/resources/sptopics/tmi/healthstud ies.html. 16 The Status of State-level Radiation Emergency Preparedness and Response Capabilities, 2010, Council of State and Territorial

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Epidemiologists, Oct. 6, 2010, www.cste.org/ webpdfs/2010raditionreport.pdf. 17 Testimony before Senate Subcommittee on Clean Air and Nuclear Safety and Committee on Environment and Public Works, April 12, 2011, www.nrdc.org/nuclear/tcochran_110412.asp. 18 David Lochbaum, Susquehanna Spent Fuel Pool Concerns, and How I Ended Up at UCS, All Things Nuclear blog, Union of Concerned Scientists, April 21, 2011, http://allthingsnuclear. org; for background, see Jennifer Weeks, Managing Nuclear Waste, CQ Researcher, Jan. 28, 2011, pp. 73-96. 19 The Status of State-level Radiation Preparedness, op. cit. 20 Quoted in Fink, op. cit. 21 Karl Grossman, NRCs Pro-nuke Spin on Evacuation Zones, Common Dreams website, April 5, 2011, www.commondreams.org/view/ 2011/04/05-4. 22 Ibid. 23 Fink, op. cit. 24 Quoted in Ibid. 25 Matthew Bunn, Japans Nuclear Crisis: 6 Reasons Why We Should and Shouldnt Worry, Power and Policy blog, Belfer Center for Science and International Affairs, Harvard Kennedy School, March 14, 2011, http://belfer center.ksg.harvard.edu/power/2011/03/14/japansnuclear-power-plant-crisis-some-context. 26 Ibid. 27 Special Report on Renewable Energy Sources and Climate Change Mitigation, International Governmental Panel on Climate Change, www. ipcc.ch/#. 28 IPCC Wind Energy and Solar Power Have the Potential to Outstrip Demand for Energy by 2020, REVE (Regulacion Eolica von Vehiculos Electricos) website, May 6, 2011, www.evwind.es/noticias.php?id_not=11456. 29 New U.S. Record for Wind Power Growth, Future Pundit blog, April 11, 2010, www.future pundit.com/archives/007089.html; for background, see David Hosansky, Wind Power, CQ Researcher, April 1, 2011, pp. 289-312. 30 Global Solar Power Growth Doubled in 2010: Study, Reuters, Feb. 14, 2011, www.reuters. com/article/2011/02/14/us-energy-solar-idUS TRE71D4WJ20110214. 31 Bryan Walsh, Whats the Cost of Shifting Away from Nuclear Power? Ecocentric blog, Time.com, March 16, 2011, http://ecocentric. blogs.time.com/2011/03/16/whats-the-cost-ofshifting-away-from-nuclear-power. 32 The Birth of Nuclear-Generated Electricity, U.S. Department of Energy Office of Science and Technology website, www.osti.gov/accomp lishments/documents/fullText/ACC0010.pdf. 33 For background, see Outline History of Nuclear Energy, World Nuclear Association website, June 2010, www.world-nuclear.org/ info/inf54.html. 34 Enrico Fermi, The Future of Atomic Energy, Technical Information Division, Oak Ridge Directed Operations, U.S. Atomic Energy Commission, www.osti.gov/accomplishments/docu ments/fullText/ACC0043.pdf. 35 Dwight D. Eisenhower, Address before the General Assembly of the United Nations, Dec. 8, 1953, www.presidency.ucsb.edu/ws/index.php? pid=9774#axzz1Mcb3DKor. 36 Historic Achievement Recognized: Shippingport Atomic Power Station, ASME (American Society of Mechanical Engineers) website, http:// files.asme.org/ASMEORG/Communities/History/ Landmarks/5643.pdf; Mike Testa, Beaver Valley Power Station, Shippingport, Pennsylvania, Power, Nov. 1, 2008, www.powermag.com/nuclear/BeaverValley-Power-Station-Shippingport-Pennsylvania_ 1487.html. 37 Nuclear Regulatory Commission, AllGov.com, www.allgov.com/Agency/Nuclear_Regulatory_ Commission. 38 For background, see Energy Timeline, Department of Energy website, www.energy.gov/ about/timeline.htm. For background, see Backgrounder on the Three Mile Island Accident, Nuclear Regulatory Commission, www.nrc.gov/reading-rm/doccollections/fact-sheets/3mile-isle.html, and Three Mile Island 29 Years Later: Nuclear Safety Problems Still Unresolved, Union of Concerned Scientists, March 27, 2008, www. ucsusa.org/news/press_release/three-mileisland-29-years-lat-0104.html?print=t; Christine Perham, EPAs Role at Three Mile Island, Environmental Protection Agency, www.epa. gov/history/topics/tmi/02.htm. 40 Fourteen-year Cleanup at Three Mile Island Concludes, The New York Times, Aug. 15, 1993, www.nytimes.com/1993/08/15/us/14-year-clean up-at-three-mile-island-concludes.html. 41 Three Mile Island 29 Years Later: Nuclear Safety Problems Still Unresolved, op. cit. 42 For background, see Frequently Asked Chernobyl Questions, International Atomic Energy Agency, www.iaea.org/newscenter/features/ chernobyl-15/cherno-faq.shtml; Backgrounder on Chernobyl Nuclear Power Plant Accident, Nuclear Regulatory Commission, www.nrc.gov/ reading-rm/doc-collections/fact-sheets/cher nobyl-bg.html. 43 Lisbeth Gronlund, How Many Cancers Did Chernobyl Really Cause? All Things Nuclear blog, Union of Concerned Scientists, April 17, 2011, http://allthingsnuclear.org/post/47041121 49/how-many-cancers-did-chernobyl-reallycause-updated. 44 Health Effects of the Chernobyl Accident: An Overview, World Health Organization, April 2006, www.who.int/mediacentre/factsheets/fs 303/en/index.html. 45 For background, see NRC Releases Preliminary Risk Analysis of the Combined Safety Issues at Davis-Besse, Nuclear Regulatory Commission, Sept. 20, 2004, www.nrc.gov/readingrm/doc-collections/news/2004/04-117.html; DavisBesse Atomic Reactor: 20 More Years of Radioactive Russian Roulette on the Great Lakes Shore? Beyond Nuclear website, www.beyond nuclear.org/storage/Davis_Besse_Backgrounder. pdf; Davis-Besse, Union of Concerned Scientists, www.ucsusa.org/assets/documents/nuclear_pow er/davis-besse-ii.pdf. 46 Davis-Besse Atomic Reactor: 20 More Years of Radioactive Russian Roulette on the Great Lakes Shore? ibid. 47 J. Samuel Walker, and Thomas R. Wellock, A Short History of Nuclear Regulation, 19462009, U.S. Nuclear Regulatory Commission, October 2010, p. 89, www.nrc.gov/reading-rm/ doc-collections/nuregs/brochures/br0175/br0 175.pdf.
39

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include HealthCare Reform and Energy and Climate.

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48 FirstEnergy Nuclear Operating Company to Pay $28 Million Fine Relating to Operation of Davis-Besse Nuclear Power Station, press release, U.S. Department of Justice, Jan. 20, 2006, www.justice.gov/opa/pr/2006/January/06_enrd_ 029.html. 49 For background, see Jennifer Weeks, Managing Nuclear Waste, CQ Researcher, Jan. 28, 2011, pp. 73-96. 50 Quoted in Nuclear Power: Still Not viable Without Subsidies, Union of Concerned Scientists, February 2011, www.ucsusa.org/assets/ documents/nuclear_power/nuclear_subsidies_ report.pdf. 51 Briefing on Small Modular Reactors, Nuclear Regulatory Commission, March 29, 2011, www.nrc.gov/reading-rm/doc-collections/com mission/tr/2011/20110329.pdf. 52 Testimony before the House Oversight and Government Reform Domestic Policy Subcommittee, April 20, 2010, www.npolicy.org/ article.php?aid=39&rtid=8. 53 Testimony before the House Oversight and Government Reform Domestic Policy Subcommittee, April 20, 2010, www.npolicy.org/ article_file/20100420-BradfordTestimonyApril_ 310111_0400.pdf. 54 Ibid. 55 Bill Summary and Status, H.R. 6, CRS Summary, Library of Congress website, http://thomas. loc.gov/cgi-bin/bdquery/z?d109:HR00006:@@@ D&summ2=m&. 56 For background, see Clemmitt, op. cit. 57 Krista Mahr, Japan Mulls Making All New Buildings Go Solar, Time Ecocentric blog, May 24, 2011, http://ecocentric.blogs.time.com/ 2011/05/24/japan-mulls-making-all-new-build ings-go-solar. 58 Dea Markova, A Global View of Local Nuclear Appetite, Morningstar website, April 26, 2011, www.morningstar.co.uk/uk/13/articles/97 509/A-Global-View-of-Local-Nuclear-Appetite. aspx. 59 EDF Wants Nuclear Crisis Task Force, United Press International, April 22, 2011, www. upi.com/Business_News/Energy-Resources/ 2011/04/22/EDF-wants-nuclear-crisis-task-force/ UPI-46741303498394. 60 Markova, op. cit. 61 Chiles Response to Japans Nuclear Crisis, Arabic Knowledge at Wharton, April 19, 2011, http://knowledge.wharton.upenn.edu/arabic/ article.cfm?articleid=2656&language_id=1. 62 Quoted in Matthew L. Wald, NRG Abandons Project for Two Reactors in Texas, The New York Times, April 19, 2011, www.nytimes. com/2011/04/20/business/energy-environment/

FOR MORE INFORMATION


Electric Power Research Institute, 3420 Hillview Ave., Palo Alto, CA 94304; http://my.epri.com. Industry-funded research organization providing technical research studies on electric-power production. Greenpeace USA, (800) 722-6995; www.greenpeace.org. Environmental group advocating phasing out nuclear power. History of Nuclear Power Plant Safety, http://users.owt.com/smsrpm/nksafe. Informational website developed in cooperation with the American Nuclear Society. International Atomic Energy Agency, Vienna International Centre, PO Box 100, A-1400 Vienna, Austria; (+431) 2600-0; www.iaea.org. United Nations agency that promotes international cooperation for safe, peaceful use of nuclear energy. Nonproliferation Policy Education Center, 1601 North Kent St., Suite 802, Arlington, VA 22209; (571) 970-3187; www.npolicy.org. Nonpartisan research and analysis organization that educates about nuclear-weapons proliferation. Nuclear Energy Institute, 1776 I St., N.W., Suite 400, Washington, DC 200063708; (202) 739-8000; www.nei.org. Membership organization for industries using nuclear technology. U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; (800) 3685642; www.nrc.gov. Federal agency that regulates civilian uses of nuclear energy, including power plants. Physicians for Social Responsibility, 1875 Connecticut Ave., N.W., Suite 1012, Washington, DC 20009; (202) 667.4260; www.psr.og. Membership group for health professionals and other advocates for policies to limit nuclear-weapons proliferation and environmental pollution. ProPublica, One Exchange Plaza, 55 Broadway, 23rd Floor, New York, NY 10006; (212) 514-5250; www.ProPublica.org. Nonprofit investigative journalism group that reports on a wide range of topics, including the Fukushima accident and related nuclear-power issues. Union of Concerned Scientists, Two Brattle Square, Cambridge, MA 02138-3780; (617) 547-5552; www.ucusa.org. Scientist-founded environmental research and advocacy group.
20nuke.html. 63 Steven Mufson, Constellation Energy Shelves Plan for Calvert Cliffs Reactor, The Washington Post, Oct. 13, 2010, www.washingtonpost. com/wp-dyn/content/article/2010/10/08/AR 2010100807370.html. 64 Holt, op. cit., p. 3. 65 Quoted in ibid. 66 Ibid., p. 19. 67 Testimony before the House Oversight and Government Reform Domestic Policy Subcommittee, April 20, 2010, www.heritage.org/ research/testimony/nuclear-power-federal-loanguarantees-the-next-multi-billion-dollar-bailout. 68 NRC Chairman Gregory B. Jaczkos Statement on AP 1000 Review Issues, press statement, Nuclear Regulatory Commission, May 20, 2011, www.nrc.gov/reading-rm/doc-collections/ news/2011/11-087.pdf. 69 Curtis Morgan, Regulators Raised New Concerns About Reactor, Miami Herald online, May 24, 2011, www.miamiherald.com/2011/05/ 23/2231057/regulators-raised-new-concerns.html. 70 Jarred Cobb, Another Nail in the Coffin for the Nuclear Renaissance, Greenpeace website, May 23, 2011, www.greenpeace.org/usa/ en/news-and-blogs/campaign-blog/another-nailin-the-coffin-for-the-nuclear-re/blog/34898. 71 Jason Mick, Dont Let Japans Nuclear Mistakes Cripple the Worlds Energy Future, Daily Tech, April 13, 2011, www.dailytech.com/EDI TORIAL+Dont+Let+Japans+Nuclear+Mistakes+ Cripple+the+Worlds+Energy+Future/article21 360.htm.

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Bibliography
Selected Sources
Books
Cooke, Stephanie, In Mortal Hands: A Cautionary History of the Nuclear Age, Bloomsbury USA, 2009. A reporter describes the many, largely unsuccessful, international attempts to avoid proliferation of nuclear weapons as civilian uses of nuclear energy spread. Mahaffey, James, Atomic Awakening: A New Look at the History and Future of Atomic Power, Pegasus, 2010. A former research scientist at the Georgia Institute of Technology recounts the discovery and technical development of nuclear energy from the 18th century to its modern uses, arguing that, if properly handled, its risks can be lowered enough to make it acceptable to the public. Walker, J. Samuel, and Thomas R. Wellock, A Short History of Nuclear Regulation, 1946-2009, U.S. Nuclear Regulatory Commission, October 2010, www.nrc.gov/reading-rm/ doc-collections/nuregs/brochures/br0175/br0175.pdf. The official historians of the governments nuclear-power oversight agency recount the history of nuclear power in America. Krueger, Paul, San Onofre Worker Files Whistleblower Suit, NBC San Diego website, March 31, 2011, www.nbc sandiego.com/news/local/San-Onofre-Worker-Files-Whistle blower-Suit-118953799.html. A manager at Californias San Onofre nuclear plant claims he was fired for reporting safety issues. Plumer, Bradford, Do We Really Need Nuclear Power?, The New Republic, March 16, 2011, www.tnr.com/article/ environment-energy/85289/nuclear-power-us-japan-meltdown. Recent studies by environmental groups and academic researchers show that it would be possible, though very difficult, to meet future electricity demand using only renewable sources such as wind and solar power while phasing out nuclear power. Stone, Richard, Return to the Inferno: Chernobyl After 20 Years, Science, April 14, 2006, p. 180. Twenty years after the worlds worst nuclear-reactor accident, the 1986 meltdown at Chernobyl in what is now Ukraine, scientists continued to find high radiation levels in plants and animals miles from the plant.

Articles
Behr, Peter, and Climatewire, How Long Can Nuclear Reactors Last? Scientific American online, Sept. 20, 2010, www.scientificamerican.com/article.cfm?id=how-long-cannuclear-reactors-last. Economics and current energy law make building a new fleet of U.S. reactors unlikely, so researchers are examining how long todays reactors can safely operate. Brumfiel, Geoff, Fukushima Nuclear Plant Is Leaking Like a Sieve, Nature Newsblog, May 26, 2011, http://blogs.nature. com/news/2011/05/fukushima_nuclear_plant_is_lea_1.html. A blogger for a prestigious British scientific journal reports that melted fuel cores at three damaged Fukushima Daiichi reactors are leaking radioactive water into the environment. Deedy, Donna, and Michael Grabell, Safety Reviewers Raise Questions About Construction of New Nuclear Fuel Plant, ProPublica, May 5, 2011, www.propublica.org/article/ safety-reviewers-raise-questions-about-construction-of-newnuclear-fuel-pla/single. The only U.S. facility designed to transform surplus weapons-grade plutonium into fuel for nuclear power plants is under construction in South Carolina, the first nuclear power-related construction undertaken in the United States since the 1979 Three Mile Island accident. But the project is behind schedule and over budget, and some engineers are questioning the safety of the transformation process.

Reports and Studies


Holt, Mark, Nuclear Energy Policy, Congressional Research Service, Oct. 21, 2010, www.fas.org/sgp/crs/misc /RL33558.pdf. An analyst for Congress nonpartisan research office describes recent and proposed U.S. laws and policies that affect nuclear energy, nuclear-energy research and the nuclearpower industry. Joskow, Paul L., and Jon E. Parsons, The Economic Future of Nuclear Power, Daedalus, Fall 2009, p. 45, http://econwww.mit.edu/files/4168. Two Massachusetts Institute of Technology energy-economics scholars describe a wave of renewed international interest in nuclear power and discuss how economic issues such as climate-change laws and treaties that raise the price of carbonbased fuels would change the outlook for nuclear energy. Lochbaum, David, The NRC and Nuclear Power Plant Safety in 2010: A Brighter Spotlight Needed, Union of Concerned Scientists, March 2011, www.ucsusa.org/assets/ documents/nuclear_power/nrc-2010-full-report.pdf. Many serious safety-related problems discovered at U.S. nuclear plants in 2010 occurred because utility companies and the Nuclear Regulatory Commission allowed small issues to worsen, says an analyst for a research-oriented environmental group.

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CHAPTER

WIND POWER
BY DAVID HOSANSKY

Excerpted from David Hosansky, CQ Researcher (April 1, 2011), pp. 289-312.

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Wind Power
BY DAVID HOSANSKY
Were seeing an exponential growth in wind energy, says Lena Hansen, an exike much of the rural pert on renewable energy and Midwest, Rock Port, Mo., biofuels at the Boulder, Colo.population 1,300, has based Rocky Mountain Instifaced its share of economic tute, which promotes the susstruggles: falling incomes, tainable use of resources. It boarded-up businesses and really can be quite a substantial an exodus of young people. part of our energy future. And yet the quiet farming In some respects, wind town is on the leading edge seems like a perfect fit for the of what could be Americas nation. The steady and pownext energy revolution. erful gusts that blow across On a spring day in 2008, the Great Plains, West Coast Rock Port became the nations and other regions have led to first community to get just the United States being dubbed about all its power from the the Saudi Arabia of wind enwind. Four massive threeergy. Some studies indicate bladed turbines on agriculturthat, at least in theory, the wind al land within the city limits that blows across the contiprovide an estimated 16 milnental United States could suplion kilowatt-hours of electricity ply as much as 16 times the each year enough to meet nations electricity needs. Offthe towns needs and provide shore areas alone, where depower for sale to other jurisvelopers are beginning to plan A massive wind farm planned in Nantucket Sound off dictions. And those turbines, massive wind farms, may be Cape Cod draws opponents and supporters to Woods plus nearby wind farms, are able to generate as much enHole, Mass., for a talk by Interior Secretary Ken Salazar on Feb. 2, 2010. Approved by Salazar that April, the generating not only electricity ergy as four times the nations 130-turbine project would be the nations first offshore but also money: higher real electricity needs. 4 wind farm. Opponents say it would harm wildlife and estate tax revenue for local But the obstacles are forscenic views. Supporters say clean energy and government and $3,000 to midable. Much of the nations hundreds of jobs would be generated. $5,000 per year for ranchers wind blows far from major popergy source in the nation, increasing ulation centers, which means that netwho lease their land for the towers. Were farming the wind, which is in generating capacity by as much as works of transmission lines would be something that we have up here, said 50 percent annually. Boosted in part by needed to deliver energy to consumers. Jim Crawford, a natural-resource engi- tax breaks and renewable-energy manAnd because wind blows intermitneer at the University of Missouri Ex- dates in a number of states, wind now tently, it often fails to generate power tension in Columbia. The payback on provides about 2 percent of electricity when consumers need it most. This a per-acre basis is generally quite good nationwide and more than 15 percent in was vividly demonstrated during a bitwhen compared to a lot of other crops, Iowa, which leads the nation in the per- ter cold snap last Christmas, when a and its as simple as getting a cup of centage of power derived from wind. 3 lack of wind left most of Britains 3,000 Wind far exceeds every other wind turbines becalmed just as power coffee and watching the blades spin. 1 Wind-energy advocates point to suc- renewable-energy source in amount of demands swelled. The British, who cess stories such as Rock Port as ex- electricity generated except hydropower. hope eventually to derive 30 percent amples of how the nation can tap wind Many analysts view wind power as a of their power from wind, were forced to satisfy much of its energy needs. 2 key component of any strategy to re- to ramp up coal-fired power stations As concerns about the environmental duce emissions of carbon dioxide, a that emit large amounts of pollutants. impacts of traditional energy sources gas released by burning of fossil fuels Until engineers develop a cost-effective have mounted, wind has emerged in that is blamed for contributing to cli- way to store excess power from wind recent years as the fastest-growing en- mate change. turbines, utilities will need to build

THE ISSUES

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AP Photo/Julia Cumes

April 1, 2011

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WIND POWER
Thirty-Eight States Generate Wind Energy
Wind power in the United States exceeded 40,000 megawatts in 2010, a fourth of it in Texas. Generating capacity is also high along the coasts of California, Oregon and Washington state. Only 12 states mostly in the Southeast lack wind-power capacity. Wind Power by State, Through 2010
Wash. Mont. N.D. S.D. Idaho Wyo. Neb. Nev. Calif. Ariz. Okla. N.M. Texas Ark.
Miss.

Minn. Wis. Iowa


Ill. Mich.

N.H. Vt.
Maine

Ore.

N.Y. Pa.

Mass. R.I. Conn. N.J. Del. Md. D.C.

Utah

Ind. Ohio Ky.


Tenn. W.Va.

Colo.

Kan.

Mo.

Va. N.C. S.C.

La.

Ala. Ga.

Electricity in Megawatts
Fla.

Alaska

None 1-100 101-1,000 1,001-2,000 2,001-10,000

Hawaii

Source: U.S. Wind Industry Year-End 2010 Market Report, 10,000+ American Wind Energy Association, January 2011, www.awea. org/learnabout/publications/loader.cfm?csModule=security/getle&PageID=5083

conventional power plants to meet demand when winds fail. Rock Port draws energy from the regional power grid on non-windy days and sends excess energy to the grid when the winds return. People want to use electricity when they need it and not just when the wind blows, says Daniel Simmons, director of state and regulatory affairs at the Institute for Energy Research, a group in Washington that supports free-market energy solutions. To harvest large amounts of energy, wind developers construct towers that can exceed 400 feet in height, often with a trio of blades each half the length of a football field and designed to capture as much wind as possible. The towers are arrayed by the dozens, hundreds or even thousands in wind farms. Sometimes they are built on ridges where winds are optimal and where they can be seen for miles,

to the chagrin of people who enjoy unspoiled vistas. The turbines often fray the nerves of nearby residents bothered by their noise and flickering shadows. The revolving blades act as large reflectors that can interfere with radars by appearing as false targets or as clutter that obscures real targets a significant concern for the military, although new radar technology can help alleviate the problem. Even environmentalists, while favoring a pollution-free energy source, have raised concerns. They cite the potential impact of wind farms on otherwise undisturbed areas and the deaths of birds and bats that fly into turbine blades or are affected by shifts in air pressure caused by the blades. (See sidebar, p. 245.) Debates over wind energy have roiled policy makers on the national and state levels. Lawmakers have

clashed over such issues as tax breaks for the wind industry and limits on how close turbines can be to houses. President Barack Obama is pressing for legislation requiring that 80 percent of the nations energy come from lowor non-polluting sources, including wind, by 2035. Many in Congress worry, however, that such a requirement would hurt the oil, gas and coal industries and possibly lead to higher costs for taxpayers. Taxpayers get a double whammy in terms of subsidies: They have to pay for the subsidy and then they pay for higher rates as a result of having the renewables as part of the electricity system, says Simmons. Weve been subsidizing wind and other renewables for 30 years, and theyre still not cost-effective. Without sustained government support, the wind industry may not be able to continue competing with natural gas, which is plentiful and, at least for the moment, affordable. Despite its phenomenal growth in recent years, wind has faced something of a boom-and-bust cycle, with development of new wind farms dropping by 70 to 90 percent in years when Congress has allowed federal tax credits for turbines to expire. In contrast, wind development overseas is proceeding at a breezy pace. Thanks to significant financing incentives and sustained government support for renewable energy, Denmark now derives 24 percent of its electricity from wind. The European Union is adding more electricity capacity from wind than any other source, and several governments are setting goals of deriving a third or more of their electricity from wind and other renewable sources within a few decades. Still, many consumers are raising alarms over higher electricity rates and what they regard as a blight of turbines across the landscape. China is also revving up its windenergy capabilities. It aims to get 15 percent of its energy from non-fossil-fuel sources by 2020. 5 Last year, China became the largest provider of wind

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energy in the world, with 41,800 megawatts of electricity capacity. The United States, with about 40,000 megawatts, fell to second. 6 The rapid pace of wind-industry development abroad troubles U.S. turbine manufacturers, who say that Washingtons failure to better support the wind industry is making it difficult for them to compete with overseas turbine producers. It has put the U.S. at a disadvantage in competing in the global marketplace, says Bob Gates, chief commercial officer of Clipper Windpower Inc., a turbine maker in Carpinteria, Calif. In the long term, its helping to export jobs. As policy makers consider whether to provide more support for wind power, here are some key questions being debated: Can the United States derive a significant amount of its energy from wind? Those who believe wind may emerge as a top source of electricity in the United States point to a 2008 Department of Energy (DOE) report that laid out a road map for obtaining 20 percent of the nations energy or 300 gigawatts from wind by 2030. The report found that the goal could be feasible but would require improvements in turbine technology, large-scale investments and better planning so that far-flung regions could support one another as electricity supply and demand spiked and dipped across the grid. Reaching the goal by 2030 would cost nearly $200 billion for turbines, improved transmission capability and other infrastructure, the report estimated. However, those expenses would largely be offset by reduced costs for coal, natural gas and other fuel. The report also noted that wind energy could provide such benefits as increased diversity of the nations fuel sources and reductions in coal and natural-gas emissions associated with climate change and air pollution.

How Wind Turbines Work


Turbines convert kinetic energy generated by the winds motion into mechanical power. The wind turns the blades, which spin a shaft that connects to a generator to create electricity.

Wind Turbine Diagram and Parts

Anemometer: Measures wind speed and transmits the data to the controller. Brake: A disc brake that can stop the rotor in emergencies. Controller: Starts up the machine at wind speeds of about 8 to 16 mph and shuts off the machine at about 55 mph. Gear box: Gears connect the low-speed shaft to the high-speed shaft and increase speeds from between 30 and 60 rotations per minute to 1,000 to 1,800, the speed required by most generators to produce electricity. Generator: Produces 60-cycle AC electricity. High-speed shaft: Drives the generator. Low-speed shaft: The rotor turns the low-speed shaft at about 30 to 60 rotations per minute. Nacelle: Contains the gear box, low- and high-speed shafts, generator, controller and brake. Pitch: Blades are turned, or pitched, out of the wind to control rotor speed. Rotor: The blades and hub together are called the rotor. Tower: Made from tubular steel, concrete or steel lattice. Wind vane: Measures wind direction and works with the yaw drive to orient the turbine to the wind. Yaw drive: Keeps the rotor on upwind turbines facing into the wind as wind direction changes. Yaw motor: Powers the yaw drive. Source: Department of Energy, www1.eere.energy.gov/windandhydro/wind_how.html

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There are significant costs, challenges and impacts associated with the 20 percent wind scenario, concluded the report. There are also substantial positive impacts. . . . Achieving the 20 percent wind scenario would involve a major, national commitment to clean, domestic energy sources. 7 But some experts doubt that wind can grow from 2 percent to 20 percent of the nations energy supply in less than two decades. Theres been an incredible amount of money thrown at renewables and renewable-technology development, and things havent changed much, says Robert Michaels, a professor of economics at California State University at Fullerton and a consultant on wind issues. We keep hearing that, in five years, renewables are going to be economical. And five years pass, and theyre not. If there were not renewable-energy standards and the tax breaks, there would be very little development of wind. Indeed, the United States faces two fundamental obstacles: Wind often fails to blow when it is needed and where it is needed. Perhaps the single biggest challenge of wind energy is that winds often die down just as they are needed most. Because utilities lack efficient systems to store surplus wind energy and distribute it when demand peaks, they have to either build extra power plants to back up their turbines or buy electricity at a premium on the spot market. Both options can be costly. Peak demand for electricity generally occurs on very hot or very cold days, when consumers are switching on air conditioners or furnaces. But strong winds often blow at night, when demand is relatively low, and gusts rarely coincide with prolonged hot and cold spells. The mismatch between winds and consumer demand was illustrated on an unusually hot August afternoon in 2010, when Texas broke its record for energy consumption. Even though the state leads the nation in windturbine capacity, its winds tend to fade during August, and only about 5 percent of energy from its wind farms was available when consumers needed it most. The wind is free, but it also isnt dispatchable, says Simmons of the Institute for Energy Research. You cant just say youre going to produce wind tomorrow at 3 p.m. The intermittency also means that wind turbines are comparatively inefficient. They typically generate electricity at only about 25 to 40 percent of their capacity because their blades are often still. In contrast, a traditional coal plant operates at about 70 percent capacity. 8 The other fundamental challenge is that the strongest winds tend to blow in sparsely populated areas. Wind farms are proliferating in regions such as West Texas and the Dakotas, but utilities need to move that energy to cities where it is needed. The only way to do that is to build large networks of transmission lines. The 2008 DOE report estimated that to achieve the 20 percent wind-energy goal, the United States would need to build 12,000 miles of transmission lines at a cost of about $20 billion. Other analysts put the pricetag higher. 9 Ratepayers would likely bear the expense. The nation faces at least one more fundamental challenge in harnessing wind: local opposition. Polls show strong public support for wind energy at least in theory. Eighty-nine percent of respondents to a poll commissioned by the American Wind Energy Association, an industry trade group, said they favored wind power. But numerous communities are battling plans for local wind farms or networks of transmission lines. 10 The issue has come to the fore from quiet Maine islands to the Texas Hill Country. Is it really worth permanently industrializing and destroying a unique scenic area like the Hill Country? asks Robert Weatherford, a landowner in Texas Gillespie County who is battling plans to build turbines on prominent ridges and create a long-distance transmission network that would affect private properties. Despite these challenges, experts say that the goal of 20 percent wind energy or even more is achievable if national leaders establish it as a priority. To manage the intermittency of wind, utilities could rely on a mix of complementary energy sources for example, by switching between wind turbines during unsettled weather patterns and solar panels on hot days, while backing them up with gas-fired plants that can quickly ramp up and down. While new transmission lines will inevitably be controversial and costly, utilities could reduce the impact by working closely with local communities, avoiding sensitive areas or possibly tapping energy from offshore wind farms built near major cities. Its a willpower issue more than it is a cost issue, says Fort Felker, director of the National Wind Technology Center at the DOEs National Renewable Energy Laboratory in Golden, Colo. Experts say surpassing the 20 percent goal may be unrealistic without advances in technology because the challenges of intermittency and power transmission become increasingly difficult as more wind power is introduced into the grid. You could get up to 10 to 20 percent without too much stress on the system, says Robert Evans, a professor of mechanical engineering and inaugural director of the Clean Energy Research Centre at the University of British Columbia. If you get around the 20 percent mark or more, youll start to see real strains. Is wind energy good for the environment? The approximately 5,000 wind turbines in the Altamont Pass in central California, intended to produce
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Vermont Wind Farms Pit Greens Against Greens


Does providing renewable energy lead to environmental damage?
The situation in Vermont is not unique. A proposal to expand pposition to new wind farms in ecologically minded Vermont has come from an unusual source: environ- a West Virginia wind farm sparked a green vs. green battle in mentalists. Conservationists in the Green Mountain the courts over whether the turbine blades could endanger State have split over the prospect of building turbines on ridges, bats. And plans to build a massive offshore wind farm in a pitting those who worry about destruction of wildlife habitat wildlife-rich section of Nantucket Sound, known as Cape Wind, and scenic views against others who believe that turbines are has faced stiff resistance from prominent environmentalists, including Robert Kennedy Jr., who worry about effects on local necessary to move the state toward renewable energy. You want to save the environment by building renewable en- communities, wildlife and the landscape. Interior Secretary Ken ergy, but in Vermont the only viable places for turbines are high- Salazar approved the project last year. On the other hand, Midwestern ranchers who are not orelevation ridges that have important habitat, says Lukas Snelling, director of communications for Energize Vermont, a nonprofit advocacy dinarily associated with environmental causes have frequently group that promotes sustainable energy. So if you build wind farms, embraced wind farms. Turbines are injecting money and jobs into economically depressed rural sections of the Plains, and youre actually destroying part of the environment. Snelling says the wide roads and massive amounts of concrete states such as Texas, Iowa and Kansas are emerging as leadneeded to install turbines would essentially industrialize sensitive ing producers of wind energy. The situation has created mountain regions. As an alsome unusual political alliances. ternative, Energize Vermont For example, Sen. Sam Brownbacks small-scale, communityback, R-Kansas, aligned himself energy developments, inwith liberal Democrats in supcluding solar panels and hyporting a national renewabledropower from existing dams. energy standard last year. 2 Such projects, it contends, are a better fit for Vermonts Snelling doesnt object to wind small-town nature than largeenergy as long as the turscale wind turbines. bines are put in such spots as On the other side of the Midwestern croplands where they debate, long-established enwont endanger sensitive wildlife vironmental groups such as habitats. But he has deep reserthe Vermont Natural Resources vations about plans for about 10 Council and the Vermont wind farms in his states picPublic Interest Research Group turesque Green Mountains. favor building turbines in seBuilding wind farms in the lected locations. If properly Midwest or in the West is a very Wind turbines and clouds sit atop a hill in Vermont. placed, they contend, the turdifferent thing than building Local conservationists are divided over bines could take advantage them in Vermont, he says. Verplans to erect more hilltop turbines. of reliable wind without sigmont is a unique microcosm nificant effects on the environment, providing a critical alternative where the desire to build renewable energy in the country is to fossil-fuel plants that emit carbon dioxide and other pollutants. hitting right up against the desire to protect natural resources. In a statement urging its members to support the proposed Its as though the need to combat climate change necessitates installation of a wind farm of about 20 turbines, the Vermont that we destroy part of the environment. Its just such a weird Public Interest Research Group declared: There is no free lunch catch-22 that I cant support it. when it comes to turning on our lights or running our refrig David Hosansky erators. When we consume energy, we produce an environmental impact, and the impacts of wind power pale in com1 Kingdom community wind comment period now closed, Vermont Public parison to those of fossil fuels and nuclear power. 1 Moreover, environmentalists who support bringing turbines Interest Research Group, Feb. 18, 2011, www.vpirg.org/node/409. 2 Katie Howe and Katherine Ling, Renewable Electricity Standard to Vermont point to agreements under which wind farms have Alone or Dies, Senate Sponsors Vow, The New York Times, Sept.Bill Stands 23, 2010, said they will protect hundreds of acres through conservation www.nytimes.com/gwire/2010/09/23/23greenwire-renewable-electricity-standardeasements and return the land to its natural state once the farm bill-stands-alo-16736.html. has been decommissioned.

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China Leads in New Wind Installations
China installed more than 16,000 megawatts of wind-power capacity in 2010 nearly half the global total and far more than any other country. The United States was a distant second, with 14 percent of the global total. China recently overtook the United States in cumulative wind-energy capacity. New Wind Energy Installed, by Country, 2010 Canada Italy
(948 Mw) (690 Mw)

Sweden
(603 Mw)

Rest of World
(4,750 Mw)

2.6%
United Kingdom
(962 Mw)

1.9%

1.7% 13.3%

2.7%

China

France
(1,086 Mw)

Germany
(1,493 Mw)

3.0% 4.2% 4.2% 6.0%


India
(2,139 Mw)

(16,500 Mw)

46.1%

Spain
(1,516 Mw)

United States

14.3%

(5,115 Mw)

Source: Global Wind Report: Annual Market Update 2010, Global Wind Energy Council, March 2011, www.gwec.net/leadmin/documents/Publications/Global_ Wind_2007_report/GWEC Global Wind Report 2010 low res.pdf
Continued from p. 294

clean energy, have an environmental downside. The blades have killed thousands of birds, including rare raptors such as golden eagles and burrowing owls. Wind-farm power lines have electrocuted others. In West Virginia, a wind farm may have killed as many as 2,000 bats in one year. 11 Scientists believe turbines can be deadly to bats for two reasons: The nocturnal animals fly into turbine blades for reasons that are not clear, and their tiny lungs hemorrhage when they enter low-pressure zones created by the moving blades. Wind farms that are some distance from critical migratory paths or major populations of birds and bats do not

have such deadly effects, and environmentalists generally cheer the emergence of an energy source that does not emit carbon dioxide or other pollutants. Nevertheless, some are watching the spread of wind farms with concern. Renewable energy is not necessarily green energy, said Eric R. Glitzenstein, a lawyer involved in efforts to stop expansion of a West Virginia wind farm to protect the endangered Indiana bat. We should not be creating new ecological crises by addressing existing ones. All energy sources have potential benefits, but they also have potential risks. 12 Wind-energy advocates, however, contend that careful placement of wind

farms, away from migratory-bird routes and other sensitive areas, is significantly reducing the impact on wildlife. The Altamont Pass turbines were installed after the 1970s energy crisis, when such issues were not well known. The towers also are far shorter than modern turbines, allowing their blades to reach almost to the ground and kill raptors as they dive for prey. Supporters of wind energy also point out that far greater numbers of bird deaths millions to tens of millions yearly occur because of pesticides, attacks by domestic and feral cats and collisions with windows, according to Fish and Wildlife Service estimates. 13 The concerns about birds and bats around wind turbines were rooted in early turbines that were poorly sited, along migration corridors, says the Rocky Mountain Institutes Hansen. For all the reasons that birds and bats die, turbines are pretty low on the list. Still, a 2005 report by the General Accounting Office, the congressional watchdog agency now known as the Government Accountability Office, concluded that more research is needed on how wind farms affect birds and bats. It also warned that little is known about the potential impact of offshore wind farms on marine life. 14 Wildlife issues aside, critics point out that wind farms require far more land per kilowatt generated than traditional forms of electricity generation. Robert Bryce, an energy writer who has questioned the environmental benefits of renewable energy, estimates that wind power requires 45 times more land than nuclear power and several times more land than coal and natural gas plants. 15 Experts say this phenomenon, known as energy sprawl, could result in turbines covering an area the size of Texas or larger, with potential damage to sensitive ecosystems, if the United States continues to increase its use of wind.

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People dont want to see coast-toBut Evans and other energy ex- Should the U.S. government do coast windmills, says the University perts dismiss such arguments as mis- more to support wind energy? of British Columbias Evans. leading. While older coal-fired Texas may be known for oil fields, Wind-energy supporters, however, plants cannot easily cycle on and but its legislature was quick to emsay that the turbines take up rela- off, newer and more efficient gas- brace renewable energy. In 1999 the tively little space and that land around fired plants can with comparatively state required utilities to generate each tower remains available for farm- little impact on emissions, they argue. 2,000 new megawatts of power from ing, ranching or other purposes. The A kilowatt-hour of electricity pro- renewable energy within a decade and issue of the footprint of wind farms duced by wind will not entirely off- later set an even more ambitious goal: is overblown, says Jeff Deyette, as- set the emissions associated with a 10,000 megawatts by 2025. sistant director of energy research and kilowatt-hour produced by burning As a result, Texas installed more analysis at the Union of Concerned fossil fuels, but it will offset most than 10,000 megawatts of capacity from Scientists, a research group that pro- of it, they say. wind and other renewable sources by motes environmental protection. Adding wind significantly reduces 2010, some 15 years ahead of schedThere are a lot of other uses for the our carbon emissions because youre ule. The move toward wind has not land on wind been without controverfarms. And as we sy, though. Residents make improvehave sued to block ments in technoloplans for transmission gies, as wind turlines across the state, and bines get larger and utilities warn that wind there are fewer of energy is often too unthem, you need far reliable to meet peak less land. demands. Still, advoCritics also quescates believe Texas zest tion whether wind for wind power sets an farms reduce air example for the rest of pollution from trathe nation. ditional power The states goals are plants. Because incredibly effective at wind may not blow stimulating new techwhen electricity is nologies and economic Wind-turbine blades await delivery at a factory in Chinas northern needed, utilities growth, said Tom Smith, Hubei province on Sept. 30, 2010. China plans to generate 15 percent often have to build director of the Texas of its energy from non-fossil-fuel sources by 2020. Last year, China became the worlds largest provider of wind energy, additional plants to office of Public Citizen, overtaking the United States. supply back-up a consumer-advocacy p o w e r. C y c l i n g group. 17 such plants up and down is costly running fossil-fuel plants a lot less, Texas is one of more than two dozen and can emit excessive pollution, Hansen says. states that have adopted renewableShe and other renewable-energy energy standards, and wind-energy much as driving a car at different speeds can burn more fuel than advocates also say the environmental supporters want federal policy makharm caused by burning fossil fuels ers to follow suit. They say a national driving at a constant speed. Cycling causes coal units to oper- far exceeds the drawbacks of wind. renewable-energy or a broader cleanate less efficiently and reduces the ef- The extraction, transport and com- energy standard would strengthen the fectiveness of the environmental-control bustion of coal, natural gas or other economy by creating green jobs, reequipment, substantially increasing fossil fuels can affect water and air duce emissions from coal and naturemissions, stated a 2010 report by quality, wildlife habitats and glob- al gas and ensure a balance of enerBentek Energy, an energy-market infor- al climate, they argue. When I gy sources. mation company, that was prepared for have a choice between looking at A renewable-energy standard the Independent Petroleum Association wind turbines and looking at smog, would save money and shield conof Mountain States, an oil-industry Id rather look at wind turbines, sumers from fuel-price volatility, says Hansen says. trade group. 16 Rob Gramlich, senior vice president
AFP/Getty Images/Peter Parks

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for public policy at the American ergy advocates want a permanent If we want to move beyond peWind Energy Association. credit rather than one that expires every troleum energy and achieve some sort Critics, however, say the govern- few years an irregular and often of energy independence, as well as ment should not favor one energy unpredictable occurrence they say has maintain our technological lead in the source over another, arguing that can stunted the industrys growth. Critics world . . . , it does make sense in our drive up rates and make it harder for say the credit costs taxpayers and un- view to have government subsidies new energy technology to get a toe- fairly benefits the wind industry. until the wind industry can stand on hold in the market. In many respects, the debate over its own, says Gene Hunt, director of You dont want to force people to government support of wind energy corporate communications for Beacon use a certain technology, particularly comes down to two basic issues: Power Corp., in Tyngsboro, Mass., because a better technology may turn Whether the United States has a com- which makes flywheels for storing kiup, says California State Universitys pelling reason to promote renewable netic energy from wind and other Michaels. sources that is released Critics also point to the electrical grid out that California when needed. (See sideand some other states bar, p. 303.) Critics of are falling behind government intervenschedule to meet tion, however, maintain renewable-energy that the United States goals, partly behas vast stores of coal cause of outdated and natural gas that can transmission sysmeet the nations electems and a need for tricity needs for decades more renewable-enor even centuries to ergy facilities. A fedcome. If the goal is to eral standard may reduce carbon dioxide be even more diffiemissions, it would be cult to meet, espebetter to tackle that cially because states problem directly inhave widely differing stead of artificially Interior Secretary Ken Salazar visits the American Wind Energy amounts of wind and propping up the wind Associations annual wind-power convention in Chicago in May 2009. other potential industry, they say. Salazar and Energy Secretary Steven Chu unveiled a plan on sources of renewable We need to address Feb. 7, 2011, to accelerate the development of energy, such as sunthe carbon dioxide proboffshore wind energy in the United States. shine for solar power. lem in the most costThese policies mandate more ex- energy, and whether the government effective way, says Ross Baldick, a propensive forms of electricity generation, should support wind to counterbalance fessor of electrical and computer says the Institute for Energy Researchs policies that help other energy sources. engineering at the University of Texas. Simmons. State legislatures have tailored (See At Issue, p. 305.) An energy expert who favors a carbontheir laws to their situation, and still Wind advocates say it is crucial for consumption tax instead of tax credits theyre not meeting their standards. The the United States to reduce fossil-fuel for the wind industry, he adds, As a problem with the federal mandate is emissions, especially carbon dioxide that U.S. taxpayer, I dont want to spend it could be more of a one-size-fits-all is blamed for climate change. They also money on something that doesnt solve policy, which I believe will be even say the nation needs a stronger re- the problem. more difficult to meet. newable-energy industry to compete As for government help, windOther policies that benefit wind are globally in that sector. Wind is less ex- energy supporters say they need fedalso proving controversial, particularly pensive than other sources of renew- eral assistance if the industry is to the federal renewable-energy-production able energy, such as solar power and compete on equal terms with protax credit. It amounts to 2.1 cents per biofuels. It also appears to be safer than ducers of conventional energy. Oil kilowatt-hour for the production of nuclear power, which is likely to lose companies enjoy generous tax deelectricity from large-scale wind tur- public support after last months release ductions, natural gas companies have bines and geothermal plants. Wind en- of radiation from reactors in Japan. Continued on p. 300
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Chronology
5500 B.C.1400 A.D. 1900-1980s
Wind power first harnessed in the Middle East. 5500-5000 B.C. Egyptians and Sumerians use wind energy to sail their boats. 500-900 A.D. Persians build windmills to pump water and grind grain Middle Ages (400-1400 A.D.) Windmills spread throughout the world to grind grain, pump water and drain land.

Farmers use wind turbines for power but most of nation relies on nuclear energy and fossil fuels to generate electricity. 1930s-40s Farmers lacking electricity use small, multi-blade turbines to operate irrigation pumps. 1941 Worlds first megawatt turbine begins delivering electricity to a Vermont grid. 1950s-60s United States and other industrialized nations develop national electrical grids, relying primarily on oil, natural gas, coal and nuclear power. 1973-1974 Mideast oil embargo sparks widespread fuel shortages and spurs interest in alternative energy. 1980 Worlds first wind farm is installed in southern New Hampshire. 1983 Iowa requires utilities to invest in wind and biomass power. 1986 California establishes itself as the global leader in wind energy, with 1.2 gigawatts of capacity.

1999 Congress allows the production tax credit to expire, setting up a boombust cycle in the wind industry. 2000 Europe achieves more than 12 gigawatts of wind-energy capacity, by far the most of any region worldwide. 2003 Oil prices begin rising sharply and speculation grows that petroleum resources may be running low, spurring increased interest in alternative energy. 2005 United States reestablishes itself as the world leader in wind-energy capacity, despite rapid growth in Europe. 2008 Rock Port, Mo., becomes first U.S. community powered by wind energy. April 27, 2010 Interior Secretary Ken Salazar announces approval of nations first offshore wind farm, the controversial Cape Wind project in Nantucket Sound. December 2010 Efforts to establish a national renewable energy standard die in Congress despite passage of separate versions in the House and the Senate Energy and Natural Resources Committee. 2010 China, with nearly 42 gigawatts of wind-energy capacity, overtakes the United States (40 gigawatts) as the worlds wind-energy leader. Jan. 25, 2011 In his State of the Union address, President Obama sets goal of deriving 80 percent of nations power from clean-energy sources by 2035.

18th and 19th Centuries Steam supplants wind power during


Industrial Revolution. 1700s Windmills are well established as the primary power source in preindustrial Europe. Early 1800s New steam-powered engines begin to replace windmills. 1887 Professor James Blyth of Andersons College, Glasgow, builds first windmill for electricity production. 1887-88 Cleveland inventor Charles Brush builds first wind turbine to generate electricity in the United States. 1890s Danish scientist Poul la Cour begins testing wind turbines in effort to bring electricity to rural Denmark.

1990s-Present Rising oil prices spark renewed


interest in wind energy. 1992 As part of an omnibus energy measure, Congress passes the production tax credit, intended to spur wind-farm development.

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With Wind Turbines, Taller Is Better


Some turbines are 400 feet tall, with blades half as long as a football field.
wind turbine is a machine that converts the winds kinetic energy, or movement, into electricity. The rotor generally consists of three blades that face the oncoming wind, automatically swiveling when the wind direction changes. In a typical breeze, the blades turn a shaft that revolves about 20 to 30 times a minute not enough to produce much power. However, the shaft is attached to a gearbox with a series of interconnected cogs that magnify the spinning motion. This enables a second shaft to spin many times faster than the first. A set of copper-wire coils is attached to the high-speed shaft. The shaft and coils spin within a circle of magnets, generating electricity. The electricity flows through power cables to a transformer, which converts the electricity into the necessary voltage, and then into the electrical grid. Most turbines rotate on a horizontal shaft, with blades that turn in a vertical plane. However, there are also vertical-axis wind turbines. Blades on those machines move in a horizontal plane and can take advantage of wind from different directions. Vertical-axis wind turbines generate relatively little power and can become unstable as winds grow stronger. The larger the area that is swept by the blades, the more power that can be generated. Doubling the blade length generates four times as much power. In addition, tall turbines with horizontal shafts tend to produce more power because they reach higher in the atmosphere, where wind blows more strongly. As a result, turbines have become increasingly large. The largest blades are half the length of a football field or even longer; the tallest turbines generally reach more than 400 feet above the ground. Even a relatively small change in the wind can have a significant effect on the amount of electricity generated. Energy increases by the cube of the wind speed, which means that a doubling of wind produces eight times more power. However, at very high wind speeds typically between 45 and 80 miles per hour turbines have an automatic shutdown mechanism that prevents the blades from becoming damaged. Because the size of the turbine largely determines the amount of electricity that it can generate, small-scale turbines have lim-

ited applications. A turbine with a rotor assembly a central hub and blades spanning three feet from tip to tip can generate about one-half a kilowatt per hour, which is enough to charge batteries in boats, vans, and other low-power vehicles. Supplying the power needs of an average-size house can require a rotor assembly spanning about 10 to 15 feet, mounted 30 feet high or more to catch stronger winds. Residential wind turbines exist, but they are of limited practicality because of their size requirements. In theory, a wind turbine can convert a maximum of about 60 percent of the winds kinetic energy into electricity. The most efficient turbines are closing in on the 50 percent mark, which means there is a limited amount of additional energy that a turbine can produce unless it is built much larger. Engineers are focusing on capturing more energy from the wind by looking at how arrays of turbines are organized. As wind moves through a wind farm, the front row of turbines extract about half the kinetic energy, leaving relatively little energy for downwind turbines to capture a problem known as wind shade. For that reason, turbines need to be spaced far apart, which makes it difficult to capture large amounts of energy in a small space. Rather than arranging turbines in straight lines or rectangles, as is often the case with wind farms, researchers are studying whether other formations, such as triangles or beehive shapes, would be more productive. They are also looking into coordinating the movements of turbines to ensure that each turbine captures as much energy as possible. Perhaps there is a coordinated control system that can do better where upwind machines back off a little bit while the downwind ones collect more, instead of the simplistic approach where its every man for himself, explains Fort Felker, director of the National Wind Technology Center, part of the Department of Energys National Renewable Energy Laboratory in Golden, Colo. The way engineering works is [that] its often a succession of 1 percent improvements. You keep that up for 10 or 20 years, and youre looking at real changes. David Hosansky

Continued from p. 298

eminent-domain power to build pipelines, and nuclear power plants enjoy partial immunity from lawsuits, they point out. Weve had decades of incentives that have skewed the market toward natural gas and other fossil fuels. Nuclear has also benefited, says Deyette of the Union of Concerned Scien-

tists. I see a renewable electricity standard as helping to level the playing field. Whether a renewable energy standard or a permanent production tax credit would put the various energy industries on equal footing is a complicated question to answer. Coal and natural gas companies say they are at a disadvantage because they are far

more regulated than wind- and other renewable-energy producers. Wind companies respond that decades of government support for traditional fuel sources have entrenched those industries, making it even more important for the government to help emerging technologies gain traction. Some analysts say the best policy would be to end all incentives and let

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competition work its will. It will give us the most robust energy market in the end when you have the various technologies competing on their attributes, says Simmons.

Growth in Wind Power Slow in 2010


Wind-power capacity of more than 5,000 megawatts was added in the U.S. in 2010, about half the amount in 2009. The decline in new installations ran counter to the past decades upward trend.
(in megawatts)

BACKGROUND
Sails and Windmills
umans have turned to the wind for power ever since they hoisted the first sails at least 7,500 years ago in Egypt and Sumer. The Greek engineer Heron of Alexandria designed a wind wheel in the first century A.D. the earliest known effort to use wind for powering a machine. Persians built a type of windmill known as a panemone sometime between 500 and 900 A.D. It comprised a vertical shaft attached to lightweight wooden blades that had sails made of reeds or cloth. These early windmills, which first came into use in a region between Iran and Afghanistan, were used initially to pump water and later to grind grain. Within a few centuries, windmills of various designs and with either vertical or horizontal shafts were built across the Middle East and Central Asia and eventually in India, China and Europe. They were used for grinding grain, draining land, pumping fresh water or saltwater to make salt, threshing, powering sawmills and other purposes. Windmills had several advantages over water-driven mills. They did not have to be located adjacent to fastmoving streams, and they could operate when water might freeze. Some windmills were built in a fixed position to take advantage of prevailing winds, such as on islands where wind direction was relatively predictable. Others were designed to swivel according to wind direction, a critical requirement in a region such as north-

12,000 10,000 8,000 6,000 4,000 2,000 0

Annual U.S. Wind-Power Growth, 2000-2010


5,258

10,010 8,366 5,115

67

1,691

412

1,670

397

2,385 2,462

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: U.S. Wind Industry Year-End 2010 Market Report, American Wind Energy Association, January 2011, www.awea.org/learnabout/publications/loader.cfm?cs DigitalStock Module=security/getle&PageID=5083

western Europe where winds are variable. Inventors gradually improved windmill designs, developing models with up to eight sails that generated more power than those with four sails and creating windmills that adjusted automatically to different wind speeds. During the Industrial Revolution, steam and internal-combustion engines largely supplanted traditional windmills, but society still found new uses for wind energy. For example, windmills pumped water for steam locomotives, a major factor in the expansion of rail systems. And as Americans plowed the Midwest and Great Plains, farmers used an estimated several million small windmills to operate irrigation pumps. Winds remarkable power in the atmosphere accounts for the enduring popularity of windmills. The ultimate driver of wind is energy from the sun, which heats the atmosphere unevenly depending on such factors as latitude, season, time of day and whether the air being warmed is over land or water. Air that grows hotter expands and rises, and heavier, cooler air rushes in to fill the space it occupied. This moving air is wind. Large-scale wind patterns are influenced by the Earths rotation, which

causes air to circulate around regions of high and low pressure. Daily wind movements, which can be extraordinarily difficult to predict, are determined by such factors as the movement of high- and low-pressure systems and local topography, with the strongest breezes tending to occur in mountainous regions, high, open land and coastal areas.

Harnessing Electricity
lthough modern wind turbines began to emerge in the 1970s, they have been used to generate electricity since the late 19th century. Ohio inventor Charles F. Brush built the first large windmill for electricity in the United States in 1887. Made from 144 cedar blades, it could generate 12 kilowatts for batteries or his mansions lights. Soon after, Danish meteorologist Poul la Cour found that fast-moving rotors with fewer blades could generate more power. By the 1930s, farmers who had no other access to electricity were using small multi-bladed turbines, which were relatively inexpensive and easy to build. On the eve of World War II, the worlds first megawatt turbine a

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large machine with 98-foot blades began delivering electricity to a local grid in Vermont. Turbine use declined in the postwar era as the United States and other countries began building national power grids, taking advantage of relatively low coal and natural gas prices and newly developed nuclear technology. With the electrification of rural areas, windmills largely fell into disuse. But in the mid-1970s, Arab nations imposed an oil embargo on the United States in retaliation for U.S. support of Israel, and oil supplies fell sharply while prices skyrocketed. 18 Concerns about access to traditional fuel sources spurred new interest in wind and other alternative power sources. California provided tax incentives for wind power, sparking the first major development of wind farms for electric utilities. These turbines, somewhat primitive by todays standards, were placed by the thousands in wind farms such as those in the Altamont Pass. By 1986, California had installed nearly 1.2 gigawatts of wind power, which at the time represented nearly 90 percent of global windenergy capacity. But the expiration in the mid-1980s of the states tax incentives (along with the expiration of a similar federal initiative in 1985) brought new installations to a halt.

Getty Images/Scott Olson

Getty Images/Ethan Miller

Growth in Europe

Consider the Alternatives


The nations renewable-energy toolkit includes more than just wind power. About one-third of U.S. renewable energy comes from hydropower. Nevadas Hoover Dam provides electricity for Nevada, Arizona and several cities in Southern California, plus water for irrigation (top). A small amount of renewable energy comes from solar power. On Chicagos South Side, more than 32,000 solar panels generate enough electricity for 1,500 homes.

everal European countries, including Denmark and Germany, enacted ambitious renewable-energy policies and took the lead in wind-farm development. By 2000, Europe had more than 12 gigawatts of capacity, compared with 2.5 in the United States. Interest in wind energy spurred considerable technological development on both sides of the Atlantic. In the 1980s and 90s engineers developed many innovations currently used in multi-megawatt turbines, including
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Storing Energy for a Rainy Day


Technology is providing new ways to deal with peaks in power demand.
Engineers are studying an alternative storage technology: speonsider the humble flywheel: Ever since the Bronze Age, wheels of one form or another, such as spinning cialized batteries that can hold large amounts of energy overnight wheels and potters wheels, have been used to keep and release it during the day. Conventional lead-acid batteries are motion constant during certain mechanical activities. Today the too expensive and dont last long enough, so research is focusheavy flywheel in a car engine helps keep the crankshaft turn- ing on batteries with other chemical combinations. For example, giant sodium-sulfur batteries the size of a double-wide trailer are ing at a constant speed. Now the flywheel is being used for a different purpose: stor- being tested at several wind farms. They offer the advantage of ing energy to stabilize the output from electrical grids especial- storing large amounts of energy that is released at a comparatively efficient rate, but they remain very expensive. ly grids that rely on intermittent sources of energy such as wind. Engineers are also exploring ways to store energy in other ways, What flywheel systems can do 24/7 is act as shock absorbers to the grid, says Gene Hunt, director of corporate com- such as by creating reservoirs of compressed air in underground cavities. The air is used to spin the turbine munications for Beacon Power Corp., on a generator when electricity is needed. a Tyngsboro, Mass., company that is One of the key challenges to overnight developing flywheels for utilities. They storage systems is the cost. Whereas a new allow you to maintain as close a balgas-fired power plant can generate elecance in the demand and supply of tricity for about $600 to $1,200 per kiloelectricity as possible. watt, a battery that offers eight hours of Beacon Power is finishing constorage would likely cost $4,000 or more, struction on a 20-megawatt energysays Paul Denholm, a senior energy anastorage facility in Stephentown, N.Y., lyst at the National Renewable Energy Labthat uses 200 flywheels to store oratory. A 2008 report by the American Inelectricity from wind or other sources stitute of Chemical Engineers estimated that in the form of kinetic energy and reit could cost more than $340 billion to delease it to the grid when needed. velop mass-energy storage systems if reThe flywheels spin at 16,000 rotanewable energy were to supply 20 percent tions per minute. By releasing enerof the nations energy needs. 1 gy to the grid for as long as 15 minutes, they can temporarily regulate Unless technological innovations can sigthe frequency of electrical power if nificantly reduce the cost of such storage demand or supply suddenly change. systems, experts say utilities that are inteLena Hansen of the Rocky Mountain Flywheels are at the forefront of a grating more renewable energy will try to Institute views electricity storage as a key wave of technological innovation derely on other methods for meeting peak challenge for the wind-energy industry. signed to address a major concern electrical demand. In addition to using flyabout wind energy: its intermittency, or unreliability. If engineers wheels, they can manage demand by reimbursing residents who can develop economical systems to store energy when the wind reduce their electrical use during peak times by using systems to is blowing and release it to the grid when winds are calm, the cycle air conditioning on and off or setting dishwashers to run late changeable nature of wind would no longer represent a serious at night. Utilities can also trade electricity more broadly, meeting a obstacle to integrating large amounts of wind into electrical grids. spike in demand in one region with extra supply from another. While the flywheels are designed to provide a cushion of But overnight storage will likely continue to get considera few minutes while traditional power plants ramp up, much able interest. of todays research focuses on storing energy overnight and reOne of the biggest constraints for the system now is the inleasing it during peak demand times during the day. ability to store electricity, says Lena Hansen, an expert on renewFor decades, utilities have stored comparatively small amounts able energy and biofuels at the Rocky Mountain Institute, a reof energy the old-fashioned way by pumping water uphill search group in Colorado. Electricity storage would be game-changing. from one reservoir to another with surplus electricity. When that David Hosansky energy is needed during the day, the water is released downhill to flow through a turbine the modern version of the water1 Bernard Lee and David Gushee, Massive Electricity Storage, American wheel on an old gristmill creating electricity. Although such a Institute of Chemical Engineers, June 2008, www.aiche.org/uploadedFiles/ system works well, constructing additional reservoirs would in- About/DepartmentUploads/PDFs/MES%20White%20Paper%20submittal%20to% 20GRC%206-2008.pdf. volve significant costs and extended environmental reviews.

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Continued from p. 302

blades made of fiberglass and other materials and sophisticated controls to better capture wind gusts. In 1998, turbines had an average capacity of seven to 10 times the capacity of those in the1980s, and costs had dropped nearly 80 percent. 19 By the first decade of the 21st century, increasingly durable and powerful turbines could generate as much as five megawatts apiece on land; offshore turbines approached the 10-megawatt level. With individual turbines nearing maximum efficiency, engineers and scientists began focusing more on such issues as arranging arrays of turbines to make maximum use of winds, improving wind forecasting and using remote-sensing technology to automatically reposition blades to take better advantage of gusts. Such research can help wind farms generate more power in low-wind situations. Over the past decade, concerns about climate change, energy security and the long-term availability of fossil fuels have spurred rapid expansion of wind and other forms of renewable energy in the United States and overseas. The U.S. wind-power industry expanded by as much as 50 percent annually, increasing capacity from 2.5 gigawatts in 2000 to about 40 at the end of 2010. 20 Much of the expansion stemmed from the enactment of renewableenergy standards by more than two dozen states, beginning with Iowa in 1983. The federal production tax credit, first enacted in 1992 as part of comprehensive energy legislation, has also spurred wind-farm development although its expiration in 1999 and again in 2003 caused sporadic growth. In 2005, the United States re-established itself as the world leader in wind-energy capacity, only to lose the title last year to China, which is aggressively turning to wind to help meet its fast-growing energy needs.

Wind Supplies Tiny Slice of U.S. Energy


Wind power and other renewable-energy sources supplied less than 10 percent of U.S. energy in 2009. Most of the renewable energy came from hydroelectric and biomass sources, with small amounts produced by wind, solar and geothermal power. More than 80 percent of the nations electricity came from oil, natural gas and coal.

Sources of the Nations Energy Supply, 2009


Renewable Nuclear

8% 9%
Petroleum Coal

21%
Natural Gas

37%

25%

Source: U.S. Energy Information Administration, August, 2010, www. eia.doe.gov/cneaf/alternate/page/renew_ energy_consump/rea_prereport.html

Although wind energy is generally popular in Europe, its increased use has spurred controversy, especially over wind turbines in scenic areas and the cost of new transmission lines. Moreover, concerns have arisen over high residential electricity rates stemming partly from wind-energy subsidies, especially in Denmark. As wind developers begin running out of optimal sites on land, they are looking into more offshore locations where turbine towers can be secured to the sea bottom. Offshore wind farms present greater engineering challenges and are more expensive to build and maintain than those on land. But winds over the water are comparatively reliable and contain less turbulence, which allows the turbines to extract more energy. Furthermore, offshore turbines can support larger blades and thereby generate more power. Europe has emerged as a center for offshore development, partly because it has limited sites for landbased wind farms. The United States has yet to construct an offshore wind farm. But a number of projects are under consideration, and U.S. Interior Secretary Ken Salazar last year approved development of the Cape Wind project off Cape Cod, a proposed 130-turbine wind farm that has faced vigorous local opposition because of potential visual and environmental impacts on Nantucket Sound. (See sidebar, p. 295.)

European countries, seeking to cut carbon-dioxide emissions, continue to use tax incentives and renewableenergy goals to promote wind energy. Wind accounts for 24 percent of electricity use in Denmark, 14.4 percent in Spain, 14.8 percent in Portugal, 9.4 percent in Germany and 10.1 percent in the Irish Republic. 21 Gains have required creative approaches to the grid. Denmark, for example, sometimes exports energy to its neighbors and sometimes imports it, depending on fluctuations in winds.

CURRENT SITUATION
White House Support

n this years State of the Union address, President Obama set a goal of
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At Issue:
Should the federal government do more to support wind energy?
yes

DENISE BODE
CEO, AMERICAN WIND ENERGY ASSOCIATION
WRITTEN FOR CQ RESEARCHER, APRIL 2011

DANIEL SIMMONS
DIRECTOR OF STATE AND REGULATORY AFFAIRS, INSTITUTE FOR ENERGY RESEARCH
WRITTEN FOR CQ RESEARCHER, APRIL 2011

ind power is here. Today wind power is a major, mainstream source of electricity that successfully competes in all ways with any of the more traditional sources of energy. Wind power, for example, competes on size. This safe, inexhaustible resource accounts for 35 percent of all new electricity generation since 2007 more than coal and nuclear combined. Wind power also competes on cost. New wind installations beat new coal and nuclear plants on electricity cost and are competitive with natural gas. Thus, no technological advances are needed to bring wind power into the mainstream. It already is. Still, policy incentives are needed but only to level the playing field. The Congressional Research Service notes that for more than 90 years, fossil-fuel industries have been receiving subsidies via generous tax breaks. They are seldom debated or, for that matter, heard of, because they are permanent. Examining the issue during the Bush administration, the Government Accountability Office concluded that fossil fuels continue to receive nearly five times the tax incentives as renewable energy. Moreover, on top of direct subsidies, fossil fuels cost Americans $120 billion annually in health damages, according to a National Academy of Sciences report commissioned by the Bush administration. Wind power, meanwhile, has had to compete despite receiving only one- and two-year policy extensions. Yet the industry already boasts 85,000 jobs and 400 manufacturing plants in the United States making the wind-power industry one of the fastest-growing manufacturing sectors in America. Strong policy support for fossil fuels during the last century helped create an abundance of affordable domestic energy, powering strong economic growth. It also created an addiction to fossil fuels. But rising demand, volatile prices and instability overseas have created the need for a more diverse energy supply. With wind power, utilities can lock in power prices with 20-year contracts, providing a hedge against fuel-price increases and volatility. Wind is a fuel, and its free. America boasts some of the worlds best wind resources. Theres enough wind-energy potential to power this land 10 times over. Iowa already makes 15 percent of its electricity from wind, and soon winds share will be 20 percent. In 2008, the Department of Energy confirmed what the industry already knew that wind can provide 20 percent of the nations electricity by 2030. The industry is anxious to meet that benchmark. It just needs a little policy stability to do so.
no

yes no
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here is no justification for increasing support for wind. It is time that wind pulls its own weight instead of relying on taxpayers dollars and pleading for additional subsidies and mandates. Wind proponents argue that wind is not a mature technology and should therefore receive subsidies, set-asides and preferential treatment from the government. This argument ignores the fact that wind energy has been used for more than 7,000 years. It also ignores the fact that wind has been used to produce electricity for over 120 years. In fact, coal has been used to make electricity for only five years longer than wind. Wind may not seem like a mature technology because it is unreliable. People switched away from wind to other sources of energy such as coal, hydroelectric, natural gas and petroleum because the wind doesnt always blow, and these other sources could be counted upon. For example, shipping became much more reliable when vessels switched from sails to coal power. Wind proponents also argue that their industry should receive support because wind energy could reduce Americas imports of oil. This is unlikely because wind produces electricity while cars and trucks run on gasoline and diesel. Electric vehicles might reduce oil consumption, but they are not competitive with gas and diesel vehicles. Nissan has sold only 173 Leafs, and Chevy has sold 928 Volts. These anemic sales should improve, but electric cars are very expensive and lack the range of conventional vehicles. For over 100 years, people have been trying to build electric vehicles that are competitive with conventional vehicles. They have yet to succeed. The wind lobby also argues that wind should receive subsidies because conventional fuels do. While fossil fuels receive larger total subsidies, if the comparison is made on a per-unitof-energy-output basis, wind subsidies dwarf conventional energy subsidies. According to the Energy Information Administration, total federal subsidies for wind-generated electricity for fiscal 2007 were $23.37 per megawatt hour, compared to $1.59 for nuclear, 44 cents for coal and 25 cents for natural gas and petroleum liquids. Our energy and fiscal situation would be improved if we removed all energy subsidies. Wind energy does not merit increased government support. Federal policies have supported wind power for decades despite the fact that it is inefficient and unreliable. Wind is a mature energy technology. Its time that it starts acting like it.

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to ensure that a percentage of the nations energy generating 80 percent comes from renewable of the nations energy sources perhaps by infrom so-called cleancluding a specific target energy sources by 2035. within the broader clean Some folks want wind energy goal. Or, alternaand solar, Obama said. tively, would the legislaOthers want nuclear, tion allow natural gas and clean coal and natural coal to continue to domgas. To meet this goal, inate electricity markets, we will need them all which the wind industry and I urge Democargues could prevent wind rats and Republicans to from expanding? work together to make Whether Congress it happen. 22 looks at the renewableFrom the viewpoint energy standard or the of wind and other reclean-energy standard, they newable-energy indusshould be focused on entries, the proposal suring diversity in our enmarked a strategic reergy portfolio, says Gramtreat. The House in 2009 lich of the American Wind voted to require that Energy Association. A big 20 percent of the napart of their responsibility tions energy come from is to avoid fuel-price volatilrenewable sources by ity. Wind can offer a stable 2020, and the Senate Enprice, but Im not aware of ergy and Natural Reany non-renewable sources sources Committee apthat can do the same. proved a 15 percent While the presidents prorenewable-energy stanposal for a clean-energy standard that would have dard is likely to generate taken effect in 2021. Neidebate over the nations enther proposal, howevWind turbines tower over a farmhouse in rural northern Illinois. ergy future, it appears to er, reached Obamas The battle between operators of wind farms and residents trying face long odds in the curdesk before Congress to stop their development is reaching a crescendo in Wisconsin, rent Congress. A number of adjourned, largely bewhere the wind industry says proposed statewide standards for Democrats greeted Obamas cause of bitter debate in locating turbines will stymie their construction. Some homeowners say the flickering shadows and noise from plan with enthusiasm, but Congress over climategiant turbines are so distracting that they want to Republicans argued that a change legislation. sell their houses if they can and move. federal standard could drive By broadening the up electricity rates and unproposed energy standard to include nuclear, natural gas with the investment firm Sanford C. duly favor one energy sector over anand clean coal, Obama hoped to draw Bernstein & Co. But, Singh adds, The other. Leaving such mandates to the support from those industries cru- standard thats proposed is very states would be wiser, they said. A clean-energy standard is better cial to his energy agenda given the amorphous right now. Its a big picsharply conservative tilt of Congress ture. A lot of work needs to go into than a renewable-energy standard or defining clean energy. one that picks and chooses among the following the 2010 elections. The wind industry, which prefers a kinds of energy, said Sen. Lamar AlexanObamas broadened the constituency by proposing a clean-energy renewable-energy standard, is respond- der, R-Tenn. But I would prefer to let standard, and that might help his ing cautiously until more details of the states make these decisions. 23 Added Fred Upton, R-Mich., chairman plan get more support, says Saurabh plan emerge. A major issue is whether Singh, a senior research associate a standard would include provisions of the House Energy and Commerce
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Getty Images/Scott Olson

Committee, energy independence is not achieved through government dependence. 24 In addition to a clean-energy standard, the wind industry is keeping a close eye on federal incentives, such as the production tax credit for renewable energy. Last extended as part of an economic stimulus plan in 2010, the credit will expire next year. A top priority for the wind industry is making the credit permanent, or at least passing a long-term extension. All the traditional energy sources have their support permanently, but wind only has it for a year or two, says Gates of Clipper Windpower. The uncertainty over the tax credit has a negative effect on the business and . . . long-term job growth. The wind industry is concerned that allowing the tax credit to expire would stunt new investment. Over the last decade, the industry has experienced boom-and-bust cycles, with growth plummeting by 70 to 90 percent in years such as 2004 after the tax credit was allowed to expire. Given congressional concerns over the budget deficit, however, analysts warn that a renewal of the production tax credit is far from certain. When we go into the expiration at the end of 2012, were going to have a very difficult debate, says Christine Tezak, senior energy and policy analyst at the international investment firm Robert W. Baird & Co. It will be very challenging for the industry. As for the desire to make the production tax credit permanent, she says flatly, A permanent extension is a dream too far.

cerned that proposed statewide standards for selecting locations for turbines will make it virtually impossible to build new wind farms and may energize wind opponents in other states. Local officials in Wisconsin, as in many other states, have the authority to determine how close a wind turbine may be built to a house or property line. This has led to a conflicting set of rules, with residents worried that wind farms are encroaching on farms and subdivisions. Some homeowners say the flickering shadows and noise from giant turbines is so distracting that they want to sell

against the wind industry, erupted in December when Wisconsins Public Service Commission approved rules that, among other things, prevent local governments from requiring wind turbines to be built more than 1,250 feet from a house. The wind industry viewed the new rules as a model for replacing a confusing and often shifting patchwork of city and county regulations with a single, predictable statewide standard. But the new setback standard drew sharp criticism from property owners. Republican Gov. Scott Walker proposed much a stricter standard, barring tur-

Residents have indicated that the turbines that are located too close to homes can have an adverse impact on their health everything from high anxiety levels to high blood pressure to rapid heart rate.
Tom Larson Director of Legal and Public Affairs, Wisconsin Realtors Association

Not in My Backyard

he battle between energy companies that want to install new wind farms and residents trying to stop development is reaching a crescendo in Wisconsin. The wind industry is con-

their houses and move. But that can be difficult. Nearby turbines can drive down property values by 40 percent, according to the Wisconsin Realtors Association. Residents have indicated that the turbines that are located too close to homes can have an adverse impact on their health everything from high anxiety levels to high blood pressure to rapid heart rate, says Tom Larson, chief lobbyist and director of legal and public affairs for the association. He adds that flickering shadows from the turbines are like the Bat-signal [for Batman] right on your house, constantly. Its a big deal. They [the turbines] are monsters. The debate over wind-turbine setbacks, which pits property owners

bines from being built within 1,800 feet of a property line. The situation is now in limbo. A joint legislative committee voted March 1 to suspend the rules, giving local governments, at least temporarily, the power to establish setbacks on a case-by-case basis. Meanwhile, lawmakers are considering a bill to give the Public Service Commission seven months to revise the rules. If Walkers proposal were adopted, that would be pretty devastating, says Gramlich of the American Wind Energy Association. He warns that the requirements are so strict that wind developers would be unable to build new wind farms in Wisconsin.

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Some worry that Wisconsins approach, if adopted in other states, could prevent the nation from expanding its wind-energy capabilities. Larson says Wisconsin has become a national battleground on the issue. Weve seen a lot of involvement from national organizations, he says. He worries that unless the two sides are able to reach a compromise, the controversy will continue to roil the state. I think therell be lawsuits, he says. I think itll be a mess. of people and companies, and I dont think Republicans want to support a big program right now, he says. Without a boost in government support, the short-term outlook for the U.S. wind industry is uncertain. It faces two challenges: Demand for new energy has declined because of the economic downturn, and natural gas prices are at unusually low levels making gas an attractive alternative to wind. As a result, new wind installations in 2010 were only half the level of 2009. (See graph, p. 301.) China likely installed three times as much new wind capacity as the United States in 2010, and Europe twice as much. 25 In addition to the competition with traditional fuel sources, wind may soon face increased competition from solar energy. Singh says technical innovations could start driving down solar prices in the next five years. And solar offers some advantages over wind: Rooftop photovoltaic cells reduce the need for transmission lines, and energy from the sun tends to correspond with peak consumer demand. Singh says that wind may eventually account for about 10 percent of the nations electricity consumption, but much higher than that is unlikely. Wind will definitely have decent growth rates. But I think the growth rates over time will become less than solar. Industry executives, however, are more bullish on winds long-term prospects. Gates of Clipper Windpower believes that the peak growth years of the last decade, in which the wind industry added as much as 10 gigawatts of capacity, may be hard to replicate. But he sees steady growth of about 5 gigawatts yearly. The industry has potential, he says. The world needs more electricity. It needs more generation of every type. Some renewable-energy advocates envision a future in which wind plays a vital role in meeting the worlds energy needs. They believe technological innovations, such as storing surplus wind energy in giant batteries and using wind power to fuel electric cars, can, along with conservation and other renewable sources, eventually make fossil fuels virtually obsolete. Although supporters and skeptics may disagree over the extent to which wind farms may help to power America, both sides agree that there is no shortage of wind energys key ingredient. As Paul Denholm, a senior energy analyst at the National Renewable Energy Lab puts it, In terms of the raw resource, theres plenty there.

OUTLOOK
Delicate Circumstances

t seems unlikely that the federal government will adopt a clean-energy standard any time soon, analysts say. Congress is too focused on other highly contentious issues, such as cutting the budget and rolling back regulations. The big challenge for a [clean energy standard] is that right now the stars are not particularly aligned for it, says Baird & Co.s Tezak. She gives it a slight chance of passing, especially if supporters try to attach it to a larger energy measure. But, she adds, that is one delicate set of circumstances. Investment analyst Singh is even more dubious. I think the chances of Obamas clean-energy standard passing in the near term are effectively zero because its going to be a pretty ambitious target thats going to affect a lot

Notes
Quoted in Andrea Thompson, First U.S. Town Powered Completely By Wind, Live Science, July 15, 2008, www.livescience.com/ 2704-town-powered-completely-wind.html. 2 For background, see the following CQ Researcher reports: Jennifer Weeks, Modernizing the Grid, Feb. 19, 2010, pp. 145-168; Marcia Clemmitt, Energy and Climate, July 24, 2009, pp. 621-644; and Barbara Mantel, Energy Efficiency, May 19, 2006, pp. 433-456. 3 Statistics for wind and other energy sources in the United States from the U.S. Energy Information Administration, Electric Power Industry 2009: Year in Review, revised Jan. 4, 2011, www. eia.doe.gov/cneaf/electricity/epa/epa_sum.html. Statistics for Iowa from the Iowa Policy Project, Think Wind Power, Think Iowa, March 2010, www.iowapolicyproject.org/2010docs/100303IPP-wind.pdf. 4 John Lorinc, Study Suggests Wind Power Potential Is Much Higher Than Current Estimates, The New York Times, July 16, 2009, http:// green.blogs.nytimes.com/2009/07/16/studysuggests-wind-power-potential-is-much-higherthan-current-estimates/; and Marc Schwartz, Donna Heimiller, Steve Haymes and Walt Musial, Assessment of Offshore Wind Ener1

About the Author


David Hosansky is a freelance writer in the Denver area who specializes in environmental issues. He previously was a senior writer at CQ Weekly and the Florida Times-Union in Jacksonville, where he was twice nominated for a Pulitzer Prize. His previous CQ Researcher reports include Food Safety and Youth Suicide.

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gy Resources in the United States, National Renewable Energy Laboratory, June 2010, www. nrel.gov/news/press/2010/885.html. 5 Non-fossil fuels to take up 11.4% of Chinas energy, China Daily, March 4, 2011, www.china daily.com.cn/bizchina/2011-03/04/content_12 117490.htm. 6 Wind industry finishes 2010 with half the installations of 2009, activity up in 2011, now cost-competitive with natural gas, American Wind Energy Association, Jan. 24, 2011, www. awea.org/newsroom/pressreleases/release_0124-11.cfm. 7 Wind Power in Americas Future: 20% Wind Energy by 2030, U.S. Department of Energy, 2008, p. 20, www1.eere.energy.gov/windand hydro/pdfs/41869.pdf. 8 Wind turbine capacity is given in ibid., p. 221; capacity for other energy sources is provided by U.S. Energy Information Administration, Electric Power Annual, revised Jan. 4, 2011, www.eia.doe.gov/cneaf/electricity/epa/epaxlfile 5_2.pdf. 9 Wind Power in Americas Future, ibid., p. 95. 10 U.S. Poll Shows Wind Works for Americans, American Wind Energy Association, April 22, 2010, http://archive.awea.org/news room/releases/04-22-10_Poll_Shows_Wind_ Works_for_Americans.html. 11 Wind Power: Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife, U.S. General Accounting Office, September 2005, p. 2, www.gao.gov/new.items/d05906.pdf. 12 Quoted in Maria Glod, Court constricts W. Va. wind farm to protect bats, The Washington Post, Dec. 10, 2009, www.washington post.com/wp-dyn/content/article/2009/12/09/ AR2009120904106.html. 13 U.S. General Accounting Office, op. cit. 14 Ibid., p. 19. 15 Robert Bryce, Power Hungry: The Myths of Green Energy and the Real Fuels of the Future (2010), p. 84. 16 How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market, Bentek Energy, April 16, 2010, p. 9, www.bentekenergy.com/documents/ben tek_how_less_became_more_100420-319.pdf. 17 By Meeting Renewable Energy Goal 15 Years Ahead of Schedule, Texas Shows Policies Work, Public Citizen, April 6, 2010, http://texasvox. org/2010/04/06/by-meeting-renewable-energygoal-15-years-ahead-of-schedule-texas-showspolicies-work/. 18 For background, see Peter Katel, Oil Jitters, CQ Researcher, Jan. 4, 2008, pp. 1-24.

FOR MORE INFORMATION


American Wind Energy Association, 1501 M St., N.W., Suite 1000, Washington, DC 20005; (202) 383-2500; www.awea.org. National trade association representing windpower project developers, suppliers, service providers and others in the wind industry. Cape Wind, 75 Arlington St., Suite 704, Boston, MA 02116; (617) 904-3100; www.capewind.org. Wind farm proposed in Nantucket Sound; potential to become first offshore wind-energy project in U.S. coastal waters. Clean Energy Research Centre, University of British Columbia, 2360 East Mall, Vancouver, British Columbia V6T 1Z3, Canada; (604) 827-4342; www.cerc.ubc.ca. Seeks to reduce the environmental impact of energy use. Energize Vermont, P.O. Box 605, Rutland, VT 05702; (802) 778-0660; www.energize vermont.org. Advocates for renewable energy in Vermont. Energy Information Administration, U.S. Department of Energy, 1000 Independence Ave., S.W., Washington, DC 20585; (202) 586-8800; www.eia.doe.gov. Statistical and analytical agency within the U.S. Department of Energy. European Wind Energy Association, Rue dArlon 80, 1040 Brussels, Belgium; 32-2-213-1811; www.ewea.org. Promotes use of wind power across Europe. Global Wind Energy Council, Rue dArlon 80, 1040 Brussels, Belgium; 32-2-2131897; www.gwec.net. Trade association for the international wind-energy industry. Institute for Energy Research, 1100 H St., N.W., Suite 400, Washington, DC 20005; (202) 621-2950; www.instituteforenergyresearch.org. Conducts research and analysis on the functions, operations and regulations of global energy markets. National Renewable Energy Laboratory, U.S. Department of Energy, 1617 Cole Blvd., Golden, CO 80401; (303) 275-3000; www.nrel.gov. The United States primary laboratory for renewable-energy and energy-efficiency research and development. Nature Conservancy, 4245 N. Fairfax Dr., Suite 100, Arlington, VA 22203; (703) 841-5300; www.nature.org. Opposes many wind-turbine development projects because of potential environmental consequences. Public Citizen, 1600 20th St., N.W., Washington, DC 20009; (202) 588-1000; www.citizen.org. Consumer advocacy group lobbying for renewable-energy standards. Rocky Mountain Institute, 1820 Folsom St., Boulder, CO 80302; (303) 245-1003; www.rmi.org. Think tank focusing on efficient use of natural resources. Union of Concerned Scientists, 2 Brattle Square, Cambridge, MA 02138; (617) 5475552; www.ucsusa.org. Advocacy group whose focus includes environmental issues.
Wind Power in Americas Future, op. cit., p. 6. 20 Wind Powering America, Department of Energy Wind and Water Power Program, www. windpoweringamerica.gov/wind_installed_ capacity.asp. 21 Wind in Power: 2010 European Statistics, European Wind Energy Association, February 2011, www.ewea.org/fileadmin/ewea_documents/ documents/statistics/EWEA_Annual_Statistics_ 2010.pdf. 22 White House press office, www.whitehouse.
19

gov/the-press-office/2011/01/25/remarks-presi dent-state-union-address. 23 Darren Goode, State of the Union 2011: Key senators laud Obama clean energy push, Politico, Jan. 16, 2011, www.politico.com/news/ stories/0111/48209.html#ixzz1GVTCjN1H. 24 Ibid. 25 U.S. Wind Industry: 2010 Year in Review, Sustainable Business, Jan. 7, 2011, www.sustain ablebusiness.com/index.cfm/go/news.display/ id/21684.

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Bibliography
Selected Sources
Books
Bryce, Robert, Power Hungry: The Myths of Green Energy and the Real Fuels of the Future, Public Affairs, 2010. A veteran energy journalist presents an engaging but highly critical look at sustainable-energy technologies, including wind. Evans, Robert L., Fueling Our Future: An Introduction to Sustainable Energy, Cambridge University Press, 2007. The inaugural director of the Clean Energy Research Centre at the University of British Columbia gives a balanced look at sustainable energy. Goodall, Chris, Ten Technologies to Save the Planet, Greystone Books, 2008. An expert on climate change analyzes the potential of wind and other sustainable technologies to provide energy without high carbon-dioxide emission. Naff, Clay Farris, ed., Fueling the Future: Wind, Thomson Gale, 2007. A science writer presents opposing viewpoints about controversial aspects of wind energy, such as whether it can meet future energy demand in a cost-effective manner. Parks, Peggy, Wind Power, Reference Point Press, 2010. Parks offers a concise introduction to key wind-energy issues, with plentiful graphics and quotes from leading experts. McNulty, Sheila, Renewables in the US: uneven incentives hamper growth, Financial Times, Jan. 14, 2011, www.ft. com/cms/s/0/6f5e9afc-1f71-11e0-87ca-00144feab49a.html. McNulty explains how the U.S. wind industry is hampered by uncertainty over future government policies, such as tax breaks. Wald, Matthew L., Wind Energy Bumps into Power Grids Limits, The New York Times, April 27, 2008, www.nytimes. com/2008/08/27/business/27grid.html. Wald examines the extent to which the nations limited transmission system is holding back wind-energy development.

Reports
U.S. Wind Energy Year-End 2010 Market Report, American Wind Energy Association, January 2011, www.awea. org/learnabout/publications/loader.cfm?csModule=security/ getfile&PageID=5083. A trade association provides statistics on the state of the U.S. wind industry. Wind Power: Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife, General Accounting Office, September 2005, www.gao.gov/new.items/d05906.pdf. The congressional watchdog group analyzes the potential impacts of wind farms on wildlife. Wind Power in Americas Future: 20% Wind Energy by 2030, U.S. Department of Energy, 2008, http://www1. eere.energy.gov/windandhydro/pdfs/41869.pdf. The federal agency examines the potential benefits of wind energy and the challenges of deriving 20 percent of the nations electricity from the renewable resource by 2030. Kreutzer, David, Karen Campbell, William Beach, Ben Lieberman and Nicolas Loris, A Renewable Electricity Standard: What It Will Really Cost Americans, Heritage Foundation, May 5, 2010, www.heritage.org/Research/ Reports/2010/05/A-Renewable-Electricity-Standard-WhatIt-Will-Really-Cost-Americans. A conservative think tank argues that a proposed federal renewable-energy standard would be highly expensive and endanger the economy. Logan, Jeffrey, and Stan Mark Kaplan, Wind Power in the United States: Technology, Economic, and Policy Issues, Congressional Research Service, June 20, 2008, accessed at http://assets.opencrs.com/rpts/RL34546_20080620.pdf. A concise and objective overview of the benefits and drawbacks of wind energy, focusing on technology, economics and policy issues.

Articles
Clayton, Mark, How Enormous Batteries Could Safeguard the Grid, The Christian Science Monitor, March 22, 2009, www.csmonitor.com/Innovation/Responsible-Tech/2009/ 0322/how-enormous-batteries-could-safeguard-the-power-grid. Clayton offers a comprehensive look at batteries and other storage technologies that can boost efforts to integrate more wind energy into the electrical grid. Fahey, Jonathan, How Clean Is Obamas Clean Energy Standard? The Associated Press, Jan. 26, 2011, viewed at http://abcnews.go.com/Business/wireStory?id=12771095. Fahey analyzes the benefits and drawbacks of various energy sources, including wind, that may be included under a clean-energy standard. Gurwitt, Rob, Renewable energy industry shows surprising clout, Stateline, Jan. 4, 2011, www.stateline.org/live/ details/story?contentId=539044. Gurwitt provides a fascinating look at the wind industrys clout in influencing policy makers across the political spectrum.

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CHAPTER

REVIVING MANUFACTURING
BY PETER KATEL

Excerpted from Peter Katel, CQ Researcher (July 22, 2011), pp. 601-624.

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Reviving Manufacturing
BY PETER KATEL
the gain hardly compensated for the loss of more than 2 million jobs during the 2007earing up for the 2009 recession or of more 2012 election at a than 5 million manufacturing time when millions jobs lost overall since 2001. 5 are jobless, President Obama And manufacturing itself, is envisioning a tomorrow once the American economthat looks like yesterday ic dynamo, accounted for only when manufacturing jobs 11.7 percent of gross domeswere plentiful. I see a futic product (GDP) last year. ture where we train workers In 1947 (as far back as offiwho make things here in the cial statistics go), the total of United States . . . working value added by industry with their hands, creating as manufacturing is formally value, not just shuffling defined represented slightpaper, he told Northern ly more than 25 percent of Virginia Community College the economy. 6 1 students in early June. The decline involves far The students are learning more than the ups and downs skills needed in todays of the business cycle, some computer-controlled factories, experts say. A number of which have replaced the global and domestic factors labor-intensive plants of the have contributed to a steady past. But critics on all sides decline of U.S. manufacturfault Obama for not doing ing competitiveness, impactmore to spur American maning the countrys ability to Workers produce electronic components at the Mansfield ufacturing. Labor unions and produce . . . leading innovaManufacturing plant in Dongguan, in southern China. Efforts to provide jobs for Chinas estimated 983 million small manufacturers want the tions, the Council on Comworking-age population could make it the worlds No. 1 government to take a more petitiveness said in June, in manufacturer as early as 2013. China exported active role in boosting factoa report endorsed by 32 unian estimated $366 billion in goods of all kinds ry jobs, and big-business versity presidents and directo the United States in 2010. groups want less government tors of national research cenregulation and more free-trade ters, including Los Alamos deals with other countries. National Laboratory. Above Other politicians besides Obama ufacturing sector with more employ- all, the group said, the educational syssense that voters are zeroing in on the ment opportunities is really important tem, from elementary schools to uniissue. They will say that we need . . . for loosening the middle class squeeze versities, should raise standards and to be a center for making things, not and providing people with better ac- emphasize math, science and engijust a service-sector, financial-sector cess to better jobs. 3 neering. The council is a nonpartisan The growing attention to manufac- group of union, business and acadeeconomy, House Minority Whip Steny Hoyer, D-Md., said at a late-May forum turing comes amid persistently high mic leaders working to ensure U.S. sponsored by the Center for Ameri- unemployment, with a national job- prosperity. 7 lessness rate of 9.2 percent. In numcan Progress, a liberal think tank. 2 But some experts warn that a vast The reason couldnt be simpler, said bers, 14.1 million people out of effort would be needed to bring new economist Jared Bernstein, who re- 153.4 million working-age adults workers up to technological speed. cently left the administration for the lib- are jobless, and another 8.6 million Precision manufacturing, such as eral Center on Budget and Policy Pri- can find only part-time work. 4 Germany specializes in, could potenManufacturing employment showed tially be a source of good jobs here, orities. Manufacturing workers earn about slight improvement from December 2009 says Robert Reich, Labor secretary in 20 percent more than service-sector employees, he told NPR. A stronger man- to last April, adding 243,000 jobs. But the Clinton administration and now a

THE ISSUES

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Factory Jobs Have Plummeted
The number of U.S. factory workers rose dramatically in the industrial boom after World War II, but manufacturing employment began dropping in the late 1990s in the face of foreign competition, overseas production of U.S. goods (offshoring) and the recession.
No. of jobs (in millions)

U.S. Manufacturing Employment, 1947-2011


( January gures shown)

20

15

10 1947

1953

1959

1965

1971

1977

1983

1989

1995

2001

2007

2011

Source: Current Employment Statistics Survey, Bureau of Labor Statistics, July 8, 2011

public policy professor at the University of California, Berkeley, but wed have to redesign our educational system to prepare many more young people for these sorts of jobs. Concern about education is shared across the ideological spectrum. But divisions run deep on matters as basic as the seriousness of the decline in manufacturing employment. Mark Perry, a visiting scholar at the American Enterprise Institute, a conservative think tank, notes that the automation of assembly lines and the growth of service sectors are global phenomena that have affected manufacturing sectors in all the long-industrialized countries, such as the nations of Western Europe. Manufacturing as a share of GDP is declining here but its also declining for the whole world, says Perry. Manufactured goods are falling as a share of overall income partly because the success of manufacturing has been huge increases in productivity. He acknowledges that the trend doesnt extend to the worlds most rapidly industrializing country, China. Economists at the Center for American Progress, which has close ties to

the Obama administration, note that American manufacturing is underperforming its global competitors, with the U.S. share of world manufacturing down from about 28 percent in 1970 to about 18 percent in 2008. 8 And Andrew N. Liveris, chairman and CEO of Dow Chemical Co., argues in a new book that productivity the result of machines replacing people didnt kill off manufacturing jobs in the 2000s. These job losses he writes, are primarily the result of other countries attracting American business to their shores. 9 The post2001 period coincides with Chinas full-scale entry into the global trading system. (See Asian Tigers, p. 613.) Labor union activists, along with some small-scale manufacturers and academic economists and engineers, argue that other countries take an activist approach to manufacturing policy, including by training engineers to the same skill level as their U.S. counterparts on the high-end side of manufacturing. If youre setting up an R&D facility in China or India, says T. Christopher Hill, retired vice provost for research at George Mason

University in Fairfax, Va., and a longtime science and technology policy expert, youre going to be hiring cosmopolitan, highly educated people just like you. China figures in all (and India in many) discussions of U.S. manufacturing. Just as the United States became the worlds top manufacturing power by mid-20th century, China seems to be on the way to achieving the same status in the 21st century. The Worlds Factory, the Deloitte consulting firm dubbed China in a 2003 report. By 2007, another consultant, IHS Global Insight, forecast that China could become the worlds No. 1 manufacturer as soon as 2013. The reasons include the Chinese governments relentless push to provide jobs for its huge working-age population, now estimated at 983 million. Whether China breaks world trade rules in the process by keeping its currency artificially low, for example is a matter of fierce debate. (See Chinas Currency, p. 615.) 10 Chinas exports to the United States in 2009 ran the gamut from sophisticated goods such as computer equip-

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ment (which tops the list), to relatively low-tech products such as clothing and toys. All told, China exported $296 billion in goods of all kinds to the United States (including food and lumber) in 2009. The estimate for 2010 was $366 billion. 11 Meanwhile, U.S. exports to the enormous Chinese market consist overwhelmingly of agricultural products and raw materials soybeans, scrap and waste products and resins and fibers. These categories accounted for $20.5 billion of the total $69.6 billion in U.S. exports to China in 2009. Manufactured U.S. goods shipped to China came to $11.3 billion. 12 The predominance of manufactured goods as opposed to agricultural and industrial raw materials should be a matter of national concern, says Scott Paul, executive director of the Alliance for American Manufacturing, an advocacy organization formed by the United Steelworkers union and some manufacturers. Our exports reflect very little value added by the U.S. economy, he says. In essence we are fueling the Chinese industrial machine. Business officials argue that American companies would have been irresponsible to stay out of one of the worlds most rapidly expanding markets. Sometimes it makes sense for a factory to locate in China, says Chad Moutray, chief economist for the National Association of Manufacturers. In other cases, it can locate here. That is a company-by-company decision. Those decisions may be starting to incline now in favor of American locations, the Boston Consulting Group reported last May. Wages are rising in China, and its far more advantageous to make things in the United States for U.S. consumption, says the reports author, senior vice president Harold Sirkin. But one American with an eye on his future employment at the White House is still watching China and

U.S.-China Trade Remains Unbalanced


The value of U.S. imports from China in 2010 exceeded U.S. exports by nearly $100 billion. The United States has had a negative trade balance with China since 2000.
(in $ billions)

U.S. Trade with China, 2000-2010

$400 350 300 250 200 150 100 50 0 -50 -100 -150 -200 -250 -300

2000

2005

2006

2007

2008

2009

2010

Source: Wayne M. Morrison, China-U.S. Trade Issues, Congressional Research Service, June 2011, www.fas.org/ sgp/crs/row/RL33536.pdf

U.S. exports U.S. imports U.S. trade balance

other foreign competitors nervously. I dont want the new breakthrough technologies and the new manufacturing taking place in China and India, President Obama told workers at the Allison Transmission Corp. factory in Indianapolis last May. I want all those new jobs right here in Indiana, right here in the United States of America, with American workers, American knowhow, American ingenuity. 13 As politicians and business and industry leaders confront the future of U.S. manufacturing, here are some of the questions being debated: Is U.S. manufacturing reviving? Since the late 1990s, growing numbers of U.S. firms and multinational corporations have set up factories in China, and billions of dollars worth of China-manufactured goods line American store shelves. Consequently, when the Boston Consulting Group (BCG) reported that some U.S. and multinational manufacturers, including Caterpillar and Ford,

were planning to shift some jobs back to the United States, in part because of generous incentives offered by states and counties, the conclusion attracted considerable attention. 14 Higher wages in China may cause some firms that were going to scale back in the U.S. to keep their options open by continuing to operate a plant in America, Gary Pisano, a professor of business administration at Harvard Business School, told The Economist in a dispatch on the BCG report. Months earlier, Wired, which is widely read in technology-business circles, had chronicled smaller U.S. companies growing disillusion with Chinese manufacturing. 15 No one involved in debates over the state of U.S. manufacturing disputes the reports. Nevertheless, Alan Tonelson, a research fellow at the U.S. Business & Industry Council Educational Foundation, an advocacy think tank promoting expansion of U.S.-based manufacturing, argues that examples of

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companies moving jobs back to the United States are anecdotal episodes that dont counter a more powerful offshoring trend. From the late 90s through 2008, multinationals hired more people overseas, he says, citing data from the U.S. Bureau of Economic Analysis. The agency reported that corporations reduced U.S. workforces by 2.9 million during the past decade, while adding 2.4 million workers in foreign operations. 16 Tonelson adds that rising labor costs in China may simply push corporations out of that country into other low-wage nations. It just makes good business sense, he says. When youre talking about very labor-intensive industries like garment making, theres no shortage of even worse-paid workers in places like Cambodia and Bangladesh. Analysts from the big-business camp argue that labor-intensive industries are unlikely under any circumstances to remain in the United States, because companies looking to keep manufacturing costs down can easily find lower-wage countries. Moutray at the National Association of Manufacturers cites a U.S. Bureau of Labor Statistics report that U.S. manufacturing workers earned, on average, $26.19 an hour, including benefits, in 2009. People have the perception that manufacturing is low-skilled, Moutray says, noting the relatively high pay scale. The compensation continues to exceed that of nonfarm compensation in general. A large part of that is because of the high skills required. 17 That pay advantage is likely to continue, Moutray says, because the American edge over global competitors lies in high-end production that demands skilled workers, who earn relatively high wages. Thats the kind of manufacturing we have to continue to emphasize, he says. What is attractive about American manufacturing is its productivity. As these firms expand sales to the global market, theyll need to keep hiring Americans, he says.

China and India Outpace U.S.


China and India are the worlds two most competitive manufacturing nations, according to a study by the global consulting rm Deloitte. The United States ranks fourth. The assessment includes sales, service and distribution operations. Manufacturing Competitiveness Rankings, 2010 (on a scale of 1 to 10)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. China India South Korea United States Brazil Japan Mexico Germany Singapore Poland 10.00 8.15 6.79 5.84 5.41 5.11 4.84 4.80 4.69 4.49

Source: 2010 Global Manufacturing Competitiveness Index, Deloitte, June 2010, www.deloitte.com/assets/DcomGlobal/Local Assets/Documents/Manu facturing/dtt_2010 Global Manufac turing Competitiveness Index_06_28_10.pdf

But Reich, the former Labor secretary, argues that expanding U.S. manufacturing may have smaller effects than some hope, precisely because the U.S. manufacturing sector is so highly automated. If the dollar continues to drop, and Chinas wages continue to rise, both absolutely and relative to the U.S. dollar, he says, U.S. manufacturing exports become more attractive, but that doesnt mean a lot more jobs. Reich adds that the future of manufacturing wages isnt promising ei-

ther. Unionized wages in the auto industry are half for new workers relative to more senior workers, he says, citing an agreement between U.S. carmakers and the United Auto Workers (UAW) union under which new hires are paid about one-half the approximately $28-an-hour scale for current workers. Even if some manufacturing jobs return, those jobs are not the same sort of high-wage, highbenefit jobs we used to have in manufacturing. 18 Nevertheless, Perry of the American Enterprise Institute has a different take on lowered wages for manufacturing workers. Maybe that is more realistic, he says, and it makes companies more competitive, which makes it more likely that they expand operations here rather than in Mexico or other countries. Perry, an economics professor at the University of Michigan, also argues that the declining role of manufacturing in the U.S. economy shouldnt be seen as an element of national weakness but as the inevitable result of technological advances. Its not so much that manufacturing is getting outsourced but that the cost of manufactured goods is falling, he says. Back in the late 1700s, something like 90 percent of people were employed in agriculture. Now, we only need less than 10 percent, but we spend less on food than at any time in history but no one talks about agriculture being dead. Do free-trade agreements with low-wage countries further weaken U.S. manufacturing? The decline in U.S. manufacturing coincided with the rise of free-trade agreements between the United States and a range of other countries, generally nations considered friendly to American interests. Pacts with 17 nations are now in effect. The agreements are designed to boost U.S. exports to partner countries by allowing

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Manufacturings Shrinking Share of U.S. Economy


Manufacturing accounts for only about 12 percent of the countrys gross domestic product (GDP), or less than half of its share in 1953. Until 1969, manufacturing comprised at least 25 percent of the economy.
Percentage of GDP

Manufacturing as a Share of GDP, 1947-2010


Getty Images/Scott Olson

30% 25 20 15 10 1947 1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

Source: Gross-Domestic-Product-by-Industry Accounts, 1947-2010, Bureau of Economic Analysis, April 2011, www.bea.gov/ industry/gpotables/gpo_action.cfm

U.S. companies to bid for government contracts in free-trade partner nations, for example. Likewise, the United States agrees eventually to drop tariffs against imports from the partner countries. 19 But ever since a long and intense debate leading up to the landmark 1994 North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada, critics have argued that the pacts serve above all to encourage U.S. companies to build factories abroad. Labor unions that portray free-trade agreements as vehicles for expanded offshoring are among the agreements main critics. They are playing a major part in holding up congressional approval of pacts with Colombia, Panama and South Korea. (See Free-Trade Agreements, p. 618.) Defenders, including all recent Republican and Democratic presidents and their top officials, call the pacts essential to boosting U.S. job creation by expanding markets in which U.S. companies, including manufacturers, sell goods and services. Were in a global economy, says the National Association of Manufacturers Moutray, noting the dynamism of the so-called BRIC nations Brazil, Russia, India and China. For multi-

nationals, a lot of their growth in sales is coming from selling manufactured goods to the BRIC countries, he says, contrasting them to the relatively mature U.S. market. Free-trade agreements, by that logic, play a key role in expanding opportunities for U.S. firms. Where the growth is going to come from is in trade, Moutray says. When you lower barriers, youre going to see more trade going back and forth. But the key to whether an agreement actually benefits the U.S. economy lies in the pacts details, says George Mason Universitys Hill. When countries have highly asymmetric social and economic systems, with workplace standards, environmental standards and wage-and-hour standards that are very different, he says, thats where problems can arise. A deeper source of these problems, Hill argues, is that free-trade agreements often are proposed for political, rather than economic, reasons. He cites the proposed pact with Colombia, which has been awaiting congressional action for seven years. Making an agreement with Colombia is a way of saying, in part, We appreciate the enormous effort youve made to bring drug cartels

under control, and to open your markets, he says. But Perry of the American Enterprise Institute argues that the proposed Colombia deal makes considerable economic sense. It would immediately eliminate Colombian tariffs on 80 percent of American consumer and industrial products exported to that country. 20 If Caterpillar is selling to Colombia, the more they sell, the higher the profits, Perry says. The Illinoisbased heavy-equipment maker strongly backs the proposed pact. The need to step up exports makes trade deals essential, Perry says. The more [trade agreements] we have, the easier it is for our manufacturers to export, he says. That means more output and more jobs here. Yet, argues economist Charles McMillion, the evidence is clear that freetrade pacts damage U.S. manufacturing. After NAFTA, weve gone from a strong manufacturing surplus to a record manufacturing deficit, with Mexico, says McMillion, president of MBG Information Services, a Washington-based economic consulting firm. U.S. Commerce Department data he analyzed show trade surpluses in manufactured goods of $5.8 billion, $7.9 billion and

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$1.7 billion for the three years before NAFTA took effect and deficits of $64.2 billion, $74.6 billion and $64.3 billion in 2006-2008. 21 Should the government actively promote U.S. manufacturing and discourage further offshoring? Debate on U.S. manufacturing reaches its sharpest point when the question is what, if anything, the federal government should do to ensure the viability of an important economic sector, such as auto manufacturing. Big corporations and conservative economists argue that the best thing the government could do would be to lower and simplify corporate taxes. Historically, the federal government didnt hesitate to protect developing industries from foreign competition. And free-trade pacts strongly supported by export-oriented businesses themselves represent a form of government action designed to boost business activity, hence profitability. U.S. trading partners routinely make demands on U.S.-based multinationals who want to set up operations. James McGregor, an expert on foreigners doing business in China, told NPR that Chinese officials arent hesitant to exact a price for access to their market. The policy theyve come up with is to force foreigners to hand over their technology if they want to do business here, he said, speaking from China. In high-speed rail, in a lot of green energy, even in electric automobiles, theyre telling companies, If you want to do business here, you come in, you take a minority share in a joint venture . . . and you hand over your technology. What is worrisome for the companies is that theyre creating their future global competitors. 22 Nevertheless, McGregor also pointed out that the vast scale of the Chinese consumer market proves irresistible to U.S. and other foreign businesses. KFC, he said, is opening

Union Members Earn More Than Non-Members


Union factory workers earn about 10 percent more than nonunion workers. Of the 13 million Americans employed in the manufacturing sector, only about 11 percent 1.4 million are union members. Median Weekly Earnings of Full-time Manufacturing Workers, 2010
$1,000 800 600 400 200 0

$828

$759

Union members

Nonunion

Manufacturing Workers in Unions


(In millions)

15 12 9 6 3 0

13.2

1.4
Total U.S. Union members factory workers

Sources: Median Weekly Earnings of Full-Time Wage and Salary Workers by Union Afliation, Occupation, and Industry, Bureau of Labor Statistics, January 2011, www.bls.gov/news. release/union2.t04.htm; Union Afliation of Employed Wage and Salary Workers by Occupation and Industry, Bureau of Labor Statistics, January 2011, www.bls.gov/news. release/union2.t03.htm

a restaurant in China every day, and Wal-Mart one store a week. 23 Analysts whose perspectives tend to reflect corporate interests and

who dismiss the idea that U.S. manufacturing is eroding reject what they view as heavy-handed federal programs to spur American manufacturing growth. But they say they would welcome some government measures. Daniel J. Ikenson, associate director of trade policy studies at the libertarian Cato Institute think tank, told a House panel last March that sweeping elimination of tariffs on imported materials and products used by U.S. manufacturers would keep U.S. goods competitive with those from Canada and Mexico. Our bolder North American neighbors, he said, have instituted permanent liberalization across the spectrum so as to afford their producers lower costs and an operational environment of greater business certainty, he said. 24 Ikenson urged Congress to eliminate what he called stifling government regulations, echoing a longtime argument of business associations that complying with voluminous environmental and workplace-safety rules drives up costs and discourages manufacturing expansion. Forward-looking governments around the world are wooing investment in R&D facilities [and] high-end manufacturing plants, he testified. 25 Other experts argue, however, that the shrinking of American manufacturing capacity demands far more direct government measures. Singapore, South Korea, Taiwan, Germany, Sweden all have pretty aggressive government engagement with their manufacturing firms, says Hill, the former George Mason University vice provost. These governments provide R&D support, manufacturing demonstration centers and smarter kinds of education, Hill says. A lot of that isnt being done in this country. The reason for the lack of U.S. government support, Hill argues, is that the long-standing conservative view that the federal government should stay out of economic policy

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has proved more durable than pro- porting them, says Paul of the Algrams that occasionally do get cre- liance for American Manufacturing. The ated. 26 These things get adopted, rest of the world has a value-added usually by Democrats, get resisted in tax, which is rebatable for exports. Congress, and as soon as the resistPaul argues that other sectors of the ing power gets the upper hand, they economy receive a variety of tax benreduce or kill them, Hill says. efits designed to stimulate their busiBut Perry of the American Enter- nesses. There are enormous advanecognition came early for Ameriprise Institute says policies specifical- tages for oil and gas, which receive can manufacturing prowess. At an ly aimed at promoting manufacturing outsized benefits for exploration, he international industrial exhibition in Lonwould by definition be don in 1851, U.S. firearms u n f a i r. S u b s i d i e s makers showed off an inwould have to come novative way to make guns from someplace, he from interchangeable parts says. And if we stimshaped by machines. 27 ulate one sector, we In the years that folhave to de-stimulate lowed the London exhibianother. tion, British manufacturers A better plan, Perry trooped to the United States says, is to create a more to learn how to use interbusiness-friendly enchangeable parts to build vironment in general. consumer and industrial Apart from free-trade equipment, including clocks, agreements and immiwatches and locks. gration policies that enDuring the same period, couraged foreign scione of the United States entists and technology most successful and celeexperts to work in the brated manufacturers, United States, he says, Samuel Colt, built a factoOne way would be ry in England to meet its to simplify taxes, eidemand for the revolver he ther by reducing dehad invented the first ductions and reducing firearm designed to fire the rate in larger tax several rounds in a row brackets, or going to without reloading after each a flat tax. A flat tax shot. The factory used mais fixed, without going chines made in Colts home up or down according state of Connecticut. 28 to the amount of The New England origin money being taxed. of Colt and other innovaPresident Obama addresses workers at the Allison Transmission Advocates of govtors was no coincidence. In plant in Indianapolis, Ind., last May 6. I dont want the new ernment stimulus of the pre-Civil War period, breakthrough technologies and the new manufacturing taking manufacturing agree about half of the 143 implace in China and India, he said. I want all those new jobs right that at least one portant inventions patented here in Indiana, right here in the United States of America, with American workers, American know-how, American ingenuity. change in tax law in the United States were would represent a conceived in New England, crucial step in enwrites Pulitzer Prize-winning couraging manufacturers to keep op- says, by way of example. Manufac- historian James McPherson. 29 Yet the erations in the United States, or to turing is almost unique in its lack of region accounted for less than 25 permove them back from overseas. some sort of positive federal involve- cent of the U.S. population. There is no tax benefit for making ment. It is one sector of our econoOf all the factors behind New Engthings in the United States and ex- my that is mostly laissez-faire. lands inventiveness, education was

BACKGROUND
Giant in the Making

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the indispensable ingredient. By 1850, McPherson writes, New England boasted a 95 percent adult literacy rate, extraordinarily high for the time. That background made them more adaptable to change, some historians reason, and more capable of devising new ways to produce goods. In the South, by contrast, literacy levels were lower 80 percent among white people and 10 percent among slaves. Eighty percent of the total labor force, slaves included, worked in agriculture double the percentage in Northern states. Manufacturing barely existed in the South, even when it came to making textiles from the regions No. 1 cash crop, cotton. Just before the war started in 1861, 97 percent of U.S. firearms, were manufactured in Northern states, along with 94 percent of the cloth, more than 90 percent of boots and shoes and 93 percent of the pig iron the blast furnace-produced raw material of steel. The drastic imbalance in Northern and Southern manufacturing capacity played an enormous role in the Norths victory in 1865. on imported British steel protected U.S. manufacturers. Across industries, manufacturing became a massive, labor-intensive process starting in the 1880s. Factories, which had employed 200 workers at most, vastly expanded their workforces. By 1890, according to one count, the United States had 79 factories of at least 2,000 employees each. As industrialization gathered strength, by 1900, 31 percent of the workforce was engaged in manufacturing, mining or construction. Over the course of the century, that share would decline, 100 years later, to 19 percent, as a consequence of automation. 31 The big, new factories adopted the continuous process system that streamlined manufacturing into a single series of operations. Increasingly, machines at the heart of the process were powered by electricity. In 1890, 350 electricity generating stations were running across the country. Another giant of industrial manufacturing took the continuous-process method further. In 1910, industrialist Henry Ford built an automobile factory in Highland Park, Mich., a Detroit suburb, that featured a major innovation a moving assembly line that carried car frames past workers. By 1914, the factory was turning out 1,000 cars a day, and Ford was building 26 more assembly-line factories in other cities. The Ford car itself represented another aspect of Fords vision. Automobiles, in his view, should be a mass-consumption product instead of a custom-built luxury item. Automotive power got another boost from World War I, which the United States entered in 1917. Trucks proved crucial in the war. Afterwards, they played a growing role in civilian longhaul transportation. The war was also crucial to major advances in airplane technology, which helped lead to a postwar boom in the formation of airlines that transported mail and then passengers. Industry, in turn, kept on improving aircraft and engine design. 32 The spread of electric power throughout cities meant the development of a vast, new market for manufactured consumer goods. By 1930, the overwhelming majority of dwellings in most major cities had electricity, and radios, irons, toasters, vacuum cleaners and washing machines were sold by the millions. Somewhat later, electric refrigerators also became a musthave in U.S. homes, replacing the oldfashioned ice-box. The Great Depression, which began in 1929 and deepened through the 1930s, stifled manufacturing, but not permanently. Mass unemployment took a terrible human toll but also gave a powerful impulse to labor unions seen as defenders of workers rights. Unions had been steadily gaining strength since the late 19th century, as workers pushed back against unsafe and exploitative conditions. These included long hours the average manufacturing workweek in 1900 was 53 hours and factory work began at age 10. Data from the only two industries that kept safety statistics point to a high level of workplace dangers in the heyday of industrialization. Railroad accidents killed 2,550 workers in 1900, and almost 1,500 coal miners died in mining accidents. 33 Manufacturing didnt recover from the Depression until World War II, which the United States entered in 1941 (two years after the conflict began). The war sparked a massive industrial revival. Airplanes, ships, tanks, transport vehicles, weapons and other war materiel poured out of American factories and shipyards. The vast output included 127,766 bombers, fighters and transport planes and 5,777 transport ships. 34
Continued on p. 612

A Giant Awakens
he 85 years following the end of the Civil War in 1865 saw the United States transformed into the worlds manufacturing powerhouse. 30 A crucial early event was the creation of integrated steel mills. Consolidating operations that had been carried out at separate plants, the integrated mills produced iron, refined it into steel and shaped it into parts needed for industry, such as railroad tracks. The first integrated plant opened in 1875. Soon after, the growing supply of U.S. steel enabled speedy completion of a national railroad network, which made possible the wide distribution of manufactured goods and raw materials. A tariff of nearly 100 percent

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Chronology
1790s-1860s 1947-1970 Early Americans, especially America reaches summit of
New Englanders, show aptitude for manufacturing. 1791 Eli Whitney invents cotton gin, revolutionizing U.S. agriculture. 1851 U.S. firearms maker Samuel Colt wows London industrial exhibition with guns made from identical, interchangeable parts. 1860 Almost all of the 143 inventions patented by Americans thus far came from non-slave states. 1865 Civil War ends with victory for Union, in part because of Norths manufacturing power.

global manufacturing power and innovation, but competition from abroad looms. 1947 Invention of transistor is a milestone in early development of computers. 1955 U.S. carmakers supply 96 percent of domestic car market. 1965 Process for etching integrated circuits on silicon chips is perfected. 1969 Computer network created by researchers at national laboratories later becomes the Internet. . . . Japanese steelmakers acquire 15 percent of U.S. market share.

American Free Trade Agreement (NAFTA), lowering tariffs and other trade barriers between the United States, Canada and Mexico. 2001 China is admitted to World Trade Organization. . . . President George W. Bush grants China permanent normal trade status with U.S. 2002 U.S. trade deficit with China grows to $103 billion up from $3.5 billion four years before. 2003 Asian carmakers supply 32.5 percent of U.S. car market. 2007 United States signs free-trade agreements with South Korea and Panama, which follow pact signed with Colombia one year earlier; congressional approval stalls after union-led political opposition. 2010 Manufacturing accounts for only 11.7 percent of U.S. gross domestic product. 2011 Manufacturing job losses since 2001 reach 5 million, including 2 million lost in 2007-2009 recession. . . . President Obama tours factories and community colleges to promote high-tech manufacturing, technical training. . . . Obama administration promises business community to eliminate burdensome and unneeded regulations. . . . Lawmakers from both parties in both chambers introduce legislation that would force U.S. action against China for allegedly manipulating its currency. . . . Obama urges Boeing Co. and International Association of Machinists to settle conflict over jobs relocated to a nonunion plant in South Carolina.

1870s-1945 1970s-Present
U.S. rapidly industrializes, becoming global manufacturing behemoth. 1875 First steel plant opens with all manufacturing processes centralized under one roof. 1910 Henry Ford revolutionizes automobile manufacturing and marketing, with first moving assembly line and affordable prices. 1930 Electrification of U.S. cities spurs development of appliances. 1939-1945 Manufacturing expands during World War II. Major new foreign competitors challenge signature U.S. manufacturing industries. 1979 Japanese carmakers gain 13.1 percent of U.S. market as American-made gas guzzlers lose popularity. 1981 Voluntary export agreement with Japan temporarily reduces number of Japanese cars exported to U.S. 1990 Foreign-owned car factories in the United States produce 2 million vehicles for domestic market. 1994 After an intense, years-long political fight, Congress approves the North

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Where Have All the Skilled Workers Gone?


The people out of work just dont match the types of jobs here.

f American manufacturing is eroding, as some experts say, Lee Combs says he knows one reason: Young people are ill-prepared to work in the field. The high schools, the colleges around here, theyre just not training people for manufacturing, says Combs, who owns and runs SC Manufacturing Inc., a machine shop in Akron, Ohio, that produces parts for the steel, oil and gas and other industries. Everybody has to be a lawyer; nobody wants to make things. Four years ago Combs grew so concerned about the scarcity of qualified workers that he founded his own school. The Akron CNC Training Center offers a four-month course in operating the computer numerical control devices at the heart of modern manufacturing. Operators program and monitor CNC machines as they transform metal or other material into precisely shaped parts. Even furniture makers are now using CNC equipment. 1 The center runs day and evening classes of 10 to 15 students each. The course costs $4,100. Before graduation, each [student] had a job, Combs says. His daughter, Laurie Norval, runs the school. Most of the students, who include a small number of women, range in age from 30 to 45. Typically, they found themselves jobless as the recession took its toll.

Combs school operates as part of the state-licensed Cleveland Industrial Center, established by another machine shop in 1993 in response to the same manpower problem that Combs cites. 2 His frustration grew out of his steadily increasing need for skilled workers. Theres so much work out there its incredible, he says. No one can find help. Wages are going up, companies are stealing workers from other companies. Combs acknowledges that his experience is hard to reconcile with high levels of joblessness. But most people looking for work, he says, dont have the training or experience needed to do the skilled work his business requires. Akron, historically a tire-manufacturing center, lies within an industrial zone centered in Cleveland. More than 40,000 manufacturing workers in the area lost their jobs in the recession. Manufacturers that survived, or are starting up, arent looking to recreate the old days of assembly-line work. Were not going to employ thousands of people in manual labor again, Combs says. Well never beat China for just labor. But Asian competitors who targeted his industry, Combs said, affected only a segment of it. China manufacturing works if youre making a half-inch bolt that hasnt changed in years, he says. But if youre upgrading, you cant get a response from the shops there, and the quality is not there on a consistent basis.

Continued from p. 610

Postwar Innovation
uring the peacetime boom that followed the end of the war in 1945, the newly prosperous United States experienced huge demand for consumer goods of all kinds, from cars to television sets. In the late 1940s and the 50s, badly battered industrialized countries were still recovering from the war, leaving U.S. manufacturers with the American market, and much of the global market, to themselves. 35 As late as 1963, U.S.-manufactured industrial products accounted for 40 percent of the world market an extraordinary share for one country. The postwar period of relative peace (numerous conflicts flared but not another major war) came at the price of the Cold War with the Soviet Union. From a manufacturing

point of view, however, the nucleartinged hostility nourished Americas military-industrial complex, which helped produce a series of worldchanging technological innovations. Starting in 1953, when IBM built the first electronic computer, big customers for the machines included the military, which used them in the fledgling space program and in designing ballistic missiles and nuclear submarines. The early computers were huge, nearly room-sized affairs, and attention soon shifted to making them smaller and more powerful, but less powerhungry. The first solution lay in transistors, which replaced the larger, electricity-gobbling and burnout-prone glass vacuum tubes. In 1954, a design refinement allowed transistors to be made of cheaper and more plentiful silicon. Then, in a series of enormous advances in 1958, 1962 and 1965, en-

gineers devised methods for etching integrated circuits which combined the functions of transistors and other components on silicon chips. 36 The circuits were first used in computers for the military. Defense needs also played a part in the development of Arpanet, precursor of the Internet, created in 1969 to link computers used in government research projects. Nongovernment users gained access in the early 1970s. The Cold War also helped propel the U.S.-led effort to rebuild the warshattered economies of Western Europe and Japan. U.S. officials and their European counterparts wanted to rapidly create conditions for restoring prosperity and social tranquility, to ensure against discontent that the Soviet Union could exploit. In addition, postwar officials wanted to design a global trading system that would prevent the outbreak of the kinds of commercial

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Combs is hardly a dispassionate observer on the issue of quality control in Chinese machine shops. But hes not the only machine-shop owner who has been lamenting a scarcity of workers. An executive of Astro Manufacturing and Design, in Eastlake, Ohio, outside Cleveland, told The New York Times last year that his firm was searching for six CNC machinists. But after combing through 50 resumes, the personnel office was still hunting. 3 A pharmaceutical manufacturer that uses computer-controlled machines also found skills inadequate among the vast majority of job-seekers. You would think in tough economic times that you would have your pick of people, said Thomas J. Murphy, CEO of Ben Venue Laboratories, a contract drug manufacturer for pharmaceutical companies. But the firm hired only 47 of 3,600 applicants for jobs that pay about $31,000 a year. 4 And the chief executive of a nonprofit that is trying to promote the development of medical technology in the Cleveland area also noted the mismatch between jobs and job-seekers. The people that are out of work just dont match the types of jobs that are here, open and growing, Baiju R. Shah, told The Times. 5 Still, in a labor climate afflicted simultaneously by unem-

ployment and skill shortages, Combs says his small school has no trouble filling its classrooms. We dont advertise, he says. Word of mouth is the best. Word of the school may travel especially quickly because in another paradox CNC training is scarce, despite the need. Most of the high schools have gotten rid of machinist training, Combs says. Weve been talking about this in Akron in machine shop groups for years, and nobody listens. Everybody wants their little Johnny to go to college. And yet, Combs says, a college graduate who finds work shouldnt count on it lasting. Who gets laid off first? Its not the machinist, I guarantee you. Peter Katel
David A. Keeps, Shape of things to come, Los Angeles Times, Jan. 4, 2007, p. F1, http://articles.latimes.com/2007/jan/04/home/hm-future4. 2 About Us, Cleveland Industrial Training Center, undated, www.cleveland industrialtraining.com/aboutus.html. 3 Quoted in Motoko Rich, Jobs Go Begging As Gap Is Exposed In Worker Skills, The New York Times, July 2, 2010, p. A1, www.nytimes.com/2010/07/02/ business/economy/02manufacturing.html. 4 Quoted in ibid. 5 Quoted in ibid.
1

rivalries that helped set the stage for both world wars. Both efforts succeeded well enough that Western Europe and Japan would soon become major players in the global economy that began to emerge in the final decades of the 20th century. Competition from Asia extended all the way into the U.S. domestic market.

Asian Tigers
he first challenge came from Japan, which was developing its own steel industry. In the 1960s, American steelmakers failed to invest in new technology. Consequently, by the late 1960s, imported Japanese steel supplied 15 percent of U.S. demand, a share that rose to about 20 percent by 1988. 37 The U.S. steel industrys problems may have been invisible to most Amer-

icans outside of steel towns such as Pittsburgh and Youngstown, Ohio, which were directly affected. But no one could miss the transformation of the American auto market. After major oil and gasoline price increases in the 1970s, a growing number of consumers opted for cars powered by four-cylinder engines a Japanese specialty. Yet U.S. carmakers kept turning out roomy gas guzzlers powered by six- or eight-cylinder engines. As early as 1979, Japanese imports accounted for 13.1 percent of U.S. motor vehicle sales (Volkswagen and other German companies accounted for 3 percent). By 2003, Asian manufacturers, a group that now included Korean companies, accounted for 32.5 percent of the U.S. vehicle market. 38 The trend so alarmed industry and government officials that the United States negotiated a voluntary export agreement with Japan. The four-year

deal, signed in 1981, effectively cut back from 2 million to 1.68 million, initially, the number of fuel-efficient Japanese cars exported to the United States. A similar deal in 1986 covered Japanese semiconductors and other key components of high-tech devices, which were becoming widely available. Foreign carmakers, meanwhile, began setting up factories in the United States after the export agreement expired. By 1990, they were producing more than 2 million vehicles a year. In 2000, foreignowned factories produced more than 4 million vehicles. 39 U.S. carmakers foreign activities soon became a major focus of congressional debate over the proposed North American Free Trade Agreement (NAFTA), which sought to create a European Union-style continental trading partnership between the United States, Canada and Mexico. U.S. auto firms were already active in both neighboring

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New Boeing Plant Tests Souths Manufacturing Strategy


Federal government alleges effort to avoid paying union wages.
outhern states have been flying high as destinations for U.S. and foreign factories, but a conflict over a new Boeing Co. airplane plant in North Charleston, S.C., threatens to bring the Souths manufacturing strategy back down to Earth. The federal agency that polices unfair labor practices has charged that Boeings opening of a production line for its new 787 Dreamliner passenger jet outside the companys unionized Pacific Northwest factories amounts to illegal retaliation against a labor union. The new $900 million, 1,200-employee South Carolina plant opened this year. 1 The National Labor Relations Board (NLRB) alleged that Boeing was retaliating against the International Association of Machinists and Aerospace Workers (IAM) for past strikes at Boeings main plant in Everett, Wash., and at plants in Oregon. Boeing denies the charge, arguing that it seeks to add jobs in South Carolina without eliminating any from its older manufacturing sites in the Pacific Northwest. The politically charged case could have huge consequences for Southern states seeking to lure manufacturing jobs from labor-friendly localities in the North and West. South Carolina and seven other Southern states have union membership rates of less than 5 percent of their public- and private-sector workforces. In Washington state, by contrast, 19.4 percent of the workforce is unionized. 2 The pay differential between union and nonunion labor forces is significant, too. Unionized fulltime workers in Washington state had median weekly pay of $917; the median rate for the non-unionized workers was $717. 3 NLRB Acting General Counsel Lafe Solomon filed the allegation against Boeing last April after a complaint by the IAM. The action prompted a wave of criticism against Solomon and the Obama administration. I was a reluctant issuer of this complaint, Solomon told the House Oversight and Government Affairs Subcommittee. I wanted it settled. I thought it was in everybodys best interest to be settled. The parties have a long-standing relationship with each other. . . . And I would have preferred them working this out. 4

President Obama, whose chief of staff, William M. Daley, was a Boeing board member, as was Commerce secretary nominee John Bryson, made clear that he too would like the case settled without further litigation. What defies common sense is the notion that we would be shutting down a plant or laying off workers because labor and management cant come to an agreement, Obama said at a June 29 press conference. 5 The battle over Boeing is taking place as states and regions are competing ever more intensely for manufacturing jobs after U.S. companies offshored thousands of jobs to other countries. The competition often pits states with right to work laws that discourage unionization against those with laws that make it easier for unions to organize factories and other job sites. South Carolina and all other Southern states are in the right to work camp. Washington state and Oregon are union strongholds. 6 The NLRBs Solomon said in the complaint that Boeing made the move because of five IAM strikes since 1977, the most recent in 2005 and 2008. He said the company was hitting back at workers who took part in the strikes and aimed to discourage these and/or other employees from engaging in these or other union . . . activities. As evidence, Solomon cited statements by Boeing executives, including one in which President and CEO Jim McNerny said in a conference call that the South Carolina decision was due to strikes happening every three or four years in Puget Sound. 7 Boeing, in its official response, argues that the South Carolina operation would be an expansion that wouldnt cost any jobs in the unionized plants in the Pacific Northwest. And even if Boeing established the South Carolina operation to protect against future strikes, that action would not be evidence that the decision to place the second assembly line in North Charleston was designed to retaliate against the IAM for past strikes, the company said. 8 The NLRB began hearings in June in Seattle on its complaint. 9 Meanwhile, politicians and advocates on both sides of the business-labor divide were arguing over the cases possible effects on the Souths manufacturing strategy. We should have another wave of suppliers headed to the Southeast, Republican Sen. Lamar Alexander of Tennessee said

countries and argued that expanding trade between the three nations would boost employment. Following a drawnout political battle between unions and big-business interests in the late 1980s and early 90s during the George H. W. Bush administration, Congress approved the agreement in 1994 during the Clinton administration. Another major trade agreement came in November 2001, when China

became a member of the World Trade Organization (WTO), a global system that lays out rules and standards of fair and unfair trading practices. A month later, President George W. Bush granted China permanent normal trade status, which he said would open Chinas vast market to American products. 40 The new trade agreements capped Chinas opening to both domestic capitalism and to large-scale investment

by foreign corporations, a process that began in 1978 and expanded in stages throughout the 1980s and 90s. By 1988, American companies were exporting $5 billion worth of merchandise to China, while U.S. imports of Chinese products totaled $8.5 billion. As of 2002, the trade gap between the two nations had mushroomed from $3.5 billion to $103 billion. 41

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in response to the NLRB 1 Steve Wilhelm, Boeings new Southcomplaint, which he said ern workplace gears up to show that its the future, Puget Sound Business would freeze companies, Journal, June 10, 2011, (no page numsuch as these suppliers, who ber noted); Keith Laing, Despite lawsuit, Boeing opens SC plant, The Hill, might be thinking about June 10, 2011, http://thehill.com/blogs/ expanding into a right-totransportation-report/aviation/165787work state. 10 despite-lawsuit-boeing-opens-south-caro lina-787-plant. But Rep. Dennis Kucinich, 2 Union affiliation of employed wage a liberal Democrat from and salary workers by state, U.S. BuOhio, argued that Boeing reau of Labor Statistics, updated Jan. 21, Boeing will assemble its 787 Dreamliner passenger jet at 2011, www.bls.gov/news.release/union2. was trying to exploit ecothis new $900 million plant in North Charleston, S.C. t05.htm. nomic anxieties in compet3 Union Members Summary, U.S. Buing states. Its Boeing that reau of Labor Statistics, Jan. 21, 2011, has pitted one state against the other, Kucinich said. Its Boeing www.bls.gov/news.release/union2.nr0.htm. thats pitting one group of workers against another at a time of 4 House Oversight and Government Reform Committee Holds Field Hearing great economic uncertainty and at a time when corporate profits on Unionization and Regulation Issues . . . , CQ Congressional Transcripts, June 17, 2011. generally are rising during a jobless recovery. 11 5 Quoted in Michael D. Shear, Obama: Republican Leaders Must Bend on The South has been a manufacturing magnet long before Taxes, The New York Times, June 29, 2011, http://thecaucus.blogs.nytimes. Boeing arrived. 12 Nissan Motor Co. opened a Tennessee forklift com/2011/06/29/obama-republican-leaders-must-bend-on-taxes/?hp. 6 distribution center in 1977, and a decade later Japanese automakers 7 National Right To Work Committee, (map), undated, www.nrtwc.org/. Complaint Hearing, and other companies operated at least 56 factories in the state. Board, Case and Notice of April 20, before the National Labor Relations 19-CA-32431, 2011, pp. 4-6, http://seattletimes. In 1985, General Motors located its Saturn car factory in Spring nwsource.com/ABPub/2011/04/20/2014824340.pdf. Hill, Tenn. (The Saturn line was discontinued in 2009, but GM 8 Answer, before the National Labor Relations Board, May 4, 2011, www.deseret news.com/media/pdf/468907.pdf. uses the factory for other products.) BMW opened a factory in 9 Phuong Le, Spartanburg, S.C., in 1993. The same year Mercedes-Benz picked sociated Press,Hearing begins in labor complaint against Boeing, The AsJune 14, 2011. 13 Vance, Ala., as the site of an SUV factory. 10 Quoted in Dave Flessner, Lamar Alexander touts Tennessee, Chattanooga Kia, the Korean carmaker, opened a $1 billion factory in Times Free Press (Tennessee), May 24, 2011, p. C1. West Point, Ga., in 2009, hiring 2,500 workers. Chris Cummiskey, 11 House Oversight and Government Review Subcommittee, op. cit. 12 John Holusha, New G.M. Plant Site Linked to Shift in Population, The Georgias economic development commissioner, said that with New York Times, July 31, 1985, p. A8. employment by supply firms added, the Kia plant was re- 13 Doron P. Levin, What BMW Sees In South Carolina, The New York Times, sponsible for 20,000 jobs. 14 April 11, 1993, Sect. 3, p. 5; Donald W. Nauss, Mercedes to Build Plant in Yet, some note that just because a manufacturer locates a Alabama, Los Angeles Times, Sept. 30, 1993, http://articles.latimes.com/199309-30/business/fi-40474_1_rural-alabama. plant in the South doesnt mean the jobs will be there forever. 14 Job Creation and Economic Growth, Subcommittee on Commerce, ManIn West Point, some longtime residents remember when textile ufacturing and Trade, House Energy and Commerce Committee, written tesplants shut down and moved the jobs to Asia. Weve been timony, March 3, 2011. there, said Jimmy Norred. This place was almost desperate. 15 15 Quoted in Julia Bauer, Georgia town knows Michigan pain, Kalamazoo Peter Katel
Gazette (Michigan), Sept. 12, 2010, p. F1; Julia Bauer, Union shops hindering job growth?, Bay City Times (Michigan), Sept. 5, 2010, p. A1.

CURRENT SITUATION
Chinas Currency

roposals to boost U.S. manufacturing tend to fall into either the liber-

al Democratic or conservative Republican category. But one issue brings liberal Democrats together with some conservative Republicans, despite their disagreements about nearly everything else. In the view of these unlikely allies, China keeps the value of its currency, known as the yuan, or renminbi, artificially low, measured against the dollar, so that Chinese exports will be cheaper, and hence sell better. Com-

peting U.S. manufacturers, the argument goes, suffer as a result. China has been given free rein to manipulate its currency for far too long, with hundreds of thousands of American jobs lost and unsustainable global trade imbalances as a result, Rep. Sander Levin, D-Mich., said last February when he introduced the Currency Reform for Fair Trade Act of 2011. It would toughen existing law by requiring the

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Boeing Co.

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nipulator. The Treasury federal government to Department, in a bianimpose duties in nual report to Congress effect, import taxes on Chinas currency, noted on goods from that the Chinese governcountries that keep ment had allowed the their currencies undervalue of the yuan to rise valued. 42 5 to 6 percent. 47 The House bill has 110 Democratic That increase still left and 46 Republican the Chinese currency cosponsors. An idensubstantially undervaltical Senate bill introued, the department duced by Sen. Shersaid. But the report conrod Brown, D-Ohio, cluded that the underalso has a bipartisan valuation wasnt extreme group of cosponsors, enough to be categothough an imbalrized as manipulation, anced one, with which could have trigPresident Bill Clinton signs the North American Free Trade Agreement nine Democrats, two gered retaliation by the (NAFTA) between the United States, Mexico and Canada on Dec. 8, Republicans and United States in the form 1993. Critics, including labor unions, argue that such pacts encourage one independent of tariffs. 48 U.S. companies to build factories abroad. They are resisting congressional approval of U.S. pacts with Colombia, Panama and An economist who signed on. South Korea. Defenders, including all recent Republican and follows the issue closeSomewhat weakDemocratic presidents, say trade agreements boost U.S. job creation by ly said the administraer Republican supexpanding markets in which American companies, tion seemed to have port for cracking including manufacturers, sell goods and services. calculated that quiet down on China reflects a business community split. Small (a Democrat who advised Republican diplomacy would work better. I smell and medium-sized manufacturers back Sen. John McCain of Arizona in the a deal here, C. Fred Bergsten, direca hardline approach. Most large cor- 2008 presidential election) called tor of the Peterson Institute for Interporations, with big operations in China, Chinas currency policy the most crit- national Economics, told The New York shy away from tough action, fearing ical barrier to free trade by a U.S. Times, deafening silence from the Americans in return for, maybe, some a trade conflict. They tend to support trading partner. 45 But Alex Brill, a research fellow at kind of commitment from the Chinese U.S. litigation against China in the World the conservative American Enterprise to let the rate move. 49 Trade Organization (WTO). 43 That division was evident at a Joint Institute, made no mention of Chinas Economic Committee hearing in June. currency. Jay Timmons, president and One of two lawmaker witnesses, De- CEO of the National Association of mocratic Sen. Debbie Stabenow of Manufacturers (NAM), whose board Michigan, condemned China for break- members include officials from major he Obama administration is telling ing international trade rules. Repub- multinational corporations, referred manufacturing executives that the lican Rep. Charles Bass of New Hamp- briefly to the issue. The associations White House feels their pain in dealing shire, on the other hand, argued against manufacturing strategy, which Timmons with federal regulations on environmental the view that manufacturing-sector cited, does raise Chinas currency pol- protection and consumer and workproblems grow out of an unfair play- icy, but only in general terms: It calls place issues. President Obama directed ing field with our trading partners. 44 for a trade policy that, among other his staff to identify regulations that are Of the other witnesses, Paul, of the things, reduces distortions due to cur- out-of-date, unnecessary, excessive or in Alliance for American Manufacturing, rency exchange rates. 46 conflict with other rules. 50 The Obama administration has also co-founded by the steelworkers union, Sometimes you cant defend the devoted considerable attention to been handling the issue cautiously. In Feb- indefensible, White House Chief of what he called Chinas currency ma- ruary, days before lawmakers introduced Staff William Daley said at a June nipulation and its effects on U.S. man- the crackdown bills, the administration de- meeting convened by the NAM. 51 ufacturers. And economist Mark Zandi clined to cite China as a currency maContinued on p. 618

Easing Regulations

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AFP/Getty Images/Paul J. Richards

At Issue:
Do proposed free-trade agreements threaten U.S. manufacturing?
yes

ALAN TONELSON
RESEARCH FELLOW, U.S. BUSINESS AND INDUSTRY COUNCIL
WRITTEN FOR CQ RESEARCHER, JULY 2011

JAY TIMMONS
PRESIDENT AND CEO, NATIONAL ASSOCIATION OF MANUFACTURERS
FROM TESTIMONY BEFORE THE JOINT ECONOMIC COMMITTEE, JUNE 22, 2011

he economic acid test of any U.S. trade agreement is whether it promotes the nations prosperity on net, or is likely to do so. According to this common-sense standard, the proposed U.S. free-trade agreements with Korea an industrial powerhouse and with Colombia and Panama look like clear losers, and doubly so when it comes to American domestic manufacturing. And since domestic manufacturing revival is central to Americas recovery hopes because of the sectors strong record of creating high-wage jobs and fostering innovation any trade deals likely to weaken manufacturing should be rejected by Congress. Quantifying the economic impact of individual trade agreements is difficult at best. But one set of conclusions seems reasonably uncontroversial. If trade deals result in U.S. trade deficits, or worsen Americas trade balances, they detract from growth. If they result in trade surpluses or improve the nations trade balances, they add to growth. Further complicating analysis: Trade deals dont determine trade balances by themselves. Domestic conditions like growth rates and interest rates also matter. Because the agreements now before Congress are prospective, the evidentiary jury is still out. But Washingtons trade diplomacy record over many decades, and long-standing approaches that shaped the Korea, Colombia and Panama agreements, are hardly encouraging. America has reached several global free-trade deals since the end of World War II. Yet the nation has run large, growing trade deficits practically every year since 1970 and the shortfalls have become especially big in manufacturing. Americas many bilateral trade deals have generated more mixed results, but major manufacturing deficits with leading manufacturing countries, like Korea, have proved remarkably persistent. In the case of China, these gaps have soared exponentially. Korea also presents its own specific challenges. Its national business model emphasizes promoting manufacturing in Korea and shutting out foreign competition. Koreas main individual trade barriers are rarely written down in easily accessible regulatory and legal codes. Thus theyre excruciatingly difficult for U.S. or any foreign officials or businesspeople even to identify, much less address. Indeed, the proposed Korea trade deal is best seen as an agreement between a country determined to strengthen its manufacturing at all costs, and one content to leave the sectors fate to market forces whether its trade partners take them seriously or not. As history teaches, such initiatives usually spell big trouble for U.S. domestic manufacturing.
no

yes no
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any policymakers oppose trade agreements in the mistaken belief that these agreements are the cause of the U.S. manufacturing job loss. The opposite is true. Trade agreements have never been a major factor in our manufactured goods deficit, and over the past three years we have had a manufactured goods trade surplus of $70 billion with our trade agreement partners. During that same period, our manufactured goods trade deficit with countries without trade agreements with us was $1.3 trillion. The most important element of a progressive trade policy is a strategy that embraces market-opening bilateral and regional trade agreements. A critical first step is to pass and implement immediately the pending trade agreements with Korea, Colombia, and Panama agreements that are estimated to generate $13 billion of new exports and support 100,000 jobs. These agreements have been pending in Congress for four years, and during this time our competitors have not been idle. There are hundreds of trade agreements, while the United States has free-trade agreements with only 17 countries. As our competitors race to negotiate barrier-reducing agreements for their companies, U.S. manufacturers are falling further and further behind in their ability to secure markets. The United States also needs to keep pressing for meaningful multilateral agreements in the World Trade Organization (WTO) as well, but we must not let that delay us from obtaining the quicker and deeper liberalization that bilateral and regional agreements provide. The U.S. domestic market for manufactured goods is not expected to grow more rapidly than it has in the past 20 years, when manufacturing productivity exceeded the growth of output. So if production is to outpace productivity and create new jobs, we will have to rely more on exporting to the more rapidly growing markets overseas, particularly in Latin America and Asia. Even though the United States remains the worlds largest manufacturer, producing one in every five dollars of all manufactured goods in the world, we steadily are losing ground in world markets. Manufacturers believe we need a trade policy that will strengthen manufacturing in America, improve our competitiveness and stimulate job creation at home. There are 120 other free-trade agreements being negotiated around the world, but the U.S. is only party to one of those. Our competitors are looking for ways to take our mantle of economic leadership away from us, and we ought not to be unintentionally helping them do so.

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Doug Starrett, president and CEO of L.S. Starrett Co. of Athol, Mass., a precision toolmaker, had prompted Daleys comment, with an account of the firms plans to upgrade a water-powered generator in Athol plans that ran into a challenge from the U.S. Fish and Wildlife Service. Starrett characterized the conflict as one of thousands around the country in which the government continues to throw sand into the gears of progress. 52 Daley promised to look into the case. We will . . . see, he said, if there is any way to bring reason to whats happened. 53 According to a First U.S. Circuit Court of Appeals decision on the case in June, the agency had concluded that expanding the generator could endanger migratory fish on the Millers River. The Federal Energy Regulatory Commission (FERC) then ruled that it would have to license the expansion, something Starrett had thought wasnt required. 54 Judge Norman H. Stahl expressed sympathy for Starrett in terms that echo business executives complaints. Here we have the last full-line precision tool company producing its product within the United States, the judge wrote, in a concurring opinion endorsed by Judge Juan R. Torruella. In order to remain competitive in the global marketplace, Starrett has aggressively sought to lower its cost structures and has instituted many energy conservation measures. . . . Our decision today, however, may well mean that this company loses the economic advantage it would have from its low-cost, nonpolluting power structure. 55 Nevertheless, the law was clear that the Starrett project fell under FERC jurisdiction, the judges concluded. But they did hint that FERC might have handled the case differently. It would seem, they wrote, that Starretts project is a prime example of efficient

usage through a nonpolluting power source and is one that we should be encouraging, not stifling. 56 But though excessive regulation is a long-standing complaint of manufacturers, and businesses in general, some accuse them of exaggerating the effects of red tape. If the problem was over-regulation, there wouldnt be manufacturing in Germany, says Paul of the Alliance for American Manufacturing. Fundamentally, if you took that argument to the extreme, unless we had regulations as poor as Chinas we wouldnt be competing at all.

Free-Trade Agreements
awmakers are trying to reach a settlement seen by some as essential to approval of three pending free-trade agreements with potentially strong effects on U.S. manufacturers. U.S. Chamber of Commerce President Thomas J. Donohue said in midJune that lawmakers were right on the doorstep of a compromise on expanding some provisions of the Trade Assistance Act (TAA), a 1962 law that extends cash and other assistance to workers who lose their jobs as a result of foreign competition made possible by free-trade deals. 57 Agreement on that assistance is considered crucial, in turn, for congressional approval of the free-trade agreements with South Korea, Colombia and Panama. The Colombia pact has been awaiting enactment since 2006, and the other two since 2007. 58 The proposed expansions would increase a health care tax credit to 80 percent of medical costs and make service and public-sector employees, as well as workers who suffered when their jobs were outsourced to another country, eligible for the aid. Those assistance measures were included in the 2009 economic stimulus bill but lasted only two years. 59

Stimulus . . . wasnt meant to make permanent policy, Republican Sen. Charles E. Grassley of Iowa, an influential member of the Senate Finance Committee, told CQ Weekly. 60 But Michigans Rep. Levin, the top Democrat on the House Ways and Means Committee, countered, In a period of high unemployment it is inexcusable, intolerable and unacceptable that the 2009 [Trade Assistance Act] provisions have not been extended. 61 To be sure, even approval of the stepped-up assistance might not ensure passage of the trade deals. An AFL-CIO official criticized the TAA as an inadequate tradeoff for a free-trade agreement. 62 However, the Chamber of Commerce, NAM and other major business federations that have been pushing hard for the trade deals told the White House in May that they considered the TAA a central part of Americas overall trade agenda. 63 The set-to over the assistance bill raises the ideological issues that punctuate the entire question of U.S. manufacturing policy in the age of globalization. At the Puritan Products chemical firm in Bethlehem, Pa., in late June, Sen. Robert Casey, D-Pa., told workers in support of the TAA, We have to compete every day of the week with countries that frankly cheat and make it much more difficult to have a level playing field for folks that are trying to manufacture a product in this difficult environment. 64

OUTLOOK
Brain Drain?
or some of those most worried about Americas manufacturing future, the looming danger isnt the loss of more factory smokestacks, its brain

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drain. The belief that we could invent stuff here and make stuff there is now, I think, under serious reconsideration, said Ron Bloom, the Obama administrations senior counselor for manufacturing policy. 65 That belief, Bloom said, grew out of a thesis that America had evolved into a post-manufacturing era. A lot of people in this town believed that manufacturings decline was inevitable. . . . They actually thought it was a good thing, he said. 66 But, said Bloom, a former special assistant to the president of the United Steelworkers union, the reality is that engineering and R&D cant be run separately from production, in the long run. If you look at how companies are behaving . . . if they relocate their manufacturing operations, slowly over time, their R&D and their innovation will go with it. 67 In a variation of that view, former Labor secretary Reich argues that the assembly phase of manufacturing can easily be carried out separately from the engineering and design functions. It is important for designers and R&D people to be closely involved in making high-value-added components that find their way into manufactured items, he says. Reich says the biggest American corporations are now multinational entities that dont necessarily have a vested interest in keeping their high-end operations in the United States, where higher wages and tougher regulations may make manufacturing costs higher for some products. And Reich argues that unions and smaller high-tech firms, which do have a stake in keeping the engineering side of manufacturing, at least, in the United States, dont pack much political punch. Its an open question, where that lobbying for the high-value-added jobs of the future to be in the United States is going to come from, he says. An even darker view comes from economist McMillion, who has been

tracking indicators of shrinkage in U.S. manufacturing capacity. Weve sustained a massive shift out of production, he says. In April, our total manufacturing output was 2.1 percent less than in April, 2000. That 11-year decline had not happened since 1927 to 1938. Even more problematic, McMillion says, todays budget cuts at the federal and state levels further reduce physical and human resources on which manufacturers rely. We dont build new roads, we close our schools, close our libraries. And, he adds, I dont see the political will to fix this. However, other tough critics of corporate and government policies argue that political and economic conditions are shifting in favor of a U.S. manufacturing revival. The value of the dollar on the world market seems likely to remain low in the foreseeable future, says Paul of the Alliance for American Manufacturing, a development that favors U.S. manufacturers that export products. On a deeper level, there is increasing awareness that we do need to have productive capacity in this country, Paul says. And the underbelly of outsourcing is being exposed. Its quite possible that the economic fad of the next decade will be reshoring, and I welcome it. Perry of the American Enterprise Institute also sees reshoring as a trend with staying power. As manufacturers expand their stateside operations rather than send them abroad, even some manual workers as opposed to engineers and designers will benefit, he says. Nevertheless, theyre not likely to earn as much as they used to. U.S. manufacturing workers in the future are going to have to accept more realistic wages, he says. Moutray of the NAM also argues that even though trends favor expansion of U.S. manufacturing, globalization is here to stay. We were in a little bit of a bubble before, he says. For a while,

we were the only game in town. New opportunities for employment will come from finding markets and new opportunities overseas. Editorial intern Daniel Bauer contributed research and reporting.

Notes
Remarks by the President at Skills for Americas Future Manufacturing Event, The White House, June 8, 2011, www.whitehouse.gov/thepress-office/2011/06/08/remarks-president-skillsamericas-future-manufacturing-event. For background see Peter Katel, Vanishing Jobs, CQ Researcher, March 13, 2009, pp. 225-248. 2 Future of U.S. Manufacturing, C-SPAN, May 31, 2011, www.c-spanarchives.org/program/29 9775-1. 3 Scott Horsley, Obama: We Need More Manufacturing Jobs, NPR, June 24, 2011, www.npr. org/2011/06/24/137383302/obama-we-needmore-manufacturing-jobs. 4 Employment Situation Summary Table, U.S. Bureau of Labor Statistics, updated July 8, 2011, http://bls.gov/news.release/empsit.a.htm. 5 Megan M. Barker, Manufacturing employment hit hard during the 2007-2009 recession, Monthly Labor Review, U.S. Bureau of Labor Statistics, April 2011, www.bls.gov/opub/mlr/ 2011/04/art5full.pdf; Mark Zandi, testimony to Joint Economic Committee, June 22, 2011, p. 4, http://jec.senate.gov/public//index.cfm?a=Files. Serve&File_id=e922d094-bf87-47f2-9f5d-834ad cf16f7f. 6 Value Added by Industry As a Percentage of Gross Domestic Product, U.S. Bureau of Economic Analysis, updated April 26, 2011, www. bea.gov/industry/gpotables/gpo_action.cfm. 7 Ignite 2.0: Voices of American University Presidents and National Lab Directors on Manufacturing Competitiveness, Council on Competitiveness, June 2011, p. 8, www.compete.org/ publications/detail/1731/ignite-2.0/. 8 Michael Ettlinger and Kate Gordon, The Importance and Promise of American Manufacturing, Center for American Progress, April 2011, p. 11, www.americanprogress.org/ issues/2011/04/pdf/manufacturing.pdf. 9 Andrew N. Liveris, Make It In America (2011), pp. 37-38. 10 The World Factbook China, CIA, updated weekly, www.cia.gov/library/publications/
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the-world-factbook/geos/ch.html; Judith Banister, et al., Population Aging and Economic Growth in China, Harvard School of Public Health, March 2010, www.hsph.harvard.edu/ pgda/WorkingPapers/2010/PGDA_WP_53.pdf; The Worlds Factory: China Enters the 20th Century, Deloitte Research, August 2003, www. deloitte.com/view/en_GX/global/insights/de loitte-research/44c64d63e70fb110VgnVCM100 000ba42f00aRCRD.htm; China Set to Take the Lead in Global Manufacturing, HIS Global Insight, June 7, 2007, www.ihsglobalinsight.com/ Perspective/PerspectiveDetail9537.htm. 11 Wayne M. Morrison, China-U.S. Trade Issues, Congressional Research Service, Jan. 7, 2011, p. 11, www.fas.org/sgp/crs/row/RL33536.pdf. 12 Ibid., pp. 4-8. 13 Remarks by the President to Workers at Allison Transmission Headquarters, The White House, May 6, 2011, www.whitehouse.gov/ the-press-office/2011/05/06/remarks-presidentworkers-allison-transmission-headquarters. 14 The Return of U.S. Manufacturing: Current trends and implications, Boston Consulting Group, May 2011, p. 8, (report supplied by firm; not publicly available). 15 Quoted in Moving back to America, The Economist, May 12, 2011, www.economist.com/ node/18682182?story_id=18682182&fsrc=rss; Brendan I. Koerner, Made in America: Small Businesses Buck the Offshoring Trend, Wired, Feb. 28, 2011, www.wired.com/magazine/ 2011/02/ff_madeinamerica/all/1. 16 David Wessel, Big U.S. Firms Shift Hiring Abroad, The Wall Street Journal, April 19, 2011, http://online.wsj.com/article/SB1000142405274 8704821704576270783611823972.html; U.S. Direct Investment Abroad, U.S. Parent Companies, U.S. Bureau of Economic Analysis, http:// bea.gov/international/ii_web/timeseries7-2.cfm? indtypeid=1,2&entitytypeid=2&econtypeid=1& dirlevel1id=2&seriesid=8&rowtypeid=99&step num=5&rowid=94&columnid=47&tableid=205& yearid=28,29,30,31,32,33,34,35,36,37,38,39&CFID =4869752&CFTOKEN=faf4dcd2bfcd5777-8F037 D72-9823-A0A0-6BB2AB963DC4D1A4&jsession id=a030616949a35efbe8811cb791f1863146d5. 17 Productivity and Related Measures: 1990 to 2009, U.S. Census Bureau, 2011, www. census.gov/compendia/statab/2011/tables/11s 0642.pdf; International Comparisons of Hourly International Comparisons of Hourly Compensation Costs in Manufacturing, U.S. Bureau of Labor Statistics, updated March 8, 2011, http:// bls.gov/web/ichcc.supp.toc.htm#prod_worker. 18 Nick Bunkley, U.A.W. Open to More Jobs At a Second-Tier Pay Level, The New York Times, March 30, 2011, p. B3, www.nytimes. com/2011/03/30/business/30auto/html. For background see Pamela M. Prah, Labor Unions Future, CQ Researcher, Sept. 2, 2005, pp. 709-732. 19 The 17 free-trade partners are: Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Peru, Singapore. Free Trade Agreements, Office of the United States Trade Representative, undated, www.ustr.gov/tradeagreements/free-trade-agreements.; U.S. Free Trade Agreements, export.gov, updated April 26, 2011, www.export.gov/FTA/index.asp. 20 Overview of the U.S.-Colombia Trade Agreement, undated, U.S. Trade Representative, www.ustr.gov/uscolombiatpa/facts. 21 U.S. Manufacturing Trade Surpluses With Mexico Plunged to Record Deficits Since Nafta, CW McMillion/MBG Information Services, undated. 22 U.S. Companies target Chinese Consumers, NPR, Morning Edition, June 16, 2011, www. npr.org/2011/06/16/137215569/u-s-companiestarget-chinese-consumers. 23 Ibid. 24 Daniel J. Ikenson, written testimony, Subcommittee on Commerce, Manufacturing and Trade, House Committee on Energy and Commerce, March 16, 2011, http://democrats. energycommerce.house.gov/sites/default/files/ image_uploads/Ikenson.CATO%202011-3-16. pdf. 25 Ibid. 26 Gerald L. Epstein, Restart the Congressional Office of Technology Assessment, Science Progress, March 31, 2009, www.scienceprogress. org/2009/03/restart-ota/; Kenneth J. Cooper, Lawmakers Ready to Shut Technology Office, The Washington Post, June 12, 1995, p. A17. 27 Except where otherwise indicated, this subsection is drawn from James McPherson, Battle Cry of Freedom (1988), pp. 15-40, 93-103, 318-320. For an extensive collection of more than 200 CQ Researcher reports on manufacturing dating back to 1926, see the CQ Researcher Archive. 28 Samuel Colt, Who Made America?, pbs.org, undated, www.pbs.org/wgbh/theymadeamerica/ whomade/colt_hi.html. 29 McPherson, op. cit., p. 19. 30 Except where otherwise indicated, this subsection is drawn from Ronald E. Seavoy, An Economic History of the United States From 1607 to the Present (2006). 31 Donald M. Fisk, American Labor in the 20th Century, U.S. Bureau of Labor Statistics, Jan. 30, 2003, www.bls.gov/opub/cwc/cm2003 0124ar02p1.htm#3. 32 Glenn E. Bugos, The History of the Aerospace Industry, Feb. 1, 2010, Economic History Association, http://eh.net/encyclopedia/ article/bugos.aerospace.industry.history; Gene Smiley, The U.S. Economy in the 1920s, Economic History Association, Feb. 1, 2010, http:// eh.net/encyclopedia/article/Smiley.1920s.final. 33 Fisk, op. cit. 34 Christopher J. Tassava, The American Economy during World War II, Economic History Association, Feb. 5, 2010, http://eh.net/encyclo pedia/article/tassava.WWII. 35 Except where otherwise indicated this subsection is drawn from Seavoy, op. cit. 36 The History of the Integrated Circuit, No belprize.org, May 5, 2003, http://nobelprize. org/educational/physics/integrated_circuit/his tory/index.html.

About the Author


Peter Katel is a CQ Researcher staff writer who previously reported on Haiti and Latin America for Time and Newsweek and covered the Southwest for newspapers in New Mexico. He has received several journalism awards, including the Bartolom Mitre Award for coverage of drug trafficking, from the Inter-American Press Association. He holds an A.B. in university studies from the University of New Mexico. His recent reports include Vanishing Jobs and Jobs Outlook.

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Except where otherwise indicated, this subsection is drawn from Seavoy, op. cit. 38 Stephen Cooney and Brent D. Yacobucci, U.S. Automotive Industry: Policy Overview and Recent History, Congressional Research Service, April 25, 2005, p. 49, http://ncseonline. org/NLE/CRSreports/05Apr/RL32883.pdf. 39 Ibid., pp. 24-25. 40 Scott Lindlaw, Bush Grants China Normal Trade Status, Los Angeles Times (The Associated Press), Dec. 28, 2001, Part 3, p. 12. 41 Wayne M. Morrison, China-U.S. Trade Issues, Congressional Research Service Aug. 4, 2003, pp. 2-4, http://fpc.state.gov/documents/ organization/23198.pdf. 42 Bipartisan, Bicameral Group of Lawmakers Call for Action on China Currency Manipulation, press release, House Ways and Means Committee Democrats, Feb. 10, 2011, http://democrats. waysandmeans.house.gov/press/PRArticle.aspx? NewsID=11455. 43 Joseph J. Schatz, Brown, Snowe Pushing for China Currency Vote, CQ Today, Nov. 29, 2010. 44 Testimony, Sen. Debbie Stabenow, Joint Economic Committee, June 22, 2011, http://jec. senate.gov/public//index.cfm?a=Files.Serve&File_ id=242f07e2-2de3-40c8-9c08-c83a179f8129; Testimony, Rep. Charles Bass, Joint Economic Committee, June 22, 2011, http://jec.senate.gov/ public//index.cfm?a=Files.Serve&File_id=36eed 0e8-10a4-4b44-82ff-1f38d41889a6. 45 Testimony, Scott Paul, Joint Economic Committee, June 22, 2011, http://jec.senate.gov/ public//index.cfm?a=Files.Serve&File_id=19d9fe 8c-f7fb-437c-a7bf-97fb8c2e872d; Testimony, Mark Zandi, Joint Economic Committee, June 22, 2011, http://jec.senate.gov/public//index.cfm? a=Files.Serve&File_id=e922d094-bf87-47f2-9f5 d-834adcf16f7f; Shailagh Murray, Moodys Economist Has Become a Go-To Guy on Stimulus Plan, The Washington Post, Feb. 3, 2009, www.washingtonpost.com/wp-dyn/con tent/article/2009/02/02/AR2009020202971.html. 46 Manufacturing Strategy for Jobs and a Competitive America, National Association of Manufacturers, January, 2011, www.nam.org/ System/Capture-Download.aspx?id=99977bfad78b-4da1-b812-c4dd3f3cc94f; Jay Timmons, testimony, Joint Economic Committee, June 22, 2011, http://jec.senate.gov/public//index.cfm? a=Files.Serve&File_id=ef33d476-f29a-4798-92 b7-728638504efa; Alex Brill, testimony, Joint Economic Committee, June 22, 2011, http://jec. senate.gov/public//index.cfm?a=Files.Serve&Fil e_id=41ca86df-a0c3-4621-bee2-5bcc5307054b.

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FOR MORE INFORMATION


Alliance for American Manufacturing, 727 15th St., N.W., Washington, DC 20005; (202) 393-3430; www.americanmanufacturing.org. Co-founded by the United Steelworkers union and some manufacturers, the group advocates tougher enforcement of trade rules against China and greater government efforts to strengthen U.S. manufacturing. Bureau of Economic Analysis, 1441 L St., N.W., Washington, DC 20230; (202) 606-9900; www.bea.gov. The bureaus website is rich in data on U.S. manufacturing, including the foreign operations of U.S. corporations. Bureau of Labor Statistics, Postal Square Building, 2 Massachusetts Ave., N.E., Washington, DC 20212-0001; (202) 691-5200; www.bls.gov. The principal federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy. Its website contains data on a vast range of labor and business-related subjects. Council on Competitiveness, 1500 K St., N.W., Washington, DC 20005; (202) 682-4292; www.compete.org. A nonpartisan advocacy group with ties to business, labor and academia that is developing a national manufacturing strategy proposal. National Association of Manufacturers, 1331 Pennsylvania Ave., N.W., Washington, DC 20004; (1-800) 814-8468; www.nam.org. Represents major manufacturers and calls for tax cuts and easing of government regulation to strengthen U.S. manufacturing. U.S. Business and Industry Council, 512 C St., N.E., Washington, DC 20002; (202) 266-3980; http://americaneconomicalert.org. A trade association that represents smaller manufacturers who advocate reshaping U.S. trade policy to provide more benefits to domestic companies and consumers. The White House, whitehouse.gov. The administrations main website contains all of President Obamas speeches about manufacturing, as well as blog posts on the subject by White House staff.
Sewell Chan, Chinas Currency Avoids Manipulated Ruling, The New York Times, Feb. 5, 2011, p. B3. 48 Ibid.; Jackie Calmes, Geithner Hints At Harder Line on China Trade, The New York Times, Jan. 22, 2009, www.nytimes.com/2009/ 01/23/business/worldbusiness/23treasury.html. 49 Quoted in Chan, op. cit. 50 2011 Manufacturing Summit, (video), op. cit. 51 Ibid. 52 Ibid. 53 Ibid. 54 L.S. Starrett Company v. Federal Regulatory Energy Commission, U.S. Court of Appeals for the First Circuit, No. 10-1470, June 15, 2011, www. ca1.uscourts.gov/pdf.opinions/10-1470P-01A.pdf. 55 Ibid., p. 23. 56 Ibid., pp. 24-25.
47

Quoted in Finlay Lewis, Heat Rises on Hill Around Trade Program Extension, CQ Weekly, June 20, 2011, p. 1305. 58 Sarah Russell, U.S. Chamber Launches Offensive to Push Free Trade Deals, Market News International, June 15, 2011. 59 Lewis, op. cit. 60 Quoted in ibid. 61 Quoted in ibid. 62 Quoted in ibid. 63 Quoted in ibid. 64 Quoted in Andrew George, Senator urges renewed job aid, Eastern Express Times (Pennsylvania), June 21, 2011, p. A1. 65 Future of U.S. Manufacturing, C-SPAN, op. cit. 66 Ibid. 67 Ibid.

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Bibliography
Selected Sources
Books
Karabell, Zachary, Superfusion: How China and America Became One Economy and Why the Worlds Prosperity Depends on It, Simon & Schuster, 2009. A financial writer argues that the mutually dependent relationship between the United States and China has to be managed but cant be reversed. Liveris, Andrew N., Make It In America: The Case for Re-Inventing the Economy, John Wiley & Sons, 2011. The chairman and CEO of Dow Chemical Co. raises an alarm over what he views as eroding U.S. manufacturing capability and governments responsibility to help reverse the trend. Gavin, Robert, Retooling an industry, The Boston Globe, Oct. 17, 2010, Business Sect., p. 1. Massachusetts Institute of Technologys president, concerned at the state of U.S. manufacturing, has launched a universitywide initiative to re-energize the sector. Hagerty, James R., Industry Puts Heat on Schools to Teach Skills Employers Need, The Wall Street Journal, June 6, 2011, http://online.wsj.com/article/SB10001424 052702304563104576355230583773702.html. Companies and trade associations, alarmed at high-schoolers low levels of math and science achievement, are teaming up with community colleges to train prospective workers in the skills theyd need for specific jobs. Rampell, Catherine, Companies Spend on Equipment, Not Workers, The New York Times, June 9, 2011, www.ny times.com/2011/06/10/business/10capital.html. Corporations are using their growing cash reserves to buy equipment, which allows them to produce goods with fewer people. Wessel, David, Big U.S. Firms Shift Hiring Abroad, The Wall Street Journal, April 11, 2011, http://online.wsj. com/article/SB1000142405274870482170457627078361 1823972.html. An analysis of government data shows that U.S. firms have been creating more jobs in other countries than at home.

Articles
Allen, Jodie, Americas Biggest Trade Export to China? Trash, U.S. News & World Report, March 3, 2010, www.us news.com/opinion/blogs/jodie-allen/2010/03/03/ameri cas-biggest-trade-export-to-china-trash. A veteran business writer for the nonprofit Pew Research Center analyzes the growing volume of U.S. exports of scraps and trash to China, which sends back manufactured goods in return. Bradsher, Keith, As Chinas Workers Get a Raise, Companies Fret, The New York Times, May 31, 2011, www.ny times.com/2011/06/01/business/global/01wages.html. The newspapers Hong Kong bureau chief reports on rising factory pay in China and the resulting upward pressure on prices of Chinese exports. Bunkley, Nick, U.A.W. Open to More Jobs At a SecondTier Pay Level, The New York Times, March 30, 2011, www.nytimes.com/2011/03/30/business/30auto.html. The United Auto Workers union is showing willingness to extend an initial agreement under which newly hired workers are paid about one-half the $28 an hour earned by workers already on the payroll. Fingleton, Eamonn, Germanys Economic Engine, The American Prospect, Feb. 24, 2010, http://prospect.org/cs/ articles?article=germanys_economic_engine. Many critics of the U.S. governments treatment of manufacturing point to Germany as an example of how to maintain a countrys manufacturing sector and keep unemployment low. Writing for the liberal magazine, business writer Fingleton argues the case for the German example (a Washington Post editorial writer, takes the opposing view: Lane, Charles, The U.S. does not need to copy Germany, The Washington Post, June 24, 2011, www.washingtonpost.com/blogs/post-partisan/ post/the-us-does-not-need-to-copy-germany/2011/03/04/AGRb 0XjH_blog.html).

Reports and Studies


Ezell, Stephen J., and Robert D. Atkinson, The Case for a National Manufacturing Strategy, Information Technology and Innovation Foundation, April 2011, www.itif.org/ files/2011-national-manufacturing-strategy.pdf. The United States should emulate foreign competitors who follow strategies designed to support their manufacturers, writers for a nonpartisan think tank argue. Morrison, Wayne M., China-U.S. Trade Issues, Congressional Research Service, updated June 2, 2011, www.fas.org/ sgp/crs/row/RL33536.pdf. An expert at Congress nonpartisan research agency analyzes the debates that arise from the trade relationship that has had a major effect on U.S. manufacturing. Popkin, Joel, and Kathryn Kobe, Manufacturing Resurgence: A Must for U.S. Prosperity, National Association of Manufacturers, January 2010, www.nam.org/~/media/ F36EC9F57BFF4DA4AEBAFAAB4B009B92.ashx. Writing for the major manufacturers trade group, two economists argue that tax reductions on manufacturers U.S. operations, among other measures, are essential to strengthen U.S. manufacturing.

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CHAPTER

HOUSING THE HOMELESS


BY PETER KATEL

Excerpted from Peter Katel, CQ Researcher (December 18, 2009), pp. 1053-1076.

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Housing the Homeless


BY PETER KATEL
the number from the previous year, the U.S. Department of Housing and Urban eida Ortiz was getting Development (HUD) reportby. She lived with her ed in an annual survey on sister and both of their homelessness. 1 children in an apartment in Overall, about 1.6 million Worcester, Mass. Then, in the people slept in homeless shelspring of 2007, her factoryters or other temporary housworker father was diagnosed ing in the United States in with stomach cancer, so Ortiz 2008, the report said. 2 Whether moved back into the home that rough estimate shows an her parents owned to help her increase or decrease from the mother care for her father. 1980s cant be determined, After he died, in DecemCunningham says, given the ber of that year, Ortiz and vast differences in methodolher mother couldnt afford ogy from then until now. the mortgage payments on Whatever the case, housthe house. A move back to ing advocates are united in her sisters didnt work out, the belief that government so Ortiz and her two chilaction can eliminate homedren began sharing an apartlessness once and for all. Conment with a roommate. But servatives tend to be more she wasnt making enough skeptical, though ideology from her part-time job as a isnt a reliable guide to views nursing assistant to kick in on homelessness. Nursing assistant Leida Ortiz is working three part-time jobs and getting back on her feet after becoming her $400 share of the rent. It is immoral, Cheh Kim, homeless in July and living with her two children in a The roommate asked her a staff member for Sen. Christomotel room for two weeks. At a recent briefing on Capitol and her 11-year-old son, pher Bond, R-Mo., told the Hill, she urged housing advocates to work to expand the Joseph, and 5-year-old daughCapitol Hill briefing. People emergency housing program that helped her family. ter, Angelina, to leave. need to understand that anyI became homeless in July, Ortiz picture of homeless that hit the body can slip into homelessness. Just said. I cried every night, wondering if national consciousness in the early go into shelters and talk to people and my kids were going to end up in dif- 1980s seemingly unemployable realize that a lot of them were middleferent schools somewhere else. We were people suffering mental illness or ad- income, or owned small businesses, and living out of our bags. We didnt know diction or both. But in an economic because of one little thing in their life, where we were going to end up next. climate shadowed by massive un- they just fell down. The kids, they see that youre stressed, employment, some experts see workTo be sure, Kims overall view was they get stressed. They see you putting ing families facing threats to their that Congress has been responding housing stability that easily can es- effectively to the persistence of homeyourself to sleep every night crying. Speaking at a Capitol Hill briefing calate into homelessness, as in Ortizs lessness. A major piece of evidence: held by an advocacy group in early case. When youre going into a re- a $1.5 billion appropriation in mid-2009 December, Ortiz recounted a happy cession starting with a limited supply for a new Homelessness Prevention ending to her familys two-week stay at of affordable housing, with families and Rapid Re-Housing Program (HPRP). a motel. She urged the assembled hous- who are precariously housed and at But Joel Segal, a staffer for Rep. ing advocates and congressional staffers risk, its the perfect storm for families, John Conyers, D-Mich., argued at the to work to expand the prevention and says Mary K. Cunningham, a hous- briefing that congressional attitudes rerapid rehousing program that she cred- ing specialist at the nonpartisan Urban main an obstacle to a definitive soluInstitute think tank. ited for her familys rescue. tion to homelessness. A majority of In 2008, homelessness among peo- people in Congress do think that homeNow working three part-time jobs, the 30-year-old Ortiz hardly fits the ple in families rose by 9 percent over less people want to be homeless, Segal
CQ Press/Peter Katel

THE ISSUES

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California Has Largest Homeless Population
Nearly 160,000 people in California are homeless, more than twice as many as New York, the state with the next-largest homeless population. Seventeen states have more than 10,000 homeless people, while 11 states have fewer than 2,000.
children and youth. Schools can also use grants made under the law to provide homeless students with medical and dental care and other services. A constellation of other laws authorizes programs designed for the chronically homeless, for households who cant afford decent housing and for veterans without homes. This year, Congress added new forms of assistance, including the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act for families facing imminent loss of housing or recently made homeless. The law also promotes the construction of so-called supportive housing for the long-term homeless, who need mental health services and similar services along with roofs over their heads. Meanwhile, about 2 million families nationwide receive substantial help in paying their rents under the Section 8 Housing Choice Voucher Program, in place since 1974 and revamped in 1998. For many housing advocates, Section 8 vouchers represent a speedy way to expand the supply of affordable housing, the lack of which they view as a major contributor to homelessness. Some conservative policy experts say the problem isnt a shortage of affordable housing but deeply rooted poverty a condition they call illsuited for resolution by housing subsidies. The idea that housing is unaffordable and that weve done nothing about it give me a break, says Howard Husock, vice president of the Manhattan Institute for Policy Research, a New York think tank. What weve done to make housing more affordable over the past 30 years is so extensive that I would inquire of advocates what more they would have government do. Even so, HUD, which administers three of those programs, calculates that a family with one full-time, minimum-wage worker cant afford a two-bedroom apartment anywhere in the country. 5

Homeless Population by State


(on a single night in January 2008)
Wash. Ore. Mont. N.D. S.D. Wyo. Neb. Nev. Calif. Ariz. Okla. N.M. Texas
Alaska Fla. Hawaii Utah Colo.

Minn. Wis.
Mich.

N.H. Vt. Maine N.Y. Pa. Mass. R.I. Conn. N.J. Del. Md. D.C.

Idaho

Iowa
Ill.

Kan.

Mo. Ark.
Miss.

Ind. Ohio W.Va. Ky. Va.


Tenn.

N.C. S.C. Ga.

Ala.

La.

0-1,999 2,000-9,999 10,000-19,999 20,000-59,999 60,000+

Source: The 2008 Annual Homeless Assessment Report to Congress, U.S. Department of Housing and Urban Development, July 2009

told Kim and the rest of those present. Thats who they see in the streets pushing the baskets. Trust me on this they do not know whos in those shelters, because most members of Congress are raising money from very wealthy donors. Notwithstanding the staffers emphasis on shelters, the growing consensus among advocates for the homeless is that a danger exists of policy makers focusing too heavily on shelters. That approach, they say, would effectively mean continuing to channel mentally unstable and chronically homeless people into shelters instead of expanding a newer strategy of building permanent facilities designed to meet their needs. And families in unstable housing situations perhaps doubled up in relatives homes should be kept out of shelters in the first place.

What weve learned over the past 10 years is that building up a bigger shelter system is a sort of self-fulfilling prophecy, says Nan Roman, president of the National Alliance to End Homelessness. A number of sources report rising housing instability among families. HUD experts studying present-day trends see a link between the economic crisis and the growing number of families in shelters. 3 The National School Boards Association said in January 2009 that 724 of the countrys nearly 14,000 school districts had already served 75 percent or more of the number of homeless students theyd served during the 2007-2008 school year. 4 Districts track the trend because the Education for Homeless Children and Youth Act requires schools to provide the same level of education to students without fixed addresses as to all other

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As a practical matter, a one-earner family means a household headed by a single mother the population segment that by all accounts is the most economically and socially vulnerable to deep poverty. The HUD annual report says that families in shelters are typically headed by a single mother. 6 Ortiz, the once-homeless single mother in Worcester, Mass., says that she was able to start turning her life around only after her citys housing program helped her find an $850-a-month apartment, which she pays for with the help of a $700 monthly subsidy from the rapid rehousing program. Before that, she says. I couldnt get more work hours because of my kids getting out of school at 4:10. I didnt have anybody reliable enough to drop them off for me or pick them up if I did get a full-time job, and after-school programs cost so much. Once she and her family got a place of their own, she found a friend who could pick up the children twice a week, allowing Ortiz to work two part-time jobs as a nursing assistant, and one in a party-supply store. In addition, shes studying for the GED, planning to then enroll in medicaltechnology training. Things are slowly falling into place for me, she says. A shelter would have been no way for my kids to live. Its not the same as having your house. As homeless advocates and public officials struggle with rising numbers of homeless families, here are questions being debated: Can government end homelessness? Homelessness has remained a social and political issue since it surfaced in the late 1970s and exploded in the early 80s. The fact that more than a million and a half people every year experience homelessness makes plain that all the attention focused on the problem over the past three decades hasnt

Total No. of Homeless


About 1.6 million persons used a shelter or transition housing, including half a million individuals in families. Over the Course of a Year (Oct. 2007-Sept. 2008)
2,000,000 1,500,000 1,000,000 500,000 0

516,700
People in families (32%)

1.09 million
Individuals (68%)

At a Single Point in Time (one night in January 2008)


100% 80

Sheltered (58%)
60 40 20 0

Unsheltered (42%) 664,414 Sheltered and unsheltered

150,000 120,000 90,000 60,000 30,000 0

124,135

Chronically homeless

Source: Department of Housing and Urban Development, July 2009

eliminated it. To some conservatives, the persistence of homelessness despite myriad government programs suggests they may be doing more to perpetuate the problem than to solve it if a solution is possible at all, which some conservatives doubt. Nevertheless, conservatives dont automatically reject government pro-

grams, especially those aimed directly at people shuttling between the street and shelters. In fact, the government committed itself to ending chronic homelessness in 10 years when Republican George W. Bush was in office (see p. 1068). Housing advocates on the liberal side argue for expanding that goal to ensure that no families suffer loss of their homes, or, in the worst-case scenario, get help in acquiring new housing. That strategy is embodied in the expansion of the McKinney-Vento Homeless Assistance Act that President Obama signed into law in May. It provides homelessness prevention aid to families living in unstable housing conditions moving in with relatives, for example. Now, the housing advocates are pushing for more funding, arguing that as more families benefit, builders will respond. The government can stimulate the housing market in a way to allow homeless people to become housed, says Linda Couch, deputy director of the National Low Income Housing Coalition. She advocates expanding government subsidies designed to make housing affordable for low-wage workers. Responses that go beyond helping individuals cope with financial emergencies are also well within governments capability, Couch argues. We know how to build housing, she says. Its not rocket science, its just too expensive for people earning the minimum wage, or even two times the minimum wage. Work doesnt pay enough. Conservative analysts dont necessarily reject strategies designed to boost the purchasing power of low-wage workers. But they argue that such measures shouldnt be lumped in with responses to homelessness. Government should strive to end homelessness of single individuals people who live on the street, who have mental illness and substance abuse problems, says Husock, at the Manhattan Institute. People who arent on the street but who face housing crises,

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Homeless in Nations Capital Face Cold Winter


Funding cuts may reduce number of beds in shelters.
ark Raymond is worried. He says funding cuts will prevent his organizations huge 1,350-bed shelter in Washington among Americas largest from adequately serving homeless men and women in the nations capital. Lots of programs that were started last year and this year are not to be funded next year, says Raymond, director of administrative offices at the Community for Creative Non-Violence. In late September, Clarence Carter, director of the citys Department of Human Services, announced a $12 million cut in homeless-services funding for fiscal 2010. D.C. Council member Tommy Wells, D-Ward 6, contended the cut could be as large as $20 million. 1 Either way, homeless shelters say they will have to scramble to find enough beds for the lethally cold hypothermia season. The current economy has forced more people onto the streets, including more families in which jobs have been lost and no savings exist. The slow housing market means an increasing number of electricians and construction workers are unemployed. 2 Half the homeless adults in Washington dont receive regular income, including Social Security and disability checks. The 20 percent who are employed have a median monthly income of $524. According to a January 2009 survey, 6,228 homeless people live in shelters or transitional housing in the District, a 3 percent increase over 2008. 3 In July the total included 703 homeless families and more than 1,400 homeless children. Last year, homelessness among families across the nation rose 9 percent but 25 percent in the District. 4 The number of teenagers without a place to live is also rising. But so is awareness of their plight. Recently, rappers Flava Flav, once homeless himself, and Chuck D., of the band Public

Enemy, shared a Thanksgiving meal with the young residents at the Sasha Bruce House in Washington, which features programs for children ages 11-17. Typically, youths are reunited with their families or transitioned into more permanent care. Counseling services are provided, particularly as children without families transition into adulthood. The two entertainers encouraged the youngsters to stay in school. It takes three times as much to get your education later as now, so do it now, Chuck D told the teens crowded around him. Later, Public Enemy performed, and Flava Flav stressed the importance of volunteerism. If youre successful and cant talk to younger people in need, you got a problem, he said. During his term, former Mayor Anthony A. Williams called for an end to homelessness by 2014. 5 A major component of his Homeless No More plan, now being implemented by current Mayor Adrian M. Fenty, is providing housing and financial support to those most at risk of becoming homeless. In early December, the District distributed $7.5 million in federal stimulus money to house homeless families and help struggling families remain in their homes. The money, from federal Homeless Prevention and Rapid Re-Housing funds awarded to the District in July, will help 680-800 households. 6 Those who have been homeless the longest and those with the most severe disabilities will be housed first. Proponents of the plan say programs in Denver, San Francisco, and Portland, Ore., have proven that providing housing and counseling is more humane and cost-effective than putting people in shelters. Martha Burt and Sam Hall researchers at the Urban Institute, a Washington think tank endorse Fentys focus on permanent supportive housing, but they caution he needs to

he argues, can be helped more effectively by programs that dont limit assistance to housing subsidies. Lets say a blue-collar, two-parent family has been hurt by this recession, Husock says. Why would we want to say, Heres a chit for housing? All you can use that for is to rent an apartment from a landlord who is willing to take you. Why wouldnt we say we are increasing unemployment insurance, or the value of the earned-income tax credit, and you can use that money as you see fit? If you want to live with his parents for a year while you save, why wouldnt you have that choice?

But the line isnt hard and fast between policy experts who are skeptical of governments capacity to end all homelessness, and those who argue that government programs can prevent homelessness as well as rescue the homeless from the street. Roman has no preference for housingonly assistance over other kinds of aid. Housing affordability has an income dimension and a supply dimension, she says. You could make housing cheaper or figure out some way to supplement peoples income through vouchers or tax credits however you want to do it.

The bottom line, Roman says, is that the government can rescue longterm homeless people from the streets, even while ensuring that people who have homes dont lose them. Do I think homelessness can be ended? Yes, she says. People will always have housing crises, but I dont think theres any particular reason we cant end homelessness. I remember a time when we didnt really have homelessness. Policy experts who advocate reducing governments efforts at social engineering doubt that politicians and bureaucrats can achieve anything close to a definitive result. I dont think

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said. They say they want a keep the momentum going place to live. We have resources if homelessness is to be being provided to us at record ended in the next four levels. If you look at the numyears. 7 However, Michael bers for chronic homelessness, Ferrell, executive director of were winning. 8 the District of Columbia Coalition for the Homeless, Emily DeRuy says ending homelessness by 2014 is very highly un1 Darryl Fears, Officials Squabble, likely and calls for a multiService Providers Scramble; No Matpronged approach. ter How You Do the Math, AdvoThe first prong has to cates Say, Less Money Means More People on Streets, The Washington be prevention strategies, and A homeless man settles in at a Metro station in Washington, Post, Oct. 6, 2009, p. B2. quite frankly, thats prefer2 Mary Otto, A Growing Desperation; D.C., in May 2009. More than 6,000 homeless people able to addressing the problive in shelters or transitional housing in the District. Housing, Economic Slumps May lem on the back end, he Portend Rise in Ranks of Regions says. Homeless individuals and families should be rehoused Homeless, Survey Shows, The Washington Post, Jan. 25, 2008, p. B1. 3 A Summary of the 2009 Point in Time Enumeration for the District of as soon as possible, he explains, but the long-term goal Columbia, The Community Partnership for the Prevention of Homelessness, should be to provide enough rental assistance or subsidies www.community-partnership.org/docs/TCP%20Fact%20Sheet%20Point%20in for up to 12 months to prevent homelessness from occur- %20Time%202009.pdf. 4 In the News, Washington Legal Clinic for the Homeless, www.legalclinic. ring in the first place. org/about/inthenews.asp. But Raymond cautions against shifting the focus away from 5 Anthony A. Williams, Homeless No More: A Strategy for Ending Homeshelters. So many people need subsidized housing, he says, lessness in Washington, D.C. by 2014, U.S. Department of Health and that there is a year-and-a-half, two-year waiting list. Shelters Human Services, www.hrsa.gov/homeless/statefiles/dcap.pdf. 6 Darryl Fears, District to Disburse $7.5M in Stimulus Money to Help Homeare absolutely still necessary. less, The Washington Post, Nov. 30, 2009. The shift towards permanent supportive housing instead of 7 Martha Burt and Sam Hall, What It Will Take to End Homelessness in shelters, however, is a national trend. Philip F. Mangano, until D.C., The Urban Institute, July 13, 2008, www.urban.org/publications/9011 recently executive director of the U.S. Interagency Council on 85.html. 8 Derek Kravitz, Homelessness Official Wins Praise with Focus on PermaHomelessness, had focused on getting people out of shelters nent Housing; Detractors Cite Manganos Frequent Travel, Including Trips and into homes. When you ask the consumer what they want, Abroad, The Washington Post, Dec. 30, 2008, p. A13. they dont simply say a bed, blanket and a bowl of soup, he

government can end homelessness, says Michael D. Tanner, a senior fellow at the Cato Institute, a libertarian think tank. But government could protect more people from homelessness by making affordable housing more available, argues Tanner, who specializes in domestic policy. County and city governments could modify zoning restrictions that, for instance, prohibit apartment building construction in some localities. Should the definition of homeless include people in unstable housing situations? The ways in which laws and poli-

cies define a condition also specify who will and who wont benefit from programs designed as remedies. Homeless might seem to be an easily defined term. But some argue for expanding its definition to those with housing, albeit in unstable situations. Skeptics question whether that would blunt the effectiveness of programs designed to get unsheltered people off the streets. The activists who first drew attention in the late 1970s to the homeless were advocating on behalf of the lost souls on skid rows in virtually every city, the looked-down-upon people

often described as hoboes, vagrants and bums. They slept in parks, bus stations or cardboard boxes in alleys or at best ultra-cheap hotels known as flop houses or cage hotels (featuring cubicles with wire-mesh roofs to prevent stealing). At about the same time, concerns were also raised about veterans of the recently ended Vietnam War. Then came the recession of 1981-1982, and worries about homelessness began to focus on people whod never been homeless before but were losing their houses after losing their jobs. (The unemployment rate rose to 10.8 percent in

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Most Sheltered Homeless People Are Men
Nearly two-thirds of the people living in shelters in 2008 were men. One-fth were under age 18, and 43 percent were disabled.

Percentage of All Sheltered Homeless Persons, 2008


80% 70 60 50 40 30 20 10 0
Male Female Under 18 18-30 31-50 51-61 62 and older White, White, Black or Other Multiple IndiNon- Hispanic African- single races vidual Hispanic American race Family Veter- Disabled ans Adults 36% 20.4% 22.5% 14% 2.8% 11.6% 3.4% 5.4%

Gender
64%

Age

Race

Household size 66.7%


42.8%

40.3%

37.9%

41.7%

33.3% 11.6%

Source: The 2008 Annual Homeless Assessment Report, U.S. Department of Housing and Urban Development, July 2009

December 1982, compared to 10.0 percent this November.) 7 Citing an apparent connection between economic trends and threats to the housing stability of working Americans, some housing program advocates began arguing for a more expansive definition of homelessness. But HUD, the federal agency most directly involved in the issue today, defines the term literally: A homeless person is someone who lacks a fixed, regular and adequate nighttime residence, and who spends nights in a shelter of some kind, including places not designed for that use. 8 That definition, however, doesnt control all federal law on homelessness. When it comes to public school students, the 2000 McKinney-Vento Homeless Assistance Act, which created most homelessness-related programs, effectively defines homelessness more expansively. Children who can enroll in programs for helping homeless children and youth include those who are sharing housing with others because of economic hardship; who are living in hotels, trailer parks or campgrounds out of necessity; who are awaiting foster care placement or those whose parents are migrant workers. 9

The Runaway and Homeless Youth Act uses a still-broader definition. It makes young people eligible for transitional housing if theyre 16-21 years of age, or for short-term shelter if under 18 and not living with relatives. 10 As these interpretations of the word show, defining the term is the critical step in deciding who can benefit from government programs. Its a waste of breath to argue with people who want an expansive definition that makes it look like we should do more, and with the others who want a restricted agenda so it makes it look like we should do less, says Christopher Jencks, a professor of social policy at Harvard Universitys Kennedy School of Government. Both sides have agendas. At the same time, Jencks favors the approach of housing advocates who want government to issue more housing subsidies. Im not sure that making the number bigger is the way to go, he says. Do we want to say that 4 million people are homeless? Some housing advocates argue that a broader definition of homelessness applied to all government programs would, in fact, reflect reality. We believe that everyone has a right to a

home, says Couch of the National LowIncome Housing Coalition. In my mind that doesnt include a van, or a garage or couch-surfing. It would be a real shame, after all weve learned about the importance of stable housing if, in response to the spike in family homelessness, we started building shelters. Couch adds that HUD officials, along with lawmakers who specialize in housing issues, understand that building more facilities designed for the street-dwelling homeless population wouldnt respond adequately to the housing instability that threatens families who may have roofs over their heads but may also have to change lodgings frequently. I think reason will prevail, Couch says. People in housing know that homelessness is solved by housing. Some of those who favor narrowing the scope of anti-homelessness programs argue that defining homelessness beyond the plain meaning of the word opens the door to unfocused strategies. In Hong Kong they talk about street sleepers, says Husock of the Manhattan Institute. Its a very accurate description, and a useful one to distinguish them from people who are sharing accommodations with other family members.

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People who are doubled-up clearly experience stress, Husock acknowledges. But it doesnt resemble the perils faced by people in the streets. We should not confuse that issue with the problems faced by very-lowincome people, he says. Two or three generations under one household roof its not a common-sense definition of homelessness. But even some who agree that the definition of homeless should be kept narrow also advocate that people at risk of becoming homeless and currently bedding down at a relatives or friends house where theyre doubled up should get assistance under homelessness prevention programs. That approach wouldnt require expanding the definition of homeless. There are lots of people who are literally homeless, says Roman of the National Alliance to End Homelessness. A substantial percentage of them are not sheltered at all. Thats who is homeless. People who are doubled up and at risk of homelessness, we would not be in favor of calling homeless. Are housing subsidies the best way to help families facing homelessness? Since 1974, the Section 8 Housing Choice Voucher program has been the major federal provider of housing for low-wage workers. Its rental subsidy means recipients dont have to pay more than 30 percent of their income for housing. Through the voucher, the government pays the difference between that 30 percent and the monthly rent. About 2 million U.S. households currently receive subsidies, which go to poor families who can document their inability to rent decent housing. But most cities also maintain waiting lists, some of them years long, because demand for vouchers outstrips supply. Overwhelmingly, housing experts say, the biggest share of vouchers go to households headed by single mothers, who make up the greatest

Housing Issues Central to Homelessness


Lack of affordable housing is seen as the biggest cause of homelessness and the main solution by ofcials from a majority of 27 U.S. cities surveyed. Most of the ofcials also called for permanent housing for the disabled and better-paying jobs.

Top Three Causes of Homelessness


(percentage of cities responding)
80% 70 60 50 40 30 20 10 0 Lack of Poverty Domesaffordable tic housing violence Unemployment Lowpaying jobs Other

74% 52% 44% 44% 30% 19% 15% 11% 7%

Family Substance Mental disputes abuse illness

Top Three Things Needed to Address Homelessness


(percentage of cities responding)
100% 80 60 40 20 0

96% 78% 74%

19%

15%
More substanceabuse services

11%

8%

More subsidized housing

BetterMore permanent paying job housing opportuni- opportunities ties for disabled

Other

More Better jobcoordination training with mental programs health services

Source: Hunger and Homelessness Survey, United States Conference of Mayors, December 2009

share of low-income families threatened by housing instability. Vouchers may be simple in concept, but Section 8 isnt simple in operation. The system is governed by hundreds of pages of regulations and guidance that make the program, some argue . . .

difficult to administer, the Congressional Research Service (CRS) reported last year. 11 The program owes its complexity to its dual mission. Section 8 was designed to provide decent housing to poor people, with the longer-range aim

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of helping them climb out of poverty. But affordable housing alone may not be enough for some people to make that climb. Recognizing the key role of education in giving young people a chance at a better future, the socalled portability feature of Section 8 allows voucher recipients to live wherever a landlord will accept them (the feature also allows families to move to another state for a job). Portability offers the possibility for families with vouchers to move from areas of high concentrations of poverty, poor schools, and little opportunity to areas with low concentrations of poverty, good schools and more opportunity, the CRS report said. It added, Researchers and advocates for lowincome families have argued that the mobility potential of portability has not been fully reached. They argue for more funding for mobility counseling and performance standards that encourage mobility efforts. 12 Some housing advocates argue that expanding the long-established program offers the fastest way to open affordable housing to more families. Rep. Maxine Waters, D-Calif., is sponsoring a bill to add 150,000 more vouchers next year. The National LowIncome Housing Coalition, which is backing the legislation, sees the legislation as the first step toward a larger goal of doubling the number of vouchers to 4 million by 2020. We know that vouchers solve homelessness, says Couch, at the National Low-Income Housing Coalition. Often, homeless families need nothing other than a voucher. They dont need transportation or job training. Vouchers are a surefire way not only to prevent homelessness but also to get people out of that situation as quickly as possible. An expansion is especially needed now, Couch argues, because the recession is hitting low-wage households so hard. Typically, about 10 percent of people cycle off the program every year, she says. But in the recession, what weve seen is that, because peoples incomes arent going up, theyre staying in the program longer than normal. The waiting lists in a lot of places are frozen. Not all those who object to the proposed expansion oppose vouchers on principle. Rep. Barbara Capito, R-W. Va., the ranking Republican on the House Financial Services Housing and Community Opportunity Subcommittee, voted against the Waters bill in the House Financial Services Committee. Its a critical program, particularly at a time of economic challenge, Capito says. Id like to see the vouchers work better for people, but Im concerned the Section 8 could swallow up the HUD budget. Capito says adding 150,000 vouchers would lessen the housing agencys ability to deal with other issues, including substandard housing, which she calls a serious problem in her district. But the cost of the proposed voucher expansion is way out of control, she says. Deeper objections to Section 8 focus on what critics call the programs tendency to make beneficiaries dependent on the vouchers. It makes much more sense to supplement the earnings of those at the low end of the income scale, says the Manhattan Institutes Husock. Its much more efficient. If people have cash in their pocket, they can find something to rent. Built into Husocks preferred approach is that recipients of income supplements would, by definition, have incomes that is, they would have jobs. People suffering unstable housing who dont have jobs have other problems that arent best solved by simply subsidizing apartments for them, he argues. Job training or help in job-seeking would be of more help. Housing as a solution to the problem of poverty its not self-evident to me why that would be the best solution. People who deal with individuals housing problems agree to some extent with Husocks categorizations. There are families who have substance-abuse problems, domestic violence, extreme disability issues such as a child with cerebral palsy, says Marta Beresin, a staff attorney with the Washington Legal Clinic for the Homeless. But she adds that a number of families in these circumstances couldnt be helped by income supplements tied to employment. There are families where the head of household may not qualify for disability benefits but may have a lot of issues that make it difficult to hold down a steady job domestic violence, mental health, kids with lot of health issues. Those conditions, Beresin agrees, spring from deeply rooted poverty. But she differs with Husock on how to give families afflicted with these woes a toehold on a better existence. For these households, The only way theyre ever going to get out of a shelter is with a housing subsidy.

BACKGROUND
The Right to Shelter
he sight of homeless people in big cities began to arouse public concern in the late 1960s and postVietnam War era when social activism was at its peak. At the end of the decade, a New York lawsuit played a key role in the emergence of homelessness as a national issue with legal and political dimensions. Robert M. Hayes, a lawyer with the white-shoe Wall Street law firm Sullivan & Cromwell, filed a class action lawsuit against the city and state in 1979 on behalf of homeless men represented by six homeless plaintiffs demanding a right to shelter. Some

Continued on p. 1064

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Chronology
1978-1980s
As homelessness grows into a major social and political-legal problem, advocates win important legal rights for those lacking permanent housing. 1978 Washington, D.C., activist Mitch Snyder leads a takeover of the National Visitors Center by the homeless, forcing the city to open more shelter space. 1979 Wall Street lawyer Robert M. Hayes sues New York City and state, demanding a right to shelter for homeless men; initial ruling in case named for homeless plaintiff Robert Callahan is favorable to the homeless. 1981 Callahan dies while sleeping on the street. . . . In a landmark agreement, New York settles the case by agreeing to provide shelter for everyone who is homeless. 1982 Philadelphia law guarantees the homeless a right to shelter. . . . As deep recession brings unemployment, homelessness surges. 1983 Callahan agreement is amended to apply to women. 1984 After more attention-getting protests organized by Snyder and fellow activists, Washington voters pass the nations first referendum guaranteeing overnight shelter to homeless people. 1987 President Ronald W. Reagan signs into law the McKinney (later renamed McKinney-Vento) Homeless Assistance Act, which becomes the major source of federal funds to help the homeless.

2002 George W. Bush administration vows to end chronic homelessness in 10 years. 2003 Administration hands out $48 million in grants to programs designed to get chronically homeless people off the streets. 2007 HUD count shows number of chronically homeless dropped since 2006 by about 30,000 to approximately 124,000. . . . Service providers begin warning of the potential for massive homelessness among Iraq-Afghanistan veterans. 2008 As recession grips the nation, progress on reducing the ranks of the chronically homeless halts; number remains essentially flat from previous year. . . . Bush creates National Housing Trust Fund, designed to finance affordable housing. 2009 Family homelessness is up 9 percent, apparently due to recession, with veterans slightly overrepresented among the homeless. . . . National School Boards Association reports growth in student homelessness in more than 700 school districts. . . . President Barack Obama signs law creating new Homelessness Prevention and Rapid Re-Housing program, funded with $1.5 billion. . . . U.S. Conference of Mayors says about threequarters of a group of cities show rise in family homelessness and decline or leveling off of homelessness among individuals. . . . Advocacy groups launch drive to push Congress to appropriate another $1 billion to the program for fiscal 2010-2011.

1990s

Persistent homelessness leads academics and think-tank analysts to crunch data in an effort to understand causes and possible cures and leads the Bill Clinton administration to step up its rhetoric on the issue. 1993 Martha R. Burt of the Urban Institute concludes that a shortage of affordable housing for working Americans clearly is one cause of the long-running homelessness crisis. . . . Homeless 43-year-old Yetta M. Adams freezes to death outside Washington, D.C., headquarters of the U.S. Department of Housing and Urban Development (HUD). 1994 Partly in response to Adams death, the Clinton administration unveils a plan to reduce homelessness by one-third. 1998 Congress revamps Section 8 housing voucher program to require that vouchers for rental assistance go to very poor families.

2000s

Idea that government can eliminate homelessness gains strength, but the economic crisis at the end of the decade threatens to deepen the problem.

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Scotlands Homeless and the Right to Housing


Long-term housing soon will be available to almost everyone.

cotland probably comes closer than any other country to implementing a right to housing for the homeless, according to American homeless advocates. 1 Since 1977, legally enforceable rights to housing have been on the books in Scotland, as well as England and Wales. But until recently the right was limited to priority categories of the most vulnerable people families with children, the elderly, disabled and those displaced in natural disasters, among others. 2 In 2003, Scotland forged ahead of the rest of Britain and greatly expanded the kinds of homeless individuals for whom the government has a duty to provide accommodation, including single adults. Scotlands uniquely expansive definition of homelessness has no equivalent anywhere in Europe, according to Tom Mullen, a professor of law at the University of Glasgow. 3 By 2012 the right to long-term permanent housing will extend to virtually all homeless people in Scotland under the revised law. In the interim, local authorities have a legal duty to provide immediate temporary shelter for all homeless persons and long-term permanent housing for a greatly expanded class of priority groups. In 2004, the priority-need category was expanded to include homeless youth ages 16-17; 18-20-year-olds in danger of sexual or financial exploitation or drug abuse; adults discharged from prison, the armed forces or a hospital; adults with personality disorder, and those at risk from domestic abuse, violence or harassment. On paper we have the most progressive homelessness legislation in Europe, if not, possibly, the world, concedes Chris Campbell, deputy chief executive of the Scottish Council for Single Homeless, an umbrella group for homeless-service organizations. But the challenge of making it work on the ground, he says, includes changing public attitudes about the deserving vs. the undeserving: Someones been on the waiting list paying their rent on time: Should they come before or second to someone who in their eyes is going to squander that tenancy with a drug issue? Homeless advocates say the tension comes essentially over allocating a scarce, desirable resource public housing, which doesnt carry the same stigma as in the United States and finding enough government money to increase the supply of affordable housing.

In 2005, a government-appointed monitoring group found that a shortage of affordable housing was a major obstacle to implementing the new law. 4 Towns short of housing have resorted to sending families to bed and breakfasts or towns up to 200 miles away, according to homeless advocates. The shortage has produced one of the most commonly heard criticisms of the law. Imagine a small town in Scotland with a family which has been there quite a long time and has made an application to move into social [public] housing. They see someone who is not from that area getting housing in front of them quite legitimately because theyre homeless. That can cause a problem, says Graeme Brown, director of Shelter Scotland, a homeless advocacy and advice organization. Reluctance among some local government officials to shift toward the statutes more inclusive definition of those eligible for help has also been cited by government monitors as impeding the laws goals. 5 Before passage of the 2003 act, those who did not fit into priority categories were entitled only to advice and assistance not housing which some observers viewed as a way of rationing scarce housing. 6 Another rationing device was the lower-priority status the law gave to intentional homelessness. The category was developed in response to local authorities fears that large numbers of people would give up their existing accommodation to secure a better house under the legislation. After 2012, those deemed intentionally homeless are the only remaining group entitled only to temporary, not permanent, housing. 7 Immediately after passage of the act, the number of homeless applications surged a 34 percent increase in 2005-06 over the beginning of the decade. Some experts attribute the rise to more people becoming aware they were now eligible for help. Homelessness figures in 2008-09 show a slight increase, but the steep rise seen earlier in the decade has now leveled off, coinciding with policy changes making housing rights available to more single adults, according to the Scottish government. 8 To be fair, local government has gotten better at preventing homelessness, Brown says. The highly visible homeless sleeping on the streets that we saw 10 years ago in Edinburgh and Glasgow has declined.

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shelter space was available, but government policy at the time was to deny shelter in order to pressure homeless people to find temporary housing on their own. 13

In 1979, Judge Andrew R. Tyler of the New York Supreme Court (equivalent to district courts in other states) ruled that the U.S. and New York constitutions required that shelter space be available for every homeless man.

Technically, the ruling applied only to homeless men in the skid row area of New York known as the Bowery. But after the judge made his initial ruling to the case, Hayes and government lawyers settled the suit by

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phone from Edinburgh, where Two innovative Scottish it was raining, he added, This programs hold out hope of is a northern European counkeeping people in their homes try; you need a roof over in these times of rising foreyour head. closures which hit 6,500 The laws ultimate success households last year. Under hinges on whether local govthe 2003 law, a lender who ernments manage to house the is about to foreclose on a expanded universe of citizens homeowner or a landlord who will qualify for help by about to evict a tenant must the laws target date of 2012 inform the local government still an open question, homeauthority immediately. The Homeless people live under a bridge along the River Clyde less advocates say. 10 idea is to give officials time in Glasgow, Scotland. Scotland has greatly expanded to prevent eviction or find althe governments obligation to house the homeless. Sarah Glazer ternative housing. Scotland has also pioneered an innovative mortgage-to-rent scheme, since imitated by England and Wales. Local nonprofit 1 Eric S. Tars and Caitlin Egleson, Great Scot! Georgetown Journal on groups funded by government purchase a house that is about Poverty Law & Policy, winter 2009, pp. 187-216, www.nlchp.org/view_report. cfm?id=314. to be foreclosed upon and rent the house back to the resi- 2 The 1977 act, enacted under a Labor government, applied to all of Great dents. With funding limited, however, it will help only 250-300 Britain. Homeless rights under the act were reduced later under Conservative of the 4,500 households that may be repossessed this year, ac- governments in 1979-1997 in England and Wales, but not Scotland, and largely restored under Labor in 2002. cording to the Scottish government. 3 Tom Mullen, The Right to Housing in Scotland, Homeless in Europe, In a recent law journal article on the 2003 legislation, at- European Federation of National Organizations Working with the Homeless, torney Eric S. Tars of the National Law Center on Home- autumn, 2008. The law is the Homelessness, Etc. (Scotland) Act of 2003, lessness and Poverty, in Washington, D.C., applauded a Scot- www.feantsa.org/files/Month%20Publications/EN/Magazine_Homeless_in_ Europe_EN/Homeless%20in%20Europe_Autumn08_EN.pdf. tish applicants ability to sue if local government has not met 4 Ibid. its statutory duty to provide him housing a right denied 5 Ibid., and Tars and Egleson, op. cit., p. 203. 6 Mullen, op. cit. to Americans. 9 But in Scotlands far less litigious society, suits are rare. If 7 Ibid., p. 197. However, temporary housing can last up to one year, with someone comes to Shelter Scotland for help after their local further help after that. 8 authority has wrongly denied them housing, we find that al- 9 E-mail from Scottish Housing and Support Division. Tars and Egleson, op. cit., p. 215. The law provides a legally enforceable most always the [local] council will back down after they are duty on the local government to meet the housing needs of its residents. contacted, Gavin Corbett, Shelter Scotlands head of policy, Applicants unhappy with a decision may seek judicial review. However, in said in an e-mail. Shelter could threaten the council with a a judicial review a court cannot substitute its own opinion for that of the decision makers. It can strike down a decision on the grounds that the dejudicial review of its decision in a higher court, but it rarely cision maker has exceeded or abused powers or failed to perform the duty delegated or entrusted or exhibited bias. (E-mail from Scottish Housing and comes to that. The lack of litigiousness may reflect greater social con- Support Division.) 10 Local authorities have targets to increase their numbers of priority-need sensus around the issue of homelessness in Scotland than assessments until all of those assessed as homeless have the same rights. even in the rest of Great Britain, says Brown. Culturally Statistics published by the Scottish government in September indicate local and politically, even in these post-industrial days, Scotland authorities have increased their priority assessments to 83 percent of homeless households across Scotland. is still more of a nation concerned about their fellow citizens, he says in his lilting Scottish brogue. Speaking by
Getty Images/Christopher Furlong

agreeing that government was obliged to provide shelter for all men with no homes (women were included later). Underscoring the urgency of the homelessness issue, Robert Callahan, who led the list of named plaintiffs,

died on the street before the settlement was reached. The August 1981, court-approved agreement led to a vast expansion of shelter space in New York. When Hayes had gone to court, shelter space was

scattered around the cheap, dormitorystyle hotels known as flophouses. By 1988, when demand for shelter reached a peak, city refuges could house as many as 10,000 people in 24 shelters. The accommodations went far beyond

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a place to sleep, meals and bathing facilities. The shelters also offered health care, mental health counseling, drug rehabilitation and job-training programs. By 1981, homeless men and women were fixtures in cities across the country, often camping out in downtown areas and parks. Many were former residents of mental institutions who were turned out and left on their own after a wave of deinstitutionalizations prompted by horror stories about conditions in institutions. Some scholars say that President Ronald W. Reagans administration further added to the ranks of the homeless by drastically cutting back on the number of recipients of federal disability payments, among them people too mentally ill to work. The administration also cut federal funds for public housing. 14 New Yorks growing homeless population inspired activists and lawyers elsewhere. Pinning down the numbers proved difficult. Jencks, at Harvard Universitys Kennedy School, estimated that the nations homeless population grew from 100,000 in 1980 to 200,000 in 1984 to 400,000 in 1987-1988. 15 Mitch Snyder, a Washington-based advocate for the homeless, had put the number of homeless at 2 million to 3 million, but he later acknowledged the estimate had no meaning, no value. 16 Snyder dedicated himself to awakening the national conscience and challenging the political system. Starting in the late 1970s, he had begun organizing demonstrations designed to call attention to the unmet needs of homeless men and women in the streets of the nations capital, often sleeping on steam-heat exhaust grates located near federal buildings. Headline-grabbing protests that Snyder sparked as a leader of a onetime anti-Vietnam War organization, the Community for Creative Nonviolence included a December 1978 takeover of the National Visitors Center, near Union Station, by homeless people. The action forced the city to provide more shelter space. 17 In November 1981 three months after the New York settlement Snyder led a group of about 150 activists and homeless people in building and occupying a tent camp they called Reaganville in Lafayette Park, across from the White House. In naming the camp after President Reagan, the activists were trying to evoke the Great Depression, when the jobless and homeless built camps they called Hoovervilles, after President Herbert Hoover. The next year, Philadelphia enacted an ordinance that also guaranteed the right to shelter, and in 1984 Washington finally acted. Partly in response to Snyders and other protests, Washington voters in 1984 passed the nations first referendum measure guaranteeing adequate overnight shelter to homeless people a statutory equivalent of the New York legal agreement. 18 The 1987 law made up the biggest part of the federal attempt to cope with homelessness, but some separate programs had already existed, and others were created later. These included services to homeless youth, provided under a 1974 law; grants to homelessnessprevention projects in local communities, authorized by a 1983 law; a series of programs aimed at homeless veterans, created over several years; and a Social Security Administration program begun in fiscal 2003 designed to help chronically homeless people apply for disability payments. As Congress legislated, policy experts at universities and think tanks were trying to determine the size of the homeless population and its subgroups and whether socioeconomic changes played a part in the growth of homelessness. They zeroed in on changes in the housing market, the job market and care of the mentally ill. By the early 1990s, a consensus had formed among liberals and centrists that the decreasing availability of affordable housing was the root cause of non-chronic homelessness among families and others. There is an absolute shortage of appropriate rental units to accommodate poorly housed families, wrote Martha R. Burt, a scholar at the Urban Institute think tank, in a 1993 book that analyzed voluminous data on housing availability, cost and other factors. She found, however, that families made up perhaps as little as 12 percent, of the homeless population. 21 The bulk of the homeless were single men, almost all weighed down by mental illness, addiction or both disabilities that had led to long periods of reliance on shelters or the streets. It was these chronically homeless who had been largely responsible for drawing attention to the issue. They continued to do so, even in death. On Nov. 29, 1993, a homeless woman named Yetta M. Adams, 43, died of exposure on a bench outside

Beyond Shelter
he major federal response to rising homelessness came in the form of the Stewart B. McKinney Homeless Assistance Act, which Reagan signed in 1987. (It was retitled in 2000 as the McKinney-Vento Homeless Assistance Act.) 19 The law authorized programs designed to expand or upgrade shelters and created a series of initiatives aimed at meeting other needs of the homeless population, including: HUD homeless assistance grants for emergency shelters; supportive housing for disabled people and SRO (single-room occupancy) rehabilitation; Veterans Administration and Department of Labor programs for homeless veterans who needed medical care and job-seeking help; Health and Human Services grants and medical care; and Education Department programs for homeless children and youth. 20

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the Washington headquarters of HUD Secretary Henry G. Cisneros, prompting new government attention. In response, the Clinton administration launched a wave of spending grants totaling $11 million to 187 homelessassistance programs in 44 states. And in May 1994, the administration unveiled a plan aimed at reducing chronic homelessness by one-third.

Six years after the Bush administration launched its 10-year campaign, chronic homelessness seemed to be diminishing. From 2006 to 2008, for instance, the national one-night count of homeless people that HUD conducts every January showed a decrease from 155,623 to 124,135 chronically homeless people both in shelters and in other locations, such as streets and bus stations. (Despite the seeming precision of those numbers, HUDS point-in-time count is an estimate, given the difficulty of locathe Clinton plan didnt fulfill the ing every single homeless person on expectations created by its ana single night.) 26 nouncement. Some From 2007 to 2008, programs took efhowever, HUDs count fect, said Donald of the chronically homeWhitehead, execuless was virtually untive director of the changed. 27 National Coalition Ending chronic for the Homeless, homelessness has been but many other inia national policy objectiatives were never tive that has been supimplemented, [and] ported by significant inHUD ended up vestments in developing with no real, subpermanent supportive stantial increase in housing, HUD said in its new funding. 22 report, which was reNonetheless, the leased this year. For sevidea took hold that eral years communities the government could have reported declines do more than simply in the number of perrespond to homesons experiencing chronlessness. In 2000, the ic homelessness. 28 Tracy Munch (above) and her fianc were evicted last February from the house they were renting in Adams County, Colo., after the owner National Alliance to Meanwhile, some orstopped paying his mortgage. They managed to borrow enough money End Homelessness ganizations advocating a to rent another house for themselves and their four children, released a 10-year plan push to eliminate homebut not in time to avoid eviction. to eliminate homelessness in all its forms lessness. Housing has were working to expand become scarcer for those with little money, people get jobs, permanent housing, the definition of homelessness. The the organization said. Earnings from em- substance-abuse treatment and men- goal was to enlarge the community of ployment and from benefits have not tal health services. 25 people who would benefit from prokept pace with the cost of housing for Over the following years, the Bush grams aimed at the people who werent low income and poor people. Services administration maintained its focus on included in the chronic segment of that every family needs for support and the chronically homeless. For exam- the homeless population. stability have become harder for very ple, in evaluating grant applications for In 2008, Rep. Gwen Moore, D-Wis., inpoor people to afford or find. 23 building housing for the chronically troduced a bill to expand the McKinneyThe plan centered on mobilizing homeless, HUD gave preference to state Vento laws definition of homeless to government and private organizations and local agency applicants that had include individuals or families who would to provide housing and related ser- developed 10-year plans of their own. imminently lose their housing and

Ending Homelessness

vices designed to reverse the conditions that the alliance saw as the core of the problem. But the new Bush administration took a narrower approach. In 2002 it set a goal of ending chronic homelessness in 10 years. To carry it out, the administration revived the Interagency Council on Homelessness, which had been formed in 1987 but fell into inactivity in the 1990s. 24 In a series of other actions designed to meet the 10-year goal, the administration in 2003 made grants totaling $48 million to programs designed to help chronically homeless

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couldnt afford a new house or apartment, plus anyone fleeing domestic violence or another threat to life. Moores bill would also have authorized community programs to serve families with children, or children on their own, who were defined as homeless in other laws. The effect would have been to include people who had experienced prolonged periods without stable housing, and could be expected to remain in that condition because of chronic disabilities, chronic physical or mental health problems, addiction, histories of domestic violence, or multiple barriers to employment. The legislation passed the House, but the Senate took no action on the measure. 29 The statistics confirmed anecdotal reports that had been circulating among advocates for low-income families. As a result, the advocacy organizations were able to bolster the argument theyd been making for increasing homelessness assistance and prevention funds to individuals and families who fell outside the chronically homeless category. Until then, says Roman of the National Alliance to End Homelessness, We didnt have the data. Economic conditions alone would have been enough to suggest that the ranks of the homeless would include growing numbers of low-income households hit by job loss or cutbacks in working hours. But another factor was present as well the appearance of a new cohort of combat veterans. As men and women began returning from Iraq and Afghanistan, many in the veterans and housing policy communities began warning against a repetition of what many believed to be a plague of homelessness among Vietnam vets. Researchers in the 1990s had concluded that homeless veterans of the Southeast Asia war were not as numerous as many had thought. 32 Still, the reality of any veterans from the new centurys wars wandering streets or sleeping in shelters was widely considered a reflection of failure by governments veteran-care and social services agencies. Were beginning to see, across the country, the first trickle of this generation of warriors in homeless shelters, Phil Landis, chairman of Veterans Village of San Diego, a residence and counseling center, told The New York Times in 2007. But we anticipate that its going to be a tsunami. 33 So far, no tidal wave has hit. But the HUD annual report does show that veterans account for 11.6 percent of the adult population that uses shelters, but a lesser share 10.5 percent of the national adult population. The estimated number of homeless veterans should be watched closely, the report adds, as the number of veterans returning from recent combat increases during the next few years. 34

CURRENT SITUATION
Fund Drive

War and Recession


n the last two years of the Bush administration the economic and political climate in which politicians and advocates debated and crafted anti-homelessness measures was changing fast. The foreclosure crisis that started in 2007, with millions of homeowners beginning to default on mortgages, led to the Wall Street meltdown and what economists began calling the Great Recession. 30 The same HUD report that showed a decline in the number of chronically homeless people also seemed to contain an early warning about families. The report showed that the number of homeless people in families increased from 2007 to 2008 by 43,000, to 516,724, a 9 percent jump. And the number of families in shelters with children rose from 130,968 in 2007 to 159,142. The most common demographic features of sheltered family members are that adults are women, children are young, the family identifies itself as belonging to a minority group, and the family has two or three members, the report said. 31

ousing advocacy groups are campaigning for increased federally funding for homelessness programs. But many are pessimistic due to the state of the economy, the growing government deficit and the Obama administrations growing list of priorities, including the newly announced Afghanistan troop surge. At the same time, the gravity of the economic crisis may persuade politicians that homelessness has become more than a niche issue. I can count on one hand the number of staffers who are actually invested, passionate, care about housing, Kim, the aide to Missouri Republican Sen. Bond, told a Capitol Hill briefing in early December organized by the National Alliance to End Homelessness. He added, Now with the foreclosure crisis, there are probably people who are a little more sensitive to it. Alliance president Roman went even further. Enactment earlier in the year of the Homelessness Prevention and Rapid Rehousing Program (HPRP) designed to help families avoid losing their housing marked a major shift in government strategy, she said. We may actually come out of this difficult period with a better homelessness system than we went into it with, if were
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At Issue:
Should homelessness be redefined by HUD to include more youths and families?
yes

PHILLIP LOVELL
VICE PRESIDENT FOR EDUCATION, HOUSING, AND YOUTH POLICY FIRST FOCUS
WRITTEN FOR CQ RESEARCHER, DEC. 15, 2009

HOWARD HUSOCK
VICE PRESIDENT FOR POLICY RESEARCH MANHATTAN INSTITUTE FOR POLICY RESEARCH AND AUTHOR, AMERICAS TRILLION-DOLLAR HOUSING MISTAKE: THE FAILURE OF AMERICAN HOUSING POLICY
WRITTEN FOR CQ RESEARCHER, DEC. 15, 2009

ot homeless enough. Thats the message sent to over 550,000 children who are considered homeless by the Department of Education and other agencies but are not homeless enough for the Department of Housing and Urban Development (HUD). Yes, you read that correctly. A child can be homeless enough for one federal agency, but not for another. Increasingly, the homeless are families who lose their homes and temporarily double up with others or stay in motels, often because shelters are full. They do not live in unstable housing situations. They have lost their homes, cannot afford another apartment and do not know where or when their next move will take place. No one staying in this type of temporary, often unsafe, situation can be said to have a home. Denying this fact is disastrous. In 2007, a youth whom I will call John became homeless. Desperate, he accepted an offer to stay with an adult for two months. John was raped repeatedly and, as a result, contracted HIV. When I met John, he looked like a normal kid. He was receiving a scholarship to help him go to college and was bright, articulate and smiling. He did not look homeless. But he was no less homeless, vulnerable or deserving of federal support. The president recently signed legislation making modest improvements to the HUD definition. Now, a family in a doubled up or motel situation is considered homeless if they can only stay in their housing for 14 days. Additionally, families can be considered homeless if they are fleeing situations where the health and safety of children are jeopardized. Neither provision would have helped John. He stayed in his doubled up situation until another temporary situation became available well above the 14-day maximum. And the only way he would qualify for assistance under the health and safety clause is by being raped. This is unacceptable. In the end, this is about our children. This is about keeping them safe and making sure they have the basic necessities of life. Congress must change HUDs definition of homelessness to reflect reality. A narrow definition masks the real problems facing our communities. Homelessness cannot be defined away. It will be some time before Congress considers this issue again. In the meantime, HUD is required to issue regulations on the newly passed definition of homelessness. For all those who may follow in Johns footsteps, let us hope HUD does so in a way that protects as many children, youth and families as possible.
no

yes no
w
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ithout doubt, the collapse of the U.S. housing market has caused hardship. Owners are stuck with homes worth less than the price they paid. Others have moved in with parents and extended families. We cannot, however, address our housing situation clearly by using emotional descriptions as arguments for a vast expansion of subsidized housing which would be both difficult to afford and, just as significantly, ill-advised social policy. The term homelessness dates to the early Reagan administration, when two trends overlapped. The deinstitutionalization of those suffering from mental illness or alcohol and substance abuse problems begun as a liberal policy in the 1960s utterly failed. Many people wound up living on the streets, becoming the public image of homelessness. At the same time, reductions in public assistance forced some very low-income (primarily single-parent) households to double-up with relatives or live in more crowded conditions. Such households never fit the common-sense definition of homeless known in Britain as street-sleeping. But advocates of subsidized housing began to include them in estimates of homelessness and, in some cities, they began to be admitted in large numbers to public group-living quarters (the very term shelters perpetuated the image that such households were living on the street). Those households also received priority for a rapidly expanding housing-voucher program, which allowed them to pay public housing rents for private apartments. This, in turn, ballooned the Section 8 voucher program to the point that its budget now surpasses that for cash welfare assistance. Now those who want to further expand such housing assistance are using the foreclosure and delinquency spike as a rationale for expanding that same housing-voucher program by using the image of the recession-strapped working family as the new face of homelessness. Such problems are being addressed through federal efforts to modify loans and other methods. Doubling the size of the housing-voucher program is not likely even to reach such families. Far better to continue to take steps to help the truly homeless the mentally ill who should be assisted through housing combined with social services and to adjust the voucher program by converting it to a cash payment expansion of the Earned Income Tax Credit. Lets help those of low income but not by costly, ineffective and inaccurately labeled remedies.

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Continued from p. 1068

Advocacy groups are also pressing homes, the U.S. Conference of Mayors able to take advantage of the oppor- for the appropriation of $2.4 billion reported in early December. 37 tunity presented by HPRP. under the Homeless Emergency AsThe recession and a lack of afAccordingly, Roman and her allies sistance and Rapid Transition to Hous- fordable housing were cited as the are urging Congress to add another ing (HEARTH) Act. Enacted in 2009, top causes of family homelessness $1 billion to the HPRP, on top of the but without funding for 2009-2010, in the surveyed cities, the organi$1.5 billion appropriated earlier this year. HEARTH authorizes homeless-assistance zation said. 38 They also want The survey covered lawmakers to allocate 27 cities from October $1 billion to the Na2008 to Sept. 30, 2009, tional Housing Trust including Boston, Fund (NHTF), creatChicago, Dallas and ed by a 2008 law to Los Angeles, as well provide funds to as Gastonia, N.C., build or rehabilitate Louisville and St. Paul, rental housing for Minn., among the households with very smaller cities. About low incomes. The three-fourths of the request is in line with cities reported an a plan endorsed by uptick in family homethe Obama adminislessness ranging tration for fiscal 2010from 1 percent in Salt 2011. We will work Lake City to 41 perwith Congress to cent in Charleston, S.C. identify a financing Seventy-four percent of source for the Housthe municipal governHomeless people pitch camp beside a Las Vegas street last April. Across i n g Tr u s t F u n d , ments reported a lack the nation, another group of people is joining the growing number of which will help proof affordable housing low-income households hit by job loss and homelessness: men and vide decent housing as the top cause of women returning from the wars in Iraq and Afghanistan. homelessness. for families hardest Developments among families hit by the current economic down- grants and supportive housing for stood in sharp contrast to the trend turn, HUD Secretary Shaun Donovan homeless people with disabilities. said in October. 35 In addition, with the Temporary for individuals. In 64 percent of Rep. Barney Frank, D-Mass., chair- Assistance to Needy Families (TANF) the responding cities (16 cities), man of the House Banking Commit- system up for reauthorization in individual homelessness was retee, and Sen. Jack Reed, D-R.I., a mem- 2010, housing advocates are asking ported decreased or at the same ber of the Housing, Transportation, Congress to add funding for states level as the previous year. Norfolk, and Community Development Sub- with effective strategies against family Va., reported the highest increase, committee, have introduced bills to homelessness. TANF was created of 18 percent. make the $1 billion allocation. However, the survey isnt a preunder the Clinton administration as a In the last month of 2009, the Na- new version of welfare aid to families cision instrument, as the Conference tional Low-Income Housing Coalition with children. acknowledged. For instance, Los Anwas drumming up a grassroots camgeles reported a 68 percent decline paign to pressure lawmakers into comin family homelessness, basing that mitting themselves to the trust fund result on censuses it conducted in legislation. Our goal is to create an 2007 and 2009. The steep decline early-December blizzard of phone calls everal big and medium-size cities . . . conflicts with anecdotal evifrom all over in a compressed period are showing the same trend in dence from Los Angeles homeless of time to demonstrate strong and homelessness that HUD reported in service providers, who say the urgent support for an initial infusion mid-2009. Homelessness among single number of families seeking shelter of money for the NHTF, the coalition individuals is declining or remaining has swelled recently because of the told its members. 36 flat, but more families are losing their recession.

Metropolitan Trends

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AFP/Getty Images/Jewel Samad

And the reported national drop in individual homelessness has at least one major exception. In New York, which didnt participate in the survey, lawyers representing homeless men and women took city government to court in early December, charging failure to live up to the landmark Callahan agreement of 1981. The city isnt keeping up with demand for shelter space, lawyers for the Legal Aid Society and the Coalition for the Homeless charged. The extreme situation now is reminiscent of problems that we havent seen in years, Steven Banks, attorney in chief for Legal Aid, told The New York Times. Its a failure to plan, and its having dire consequences for vulnerable women and vulnerable men. 39 A motion by the lawyers cited reports by monitors for the coalition. For example, they said two shelters in late September hadnt provided beds for 15 men. At another shelter in late October, 52 men slept in chairs or on the floor; 14 men were bused to shelters with beds, but 38 were left bedless for the night. At yet another shelter, two women slept on a dining room table. Robert V. Hess, the citys commissioner of homeless services, called the motion alarmist. He told The Times: Weve seen an uptick in demand, so our system, as you might expect, is a little tight. Were confident that well continue to be able to meet demand and meet our obligations throughout the winter. 40 Capacity in the adult shelter system was at 99.6 percent on Dec. 8, Hess told The Times. The shelters held 4,934 men and 2,041 women that day. Not included were military veterans in short-term housing; chronically homeless people whove entered a program designed for them; and 30,698 people in families who were in short-term housing set aside for them.

Concerning the monitors reports, Hess said that some of those without beds had refused them, or had arrived at shelters after 2 a.m. Of a report that some women were taken by bus to a shelter where they had less than five hours to sleep, Hess called the account potentially correct.

Small-Town Woes

omelessness is often considered a big-city phenomenon, but its hitting rural communities and small towns as well. More companies are downsizing or closing, says Kay Moshier McDivitt, adviser to the Lancaster County Coalition to End Homelessness, in the heart of Pennsylvanias Amish country. Now our demand has increased beyond our ability to respond. Employment prospects in the area, a major tourist destination, are dominated by low-wage service jobs, which leave little cushion against job loss. Some service workers spend up to 75 percent of their incomes for housing, McDivitt says. Speaking at the December Capitol Hill briefing organized by the National Alliance to End Homelessness, McDivitt said that in October and November of 2009 the coalition had received 1,500 requests for help paying rent or mortgages a 400 percent increase over 2008. Most of our families when they first become homeless spend a year or more moving among family and friends. By the time we see our families, they have often been homeless for a year or more, with lots of instability. They are ready for permanence and stability. Demand for help has risen so sharply the coalition is setting up its first family shelters. Until now, McDivitt said, HPRP funds have enabled the county to help families pay rent so they never become homeless. But, she adds, We expect family homelessness is going to increase.

A slightly less pessimistic assessment came from Kathy Wahto, executive director of Serenity House of Clallam County, Wash., which helps the homeless in Port Angeles, northeast of Seattle. There, despite persistent poverty, a state-funded homelessness-prevention program had helped lower homelessness by about 40 percent over the past three years. But the recession has cut a major source of revenue for that program document recording fees on real estate transactions. Thats $200,000 in revenue were not going to have, Wahto said. HPRP partly made up for the loss with an $89,000 infusion. The ending of homelessness in our county was in sight, Wahto said. We dont want to go backwards.

OUTLOOK
Modestly Positive Trends

ousing advocates whove been pushing for years to expand homelessness services tend toward optimism about the medium-term future. If you had asked me last year if we would have $1.5 billion for HPRP, I would have said no, says the Urban Institutes Cunningham. A lot of positive things are coming out of the present administration. She concedes that homelessness programs are competing for money and attention in a time of crisis on several fronts. But its within the administrations reach to go a long way toward eliminating homelessness, she says. If you look at the research, the bottom line is, we know how to end homelessness. We just need the political will to do it. Husock of the Manhattan Institute takes a somewhat more skeptical view, though not an entirely bleak one. I

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would guess we would be closer to the status quo than any kind of big change, he says. But he says hes encouraged by the openness of HUD Secretary Donovan to programs in Atlanta and elsewhere that combine housing assistance with work requirements of the kind that transformed the welfare system. To me, Atlanta is pointing the way to the future, Husock says. Overall, he says, The trend has been modestly positive. The Cato Institutes Tanner takes a dimmer view, based on what he calls continuing attachment to regulatory controls that he argues slows construction of affordable housing. I dont see any policy to expand the availability of low-income housing through eliminating rent control or zoning regulations. That aside, he argues that the extent of homelessness over the next decade will largely be determined by the state of the economy. If you get long-term economic growth, youll get a lower number of people homeless because they lost their jobs. On that point at least, virtually everyone agrees. How about you give me a prediction about where well be on the unemployment rate in 10 years, says Jencks of Harvards Kennedy School of Government. I would love to believe we wont be in this fix. One nuance to the question, though, is that providing more services to homeless people may not result in an immediate reduction in their numbers. Conservatives tend to argue, and theyre not completely offbase, that when you do more, youre going to get more homeless people, Jencks says. I dont take that as defeat. A lot of people are living in terrible circumstances, and if you give them the opportunity not to live with a belligerent brother-in-law, they will. Is that a waste? I dont think so. Among those who deal daily with the heartaches and complexities of individual and family housing crises, the depth of the economic crisis leads to caution in forecasting when a homelessness turnaround might occur. A number of people are falling into poverty, and a number of governments are being hit by the recession and having to cut programs, says Beresin of the Washington Legal Clinic for the Homeless. It takes a long time to bounce back from all that not to mention that weve decided to send 30,000 more troops into Afghanistan. In Washington, Beresin notes, some construction projects for affordable housing have been stopped in their tracks because a city government program that provides funding is itself short of revenue, which comes from a real-estate transaction tax. D.C. definitely cant do it alone, she says. It needs federal dollars, and if those arent going to be there because the government is prioritizing other things, we dont have much control over that. Still and all, among advocates who deal with Congress, the prevailing mood tends toward optimism. In 10 years, I think there will be fewer homeless people, says Roman of the National Alliance to End Homelessness. Weve learned a lot about how to run a much better homeless system. We could probably get about half the way to ending homelessness with that. The other half may be harder to solve. The affordable housing crisis is the driver, she says. When we didnt have that gap, we didnt have homeless people. People have lots of problems, but they used to be able to afford a place to live, and now they cant.

Notes
The 2008 Annual Homeless Assessment Report to Congress, U.S. Department of Housing and Urban Development, July 2009, p. v, www.hudhre.info/documents/4thHomeless AssessmentReport.pdf. HUD reported on 2008 in mid-2009; the 2009 report is scheduled for release in 2010. 2 Ibid. 3 Affordable Housing, U.S. Department of Housing and Urban Development, Dec. 3, 2009, www.hud.gov/offices/cpd/affordablehousing/. 4 Ellie Ashford, Districts Cope With Rising Numbers of Homeless Students, School Board News, National School Boards Association, January 2009, www.nsba.org/HPC/Features/About SBN/SbnArchive/2009/January-2009/Districtscope-with-rising-numbers-of-homeless-students. aspx. 5 Affordable Housing, op. cit. 6 The 2008 Annual Homeless Assessment, op. cit., p. 31. 7 Labor Force Statistics from the Current Population Survey, U.S. Bureau of Labor Statistics, updated monthly, http://data.bls.gov/PDQ/ servlet/SurveyOutputServlet. 8 Federal Definition of Homeless, U.S. Department of Housing and Urban Development, March 3, 2009, www.hud.gov/homeless/ definition.cfm. 9 Libby Perl, et al., Homelessness: Targeted Federal Programs and Recent Legislation, Congressional Research Service, Jan. 15, 2009, p. 2,
1

About the Author


Peter Katel is a CQ Researcher staff writer who previously reported on Haiti and Latin America for Time and Newsweek and covered the Southwest for newspapers in New Mexico. He has received several journalism awards, including the Bartolom Mitre Award for coverage of drug trafficking, from the Inter-American Press Association. He holds an A.B. in university studies from the University of New Mexico. His recent reports include Prisoner Reentry, Hate Groups and Legalizing Marijuana.

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http://web.mit.edu/lugao/MacData/afs.lugao/Mac Data/afs/sipb/contrib/wikileaks-crs/wikileaks-crsreports/RL30442.pdf. 10 Ibid. 11 Maggie McCarty, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals in the 110th Congress, Congressional Research Service, p. 3, http://wikileaks.org/leak/crs/RL 34002.pdf. 12 Ibid., p. 10. 13 Details of the lawsuit and its effects are drawn from Kim Hopper, Reckoning With Homelessness (2003), pp. 186-191; Lyn Stolarwski, Right To Shelter: History of the Mobilization of the Homeless as a Model of Voluntary Action, Nonprofit and Voluntary Sector Quarterly, 1988, http://nvs.sagepub. com/cgi/reprint/17/1/36.pdf; Robin Herman, Pact Requires City to Shelter Homeless Men, The New York Times, Aug. 27, 1981, p. A1; Charles Kaiser, A State Justice Orders Creation of 750 Beds for Bowery Homeless, The New York Times, Dec. 9, 1979. 14 For background, see Charles S. Clark, Mental Illness, CQ Researcher, Aug. 6, 1993, pp. 673-696. Chris Koyanagi, Learning From History: Deinstitutionalization of People With Mental Illness as Precursor to Longterm Care Reform, Kaiser Commission on Medicaid and the Uninsured, August 2007, p. 8, www.kff.org/ medicaid/upload/7684.pdf. 15 Christopher Jencks, The Homeless (1994), pp. 16-17. For background, see William Triplett, Ending Homelessness, CQ Researcher, June 18, 2004, pp. 541-564. 16 Ibid., pp. 1-2. 17 Paul W. Valentine, Street People in Visitor Center Vex U.S., The Washington Post, Dec. 7, 1978, p. B1; Paul W. Valentine, City Agrees to Provide More Homeless Shelters, The Washington Post, Dec. 16, 1978, p. D1. 18 Sandra G. Boodman, City Softens Opposition to Shelter Initiative, The Washington Post, Nov. 8, 1984, p. A58. 19 Except where otherwise indicated, this subsection is drawn from Perl, et al., op. cit. 20 Ibid. 21 Burt, op. cit., pp. 16-17. 22 Quoted in Triplett, op. cit. 23 A Plan, Not a Dream: How to End Homelessness in Ten Years, National Alliance to End Homelessness, June 1, 2000, www.end homelessness.org/content/article/detail/585. 24 Maggie McCarty, et al., Homelessness: Recent Statistics, Targeted Federal Programs, and Recent Legislation, Congressional Research Service, May 31, 2005, pp. 17-18,

FOR MORE INFORMATION


Manhattan Institute for Policy Research, 52 Vanderbilt Ave., New York, NY 10017; (212) 599-7000; www.manhattan-institute.org. A conservative leaning think tank on urban issues that tends to be skeptical about federal housing and homelessness policies. National Alliance to End Homelessness, 1518 K St., N.W., Washington, DC 20005; (202) 638-1526; naeh@naeh.org. Works on legislation and program design and publishes research on causes and effects of homelessness. National Center on Homelessness Among Veterans, U.S. Department of Veterans Affairs, 810 Vermont Ave., N.W., Washington, DC 20420; (800) 827-1000; www1.va.gov/Homeless/. Publishes information on federal homeless programs as well as research on veterans and homelessness. National Coalition for the Homeless, 2201 P St., N.W., Washington, DC 20037; (202) 462-4822; www.nationalhomeless.org/index.html. Helps organize voter-registration drives for the homeless and other national campaigns. National Law Center on Homelessness & Poverty; 1411 K St., N.W., Washington, DC 20005; (202) 638-2535; www.nlchp.org. Pursues judicial and legislative remedies to problems tied to homelessness. U.S. Department of Housing and Urban Development, 451 7th St., S.W., Washington, DC 20410; (202) 708-1112; http://portal.hud.gov/portal/page/portal/ HUD/topics/homelessness. Publishes detailed data on homelessness and government programs. Urban Institute, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.urban.org/housing/index.cfm. A nonpartisan think tank that studies homelessness and policies designed to reduce or end it.
www.fas.org/sgp/crs/misc/RL30442.pdf. Ibid., pp. 17-18. 26 The 2008 Annual Homeless Assessment Report to Congress, op. cit. 27 Ibid. 28 Ibid., p. 5. 29 HR 7221, CQ Billtrack, Nov. 17, 2008. 30 For background, see Marcia Clemmitt, Mortgage Crisis, CQ Researcher, Nov. 2, 2007, pp. 913-936; Peter Katel, Straining the Safety Net, CQ Researcher, July 31, 2009, pp. 645-668. 31 The 2008 Annual Homeless Assessment Report to Congress, op. cit., pp. 31, 42. 32 For background, see Peter Katel, Wounded Veterans, CQ Researcher, Aug. 31, 2007, pp. 697-720. 33 Quoted in Erik Eckholm, Surge Seen in Number of Homeless Veterans, The New York Times, Nov. 8, 2007, www.nytimes.com/2007/ 11/08/us/08vets.html. 34 The 2008 Annual Homeless Assessment Report to Congress, op. cit., p. 28. 35 Administration Calls on Congress to Approve Key Housing Measures, U.S. Department
25

of Housing and Urban Development, press release, Oct. 29, 2009, http://treas.gov/press/ releases/tg336.htm. 36 Please Call Congress December 1 or 2 for NHTF Money, National Low Income Housing Coalition, undated, http://capwiz.com/nlihc/ issues/alert/?alertid=14407651. 37 Hunger and Homelessness Survey: A Status Report on Hunger and Homelessness in Americas Cities, a 27-City Survey, United States Conference of Mayors, December 2009, www.usmayors.org/pressreleases/uploads/USC MHungercompleteWEB2009.pdf. 38 U.S. Cities See Sharp Increases in the Need for Food Assistance; Decreases in Individual Homelessness, United States Conference of Mayors, Dec. 8, 2009, www.usmayors.org/press releases/uploads/RELEASEHUNGERHOMELESS NESS2009FINALRevised.pdf. 39 Quoted in Julie Bosman, Advocates Say City is Running Out of Beds for the Homeless, The New York Times, Dec. 10, 2009, www.nytimes. com/2009/12/10/nyregion/10homeless.html?_r= 1&ref=nyregion. 40 Quoted in ibid.

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Bibliography
Selected Sources
Books
Burt, Martha R., Over the Edge: The Growth of Homelessness in the 1980s, Russell Sage Foundation, 1993. One of the leading scholars of homelessness wrote an early and influential analysis of its causes and extent. Hopper, Kim, Reckoning With Homelessness, Cornell University Press, 2003. Homelessness can be approached historically, through firsthand observation or anthropologically; one anthropologist blended all three approaches. Husock, Howard, Americas Trillion-Dollar Housing Mistake: The Failure of American Housing Policy, Ivan R. Dee, 2003. A policy expert for the conservative-leaning Manhattan Institute critically analyzes federal subsidized-housing programs as a strategy that has promoted dependency instead of independence and social advancement. Jencks, Christopher, The Homeless, Harvard University Press, 1994. Writing from a perspective that remains relevant today, an influential policy scholar examines the causes and possible remedies for homelessness. Patterson, Thom, U.S. seeing more female homeless veterans, CNN, Sept. 25, 2009, www.cnn.com/2009/LIVING/ 09/25/homeless.veterans. As growing numbers of women return from the front lines, some are joining the ranks of homeless male veterans. Rubin, Bonnie Miller, Homeless, unless you count storage space, Los Angeles Times, Nov. 15, 2009, p. A12. A reporter finds a Chicago-area family fallen on hard times whose illegal home is a storage locker, except on rare occasions when they can rent a motel room for a night. Urbina, Ian, Recession Drives Surge in Youth Runaways, The New York Times, Oct. 26, 2009, p. A1. The number of teenagers living on their own usually in perilous circumstances is growing because of family stresses aggravated by the economic crisis.

Reports
The 2008 Annual Homeless Assessment Report to Congress, U.S. Department of Housing and Urban Development, July 2009, www.hudhre.info/documents/4thHome lessAssessmentReport.pdf. The federal governments annual study provides a wealth of statistics and analysis. Cunningham, Mary K., Preventing and Ending Homelessness Next Steps, Urban Institute, February 2009, www.urban.org/publications/411837.html. A longtime specialist provides a detailed summary of programs and recommends further measures. DeHaven, Tad, Three Decades of Politics and Failed Policies at HUD,Cato Institute, Nov. 23, 2009, www.cato.org/ pub_display.php?pub_id=10981. A budget analyst for the libertarian think tank recounts the history of scandals at the main federal agency in charge of program to alleviate homelessness. Duffield, Barbara and Phillip Lovell, The Economic Crisis Hits Home: The Unfolding Increase in Child and Youth Homelessness, National Association for the Education of Homeless Children and Youth, First Focus, December 2008, www.naehcy.org/dl/TheEconomicCrisisHitsHome.pdf. Childrens rights organizations examine the growth in homelessness and unstable housing among young people. Perl, Libby, et al., Homelessness: Targeted Federal Programs and Recent Legislation, Congressional Research Service, Jan. 15, 2009, http://wikileaks.org/leak/crs/RL30442.pdf. Specialists for Congress research arm provide a wealth of detail about legislation designed to reduce homelessness.

Articles
Bazar, Emily, Tent cities filling up with casualties of the economy, USA Today, May 5, 2009, p. A1. Money troubles are driving thousands of homeless people into tent encampments around the country, a national newspaper reports. Chong, Jia-Rui, Some vets of recent wars find homelessness at home, Los Angeles Times, June 29, 2009, p. A4. A growing number of Iraq-Afghanistan combat veterans are winding up homeless, often because of the psychological effects of their battlefield experiences. Eckholm, Erik, More Homeless Pupils, More Strained Schools, The New York Times, Sept. 6, 2009, p. A1. School systems are scrambling to meet the needs of children and youth living in various types of temporary housing, ranging from trailers in campgrounds to friends and relatives homes. Fears, Darryl, 15 Homeless People Get Apartments Next Month, The Washington Post, Sept. 29, 2009, p. B4. As part of a nationwide policy to provide supportive housing to chronically homeless people, Washington is moving forward with a plan to provide permanent housing for mentally ill people who had been living on the street.

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CHAPTER

AGING POPULATION
BY ALAN GREENBLATT

Excerpted from Alan Greenblatt, CQ Researcher (July 15, 2011), pp. 577-600.

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Aging Population
BY ALAN GREENBLATT
niors which will be much higher than population growth among young and workingames Kempthorne is runage Americans will lead to ning out of money. He changes across society, insaved, or thought he was cluding pressures on the worksaving, for retirement, force and federal budget. 4 says his son, Dirk, a former Thats despite the fact that Republican governor of the United States is aging less Idaho. He thought he rapidly than other developed would be okay, even if he nations, such as Germany, lived to be 90. Italy, Spain and Japan. By But on the 4th of July, the 2015, the population of senior Kempthorne turned 96. working-age people typiHis savings are gone, and cally defined as those behis only source of income is tween ages 15 and 64 will Social Security Social Sebegin to decline throughout curity and a couple of sons, the developed world, with the Dirk Kempthorne says. United States as the sole major As the proud patriarch of a exception. successful family, James The demographics are Kempthorne isnt happy about obviously more favorable having to rely on his children than just about anywhere else for help. But hes not alone. in the rich world, says Nearly 10 million adult children Richard Jackson, who directs over age 50 in the United States the Global Aging Initiative at provide care or financial help the Center for Strategic and to their aging parents. 1 International Studies, a think Such numbers are only tank in Washington. We have going to grow. The oldest an aging population, but at members of the baby boom the end of the day, when Activists on Capitol Hill urge lawmakers on April 15 not generation 78 million the last of the boomers have to cut Medicare, the federal governments health Americans born between passed on to that great Woodinsurance program for the elderly and disabled. The same 1946 and 1964 are turnstock in the sky, well be day, however, the majority-Republican House approved a ing 65 this year. The sheer about as old as Japan and budget plan that would rein in Medicare costs. Democrats oppose the plan and intend to use it as a campaign issue number of them means that Italy are today. And well in 2012. Economists say entitlement programs must be one will turn 65 every 8 sechave a growing population scaled back to control the countrys deficit. onds until 2030. 2 and not a stagnant or a deBut the population of the clining one. I assume that most people would old old those over age 85 is But the United States has a major growing, proportionately, faster. Ameri- like to live a long, full life, and thats problem those other countries dont ca has the largest number of centenar- increasingly possible, says John Rother, have. Spending on health care is far ians in the world, at 72,000 a total policy director at AARP, the major ad- greater here than in other developed that has doubled over the past 20 years vocacy group for seniors, formerly countries and will only rise with the and will at least double again by 2020, known as the American Association of aging of the population. 5 Retired Persons. Advances in health care according to the Census Bureau. 3 We look as though our problem Thats the result of good news: in- make that more likely for people. is very affordable, relative to other Still, Rother acknowledges that a good countries, says Neil Howe, president creased life expectancy that stems deal of concern exists about the chal- of LifeCourse Associates, a demofrom improved medicine and nutrition and a drastic decline over recent lenges posed by the aging population. graphics consulting firm in Great Falls, The rapid growth in the number of se- Va., and author of several books about decades in infant mortality.

THE ISSUES

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More Americans Expect to Delay Retirement
One-fth of American workers say they expect to retire later than planned a lower percentage than in 2009 and 2010, but higher than when the economy was stronger in 2002. Workers Expecting to Retire Later Than Planned, 2002-2011
(percentage)

25% 20 15 10 2002 2005 2008 2009 2010 2011 Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/surveys/rcs/2011/ebri_03-2011_no355_ rcs-11.pdf.
Digital Stock

demographics. The big factor that pushes hugely in the other direction is health care. We are anomalous in that we have a system in which health care costs are growing uncontrollably even before the age wave. Total enrollment in Medicare, the federal governments health insurance program for the elderly, is expected to rise from 47 million today to just over 80 million by 2030. 6 Richard Foster, Medicares chief actuary, predicts the programs trust fund could be depleted by 2024. 7 The growing number of aging Americans also will put enormous strains on Social Security and Medicaid, the state-federal health insurance program for the poor and disabled, which pays for more than 40 percent of nursing home care in the United States. What were long-term problems are now at our doorstep, says Maya MacGuineas, director of the Fiscal Policy Program at the New America Foundation and president of the nonpartisan Committee for a Responsible Federal Budget, which advocates greater fiscal discipline.

On April 15, the U.S. House of Representatives approved a budget plan that would attempt to rein in Medicare costs by converting it from an insurance program to a limited subsidy for seniors buying private insurance. The plan is unpopular with the public, according to polls, and Democrats not only oppose it but plan to use it as a campaign issue in 2012. 8 We will never allow any effort to dismantle the program and force benefit cuts upon seniors under the guise of deficit reduction, five Democratic senators wrote June 6 to Vice President Joseph Biden, who had been leading negotiations with members of Congress on debt reduction. Our nations seniors are not responsible for the fiscal challenges we face, and they should not be responsible for shouldering the burden of reducing our deficits. But many policy analysts insist some changes to entitlements benefiting seniors, particularly Medicare, will be necessary to bring down the federal deficit. On average, says Richard W. Johnson, director of the retirement policy program at the Urban Institute, a cen-

trist think tank in Washington, Americans are healthier than 30 years ago. But theres been an increase since the late 1990s in the number of Americans in their late 40s or 50s who are disabled or suffer ailments that make it harder for them to work. Were seeing increases in the number of handicapped people in late middle age, mostly because of obesity and sedentary lifestyles, says demographer Phillip Longman of the New America Foundation, a liberal think tank in Washington. Here we have this generation thats physically unfit and has no savings and whose health care we cant afford at current prices. Such health challenges are going to make it difficult for many Americans to work longer, which economists argue will be necessary to shore up not only Social Security but also personal retirement savings. Rother, the AARP policy director, stirred up a great deal of controversy with remarks quoted in The Wall Street Journal that suggested the seniors lobbying group, which had helped torpedo a plan to partially privatize Social Security in 2005, might be willing to accept benefit cuts in the program. 9 The group immediately sought to downplay Rothers comments. Still, the open debate about cutting entitlement programs, combined with losses in the stock market and the collapse of the housing bubble, have left elder Americans nervous about their financial futures. 10 A retirement confidence survey by the Employee Benefit Research Institute found that the percentage of workers not at all confident they will be able to afford a comfortable retirement rose from 22 percent last year to 27 percent this year, the highest level in the 21 years the group has conducted the survey. (See graph, p. 581.) 11 And its going to be harder for younger Americans to support the swelling population of seniors. Dowell Myers, a demographer at the University of

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Southern California, says the ratio of those over 65 to those between 25 and 64 has been constant for 40 years, with 24 seniors for every 100 working-age Americans. But that dependency ratio will spike by two-thirds over the next 20 years, to 38 seniors per 100 workingage adults, he says. When we come out of this recession, were going to have fewer new workers and more boomers retiring, Myers says. Thats when well feel the changes. As Americans contemplate the consequences of an aging population, here are some of the questions theyre debating: Should Americans work longer? In March, the Centers for Disease Control and Prevention announced that the U.S. death rate had hit a new low while life expectancy had once again ticked up. A male born in 2009 could expect to live 75.7 years, while a female could expect to live to 80.6. 12 Those numbers are a vast improvement over life expectancy in 1935, when Social Security was created. Life expectancy at birth then was just 58 for men and 62 for women. 13 Those averages were held down by much higher rates of infant mortality. Most people who lived to adulthood could expect to live past 65, even then. Still, people are living longer and spending more years in retirement. Those two facts are putting additional strain on both Social Security and Medicare finances. The typical beneficiary is expecting to receive benefits for almost nine years longer than when the Social Security program started, says Charles Blahous, a trustee of the Social Security program and research fellow at the conservative Hoover Institution at Stanford University. Not only are people living longer, but they are retiring earlier. Most men worked, on average, just past 65 during the 1950s. Now, the average retirement age is 62, says Blahous, who

Workers Gloomy About Retirement Prospects


More than one-fourth of American workers are not at all condent that they will have enough money to last through retirement. Thats nearly a three-fold increase from nine years earlier. Fewer than one in eight workers is very condent about a comfortable retirement.
50% 40 30 20 10 0

Worker Condence in Having Enough Money to Live Comfortably Throughout Retirement, 2002-2011

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Very confident Somewhat confident Not too confident Not at all confident Dont know/ refused to answer

Source: Ruth Helman, et al., The 2011 Retirement Condence Survey: Condence Drops to Record Lows, Reecting the New Normal, Employee Benet Research Institute, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/ebri_03-2011_no355_rcs-11.pdf.

was an economic aide to former President George W. Bush. The age for retiring with full Social Security benefits is slowly rising to 67. Some politicians and economists believe it needs to be raised further. That was the recommendation of President Barack Obamas debt commission last year and is a policy direction lately followed in several European countries. What we really need to do is raise the early-entitlement age, which has always been 62 since it was introduced, in 1956 for women and in 1962 for men, says the Urban Institutes Johnson. The problem with having the early retirement age relatively young is that it does send a signal that 62 is an appropriate time to retire. Its not good for society as a whole, and its also not good for individuals. Many people may not be able to retire early, regardless of the official retirement ages set by Social Security. Americans do a bad job of saving in

general, and retirement accounts, in particular, are not as full as they should be. Many people have yet to make up recent stock market losses, and a weak housing market has largely dashed hopes of turning homes into assets that can offer support in retirement. Fewer private employers are offering guaranteed pension benefits, and pensions and other retirement benefits for government workers are under political pressure as well. 14 The result is that about half of U.S. households are at risk of not being able to maintain their living standards in retirement, according to the Center for Retirement Research at Boston College. 15 More Americans might need to keep working, and market demand for them to do so may also rise, suggests MacGuineas, of the New America Foundation. Were actually going to be having labor-market shortages as baby boomers move out of the workforce, she says. A number of social scientists have speculated about whether boomers will

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Cities Struggle to Meet Growing Needs of Elderly


We have a country thats aging everywhere.
ockfords not doing well. The Illinois city, about 90 miles northwest of Chicago, was once a leading furniture-making center, but those jobs are mostly gone. As a result, Rockfords unemployment rate was among the highest among U.S. cities during the recent recession. Most jobs that remain are snatched up by workers 55 and older about all thats left of Rockfords working-age population. Rockford Mayor Larry Morrissey, who is in his 40s, was elected on a platform of promising economic revitalization that would help bring young people including natives whove left back to town. Without strong cultural amenities or a major university, its been a tough sell. Lack of jobs presents the biggest obstacle. Even entry-level jobs paying just above minimum wage that once would have gone to teenagers or people in their 20s are now largely held by workers in their 50s. We have an aging population, and its getting poorer, said James Ryan, Rockfords city administrator. 1 Rockford may be an extreme case, but its not unique. Many former industrial cities in the Northeast and Midwest are growing both older and less affluent. Among the nations 100 largest metropolitan areas, the ones that have had the highest percentage growth of seniors are struggling places such as Scranton, Pa., Buffalo, N.Y., and Youngstown, Ohio. 2 They have higher concentrations of seniors, says William Frey, a demographer at the Brookings Institution think tank who has analyzed 2010 census data on the location of seniors. The younger people have left. There are metropolitan areas in Florida that have a high density of people over age 65. But the number of seniors and aging baby boomers who pick up and move to warmer climes

in Florida and Arizona is relatively small. Most people retire in their own homes, or at least their own counties. You can certainly find lots of upper-middle-class baby boomers who are coping quite well, moving into college towns where there are good social services available and good medical services, says demographer Phillip Longman, a senior research fellow at the New America Foundation. The vast majority of baby boomers, however, are often stuck underwater in postwar tract housing and more recent exurban construction. They cant get out if they wanted to. Frey says its important for communities, particularly in the suburbs that were planned with younger populations in mind, to learn to adapt to aging ones. Every metropolitan area, he says, is seeing marked growth in its senior population and will see more as boomers age. The baby boom python keeps rolling along, he says. In recent years, many local governments and nonprofit groups have tried to come up with programs, such as increased transit, that will help address the needs of populations that are aging in place. About 40 localities, including Atlanta, Iowa City, Iowa, and Pima County, Ariz., have passed ordinances mapping out voluntary or mandatory design requirements for new-home construction that would accommodate the needs of seniors and the disabled, sparing more of them from moving to nursing homes. We could save a lot of money if individuals could continue to live in their own homes and receive in-home nursing if they need it, says Rep. Jan Schakowsky, D-Ill., who has introduced inclusive home design legislation at the federal level. Helping seniors cope with chronic disease is another way to keep them out of nursing homes. Thats why Elder Ser-

keep working longer for that reason or perhaps out of a desire to keep mentally and socially active. Many have speculated that the next generation of older Americans will want to volunteer or work part time, if not stay in their same job past the normal retirement age. Theres not going to be a shrinking entry-level workforce, but its not going to be growing either, says Jackson of the Center for Strategic and International Studies. There may be demand for older workers. But not everyone is convinced that many more people will be able to keep working well into their 60s or

even 70s. Robert H. Binstock, a professor of aging and public policy at Case Western Reserve University, notes that although people are living longer, theyre also afflicted with chronic diseases for longer periods of time. A lot of them cant do their jobs anymore, he says. The whole notion that everybody is going to be able to keep doing their job until 70, its silly. Blahous, the former Bush administration official, dismisses such arguments. Social Security already makes provisions for disabilities, and people worked, on average, longer a half-

century ago, he says. People take early retirement more often, Blahous says, not because more people are physically breaking down. Its because its financially beneficial. But putting aside arguments about whether people are physically capable of working longer, theres also the question of whether they can find work. Alicia Munnell, director of the Boston College Center for Retirement Research, says employers will never say they wouldnt hire older people thats against the law but they are very ho hum about the prospect. Her center has conducted surveys that show

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Its not just the lack of provices of Merrimack Valley gramming help offered by govin Lawrence, Mass., has ernments that is a problem for been working with seniors aging communities, but also a and physicians to help codecline in basic services and ordinate management of amenities, Binstock says. prescription drug regimens Youve got lots of places that and other treatments. Were are aging, and the young people not a medical facility, but are moving out, particularly in what we have is the abilirural areas, he says. Youre going ty to draw elders in and to have communities that arent educate them on their even going to have grocery stores. health care, says Rosanne Eighty-year-old Ada Noda, of St. Augustine, Fla., developed Some states have a youth DiStefano, the facilitys exhealth problems and couldnt work, forcing her to declare bankruptcy. Aging trends are seen by many experts as a population that is growing more ecutive director. significant reason for the climb in health care costs. But rapidly than the older populaDiStefanos program has health economists say medical costs are rising largely because tion, notably in the Southwest, been widely imitated in of the increasing availability of expensive treatments. says Frey. But aging populaMassachusetts, as have a tions are growing in many number of other innovations designed to help residents adjust to old age. But such parts of the country not accustomed to accommodating them. The localities where older residents are starting to predomprograms are having trouble attracting funding in the present inate, such as Rockford, are the ones that are going to be budget environment. Many local governments are providing exercise classes and most severely hit, says Frey. We have a country thats aging nutrition assistance for seniors, but a survey by the National everywhere, but its only young in certain spots. Association of Area Agencies on Aging found that finance and Alan Greenblatt funding problems are the biggest challenge localities face in adjusting to an aging population. Thirty percent of local gov1 Ted C. Fishman, Shock of Gray (2010), p. 235. ernments say that their overall revenues are in decline. 3 If you go community by community, sure, some have de- 2 For background, see Thomas J. Billitteri, Blighted Cities, CQ Researcher, veloped programs that are better than others, says Robert H. Nov. 12, 2010, pp. 941-964. 3 The Maturing of America: Communities Moving Forward for an Aging Binstock, a professor of aging and public policy at Case West- Population, National Association of Area Agencies on Aging, June 2011, ern Reserve University. Overall, its a tremendous problem. www.n4a.org/files/MOA_FINAL_Rpt.pdf, p. iii.
AP Photo/Jake Roth

employers are worried about issues such as older workers stamina, ability to learn new skills and adaptability to changing technology. Thus, although the economics of both entitlement programs and household finances would seem to dictate that more Americans will have to work longer, their chances of doing so might not be as good as they would wish. We see employers willing to keep older workers, but they are reluctant to hire [older] people who are new to the payroll, says the Urban Institutes Johnson. We know that when older people lose their jobs, getting a new

job is harder, and the periods of unemployment are longer. Will spending on health care for the elderly bankrupt the United States? Health care costs already consume more than double the share of the economy that they did 30 years ago. They are expected to consume $2.8 trillion this year, or 17.9 percent of gross domestic product (GDP), according to the federal Centers on Medicare and Medicaid Services (CMS). Thats up from 8.1 percent of the economy in 1975. 16

Medicare and Medicaid spending have grown at a similar pace. The two programs, which provide coverage for seniors and the poor and disabled, respectively, are on course to grow from about 4 percent of GDP in 2008 to nearly 7 percent by 2035. 17 The 2010 federal health-care law, known as the Affordable Care Act, was designed to cut Medicare costs by nearly $120 billion over the next five years. 18 But Medicares actuaries worry that savings from the 2010 law cant all be relied upon. Thats because Congress has frequently canceled plans to lower Medicare fees

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AGING POPULATION
U.S. Population Growing Grayer
A record 40 million Americans are age 65 or older, nearly double the total four decades ago. The number of seniors has risen every decade since 1880.
(in millions)

50 40 30 20 10 0

Number of Americans Age 65 or Older, 1880-2010

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Sources: Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/lifeexpect.html; Prole of General Population and Housing Characteristics: 2010, U.S. Census Bureau, 2010, factnder2.census.gov/faces/ tableservices/jsf/pages/productview.xhtml?pid=DEC_10_DP_DPDP1&prodType=table.

for hospitals and physicians. 19 As a result, the Medicare trust fund is on course to run out of money in 2024 five years earlier than previously predicted according to Richard Foster, the chief actuary at CMS. Rising health care costs are a burden not just for the government but for individuals as well. Were spending about $8,000 more annually for insurance for a family of four than we did in 2000, says Paul Hewitt, vice president of research at the Coalition for Affordable Health Coverage, an advocacy group in Washington. Experts say aging trends are a significant reason for the climb in health care costs and an important source of pressure on the federal budget. Its worth keeping in mind that a significant share of health care growth is demographically based, says Jackson of the Center for Strategic and International Studies. Youre looking at a steep rise in cost just because of the rise in the average age of the beneficiaries the aging of the aged. But health economists say aging trends are far from the whole story. Medical costs are rising largely because of the ever-increasing availabil-

ity of expensive treatments in the health care system a system that treats young and old alike. The real problem is not the aging of the population, but the rise of health care costs, says Case Westerns Binstock, a former president of the Gerontological Society of America. We dont look at the elephant in the room here, which is the enormous profits of the medicalindustrial complex. Most experts agree that major alterations are in order. Some are discouraged that the two major parties seem worlds apart on health care issues. Both parties have to recognize the need to compromise, says the Urban Institutes Johnson. That does not appear imminent. Republicans have pledged to repeal the 2010 health care law, considered one of Obamas signature achievements, while Democrats intend to use the GOPs controversial plan to turn Medicare into something resembling a voucher program against them in the 2012 elections. Even as congressional Republicans seek to slash Medicare and other entitlements, they oppose the Independent Payment Advisory Board, estab-

lished by the 2010 health care law, which is meant to make recommendations for Medicare spending cuts when its growth exceeds GDP growth by more than 1 percent. Cutting providers eventually cuts benefits because they are less available, said Sen. Jon Kyl, R-Ariz., the minority whip. You dont have as many physicians, for example, to take care of Medicare patients, so either people have to wait a lot longer or they never get to see the physician theyd like to. 20 But if a political deal is not reached, the consequences could be dire, experts warn. The Congressional Budget Office (CBO) says health care costs, on their current course, could swallow all of GDP by 2082. 21 The risk of bankruptcy from health costs in particular, says Hewitt, are exactly what bond rating agencies have warned about when they have threatened recently to downgrade U.S. debt meaning the federal government may not be able to borrow money as cheaply because theres more risk that it wont be able to cover its interest payments. Three-quarters of the projected deficits over the next 10 years are new health care spending, according to CBO, Hewitt says. If you could hold health costs at 2011 levels, you wouldnt have any deficit of note in 2021. Theres no question that were on course for health care costs to bankrupt the country, says the New America Foundations MacGuineas. You cant have anything growing faster than GDP forever, because it consumes more and more of the economy. That may be the greatest danger. MacGuineas, like other budget experts, predicts that some sort of change will be made in health care spending, because present trends are not sustainable. But the changes wont come without pain and political difficulty. In the meantime, rising health costs may continue to squeeze spending on other programs.

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Will the young and old fight over resources? When he unveiled his budget in February, New York City Mayor Michael Bloomberg warned that the city faced tough choices because of a budget shortfall of nearly $5 billion. Everybody expects you to do everything, the mayor said. Thats not the world we live in. 22 Bloomberg felt he had no choice but to threaten layoffs of more than 4,000 school teachers. At the same time, however, his budget contained a new initiative: the construction of 10 megacenters for senior citizens. Both ideas were ultimately rejected by the city council. Still, says the Urban Institutes Johnson, That was striking. It seems to be the essence of the potential for intergenerational combat. The idea that aging boomers will drain the nations resources through entitlements such as Social Security and Medicare and that younger generations are not just going to resent but protest it has seeped into popular culture. It forms the premise, for example, of satirical novels such as Christopher Buckleys Boomsday and Albert Brooks 2030. While older voters demand full funding for Social Security and Medicare, younger voters may worry that the growth of those expensive programs is crowding out spending on areas that benefit them more directly, such as education and transportation. Or the young might want to see entitlements cut in order to chop deficits that theyll eventually have to repay. I think its amazing weve gotten this far without younger generations getting more agitated about constantly investing in seniors, with no similar promises made for productive investments for young people, says MacGuineas. Voting schisms along generational lines have become apparent in some recent elections. You had this overwhelming tilt of millennials to the

Elderly a Growing Share of Electorate


The proportion of the American electorate age 65 and older has risen modestly over the past 20 years, from 17 percent in 1990 to 19 percent in 2010. But it is expected to grow sharply over the next 40 years, topping 30 percent by 2050.
(percentage)

35% 30 25 20 15 1990 * projected

Voting-age Population Age 65 and Older, 1990-2050

2000

2010

2020*

2030*

2040*

2050*

Sources: United States 1990 Census of Population, U.S. Census Bureau, www.census.gov/prod/cen1990/cp1/cp-1-1.pdf; United States 2000 Census of Population and Housing, U.S. Census Bureau, November 2010, www.census. gov/prod/cen2000/phc-1-1-pt1.pdf; Projections of the Population by Selected Age Groups and Sex for the United States: 2010 to 2050, U.S. Census Bureau, 2008, www.census.gov/population/www/projections/les/nation/summary/np2008-t2.xls.

Democrats and Obama in 2008, says Howe, co-author of Millennials Rising, about the generation born between 1982 and 2002. Obama and McCain Sen. John McCain, Obamas GOP opponent were dead even among those 30 and over. Older Americans voted disproportionately for GOP candidates in 2010. But Democrats won a special election in May in a traditionally Republican congressional district in upstate New York. The election was widely interpreted as a referendum on the House GOPs plan to turn Medicare into a form of voucher program, with seniors turning out in force to reject the idea and the Republican candidate. Over the years, until very recently, theres been very little evidence that older people vote on the basis of old-age benefits as a bloc, says Binstock at Case Western Reserve. Its only in 2010 and the 26th District in New York that you begin to see some signs of this, particularly in relation to Medicare.

Howe and others say boomers, throughout their adult lives, have not voted as a predictable bloc. If they start to in old age, however, they would be formidable. As the population ages, the electorate the group of people actually voting is growing older at a disproportionate rate. The percentage of the voting-age population that is over 65 is expected to climb by more than 10 percent over the next 25 years. 23 (See graph, above.) And, because older voters tend to go to the polls more regularly, their share of the electorate will climb even more, Binstock predicts. Some political scientists are skeptical that there will be a young persons revolt, or even noticeable friction between the generations. I dont buy the generational-conflict theory, says Alan Abramowitz, a political scientist at Emory University. Programs that benefit the elderly, such as Social Security and Medicare, also benefit their children and grandchildren. If you cut benefits for the elderly, one conse-

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AGING POPULATION
quence will be to largely synonymous shift costs onto their with death. Older peochildren and reduce ple were both rarer and income available to more vulnerable to sudpay for, among other den death due to such things, education for things as infectious distheir children. eases and poor sanitaOthers echo this tion. But even as modpoint, noting that oldern medicine has age entitlements keep conquered diseases that seniors from being a afflict the old, it has done financial burden on even more to address their children, while infant mortality. older voters will want With fewer people to see young people dying young, life exsucceed through edpectancy has increased. ucation in part, to And healthier babies help pay the taxes have coincided with Walter Breuning celebrates his 113th birthday at a retirement home in that fund their entiother societal and ecoGreat Falls, Mont., on Sept. 21, 2009. At his death in April 2011 at age tlements. nomic factors to bring 114, he was the last American man born in the 19th century and one of the worlds oldest people. The oldest of the 78 million Americans born Older people birthrates down. As during the post-World War II baby boom are turning 65 this year, while really do care about prosperity grows, death the share of the population over 85 is growing even faster. their grandchildren rates fall. And the adand obviously have vent of pensions and a financial stake in having a proother social-insurance programs has ductive workforce, says Rother, the meant that parents no longer have as AARP vice president. Younger peogreat a need for large families to supple need to look forward to a seport them as they age. cure retirement, and they obviously Meanwhile, womens roles have cant vote to limit Medicare without changed. Many now balance reproduchaving repercussions for them later. tion with concerns and responsibilities Still, some observers say resentment or most of human history, jour- outside the home. Contraceptives are among the young is only likely to nalist Ted C. Fishman points out more widely available, while abortion grow as entitlements take up an in- in his book about global aging, Shock has become legal and available. creasingly large share of a strained fed- of Gray, people who lived past 45 had Finally, as American society has eral budget. And some worry that the beaten the odds. Life expectancy bare- urbanized, fewer families need to intergenerational compact may be ly budged from 25 years during the have multiple children to help work frayed by the fact that the older Amer- Roman Empire to 30 years at the dawn in the fields. icans who receive entitlements are of the 20th century. 24 predominantly white, while the school Until the Industrial Revolution, peoand working-age populations will be ple 65 or older never comprised more increasingly made up of minorities, in- than 3 or 4 percent of the population. n the 1930s, demographers predictcluding Hispanics and Asians. (See side- Today, they average 16 percent in the ed that after a long period of debar, p. 588.) developed world and their share Despite the rumblings, I think the is expected to rise to nearly 25 per- cline in birthrates dating back to the population may come to appreciate that cent by 2030. 25 (The share of Amer- Industrial Revolution, the U.S. populaold-age benefits are actually things that icans over 65 will be nearly 20 per- tion would stagnate and was unlikely benefit all generations, Binstock says. cent by then.) Demographers call such to rise above 150 million by centurys However, I do think that the growing shifts from historic norms the demo- end. But birthrates shot up immediately after World War II, quickly rising to Latino population may very well come graphic transition. to resent paying taxes to support an A confluence of factors has led to more than 4 million births per year. Continued on p. 588 older white generation. the current transition. Aging was once

BACKGROUND
Living Longer

Fertility Splurge

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Getty Images/John Moore

Chronology
1940s-1960s High postwar birth rates fuel
suburban growth. 1946 First of the 78 million American baby boomers are born. 1956 Women are allowed to collect early benefits under Social Security at age 62. The same deal is offered to men in 1962. 1959 More than 50 million Americans are under age 14, representing 30 percent of the population. 1960 Sun City opens in Arizona, pioneering the retirement community idea. 1960 Seventy percent of women ages 20-24 are married. 1965 Forty-one percent of Americans are under age 20. . . . Medicare and Medicaid, the main government health programs for the elderly, poor and disabled, are created.

1990 Proportion of married women ages 20-24 drops to 32 percent. 1992 Bill Clinton elected as the first boomer president.

the retirement age for pilots from 60 to 65. . . . The nations earliestborn boomer, Kathleen CaseyKirschling, applies for Social Security benefits.

2000s

2010s

Oldest boomers, enter their 60s, raising concerns about the cost of their retirements. 2000 For every American 65 or older, there are 3.4 workers contributing payroll taxes to Social Security a ratio that will shrink to 2.0 by 2030. 2003 Congress passes an expansion of Medicare that offers a prescription drug benefit to seniors. . . . Pima County, Ariz., becomes the first local government to require all new homes to be designed to accommodate seniors and the disabled. 2005 The pregnancy rate of 103.2 per 1,000 women aged 15 to 44 years old is 11 percent below the 1990 peak of 115.8. 2006 President George W. Bush, one of the oldest boomers, turns 60. . . . The Pension Protection Act allows workers to dip into their pensions while working past 62. 2007 Federal Reserve Chairman Ben S. Bernanke predicts Social Security and Medicare will swallow 15 percent of annual economic output by 2030. . . . The Federal Aviation Administration proposes increasing

The number of older Americans continues to rise, but the U.S. enjoys more growth among school and working-age populations than other rich nations. 2010 The number of workers 55 and over hits 26 million, which is a 46 percent increase since 2000. Congress enacts the Affordable Care Act, designed to expand health coverage, including a doubling of the eligible population under Medicaid. 2011 March 16: The Centers for Disease Control and Prevention announces that life expectancy for Americans at birth increased in 2009 to 78.2 years. . . . April 15: The House passes a budget that would convert Medicare into a voucher program for those now under 55. . . . May 24: Democrats win a special election in a traditionally Republican district in upstate New York; the race is seen as a referendum on the House GOP Medicare proposal. 2015 Working-age populations are projected to start declining in the developed world, with the United States as the major exception. 2025 Population growth is expected to stall in every developed country except the United States, which is also expected to be the only developed nation with more children under age 20 than elderly over age 65.
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1980s-1990s Boomers set aside youthful rebellion to take a leading role in wealth creation and politics. 1983 Congress approves a gradual increase in the age at which Americans can collect full Social Security benefits, from 65 to 67. 1986 The Age Discrimination Employment Act is amended to eliminate mandatory retirement ages.
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AGING POPULATION

Minority Youths Are Rising Demographic Force


Trend has major implications for aging whites.
hite America is aging, while its young people are increasingly dominated by members of ethnic and racial minorities. As a result, the days when the United States will no longer be a white-majority nation are coming sooner than demographers had long expected. That could lead to a political struggle over resources, some social scientists contend. There could be a generational battle over governmental priorities one with racial or ethnic overtones. Younger members of minority groups may not want to fund entitlement programs that chiefly benefit a mostly white cohort of older Americans. Conversely, the elderly who hold disproportionate political power thanks to higher rates of voter turnout may seek to protect such programs at the expense of investments in government programs that chiefly benefit the young. Over time, the major focus in this struggle is likely to be between an aging white population that appears increasingly resistant to taxes and dubious of public spending, and a minority population that overwhelmingly views government education, health and social-welfare programs as the best ladder of opportunity for its children, political journalist Ronald Brownstein wrote in the National Journal last year. 1 In a number of places, minorities already outnumber whites at least among schoolchildren. The population of white children declined by 4.3 million from 2000 to 2010, while that of Hispanic children rose by 5.5 million, according to the 2010 decennial census. Indeed, the number of white children decreased in 46 states between 2000 and 2010. Whites now make up a minority among

those younger than 18 in 10 states and 35 large metropolitan areas, including Atlanta, Dallas and Orlando. In Texas, 95 percent of the growth of the youth population occurred among Hispanics. What a lot of older people dont understand is that, to the extent we have a growing youth population, its entirely due to minorities, says William Frey, a demographer at the Brookings Institution who has analyzed the 2010 census data on children. Twenty-three states have seen a decline in the total number of children. In the baby boom generation, about 20 percent never had children, which is about double the rate of the previous generation of elders, says Phillip Longman, a policy researcher at the New America Foundation think tank in Washington. Now, youre talking about this aging population that doesnt have any family support and doesnt have any biological relations, he says. Its not so much that theyre white as they forgot to have children. This opens one of the big questions regarding the differences between an older, white population and a younger population made up more from minorities. In his 2007 book Immigrants and Boomers, demographer Dowell Myers worried that there is little kinship or sense of shared identification between the groups. But Longman says such concerns may be overstated. Thirty years ago, I predicted that would be a big thing, the conflict between generations made even worse by the fact that it has an ethnic and racial component to it as well, he says. Longman argues now, however, that racial lines are getting blurrier. Just as the definition of who was white expanded in

Continued from p. 586

All told, about 76 million children were born in the United States between 1946 and 1964, generally considered the period of the baby boom. (Several million have died, but immigrants have more than made up for those numbers, bringing the baby boom total to 78 million.) Simply put, the baby boom was a disturbance which emanated from a decade-and-a-half-long fertility splurge on the part of American couples, concluded the Population Reference Bureau in 1980. 26 Childbearing long delayed first by the Great Depression of the 1930s and then by war was put off no longer.

Women married younger and had their first babies at an earlier age than at any time in modern history. 27 The fertility rate, which refers to the average number of children born to women of childbearing years, had averaged 2.1 children per woman during the 1930s but peaked at 3.7 in the late 1950s. 28 The number of babies being born certainly surprised the General Electric Co. in January 1953. It promised five shares of stock to any employee who had a baby on Oct. 15, the companys 75th anniversary. GE expected maybe eight employees would qualify. Instead they had to hand over stock to 189 workers. 29

The time was ripe, economically, for many more people to have children than had done so during the Depression. GDP expanded rapidly, from $227 billion in 1940 to $488 billion in 1960. Median family income and wages climbed steadily because of tight labor markets, while inflation remained low. The Servicemembers Readjustment Act of 1944, commonly known as the GI Bill of Rights, helped more people in the middle class buy their first homes and get college educations, significantly increasing their lifetime earnings. Never had so many people, anywhere, been so well off, observed U.S. News & World Report in 1957. 30

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White parents with chilthe first half of the 20th cendren may be more likely to lotury to include groups such cate in select neighborhoods as the Irish and Italians, Hisand communities, perhaps those panics will increasingly be with better schools, or superiseen as white, Longman or public amenities related to says. I just think the meltchildrearing, he writes. 3 ing pot continues, he says. Polls indicate that younger It will be in the interest Americans are readier to emof the aging white populabrace racial diversity than tion to see that young peotheir elders, while more deple, including Hispanics and Minorities are fueling the nations growing youth scribe themselves as mulother minorities, fulfill their population. Above, black and Hispanic students at the Harlem Success Academy, a New York charter school. tiracial. Still, racial animosieducational potential, says ties and differences persist, Myers. Otherwise, they will and they may become exacerbated as the white population ages be caught short as the working-age population, which pays and the minority population grows larger. the bulk of the taxes that support programs that benefit The public-school system is one place where tensions could seniors, is made up largely of minorities. The person you rise. Gaps on average reading and math test scores posted by educated 20 years ago, thats who is going to buy your Hispanics and non-Hispanic whites have been narrowing, but house, he says. remain wide. Despite the closing white-Hispanic gaps on civics Alan Greenblatt performance, the fact is were still seeing gaps in the double digits, said Leticia Van de Putte, a Texas state senator who sits on the board that oversees National Assessment of Edu- 1 Ronald Brownstein, The Gray and The Brown: The Generational Mismatch, National Journal, July 24, 2010, www.nationaljournal.com/magazine/ cational Progress testing. 2 the-gray-and-the-brown-the-generational-mismatch-20100724. Because school funding relies partly on property tax as- 2 State Senators React to Hispanic Achievement Gains, Hispanic Tips, May 5, sessments in most places, such disparities may be perpetuated 2011, www.hispanictips.com/2011/05/05/state-senators-react-to-hispanicby racial segregation. Although the 2010 census showed a de- achievement-gains-on-latest-naep-civics-report-card-that-showed-substantialgains-in-the-performance-of-hispanic-students-at-grades-four-eight-and-12/ cline in residential segregation, black and Hispanic children are 3 William Frey, Americas Diverse Future, The Brookings Institution, April 2011, more likely to live in a segregated neighborhood than black p. 10, www.brookings.edu/~/media/Files/rc/papers/2011/0406_census_diversity_ frey/0406_census_diversity_frey.pdf. and Hispanic adults, according to Frey.
Getty Images/Chris Hondros

The Baby Bust


erhaps because of the advent of the birth control pill in 1960 and the fact that more women had careers, boomers were slower to become parents than their parents had been. Between 1965 and 1976 the era of the so-called baby bust fertility among whites dropped below replacement levels. 31 After just two decades of a fertility splurge, Americans went back to marrying later and producing fewer children. In 1990, only 32 percent of women 20-24 were married, com-

pared to 70 percent in 1960. Social scientists began to posit that it was the baby boom that was exceptional in American history, not the subsequent bust. 32 But the baby bust was followed by the uptick known as the echo boom, when many boomers became parents, racking up 64 million live births between 1977 and 1993. 33 Meanwhile, boomers continued to dominate many aspects of American life and culture. Some criticized them as frivolous, blaming their personal habits and quests for self-fulfillment for every social ill from divorce rates to teen drug use. Others defended

them for fighting for greater rights for women and gays, among others. The debate about boomers values became a recurring motif in politics especially after Bill Clinton, who would become the first boomer president, emerged on the national stage in 1992. Political scientists have noted that boomers failed to coalesce behind a single political party, with many growing more fiscally conservative during the 1980s but remaining socially liberal, with views on race, AIDS, drugs and womens rights distinctly different from their parents generation. But the mere fact of their massive numbers made them hard to ig-

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nore and created policy challenges buy private insurance is an example. A The percentage of adults who are as they aged. This year, the first of survey conducted in May by the Pew providing personal or financial care about 78 million baby boomers turn Research Center for the People & the to a parent has tripled since 1994, 60, including two of my dads fa- Press found opposition to the plan was according to the MetLife Mature Marvorite people, me and President especially high among people who say ket Institute. Nearly 10 million adult Clinton, President George W. Bush they have heard a lot about this pro- children over the age of 50 care for said during his 2006 State of the posal fully 56 percent are opposed, their aging parents, said Sandra Union address. This milestone is while 33 percent are in favor. 36 Timmermann, the institutes director. more than a personal crisis. It is a The politics of this is, the baby Assessing the long-term financial imnational challenge. The retirement of boom is a generation thats always pact of caregiving for aging parents the baby boom on caregivers themgeneration will selves, especially those put unprecedented who must curtail their strains on the fedworking careers to do eral government. 34 so, is especially important, since it can Combined spendjeopardize their future ing for Social Secufinancial security. 37 rity, Medicare and Boomers are quite Medicaid will condifferent from earlier sume 60 percent of generations as theyre the federal budget approaching this age, by 2030, Bush said, says William H. Frey, presenting future a demographer at the Congresses with Brookings Institution, a impossible choices centrist think tank in staggering tax Washington. For exincreases, immense ample, boomer women deficits or deep cuts are much more likein every category of A nurse examines stroke victim Elvira Tesarek at her home in Warren, ly to have lived indespending. R.I., in May 2011. Nearly 1,300 elderly and disabled adults in the state have been able to return home under a pilot program pendent lives, been Bush had spent designed to cut spending on Medicare. head of households a good chunk of and worked. 2005 touting a plan But theres a great to revamp Social Security, meant to be the signature been pretty willing to vote themselves deal of economic inequality within the domestic achievement of his second good fiscal deals, says MacGuineas of baby boom generation, he notes, which means many retirees will have a hard term. But the plan which would the New America Foundation. time making ends meet. 38 In addihave allowed workers born after 1950 tion, Frey says, boomers didnt have to put part of their payroll taxes into as many children as their parents genprivate investment accounts in exeration, so they cant rely on them change for cuts in traditional benefits oomers will add to the rising num- for support. went nowhere. A Washington ber of seniors but their parents, Not everyone views the aging of Post/ABC News Poll found that 58 percent of those surveyed said the more in many cases, will still be around. America as bad news. An aging popthey heard about Bushs plan, the less Those 85 and over now make up the ulation, says Eric Kingson, a professor fastest-growing segment of the U.S. pop- of social work at Syracuse University, they liked it. 35 More recent attempts to overhaul the ulation, according to the National Insti- is a sign that society has successfully major entitlement plans benefiting se- tute on Aging. That means that even as fostered an economy that helps peoniors have proved no more popular. A boomers enter what has traditionally ple lead long, prosperous lives. PopHouse Republican plan to convert been considered old age, they are sand- ulation aging is not just about the old, Medicare from an insurance program wiched between still-living parents and he says. Its about how all of our ininto a credit that would help seniors their own children and grandchildren. stitutions are going to change.

Sandwich Generation

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McClatchy-Tribune via Getty Images/Jay Reiter

CURRENT SITUATION
Financial Insecurity
ven as federal officials debate the affordability of Social Security and Medicare as the population ages, individual Americans are increasingly concerned about their own ability to support themselves during retirement. Even before the financial crisis of 2008, income and wealth inequality was growing among seniors. Back in 2004, the top 5 percent of the baby boomers controlled more than half of the assets, says Diane Oakley, executive director of the National Institute on Retirement Security in Washington. The bottom half had less than 3 percent of the assets. She hopes lower-income Americans have been able to save more for retirement since then, but stock market losses and the collapse of the housing bubble make that unlikely. In a recent poll, 78 percent say they cant save enough on their own to be secure in retirement, says Brian Perlman, president and CEO of Mathew Greenwald & Associates, a market research firm in Washington. Peoples beliefs are that its harder and harder to do that. The risk for retirement has shifted more onto individuals, Oakley says. From 1980 to 2008, she says, the percentage of private-sector workers covered by defined-benefit pension plans which offer a guaranteed income throughout retirement dropped from 38 percent to 20 percent. Meanwhile, defined-contribution plans, such as 401(k) plans, have grown. These plans, which shift the burden for retirement savings onto individuals, have certain tax advantages, but

like any personal savings account, they can be drained dry. Unlike definedbenefit plans, the money is gone once 401(k) assets are depleted. Americans are not contributing enough to 401(k)s to build up sufficient retirement nest eggs. According to Towers Watson, a human-resources consulting firm, only 57.3 percent of Americans have enough in their retirement accounts to replace one years worth of working salary. Only 10.9 percent had more than four times their current salary saved up. 39 Because most people are going to be retired more than a few years, that presents a problem. For most, Social Security will represent the bulk of their retirement income, but benefits average only about $14,000 per year. Only about half of workers are in any kind of retirement plan through their employers, says the Urban Institutes Johnson. People dont make the most of their 401(k) plans they dont contribute the maximum, or at all.

Automatic Enrollment
ost workers have to sign up for 401(k) plans, but Johnson favors automatic enrollment. Automatic enrollment plans would allow employers to deduct part of each paycheck and put the money toward employees retirement, unless a worker made the express decision to opt out. Weve run some simulations, Johnson says. If most people behave as we expect they would, based on past experience, automatic enrollment would increase retirement incomes for low- and moderate-income people by about 20 percent. The Obama administration supports the idea of automatic enrollment. The administration would like employers, even if they dont offer 401(k) accounts of their own, to enroll their workers in some kind of retirement account.

The basic idea is that an employer would simply do payroll deduction, says J. Mark Iwry, senior adviser to Treasury Secretary Timothy Geithner. When we do automatic enrollment in 401(k)s, the [participation] rate goes up from two-thirds or threequarters to more than 90 percent. But the idea of enrolling workers automatically into retirement savings accounts may run into opposition in Congress because of budget concerns. Obamas deficit commission last year recommended lowering the cap on annual contributions allowed to such retirement savings accounts. 40 Aside from putting more money aside for retirement, individuals will also come to rely more on income earned later in life whether by staying in their old job longer or finding a new one after retiring, many economists believe. If people want to have a secure retirement, they really should work longer, says Alicia Munnell, director of the Center for Retirement Research at Boston College. Theres an enormous benefit in terms of what your Social Security benefits and 401(k) accounts will be. And then, you have [fewer] years over which to spread your savings. All were talking about, basically, is three to four more years. Were not talking about into your 90s.

Government Cutbacks
ost government workers can count on a relatively comfortable retirement. In contrast to privatesector employees, about 90 percent of state and local government workers are enrolled in defined-benefit programs. But the disparity between the plans offered to government workers and those at private companies, along with severe budget problems confronting state and local government workers,

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is increasing pressure on retirement benefits in the public sector, too. The gap between what states had promised to pay out in pensions and retirement health benefits and the assets they have to pay them had grown to more than $1.26 trillion by the end of the 2009 budget year, according to the Pew Center on the States. 41 Some economists say the gap is even larger. State and local retirement accounts might be more than $1 trillion in the red, but union leaders say its unfair to blame government workers because legislatures failed to make scheduled payments to pension funds over the years. Better to blame Wall Street, they say, for racking up record profits even as large-scale investment losses have blown a hole through pension accounts. Theyve blamed public empowers that would allow him to change retirement-benefit formulas. 42 Reed warns that he will have to lay off two-thirds of the citys work force if he cant achieve significant savings in retirement-benefit costs. What consumed $65 million of the citys budget a decade ago already accounts for $250 million and half the citys current budget shortfall. Retirement costs could rise to as much as $650 million annually over the next few years, Reed says. In Reeds mind, its simply a math problem. We are draining money out of services and pouring them into retirement benefits, Reed says. However you define unsustainable, its unsustainable. Public-employee unions concede that Reeds complaints are borne out of real problems with San Joses finances. They dont agree that his approach is the best way to address those problems, however. And union leaders in San Jose, like their colleagues elsewhere, think stripping public employees of promised benefits will undermine one of the few pockets of retirement security. Its perfectly understandable that workers in the private sector are worried about their retirement security, says John Liu, New York Citys comptroller. But to scapegoat public employees will fuel a race to the bottom in our country. Yet, further cutbacks appear inevitable, even for government workers who have long counted on benefits that would allow them to retire free of financial anxiety. State officials appear to have lost some of their initial enthusiasm for moving to 401(k)style plans, however, because of the enormous upfront costs in switching from traditional pensions. In Kentucky, increased costs are estimated at $8 billion over 15 years. Nevada would run through $1.2 billion in just two years. 43
Continued on p. 594

We are draining money out of services and pouring them into retirement benefits. However you define unsustainable, its unsustainable.
Mayor Chuck Reed San Jose, Calif.

About a dozen states have altered their pension systems over the past couple of years, according to the National Conference of State Legislatures. Most have made moves such as putting new employees into 401(k)style accounts, rather than enrolling them in defined-benefit plans.

Math and Politics


ut some governors and lawmakers have sought changes in retirement coverage for current workers as well. The battle over retirement benefits has turned political, most notably in Wisconsin, where legislation to strip most public employees of collective bargaining rights led to weeks of large-scale protests at the capital.

ployees for problems theyve never caused in the first place, says Randi Weingarten, president of the American Federation of Teachers. Patrick OConnor, an alderman in Chicago, agrees that unions have a point when they accuse government officials of not properly funding promised benefits. Still, he argues, cities and states have no choice but to cut back on benefits that are no longer affordable. Government cant blame the unions in total, OConnor says. Government is what put the benefits in place. But I dont think anybody who looks at pension plans thinks they can be funded at the levels theyre at. In San Jose, Calif., Mayor Chuck Reed declared a state of fiscal emergency in May, hoping he can persuade voters to give him additional

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At Issue:
Should the retirement age be raised?
yes

ANDREW G. BIGGS
RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE
WRITTEN FOR CQ RESEARCHER, JULY 2011

NANCY ALTMAN AND ERIC KINGSON


CO-CHAIRS, STRENGTHEN SOCIAL SECURITY CAMPAIGN
WRITTEN FOR CQ RESEARCHER, JULY 2011

ocial Securitys retirement age should not be increased for anyone on the verge of retirement, but theres a good case for doing so over coming decades, as the Baby Boomers retire and the population ages. In 1950, the average retiree claimed Social Security benefits at age 68.5 and lived to around 76. Today, a typical retiree claims benefits at 63 and will live an additional two decades. Americans today live almost one-third of their adult lives in retirement, supported by an increasing tax burden on their kids and grandkids. This isnt simply unfair to future generations. It is also a waste of human talent. Are there some people who cant work longer? Of course. And for them, early retirement or disability benefits remain an option. But it would be strange in todays service economy if Americans, who work mostly in offices, could not work as long as prior generations who toiled in mines, mills and farms. Indeed, our longer lives are also healthier lives. According to the National Center for Health Statistics, among individuals ages 65-74 the share describing themselves as in fair or poor health dropped from 25.1 percent in 1983 to 18.5 percent in 2007. Overall, 75 percent of individuals over 65 report being in good, very good or excellent health. Its easy to scare people for instance, President Obamas Commission on Fiscal Responsibility and Reform would increase the retirement age to 69. But this would apply only to people who havent even been born yet and at retirement would live on average to age 88 almost 10 years longer than they did when Social Security started in the 1930s. It is true that life expectancies have risen faster for highearners than for low-income Americans. This is why almost every reform plan that raises the retirement age also makes Social Security more progressive, by boosting benefits for lowearners while trimming them for the rich. One option is to let the retirement age rise to 67 as scheduled, then increase it in future years as life spans rise. If life expectancies increase quickly, then the retirement age will follow; if life spans stay constant, the retirement age wont need to increase further. By itself, this would fix nearly one-quarter of Social Securitys deficit. Mathematically, we cant fix the entire entitlement deficit by raising taxes. And Medicare is far more likely to require tax increases than Social Security. So it only makes sense to reduce costs where we can. Increasing the retirement age is a reasonable response to longer lives.
no

yes no
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o reduce unemployment during the 1961 recession, and in recognition that many Americans were unable to work until age 65, Congress allowed men to claim reduced Social Security benefits at age 62, just as it had for women in 1956. Speaking in support, Democratic Ohio Rep. Charles Vanik said that if 2 million male workers eventually retire under this program, 2 million job opportunities will be created. Ironically, with unemployment topping 9 percent, many in Congress today favor increasing Social Securitys full retirement age. This is the wrong policy today, would have been wrong in 1961 and will be wrong in the future. A retirement age increase is mathematically indistinguishable from a benefit cut, and ill-advised because benefits are too low. Congress has already increased the retirement age from 65 to 67, a 13 percent cut for people born after 1960. A further increase, from 67 to 69, would be another 13 percent cut for retired workers, no matter whether they claim benefits at age 62, age 70, or any age in between, and translates into lower benefits for many spouses and widow(er)s. Benefits are modest, averaging about $14,000, and the retirement prospects for persons in their 40s and early 50s are already dimmed by diminishing pension protections, shrinking 401(k) and IRA retirement savings, unemployment and declining home values. Retirement-age increases especially burden lower-wage and minority workers, who often have no choice but to retire early. It is well-known that many workers must stop work because of serious health and physical challenges; still others face age discrimination and job loss. Sixty-two percent of Latino males and 53 percent of older black male workers are in physically demanding or difficult jobs, compared with 42 percent of their white male counterparts. By retiring early, they claim permanently reduced benefits. A hardship exemption for these categories of workers has never been found to be politically feasible or workable. Lower-wage workers, on average, have seen little or no increase in life expectancy. Over the past quarter-century, the life expectancy of upper-income men increased by five years while life expectancy among lower-income men increased by only one year and that of lower-income women actually declined. For all these reasons, Congress should follow the will of the American people, who reject increasing the retirement age. Congress should consider eliminating Social Securitys projected shortfall by scrapping the cap on earnings subject to Social Securitys FICA contributions, as the American people strongly favor.

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Continued from p. 592

Even the well-funded Pentagon is worried about whether it can afford to fund retirement benefits, including health care, at the levels soldiers and sailors have come to expect. Retiree pay will cost the Department of Defense about $50 billion next year, according to the Obama administrations proposed fiscal 2012 budget. Military health costs, which have doubled over the past decade, will run even more, with a fair share going to coverage of military retirees. We in the Department of Defense are on the same path that General Motors found itself on, retired Marine Maj. Gen. Arnold Punaro, who advises the Pentagon on financial operations, told NPR. General Motors did not start out to be a health care company that occasionally built an automobile. Today, were on the path in the Department of Defense to turn it into a benefits company that may occasionally kill a terrorist. 44 Robert Gates, who stepped down as Defense Secretary June 30, said the military may have to consider moving to a 401(k)-style plan. Financial problems make some sort of change to the Pentagons pension and retirement health formulas inevitable, he told Defense News. We are way behind the private sector in this. 45

OUTLOOK
Political Prospects
iven the costs associated with aging particularly those involving medical care some economists are growing pessimistic about the countrys long-term budget health. By the time the last of the boomers have turned 65, in 2029, there will be nearly twice as many people enrolled

in Medicare as there are today, according to AARP. Social Security has pretty much anticipated the aging population and built up a very large trust fund, says Rother, AARPs policy director. Medicare is the place where the stress shows. Health care costs are bound to be driven higher by an older population. Some worry Congress wont be able to agree on ways to significantly reduce growth in entitlement programs and thereby reduce the federal deficit. I just think the two parties are kind of locked in cement on this stuff, says Hewitt of the Coalition for Affordable Health Care. The question of whether Congress will change entitlements really depends on the attitudes of the voting public, he says. I frankly dont think that fiscal conservatives are going to be able to hold the line, because baby boomers in the end are going to decide they dont want to defund their retirement, Hewitt says. Myers, the USC demographer, says politicians will need to appeal to older voters to make big policy changes. Older Americans may love their entitlements, but theyll have to be convinced that younger, workingage people need money left over for productive investments in areas such as education and infrastructure and shouldnt be saddled with crippling debt, Myers says. The only winning political strategy is not to fight [older voters] but persuade them its in their interest, Myers says. I believe they control the electorate for the next 20 years, and we dont have 20 years to wait. Budget realities will force changes to entitlement programs in the next decade, says MacGuineas of the New American Foundation. And, she says, waiting until financial markets force fiscal changes, as has been happening in European countries such as Greece, wont be pleasant.

Theres no question that by 2020, changes will have been made, she says. What Im worried about is that changes may have been forced upon us changes made because of markets will be much more painful. Not everyone thinks some kind of fiscal crisis is inevitable. Blahous, the Hoover Institution fellow and Social Security trustee, says hes pessimistic, but not because he worries the country will face economic Armageddon. Instead, Blahous worries that continuing unbridled growth in major entitlement programs will mean well have more expensive government than weve ever had before, he says. Peoples after-tax income will not have the growth weve seen in the past. There are some positive predictions. The Urban Institutes Johnson says widowhood is becoming less common. Men are living longer, and the differences between men and womens mortality is lessening. Widowhood is still associated with poverty. Still, Johnson expects income inequality among the aged to continue to grow and more older Americans will need to work longer. Others say policy changes to health coverage are inevitable, despite the political opposition engendered both by President Obamas 2010 health care-expansion law and the House GOPs current effort to limit Medicare growth. Were going to be moving more and more toward managed care, says Binstock, the Case Western Reserve health policy professor, in the sense that therell be a fixed budget in terms of care for older people. Older people will be hurt as a result, Binstock contends. But the New America Foundations Longman isnt convinced. A move toward some form of managed care will lead to better health outcomes than the current U.S. health system, which

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is prone to ill-informed treatment and mistakes, he says. I would hope in 10 years, we have turned the corner on the health care thing, Longman says. The idea that were going to let people go get any care they want from anybody they want, thats not going to work. Longman says the outlook is gloomy but that it wont be impossible to turn things around. As long as health care is restructured and as long as todays young people dont forget to have children, the U.S. should be able to care for its growing senior population, he says. But fewer people are having children and certainly fewer are having multiple children, notes Fishman, the author of Shock of Gray. Were about a generation away from children having no brothers and sisters, no aunts and uncles, no cousins, he says. People may be looking continuously for more family supports, but the family just wont be there. The prospect of fewer children and longer life expectancy means the median age will continue to rise. No matter the difficulties posed by the aging of the baby boom generation, they wont be solved by that generations passing. The boomers may seem like a large cohort of older people, Fishman says, but the median age is increasing and that wont turn around.

For background, see Marcia Clemmitt, National Debt, CQ Researcher, March 18, 2011, pp. 241-264. 5 For background, see the following CQ Researcher reports: Marcia Clemmitt, HealthCare Reform, June 11, 2010, pp. 505-528, updated May 24, 2011; Beth Baker, Treating Alzheimers, March 4, 2011, pp. 193-216; Alan Greenblatt, Aging Baby Boomers, Oct. 19, 2007, pp. 865-888; and Marcia Clemmitt, Caring for the Elderly, Oct. 13, 2006, pp. 841-864. 6 Richard Wolf, Medicare to Swell With Boomer Onslaught, USA Today, Jan 1. 2011, http:// abcnews.go.com/Politics/medicare-swell-babyboomer-onslaught/story?id=12504388. 7 From remarks at The 2011 Medicare Trustees Report: The Baby Boomer Tsunami, American Enterprise Institute, May 16, 2011. 8 See, for instance, CNN Poll: Majority Gives Thumbs Down to Ryan Medicare Plan, CNN.org, June 1, 2011, http://politicalticker.blogs.cnn. com/2011/06/01/cnn-poll-majority-gives-thumbsdown-to-ryan-plan/. 9 Laura Meckler, Key Seniors Association Pivots on Benefit Cut, The Wall Street Journal, June 17, 2011, http://online.wsj.com/article/ SB10001424052702304186404576389760955403 414.html. 10 For background, see Thomas J. Billitteri, Middle-Class Squeeze, CQ Researcher, March 6, 2009, pp. 201-224. 11 Employee Benefit Research Institute, The 2011 Retirement Confidence Survey: Confidence Drops to Record Lows, Reflecting the New Normal, March 2011, www.ebri.org/pdf/ surveys/rcs/2011/EBRI_03-2011_No355_RCS11.pdf. 12 U.S. Death Rate Falls for 10th Straight Year, Centers for Disease Control, March 16, 2011, www.cdc.gov/media/releases/2011/p03 16_deathrate.html.

13 Life Expectancy for Social Security, Social Security Administration, www.ssa.gov/history/ lifeexpect.html. 14 For background, see Kenneth Jost, PublicEmployee Unions, CQ Researcher, April 8, 2011, pp. 313-336; and Alan Greenblatt, Pension Crisis, CQ Researcher, Feb. 17, 2006, pp. 145-168. 15 For background, see the centers Web page on its National Retirement Risk Index publications at http://crr.bc.edu/special_projects/ national_retirement_risk_index.html. 16 See Annual Report of the Medicare Trustees, Center for Medicare and Medicaid Services, May 13, 2011, www.cms.gov/ReportsTrustFunds/ downloads/tr2011.pdf. 17 Choosing The Nations Fiscal Future, National Academies Press (2010), p. 79, available at www.ourfiscalfuture.org/wp-content/uploads/ fiscalfuture_full_report.pdf. 18 Strengthening Medicare: Better Health, Better Care, Lower Costs, Centers for Medicare and Medicaid Services, www.cms.gov/apps/ files/medicare-savings-report.pdf. 19 Matthew DoBias, Medicares Actuary Paints a Darker Picture Than Trustees, National Journal.com, May 23, 2011, www.nationaljournal.com/healthcare/medicare-s-actuarypaints-a-darker-picture-than-trustees-20110523. 20 Emily Ethridge, Republicans Decry Medicare Cost-Control Panel While Seeking Broad Cuts, CQ HealthBeat, June 8, 2011. 21 CBOS 2011 Long-Term Budget Outlook, Congressional Budget Office, www.cbo.gov/doc. cfm?index=12212. 22 Jonathan Lemire and Erin Einhorn, Mayor Bloomberg Unveils $65.6 Billion Budget, New York Daily News, Feb. 17, 2011, http:// articles.nydailynews.com/2011-02-17/local/286 28742_1_president-michael-mulgrew-mayorbloomberg-teacher-layoffs.

Notes
1 Double Jeopardy For Baby Boomers Proving Care For Their Parents, MetLife Mature Market Institute, June 2001, p. 2, www.metlife. com/assets/cao/mmi/publications/studies/2011/ mmi-caregiving-costs-working-caregivers.pdf. 2 For background, see Thomas J. Billitteri, Rethinking Retirement, CQ Researcher, June 19, 2009, pp. 549-572. 3 Matt Sedensky, Number of 100-Year-Olds is Booming in U.S., The Associated Press, April 26, 2011, http://news.yahoo.com/s/ap/ 20110426/ap_on_re_us/us_centenarian_boom.

About the Author


Alan Greenblatt covers foreign affairs for National Public Radio. He was previously a staff writer at Governing magazine and CQ Weekly, where he won the National Press Clubs Sandy Hume Award for political journalism. He graduated from San Francisco State University in 1986 and received a masters degree in English literature from the University of Virginia in 1988. For the CQ Researcher, he wrote Confronting Warming, Future of the GOP and Immigration Debate. His most recent CQ Global Researcher reports were Attacking Piracy and Rewriting History.

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23 As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237? story_id=17800237. 24 Ted C. Fishman, Shock of Gray (2011), p. 13. 25 Richard Jackson and Neil Howe, The Graying of the Great Powers (2008), p. 7. 26 Paul C. Light, Baby Boomers (1988), p. 10. 27 Herbert S. Klein, The U.S. Baby Bust in Historical Perspective, in Fred R. Harris., ed., The Baby Bust: Who Will Do the Work? Who Will Pay the Taxes? (2006), p. 115. 28 Light, op. cit., p. 23. 29 Steve Gillon, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America (2004), p. 1. 30 Ibid., p. 6. 31 Klein., op. cit., p. 173. 32 Jeremy Greenwood, Ananth Seshadri and Guillaume Vandenbroucke, The Baby Boom and Baby Bust. American Economic Review, 2005, p. 183. 33 William Sterling and Stephen Waite, Boomernomics: The Future of Money in the Upcoming Generational Warfare (1998), p. 3. 34 President George W. Bush, State of the Union address, Jan. 31, 2006, www.washing tonpost.com/wp-dyn/content/article/2006/01/ 31/AR2006013101468.html. 35 Jonathan Weisman, Skepticism of Bushs Social Security Plan Is Growing, The Washington Post, March 15, 2005, p. A1, www.wash ingtonpost.com/wp-dyn/articles/A35231-2005 Mar14.html. 36 Opposition to Ryan Plan Among Older, Attentive Americans, Pew Research Center, June 6, 2011, http://people-press.org/2011/ 06/06/opposition-to-ryan-medicare-plan-fromolder-attentive-americans/. 37 Sheryl Nance-Nash, Caring for Aging Parents Will Cost Boomers $3 Trillion, AOL Daily Finance, June 15, 2011, www.dailyfinance.com/ 2011/06/15/caring-for-aging-parents-will-costboomers-3-trillion/. 38 For background, see Marcia Clemmitt, Income Inequality, CQ Researcher, Dec. 3, 2010, pp. 989-1012. 39 See, Retirement Attitudes, Towers Watson, September 2010, www.towerswatson.com/assets/ pdf/2717/TowersWatson-Retirement-Attitudes_ NA-2010-17683.pdf. 40 Will Congress Slash Your 401(k) Tax Break, Reuters Wealth, June 16, 2011, http://blogs. reuters.com/reuters-wealth/2011/06/16/willcongress-slash-your-401k-tax-break/. 41 William Selway, U.S. States Pension Fund Deficits Widen by 26%, Pew Center

FOR MORE INFORMATION


AARP, 601 E St., N.W., Washington, DC 20049; (888) 687-2277; www.aarp.org. The largest advocacy organization for older Americans. American Society on Aging, 71 Stevenson St., Suite 1450, San Francisco, CA 94105; (415) 974-9600; www.asaging.org. Founded as the Western Gerontological Society; offers programs and online learning for professionals in health care, social services, government and other fields who seek to improve the quality of life for older adults. Boston College, Center for Retirement Research, Hovey House, 140 Commonwealth Ave., Chestnut Hill, MA 02467; (617) 552-1762; crr.bc.edu. Conducts research on issues related to retirement, particularly finance and health. Center for Strategic and International Studies, Global Aging Initiative, 1800 K St., N.W., Washington, DC 20006; (202) 887-0200; csis.org/program/global-aging-initiative. Conducts research and education programs on long-term economic, social and geopolitical implications of demographic change in the United States and abroad. Employee Benefit Research Institute, 1100 13th St., N.W., Suite 878, Washington, DC 20005; (202) 659-0670; www.ebri.org. Conducts research on employee benefits, including pensions and defined-contribution plans such as 401(k)s. National Association of Area Agencies on Aging, 1730 Rhode Island Ave., N.W., 4th Floor, Washington, DC 20036; (202) 872-0888; www.n4a.org. Umbrella organization for local area aging agencies. National Institute on Aging, Building 31, Room 5C27, 31 Center Dr., MSC 2292, Bethesda, MD 20892; (301) 496-1752; www.nia.nih.gov. Leads the federal governments scientific effort to study the nature of aging. National Institute on Retirement Security, 1730 Rhode Island Ave., N.W., Suite 207, Washington, DC 20036; (202) 457-8190; www.nirsonline.org. Studies retirement-income issues such as pensions. Urban Institute, Program on Retirement Policy, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; www.retirementpolicy.org. Conducts research on issues relevant to retirement, such as Social Security, long-term care and unemployment rates among older Americans. UCLA, Center for Policy Research on Aging, 3250 Public Policy Building, Box 951656, Los Angeles, CA 90095; (310) 794-5908; www.spa.ucla.edu. Studies major policy and political issues surrounding aging; devotes particular attention to issues relating to ethnic populations.
Study Says, Bloomberg, April 25, 2011, www.bloomberg.com/news/2011-04-26/u-sstates-pension-fund-deficits-widen-by-26-pewcenter-study-says.html. 42 Elizabeth Lesly Stevens, San Jose Mayor Declares State of Fiscal Emergency, The Bay Citizen, May 21, 2011, www.nytimes.com/2011/ 05/22/us/22bcstevens.html. 43 Stephen C. Fehn, States Overhaul Pensions But Pass On 401(k)-Style Plans, Stateline, June 21, 2011, www.stateline.org/live/details/story? contentId=582585. 44 Tamara Keith, Health Care Costs New Threat to U.S. Military, NPR, June 7, 2011, www. npr.org/2011/06/07/137009416/u-s-military-hasnew-threat-health-care-costs. 45 Vago Muradian, Q&A: Robert Gates, U.S. Defense Secretary, Defense News, June 13, 2011, p. 32, www.defensenews.com/story.php? i=6792060&c=FEA&s=INT.

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Bibliography
Selected Sources
Books
Fishman, Ted C., Shock of Gray, Scribner, 2010. The author, a former financial trader, uses statistics and sketches of representative individuals to portray how aging is presenting fiscal, health and economic challenges to countries including Japan, China and the United States. Gillon, Steve, Boomer Nation: The Largest and Richest Generation Ever and How It Changed America, Free Press, 2004. The History Channels Gillon writes a sympathetic history of the boomers, whose birth, he says, is the single greatest demographic event in American history. Pearce, Fred, The Coming Population Crash and Our Planets Surprising Future, Beacon Press, 2010. A former New Scientist news editor traces the history of population changes, looking at past state-sponsored efforts at population control and the implications for possible population decline in decades to come. Is there such a thing as a Medicare voting bloc? Some political scientists suggest there increasingly could be pitched political battles between generations over government resources. Ludden, Jennifer, Boomers Take the Retire Out of Retirement, NPR.org, Jan. 1, 2011, www.npr.org/2011/01/01/13 2490242/boomers-take-the-retire-out-of-retirement. As baby boomers reach age 65, many are optimistic, but a bit more than half may not be able to maintain current living standards in retirement. Rucker, Philip, NY Race Is Referendum on GOP Medicare Plan, The Washington Post, May 15, 2011, www.washing tonpost.com/politics/ny-special-election-becomes-refer endum-on-gop-medicare-plan/2011/05/15/AFnoVR4G_ story.html?hpid=z3. Democrats successfully test a strategy they intend to use in 2012, castigating Republicans for looking to overhaul Medicare.

Studies and Reports


Arno, Peter S., and Deborah Viola, Double Jeopardy for Baby Boomers Caring for Their Parents, MetLife Mature Market Institute, June 2011, www.metlife.com/assets/cao/mmi/pub lications/studies/2011/mmi-caregiving-costs-working-care givers.pdf. Nearly 10 million adult children over age 50 care for their aging parents. Cohn, DVera, and Paul Taylor, Baby Boomers Approach 65 Glumly,Pew Research Center, December 2010, http:// pewsocialtrends.org/files/2010/12/Boomer-Summary-Re port-FINAL.pdf. As they approach 65, boomers continue to be accepting of changes in social trends and arent ready to concede they have reached old age. Frey, William, Americas Diverse Future, Brookings Institution, April 2011, p. 10, www.brookings.edu/~/media/ Files/rc/papers/2011/0406_census_diversity_frey/0406_ census_diversity_frey.pdf. The 2010 census showed that the number of white and black children shrank, while there was significant growth among Hispanics and Asians younger than 18. Jackson, Richard, and Neil Howe with Rebecca Strauss and Keisuke Nakashima, The Graying of the Great Powers: Demography and Geopolitics in the 21st Century, Center for Strategic and International Studies, 2008, www.aging society.org/agingsociety/publications/public_policy/CSIS major_findings.pdf. The report offers a comprehensive survey of aging trends in the developed and developing world.

Articles
As Boomers Wrinkle, The Economist, Dec. 29, 2010, www.economist.com/node/17800237?story_id=17800237. Aging baby boomers will resist any cuts to their entitlements. Brownstein, Ronald, The Gray and the Brown: The Generational Mismatch, National Journal, July 24, 2010; www. nationaljournal.com/magazine/the-gray-and-the-brownthe-generational-mismatch-20100724. The United States is seeing a divergence in attitudes and priorities between a heavily nonwhite population of younger people and an overwhelmingly white cohort of older people. Fehr, Stephen C., States Overhaul Pensions But Pass on 401(k)-Style Plans, Stateline, June 21, 2011, www.state line.org/live/details/story?contentId=582585. Pensions for state government workers are badly underfunded, but officials are still wary of switching employees to retirement savings accounts. Hare, Kristin, Older Americans Are Working Longer, St. Louis Beacon, April 24, 2011, www.stlbeacon.org/issuespolitics/172-Economy/109733-retiring-retirement-americansare-working-longer-. Ten years ago, 4 million people age 65 and older were working or looking for jobs. By March, that number had increased to 7 million. Johnson, Kirk, Between Young and Old, A Political Collision, The New York Times, June 3, 2011, www.nytimes. com/2011/06/04/us/politics/04elders.html.

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Additional Articles from Current Periodicals
Community
Carreras, Jessica, Golden Gays, Between the Lines (New York), July 8, 2010. As America ages, gays and lesbians have started to concentrate more and more on aging issues affecting their community. Meyers, Jessica, Aging Boomers Heading to the Burbs, Dallas Morning News, July 25, 2010, p. A1, www.dallas news.com/news/community-news/prosper/headlines/2010 0725-as-aging-baby-boomers-head-to-suburbs-collin-countyto-feel-impact.ece. Many retirees are moving to the suburbs only to find that their new communities are as unaccommodating for aging seniors as the cities they left. Pyros, Andrea, As Seniors Age, Families Face Myriad Challenges, Poughkeepsie (N.Y.) Journal, Nov. 25, 2010. Americans are taking in their aging parents in greater numbers, spurring a rise in multigenerational homes. Wolfe, Warren, et al., Where Will Seniors Live? Star-Tribune (Minneapolis), Dec. 2, 2010, p.A1, www.startribune.com/life style/111163024.html. Communities built for the elderly are sprouting up all over the nation, but seniors are reluctant to inhabit them. totally disabled, while the reality is often somewhere in between.

Employment
Collins, Margaret, Survey Suggests Benefits Keep Older Workers from Leaving,Sun-Sentinel (Fort Lauderdale, Fla.), June 19, 2011, p. D1, www.sun-sentinel.com/business/flretaining-older-workers-20110617,0,6111086.story. As fewer seniors maintain the savings they need to retire, employers are offering incentives to prolong aging workers time in the labor force. Gibson, Caitlin, Agings Evolving Puzzle: How Washingtons Communities, and Their Seniors, Must Adapt to a Changing Game, The Washington Post, June 16, 2011, p. T19, www.washingtonpost.com/local/agings-evolvingpuzzle-how-communities-and-their-seniors-must-adapt-to-achanging-game/2011/05/23/AGJ9FmWH_story.html. Unemployment and large elderly populations are driving Washington, D.C., residents to develop programs aimed at keeping seniors active and healthy as they age in their own homes. Johnson, Kirk, Between Young and Old, a Political Collision, The New York Times, June 4, 2011, p. A10, www. nytimes.com/2011/06/04/us/politics/04elders.html. Unemployment and bankruptcy are growing among Americans age 65 and over, contributing to a growing generational divide.

Culture
El Nasser, Haya,Boomer Divide: Generation Spans 19 Years, USA Today, Dec. 3, 2010, p. A1, www.usatoday.com/news/ nation/2010-12-03-1Atwoboomers03_CV_N.htm. Boomers are generally viewed as a massive, homogenous portion of the population, but not every member of the generation feels connected. Horovitz, Bruce, Big-Spending Boomers Bend Rules of Marketing, USA Today, Nov. 16, 2010, p. A1, www.usa today.com/printedition/news/20101116/1aboomerbuyers 16_cv.art.htm. Marketing firms are increasingly switching their focus from the young to the old as seniors wield more influence. Jayson, Sharon, Tired of the Baby Boomers; Other Generations are Weary of Their Place in the Culture, USA Today, Nov. 18, 2010, p. D1, www.usatoday.com/yourlife/ parenting-family/2010-11-18-boomerloathing18_CV_N.htm. The boomer generations time in the spotlight may be exhausting the rest of Americas patience. Tugend, Alina, Fears, and Opportunities, on the Road to Retirement, The New York Times, June 4, 2011, p. B5, www. nytimes.com/2011/06/04/your-money/04shortcuts.html. Stereotypes of seniors range from adventure-seeking to

Health Care
Fitzgerald, Jay, Retiring Boomers, Rising Health Costs Are a Frightening Combination, The Boston Globe, June 12, 2011, p. 1, articles.boston.com/2011-06-12/business/29650 598_1_medicare-spending-medicare-today-medicare-modern ization-act. No consensus has emerged on how to reform a Medicare system that most experts agree is unsustainable in its current form. Rivkin, Jacqueline, Not There to Care; With Ailing Parents, Children Living Elsewhere Struggle to Balance Competing Needs, Newsday (New York), June 4, 2011, p. B4. Many working adults are struggling financially and emotionally to care for aging parents while maintaining a career. Sullivan, Julie, Baby Boomers Set to Become Generation Alzheimers With 1 in 8 Predicted to Get the Disease, Oregonian (Portland), Jan. 28, 2011, www.oregonlive.com/ health/index.ssf/2011/01/baby_boomers_set_to_become_ gen.html. According to the Alzheimers Association, the diseases is on track to become the defining disease of aging baby boomers, yet research and treatment options are limited compared to other serious ailments, such as cancer.

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CHAPTER

CAMPAIGN FINANCE DEBATES


BY KENNETH JOST

Excerpted from Kenneth Jost, CQ Researcher (May 28, 2010), pp. 457-480.

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Campaign Finance Debates


BY KENNETH JOST
important role in federal elections since enactment of the McCain-Feingold campaign fiavid Keating is not nance law in 2002. 2 shy about getting into The controversial law tough political fights. formally, the Bipartisan CamAs executive director of the paign Reform Act (BCRA) Club for Growth, a political bars federal officeholders and organization that promotes political parties from solicitpro-growth policies, limited ing unregulated soft money government and low taxes, for party-building activities. It Keating has helped direct hunalso limited the ability of cordreds of thousands of dollars porations and unions to pay into congressional campaigns. for thinly disguised campaign His specialty: backing hardcommercials on television durline conservatives against moding election season. erate Republicans. The Supreme Court upheld The club funneled around the law in 2003 in a decision $1 million into a special House known as McConnell v. FEC race in upstate New York in but has reversed course in November 2009, hoping to three rulings since Chief Jushelp Conservative Party nomtice John G. Roberts Jr. took inee Doug Hoffman in the office in 2005. In the most rethree-way contest. The spendcent, Roberts helped forge a ing helped force the Repub5-4 majority on Jan. 21 in striklican candidate, Assemblying down the laws prohibiwoman Dede Scozzafava, out tion on independent campaign Chief Justice John G. Roberts Jr. helped forge the Supreme of the race, though Hoffman spending by corporations or Courts new stance on campaign finance, voting with eventually lost to Democrat unions. Five days later, Presithe 5-4 majority in the Citizens United case. President Obama said the ruling will open the floodgates for Bill Owens. dent Obama denounced the special interests, including foreign corporations, to Now, the club can take decision, Citizens United v. Fedspend without limit in our elections. But Senate credit for besting another eral Election Commission, in Republican leader Mitch McConnell of Kentucky called GOP mugwump*: three-term his State of the Union address. the ruling an important step in restoring the First Republican Sen. Robert BenWith Roberts and five other Amendment rights of corporations. Polls show the American public strongly opposed to the ruling. nett of Utah. The organizajustices seated below him, the tion spent about $175,000 on president said the ruling will advertising, mailers, robo-calls and or- for renomination. 1 Two hard-line con- open the floodgates for special interganizing over the past few months at- servatives will now vie for the nomi- ests, including foreign corporations, to tacking Bennett, among other things, nation in a primary on June 22. spend without limit in our elections. 3 for voting for the financial industry Keating is a bit shy, however, about (Excerpts, p. 463; story, p. 468.) bailout and co-authoring a bipartisan disclosing his groups campaign spendThe courts new stance on campaign health care overhaul plan. ing. In September 2007, the club paid finance law reflects and reinforces a backWith Tea Party activists out in force, a $350,000 civil fine to the Federal Elec- lash led mostly by Republicans and conGOP delegates assembled in state con- tion Commission (FEC) for failing to servatives. Regulating campaign finance vention in Salt Lake City on May 8 re- register as a political committee or to is now going to hit a brick wall, says jected the 76-year-old incumbents bid report its contributions and expendi- Jan Baran, a Washington lawyer who tures. The case was part of the FECs has represented Republicans in several * The Mugwumps were Republicans who crackdown on so-called 527s polit- challenges to campaign finance laws. Supporters of campaign finance supported Democrat Grover Cleveland in the ical committees named after the Tax 1884 presidential election; the term came to Code section governing their operations regulations say the critics are seeking refer to party bolters generally. which have played an increasingly to dismantle laws dating from the early

THE ISSUES

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Spending Rose After Soft Money Ban
Independent campaign-related expenditures by political action groups shot up in 2004, the rst federal election year after enactment of the Bipartisan Campaign Reform Act (BCRA). The increase is seen as an unintended effect of the acts prohibition on the raising or spending of unregulated soft money by political parties. Independent spending is expected to increase further under the Supreme Courts decision in Citizens United v. Federal Election Commission, which allows corporations and unions to use money from their general treasuries to support or oppose political candidates. Independent Campaign-related Spending by Political Action Groups (in $ millions)
500 400 300 200 100 0

$440.3 $316.7 $36.7 2000 $20.2 2002 2004 2006 2008 $268.4

Source: Federal Election Commission data from Center for Responsive Politics, www.opensecrets.org/indexp/index.php

20th century that were strengthened in the 1970s after the Watergate scandals and are still needed today to limit the influence of special interests in federal elections. The challenges are a part of a systematic, long-term litigation offensive mounted by deeppocketed interests who are opposed to any type of regulation of political spending, says Tara Malloy, associate legal counsel of the bipartisan, Washingtonbased Campaign Legal Center. Keating is behind one of the new challenges: a federal court suit filed on behalf of the newly formed SpeechNow.org and aimed at knocking out contribution limits and reporting requirements for political committees that make independent expenditures in federal elections. In March, the U.S. Court of Appeals for the District of Columbia Circuit unanimously struck down the contribution limits but upheld disclosure requirements. In his opinion for the court, Chief Judge David Sentelle cited the Supreme

Courts conclusion in January that independent campaign spending poses no risk of corrupting federal candidates or officeholders. Given this analysis from Citizens United, Sentelle wrote in the March 26 decision, we must conclude that the government has no anti-corruption interest in limiting contributions to an independent expenditure group such as SpeechNow. 4 The Supreme Court is sending a strong deregulatory signal, and it is not lost on the lower courts, says Rick Hasen, a professor at Loyola Law School in Los Angeles who supports campaign finance regulation. His blog compiles developments on campaign and election law. 5 The high courts Citizens United decision provoked sharply divergent reactions the day of its release. Obama said the ruling amounted to a green light for a new stampede of special interest money. But Senate Republican leader Mitch McConnell of Kentucky, the lead plaintiff in the earlier case challenging

BCRA, said the ruling was an important step in restoring the First Amendment rights of corporations. Four months later, however, many experts are predicting no in-rush of corporate money into congressional campaigns. I do not believe that forprofit corporations are sitting on piles of money that they wish to put into their public-affairs budgets, says Michael Malbin, president of the Campaign Finance Institute, a research center at George Washington University in Washington, D.C. Still, congressional Democrats are pushing legislative proposals aired in House and Senate committee hearings in May that would require additional disclosure of corporate spending in federal campaigns. The lead sponsor of the Senate bill, New York Democrat Charles Schumer, says the measure would shine a light on the flood of spending unleashed by the Citizens United decision. Thomas Donohue, president of the U.S. Chamber of Commerce, calls the companion House measure sponsored by Rep. Chris Van Hollen, D-Md., a thinly veiled attempt to hijack the political playing field to his advantage on the eve of midterm elections. 6 Meanwhile, campaign finance deregulators are pressing an array of court cases seeking to roll back federal or state laws that supporters say limit the influence of wealthy individuals and wellfinanced special interests or encourage wider participation by small donors. In one case, the Republican National Committee (RNC) is seeking to carve out exceptions to the soft-money ban in the McCain-Feingold law. A three-judge federal court in Washington rejected the RNCs plea, saying it was bound by the Supreme Courts 2003 decision upholding the provision. 7 Two state systems for partial public financing of campaigns Arizonas and Connecticuts are also facing constitutional challenges in federal courts. The Roberts Court has given some help

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to opponents of public financing with a ruling in 2008 that struck down the so-called Millionaires Amendment in the McCain-Feingold law. The ruling in Davis v. Federal Election Commission struck down a provision that raised contribution limits for congressional candidates if they were running against wealthy, high-spending candidates financing their own campaigns. The 5-4 majority found that the scheme improperly burdened the political speech rights for self-financing candidate. The legal challenges are playing out against a continuing debate about the effects of public financing and continuing public resistance to the idea. Supporters say the plans, which typically tie public funding to spending limits, help reduce the impact of campaign cash on candidates and officeholders. Opponents say the plans force taxpayers to finance candidates they do not support and burden candidates who want to run with private instead of public financing. 8 (See sidebar, p. 470.) The opposing sides also differ about BCRAs effects on the political system. Supporters say it has changed politics for the better, in particular by eliminating soft money. That whole spectacle of having wealthy interests buy access and influence by making huge soft money contributions has been effectively shut down, says Donald Simon, general counsel for Democracy21, a pro-campaign finance reform group. But Bradley Smith, a former Republican-appointed FEC chairman and head of the deregulatory-minded Center for Competitive Politics, says BCRA has failed in the goals claimed by its supporters when enacted and since. I dont think anybody can say that politics is better, that government is better or that influence has been tamed, says Smith, who is also a professor at Capital University Law School in Columbus, Ohio. As these debates continue, here are some of the specific questions pending in Congress and the courts:

Majority Back Spending Limits on Corporations


Most Americans disagree with the Supreme Courts decision to allow corporations to spend freely in federal elections. Do you agree or disagree with the Supreme Courts decision to allow corporations to spend freely to support candidates in federal elections?
50% 40 30 20 10 0
6% 10% 4% 5% Total Democrat Republican Independent 14% 11%11% 11% 49% 44%44% 44%

23% 21%22% 19%

19% 18% 13% 12%

Strongly agree

Moderately agree

Moderately disagree

Strongly disagree

Not sure

Would you support or oppose an effort by Congress to reinstate limits on corporate and union spending on election campaigns?
60% 50 40 30 20 10 0

52% 20%
Support strongly Support somewhat

14%
Oppose strongly

9%
Oppose somewhat

Sources: Angus Reid Public Opinion, online poll conducted Jan. 27-28, 2010, among 1,003 Americans (question 1); ABC News/Washington Post telephone poll, Feb. 4-8, 2010, among random national sample of 1,004 adults (question 2).

Should Congress require increased disclosure of corporate spending in political campaigns? Voters trying to make up their minds in congressional races in 2008 got nearly $100 million worth of advice from commercials paid for by independent groups unaffiliated with political parties or candidates campaigns. But voters would have been hard-pressed to figure out, for example, that ads praising lawmakers for passing the State Childrens Health Insurance Program and sponsored by Americas Agenda:

Health Care for Kids were paid for by the pharmaceutical industry. Nor would they have known that labor unions bankrolled the commercials criticizing Rep. Lincoln Diaz-Balart, R-Fla., broadcast in the name of Patriot Majority. 9 The Supreme Courts decision in the Citizens United case in January opens the door to more such advertising by allowing corporations and unions to spend unlimited amounts from their own treasuries directly urging a vote for or against specific candidates in congressional or presidential elections.

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Before Citizens United, corporate- or union-funded ads during election season could mention congressional candidates by name but had to stop short of urging a vote for or against a candidate. Unable to overturn the Supreme Court ruling by statute, Democratic members of Congress are responding with legislation to require additional disclosure for any campaign-related advertising paid for by corporations or unions. The Schumer-Van Hollen bill, dubbed the DISCLOSE Act (Democracy Is Strengthened by Casting Light On Spending in Elections), would require the head of a corporation or union running a political ad to personally appear in the commercial, just as federal candidates are now required to do in their campaign ads. In addition, the proposal would require that ads sponsored by independent groups that receive corporate or union funds list the groups top five sources of financing. The CEO of the top funder would also have to appear in the ad. And political committees would have to report all donors who give more than $1,000 in a given year. Our bill will follow the money, Schumer, the former head of the Democratic Senatorial Campaign Committee, said in a statement. In cases where corporations try to mask their activities through shadow groups, we drill down so that the ultimate funder of the expenditure is disclosed. Four Democrats joined in cosponsoring Schumers bill. In the House, Van Hollen attracted two Republican cosponsors: Michael Castle of Delaware and Walter Jones of North Carolina. But Senate GOP leader McConnell typified Republican reaction to the bill by accusing the Democrats of trying to keep business interests from speaking out in the upcoming midterm elections. The bill, McConnell said, is about election advantage, plain and simple. 10 Campaign finance reform advocates say the disclosures will help voters. Lets make sure the American people have a clear and accurate understanding of whos spending what to influence American politics, says Meredith McGehee, policy director of the Campaign Legal Center. Then let them make up their own minds. Critics of campaign finance regulations say the proposal is actually aimed at discouraging corporations from paying for campaign ads. Its multiple, redundant, burdensome disclosure, says attorney Baran. And the circumstances suggest that the purpose of the redundancies and the burdens is not disclosure but to discourage speech. Malbin with the Campaign Finance Institute agrees that disclosure requirements will discourage corporations from paying for political ads. Most corporations prefer not to [be identified], Malbin says. They like to pass their money through trade associations or other kinds of organizations. Some election law experts doubt that corporations are eager to get involved in political races at all. Most people in corporate America are under more pressure not to engage in politics than they are to engage in politics, says James Portnoy, chief counsel for corporate and government affairs at Kraft Foods and a former FEC official and Democratic staffer on Capitol Hill. But Portnoy predicts what he calls thirdparty push by trade associations and political consultants to get corporations to spend on political races. In fact, the Chamber of Commerce announced plans within two months after the Citizens United decision to spend at least $50 million on political races and related activities this year, a 40 percent increase over what the Chamber spent in 2008. 11 The pro-regulation Brennan Center for Justice at New York University School of Law cited the Chambers plans in testimony before the House Administration Committee as evidence of the need for disclosure of what the group called black-box spending by corporations. But Michael Toner, a corporate lawyer in Washington and former Republican-appointed FEC chairman, warned the committee that the various disclosure provisions in the bill would almost certainly result in litigation challenging the requirements as unconstitutional under the Citizens United decision. 12 Should the ban on soft money contributions to political parties be eased? The eventual enactment of the McCain-Feingold law in 2002 stemmed in large part from public disgust with the soft-money scandals of the mid- and late-1990s. In the most dramatic example, President Bill Clinton hosted White House coffees for well-heeled donors and corporate execs who repaid the hospitality with five- and sixfigure donations to Democratic Party committees. Republican Party fund-raisers were also found to be hitting up bigmoney donors with promises of special access to officeholders. The contributions were termed soft money because they were outside the hard limits of campaign finance law, which bar corporate contributions to candidates and limit individual contributions to what is now around $3,000. The donations ostensibly went for general party-building purposes, not federal elections. In 1998 the Senate Committee on Governmental Affairs ended its investigation of Clintons fundraising by saying that soft money had led to a meltdown of the campaign finance system. McCain-Feingold sought to end the soft-money system by generally prohibiting federal officials and candidates and national and state party officials from raising the unregulated funds. In upholding the provisions in 2003, the Supreme Court said Congress had ample evidence to believe that softmoney contributions had a corrupting influence or gave rise to an appearance of corruption.

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Now, the Republican National Committee which unsuccessfully challenged the soft-money ban in the earlier case wants the courts to carve out exceptions. The RNC is seeking legal clearance to solicit unlimited sums from any source to use in supporting state candidates, state redistricting efforts, grassroots lobbying efforts on major issues and its general operating expenses. The RNCs attorneys argue that none of the listed activities are unambiguously related to federal elections. But in addition they argue that the Supreme Courts new ruling rejects the anticorruption rationale relied on seven years ago in upholding the soft-money ban. The prevention of access and gratitude is not a cognizable anti-corruption interest, said James Bopp, a lawyer in Terre Haute, Ind., who represented Citizens United up to the time of the Supreme Court arguments. Defending the ban, lawyers for the FEC and for the Democratic National Committee, which intervened in the case, argue that Citizens Uniteds ruling on independent expenditures has no bearing on the validity of the ban on raising soft money. In any event, they add, a lower court has to follow the Supreme Courts earlier decision unless overruled by the justices themselves. The three-judge court that heard the case upheld the soft-money ban and rejected the RNCs proposed exceptions. But the court pointedly noted in its March 26 decision that the Supreme Court could refine or modify its earlier ruling as the Court sees fit. 13 Critics of campaign finance regulations hope the Supreme Court will do just that. The soft-money ban on parties is a mistake both constitutionally and as a political matter, says Smith with the Center for Competitive Politics. The vast majority of people [who give money] have no intention of corrupting officeholders. They just want good government. Supporters say the court should stick

The Supreme Courts Citizens United Ruling: Political Speech Rights for Corporations
The Supreme Courts 5-4 decision in Citizens United v. Federal Election Commission struck down a provision of the Bipartisan Campaign Reform Act (BCRA) that barred unions or corporations from spending money to advocate the election or defeat of a candidate for federal ofce except through a separately organized political action committee. The decision overruled part of the courts earlier decision in McConnell v. Federal Election Commission (2003) upholding the provision; it also overruled a 1990 decision, Austin v. Michigan State Chamber of Commerce, which upheld a state law prohibiting corporations from spending on state election campaigns.

No sufcient governmental interest justies limits on the political speech of nonprot or for-prot corporations.
Justice Anthony M. Kennedy (majority opinion)

While American democracy is imperfect, few outside the majority of this Court would have thought its aws included a dearth of corporate money in politics.
Justice John Paul Stevens (dissenting opinion)
Source: Citizens United v. Federal Election Commission, www.supremecourt.gov/ opinions/09pdf/08-205.pdf

with its earlier decision. The RNC suit is nothing more than simply trying to get a second bite at the apple, says Democracy 21s Simon, who is representing Rep. Van Hollen as an intervenordefendant in the case. Theres really nothing new here. The RNC has filed its appeal with the high court; the FEC is due to file its response the week of May 24. In the meantime, however, the FEC has issued an advisory opinion to a Democratic group working on redistricting issues that those activities do not bear on federal elections. On that basis, the agency told the National Democratic Redistricting Trust that members of Congress can raise funds for the group without regard to the soft-money ban. 14

The anti-regulation Center for Competitive Politics applauds the FECs stance on the issue. The advisory opinion demonstrates that some political activities simply are not for the purposes of influencing elections, says Steve Hoersting, the centers vice president. Lawyers with the Campaign Legal Center opposed the FECs ruling and note that the agency has argued in the RNC case that redistricting activities are in connection with a federal election. But Paul Ryan, who handles FEC matters for the center, says the agencys new stance does not necessarily affect the issues in the RNC case because the soft-money ban for national party committees is broader

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Parties Raised More Soft Money Until Prohibited
Both the Democratic and Republican parties came to rely increasingly on unregulated soft money during the 1990s and through the 2000 and 2002 election cycles. The Bipartisan Campaign Reform Act (BCRA), also known as the McCain-Feingold law, generally prohibits federal ofceholders and candidates and national party committees from raising funds outside the hard limits of federal campaign nance law. The Supreme Court upheld the soft money ban in 2003, but the Republican National Committee has a pending legal challenge seeking to permit national party units to raise soft money for some state-related political activities. Hard and Soft Money Raised by National Party Committees
(BCRA prohibited committees from raising soft money in 2002.) Hard Soft Total (in $ millions) $32.9 47.5 $100.5 172.5 $256.6 261.1 $137.0 242.0 $208.9 504.3 $469.5 622.7 Percentage of Soft Money Raised 24.0% 19.6 43.3% 34.2 53.2% 41.9

1992 1996 2000 2004 2008

$104.1 194.5 $108.4 331.8 $212.9 361.6 $576.2 657.1 $599.1 640.3

Democrat

Sources: Federal Election Commission, Brookings Institution

Republican

than the prohibition on soft-money raising by federal candidates or officeholders. In any event, the Campaign Legal Centers Malloy says the Supreme Court should reject any of the exceptions the RNC is asking for. It would be a loophole that would essentially swallow the rule, she says. But Republican attorney Baran thinks the current blunderbuss ban on soft money is likely unconstitutional because it is not narrowly tailored, as needed to survive constitutional scrutiny. We should be able to take soft money to pay for our rent, he says.

Should public campaign financing be extended or ruled unconstitutional? Arizona has had its fair share of political scandals, but nothing tops the AzScam affair of the early 1990s. Seven state legislators were forced from office after having been caught on tape agreeing to accept bribes in return for supporting legalized gambling. The memory of that scandal helped campaign finance reformers in 1998 win Arizona voters approval of a public financing plan. The Clean Election Act, an initiative approved with 51 percent of the vote,

provides public funds to candidates for state office after they meet a qualifying threshold of private $5 contributions. As with other plans, candidates who take public funds have to agree to spending limits, but a participating candidate gets additional funds if outspent by a non-participating opponent. A decade later, the system is under legal attack. U.S. District Court Judge Roslyn Silver in Phoenix ruled the system unconstitutional in January, based in part on the Supreme Courts decision striking down BCRAs Millionaires Amendment. The system burdens the political speech rights of candidates who do not accept public funds, Silver said, because their spending could trigger an extra public subsidy for their opponents. The Ninth U.S. Circuit Court of Appeals reversed that decision in a ruling on May 21, but the plaintiffs are expected to ask the U.S. Supreme Court to hear the case. 15 Opponents of public financing are also hoping the New York-based Second Circuit appeals court will uphold a lower court decision striking down Connecticuts public financing scheme. In ruling the system unconstitutional in August, U.S. District Court Judge Stefan Underhill in Bridgeport, Conn., focused mostly on the burden that third-party candidates faced to qualify for public funds. 16 Apart from the particulars of public financing schemes, opponents flatly disagree about using taxpayer money for political campaigns. The governments job should be to ensure equal access to the polls, not equal resources for candidates, says Bill Maurer, a Seattle attorney with the libertarian Institute for Justice representing the plaintiffs in the case. Supporters say public financing reduces what they see as candidates unhealthy dependence on special interests for the money needed to run a campaign. Public financing schemes are very important to fair and open elections because they take private

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money out of the system, says Malloy with the Campaign Legal Center. The center has participated in both the Arizona and Connecticut cases defending the public financing plans. Maurer says the Arizona scheme is clearly unconstitutional under the Supreme Courts ruling on the Millionaires Amendment. Malloy disagrees and notes that out of five federal appeals court rulings on public financing schemes, only one court has ruled against the plans. The Supreme Court gave a green light to public financing schemes in its first modern campaign finance ruling, Buckley v. Valeo, the 1976 decision that upheld post-Watergate contribution limits but struck down spending limits for candidates. The court upheld the newly enacted presidential public financing scheme on the grounds that it relieved major-party candidates from the rigors of soliciting private contributions. The court also said the voluntary taxpayer check-off system to earmark money for the system facilitated and encouraged public participation in the political process. 17 Opponents believe public financing does not accomplish either of the goals of increasing participation or reducing undue influence by moneyed interests. The idea that tax funding is going to get rid of these problems is not true, says Smith with the Center for Competitive Politics. The presidential system itself is in trouble. In 2008, President Obama passed up public funds in the primary and general elections rather than accept the spending limits; he was the first candidate to opt out of the system for the general election since it began in 1976. We had presidential public finance, but it didnt work, says attorney Baran. Despite those criticisms, advocates of public financing are not merely defending the idea but pushing to expand it. Fred Wertheimer, president of Democracy 21, a campaign-finance reform group in Washington, wants to

make the presidential system more attractive by giving candidates a multiple match for money they raise through small donations. Wertheimer, a veteran of campaign finance debates as former president of the public interest group Common Cause, also calls for expanding public financing along similar lines to congressional races. Meanwhile, a group of reform-minded experts wants to skirt some of the legal and political difficulties of public financing by tying taxpayer subsidies not to fixed spending limits but to lower contribution limits for participating candidates. The plan coauthored by Campaign Finance Institute president Malbin and three others would encourage candidates to raise money through small contributions by multiplematching those amounts. As an example, New York Citys system along these lines provides a 6-to-1 match for privately raised small contributions. Nothing would go to a politician automatically, says Malbin, whose coauthors are Colby College political science professor Anthony Corrado, congressional scholar Thomas Mann of the Brookings Institution and Norman Ornstein, a resident scholar at the American Enterprise Institute. Every dollar that goes to a politician should go because a donor who cannot afford a lot has given money. The match makes it more meaningful to the candidate and gives the candidate more of a reason to go after it. 18 Maurer acknowledges the proposal reduces somewhat the First Amendment problem of public financing tied to spending limits, but he still objects to taxpayer funding for candidates in principle and in practice. What we are talking about here is forcing people who do not want to finance campaigns to do so, he says. In addition, he says, the subsidies will act as little more than a crutch for lazy, inept or unappealing candidates who no longer have to work as hard to craft an attractive message in order to run a competitive campaign.

BACKGROUND
Regulating Campaigns
ongress has been passing laws to regulate federal election campaigns almost since the beginning of mass electoral politics in the mid-19th century. The various laws have succeeded in protecting federal workers from blatant solicitations for contributions, kept corporations and unions from giving direct financial support to congressional and presidential candidates and in recent decades provided detailed information about campaign contributions and spending. But those laws have not succeeded in stemming the rising cost of campaigns nor prevented corporations, unions and interest groups from devising new methods for making their influence felt in federal elections. 19 The mass campaigns that began with Andrew Jackson in 1828 drew some of their financing initially from assessments on federal workers or patronage seekers. Congress acted to stem the practice, initially with an 1867 law of limited effect that prohibited assessments on navy yard workers. With abuses and public criticism continuing, Congress in 1876 barred presidential appointees from soliciting funds from federal workers. Then in 1883 Congress created the civil service system and included in the law a still-in-effect ban on any political solicitations of all civil service federal workers. Corporations became the next major source of campaign cash, especially for the politically dominant Republican Party. The GOP kingmaker Mark Hanna methodically assessed companies for support for the Republicans pro-business policies, helping to raise the unprecedented sum of $3 million for each of William McKinleys successful presidential campaigns in 1896 and 1900.

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Theodore Roosevelt denied accusations of hitting up corporations during his 1904 campaign, but evidence after the election of corporations giving prompted him to ask Congress in 1905 for a law against bribery and corruption to ban corporate contributions in federal campaigns. Roosevelt devoted little effort to the issue, but Congress passed the measure in 1907 thanks in part to lobbying by the first campaign finance reform group: the National Publicity Law Organization. The organizations continued lobbying resulted in 1910 and 1911 in the first two broad measures regulating federal elections. The Federal Corrupt Practices Act more commonly, the Publicity Act of 1910 required reporting of contributions and expenditures in House races by party committees operating in two or more states, but only after elections. The act, passed by a Republican-controlled Congress, was strengthened in 1911 after Democrats gained control of the House. The 1911 measure required pre-election disclosure of finances in House and Senate races.* It also established spending limits a provision that Republicans cynically added to try to kill the bill. Congress returned to the topic in the wake of the Teapot Dome scandal in the 1920s. The Federal Corrupt Practices Act of 1925 required quarterly reports, even in non-election years, of contributions to candidates and multistate political committees. It also reenacted spending limits, which the Supreme Court had struck down in 1921 on the grounds that Congress had no authority to regulate political primaries. (The court changed its stance on the issue in 1941.) The disclosure provisions proved ineffective because of the lack of any enforcement mechanism; the spending limits were,
* Some states adopted direct election of senators in advance of the ratification of the 17th Amendment in 1913, which substituted popular election for election by state legislatures as provided in the original Constitution.

according to Colby College professor Corrado, universally ignored. 20 Labor unions became a source of campaign cash for Democrats during Franklin D. Roosevelts presidency in the 1930s. Their role stirred opposition from Republicans, who joined with antiRoosevelt southern Democrats in 1943 in adding to a wartime labor measure a ban on union contributions to federal elections. After Republicans gained control of Congress in the postwar 1946 election, the ban became permanent as part of the Taft-Hartley Act, passed over the veto of Democratic President Harry Truman. Labor had already begun circumventing the ban, however, with the creation by the Congress of Industrial Organizations (CIO) of the Committee on Political Education (COPE) the first political action committee. Union political action committees (PACs) proliferated in the 1950s, prompting corporations and trade associations to follow suit beginning in the 1960s. The rise in campaign spending, spurred by the advent of TV advertising, led Congress in 1966 to approve a presidential public financing scheme, but the next year it passed a new bill to put the scheme on hold. With continuing controversy about both contributions and total spending, Congress crafted a broader measure in 1971. The Federal Election Campaign Act signed by President Richard M. Nixon in February 1972 set spending and contribution limits and specified availability of regular disclosures from House and Senate officers or, for presidential campaigns, from the General Accounting Office (now, the Government Accountability Office). Two years later, after Nixons resignation in the Watergate scandals, Congress wrote a broader, more detailed measure. The Federal Election Campaign Act Amendments of 1974 included tightened contribution and spending limits, created a presidential public financing system and established the FEC as an independent agency to enforce and interpret the law. The

Supreme Court carved a major hole in the law in 1976, however, with its ruling in Buckley v. Valeo striking down spending limits by candidates or independent groups as an infringement of First Amendment-protected political speech. Contribution limits, also challenged on First Amendment grounds, were upheld as preventing corruption or the appearance of corruption. 21

Finding Loopholes
he Supreme Courts decision upholding limits on campaign contributions but not on spending by candidates or individuals combined with the still standing bans on corporate or union contributions to shape campaign finance developments for the next quartercentury. The period saw the advent of so-called issue ads funded by corporate and labor interests that skirted the ban on campaign contributions by avoiding explicit endorsement of candidates. Political parties also took advantage of an FEC ruling to raise unregulated soft money for general operations, not specific campaigns. The protracted effort to curb both practices culminated in 2002 in enactment of the McCain-Feingold law, which the Supreme Court narrowly upheld a year later. Corporate PACs proliferated during the period thanks in part to an FEC ruling in 1975 that permitted companies to use treasury funds to establish and administer the organizations. Colby Colleges Corrado notes that from 1974 to 1986 the number of PACs registered with the FEC nearly quadrupled to more than 4,000 while the amounts they contributed to candidates increased eightfold from $12.5 million to $105 million. Corporate giving was institutionalized as never before, according to Smith at the Center for Competitive Politics, despite the ban on corporate contributions. 22 Meanwhile, the Supreme Court in 1985 ruled

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Chronology
Before 1960
First federal campaign finance laws go largely unenforced. 1907 Tillman Act prohibits corporations from contributing to federal candidates. 1910-11 Publicity Acts require disclosure of contributions, spending by candidates for Congress; 1911 law also establishes spending limits. 1947 Taft-Hartley Act prohibits labor unions from contributing to federal candidates.

1976 Supreme Court in Buckley v. Valeo upholds contribution limits, strikes down spending limits; upholds presidential public financing. 1978 Supreme Court strikes state law prohibiting corporations from spending on state ballot initiative. Late 1970s FEC rulings allow political parties to use unregulated soft money for party-building, get-out-the-vote.

fund-raising represents meltdown of campaign finance system.

2000-Present Major campaign finance reform


law passed by Congress; law narrowed by Supreme Court; some presidential candidates opt out of public financing. 2000 Republican George W. Bush opts out of public financing for primaries. 2002-2003 Bipartisan Campaign Reform Act (McCain-Feingold) passed by Congress, signed by President George W. Bush; act bans soft-money raising by political parties, federal officeholders and candidates; prohibits corporations, unions from election-time issue advertising except through PACs. . . . Supreme Court upholds law in 5-4 decision in December 2003. 2007 Supreme Court, 5-4, narrows ban on corporate- or union-funded issue advertising. 2008 Democrat Barack Obama becomes first major party candidate to opt out for general election. 2010 Supreme Court, 5-4, strikes down ban on corporate spending in campaigns (Citizens United v. FEC). . . . Federal appeals court invalidates contribution limits for independent groups. . . . Challenges to state public financing plans argued in federal appeals courts. . . . Republican National Committee asks Supreme Court to ease soft-money ban. . . . Congress considers bill to add disclosures for corporate political spending.

1980s-1990s Roles of soft money, outside


groups grow; bills to close loopholes proposed, but fail. Mid-1980s FEC rulings allow advocacy groups to distribute voter guides without counting them as campaign contributions if they avoid express advocacy. 1985 Supreme Court says nonprofit, ideological corporations can spend on federal campaigns if they accept no corporate, union funds. 1990 Supreme Court upholds state law prohibiting corporations from spending on political campaigns. 1995 AFL-CIO ad campaign targets vulnerable House Republicans in 1996 election; business groups follow suit. Mid- to late 1990s President Bill Clinton hosts soft money contributors in White House; Republicans also use access to hit up soft-money donors; Senate committee says Clinton

1960s-1970s Campaign spending increases;


calls for stronger federal laws. 1971-72 Federal Election Campaign Act of 1971 approved by Congress; sets contribution, spending limits; signed by President Richard M. Nixon Feb. 7, 1972. . . . Watergate break-in (June 17, 1972); investigations show illegal campaign contributions were used to pay off burglars. 1974 Federal Election Campaign Act Amendments tighten spending, contribution limits; establish presidential public financing; create Federal Election Commission (FEC); law challenged on constitutional grounds. 1975 FEC ruling allows corporations to use funds to create, administer political action committees (PACs); number of PACs quadruples over next decade.

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How Hillary: The Movie Changed Campaign Finance Law


The Supreme Court overruled two precedents in striking corporate spending limits.
n the surface, the 90-minute documentary that the conservative group Citizens United produced on Hillary Rodham Clinton late in 2007 appeared aimed at derailing her front-running campaign for the Democratic presidential nomination. But Hillary: The Movie was also aimed at a second target: federal campaign finance provisions that limited the rights of corporations to spend money to influence congressional or presidential elections. The video, never widely distributed, played no part in the demise of Clintons candidacy. But a legal challenge sparked by the documentary resulted more than two years later in a sweeping Supreme Court decision, Citizens United v. Federal Election Commission, which freed corporations from any restrictions on using their own money for independent spending in federal, state or local political campaigns. 1 Founded in 1988 by Republican activist David Bossie, Citizens United had grown two decades later into a $12 million organization that had produced overtly conservative films on a variety of topics. Bossie, who had worked on a congressional investigation of President Bill Clinton in the 1990s, decided in 2007 to take on Hillary Clintons quest for the presidency. Completed in December, the documentary opened by describing Clinton as steeped in sleaze and linked her to claimed abuses during her husbands presidency. It also criticized Clintons record as a senator from New York. With the video in the can, Bossie began plans for in-theater screenings, DVD sales and distribution on a video-on-demand channel. Short commercials were prepared to promote the video. The plans ran afoul of provisions in the Bipartisan Campaign

Reform Act (BCRA), the 2002 law also known as the McCainFeingold Act after its principal Senate sponsors: John McCain, RAriz., and Russell Feingold, D-Wis. BCRA prohibited corporations from helping to pay for electioneering communications, defined as radio or television commercials referencing a candidate for federal office around the time of a primary or general election. Citizens United was itself organized as a nonprofit corporation and had also accepted some corporate funding for the video. To preempt any enforcement of BCRAs requirements, Citizens filed suit against the Federal Election Commission (FEC) in federal court in Washington. The suit did not ask that the provisions be invalidated, only that the court rule that the provisions could not be constitutionally applied to the movie or the planned advertisements. Citizens contended that the video was exempt from the electioneering provision because it did not expressly call for Clintons defeat. It also argued that disclosure of donors required under the law would expose them to retaliation. Under BCRAs provisions, the suit was tried before a three-judge district court, which sided with the FEC in ruling that the video amounted to express advocacy against Clinton and could not be shown on the videoon-demand channel because of the corporate funding. The case reached the Supreme Court a year later in March 2009 with a new lawyer, Theodore Olson, representing Citizens United. Olson, who as U.S. solicitor general had successfully defended BCRA before the court in 2003, argued that the law was aimed at short, punchy ads, not feature-length documentaries. Some liberal justices asked how the court could draw a line.

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that nonprofit, ideological groups organized as corporations could spend their own funds on campaigns without forming a PAC as long as they did not accept corporate or union contributions. The FEC opened the door to soft money with advisory opinions in the late 1970s that state or national parties could raise money for general party activities or voter turnout drives outside the limits on individual contributions or corporate or union donations. By the end of the 1980s, soft money had become a major component of national election financing, according to Corrado. By 2000, soft money accounted for more than half of the

funds raised by the Democrats national committees and more than 40 percent of the amounts raised by their Republican counterparts. 23 The loophole for campaign-time issue advertising stemmed from a footnote in the Buckley decision that spared spending from regulation if ads did not explicitly call for electing or defeating a named candidate. Federal courts applied this express advocacy test in the 1980s, for example, to allow anti-abortion groups to distribute voter guides without counting them as campaign contributions. Unions and then corporations banned from direct campaign spending exploited the regulatory gap in the 1990s, beginning with the

AFL-CIOs $35 million ad buy in 1995 aimed at vulnerable Republican House members. By the end of the decade, business organizations, other advocacy groups and political party committees themselves were spending big, unregulated sums on election-time ads, typically negative attacks on the record of an incumbent up for reelection. The Supreme Court, meanwhile, had created additional gaps in campaign regulation. In 1985, the court struck down a $1,000 limit on independent spending by political action committees; a decade later, the court in 1996 allowed political parties to spend unlimited sums in congressional races if the spending was not coordinated with the candidate.

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porations, do not give rise to But Olsons adversary, corruption or the appearance of deputy solicitor general Malcorruption, he wrote. colm Stewart, faced stronger Kennedy similarly rejected doubts from conservative justwo other justifications for a tices when questioning led ban: protecting shareholder inhim into a reply that the govterests or preventing the disernment could go so far as torting effects of spending by to prohibit corporate funding wealthy corporations. And he of a book even if it conSupreme Court Justice Anthony M. Kennedy wrote the rejected as impractical and tained only one sentence admajority opinion in Citizens United. burdensome the alternative of vocating a vote for or against allowing a corporation to esa candidate. Thats increditablish a separate political action committee with voluntary ble, Justice Samuel A. Alito Jr. said. The justices kept the case under advisement for more than contributions to pay for political activities. In a 90-page dissenting opinion, Justice John Paul Stevens exthree months and then requested a new round of arguments specifically addressing whether to overrule the 2003 decision upholding coriated the conservative majority for passing over narrower grounds BCRA, McConnell v. FEC, as well as the courts 1990 decision, for a decision and for overturning precedents. The decision, he Austin v. Michigan State Chamber of Commerce, upholding state said, would undoubtedly cripple the ability of ordinary citizens, bans on corporate spending on elections. 2 In the new round of Congress and the States to adopt even limited measures to proarguments, in September, conservative justices, including Chief Jus- tect against corporate domination of the electoral process. tice John G. Roberts Jr., seemed intent on a broad ruling. Kenneth Jost The 5-4 decision, announced on Jan. 21, 2010, rejected several possible narrow grounds to rule for Citizens United be1 The incomplete citation is 558 U.S. (2010). Comprehensive background fore striking down BCRAs limits on corporate spending and and documents are available on SCOTUSWiki, a companion to SCOTUSBlog: overruling the two precedents. www.scotuswiki.com/index.php?title=Citizens_United_v._Federal_Election_Com For the majority, Justice Anthony M. Kennedy said indepen- mission. This account adapted from Kenneth Jost, Supreme Court Yearbook 2009-2010 (forthcoming November 2010). dent campaign spending could not be restricted on the same 2 The citations are McConnell, 540 U.S. 93 (2003); and Austin, 494 U.S. 652 anti-corruption grounds used to limit direct campaign contribu- (1990). For a full account of McConnell, see Kenneth Jost, Supreme Court tions. Independent expenditures, including those made by cor- Yearbook 2003-2004 (2004).

Earlier, the court in 1978 had given corporations the right to spend their own money on campaigns related to state ballot measures. In 1990, however, the court ruled that states and, by implication, the federal government could bar corporations from spending on races for political office. The 5-4 decision in Austin v. Michigan State Chamber of Commerce said that states had a compelling interest in eliminating the corrosive effect of political war chests amassed with the aid of the legal advantages given to corporations. Throughout the 1990s, sentiment grew among policymakers, advocacy groups and experts that the campaign finance system was broken and major changes

were needed. By the end of the decade, reform-minded members of Congress had coalesced around a proposal with two major parts: bans on soft money and corporate- or union-financed issue advertising during campaign season. Republican opposition blocked the measure at the end of the decade, but the logjam was broken in 2001 and 2002 thanks to the Democrats control of the Senate and publicity linking soft-money donations by the head of the Enron Corp. to access on energy issues. The McCain-Feingold law finally cleared the House and then the Senate in February and mid-March 2002. No sooner had President George W. Bush signed the bill than opponents

filed a constitutional challenge to the measure in federal court. The opponents were led by McConnell, the Kentucky Republican, but also included advocacy groups ranging from the Chamber of Commerce and AFL-CIO to the American Civil Liberties Union (ACLU) and National Rifle Association (NRA). In December 2003, the Supreme Court upheld all but two minor provisions of the act. Dividing 5-4 on the two major issues, the court upheld the ban on soft money by national parties as a way to prevent the potential . . . for undue influence on federal officeholders by campaign donors. The court also upheld the laws provisions that corporations and unions

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Looking for Impact of Public Campaign Financing


Does Arizonas system encourage non-traditional candidates?
wo weeks after enactment of Arizonas controversial law giving local police power to check for immigration violators, The Washington Posts liberal columnist Ruth Marcus came up with a possible explanation for the measure: the states system of public financing for state legislative candidates. Quoting Arizonans from across the political spectrum, Marcus said public financing had enabled non-traditional candidates to run for legislative seats, displacing the vetting role of business groups and party leaders. The result in the predominantly Republican state, she wrote, was to elect extreme candidates and to leave moderate Republicans all but extinct. Within a few days, a national advocate of public financing wrote to the newspaper to say: Rubbish. Nick Nyhart, chief executive and president of Public Campaign, said that in fact just over half of the legislators who voted for the measure had run with public funds compared to 80 percent of those who voted against the measure. 1 A scholar who has studied public financing schemes also discounts Marcus explanation. Fatuous, says Kenneth Mayer, a professor of political science at the University of Wisconsin in Madison. I dont see how you can make that inference. But Mayer goes on to say that it is difficult to say anything definitive about the impact of public financing in Arizona or the two other states with similar systems: Maine and Connecticut. The systems, he says, are too new and too few to give political scientists enough evidence to prove their effects in terms of competitiveness, participation, voter turnout or policy outcomes. Allison Hayward, an assistant professor of law at George Mason University in Fairfax, Va., who has studied the Arizona system, agrees. Once you control for all the factors you know, she says, what you end up with is noise.

The difficulties, however, do not prevent advocates, academics and observers from arguing about the effects of public financing, both the claimed benefits and alleged costs. Supporters believe public financing makes elections more competitive and officeholders more accountable to voters. Opponents say the systems have failed to realize those goals while costing taxpayers and burdening candidates who choose not to participate. Studies of the systems Arizonas and Maines adopted by initiative and in use since 2000 and Connecticuts enacted by the legislature for the 2008 election date from 2003. 2 A General Accounting Office (GAO) study requested by Congress found no notable increases in competitiveness, voter participation or voter perceptions of interest group influence but cautioned that it was too early to draw causal linkages to changes, if any. With three election cycles to study, Mayer and two colleagues at Wisconsin concluded in 2006 that the Arizona and Maine systems did increase competitiveness of legislative elections. Specifically, they found that public funding increased the pool of candidates, increased the likelihood of a competitive race for incumbents and reduced the incumbency reelection rates of incumbents but only marginally. This study was funded by the liberal JEHT Foundation. Looking only at Arizona for the same three elections, Hayward came to opposite conclusions. In a study commissioned by the Arizona-based Goldwater Institute, a conservative-leaning think tank, Hayward found incumbency reelection rates unchanged and the number of candidates reduced. She also found no increase in voter participation and no change in the tone of campaigns. Two years later, a study of the Arizona system by Public Campaign focused on the donors that candidates used to meet the qualifying threshold for public funds. (Legislative candidates have to get donations of at least $5 from at least 210 donors.) In com-

could pay for election-time issue ads on television termed electioneering communications in the law only from separate PACs, not out of their own treasuries. Justices in the majority found the provision would have little effect on pure issue advertising.

Continuing Debates

he legal and policy debates over McCain-Feingold have continued despite the Supreme Courts decision upholding the law. The law shut off

political parties solicitation of soft money, but critics said money flowed instead to independent groups less accountable to the public than the parties. Opponents of the law won a significant victory from the Supreme Court with two new justices since the 2003 ruling narrowing the ban on corporate- or union-funded issue ads. The court followed with two rulings that explicitly invalidated McCainFeingold provisions, including the decision in January to allow direct corporate or union spending in congressional or presidential campaigns.

Supporters of the law cite the demise of the soft-money system as an undoubted accomplishment of the law. By 2000, soft-money had come to account for more than half of the money for Democratic national party committees and more than 40 percent for Republican committees. After the law took effect, the parties fundraising totals increased Democrats more than Republicans with all of the funds now subject to donor contribution limits. One result: a greater percentage of money raised from small donations, lower percentages from large contributions.

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parison to donors in federal For their parts, scholars Hayelections, the groups reward and Mayer come to differsearcher found that the donors ing conclusions about the Arifor state legislative candidates zona scheme I cant be a were more racially, ethnicalsupporter of this program bely and geographically diverse. cause I dont see that it does any Today, Nyhart cites the of the good things that people need to attract a relatively say they want it to do, Hayward large number of small consays. But Mayer looks favorably Police officers monitor a protest against Arizonas tributors as one of the syson public financing. I think it controversial new immigration law at the tems overlooked benefits. can have positive effects. state Capitol in Phoenix on April 23, 2010. Candidates spend a lot of Kenneth Jost time talking to ordinary voters to get the small contributions, he says. The actual effects of the Arizona system are a central issue in 1 Ruth Marcus, Arizonas clean-vote surprise, The Washington Post, May 5, the recent constitutional challenge to the plan. 3 In their suit chal- 2010, p. A21; Nick Nyhart, Dont blame Clean Elections, ibid., May 11, 2010, p. A14. lenging the system several legislators and legislative candidates who 2 These studies are referenced in the story: Nancy Watzman, All Over the Map: did not participate in the system said their political-speech rights Small Donors Bring Diversity to Arizonas Elections, Public Campaign, May 20, were infringed because their opponents would have higher spend- 2008, www.publicampaign.org/sites/www.publicampaign.org/files/%20aotm_report_ 05_20_08_final_web.pdf; Allison R. Hayward, Campaign Promises: A Six-year ing limits depending on how much they spent in their races. Review of Arizonas Experiment with Taxpayer-financed Campaigns, GoldIn her opinion ruling the system unconstitutional, U.S. Dis- water Institute, March 28, 2006, www.goldwaterinstitute.org/Common/Files/ trict Court Judge Roslyn Silver voiced doubt about the claims Multimedia/935.pdf; Kenneth R. Mayer, Timothy Werner and Amanda Williams, Do Public Funding Programs Enhance Political Competition?, in she called them unsettling but still found a substan- Michael P. McDonald and John Samples (eds.), The Marketplace of Democracy: tial burden on the plaintiffs First Amendment rights. Apply- Electoral Competition and American Politics (2006); General Accounting Office, Reform: Early Experience of Two States That Offer Full ing the strictest standard of constitutional review, she went on Campaign FinancePolitical Candidates, May 2003, www.gao.gov/new.items/ Public Funding for to find that the system did not serve what she said was the d03453.pdf. For discussion and other background, see Clean Elections, Wikipedia, http://en.wikipedia.org/wiki/Clean_Elections. only legitimate governmental interest: preventing corruption. 3 The case is McComish v. Brewer. For court rulings and pleadings, affidavits The Ninth Circuit, however, reversed Silvers decision and upand briefs by the plaintiffs, see the Goldwater Institute, www.goldwaterinstitute. held the Arizona system. The system imposes only a minimal bur- org/case/68. Briefs for the state defendants are not online. den on First Amendment rights, Judge Wallace Tashima wrote for 4 McComish v. Bennett, May 21, 2010, www.ca9.uscourts.gov/datastore/opinions/ the three-judge panel, and bears a substantial relation to the States 2010/05/21/10-15165.pdf. important interest in reducing quid pro quo political corruption. 4

The law also had the unintended but perhaps foreseeable effect of dramatically increased independent spending by political groups outside candidates official campaigns. The so-called 527s listed $36.7 million in independent campaign expenditures in the 2000 presidential election year, according to the Center for Responsive Politics, a reformminded research center. In 2004 after BCRAs enactment the amount increased nearly ninefold to $316.7 million. The big spenders included such established organizations as the Democratic and Republican governors asso-

ciations and labor-backed funds, but also newer outfits such as the proDemocratic America Coming Together and MoveOn.org and the pro-Republican Progress for America and Swift Vets and POWs for Truth. In 2008, the groups spending increased again to $440.3 million, according to the center. 24 Meanwhile, the public financing system for presidential elections was gradually breaking down as candidates decided to forgo public subsidies rather than accept the spending limits imposed as part of the scheme. Republican George W. Bush in 2000 be-

came the first major candidate to opt out of public financing for primary races; John Kerry and Howard Dean followed suit in their 2004 Democratic primary contest. Then in the 2008 campaign Obama became the first candidate to opt out for both the primary and general elections. Obamas phenomenal success in Internet-based fundraising from small donors helped propel him to victory over his Democratic rival, Hillary Rodham Clinton, who also declined public subsidies, and then over Republican nominee John McCain. McCain,

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who had kept his primary campaign alive thanks to public financing, attacked Obama for going back on a pledge to stay in the public financing system. Obama countered that the spending limits were unrealistic and the system needed an overhaul. 25 The Supreme Courts new ruling on issue ads stemmed from a legal action by an anti-abortion group, Wisconsin Right to Life, which wanted to run ads criticizing Sen. Russ Feingold, D-Wis., in advance of the Democrats 2006 reelection bid. In Roberts first term as chief justice, the court in January 2006 held that its earlier ruling did not foreclose inditrict outside Buffalo, N.Y. Davis argued the law penalized him for exercising his political-speech rights by raising the contribution limits for his opponent. By a 5-4 vote, the court agreed. The law, Justice Samuel A. Alito Jr. wrote for the majority, impermissibly burdens [Davis] First Amendment right to spend his own money for campaign speech. 27 The same conservative majority formed in the Citizens United case to deal a much bigger blow to the law that campaign finance reformers had worked so hard to enact. The challenge to the law arose over Citizens Uniteds plans for screenings in 1990 that had upheld state laws prohibiting corporate spending on elections. For the four dissenters, Justice John Paul Stevens emphasized that the law actually allowed corporate-organized PACs that raised money voluntarily from shareholders, employees and others. He warned that the ruling would lead to corporate domination of the airwaves before elections.

CURRENT SITUATION
Watching the Courts
upporters and opponents of campaign finance regulation are watching court cases in Washington and around the country for rulings that may determine the fate of federal regulation of political groups, federal restrictions on soft money and state and local public financing systems. In the case with perhaps the broadest implications, attorneys representing SpeechNow.org are asking a federal district judge in Washington to give immediate effect to the appeals court decision in its favor lifting individual contribution limits to the organization. The motion filed May 14 asked Judge James Robertson to issue an immediate, nationwide injunction to block the Federal Election Commission (FEC) from enforcing the contribution limits that the U.S. Court of Appeals for the District of Columbia Circuit struck down in a unanimous, nine-judge ruling on March 26. 28 Institute for Justice attorney Steve Simpson filed the motion without waiting for the FEC and U.S. solicitor generals office to decide whether to appeal the case to the U.S. Supreme Court. Simpson cited the impending primary

Government may not suppress political speech on the basis of the speakers corporate identity. Justice Anthony M. Kennedy

vidual challenges to application to the law. When the case returned to the court the next year, many of the groups that had earlier challenged the law joined in successfully urging the justices to narrow its scope. With Roberts writing the main opinion, the court allowed corporations or unions to fund election-time issue ads on television as long as the ad did not unmistakably call for the election or defeat of a named candidate. Dissenters said the ruling amounted to overturning the earlier decision. 26 The court delivered another blow to McCain-Feingold a year later by striking down the Millionaires Amendment. The provision was challenged by Jack Davis, a wealthy businessman who spent more than $3 million in two unsuccessful congressional campaigns in a rural and suburban dis-

and DVD sales of a video, Hillary: The Movie, sharply critical of Clinton while she was the frontrunner in the race for the Democratic presidential nomination. Citizens United, a small, conservative group founded in 1988 by longtime GOP activist David Bossie, was organized as a corporation and accepted a small amount of corporate funds. That funding brought the plan into conflict with BCRAs prohibition on corporatefunded election advocacy. The courts ruling, however, broadly invalidated BCRAs prohibition on independent corporate spending on elections. Government may not suppress political speech on the basis of the speakers corporate identity, Justice Anthony M. Kennedy wrote for the majority. The decision overruled part of the McConnell decision as well as an earlier decision

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At Issue:
Do campaign finance laws unduly restrict political speech?
yes

SEAN PARNELL
PRESIDENT, CENTER FOR COMPETITIVE POLITICS
WRITTEN FOR CQ RESEARCHER, MAY 15, 2010

FRED WERTHEIMER
PRESIDENT, DEMOCRACY 21
WRITTEN FOR CQ RESEARCHER, MAY 24, 2010

or decades, lawmakers and advocates on different ends of the political spectrum have understood that restricting money in politics limits First Amendment rights. This understanding led President Harry Truman to veto the Taft-Hartley Act in 1947, which banned independent ads by both unions and corporations. In his veto message, Truman called the expenditure ban a dangerous intrusion on free speech. Limiting money spent on politics infringes on the First Amendment because effective political speech requires money. This principle applies whether a citizen-activist copies a flyer for distribution, a candidate purchases radio ads or an interest group reserves TV time to promote its agenda. The DISCLOSE Act, an effort to undo the Supreme Courts recent Citizens United decision, is a textbook example of how regulation and limits can stifle political speech. Current law already requires disclosure of contributions intended for political ads, but this bill would force private associations of citizens to reveal their donors and members even those who give for purposes other than politics. The intent is to chill unwelcome criticism by exposing donors to harassment and retaliation, reminiscent of the state of Alabamas demands during the civil rights era that the NAACP reveal its donors and members. The DISCLOSE Act would also require many ads to feature disclaimers that would consume up to half the ad without providing any additional information, dramatically limiting the amount of political speech. Another provision would ban American companies with as little as 20 percent foreign ownership from speaking, and another would ban speech by companies that have government contracts over $7 million. These provisions illustrate how campaign finance regulation can be used as a partisan weapon to silence foes while permitting allies to speak. This sloppily written bill seems designed to sow confusion among speakers, as a provision was inserted to not require FEC interpretation of the 84-page bill before midterm elections. One self-styled reformer recently sought to reassure bloggers that under the DISCLOSE Act they most likely would not face an FEC investigation if they praised or supported federal candidates, inadvertently making our point that uncertainty along with the specter of potential criminal investigation would deter unsophisticated grassroots groups. The ability of campaign finance laws to stifle political speech is clear. Americans should resist the latest siren call of reform and instead side with the First Amendment.
no

yes no
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xisting campaign finance laws protect our democracy from corruption and the appearance of corruption (contribution limits); provide information to citizens to allow them to make informed choices in elections (disclosure laws); and provide candidates with an alternative way of financing their elections (public financing systems). In the Supreme Courts landmark decision in Buckley v. Valeo (1976), the Court held that limits on contributions to candidates and parties, disclosure laws and public financing of elections are constitutional and do not unduly restrict political speech. The Court upheld contribution limits as a necessary legislative concomitant to deal with the reality or appearance of corruption inherent in a system permitting unlimited financial contributions. The Court said that To the extent that large contributions are given to secure a political quid pro quo from current and potential office holders, the integrity of our system of representative democracy is undermined. Similarly the Court in Buckley, and consistently in later cases, including Citizens United v. Federal Election Commission, upheld the constitutionality of campaign finance disclosure requirements against claims that disclosure would chill speech. The Court stated in Buckley that disclosure provides the electorate with information as to where political campaign money comes from and how it is spent by the candidate in order to aid the voters in evaluating those who seek federal office. In the case of public financing, the Court in Buckley said the presidential public financing system is a congressional effort, not to abridge, restrict, or censor speech, but rather to use public money to facilitate and enlarge public discussion and participation in the electoral process, goals vital to a selfgoverning people. In contrast, the Court in Buckley found limits enacted in 1974 on campaign spending by candidates and by individuals to be unconstitutional. In the recently decided Citizens United case, the Supreme Court by a 5 to 4 vote went further and ignored two decades of past Supreme Court decisions issued after Buckley to strike down a law in existence for more than 60 years that banned corporate spending to influence federal elections. In so doing, the Court unleashed unprecedented amounts of corporate influence-seeking money on our elections. The Courts indefensible judicial activism in Citizens United contradicted positions taken by past presidents, past Congresses and the Supreme Court itself, all of whom concluded the corporate spending ban was necessary to prevent government corruption.

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season as the reason for expedited action. He said a nationwide injunction was needed because the FEC in the past has enforced challenged regulations in some federal circuits even after sustaining an adverse ruling elsewhere. In the original suit, SpeechNow president Keating and two other libertarian activists said they wanted to donate to the organization more than the $5,000 currently permitted under federal campaign finance law. Keating and Edward Crane, founder and president of the libertarian Cato Institute, both said they wanted to give $5,500; Fred Young, a retired businessman in Wisconsin and current Cato board member, planned to contribute $110,000. The governments reply to the motion is due by May 28. Meanwhile, both sides have until June 24 to decide whether to ask the Supreme Court to review the decision. The appeals court rejected SpeechNows effort to invalidate the mandatory disclosure of donors. Simpson says his clients have not decided whether to appeal that part of the ruling. For the government, review by the Supreme Court would raise the risk of extending its defeat and lifting contribution limits for all political groups. Meanwhile, the Republican National Committee is asking the Supreme Court to speed up action on its appeal of the decision rejecting its plea to raise unregulated soft money for state elections and redistricting activity. The RNC filed its appeal on April 23 and added a motion asking the court preemptively to limit any extension of time if requested by the FEC to make sure the justices can consider the appeal before the summer recess begins at the end of June and to set an expedited briefing schedule if the case is scheduled for argument. 29 In the motion, Citizens United attorney Olson said the RNC and other plaintiffs are suffering irreparable harm to their First Amendment rights because

of the McCain-Feingold laws restrictions on soft money. In a reply filed May 4, Rep. Van Hollen, as an intervenordefendant, opposed any expedited briefing schedule. The congressman argued that even with a shortened time for briefs, the case could not be decided before the November elections. Plaintiffs challenging the Arizona public financing system are now studying a possible appeal to the Supreme Court after the Ninth Circuits decision reinstating the scheme. In the May 21 decision, the three-judge panel rejected the plaintiffs claims of a chilling effect from the system. The matching funds provision does not actually prevent anyone from speaking in the first place or cap campaign expenditures, senior circuit judge Wallace Tashima wrote. Meanwhile, opposing lawyers are waiting for a ruling from the Second Circuit appeals court on Connecticuts public financing system after the lower federal court ruled it unconstitutional in August 2009. The case was argued on Jan. 13 before a panel of two Democratic-appointed judges and one Republican appointee.

Moving in Congress?
he Senate appears to hold the key to the proposed legislation to impose new disclosure requirements on corporate spending in political campaigns as House leaders have the Democratic-written bill on a fast track in their chamber. The House bill and a companion bill in the Senate (HR 5175, S 3295) are being called the DISCLOSE Act for Democracy Is Strengthened by Casting Light on Spending in Elections. The House bill, which also bars political spending altogether by major federal contractors, was expected to reach the House floor during the week of May 24 before the beginning of Congress Memorial Day recess, according

to House Administration Committee Chairman Robert A. Brady, D-Pa. Brady commented after the committee approved the measure on a party-line vote on May 20. The committee, with a 6-3 Democratic majority, approved the bill late in the afternoon after voting down successive Republican-drafted amendments that, among other things, would have delayed the effective date until after the November congressional elections. 30 With Democrats holding a 255-177 majority, approval by the full House was regarded as a virtual certainty despite strong opposition from business groups. Few Democratic defections were expected on a bill with strong partisan implications. No action had been scheduled on the companion Senate bill as of May 24, according to a spokeswoman for the Senate Rules Committee. The lead sponsor of the Senate bill is the committees chairman, Sen. Charles E. Schumer, D-N.Y. Despite a 59-41 Democratic majority, Senate rules give Republicans more opportunities to delay or bottle up the measure. Senate GOP Leader McConnell led Republican criticism of the bill when it was introduced in early May. The bills disclosure requirements and government contractor restrictions are aimed at countering the effects of the Supreme Courts Citizens United decision in January freeing corporations to use corporate funds to support or oppose congressional or presidential candidates. Before the ruling, corporations or unions could spend in federal elections only by first forming a separate political action committee funded by voluntary contributions. Brady noted that even while striking down part of the McCain-Feingold law, the court upheld by an 8-1 vote the acts disclosure requirements. Americans have the right to know who is paying to influence their vote and potentially impacting the direction of

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our nation, Brady said after the committee mark-up. The bill would require disclosure of independent spending related to federal elections even if the advertisement or publication did not expressly call for the election or defeat of a named candidate. Spending would have to be reported to the FEC within 24 hours for any spending of $1,000 or more within the 20 days before an election. Corporations, unions or nonprofit political groups that make at least $10,000 in campaign-related expenditures in a year would generally be required to report all donors of $1,000 or more. Donors would be permitted to specify that contributions could not be used for campaign-related activities. An organization that transfers funds to another entity for campaign-related purposes would have to disclose the transfer. Under the bill, radio or television advertising by independent groups would have to include a disclaimer recorded by the chief executive officer of the corporation or comparable officer of a union or nonprofit group taking responsibility for the ad. For advertising sponsored by a coalition, the top funder of the ad would have to appear. The bills pay-to-play provision would bar big federal contractors from federal campaign-related expenditures altogether. The provision originally applied to companies with contracts greater than $50,000, but the committee approved a Democratic-written amendment to raise the threshold to $1 million. The bill also seeks to limit the influence of foreign-owned corporations by barring expenditures by a company if a foreign national owns 20 percent or more of stock, if a majority of board of directors members are foreign nationals or if foreign nationals can control a U.S. subsidiarys decisionmaking or activities with respect to U.S. elections.

OUTLOOK
No Truce in Sight
here are two things that are important in politics, Mark Hanna, the Republican kingmaker of the Industrial Age and the first of the highfinance bundlers of campaign cash, famously said. The first is money, and I cant remember the second. Hannas unembarrassed strongarming of corporations to pay to play in national politics fueled outrage that resulted in the passage of the 1907 law prohibiting corporations from contributing cash to candidates for federal offices. That law remains on the books, but the Supreme Courts decision in the Citizens United case frees corporations to spend money independently of candidates campaigns to try to sway voters in races for Congress or the presidency. The courts decision invalidated not only a major section of the recently enacted McCain-Feingold law but also laws prohibiting corporate spending in political races in about half the states. Critics fear a rush of corporate spending, made through shadowy political committees, that will tilt politics toward moneyed interests. As one example, they cite the $1 million that the software company Intuit, publisher of TurboTax, spent in an unsuccessful effort in 2006 to defeat California Controller John Chiang because of his support of a free, online taxpreparation program for low-income taxpayers. 31 Campaign finance deregulators cast themselves as advocates of free political speech against self-styled reformers who demagogue corporations, limit information for voters and turn campaigns into a legal and bureaucratic quagmire. The Founding Fathers

would be shocked at what people have to go through now to speak out at election time, says the Club for Growths Keating. The proposed legislation to require more disclosure of independent campaign spending by independent groups and their funding sources would add more rules. Supporters say the information will help voters evaluate the groups political messages. Opponents say the real purpose is to discourage corporations from speaking at all. Campaign finance reformers would go further for example, by requiring shareholder approval of corporate spending on political campaigns. That legislation proved too problematic for Congress to take on, at least for now. All the more problematic is legislation to provide public financing of congressional candidates. Public financing bills were introduced in March 2009 by leading Democratic lawmakers Senate Majority Whip Dick Durbin of Illinois and House Democratic Caucus Chairman John Larson of Massachusetts but never advanced beyond a single hearing in the House. 32 In describing their own similar public financing proposal for states, the Campaign Finance Institutes Malbin and his coauthors lamented what they called the stale two-sided battleground of campaign finance issues. They voiced the hope to move the dispute out of the courts and for both of the warring sides to accept the goals voiced by the other: to prevent corruption and to protect free speech. 33 Whatever their hopes, campaign finance debates four months later appear no fresher and the warring sides no closer to a truce, much less an entente. Theyre very clear that their goal is to disrupt the entire campaign finance apparatus from A to Z, the Campaign Legal Centers McGehee says of the groups challenging campaign finance laws in court.

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The idea thats just intolerable to them, counters Smith from the Center for Competitive Politics, is maybe we should just stop meddling with this. The idea that we should let it go just cannot be tolerated.
2000, pp. 257-280; and Kenneth Jost, Campaign Finance Reform, Feb. 9, 1996, pp. 121-144. 4 The case is SpeechNow.org v. Federal Election Commission, D.C. Cir., March 26, 2010, http:// pacer.cadc.uscourts.gov/docs/common/opinions/ 201003/08-5223-1236837.pdf. 5 See Election Law Blog; http://electionlaw blog.org/. 6 Both quoted in Kim Geiger and Clement Tan, Democrats unveil election spending bill, Los Angeles Times, April 30, 2010, p. A2. 7 The decision is Republican National Committee v. Federal Election Commission, U.S. District Court for the District of Columbia, March 26, 2010, www.fec.gov/law/litigation/ rnc_opinion_3judge.pdf, discussed infra. 8 The cases are McComish v. Bennett (Arizona), decided May 21 by the Ninth U.S. Circuit Court of Appeals, background and documents available at www.goldwaterinstitute.org/case/68; and Green Party of Connecticut v. Garfield, pending before the Second U.S. Circuit Court of Appeals, background and documents available at www.aclu.org/free-speech/judge-rules-con necticut-campaign-finance-law-unconstitutional. 9 Fredreka Schouten, Independent groups spend more than candidates in some contests, The Associated Press, Oct. 10, 2008. The Federal Election Commission cited the $100 million figure as the total of independent group spending in the 2008 campaign in its reply brief at the Supreme Court in Citizens United v. FEC, p. 12. 10 For Schumers statement, see Senate Democrats Unveil Legislation To Limit Fallout From Supreme Court Ruling That Allows Unlimited Special-Interest Spending On Elections; Announce Plan For Senate Passage By July 4, April 29, 2010, http://schumer.senate. gov/record.cfm?id=324343&. McConnell is quoted in Geiger and Tan, op. cit. 11 Quoted in Dan Eggen, U.S. Chamber sets sights on Democrats in advance of midterm elections, The Washington Post, March 16, 2010, www.washingtonpost.com/wp-dyn/content/ article/2010/03/16/AR2010031602040.html. 12 Toner appeared in person before the House Committee on House Administration on May 11, 2010; full witness list, statements, and biographies available at http://cha.house.gov/view_hear ing.aspx?r=67. The Brennan Center submitted written testimony, co-authored by Susan Liss and others, available at www.brennancenter.org/con tent/resource/testimony_on_the_disclose_act/. 13 Republican National Committee v. Federal Election Commission, op. cit. Other documents from both sides also available on the FEC site. Background on the soft-money ban is drawn from the Supreme Courts decision in McConnell v. FEC, op. cit. 14 The opinion, signed by vice chairman Cynthia Bauerly, is available on the FECs website: http://saos.nictusa.com/saos/searchao?SUB MIT=ao&AO=3047. 15 The district court decision in the Arizona case, then called McComish v. Brewer, is available on the Web site of the Goldwater Institute, www.goldwaterinstitute.org/Common/Img/ Silver%20Decision2%20%282%29.pdf, along with other pleadings and affidavits by the plaintiffs; information about the Citizens Clean Election Commission, which administers the law, can be found at www.azcleanelections.gov/home.aspx. The Ninth Circuits decision, McComish v. Bennett, is available at www.ca9.uscourts.gov/data store/opinions/2010/05/21/10-15165.pdf. 16 The decision is Green Party v. Garfield, available on the website of the American Civil Liberties Union, www.acluct.org/downloads/Green PartyDecisionAug27.pdf, along with some other documents. For coverage, see Edmund Mahony, State Law Is Revoked; Federal Judge Rules It Unconstitutional; Campaign Finance Reform, Hartford Courant, Aug. 28, 2009, p. A1. 17 The citation is 424 U.S. 1 (1976). The justices vote on public financing was 6-2, with Chief Justice Warren E. Burger and then-Associate Justice William H. Rehnquist dissenting. 18 Anthony J. Corrado, Michael J. Malbin, Thomas E. Mann and Norman J. Ornstein, Reform in an Age of Networked Campaigns, Campaign Finance Institute/American Enterprise Institute, Brookings Institution, January 2010, www.cfinst.org/books_reports/Reformin-an-Age-of-Networked-Campaigns.pdf.

Notes
1 For background, see Peter Katel, Tea Party Movement, CQ Researcher, March 19, 2010, pp. 241-264. 2 Account drawn from these sources: Mark Z. Barabak, Utahs front in civil war, Los Angeles Times, Nov. 14, 2009, p. A14 (spending in New York race); David Weigel, How the Club for Growth beat Bob Bennett, Right Now (blog), May 10, 2010, http://voices.washingtonpost. com/right-now/2010/05/how_the_club_for_ growth_beat_b.html; Matthew Mosk, Club for Growth is fined, The Washington Post, Sept. 6, 2007, p. A4. In settling the FEC case, the Club for Growth claimed a good-faith belief that it was not subject to registration and disclosure requirements. 3 The earlier decision is McConnell v. Federal Election Commission, 540 U.S. 93 (2003). For an account, see Kenneth Jost, Supreme Court Yearbook 2003-2004. Citizens United is available on the Supreme Court website: www.supreme court.gov/opinions/09pdf/08-205.pdf. For background on campaign finance issues, see these CQ Researcher reports: Thomas J. Billitteri, Campaign Finance Reform, June 13, 2008, pp. 505528; Kenneth Jost, Campaign Finance Showdown, Nov. 22, 2002, pp. 969-992; Mary H. Cooper, Campaign Finance Reform, March 31,

About the Author


Associate Editor Kenneth Jost graduated from Harvard College and Georgetown University Law Center. He is the author of the Supreme Court Yearbook and editor of The Supreme Court from A to Z (both CQ Press). He was a member of the CQ Researcher team that won the American Bar Associations 2002 Silver Gavel Award. His previous reports include Women in Politics and Electing the President. He is also author of the blog Jost on Justice (http://joston justice.blogspot.com).

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19 Background drawn in part from Anthony Corrado, Money and Politics: A History of Federal Campaign Finance Law, in Corrado, et al., The New Campaign Finance Sourcebook (2005), pp. 7-47; Bradley A. Smith, Unfree Speech: The Folly of Campaign Finance Reform (2001), pp. 17-38. 20 Corrado, op. cit., p. 15. 21 For a new account of the history, impact and survival of the decision, see Richard L. Hasen, The Nine Lives of Buckley v. Valeo, in Richard W. Garnett and Andrew Koppelman, First Amendment Stories (forthcoming, 2010), available at http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1593253. 22 Corrado, op. cit., p. 31; Smith, op. cit., p. 36. 23 Corrado, op. cit., p. 32; data from Center for Responsive Politics, cited in Jost, Campaign Finance Showdown, op. cit., p. 973. 24 Data from Center for Responsive Politics, Independent Expenditures, www.opensecrets. org/indexp/index.php. 25 For background, see Billitteri, op. cit. 26 The cases are Wisconsin Right to Life v. Federal Election Commission, 546 U.S. 410 (2006); Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007). For accounts, see the respective editions of The Supreme Court Yearbook. 27 Davis v. Federal Election Commission, 554 U.S. --- (2008). 28 For coverage and a link to the motion, see Lyle Denniston, Citizens United sequel moves along, SCOTUSBlog, May 14, 2010, www.scotusblog.com/2010/05/citizens-unitedsequel-moves-along/. 29 For coverage and a link to the motion and appeal, see Lyle Denniston, No quick ruling on GOP appeal, SCOTUSBlog, April 23, 2010, www.scotusblog.com/2010/04/no-quick-rulingon-gop-appeal/. For the later motion, see Lyle Denniston, Fast track on soft money opposed, ibid., May 4, 2010, www.scotusblog.com/ ?s=RNC+v.+FEC. 30 For coverage, see Charlene Carter, Panel Approves Bill That Would Provide New Rules for Political Spending, CQ Weekly, May 24, 2010, p. 1285. 31 See Shane Goldmacher, New rules, new tactics in U.S. races, Los Angeles Times, Feb. 24, 2010, A3. 32 See Bart Jansen, Public Campaign Financing Proposal Draws Bipartisan Backing, CQ Today, March 31, 2009. 33 Corrado, et al., op. cit., p. 1.

FOR MORE INFORMATION


AFL-CIO, 815 16th St., N.W., Washington, DC 20006; (202) 637-5000; www.aflcio.org. National trade union coalition calling for a ban on soft money contributions in national politics. Brennan Center for Justice, New York University School of Law, 161 Avenue of the Americas, 12th Floor, New York, NY 10013; (212) 998-6730; www.brennancenter.org. Public policy group that focuses on issues such as judicial elections, campaign finance and voting rights. Campaign Finance Institute, 1990 M St., N.W., Suite 380, Washington, DC 20036; (202) 969-8890; www.cfinst.org. Group affiliated with The George Washington University that conducts research and makes policy recommendation on campaign finance. Campaign Legal Center, 1640 Rhode Island Ave., N.W., Suite 650, Washington, DC 20036; (202) 736-2200; www.campaignlegalcenter.org. Nonprofit group that focuses on campaign finance and elections, political communication and government ethics. Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001; (202) 8420200; www.cato.org. Conservative public policy research foundation supporting uncapped corporate financing of campaigns. Center for Competitive Politics, 124 S. West St., Suite 201, Alexandria, VA 22314; (703) 894-6800; www.campaignfreedom.org. Nonprofit group co-founded by former Federal Election Commission Chairman Bradley Smith that is critical of the McCain-Feingold law. Center for Responsive Politics, 1101 14th St., N.W., Suite 1030, Washington, DC 20005-5635; (202) 857-0044; www.opensecrets.org. Nonpartisan group that tracks money in politics and its effect on elections and public policy. Democracy 21, 2000 Massachusetts Ave., N.W., Washington, DC 20036; (202) 355-9600; www.democracy21.org. Research organization working to reduce the influence of big money in politics and ensure the fairness of elections. Democratic National Committee, 430 S. Capitol St., S.E., Washington, DC 20003; (202) 863-8000; www.democrats.org. Provides agenda geared toward expanding opportunity for all Americans and supporting honest and accountable government. Institute for Justice, 901 N. Glebe Rd., Suite 900, Arlington, VA 22203; (703) 682-9320; www.ij.org. Libertarian civil liberties law firm litigating against freespeech restrictions. Public Campaign, 1133 19th St., N.W., Suite 900, Washington, DC 20036; (202) 293-0222; www.publicampaign.org. Nonpartisan organization that promotes campaign reform that reduces the role of special-interest money in politics. Republican National Committee, 310 First St., S.E., Washington, DC 20003; (202) 863-8500; www.gop.com. Seeks to protect free speech and reduce the influence of government. U.S. Chamber of Commerce, 1615 H St., N.W., Washington, DC 20062; (202) 659-6000; www.uschamber.com. Supports free enterprise before Congress, the White House, courts and regulatory agencies.

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Bibliography
Selected Sources
Books
Corrado, Anthony, Thomas E. Mann, Daniel R. Ortiz and Trevor Potter, The New Campaign Finance Sourcebook, Brookings Institution Press, 2005. Four leading experts on campaign finance, all supportive of regulation, join in providing a concise overview of, among other topics, the history and current status of campaign finance law; First Amendment limits on campaign finance regulation; and the role of the Federal Election Commission (FEC) in enforcing campaign finance laws. A concluding chapter offers proposals for reform. Includes chapter notes. Corrado is professor of government at Colby College, Mann a senior fellow at Brookings, Ortiz a law professor at the University of Virginia and Potter an attorney in Washington and former FEC chairman. Samples, John, The Fallacy of Campaign Finance Reform, University of Chicago Press, 2006. The director of the Cato Institutes Center for Representative Government mounts a strong attack on campaign finance laws, most of which he says should be cause for lamentation. Includes detailed notes. Slabach, Frederick G. (ed.), The Constitution and Campaign Finance Reform: An Anthology (2d ed.), Carolina Press, 2006. Twenty-three experts representing a range of views and experiences provide essays around three major topics: classifying campaign contributions and expenditures as speech; defining governmental interests in campaign finance regulation; and considering alternative methods of regulation. Includes chapter notes. Slabach is dean emeritus and professor of law at Texas Wesleyan University School of Law. Smith, Bradley, Unfree Speech: The Folly of Campaign Finance Reform, Princeton University Press, 2001. Smith, then a professor at Capital University Law School, was completing work on this strongly argued critique of campaign finance laws just as President Bill Clinton was naming him as a Republican nominee to the FEC. Chapters include an historical overview, critiques of regulation and of public financing and analyses of constitutional issues. Includes detailed notes, list of court cases and 15-page bibliography. Smith has returned to the law school; he is also founder and chairman of the Center for Competitive Politics. by Democratic lawmakers, Sen. Charles Schumer of New York and Rep. Christopher Van Hollen of Maryland, as severely burdensome of the right to engage in political speech and advocacy.

Reports and Studies


Corrado, Anthony J., Michael J. Malbin, Thomas E. Mann and Norman J. Ornstein, Reform in an Age of Networked Campaigns: How to foster citizen participation through small donors and volunteers, Campaign Finance Institute, January 2010. The authors, two campaign finance experts and two longtime Washington observers, propose a new approach to public campaign financing aimed at increasing the importance of small donors. The plan would tie taxpayer subsidies to a candidates qualifying threshold of low-level contributions, provide a multiple match for those contributions and lower contribution limits for candidates accepting the subsidies. Includes notes, detailed tables. Corrado is a professor of political science at Colby College, Malbin is director of the Campaign Finance Institute at George Washington University and Mann and Ornstein are resident scholars at the Brookings Institution and American Enterprise Institute, respectively. Hebert, J. Gerald, and Tara Malloy, Challenges to Campaign Finance and Disclosure Laws Multiply After Citizens United Ruling from Roberts Court, Campaign Legal Center, May 21, 2010, www.clcblog.org/blog_item-329.html. The 5,000-word backgrounder on the centers blog summarizes, from a campaign finance reform perspective, litigation and legislative developments following the Supreme Courts Citizens United decision. The posting triggered a pointed reply from the deregulatory-oriented Center for Competitive Politics about the CLCs funding (Hypocrisy and smears typical of the Campaign Legal Center, May 21, 2010, www.campaignfreedom.org/newsroom/detail/hypocrisy-andsmears-typical-of-the-campaign-legal-center); the CLC responded in turn (Talk About Hypocrisy!! CCPs Secret Funding Unrefuted by Poorly Researched Diatribe, May 24, 2010, www.clcblog.org/blog_item-330.html.)

Articles
Former FEC Commissioners, Chuck Schumer vs. Free Speech, The Wall Street Journal, May 19, 2010, p. A19. An op-ed signed by eight former members of the Federal Election Commission criticizes the DISCLOSE Act sponsored

The Federal Election Commission maintains a comprehensive, well-organized and up-to-date Web site detailing contributions and expenditures in federal campaigns along with records of the commissions advisory opinions, regulations and litigation (www.fec.gov). The site includes a page summarizing the Bipartisan Campaign Reform Act (BCRA), the FECs regulations and advisory opinions under the act and litigation relating to the act (http://fec.gov/pages/ bcra/bcra_update.shtml).

On the Web

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CHAPTER

INCOME INEQUALITY
BY MARCIA CLEMMITT

Excerpted from Marcia Clemmitt, CQ Researcher (December 3, 2010), pp. 989-1012.

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Income Inequality
BY MARCIA CLEMMITT
Citigroup, the financialservices conglomerate, concurs. As of 2006, the richest Census Bureau report 10 percent of Americans acreleased in September count for 43 percent of inbrought a brief flurry come, and 57 percent of net of press attention to rising inworth, based on Federal Recome inequality in America. serve data, says a Citigroup The gap between rich and analysis. The United States, poor in New York is getting Canada, Australia and the worse, noted the New York United Kingdom have seen Daily News. In 2009, 18.7 perthe rich take an increasing share cent of New York Citys popof income and wealth over the ulation lived in poverty, and last 20 years, to the extent that the median household income the rich now dominate income, fell to $50,033, from $51,116 wealth and spending. The in 2008, even as the combined distribution of wealth the worth of the citys 58 richest value of ones assets such as residents rose by $19 billion. real estate and stocks, minus As a result, the earnings gap ones debts continues to be among New Yorkers is now even more aggressively skewed larger than the gap in India than income, it said. 4 and the African nation of But having an economic Burkina Faso, Joel Berg, exclass with very large amounts ecutive director of the New of disposable money is valuYork City Coalition Against able not harmful to soA Ferrari complements the conspicuous consumption on Hunger, told the paper. 1 ciety, some argue. Thats bedisplay along Rodeo Drive in Beverly Hills, Calif. Experts The finding that income cause only the very richest agree the rich are pulling away from other Americans, inequality is increasing is can make the investments vital but not all think its a problem. Some say investments by generally accepted by anato building businesses and drithe wealthy stimulate the economy by building lysts across the political specving demand for labor, wrote businesses and driving demand for labor, but others say the result has been a severe recession and trum, with the exception of George Reisman, a professor stagnant incomes for most Americans. libertarian commentators, emeritus of economics at who argue that no existing data set Center on Budget and Policy Priori- Pepperdine University, in Malibu, Calif. accurately depicts how money is dis- ties (CBPP) a liberal-leaning think In a market economy, the wealth of tributed. What provokes debate in all tank. 2 the rich . . . is overwhelmingly investAfter-tax incomes also have risen ed in means of production, that is, in quarters, however, is whether steep income inequality in an industrialized more for the highest earners, says CBPP. factories, machinery and equipment, nation is something to worry about and, From 1979 to 2007, the average after- farms, mines, stores, and the like. 5 if it is, what policies would address it tax income of the top 1 percent of Other analysts question that propoearners nearly quadrupled, from sition. Weve had a natural experieffectively. The main story is that the very rich $347,000 to over $1.3 million, a 281- ment recently with what can happen have been pulling away from all others percent increase, based on data from to the economy when the richest peoin income over the past three decades, the nonpartisan Congressional Budget ple make extraordinary gains comOffice. Over the same period, the after- pared to others, says Yale University most analysts agree. The average pretax income for the tax income of the middle fifth of the political scientist Jacob S. Hacker. Weve bottom 90 percent of households is population rose from $44,100 to had a winner-takes-all economy for a almost $900 below what it was in $55,300, or 25 percent, while the bot- while, and its provided limited bene1979, while the average pretax income tom fifth saw its average after-tax in- fits, leaving the country with a severe for the top 1 percent is over $700,000 come grow from $15,300 to $17,600, recession and virtually stagnant inabove its 1979 level, according to the or 16 percent. 3 comes for most people.

THE ISSUES

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Dec. 3, 2010

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INCOME INEQUALITY
Richest Americans Have Biggest Share of Income
The top 1 percent of income earners in the United States control nearly 18 percent of Americans total income, the worlds highest such concentration. In 1949, however, the top American earners lagged behind those of several other countries, including Indonesia, Germany and the United Kingdom. Share of Earnings of Top 1% Income Earners in Select Countries, 1949 and 2005
Indonesia Argentina Ireland Netherlands India Germany United Kingdom Australia United States Canada Singapore New Zealand Switzerland France Norway Japan Finland Sweden Spain Portugal Italy China 0% 5 10 15 20
Share of Total Earnings of Top 1%

1949 2005

Source: Anthony B. Atkinson, et al., Top Incomes in the Long Run of History, National Bureau of Economic Research, January 2010

Simmering debates over rising income inequality in America not to mention the solvency of Social Security and the growing federal deficit lie behind many of this years policy and political battles. At the heart of the debates is the system of taxing income: In the Unit-

ed States each additional increment of an individuals income is taxed at a different rate in a so-called marginal tax scheme; marginal income tax rates on higher earnings are generally higher known as a progressive taxation scheme. And while many liberals this year have called for raising the

marginal tax rate on the highest earners, thats a bad idea, said Sen. Joseph Lieberman of Connecticut, a former Democrat who became an independent during a tough reelection campaign a few years ago. To me, these are the people we need to be protecting their income to spend and invest to spur growth and job creation. The fact is that the top 3 percent of . . . earners account for 25 percent of the consumption in our economy. 6 But history casts doubt on whether holding down taxes on the highest earnings boosts the economy, said Cenk Uygur, a journalist and political commentator on the Internet and the Sirius Satellite Radio show The Young Turks. From 1925 to 1931, the highest marginal tax rate was as low as it has almost ever been between 24-25 percent. And between 20032010, the highest marginal tax rate was also at one of its lowest points 35 percent, he said. So what happened . . . ? The Great Depression and the Great Recession. 7 The current high-profile debate over whether Social Security benefits must be cut to keep future federal budgets in balance is skewed by lack of attention to growing income inequality, argued Robert Kuttner, founder and co-editor of the liberal magazine The American Prospect. Social Security is funded by payroll taxes on earnings beneath a certain cap around $107,000 in 2010. In other words, people who earn above $107,000 only pay Social Security tax on that $107,000. Thus, lower-earning people pay a much higher percentage of their income to sustain the system than high earners, he said. If you want to get Social Security well into the black for the indefinite future, the easiest way is to restore wage growth among low earners, which would boost Social Securitys take. Instead, recent earnings growth has gone almost entirely to people whose incomes are high above the cap and

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thus hasnt helped at all to shore up Social Security, he wrote. 8 As economists, lawmakers and the public debate whether economic inequality should be an important publicpolicy agenda item, here are some questions being asked: Is income inequality growing in the United States? In recent years, many analysts have come to agree that income inequality is rising, mostly because incomes of the top earners have skyrocketed. However, some say that studies that find very high inequality are based on incomplete or misleading data. In comparisons that include peoples spending, for example, the effective income gap between the rich and poor is narrower, say some economists. Contrary to what some other studies find, poor households systematically pay less than richer households for identical goods . . . in part because they shop in cheaper stores and in part because they pay less for the same goods even in the same store, most likely by buying things on sale, wrote University of Chicago professor of economics and business Christian Broda, U.S. Department of Agriculture economist Ephraim Leibtag and Columbia University professor of Japanese economy David E. Weinstein. As a result, poorer people effectively have higher-value incomes, something that most research fails to acknowledge, they argue. When the differential spending is taken into account, poverty rates turn out to be less than half of the official numbers. 9 Income studies generally examine households, not individuals, and changes in household size over the years mean that supposed inequality problems are much lower than many estimate, wrote Stephen J. Rose, a research professor at the Georgetown University Center on Education and the Workforce. Americans today are more likely to live in single-adult households than they were 30

Tax Rates Drop for Highest Earners


The average income of the top 400 American households increased from $71 million in 1992 to $357 million in 2007 a 403 percent rise while the effective tax rate dropped from 26 percent to 17 percent. By comparison, the bottom 90 percent of earners saw their income rise from about $29,000 to about $33,000 a modest 14 percent increase. Income and Tax Rates of 400 Highest-Income American Households, 1992-2007
Average income in 2009 dollars
(in millions)

Effective tax rate 26.4% 29.9 22.0 22.8 18.2 16.6

1992 1995 1998 2001 2004 2007

$71.5 $71.6 $125.0 $158.8 $196.2 $356.7

Source: David Cay Johnston, Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data, Tax.com, February 2010

years ago, so actual per-person earnings growth for middle-class people is considerably higher than other studies suggest, he said. 10 The most recent statistics that indicate poverty is rising dont depict longterm poverty but recession-related job loss, argued Atlanta-based, nationally syndicated libertarian radio host and commentator Neal Boortz. If youre out of work, you have no income. Snap! Youre living in poverty. It doesnt matter what your net worth actually is or if you own $3 million homes free and clear. 11 The evidence is incontrovertible that American income inequality has increased . . . since the 1970s, said Robert J. Gordon, a professor of economics at Northwestern University. Nevertheless, its rise has been exaggerated since the most recent increase consists entirely of a tiny group of very high earners pulling far ahead of everyone else. Analysis of census and tax data reveals that there was no in-

crease in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent. 12 Many other commentators, however, including some conservatives, stress that the income gap that opened between 1980 and 2000 is indeed very wide. Income inequality is real; its been rising for more than 25 years, said President George W. Bush in 2007. Furthermore, the gap is serious enough to warrant careful watching, said Bush. 13 This growth in wage inequality is one of the most spectacular and consequential developments of our time, partly because most people have expected that economic development and modernization would create more economically equitable societies, said David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality, and Kim A. Weeden, an associate professor of sociology at Cornell University. 14

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Data from both . . . income tax returns and . . . W-2 records tell a simple and similar story to the tale of inequality told by analysis of census figures, which is often criticized to some extent correctly for including data on too few people, said Gary Burtless, a senior fellow at the center-left Brookings Institution think tank. The relative incomes and the relative wages of top income recipients have been increasing much faster than the incomes and wages of people further down in the distribution. W-2 records show that an earner in the top .01 percent of the income distribution made 46 times as much as the countrys median wage earner in 1990, but 81 times as much in 2005, for example. 15 Does increasing economic inequality harm society? Most analysts agree that a certain amount of income inequality is valuable because it gives people incentives to work hard and try out new business ideas, in hopes of reaping big rewards. However, many are skeptical that current U.S. inequality levels are risk free or contribute much to building the economy. Some international data suggest that countries with more extreme income inequality experience faster economic growth overall, said Brookings Burtless. From 1990 to 2000, economic growth in the G-7 countries Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, whose top finance officials have met regularly since 1976 was fastest in the United States and the United Kingdom, the countries that also experienced the fastest growth in inequality, he said. While not constituting conclusive evidence, this fact is at least consistent with the view that the rapid rise in U.S. inequality has contributed to the relatively good performance of American output and employment since the late 1970s. 16 While its true that the share of national income going to the richest 20 percent of households has risen, and families in the lowest fifth saw their piece of the pie fall, income statistics dont tell the whole story of Americans living standards, which provide evidence that rising income inequality is highly compatible with a system that produces a better life for all, wrote W. Michael Cox, director of the ONeil Center for Global Markets and Freedom at Southern Methodist University and senior fellow at the Federal Reserve Bank of Dallas, and Richard Alm, an economics writer. Today, large majorities of Americans enjoy the convenience of once-unheard-of consumer goods like cars and clothes dryers while most are employed in clean, well-lit, and air-conditioned environment[s], unlike in the past, they said. 17 Furthermore, a far more direct measure of American families economic status [rather than tax or census data] household consumption indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the socalled poverty rate no longer applies to our society, they said. In 2006, while the income ratio between the highest- and lowest-earning quintiles was 15 to one, the spending ratio was only four to one, demonstrating the similarity in living standards. Lowerincome families can spend more than many believe because they have access to various sources of spending money that doesnt fall under taxable income, including sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, and the drawing down of bank accounts, they pointed out. 18 But markets that produce income inequalities at the present scale are in fact failed markets, inefficient because they provide unreasonably high levels of return what economists dub rents to some people who dont deserve so much, argues Grusky, at Stanfords Center for the Study of Poverty and Inequality. For example, some top executives win extremely high paydays not because they lead their companies to prosper beyond expectations but due to various sweetheart deals and the machinations of corporate governing boards who approve outsize CEO payments because theyre personally beholden to the executives, he argues. International studies conducted over the past decade by the Organization for Economic Co-operation and Development have found no evidence that inequality may be conducive to growth in OECD countries, as some had suggested, said OECD SecretaryGeneral Angel Gurria. On the contrary, our work shows that greater inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve. And the resulting inequality of opportunities . . . inevitably impacts economic performance as a whole. 19 Some fear that having too much income concentrated at the top compromises the ability of a democracy to give equal political voice to all citizens. In international studies, nations with wider income inequality often have political structures in which fewer people have an equal voice and there is less government accountability, said Nancy Bermeo, a professor of comparative politics at Oxford University, in England. 20 The ability of citizens to influence public policy is the bottom line of democratic government, but in recent decades in the United States the ability to influence policy has skewed toward the most affluent people, whose priorities often dont coincide with those of people who earn less, said Martin Gilens, an associate professor of politics at Princeton University. 21 Based on survey data from 1981 to 2002, on issues where Americans

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with different income levels differ in their policy preferences, actual policy outcomes strongly reflect the preferences of the most affluent but bear virtually no relationship to the preferences of poor or middle-income Americans. So stark is this finding that it may call into question the very democratic character of our society, according to Gilens. 22 With money concentrated at the top, there may be a demand for private jets and yachts, but you need a healthy middle-income group to drive the massive consumption that promotes real economic growth, said Kemal Dervis, director of the global economy and development division at the Brookings Institution. 23 Furthermore, when we see income inequality rising, we ought to start looking for bubbles fast-rising prices in some investment sector like the Internet stock bubble of the 1990s and the housing bubble of the 2000s, said Mark Thoma, a professor of economics at the University of Oregon. Such investment bubbles arent sustainable because they ultimately price things beyond their value and out of reach of too many buyers, and their collapse leads to heavy losses and, often, economic recessions. 24 Rising inequality also played another role in sparking the financial-market crash and recession, according to University of Chicago professor of finance Raghuram Rajan. Because policy makers have few tools available for directly raising incomes, Washington took the dangerous step of subsidizing large numbers of high-risk mortgage loans such as no-down-payment loans to people who may have had limited ability to pay, out of concern that the American dream might be slipping away from many people as inequality increased, he said. Those actions helped create the swelling bubble of mortgage debt that exploded when some people began defaulting on their risky loans, said Rajan. 25

Should the government act to limit inequality? Not surprisingly, those who argue that income inequality boosts the economy strongly oppose government actions intended to limit its growth or redistribute incomes. Meanwhile, analysts who argue that inequality is risky dont necessarily agree about policies to address it. Democrats are right about one thing: I can afford to pay more in taxes, said Harvard economics professor N. Gregory Mankiw. My income is not in the same league as superstar actors and hedge fund managers, but I have been very lucky. . . . I dont have trouble making ends meet, and indeed, I could go so far as to say I am almost completely sated. . . . Nonetheless, neither high earnings nor large inherited estates should be subject to higher taxes because such taxes would sap the incentive of top professionals to work hard, Mankiw said. 26 Mankiw noted that he is regularly offered opportunities to earn extra money, but if Bush-era tax rates were raised, the resulting gains for him and for his children who will inherit the money down the line would be too small to provide an incentive for him to take those extra jobs, he wrote. The same would hold true for other highincome taxpayers whose services you enjoy, like movie actors, pop singers, blockbuster novelists, top surgeons, and orthodontists, Mankiw argued. As they face higher tax rates, their services will be in shorter supply. . . . Dont let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden. 27 Attempts to put a floor under the lowest income, such as a minimum wage, also harm society, said Art Carden, an assistant professor of economics and business at Rhodes College in Memphis. A higher minimum wage is likely to exacerbate rather than mitigate social inequalities because when potential hires arent permitted to compete intensely for jobs

by offering to work for very low wages, then firms can discriminate on the basis of something other than productivity, he argued. 28 With no minimum wage set, a historically disadvantaged jobseeker, such as Crackhead Carl, a middle-aged African-American male who was just released from jail, could win a job over Tad Vanderbilt Rockefeller, a flaxen-haired white teenager from an affluent suburb even from a racially biased employer simply by accepting a rock-bottom wage, said Carden But with a minimum wage in place, Carl could offer a racially biased employer no incentive to hire him rather than Tad, he explained. 29 Many scholars say that if greater economic equity is the goal, its hard to imagine it coming about without government action. What are the pathways to create a more equal society? Taxation, education and health care, says Dan Ariely, a professor of behavioral economics at Duke University. Theres nothing anti-capitalist about saying that the sharp edges of capitalism should be softened by government, says Yales Hacker. A quick look around the globe shows that capitalism is consistent with a lot of different ways of organizing the economy, including some with high taxes and strict regulations. The wide variation in income-inequality ratios in countries with market economies show that high U.S. ratios arent simply the inevitable product of a market economy, he says. In 2008, the ratio between the pay of the average CEO and the average worker was 319 to one in the United States but only 11 to one in Japan, 12 to one in Germany, and 47 to one in Mexico, suggesting that the U.S. distribution is out of line with those in other market economies, including some that are doing fairly well economically, such as Germany, according to the progressive Institute for Policy Studies. 30

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Rich Got Richer While Poor Lagged
The top 1 percent of American earners took in an average of $1.3 million after taxes in 2007, nearly a 300 percent increase over 1979. By contrast, income for the bottom 20 percent of earners rose only 16 percent over the same period. Average After-tax Income, 1979 and 2007 (in 2007 dollars)
Income category Lowest fifth Second fifth Middle fifth Fourth fifth Top fifth Top 1 percent 1979 $15,300 $31,000 $44,100 $57,700 $101,700 $346,600 2007 $17,700 $38,000 $55,300 $77,700 $198,300 $1,319,700 % change 16% 23% 25% 35% 95% 281% $ change $2,400 $7,000 $11,200 $20,000 $96,600 $973,100

Source: Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 2010

In the past, strong economic growth has proven to be compatible with high tax rates on top earnings, argued Clinton administration Secretary of Labor Robert Reich, a professor of economics at the University of California, Berkeley. Under President Dwight Eisenhower (whom no one would have accused of being a radical) it was 91 percent. Now its 36 percent, the lowest its been in more than 80 years. 31 The highest earners have benefited disproportionately from recent workplace productivity gains, so taxing top earnings higher would seem only fair, suggested Northwesterns Gordon and Ian Dew-Becker, a doctoral candidate at Harvard University. Between 2001 and 2004, for example, the U.S. labor force produced an explosion in productivity over 3 percent a year higher productivity gains than at any other period since World War II, they wrote. Nevertheless, median family income actually fell by 3.18 percent from 1999 and 2004, and for the whole period of rising productivity between 1995 and 2004, increased annually by only 0.9 percent, compared to an annual rate

of productivity gains in non-farm businesses of 2.9 percent, they said. 32 During this period of skyrocketing productivity, only the top 10 percent of the income distribution enjoyed a growth rate of total real income . . . equal to or above the average rate of economywide productivity growth. Thus, the no-brainer solution to central social objectives including the budget deficit, Social Security and health care is to raise taxes on the top 1 percent by a major amount, say from 33 to 50 percent, Gordon and Dew-Becker recommended. 33 I know many well-educated professionals convinced that nobody works as hard as they do, wrote Jonathan Cohn, senior editor of The New Republic. . . . But Ive met many people at the bottom of the income ladder who work just as hard, for far less reward. Between 1980 and 2005, the richest 1 percent of Americans got more than four-fifths of the countrys income gains. Does anybody seriously believe that the other 99 percent didnt deserve to take home a much larger share? 34

An investment in postsecondary skills training and education for people who cant find jobs in an increasingly technology-based job market would ease income inequality by holding wages for high-skill jobs down a bit as the supply of skilled workers came closer to meeting the full demand, says Anthony P. Carnevale, a research professor at the Georgetown University Center on Education and the Workforce. The 11 million or so low-income, dislocated or imprisoned adults with an immediate ability to benefit from new training programs are the low-hanging fruit, he wrote. 35 Government policy should focus on education rather than any direct means of redistributing income such as through tax policy, wrote University of Chicago economists Kevin M. Murphy and Gary S. Becker, winner of the 1992 Nobel Prize for economics. Taxing higher incomes is tantamount to taxing college tuition while giving subsidies for dropping out of high school, a strategy no one would recommend, Murphy and Becker write. Instead, the public should focus attention on how to raise the fraction of American youth who complete high school. 36 Not everyone is sure that education funding will help ease inequalities. The last 15 years have actually seen significantly slower job growth in high-earnings growth sectors than in the economy at large, wrote James K. Galbraith, a professor of government, and J. Travis Hale, a graduate student, at the University of Texas, Austin. So even if large numbers of young people acquire the skills needed to advance, there is no evidence that the economy will provide them with suitable employment. Moreover, investments in education presuppose that we know, in advance, what education should be for. For example, students who studied information technology in the mid-1990s were lucky; those completing similar degrees in 2000 faced unemployment. 37
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Bleak Futures Await Those with Limited Education


You need to target kids who are coming out of prison for the first time.

eople up to age 30 who only have a high school diploma or less are in trouble, potentially facing a lifetime of incomes sagging farther and farther behind those of people with a college education or technical training, says Timothy M. Smeeding, a professor of public affairs and economics at the University of Wisconsin, Madison. They face a bleak future because most of the traditional roads to a middle-class income for people with that level of education, such as manufacturing, have dried up. The resulting large oversupply of workers must fight for jobs with low skill requirements, driving down the wages for those positions even further and increasing the nations income inequality, Smeeding says. When the recession ends, it will become clear that there is no work for these people, except jobs like waiting table or mowing lawns. We have to get more people employed or well lose a whole generation. We need to get the less-skilled people to work before they all turn to crime, Smeeding says. Worse, among young men with a high school education or less, 73 percent are fathers by age 30. Furthermore, a high school dropout is likely to have 2.7 children, compared to the 1.9-child average for college graduates, creating a huge additional economic disadvantage for children of low-skilled parents. If after 1983 the country had continued to produce bachelors and associates degree holders at the same rate of increase as it did in earlier years, there would be 10 million more such degree holders competing for high-skill jobs, and the income distribution would look like it did in 1979, according to Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce. Instead, high school graduation rates stalled beginning in the mid-1970s and even dropped in some years, curtailing the number of people eligible for post-secondary training, even as the rates of high school graduates who went to college rose. The workplace income gap between high-skilled and low-skilled employees relates more to specific occupations, such as engineering, than to education itself, says Carnevale. For example, you can get a 13-month certificate in engineering and earn more than a significant chunk of people with B.A.s, he says. Its access to an occupation that makes the difference, and education gets you that access. The country needs to produce more people with post-secondary education, especially in technical fields, Carnevale says. Are we going to be able to do that? Its doubtful. Unlike with K-12 education, we tend to see higher education as something families do, not as a public good, and the result is that its tough to expand higher-education opportunities and especially tough to bridge a spending gap between institutions we have huge differentials in spending, he says. The Obama administration is taking a different and somewhat more promising tack than previous administrations, understanding that community colleges and public universities are where the students and the voters are, says Carnevale.

Meanwhile, the premium salaries that go to college-educated people increase income inequality, representing a market failure in the education system, says David B. Grusky, director of Stanford Universitys Center for the Study of Poverty and Inequality. In a rational market, schools would see rising demand for post-secondary education and open up more spots, says Grusky. Any rational market will do that. If a car manufacturer sees more demand, the company increases production of cars. But universities, especially high-status schools like Stanford, are likely to continue to limit their spots, despite increasing demand, because by doing so the degrees and certificates their graduates obtain will be worth higher salaries in a marketplace where demand for the degrees outstrips supply, he explains. As a result, the salary return for a college degree is too high today, and the college-educated people are getting a free ride, Grusky says. We havent had substantial investments in public higher education for a long time, but making them could help, he says. Young people coming out of jail and prison, who are overwhelmingly urban teenagers, face the worst lifetime income gap, says Smeeding. I told our governor that you need to target kids who are coming out of prison for the first time, help them get jobs. Because if they dont get a job quickly, within a few weeks theyll be career criminals, and since three of four are fathers, helping them is a twofer. The widespread incarceration of young men mostly AfricanAmerican but also Latino and white men who have a high school education or less is driving increased social and economic inequality in our society that is sizable . . . enduring and intergenerational, said sociologists Bruce Western at Harvard and Becky Pettit at the University of Washington, Seattle. The social and economic penalties that flow from incarceration are accrued by those who already have the weakest economic opportunities, and their prison records impose additional significant declines in earnings and employment that affect them and their children. 1 Ironically public-spending trends over the past several decades have reinforced these inequality-creating trends, especially at the state level. For example, 30 years ago, 10 percent of Californias general fund went to higher education and 3 percent to prisons. Today, higher educations share has dropped to 8 percent, and nearly 11 percent goes to prisons, so that the state spends more on inequality-increasing incarcerations than on inequalityreducing education. 2 Marcia Clemmitt
1 Bruce Western and Becky Pettit, Incarceration and Social Inequality, Daedalus, summer 2010, p. 8. 2 Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5, Members of 2005 Rising Above the Gathering Storm Committee, National Academies of Sciences and Engineering and Institute of Medicine, 2010, www.nap.edu/catalog/12999.html.

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Continued from p. 996

BACKGROUND
All That Glitters
t the end of the 18th century, the young United States was known as the best poor mans country in the world, with fertile farmland plentiful enough for most people to earn a decent living and little of either extreme poverty or extreme wealth to be found. 38 A century later, however, with the industrial age booming, the United States experienced the first of three eras of very high income inequality. The first stretched from around 1870 through the early 1900s and was characterized by ostentatious spending by industrial titans, even as poverty deepened. Humorist and social critic Mark Twain and essayist and novelist Charles Dudley Warner dubbed the period the Gilded Age in their 1873 novel satirizing the corruption in Washington that accompanied what the authors depicted as a mad national scramble after wealth, at the expense of other values. 39 Gradually, unease grew about economic inequality that might threaten the countrys cherished reputation as a land where all residents had the chance to rise. In hopes of demonstrating that Americans at all income levels were enjoying the fruits of booming industry, University of Wisconsin statistician Willford I. King launched the first major study of U.S. wealth and income distribution, publishing two books on the subject. King unhappily reported, however, that economic inequality was steeper than he had expected, with the richest 1 percent of the population taking home about 15 percent of the national income in 1910, giving the wealthiest Americans an income hundreds or even thousands of times greater than that of a working-class citizen. 40

It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient, mused King. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor, largely due to some peoples greater facility of taking advantage of . . . laws and circumstances to acquire property rights and the fact that wealth tends to breed wealth, he wrote. Is the middle class doomed to extinction, and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the property-less masses? 41 The vast sums of heritable wealth amassed by industrialists also posed a danger to society if they were simply passed on to the next generation, opined steel magnate Andrew Carnegie in his 1889 essay The Gospel of Wealth. In many cases the bequests are so used to become only monuments of . . . folly. Far better to establish a charitable institution that pursues a public good thats in accordance with the wealth earners own ideas, said Carnegie, whose own fortune established universities, libraries, museums, research institutions, a pension fund for his former employees and the think tank Carnegie Endowment for International Peace. 42 Leeriness about the rising concentration of income and the political corruption it might spawn built support among the middle and upper classes for a so-called Progressive Era in politics, which brought new regulations for business and the modern-day progressive federal income tax, which taxes higher earners at a higher percentage, among other changes. Congress had levied an income tax in 1861, to help pay for the Civil War. The tax withstood a court challenge but was eventually repealed when military needs lessened. In 1894, Congress enacted a second income tax, in the form of a 2 percent levy on all incomes over $4,000 (the equivalent of around

$100,000 today), aimed at harnessing some of the income of the richest Americans for public purposes. 43 But this time a Supreme Court divided 5-4 struck down the tax a year later. The Constitution barred Congress from enacting any so-called direct federal tax a tax based on ownership, such as the ownership of property unless it would be paid proportionately by the states according to their population, said the court. Unlike the earlier court, the 1895 Supreme Court deemed the income tax such an ownership tax. 44 Proponents were not long deterred, however. In 1909, President William Howard Taft proposed the 16th Amendment to the Constitution to allow Congress to enact a tax on income from any source, such as property or wages without apportioning the tax among states based on population. By February 1913 the amendment had been ratified by the required 36 out of the 48 states. The fortunes of the Gilded Age had largely deflated by 1920, mainly because of capital losses related to catastrophic events like World War I rather than Progressive Era reforms, according to Thomas Piketty, a professor at the Paris School of Economics, in France, and Emmanuel Saez, a professor of economics at the University of California, Berkeley. 45 In the 1920s, however, both the stock market and the nations top incomes began soaring again, and income inequality reached another peak in 1929. The crash of financial markets late in that year, and the Great Depression that followed, cut this second period of inequality very short, however. A number of factors kept economic inequalities from rising steeply again until around 1980, including the loss of capital by the wealthy during the Depression, World War II, and government actions to bolster lower earners and tax the wealthy more. The stability in income equality, where wages rose with national productivity for a generation after the Second World War, was the result of policies that
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Chronology
1860s-1910s 1930s-1960s 2000s U.S. productivity Income and wealth inequality During the Depression, govern- continues to increase, but gains
increase to unprecedented levels in the Gilded Age. 1868 Massachusetts-born writer Horatio Alger publishes Ragged Dick, the first of dozens of popular Alger novels depicting the American dream of poor boys rising to wealth through talent and hard work. 1889 In The Gospel of Wealth, industrialist Andrew Carnegie urges rich people to endow charities rather than passing their money on to their children. 1894 Congress passes a 2 percent tax on incomes over $4,000 (about $100,000 today); the Supreme Court deems it unconstitutional a year later. 1913 The Constitutions 16th Amendment, permitting Congress to enact a federal income tax, is ratified by the required 36 out of 48 states. 1915 In the largest such study to date, University of Wisconsin statistician Willford I. King reports that the richest 1 percent of Americans get at least 15 percent of the income.

ment safety-net programs support low earners; in World War II the top income tax rate rises to over 90 percent. 1932 President Herbert Hoover raises top income tax rate to 63 percent. 1935 Supreme Court strikes down a minimum-wage law. 1938 Fair Labor Standards Act sets federal minimum wage at 25 cents an hour and survives a court challenge. 1959 Since 1950, the percentage of Americans in poverty has dropped from 32 to 22 percent, and median family income has risen 43 percent.

go mostly to highest earners. During the economys expansion from 2002-2007, the top 1 percent of earners capture twothirds of income gains. 2003 Top marginal tax rate is cut to 35 percent. 2006 Richest 10 percent of Americans account for 57 percent of the nations net worth. 2007 Since 1979, the average after-tax income for the top 1 percent of earners nearly quadruples, rising from $347,000 to more than $1.3 million; after-tax income for the bottom fifth averages $17,600, up 16 percent from 1979. 2008 Ratio between the pay of the average CEO and the average worker is 319 to one in the United States, 11 to one in Japan, 12 to one in Germany and 47 to one in Mexico. 2010 Since 1979, the average pretax income has dropped $900 for the bottom 90 percent of households but risen $700,000 for the top 1 percent. . . . The nations growing income gap since 1993 is entirely accounted for by soaring incomes for the top 1 percent of earners. . . . Large majorities of Americans support raising the minimum wage and taxing the wealthy more and creating a more equal income structure, such as that in Sweden; Republicans, who oppose these actions, nevertheless regain control of the House of Representatives in the midterm elections.

1970s-1980s Inequality rises as top incomes


soar, high school graduation rates stagnate and computers and automation squeeze out middle-earning manufacturing and other jobs. 1973 High school graduation rates peak. 1979 U.S. manufacturing employment peaks at 21.4 million workers. 1981 President Ronald Reagan fires 11,000 striking members of the air traffic controllers union, helping to weaken the power of organized labor. . . . Reagan persuades Congress to pass the largest tax cuts in U.S. history.

1920s

Income inequality rises again. The top marginal income tax rate is at an all-time low 25 percent. 1929 Driven by a growing economic bubble at the top, the stock market booms, and then crashes.

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Is Upward Mobility Still Possible?


Research suggests its becoming more difficult.
he gap between rich and poor may be wider than ever in the United States, but the U.S. remains, in the dreams of many, a land of equal opportunity where talent and hard work are the tickets to a better future for anyone. Current data suggest, however, that the dream may have faded a bit. The U.S. today has a lower rate of intergenerational mobility than Europe, and that would be a surprise to most Americans, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of Education. The key reason for this is the difficulty the poor face trying to get the education they need to get into occupations that would allow them to move ahead, according to Murnane. Americans have an optimistic faith in the ability of individuals to get ahead within a lifetime or from one generation to the next, believing this much more strongly than people in other countries, wrote Julia B. Isaacs, a policy fellow at the Brookings Institution, a center-left think tank. In a survey of people from 27 countries, for example, only 19 percent of Americans thought that coming from a rich family was essential or very important to getting ahead, compared to a median of 28 percent in all the other countries. 1 In reality, however, Americans are much less likely to move from one economic level to another than people in many other countries, said Isaacs. In a study of eight of the most highly industrialized countries, the link between parents earnings and childrens economic attainment was strongest in the United States and the United Kingdom, where it takes an average of

six generations for wealthy families economic advantage to stop influencing the economic status of their children, she reported. In Canada, Norway, Finland and Denmark, by contrast, it takes only three generations to cancel out the effects of being born into a wealthy family. 2 Being born at the top or the bottom of the income distribution affects people much more in the United States than in Canada, said Miles Corak, a professor of economics at Canadas University of Ottawa. For example, in the United States, 22 percent of sons born to fathers in the bottom tenth of the income distribution remain in the bottom tenth as adults, while 18 percent move up only into the next decile; in Canada only 16 percent of those born into the bottom decile stay there and 14 percent move up to the next decile. A similar stickiness holds for the top-earning decile, Corak said. 3 Race plays a major role in trapping people at the bottom of the ladder, according to a 2009 report from the Pew Charitable Trusts Economic Mobility Project. About 47 percent of black children born to families in the middle fifth of the income distribution fall into the bottom fifth as adults, compared to only 16 percent of middle-income white children. 4 Some analysts further argue that society has built-in mechanisms to keep people from high-earning families from falling out of their spots. For example, in a recent analysis of so-called legacy college admissions, Richard D. Kahlenberg, a senior fellow at the Century Foundation, a liberal think tank, reports that at selective colleges alumni children generally make up 10 to 25 percent

Continued from p. 998

began in the Great Depression with the New Deal and were amplified by both public and private actions after the war, wrote Massachusetts Institute of Technology professor of urban economics Frank Levy and professor of economics Peter Temin. 46 For example, in the early days of the Depression President Herbert Hoover raised marginal tax rates for the highest earnings from 25 to 63 percent. Then, in 1936, President Franklin D. Roosevelt, architect of the New Deal, raised the top rate to 79 percent, with the goal of narrowing the income distribution. 47 The first federal minimum wage was enacted in 1933, but the Supreme Court struck it down in the 1935 case Schechter Poultry Corp. v. United States. 48 In 1938,

Congress passed another minimum-wage law, which has survived legal challenge. Meanwhile, the National Labor Relations Act of 1935 often called the Wagner Act, for its sponsor Sen. Robert F. Wagner, D-N.Y. endorsed the right of workers to unionize, strike and engage in collective bargaining with management while limiting the means employers could use to fight unions. 49

Inequality Rises
hen the most recent new era of rising inequality began, around 1980, many were surprised. As Galbraith at the University of Texas explained, the very essence of being a developed nation lies in industrialization,

long believed to foster both democracy and the emergence of a stable, middleclass working population, paid at rates which vary only by the range of skills in the workforce. By contrast, the very essence of underdevelopment is not poverty per se but a skewed income and wealth distribution with a few very wealthy people at the top and the vast majority of people struggling below. 50 Nevertheless, in the past three decades the United States and to a lesser extent other industrialized countries, especially Canada and the United Kingdom, have seen a rise of economic inequality whose cause analysts struggle to understand. Initially, suspicion focused on supplyand-demand trends in the workforce stemming from increased immigration

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of the student body. Since the proportion of alumni children each college accepts varies little from year to year, that suggests an informal quota system, he says. Statistical analysis suggests, he says, that being a legacy boosts a students chance of admission to a selective school by about 20 percentage points say, from a 40-percent to a 60-percent chance over a non-legacy student with a similar transcript and scores. 5 The existence of such a strong tradition of legacy admissions by the most selective colleges whose graduates also may have a leg up in many job markets is especially damaging to African-American and Hispanic students, for example, who have been underrepresented at Americas most prestigious colleges in the past and thus will continue to get no legacy boost for several generations to come, Kahlenberg said. 6 Many conservative and libertarian analysts, however, argue that, as with many purported measures of economic inequality, researchers who find low economic mobility in the United States look at the wrong studies and interpret them too narrowly. Some studies show high mobility, said Jagadeesh Gokhale, a senior fellow at the libertarian Cato Institute, and Pamela Villarreal, a graduate student fellow at the conservative National Center for Policy Analysis. For example, a study has shown that between 1984 and 1994 almost two-thirds of families in the lowest tenth of the income ladder in 1984 had reached a higher rung 10 years later, they pointed out. Meanwhile, 47 percent of the families in the top tenth of earners in 1984 had fallen to a lower decile 10 years later. 7

Furthermore, wealth is highly mobile in the United States, where most fortunes are earned, rather than inherited, write Gokhale and Villarreal. On Forbes magazines annual list of the 400 richest Americans, for example, the vast majority of the 2,218 people listed from 1995 to 2003 87 percent made the cut for only one or two years during the period, they note, indicating that most of the very top earners dont hold onto their top incomes long, as others climb to take their place. 8 Marcia Clemmitt
Julia B. Isaacs, International Comparisons of Economic Mobility, Economic Mobility Project, Pew Charitable Trusts, February 2008, www.economicmobility. org/assets/pdfs/EMP_InternationalComparisons_ChapterIII.pdf. 2 Ibid. 3 Miles Corak, Chasing the Same Dreams, Climbing Different Ladders, Economic Mobility Project, Pew Charitable Trusts, January 2009, www.pewtrusts.org/ uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/EMP_Chasing %20the%20Same%20Dream_Full%20Report_2010-1-07.pdf. 4 Renewing the American Dream: A Road Map to Enhancing Economic Mobility in America, Economic Mobility Project, Pew Charitable Trusts, November 2009, www.economicmobility.org. 5 Richard D. Kahlenberg, 10 Myths About Legacy Preferences in College Admissions, The Chronicle of Higher Education, Sept. 22, 2010, http://chronicle.com. 6 Ibid. 7 Jagadeesh Gokhale and Pamela Villarreal, Wealth, Inheritance and the Estate Tax, NCPA Policy Report No. 289, September 2006, www.ncpa.org/pub/ st/st289. 8 Ibid.
1

and more women workers. Recent analyses find that these suspect trends dont tell the whole story, however. For example, since women first began entering the workplace in large numbers, beginning in the 1970s, studies show that theyve actually outperformed men on average when it comes to moving out of moderately skilled jobs and into higher-level, better-paid occupations, said journalist Timothy Noah in a recent series of articles in the online magazine Slate. That statistic means that womens employment isnt holding workers wages down substantially. 51 Immigration, meanwhile, has had some effect in holding down wages for low-skilled workers, but its overall contribution to inequality is less than expected.

In 2000, the average income of a native-born high school dropout was about 7.4 percent lower than it would have been that year had the immigration that occurred between 1980 and 2000 never occurred, concluded George J. Borjas, a professor of economics and social policy at Harvard. Immigration depressed the incomes of high school graduates by only 2.1 percent over the two-decade period, however, Borjas said. 52 It appears that only about 5 percent of the overall increase in income inequality observed over the past three decades is due to immigration, according to Noah. 53 A bigger culprit may be what scholars call skill-based technological change (SBTC) technology-driven changes in the skills workers need to get good jobs,

especially as many medium-skill jobs, such as manufacturing, move overseas in a globalized economy where companies can pay people less to do the same work in less-developed economies. The American economy grew rapidly and its people grew together from World War II to about 1973, wrote Harvard economists Claudia Goldin and Lawrence F. Katz. Each generation of Americans achieved a level of education that greatly exceeded that of the previous one, and this situation allowed businesses based on new technologies to find enough high-skilled workers. At the same time, the emergence of new, larger cohorts of skilled Americans generally created a demand and supply balance in the workforce that kept skilled workers salaries from rising too high and

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Courts Open Door to Big-Money Political Donors


Do the rich wield more political power than the poor?

n the 2010 campaign season, a single political action committee (PAC) poured $600,000 into the Nevada Senate race on behalf of the Republican challenger, Sharron Angle, who came close to unseating Senate Democratic Majority Leader Harry Reid on Nov. 2. Big spending by PACs is nothing new in political campaigns, but the Ending Spending Fund that operated in Nevada represents a new wrinkle a PAC funded by a single big donor. 1 Two 2010 court rulings the Supreme Courts controversial January decision in the so-called Citizens United case and a March ruling by the U.S. Court of Appeals for the District of Columbia Circuit in Speechnow.org vs. the Federal Election Commission cleared the way for outside donors to pour unlimited funds into elections, as long as they dont coordinate with political candidates or party committees. 2 Outside donors can now sponsor election advertising, for example, without abiding by older campaign rules, such as individual-donor spending limits. That opens the door for a PAC like the Ending Spending Fund, bankrolled by J. Joseph Ricketts, the Omaha-based founder of the discount online stock brokerage Ameritrade. 3 This new avenue for wielding political clout is part of a historical trend over the past several decades that is consolidating disproportionate political power in the hands of the richest citizens, some scholars argue. The Founding Fathers believed in political equality, meaning that whether one is rich or poor would determine a persons market power but not their power in the democracy, says Jacob S. Hacker, a professor of political science at Yale University. I believe were falling quite dramatically short of this, as wealthier people have gradually developed institutional means like PACs and lobbies to see their favored policies enacted into law and regulation, and the government has become more friendly to these efforts, he says. There may exist mechanisms or pathways of influence by which a very small set of oligarchs rich people who wield political power could, to a far greater extent than their numbers alone would suggest, have a major impact on policy outcomes, wrote Northwestern University political scientists Benjamin I. Page and Jeffrey A. Winters. They point to the many highly professionalized and extremely expensive lobbying or-

ganizations that have sprung up in Washington since the mid20th century, mostly representing business and professional groups. Meanwhile, once-powerful labor unions now represent only about 15 percent of the U.S. workforce, mostly government workers. The pluralist dream of balance among competing interest groups is thus largely discredited, while those who are able and willing to invest large sums of money in increasingly professional and expensive lobbying efforts have a big advantage, they argue. 4 Politicians increasing need for fundraising has helped lobbies to increase the power of big-money business interests, wrote Hacker and Paul Pierson, a professor of political science at the University of California, Berkeley. For example, beginning in the 1970s, television advertising and modern public-opinion polling allowed candidates to reach unheard of numbers of people with messages shrewdly crafted to tap into voters prime desires. The ads and the pricey political consultants whom candidates hired to poll and develop campaign strategies greatly increased politicians reliance on big-money donors, Hacker and Pierson argue. 5 Based on decades of detailed polling data on different income groups, its clear that when the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did, according to political scientist Martin Gilens at Princeton University. 6 By contrast, when well-off people supported a policy change, it was three times more likely to occur than if they opposed it. Furthermore, the middle class did not fare much better than the poor when their opinions departed from those of the welloff. When median-income people strongly supported a policy change, it had hardly any more chance of occurring than a change that they strongly opposed, Gilens said. 7 The policy preferences of wealthy people tend to diverge from those of other citizens on various issues, according to Page, who has begun an extensive study of this question. His preliminary work finds that 58.8 percent of the richest Americans in the top 4 percent of income identify as Republicans, for

thus driving income inequality compared to low-skilled workers because many people could compete for high-skilled occupations, Katz and Goldin wrote. 54 Historically, education has been the primary pathway of upward mobility in the United States, says Richard J. Murnane, a professor of education and society at the Harvard Graduate School of

Education. In 1973, the United States had the highest high school graduation rate among OECD [Organization for Economic Co-operation and Development] countries, but the education engine stopped in the mid-1970s as high school graduation rates stalled, he says. Levels of income inequality depend very strongly on the supply and

demand for skills, at least among people between the 10th and the 90th percentile of the income distribution, says David Autor, an economist at the Massachusetts Institute of Technology. For example, in the early 1970s, when the huge Baby Boom generation saw a rising proportion of its members go to college, wages for higher-skilled

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example, compared to 36.1 percent of others. Very high-income Americans are more likely than others to be liberal or libertarian on social issues favoring abortion rights and the right of atheists to teach, for example. But they are more likely than others to be conservative on economic issues, not favoring government efforts to reduce economic inequalities. 8 In the 2010 midterm elections, high earners showed a strong preference for Republican candidates and, presumably, policies, while 58 percent of those earning $30,000 or less and 52 percent of those earning between $30,000 and $50,000 voted for Democratic candidates, according to a Wall Street Journal analysis. The Republican preference strengthened all the way up the income ladder, with 52 percent of those earning between $50,000 and $75,000 voting GOP; 56 percent of the $75,000 to $200,000 earners; and a whopping 62 percent of those earning over $200,000. 9 Conservative and libertarian analysts remain skeptical that economic clout helps some gain undue political influence. While highly educated people wield greater influence, it is very difficult to see how income in excess of the threshold necessary to receive a high-quality education adds much to most peoples pool of political resources, said Will Wilkinson, a research fellow at the libertarian Cato Institute. Ideologically motivated wealthy Americans are limited by the menu of preexisting organizations, prevailing ideas and the supply of ideologically congenial labor, he argued. No amount of money can buy you a think tank with your politics if there is no one with your politics to work in it. 10 Capitalism might indeed preclude democracy if capitalism meant that rich people really were a permanent class, wrote Council on Foreign Relations Senior Fellow Amity Shlaes. But one capitalist idea (the railroad, say) brutally supplants another (the shipping canal), and within a few generations . . . this supplanting knocks some parties out of the top tier and elevates others to it. 11 A focus on the dangers of wealth concentration simply provides a political justification for encouraging envy, a state that leads to neglect of family and friends, community involvement and charitable work and bolsters an empty materialism, wrote Jeffrey M. Jones, assistant director of Stanford Universitys Hoover Institution, a conservative public-policy research organization, and Daniel Heil, a graduate student at Pepperdine University. 12

Ironically, when Americans become aware that income inequality is on the rise, that knowledge actually sways the voting public away from liberal policies aimed at decreasing inequality, according to Nathan J. Kelly, an assistant professor of political science at the University of Tennessee, Knoxville, and Peter K. Enns, an assistant professor of government at Cornell University, in Ithaca, N.Y. In the United States, public opinion moves in a conservative direction in response to income inequality, among both rich and poor Americans, potentially making income inequality a self-reinforcing phenomenon, they wrote. 13 Marcia Clemmitt
Amanda Terkel, The One-Person Funded Super PAC, Huffington Post blog, Oct. 22, 2010, www.huffingtonpost.com. 2 The cases are Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010), www.law.cornell.edu/supct/html/08-205.ZS.html and Speechnow.org, et al. v. Federal Election Commission, No. 08-5223, http://pacer.cadc.uscourts.gov/com mon/opinions/201003/08-5223-1236837.pdf. For background, see Kenneth Jost, Campaign Finance Debates, CQ Researcher, May 28, 2010, pp. 457-480. 3 Terkel, op. cit. 4 Jeffrey A. Winters and Benjamin I. Page, Oligarchy in the United States? Perspectives on Politics, December 2009, p. 731. 5 Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 171. 6 Quoted in ibid., p. 111. 7 Ibid. 8 Benjamin I. Page and Cari Lynn Hennessy, What Affluent Americans Want From Politics, paper delivered to the American Political Science Association, annual meeting, Washington, D.C., Sept. 2-5, 2010, www.russellsage.org/sites/all/ files/u4/Page%20%26%20Hennessy%2C%20What%20Affluent%20Americans%20 Want%20from%20Politics.pdf. 9 Democratic Coalition Crumbles, Exit Polls Say, The Wall Street Journal online, Nov. 3, 2010, http://online.wsj.com/article/SB1000142405274870377 8304575590860891293580.html?KEYWORDS=voters+election+2010#project%3 DEXITPOLL101102%26articleTabs%3Dinteractive. 10 Will Wilkinson, Thinking Clearly About Economic Inequality, Policy Analysis No. 640, Cato Institute July 14, 2009, www.cato.org. 11 Amity Shlaes, An Age of Creative Destruction, The Wall Street Journal online, Oct. 29, 2010, http://online.wsj.com. 12 Jeffrey M. Jones and Daniel Heil, The Politics of Envy, tech-archives.net website, Aug. 21, 2009, http://sci.tech-archive.net. 13 Nathan J. Kelly and Peter K. Enns, Inequality and the Dynamics of Public Opinion: The Self-Reinforcing Link Between Economic Inequality and Mass Preferences, American Journal of Political Science, October 2010, p. 855.
1

workers temporarily fell somewhat. In the mid-1970s, as high school graduation rates stalled and smaller generational cohorts attained adulthood behind the Baby Boomers, the supply of high-skill workers began to shrink compared to the growing demand for them in technology-based industries, Autor says. At that point, we began

to get a [wage] premium for college grads, and their rising incomes helped increase income inequality. At the same time, the advent of the computer age allowed automation of virtually any repetitive task so that middleskill jobs like bookkeeping, many manufacturing jobs and even many computer programming and sales positions

gradually evaporated from the workplace or shifted overseas, explains Carnevale, at Georgetowns Center on Education and the Workforce. With high school graduation rates stagnant, a growing pool of U.S. workers are left to compete for low-skilled jobs like security guards and home-health workers, where the large supply of available workers drives

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down wages further, Carnevale says. In 1973 the majority of people with a high school education or less were in the middle 40 percent of the income distribution solidly middle class, says Carnevale. Now that number is below 30 percent. People with B.A.s, by contrast, have remained in the middle class, and about a third have moved into the top 30 percent of incomes, he says. This workforce polarization that drives income inequality is evident in European Union and OECD countries, too, says Autor. very top earners. For one thing, financial-industry executives make up nearly 20 percent of the people with salaries in the top 1 percent of the U.S. income distribution, and it strains credulity to say they are . . . the talented tamers of technological change whove benefited from skillbased technological workplace change, write Yales Hacker and University of California, Berkeley, political scientist Paul Pierson. The financial crisis demonstrated that plenty of the so-called financial innovations that their complex computer models helped spawn proved to be just fancier (and riskier) ways of . . . benefiting from short-term market swings, not the true innovation that markets presumably reward. 58 Over the past several decades, wealthy business interests have organized into lobbies, political action committees (PACs) and think tanks, at the same time as the main organizations that once represented the working class labor unions have shrunk, leaving some business sectors like finance with enormous power to influence government policies, Hacker and Pierson argue. Furthermore, beginning in the 1970s, TV ads and pricey opinion-poll surveying became a necessity for political campaigns, greatly increasing politicians need for high-dollar contributors and increasing those contributors influence in Washington, they contend. As a result, government policy has grown much more generous toward the fortunate. Financial deregulation didnt just happen, nor did tax policy that saw corporate and inheritance taxes as well as marginal taxes on high incomes drop significantly, says Hacker. The government has made and remade markets by law and regulation, and the much smaller income differentials that prevail in every other market-based industrialized economy make clear that U.S. income inequalities result from policy choices, he says. For example, not market forces alone but deliberate government policies drove the precipitous decline in U.S. union membership that began just after World War II when more than one in three workers was a union member and continues today, when about one in nine is, and most union members are government, not private-sector, workers, Hacker says. While unions arent blameless in their own demise, and globalization has realigned markets, over the past few decades Congress, state legislatures and successive White Houses dragged their feet on measure after measure that would have strengthened unions bargaining power, he says. The result is the loss of a key political force that was broadly representative of the middle class in a way that no other large, politically influential organization has been a key source of voter turnout and a counterweight in boardrooms to represent the interests of middle- and low-wage workers, Hacker says. Economic troubles fueled lawmakers increasingly business- and wealth-friendly policies beginning in the late 1970s, said University of Arizona professor of sociology and political science Lane Kenworthy. Stagflation slow economic growth combined with rising prices and high unemployment and a surge in imports had turned [Americans longheld] optimism [about the economy] to worry, and the underlying pessimism persisted through the late 1990s, making policy makers more willing to entertain the pleas of business interests, whatever they might be. 59

Winners Take All


ther scholars point to a different trend as the key driver of income inequality a winner-takeall economy in which a few high earners rack up income gains that far outstrip those of everyone else. There was no increase in inequality after 1993 in the bottom 99 percent of the population, and the remaining increase . . . can be entirely explained by the behavior of incomes in the top 1 percent, said Northwesterns Gordon. 55 Unlike in the Gilded Age, it wasnt investment income but high-rising salaries for people like top executives and Hollywood stars that fueled the outsized gains at the top, according to Piketty and Saez. 56 Some argue that superstar salaries simply represent a new, globalized market rationally presenting very high rewards to people whose wares sell to tens of millions of people worldwide. I think there are people, including myself at certain times in my career, who because of their uniqueness warrant whatever the market will bear, said Leo J. Hindery, a managing partner of the New York City-based private equity fund InterMedia Partners. 57 But others say that government structures and policies not just market forces have played a large role in the U.S. shift of income toward the

CURRENT SITUATION
Policies Debated

lthough few members of Congress or candidates in the hotly


Continued on p. 1006

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At Issue:
Should tax cuts on high earnings be extended?
yes

ALAN REYNOLDS
SENIOR FELLOW, CATO INSTITUTE
WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010

CHUCK MARR
DIRECTOR OF FEDERAL TAX POLICY, CENTER ON BUDGET AND POLICY PRIORITIES
WRITTEN FOR CQ RESEARCHER, NOVEMBER 2010

n 2001, Congress assembled a time bomb with a 10-year fuse. Unless the lame duck Congress acts with atypical urgency, all tax cuts enacted in 2001-2003 will vanish on Dec. 31. If lawmakers fail to defuse the tax time bomb by the end of the year, withholding taxes will increase dramatically. Moreover, if lawmakers and the president cant agree on a solution by years end, the top tax on dividends would jump from 15 percent to 39.6 percent, ensuring a stock market crash. The estate tax would jump to 55 percent with only a $1 million exemption. Marginal tax rates would rise by 3-5 percentage points across the board. President Obama has appeared eager to hurl himself on top of this bomb. He threatened economic homicide and political suicide by threatening to veto any solution that did not impose much higher taxes on two-earner couples and small businesses earning more than $250,000. Yet the president has had eight months to enact the tax hikes in his 2011 budget. If he couldnt do it then, he certainly cant now. Everyone knows this is playing with fire. The targets of Obamas planned tax increases account for a fourth of all consumer spending, and a greater fraction of entrepreneurship and investment. Christina Romer, formerly Obamas top economic adviser, found that a U.S. tax increase amounting to 1 percent of gross domestic product (GDP) reduces real GDP by nearly 3 percent within three years, with employment falling 1.1 percent. Harvard economists Alberto Alesina and Silvia Ardagna found that fiscal adjustments, those based upon spending cuts and no tax increases, are more likely to reduce deficits . . . [and] less likely to create recessions. Under the fanciful assumption that Obamas tax hikes on the rich did no damage to the economy, his plan is estimated to raise $35 billion next year. That would cover the budget deficit for just nine days. This is all risk and no reward. The White House is now rumored to be willing to compromise on legislation that postpones the presidents planned tax hikes on upper-income families while supposedly making permanent all other Bush tax cuts. That may not be the ideal solution, but it buys time for the new Congress to tackle the budget in an economy that is rising slowly rather than falling fast.
no

yes no
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etting President Bushs tax cuts for incomes over $250,000 expire on schedule at the end of December is the right move from the standpoint of both equity and economic efficiency. Recent decades have witnessed a stunning shift in incomes from the middle class to those few at the top. Between 1980 and 2005, about 80 percent of the countrys total income gains went to the top 1 percent of the population, according to a report by MIT researchers Frank Levy and Peter Temin. Moreover, while incomes stagnated for middle-class Americans in recent decades, they surged for the wealthy in stark contrast to the decades between the mid-1940s and mid-1970s, when income growth was widely shared. The average middleincome American family had $13,000 less after-tax income in 2007 than it would have had if incomes of all groups had grown at the same average rate since 1979. Tax policy is one of the best tools we have to help offset the troubling trend of growing inequality. Unfortunately, President Bushs tax cuts have had the opposite effect, providing much larger benefits both in dollar terms and as a percentage of income to people at the very top than to middleand lower-income people. In fact, people making more than $1 million a year get an average of about $129,000 each year from the Bush tax cuts, according to the Urban Institute-Brookings Institution Tax Policy Center. The main reason, of course, is the large tax cuts targeted specifically at high-income households. Extending the tax cuts for high-income people would only make inequality worse. (High-income people would still benefit from an extension of the so-called middle-class Bush tax cuts, since the first $250,000 of their income would be taxed at the lower marginal tax rates.) Extending the high-end tax cuts doesnt make sense from an economic perspective, either. The Congressional Budget Office (CBO) rated it the least cost-effective of 11 options for boosting economic growth and job creation. A far better alternative would be to extend President Obamas Making Work Pay tax credit, which is targeted to people who live paycheck-to-paycheck but is also scheduled to expire at the end of December. This would generate two to three times the economic growth and job creation as extending the high-end Bush tax cuts, according to CBO. The right course, then, would be to let the high-end Bush tax cuts expire, locking in significant long-term budgetary savings, while temporarily extending the Making Work Pay credit while the economy remains weak.

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Continued from p. 1004

contested 2010 elections have specifically addressed the question of whether growing economic inequality is bad or good, the issue simmers beneath many of the hottest election-year debates, including taxes, the minimum wage and the power of unions. In light of the countrys fiscal problems, many Democrats in Congress, along with President Obama, have called for the wealthiest to take on a greater share of the public burden. In a heated debate that remained unresolved when Congress adjourned its main session in the fall to campaign, the White House and most Democrats backed the idea of extending Bushera tax cuts for family earnings under $250,000 and letting the cuts expire for dollars earned above that level. 60 In order to save our children from a future of debt, we will . . . end the tax breaks for the wealthiest 2 percent of Americans, said Obama. 61 But Republicans and some conservative Democrats argue that high-earners money is the key driver of the whole economy. History shows and good economic theory shows, if you reduce taxes, youre going to have more economic activity, said Republican Minnesota Gov. Tim Pawlenty, on CBS News Face the Nation on Oct. 31. If you dont extend those Bush tax cuts all of them its going to send a very negative signal, said Pawlenty, who is reportedly mulling a run for the White House in 2012. 62 Most recently, the White House reportedly favors a plan to temporarily extend the cuts for earnings over $250,000 while extending the cuts permanently for earnings under that amount. With Congress in upheaval following the elections, its not clear whether lawmakers will tackle the issue in the final days of the 2010 lame duck session, when most newly elected members wont yet be seated. Conservative candidates campaigning around the country this fall spoke

out against government mechanisms intended to push the income distribution more in favor of lower earners. John Raese, West Virginias Republican nominee for the Senate, and Joe Miller, the Republican nominee for Senate in Alaska, for example, argued that the Constitution does not give Congress the power to set a minimum wage for the nation but reserves that power for states. 63 (Similar arguments were made on the two occasions when Congress enacted federal minimum-wage laws, in 1933 and 1938. The Supreme Court struck down the first law as unconstitutional in 1935, 64 but upheld the 1938 Fair Labor Standards Act in a unanimous 1941 decision, U.S. v. Darby. 65) Linda McMahon, the Republican nominee for Senate in Connecticut, opposed increasing the minimum wage, and Rand Paul, Republican nominee for the Senate in Kentucky, suggested a very cautious approach to minimum-wage increases. 66 How big a role candidates views on income redistribution played in election results isnt clear, but for these Senate hopefuls the results were mixed: Paul won his race; Raese, McMahon and Miller lost, but Miller is contesting his narrow defeat to write-in candidate Republican Sen. Lisa Murkowski, the incumbent. Meanwhile, four states voted on ballot measures in November that would slow the growth of unions, and all the measures were approved. Voters in Arizona, South Carolina, South Dakota and Utah approved making a secret vote by workers the sole allowable means of determining whether an authorized workplace union has been formed, outlawing an alternative practice that requires an employer to recognize that a union has been formed any time a majority of workers have signed cards authorizing union formation. 67

Ambivalent Public?

he public, meanwhile, remains both confused and ambivalent about

the underlying question of whether economic inequalities are worrisome. It is usually only left-leaning rich people that care about inequality in the U.S., said Carol Graham, a senior fellow at the Brookings Institution think tank. 68 Nevertheless, some polling suggests that the public may be fairly supportive of government policies to prop up lower incomes, in particular. For example, an October poll found 67 percent of respondents favoring an increase in the minimum wage from its current $7.50 an hour to $10 an hour, even including a majority 51 percent of Republicans. Among people who identified themselves as belonging to the Tea Party, however, 50 percent opposed the increase and 47 percent supported it. 69 Underlying the ambivalence is the fact that few Americans accurately gauge the level of income inequality, some researchers say. The public tends to guess right about lower- and middle-income wages, but few seem aware of how high the highest salaries actually are, reports Benjamin I. Page, a professor of decision making in Northwestern Universitys political science department, and Lawrence R. Jacobs, a professor of political studies at the University of Minnesota. The average person surveyed estimated $250,000 to be the annual income for a heart surgeon and $500,000 for the CEO of a large corporation. The guesses were well off the mark, especially for CEOs. The average heart surgeon earns over $400,000, while the CEOs of Standard & Poors 500 companies average over $14 million in annual income. 70 Even professional economists generally underestimate current levels of inequality, says Dukes Ariely. This finding isnt surprising, says Michael I. Norton, an associate professor of business administration at Harvard Business School. As an average person, we dont really see the very rich or their wealth. Its in trusts

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and other financial forms that make it mostly invisible. People dont see very poor people in their lives, either. At the same time, the public generally believes that society would be more just if incomes varied a bit less widely, says Norton, who, along with Ariely, conducted a recent study asking people how they would like to see income distributed in a hypothetical society, if they knew that they would be placed into that society at some random spot. When you ask people a specific question about a tax cut or some other proposal, you tend to have a very hostile debate. So we stepped back and looked at a very broad level of what kind of society people actually desire, and when we did that, people agreed a lot, Norton says. When shown unlabeled diagrams that actually depicted the income distributions of the United States and Sweden where inequality is much lower than in the United States fully 92 percent of Americans surveyed preferred to live in the unlabeled country with the Swedish distribution, says Ariely. Furthermore, when you look at the apparently differing ideology of Republicans and Democrats, the differences in how members of the two parties answered the question are very, very small, with 90 percent of Republicans opting for the Swedish distribution, compared to 93 percent of Democrats. A desire for overall fairness seems to be the key motivation for most, says Norton. When people are asked about how theyd redistribute societys wealth, they dont just give it to poor, they give it to everybody, and the main sentiment people express is the rich just have somewhat too much. When it comes to taking that broad vision and boiling it down to policy, though, thats very hard to do, Norton acknowledges. At both the macro and the micro level, people have certain ideas about what they want their lives to be, but very often our decisions go the other way.

OUTLOOK
Progressive Era Redux?
hether the American economy will continue the trend toward greater inequality or adopt policies to rein in the widening gap is unclear, and lawmakers and the public vary widely in their views of which course is preferable and what policies might change things for the better. If you look back at the 1890s ultimately there was a reaction to it, there was a cycle that saw an era of progressive taxation and other measures to limit the income inequalities that marked the Gilded Age, says Northwesterns Page. A lot of these reforms were undertaken by the upper middle class and even some wealthier people, he says. And there does now seem to be something in the air that could portend a similar shift to progressive policies, as billionaires like Microsoft founder Bill Gates and investor Warren Buffett suggest that the wealthy should devote large portions of their estates to charitable and public purposes, he says. 71 Indeed, in the Progressive Era, the economic problems dwarfed those we have today, but the nation still came together to shape national policies to overcome them and to rein in rampant inequality, says Yales Hacker. The same thing could happen today, Hacker says. Whatever pessimism I have is not over the scope of the problem but over the lack of a widespread recognition that a problem of inequality exists, he says. We have really only begun to have this debate. We are where we were on climate change a few decades ago. Hacker focuses on government policies related to unions, taxation and business regulation as keys to keeping economic inequalities at a reasonable level, but MITs Autor worries

that such a focus might leave Americans thinking that the whole thing is out of our hands. The best cure for extreme inequality is education because it creates economic opportunity, he says. We havent been keeping pace with the demand for skilled labor, and bolstering technical education and skills training for more young people could go a long way toward rebuilding the American workforce and the businesses that support it, he says. This issue may not matter much to businesses, most of which can locate anywhere in the world that a skilled workforce exists, but it matters greatly to our prosperity. The stagnant buying power of middle- and lower-earning Americans is a severe, growing problem for the wealthiest Americans, whether they realize it or not, says Max Fraad Wolff, an economics writer and commentator who teaches at the New School University Graduate Program in International Affairs. Business leaders may bank on the emergence of global markets to replace U.S. buying power, but thats not a winning strategy, he says. What we know is that Americans can sell to Americans, Wolff says. In this early phase of modernization [in emerging economies like China and India] what it means to be modern is to be Americanized, but in the early history of the United States being modern meant being Europeanized, too, he says. Eventually American pride overtook that, and that will happen to currently modernizing countries like China, too. That makes bolstering the average Americans earning power a critical issue for U.S. businesses, he says.

Notes
1 Christina Boyle, Rich-Poor Gap Grows in the City, Daily News [New York], Sept. 29, 2010, p. 5.

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INCOME INEQUALITY
Ibid. Arloc Sherman and Chad Stone, Income Gaps Between Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. 4 Ajay Kapur, Niall Macleod and Narendra Singh, Revisiting Plutonomy: The Rich Getting Richer, Industry Note, Citigroup, March 5, 2006. 5 George Reisman, For Society to Thrive, the Rich Must Be Left Alone, Mises Daily blog, Ludwig von Mises Institute, March 2, 2006, http://mises.org. 6 Sen. Joseph Lieberman, press statement, Sept. 13, 2010, http://lieberman.senate.gov. 7 Ibid. 8 Robert Kuttner, What Planet Are Deficit Hawks Living On? Huffington Post blog, Nov. 14, 2010, www.huffingtonpost.com. 9 Christian Broda, Ephraim Leibtag and David E. Weinstein, The Role of Prices in Measuring the Poors Living Standards, Journal of Economic Perspectives, spring 2009, http:// faculty.chicagobooth.edu/christian.broda/web site/research/unrestricted/z30002092155p%20% 282%29.pdf. 10 Stephen Rose, Five Myths About the Poor Middle Class, The Washington Post, Dec. 23, 2007, www.washingtonpost.com. 11 Neal Boortz, Nine in 10 Politicians Will Rip This Column, Atlanta Journal-Constitution online, Sept. 17, 2010, www.ajc.com. 12 Robert J. Gordon, Misperceptions About the Magnitude and Timing of Changes in American Income Inequality, National Bureau of Economic Research, Working Paper 15351, September 2009. 13 Growing Unequal? Income Distribution and Poverty in OECD Countries, Organization for Economic Co-operation and Development, October 2008, www.oecd.org/els/social/inequality. 14 David B. Grusky and Kim A. Weeden, Is Market Failure Behind the Takeoff in Inequality?
3 2

forthcoming in David B. Grusky and Szonja Szelenyi, eds., The Inequality Reader: Contemporary and Foundational Readings in Race, Class, and Gender, 2nd ed. 15 Gary Burtless, Comments on Has U.S. Income Inequality Really Increased? Jan. 11, 2007, www.brookings.edu/views/papers/burtless/2007 0111.pdf. 16 Gary Burtless, Has Widening Inequality Promoted or Retarded U.S. Growth? Canadian Public Policy, January 2003, p. S185, www.irpp. org/events/archive/jan01/burtless.pdf. 17 Ibid. 18 W. Michael Cox and Richard Alm, You Are What You Spend, The New York Times, Feb. 10, 2008, www.nytimes.com. 19 Angel Girria, remarks delivered at OECD conference in Paris, France, Oct. 21, 2008, www.oecd.org. 20 Conference Report: Poverty, Inequality, and Democracy, Network of Democracy Research Institutes, Bratislava, Slovakia, April 2628, 2009, p. 2, www.wmd.org/ndri/ndri.html. 21 Martin Gilens, Inequality and Democratic Responsiveness, Public Opinion Quarterly, 2005 (Special Issue), pp. 778-796, http://poq.oxford journals.org/content/69/5/778.full. 22 Ibid. 23 Quoted in Emily Kaiser, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters. com/article/idUSTRE69L0KI20101022. 24 Quoted in ibid. 25 Quoted in David Wessel, Professor Finds Many Fault Lines in Crisis, The Wall Street Journal, April 22, 2010, http://online.wsg.com. 26 N. Gregory Mankiw, I Can Afford Higher Taxes. But Theyll Make Me Work Less, New York Times, Oct. 9, 2010, www.nytimes.com. 27 Ibid. 28 Art Carden, The Minimum Wage, Discrimination, and Inequality, Mises Daily blog, Ludwig von Mises Institute, Jan. 19, 2009, http://mises.org.

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Gridlock in Washington and Financial Industry Overhaul.

Ibid. Sidney Weintraub, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic and International Studies, January 2010, www.csis.org. 31 Robert Reich, The Perfect Storm that Threatens American Democracy, Huffington Post blog, Oct. 18, 2010, www.huffingtonpost.com. 32 Ian Dew-Becker and Robert J. Gordon, Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income, paper presented at the Brookings Institution panel on economic activity, Sept. 8-9, 2005, www.brookings.edu/es/commentary/jour nals/bpea_macro/forum/200509bpea_gordon.pdf. 33 Ibid. 34 Jonathan Cohn, Moral Arguments for Soaking the Rich, The New Republic online, Oct. 17, 2010, www.tnr.com. 35 Anthony P. Carnevale, Postsecondary Education and Training As We Know it Is Not Enough, paper prepared for a Georgetown University/Urban Institute conference on poverty, Jan. 15, 2010, www.urban.org/uploadedpdf/ 412071_postsecondary_education.pdf. 36 Gary S. Becker and Kevin M. Murphy, The Upside of Income Inequality, The American: A Magazine of Ideas online, The American Enterprise Institute, May/June 2007, www.ameri can.com. 37 James K. Galbraith and J. Travis Hale, The Evolution of Economic Inequality in the United States, 1969-2007, University of Texas Inequality Project, Working Paper 57, Feb. 2, 2009, http://utip.gov.utexas.edu/papers.html. 38 Claudia Goldin and Lawrence F. Katz, The Race Between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005, May 2009, www.eco nomics.harvard.edu/faculty/katz/files/Chapter8_ NBER_1.pdf. 39 Mark Twain and Charles Dudley Warner, The Gilded Age: A Tale of Today (1873). 40 Timothy Noah, The Great Divergence, Part One, Slate, Sept. 3, 2010, www.slate.com/id/ 2266025/entry/2266026. 41 Willford I. King, The Wealth and Income of the People of the United States (1915), p. 60, http://books.google.com/books?id=dmFsmjETqIC&pg=PA287&lpg=PA287&dq=%22willford +i+king%22+%22the+wealth+and+income+of+ the+people+of+the+united+states%22&source= bl&ots=0hVvJxnasb&sig=ilCydUCzxxTa1YW85i 40XnS7ZAA&hl=en&ei=Y8HFTK36CMH7lwf BhokG&sa=X&oi=book_result&ct=result&resn um=5&ved=0CCAQ6AEwBA#v=onepage&q=ef
30

29

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ficient&f=false. 42 Andrew Carnegie, The Gospel of Wealth and Other Timely Essays (1901), p. 10, http:// books.google.com/books?id=gAGvb5vIh-AC& printsec=frontcover&dq=%22the+gospel+of+ wealth%22&source=bl&ots=DMxn1bs71e&sig= 7CUUj34D-ignVkYztYo05sC0Rf4&hl=en&ei=JM TFTPjVMoSBlAeV_cED&sa=X&oi=book_result &ct=result&resnum=4&ved=0CCkQ6AEwAw#v =onepage&q&f=false. 43 For background, see 16th Amendment to the Constitution: Federal Income Tax (1913), National Archives and Records Administration website, www.ourdocuments.gov/doc.php?flash =old&doc=57. 44 Pollack v. Farmers Loan and Trust Company, 157 U.S. 429, www.law.cornell.edu/supct/ html/historics/USSC_CR_0157_0429_ZS.html. 45 Thomas Piketty and Emmanuel Saez, The Evolution of Top Incomes: A Historical and International Perspective, Working Paper 11955, National Bureau of Economic Research, January 2006, http://elsa.berkeley.edu/~saez/ piketty-saezAEAPP06.pdf. 46 Frank Levy and Peter Temin, Inequality and Institutions in 20th Century America, MIT Industrial Performance Center, Working Paper, June 27, 2007, www.economics.harvard.edu/ faculty/katz/files/Chapter8_NBER_1.pdf. 47 Ibid. 48 Schechter Poultry Corp. v. United States, 295 U.S. 495, www.law.cornell.edu/supct/html/his torics/USSC_CR_0295_0495_ZS.html. 49 Levy and Temin, op. cit. 50 James K. Galbraith, Inequality and Economic and Political Change, University of Texas Inequality Project, Working Paper 51, Sept. 21, 2008, http://utip.gov.utexas.edu/papers.html. 51 Noah, op. cit. 52 Ibid. 53 Ibid. 54 Goldin and Katz, op. cit. 55 Gordon, op. cit. 56 Piketty and Saez, The Evolution of Top Incomes, op. cit. 57 Quoted in Louis Uchitelle, The Richest of the Rich, Proud of a New Gilded Age, The New York Times, July 15, 2007, www.nytimes.com. 58 Jacob S. Hacker and Paul Pierson, WinnerTake-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class (2010), p. 46. 59 Lane Kenworthy, Business Political Capacity and the Top-heavy Rise in Income Inequality: How Large an Impact? Politics & Society, June 2010, p. 255.

FOR MORE INFORMATION


Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001-5403; (202) 842-0200; www.cato.org. Analyzes economic issues from a libertarian point of view. Center on Budget and Policy Priorities, 820 First St., N.E., Suite 510, Washington, DC 20002; (202) 408-1080; www.cbpp.org. Liberal-leaning think tank that analyzes economic policy implications for low- and moderate-income families. Economic Mobility Project, The Pew Charitable Trusts, 901 E St., N.W., 10th Floor, Washington, DC 20004; www.economicmobility.org. Nonpartisan group studying trends in economic and social mobility. Emmanuel Saezs website, http://elsa.berkeley.edu/~saez. Analysis by University of California, Berkeley, economist supports many arguments about fast-rising income inequality. Ludwig von Mises Institute, 518 West Magnolia Ave., Auburn, AL 36832-4528; (334) 321-2100; http://mises.org. Organization of libertarian economists who argue that economic inequalities are both smaller and less troubling than many believe. My Budget 360 website, www.mybudget360.com/home. Advertising-supported online investment magazine posts data and analysis on economic inequalities. Too Much website, Program on Inequality and the Common Good, Institute for Policy Studies, 1112 16th St., N.W., Suite 600, Washington, DC 20036; (202) 2349382; http://toomuchonline.org. A liberal think tanks website posting news and commentary about economic inequality. U.S. Census Bureau, 4600 Silver Hill Road, Washington, DC 20233; (301) 763-4636; www.census.gov. Federal agency publishes periodic reports and analysis on the economy, including income distribution. University of Texas Inequality Project, http://utip.gov.utexas.edu. Austin-based group studying economic inequality around the world.

For background, see Richard Wolf, How the Tax Cut Debate Affects You, USA Today, Sept. 21, 2010, www.usatoday.com. 61 Quoted in ibid. 62 Transcript, Face the Nation, CBS News, Oct. 31, 2010, www.cbsnews.com/htdocs/pdf/ FTN_103110.pdf. 63 Adam Cohen, Could the Courts Outlaw the Minimum Wage? Time online/CNN, Oct. 20, 2010, www.time.com. 64 A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). www.law.cornell.edu/supct/ html/historics/USSC_CR_0295_0495_ZS.html. 65 U.S. v. Darby, 312 U.S. 100 (1941), http://case law.lp.findlaw.com/cgi-bin/getcase.pl?court= us&vol=312&invol=100. 66 Cohen, op. cit. 67 For background, see Anti-Union Ballot Measures Target Workers Rights, AFL-CIO

60

NOW blog, Oct. 27, 2010, and James Parks, Corporate-Backed, Anti-Union Secret Ballot Measures Pass in Four States, AFL-CIO NOW blog, Nov. 4, 2010, http://blog.aflcio.org. 68 Quoted in Kaiser, op. cit. 69 Arthur Delaney, Two-Thirds of Americans Support Raising Minimum Wage: Poll, Huffington Post blog, Oct. 6, 2010, www.huffington post.com. 70 Benjamin I. Page and Lawrence R. Jacobs, Economic Inequality and the American Public, paper delivered at a conference at the Federal Reserve Bank of Chicago, April 2-3, 2008, http://ctcp.edn.depaul.edu/HGEwebsite/Ab stracts/BenjaminPage_Paper.pdf. 71 For background see Peter Katel, Philanthropy in America, CQ Researcher, Dec. 8, 2006, pp. 1009-1032.

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Bibliography
Selected Sources
Books
Cox, W. Michael, and Richard Alm, Myths of Rich and Poor: Why Were Better Off Than We Think, Basic Books, 2000. Cox, a senior fellow at the Dallas Federal Reserve Bank, and Alm, a business reporter, argue that higher living standards for all Americans offset any increases in income inequality that have occurred over the past few decades. Hacker, Jacob S., and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, Simon & Schuster, 2010. Professors of political science at Yale (Hacker) and the University of California, Berkeley (Pierson), argue that the widening income gap has not occurred mainly because lower-educated workers dont have the skills to compete for jobs in a technological workplace but because the U.S. government has gradually adopted many policies that support the growth of income and wealth at the top. Scholars from across the ideological spectrum examine research showing that social and economic mobility have been diminishing in the United States compared to other nations, despite the widespread belief that Americans have greater equality of opportunity than elsewhere. Lindsey, Brink,Paul Krugmans Nostalgianomics: Economic Policies, Social Norms, and Income Inequality, Cato Institute, 2009, www.cato.org/pub_display.php?pub_id=9941. The libertarian think tanks vice president for research argues that U.S. income dispersion resulted from technological change that keeps low-skilled workers out of many jobs, not from economic or social policies and practices like tax rates or unionization of labor. Norton, Michael I., and Dan Ariely, Building a Better America One Wealth Quintile at a Time, forthcoming, Perspectives in Psychological Science, www.people.hbs. edu/mnorton/norton%20ariely%20in%20press.pdf. When surveyed about their preferred society, large majorities of Americans across demographic groups and the political spectrum opt for an income distribution less skewed toward the top than the current U.S. distribution. Sherman, Arloc, and Chad Stone, Income Gaps Between the Very Rich and Everyone Else More Than Tripled in Last Three Decades, New Data Show, Center on Budget and Policy Priorities, June 25, 2010, www.cbpp.org. In an examination of tax and wage data from the nonpartisan Congressional Budget Office, analysts from a liberalleaning think tank report that U.S. income is more concentrated at the very top of the economic ladder than at any time since 1928, with the income gap between the richest 1 percent of Americans and the lowest three-fifths more than tripling between 1979 and 2007. Weintraub, Sidney, U.S. Tolerance of Income Inequality, Issues in International Political Economy, Center for Strategic & International Studies, January 2010, http:// csis.org/files/publication/issues201001.pdf. A political economist from a bipartisan foreign-policy think tank argues that U.S. citizens and policy makers tolerate and even promote greater economic inequality than people in many other developed nations consider fair or economically efficient. Wilkinson, Will, Thinking Clearly About Economic Inequality, Cato Institute Policy Analysis 640, July 14, 2009, www.cato.org/pub_display.php?pub_id=10351. A research fellow at the libertarian think tank argues that income statistics are a misleading measure of economic inequality and that dispersion of incomes has little relation to either human welfare or social justice.

Articles
Kaiser, Emily, Special Report: The Haves, the Have-nots, and the Dreamless Dead, Reuters, Oct. 22, 2010, www.reuters.com/article/idUSTRE69L0KI20101022. By examining parallels between two eras when economic inequality ran high in the United States the 1920s and the 2000s economists struggle to understand why both periods preceded huge crashes of the financial markets and lengthy economic depressions. Noah, Timothy, The Great Divergence, Slate, September 2010, www.slate.com/id/2267157/. In a 10-part series, a reporter for the online magazine discusses recent research examining the possible causes and effects of rising economic inequality.

Reports and Studies


Income, Poverty, and Health Insurance Coverage in the United States: 2009, Current Population Reports, U.S. Census Bureau, September 2010, www.census.gov/prod/ 2009pubs/p60-236.pdf. This government report finds that the median household income did not change from 2008 to 2009 but that the poverty rate increased. Isaacs, Julia B., Isabel V. Sawhill and Ron Haskins, Getting Ahead or Losing Ground: Economic Mobility in America, Economic Mobility Project/Brookings Institution/Pew Charitable Trusts, October 2008, www.brookings.edu/ ~/media/Files/rc/reports/2008/02_economic_mobility_saw hill/02_economic_mobility_sawhill.pdf.

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CHAPTER

10

STRAINING THE SAFETY NET


BY PETER KATEL

Excerpted from Peter Katel, CQ Researcher (July 31, 2009), pp. 645-668.

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Straining the Safety Net he y


BY PETER KATEL
the year before the reforms were implemented, twice as many people were receiving anya Gray used to earn AFDC benefits: 4.5 million a decent living doing families and 8.4 million chiloffice work in Washdren. 2 ington, D.C. When computers Our safety net was reand other desktop technology designed to focus on workmade her skills superfluous, ing families, says Sheila however, she turned to home Zedlewski, director of the Incare for elderly people. come and Benefits Policy y Im very good, and I love Center at the liberal Urban Inmy job, so people refer me, stitute think tank. And some she says. I try to work with of the policies and procedures clients that cant really afford that states have in place dont to pay me what Im worth. serve well in this time, when But as the recession cuts there are no jobs. into the limited earnings of But Robert Rector, a senior r the working people she research fellow at the conserserves, Gray is having trouble vative Heritage Foundation again. Unable to afford her and ardent defender of the own apartment, she is staying welfare law overhaul, says critat her mothers place while ics of the reforms are arguing waiting for a federal Section that joblessness caused by the 8 rent subsidy. Gray receives recession is a reason to return The economic recession has increased the demand for food stamps and is covered to the old welfare system. Unservices at Bread for the City, a nonprofit social-services organization in Washington, D.C. Such private aid by Medicaid, the federal employment effects are programs are reinforcing state and federal safety-net health program for the poor. overblown, he says. People programs many hit by budget cutbacks. Even so, food sometimes are being hired all the time. runs short. Thats when Gray Some job-seekers have independs on a monthly bag deed been finding work since of groceries from Bread for the City, a recession wreaking havoc on em- the recession began in December 2007. a private, nonprofit social-services or- ployment nationwide, social-protection In 2008, about 56 million people were ganization in the working-class Shaw programs are undergoing their toughest hired in non-agricultural jobs, but hiring neighborhood, about 1.5 miles from test since sweeping welfare reforms was down about 7 million from 2007, the White House. Without the gov- were instituted in 1996. and 8 million from 2006. On the other r During decades of debate leading side of the equation, 24 million people ernment and private aid, she says, Id to the reforms, people at the bottom were laid off last year, but that was 2 be destitute. The 54-year-old Gray has plenty of of the socioeconomic ladder were million more than the year before, and company. Low-wage workers making seen as dependent on welfare checks 3 million more than in 2006. 3 about $20,000 a year or less account and often portrayed as lazy and unA 58-year-old Staples cashier in for between a quarter and a third of the willing to work. The law was designed Alexandria, Va., says many part-time countrys 140 million labor force. 1 to discourage long-term assistance. In- workers are seeing their hours cut back Gray is in large and growing compa- stead, states are required to push aid from 30 to 20 hours a week. Pamela ny in her reliance on the package of recipients into the workplace. Some said she earns $16,000 a year working government programs known collec- 1.7 million families with 3 million chil- full time, with crucial financial help dren are enrolled in Temporary As- from Section 8 housing allowances, tively as the safety net. A product of New Deal social poli- sistance for Needy Families (TANF), Medicaid and Bread for the City. Im cies launched in the 1930s, the safety which the 1996 law created in place not saying it would be impossible withnet was expanded during the War on of the previous Aid to Families with out them, but it would be real diffiPoverty that began in 1964. Now, with Dependent Children (AFDC). In 1995, cult, she said.

THE ISSUES

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One in Eight Americans Live in Poverty
More than 38 million Americans were living at or below the poverty level in 2007, or about 13 percent of the entire population. Moreover, 15 percent were determined to be food insecure or worse.
No. in millions

Poverty and Food Insecurity, 2007

350 300 250 200 150 100 50 0

301,621,159

38,052,247

(13%)

13,097,100

(18%)

13,011,000

(11%)

4,749,000

(4%)

Population

People living in poverty

Children (under 18) living in poverty

Number of households that are food insecure

Number of households that are very food insecure

Source: Food Research and Action Center

Meanwhile, an economic revival when and if it occurs isnt expected to spark big jumps in employment. Businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes, Federal Reserve Chairman Ben S. Bernanke told Congress Joint Economic Committee in May. 4 The bleak climate prompted the White House and Congress earlier this year to temporarily strengthen the safety-net system, including TANF and unemployment insurance, as part of the $787 billion economic stimulus law enacted in February. Also in February, Congress passed a measure proposed by President Barack Obama that stepped up funding for the Childrens Health Insurance Program and encouraged states to loosen eligibility so that more children could be covered. Financially strapped California and Michigan, as well as Texas, didnt act, but at least 13 states have enrolled about 250,000 more children, The New York Times reported. In a downturn, the number of people who need the safety net increases, said Democratic

Gov. Bill Ritter Jr. of Colorado, where an additional 21,000 children are now covered. 5 Similarly, enactment of the stimulus was followed by increases in TANF enrollments in 23 of the 30 biggest states, according to a Wall Street Journal/ l National Conference of State Legislatures survey. 6 California is among the states showing an increase in TANF enrollments 10.4 percent, for the 12 months ending in March. But that increase seems unlikely to be sustained. The new California budget will cut $528 million from the states TANF program, known as CalWorks, and $178.6 million from the program that provides medical coverage for lowincome children. 7 Even with California excluded, the increases are uneven. Michigan, devastated by the near-collapse of its auto industry, suffered the nations highest unemployment rate in May 14.1 percent. Yet during the 12 preceding months, Michigans TANF caseload dropped 4.8 percent. 8 And from April 2008 to April 2009, food stamp rolls climbed 14.5 percent. 9 The discrepancy between soaring

food stamp enrollment and declining TANF caseload has caught the eye of f one of the key players in the 1996 congressional passage of the new welfare law. It sure does make you suspicious, says Ron Haskins, co-director r of the Center on Children and Families at the Brookings Institution think tank. I really wonder whats going on in Michigan. Haskins, was staff director of the Republican-controlled House Ways and Means Human Resources Subcommittee during the welfare battle of 1996. More generally, Haskins acknowledges that the employment emphasis of the 1996 law hurt single mothers who were pushed off TANF for failure to find work. These are generally mothers who have more than one problem more than three kids, and bad transportation access, for instance. These people are slipping through the cracks, Haskins says. Meanwhile, Michigan may be only y at the beginning of a trend toward increased demand for cash assistance. Laid-off factory workers have been getting unemployment insurance (UI), says Rick McHugh, Midwest coordinator of f the National Employment Law Project, an advocacy organization, but benefits will start phasing out in August. By y years end, 100,000 laid-off workers will have used up their UI eligibility. Many of those people will not get TANF initially because they still have equity in their homes, they may still own more than one car, they even have bank accounts that have money y in them, says McHugh. In three to five years they may get to the point where theyre looking at TANF. Former industrial workers who do find new jobs are likely also to find that they pay far less. Lawrence M. Mead, a New York University political scientist and advocate of the 1996 welfare law, acknowledges that employment opportunities today largely are to be found in jobs that dont pay very well.

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On the other side of the coin, ease of employment has replaced the safety net as the main substitute for serious employment, Mead says. You may not get the job you want, you may get thrown out of a job on Wall Street, but you can get a job at Waldbaums, a popular New York area supermarket chain. But relying on low-wage employment for a major part of the workforce carries its own dangers, argues Peter Edelman, director of the Center on Poverty, Inequality, and Public Policy at Georgetown University Law Center and a longtime anti-poverty activist. The real question is: What is our standard of living, going forward? he says. And if a continuing, very large number of people are not being paid a living wage, are we going to use public policy to add appropriately to their income? To aid working families who earn too little, Edelman advocates strengthening the Earned-Income Tax Credit which reduces low-wage workers taxes and providing expanded health-care and child-care coverage. Back at the Bread for the City office in Washington, Tanya Gray is pinning her hopes for the future on her herself, as well as a power stronger than that wielded by politicians. If I take the first step, she says, God will carry me the rest of the way. As the recession brings more Americans into contact with the nations safety net, here are key questions being debated: Are safety nets working? Many experts gauge safety-net effectiveness in hard times by the level of Temporary Assistance to Needy Families payments. The population TANF serves low-income households almost always headed by a single parent is especially vulnerable to economic reversals. Others view food stamps (officially, the Supplemental Nutrition Assistance Program) as a more sensitive indicator. Enrollment in SNAP is relatively sim-

Programs Lift 14 Million Out of Poverty


Major means-tested benet programs available to only those with limited incomes and assets lifted 14 million Americans out of poverty in 2005. The Earned-Income Tax Credit was responsible for more than one-third of that amount. Temporary Assistance for Needy Families only accounted for one-tenth.
No. of people (in millions)

15 12 9 6 3 0
5.1 2.6 EarnedIncome Tax Credit

People Lifted Above Poverty Line by Major Means-tested Benets, 2005


All ages Children

14.0

6.0

4.0 2.2 Food Stamps

4.3 1.6

3.6 1.0 1.4 0.8

Housing Supplemental Temporary All meansAssistance Security Assistance tested Income for Needy benefits* Families (TANF)

* Some individuals counted more than once if enrolled in more than one program. Source: Arloc Sherman, Safety Net Effective at Fighting Poverty But Has Weakened for the Very Poorest, Center on Budget and Policy Priorities, July 2009

ple, and statistics show the program is responding effectively to growing hardship. Nationwide, food stamp enrollment rose 20 percent, to 5 million recipients, during the 12 months ending in April 2009. 10 Meanwhile, as President Obama put it recently, the recession is clobbering many people traditionally considered outside the target populations for SNAP and TANF. This group includes employees laid off from well-paid jobs that once offered considerable stability autoworkers are the classic case. As of July, 1.9 million manufacturing jobs had vanished since the recession began in December 2007 including 335,000 in car and auto-parts factories. 11 Still another group of laid-off workers includes ex-TANF recipients, or future ones. The low-wage jobs they held provided paycheck-to-paycheck living but little or no cushion to fall back on when the jobs disappeared. In other ways as well, low-wage workers enjoy less of a safety net than

those laid off from better-paying, more stable jobs. A Congressional Research Service expert reported in February that low-wage workers are less likely to receive UI benefits. Some states, for example, bar UI participation by those who earned below a set amount. In any event, as of November 2008, 55 percent of unemployed people werent receiving unemployment benefits. 12 The huge economic stimulus bill the Obama administration pushed through Congress in February included a series of measures designed to expand the safety nets coverage. TANF got an extra $5 billion to be distributed to states according to their needs for cash welfare and work subsidies. 13 The food stamp program received $20 billion to be spent over five years in boosting allotments, for example by $80 a month for a family of four. 14 And the stimulus bill included a series of provisions to increase unemployment insurance benefits, in-

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Food Pantries and Other Groups Struggle to Keep Up


Demand at free clinics has skyrocketed.
n normal times, millions of Americans depend on nonprofit service organizations such as food pantries, medical clinics and storefront legal-services offices. But judging from rising demand stemming from the recession, at least some of the nations thousands of private providers are struggling to keep up. Over the last year, free clinics have seen patient load increase by 40 to 50 percent, said Nicole D. Lamoureux, executive director of the National Association of Free Clinics, which represents more than 1,200 clinics nationwide. People who just last year had health coverage are now out of work and need to have their health-care needs met. 1 No one knows how many private organizations aid low-income people. A database maintained by the Urban Institutes National Center for Charitable Statistics lists 3,858 human services nonprofits registered with the Internal Revenue Service. But that category excludes providers of emergency aid in food, clothing, cash and child care. 2 Among President Barack Obamas proposals for fiscal 2010 is a $50 million appropriation to the Social Innovation Fund, which Congress created last year to fund successful private social-service providers that want to expand. 3 If any provider were to discover a way to expand services without requiring additional funding, that organization would become a nonprofit sector star. Like conventional, profit-oriented businesses, nonprofits are struggling to cope with declining revenues, as contributors cut back on donations. Our spending is down by 15-20 percent since last year, said Gloria Verrone, spokeswoman for the CIGNA Foundation, which funds free medical clinics in Philadelphia and Con-

necticut. Weve decided not to eliminate working with organizations that need our help, but we have had to decrease funding amounts in order to keep those relationships. We also havent been able to accept any new groups this year, but were hopeful to start doing so again by next year. 4 Other organizations also are doing more with less. Our donations have gone down, particularly from law firms, because they themselves are laying people off, says Luan Huynh, supervising attorney at East Bay Community Law Center in Berkeley, Calif. But among clients, she says, Were now seeing an increase in people who were never getting public benefits because theyve always been gainfully employed but now need help because they cant get a job. The law center receives some government funding, but other nonprofits depend entirely on public funds, and they face tough questions about performance and results when government revenues plummet. The real challenge in those conversations is that they often become political, said Sandra Hernandez, CEO of the San Francisco Foundation and former director of public health for the city and county. If they are really underperforming but have been there a long time, it may be very hard to get de-funding to stick in the political process. 5 In Washington, D.C., controversy has erupted over $21 million in proposed cuts in city funding of nonprofits. The word that comes to mind is devastating, Ed Orzechowski, CEO of Catholic Charities, said in a July 20 statement released by the Coalition for Community Investment, a group of business, nonprofit and other organizations in the city. We all recognize that the budget gap needs to be closed, but we must do so pro-

cluding a 33-week extension in highunemployment states, and $7 billion worth of incentives to states that expand UI eligibility to part-time employees and others; by mid-June, half the states had done so. 15 Food stamps and TANF have responded as they were intended to do, with the government spending more money, says Haskins at the Brookings Institution. He adds that he unlike some Republicans supports expansion of TANF caseloads as long as states maintain pressure on recipients to find work. If you dont have state programs that emphasize work and penalize people who dont look for work, then

people stay on the rolls much longer. A lot of people do find jobs, especially in services, during a recession. Liberals who opposed the 1996 welfare law argue that the recession has shown the safety net in general, and TANF in particular, to be inadequate, especially by dropping recipients if theyre not working or looking for work. In general, TANF is too hard to get on, and too many people are being kicked off, says Georgetown Universitys Edelman, who resigned as assistant secretary of Health and Human Services when President Bill Clinton signed the 1996 welfare reform law.

Moreover, the entire safety net system is strained far beyond its capacity. Even before the recession, the country was engulfed in a slow-motion socioeconomic disaster created by the expansion of the low-wage economy, Edelman argues. You have to figure out how youre going to get a decent income to people who are being failed by the labor market, he says. The labor market functioning as a free market is injuring millions and millions of people who are just playing by the rules. But the Heritage Foundations Rector, a longtime critic of anti-poverty y programs, argues that the safety net actually is working in ways that liberals

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We struggle with the rising costs of optecting those who simply cannot eration: essentials like health care and food shoulder the impact. 6 prices are placing great strains on our budThe affected organizations include get, the organization said. These changes arts programs as well as groups such . . . are necessary if we are to avoid subas Capital Area Asset Builders, which stantial cuts to client services and staff. 9 was formed to help low-income families with taxes and other financial is1 Quoted in Everton Bailey Jr., Free clinics hit with sues. A planned $250,000 city grant was more patients, less funding, The Associated Press, slated to be cut to $100,000. 7 July 20, 2009, http://news.yahoo.com/ Meanwhile, Washington nonprofits s/ap/20090720/ap_on_re_us/us_free_health_clinics. 2 NCCS All Registered Nonprofits Table Wizard, that dont depend on government grants National Center for Charitable Statistics, Urban Inalso face tough times. Weve seen a stitute, http://nccsdataweb.urban.org/tablewiz/ 10-20 percent increase in demand for tw_bmf.php. 3 Suzanne Perry, Administration Provides Fact all of our programs over the past four Sheet on Social Innovation Fund, The Chronicle years, says Jeannine Sanford, deputy diof Philanthropy, July 22, 2009, http://philanthro rector of Bread for the City, which propy.com/news/government/8941/administrationPresident Obama wants to spend vides food and medical and legal serprovides-fact-sheet-on-social-innovation-fund. $50 million to enlarge 4 Quoted in Bailey, op. cit. vices, as well as guidance in navigating successful nonprofits. 5 C. W. Nevius, Time for a hard look at fundthe government social-services bureaucracy. Demand for the latter kind of aid has increased 75 percent. ing nonprofits, San Francisco Chronicle, July 27, 2009, p. B1. 6 Quoted in Susan Kinzie, Nonprofits Revisit Budgets as Earmark Cuts For example, in largely black and poor Ward 8, the jobless Loom, The Washington Post, July 21, 2009, www.washingtonpost.com/wprate stood at 23.8 percent in April while affluent and mainly dyn/content/article/2009/07/20/AR2009072002994.html. 7 Ibid. white Ward 3 registered 2.5 percent unemployment. 8 To make matters worse, the citys already high cost of living means 8 V. Dion Haynes and Emma L. Carew, In D.C., More Jobs and More Jobless, The Washington Post, June 20, 2009, www.washingtonpost.com/wps that many gainfully employed residents cant survive without assis- dyn/content/article/2009/06/19/AR2009061901600.html; Unemployment tance, says Sanford. You can work full time in this economy, tak- rates by state, seasonally adjusted, June 2009, U.S. Bureau of Labor Statistics, http://data.bls.gov/map/servlet/map.servlet.MapToolServlet?survey=la. ing no vacation, and be well below the poverty line, she says. 9 A Message to the Community, Bread Bread for the City, meanwhile, cut staff and management www.breadforthecity.org/Page.aspx?pid=434. for the City, March 6, 2009, salaries 10 and 12 percent, respectively, while closing on Fridays.

support and that he opposes. Government programs provide a permanent subsidy to people in the lowest onethird of income distribution. In a paper in February, he listed some 50 programs aiding people below a certain income threshold, including Pell grants for low-income college students. 16 As for TANF, Rector argues that the stimulus funds effectively return the welfare system to pre-1996 days, when states got more money as their caseloads expanded. We are now in the business of paying states to put more people on welfare, he says, predicting that that provision will be transformed from a one-time measure into a permanent feature of the system.

Zedlewski at the Urban Institute argues that a far bigger issue confronts the entire safety net system. The great recession shines a light on the somewhat misguided notion that you could just focus on work supports in revamping the welfare system. You now have a much larger group of low-income parents who dont have work, and are not getting the EarnedIncome Tax Credit because they dont have a job and dont qualify for unemployment insurance. What do you do there? Furthermore, Zedlewski argues, the rebuilt welfare system, with its focus on pushing recipients into jobs, has never served people with disabilities

Getty Images/Ron Sachs

that keep them from working but dont qualify them for disability benefits. I dont think anybodys really come up with a great solution for that group, who account for a large share of our r poverty population. Are fundamental changes needed in the federal welfare program? The creation of TANF marked a major change in social policy. Supporters argue that the law was built to withstand the pressures that a recession would create. A $2 billion contingency y fund (expanded to $5 billion by the stimulus law) for larger state caseloads in times of high unemployment was part of TANF from the beginning.

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TANF is under the microscope both because of the recession and because the law creating it is up for reauthorization next year. With the legislative calendar and economic hard times coinciding, critics will have a perfect moment to push for changes in the much-debated law. Advocates of the law remain deeply committed to its underlying doctrine: To impart the value of work to people who, so the thesis goes, have never been taught the value of honest toil. Blogger Mickey Kaus, who campaigned for TANF while writing for the liberal New Republic, remains a fervent partisan. An able-bodied person who fails to work and relies instead on the dole cant have full respect in our society, and shouldnt, Kaus wrote in February. The attempt to confer equal respect by spreading around cash as opposed to guaranteeing work and making work pay is doomed. 17 The moral value of work aside, the structure of TANF which Congress created during economic boom times is bringing the new welfare system face-to-face with practical issues arising from the recession. For one thing, the welfare-to-work law cant create jobs. For another, its block-grant financing, designed to prevent caseloads from expanding automatically as more people apply for assistance, may hinder efforts to help participants find or keep jobs the overhauled welfare systems entire purpose. TANFs fixed funding poses this policy dilemma: curtail increases in cash welfare caseloads and not expand other forms of recession-related aid, or cut TANF funding for initiatives launched in better economic times, the Congressional Research Service reported in February. The kinds of non-cash aid include child care for parents looking for work or already working. 18 And most states arent in a position to fund such programs entirely

Social Security Lifts 22 Million Out of Poverty


About 22 million Americans were boosted out of poverty in 2005 by Social Security, the most effective universal, or non-means-tested, safety-net program. People Lifted Out of Poverty by Universal Safety-Net Programs, 2005
No. of People (in millions) 25

22

20 15 10 5 0 Social Security Child Tax Unemployment Credit insurance

1.2

Source: Arloc Sherman, Safety Net Effective at Fighting Poverty But Has Weakened for the Very Poorest, Center on Budget and Policy Priorities, July 2009

on their own, says Heather Boushey, a senior economist at the Center for American Progress, a think tank with close ties to the Obama administration. State budgets are slammed, she says. So you find that your childcare subsidy has been cut, and you cant afford child care for your kid, and you end up going to work late a couple of days, because your neighbor couldnt watch your child, and then you lose your job. The bottom line, Boushey argues, is that TANF cannot cope with the effects of the severe recession. Shes uncertain whether ending the block-grant system, or changing some TANF requirements, would help. But, she says,

I do not think the system as it is, is working. Such arguments overlook a considerable elasticity built into the TANF law, argues New York Universitys Mead, whose writing on welfare and work helped set the stage for the 1996 law. The TANF system has more ways of adjusting to unemployment than people realize, he says, pointing to a provision that allows a higher number of recipients to be looking for r work as opposed to already working if a state is classified as needy due to high joblessness. Mead isnt troubled if caseloads expand. And unlike the Heritage Foundations Rector he doesnt see the extra contingency money added in the stimulus law as undercutting the 1996 law. But he is ready to oppose proposals next year for bigger changes, such as an end to block grants. There might be attempts by liberals to go back to an entitlement, he says. That would be a big mistake. I dont see any need for major change. But the variety of state approaches that TANF authorizes can conceal systemic problems, argues Sharon Parrott, director of the welfare reform and income support division at the Center r on Budget and Policy Priorities. Some states have policies in place that can make it difficult for families to apply y for assistance, and some are quick to terminate families from assistance there are a variety of ways that states can keep caseloads down. States differing approaches to TANF raise a question that goes deeper than the block-grant versus open-ended funding argument, Parrott says. She cites federal data showing that the share of eligible families receiving cash assistance dropped from about 80 percent during the 1980s and early 90s to 40 percent in 2005. Is this the way y we want our safety net for the very y poorest families with children to operate? she asks. If it isnt, what different set of requirements are there

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for states to keep a focus on work, but also have programs to protect kids against deep poverty? 19 Haskins of Brookings argues that the recession doesnt call for any major retooling of the 1996 law. Working within the law as it exists, he says, the Obama administration and Congress were able to make more money available to states to allow them to take on new TANF recipients. And the recession is not a Great Depression-scale event. Americans are still getting jobs, especially in the service sector, he says. Indeed, the Bureau of Labor Statistics jobs report shows that in the service sector where women workers are concentrated 5.4 million Americans found jobs from September 2007 to September 2008, the most recent figures available. More jobs were lost but some of those hired stayed employed. 20 A lot of people do find jobs, especially in services during a recession, Haskins says. States just need to keep this balance of emphasizing work, with a safety net if they cant find jobs. Is more job training needed? In a year when the bankruptcy of two industrial giants Chrysler and General Motors marked the further erosion U.S. manufacturing, the timehonored practice of offering retraining to laid-off factory workers is encountering skepticism. That response is especially marked in Michigan, home of the Big Three U.S. car companies, which has become the nations unemployment capital. I know that for a long time there have been politicians who have spoken of training as a silver bullet and college as a cure-all, President Obama acknowledged at Macomb Community College in Warren, Mich., on July 14. I cant tell you how many workers whove been laid off, you talk to them about training and they say, Training for what? So I understand the frus-

trations that a lot of people have, especially if the training is not welldesigned for the specific jobs that are being created out there. 21 Obama was announcing the availability of federal grants for community colleges that offer programs to train students in job skills that are in demand, and to connect them with actual jobs. In a related move in May, the president urged states to discard rules that barred laid-off workers from receiving unemployment insurance if they enrolled in school or training courses. Generally, states have required UI beneficiaries to be actively looking for work. 22 In addition to Obamas retraining initiatives for laid off, longtime workers dislocated workers in economists jargon there is also training for people with little experience in the workaday world, and few of the skills it demands. Job training for the unskilled has represented a great hope of safety-net creators and advocates at least since President Lyndon B. Johnsons War on Poverty of the 1960s. He didnt want the people on welfare getting a dole, he wanted them getting skills, LBJ biographer Robert Dallek told National Public Radio on the 40th anniversary of Johnsons best-known anti-poverty speech in 1964. 23 Johnson didnt see his vision fulfilled. Among the poor, welfare rolls expanded more than the ranks of employees, Dallek said. As a result, jobtraining as a way out of poverty gets a cool reception from conservatives. I dont think job training is the solution for the lower-skilled, says Mead of NYU, an advocate of the 1996 TANF law. It shouldnt be a substitute for work. We used to say to people on welfare, You go to school first, and then work. It turns out they never went to work, or continued schooling either. Mead does see a place for training people who already have started jobs. Under TANF rules you can satisfy the

work requirement if you work a certain number of hours and then get training. Overall, though, he sees a more realistic, big-scale approach in low-wage work, accompanied by subsidies that stretch out paychecks, or r political or labor union campaigns to raise wages. In general, fundamental skill limitations and family problems prevent job progression for many lowincome people, he says. We cant expect that education is going to solve the problem. But Georgetowns Edelman argues that younger people whove never been in the labor market do benefit from training geared to their backgrounds. The models Im talking about combine learning and working at the same time, Edelman says, essentially agreeing with Mead. Thats the key so that you dont say to somebody, You have to go through this thing and then you can go to work. As for training dislocated workers, Edelman echoes the widespread skepticism spawned by the shrinking manufacturing sector. Weve perpetuated mythologies that we can train somebody up and get them a new working suit and itll be fine, he says. We really havent been honest with them. If f theyre in Michigan, they either have to get income support for the rest of their r lives or move where there are jobs. Labor Secretary Hilda Solis has been peppered with questions about the extent to which retraining can help dislocated workers find new jobs. She echoes the Obama administration line that green jobs in a renewableenergy industry that government officials are trying to propel will provide part of the solution. But she hedged that response at a House Appropriations subcommittee hearing in May, noting, I think that green jobs are not a silver bullet, by any means. 24 The previous month Solis had cited an administration forecast of 3.5 million available jobs in the nascent renewable-energy industry (including an

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unstated number that already exist). But with more than 5 million jobs already lost since the recession began (as of mid-July, after she testified, the number had reached 7.2 million), she conceded, there were more job seekers than jobs. Still, some slots are unfilled for lack of trained personnel. We do have a shortage of skilled individuals to go into these jobs, she said. If we had done more homework, we wouldnt be in such a bad position . . . where we have to work really hard to get people trained in a rapid manner. 25 Nevertheless, in the heart of the Rust Belt, even training-program supporters argue that expectations of what training can deliver may be exaggerated. My sense is that were going to have a lower level of consumption for a number of years, says McHugh, a former United Auto Workers lawyer, and that means the service economy and those kinds of jobs that in the past 15 years have been pointed to as places where manufacturing workers will go are not really a viable answer. In Michigan, they were saying, Go into health care. All autoworkers now have lost eye care and dental care. That means every kid training to be a dental hygienist has a problem. responsibility for Americans who found themselves, through no fault of their own, in economic or social distress. Social Security and unemployment Insurance were two of the specific results. 26 However, Roosevelt harbored grave doubts about the federal government providing cash assistance relief, it was then called for the jobless. He first signaled his concern following establishment of the Civil Works Administration (CWA), which created thousands of public-works jobs from a half-billion-dollar emergency appropriation by Congress in 1933. Half the workers came from the rolls of relief programs; the other half was unemployed men who hadnt received relief. Roosevelt worried about the cost as well as the danger of creating a permanent class of workers dependent on government-subsidized jobs and insisted that the CWA end soon. These kinds of jobs could become a habit with the country, he told his aides. In 1935, after the CWA was replaced by an even bigger program to put 3.5 million jobless men to work, Roosevelt ordered that another 1.5 million recipients of federal relief be transferred to local charities. 27 This time, Roosevelt went public with his opposition to relief payments. In a January 1935 address to Congress, he called them a narcotic, a subtle destroyer of the human spirit. And, he said, The federal government must and shall quit this business of relief. 28 The new labor laws and safety-net measures all sprang from the same political doctrine, that government had an obligation to ensure the minimum conditions of a decent life. And government growth was seen as a positive development needed to rein in business power, which expanded enormously. Roosevelt and the New Deal prevailed against big-business opponents, but not before a ferocious battle. In 1936, Clinton L. Bardo, president of the National Association of Manufacturers, called for liquidation of the New Deal. And the associations chairman of the board, Robert L. Lund, condemned the deliberate firing of class hatred by the New Dealers in their effort to hold political power. 29 Some Democrats, especially in the deep South, were even more strident. Gov. Eugene Talmadge of Georgia declared in 1936 that the New Deal law banning child labor had been copied from Russia. As for Roosevelt, Talmadge vowed that his state would start the punch that will go all over r America and put the Communist out of the White House and never let him return. 30

W War on Poverty y
ew Deal programs gained widespread acceptance after World War II. Democrat Harry S Truman and President Dwight D. Eisenhower, the first Republican to win the presidency following Roosevelts unprecedented four terms, saw acknowledging the consensus as political common sense. Should any political party attempt to abolish Social Security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history, Eisenhower told his brother, Edgar. 31 By the end of Eisenhowers second term, liberal and left-wing intellectuals began to argue that New Deal programs represented only a first step toward eliminating deep poverty. In his 1962 classic, The Other America: Poverty in the United States, Michael Harrington, a moderate socialist, best summed up this view. The best-seller persuaded millions of Americans, including President John F. Kennedy, that a major, new government initiative was required. 32

BACKGROUND
Safety Net Created y
efore the New Deal and the advent of federal social programs, aid the jobless, for single mothers and for others needing a helping hand varied widely among the states and cities when aid existed at all. Historian Arthur Schlesinger Jr., a specialist on President Franklin D. Roosevelts New Deal, created the doctrine of federal

Continued on p. 656

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Chronology ono gy
First national safety-net programs created during Depression by President i Franklin D. Roosevelts New Deal. 1933 Emergency program created to provide cash payments known as relief to jobless. 1935 Social Security pension system created. . . . Aid to Dependent Children (welfare system) created. . . . Unemployment insurance created. . . . Roosevelt warns of Americans dependence on relief payments. 1936 National Association of Manufacturers accuses Roosevelt of stoking class hatred.

1930s

1969 President Richard M. Nixons proposed Family Assistance Plan, featuring a guaranteed minimum income, dies in Congress.

Temporary Assistance to Needy Families (TANF), which limits welfare benefits to five years; Clinton signs it into law. . . . Three top administration officials, including Assistant Health and Human Services Secretary Peter Edelman, quit in protest. 1997 Welfare system critic Sen. Daniel Patrick Moynihan, D-N.Y., says new TANF program breaks the New Deal social contract with Americas poor.

1970s-1990s
Opposition to welfare system leads to work requirements. 1971 Gov. Ronald Reagan, R-Calif., champions workfare, requiring welfare recipients to get jobs. 1976 Echoing a common, racially tinged criticism of welfare, Reagan refers to a strapping young buck buying steaks with food stamps, during campaigning for the Republican presidential nomination. 1983 Harvard social scientists conclude 65 percent of welfare recipients at any time would be on welfare rolls for at least eight years. 1988 Congress passes compromise welfare bill, the Family Support Act of 1988, which includes work requirements that conservatives call too weak. 1992 Democratic presidential candidate Bill Clinton vows to end welfare as we know it. 1994 Republicans vow major overhaul of welfare system after taking control of both houses of Congress. 1996 Aid to Families with Dependent Children (AFDC) program is replaced by Republican-authored

2000s

Welfare policy debate gathers force as recession hits middle-class Americans. 2001 Critics note on the five-year anniversary of welfare reform that while the laws tough requirements did not add to poor peoples misery, 40 percent of the recipients who were forced off the rolls for failure to find work remained unemployed. 2008 As recession takes hold, family homelessness rises from previous year by 43,000 people, to 516,000 family members. . . . Fifty-five percent of unemployed people are ineligible or fail to apply for unemployment insurance. . . . Unemployment rate rises during the year from 4.9 percent to 7.2 percent. 2009 Congress enacts anti-recession stimulus bill containing emergency funds for TANF, food stamps and unemployment insurance. . . . TANF caseloads begin to rise in some states, but increase in food stamp use is more widespread. . . . TANF critics and supporters start preparing for reauthorization fight in 2010.

President Lyndon B. Johnson declares War on Poverty, expands safety net. 1962 Author/activist Michael Harringtons The Other America: Poverty in the United States leads to politicians growing awareness of poverty, including Democratic President John F. Kennedy, who is assassinated the following year. 1964 President Lyndon B. Johnson launches War on Poverty to create new poverty-fighting agencies and programs, emphasizing job training. 1968 Poverty rate falls to 12.8 percent in last year of Johnson administration, down from 19 percent when war began, largely as result of growth in welfare rolls.

1960s

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Do Safety Nets Undermine European Economies?


Some blame rigid labor policies, not generous welfare.
ven though he lost his job for an auto-parts maker this year, German worker Alfred Butt still took his weeklong Mediterranean vacation. Since state benefits will replace most of his lost salary for a full year, and since he keeps his full medical insurance under Germanys universal system, being out of work hasnt changed my life that much, he told The Wall Street Journal. 1 Contrast his situation to the familiar pain of an unemployed Illinois auto worker, Dylan DeRoberts. He lost his health insurance along with his job and cant afford the premiums to replace it. And he will receive only about a quarter of his former salary in jobless benefits for 59 weeks. 2 Western Europeans receive far more generous assistance than Americans when they fall on hard times. In most countries in the region, the government replaces 60-90 percent of a jobless persons wages, compared to just over 50 percent in the United States, on average. 3 The length of compensation is also longer for example, two years in Norway and unlimited in Belgium compared to the normal maximum of six months in the United States. 4 But experts have long debated whether Europes level of assistance is ultimately a drag on the economy, as conservatives argue, or a built-in stimulus that enables the unemployed to continue spending. Can Europes far lower poverty rates be attributed to its welfare benefits, they ask, and if so, are they worth the continents much bigger share of welfare spending? From the 1990s until the present economic crisis, the United States enjoyed significantly lower unemployment than such major European economies as France, Germany, Italy and Spain. The high cost to European employers of creating jobs has come in for much of the blame, especially from conservatives. In Germany, over half the cost of employing a worker consists of income tax and mandatory contributions to programs like unemployment insurance and pensions. 5 In Europe there are more protections [for workers], but that makes the economy less flexible, says Vincent R. Reinhart, res-

ident scholar at the American Enterprise Institute, a conservative think tank in Washington. They grow a little slower and have a higher unemployment rate. Weve chosen a different point along the trade-off less safe and faster. The current recession may be shifting that debate. When the U.S. unemployment rate hit 8.5 percent in March, it surpassed the rate in 16 members of the Organization for Economic Co-operation and Development including Sweden, Italy, Britain and Norway. To the Center for Economic and Policy Research, a liberal Washington think tank, the rising U.S. jobless rate turned the case for Americas superior flexibility almost entirely on its head. 6 But to others, its a sign the United States can turn on a dime. That just shows the economy is more responsive: Youre laying off people more easily, and you also hire more easily than in Europe, counters Justin Vaisse, a senior fellow at the Brookings Institution, a centrist Washington think tank. Employers in his native France who want to lay off workers have to prove the economic case for downsizing or else pay sizable severance packages all of which makes businesses reluctant to hire in the first place, he says. Yet some experts say its those rigid labor policies, rather than the cost of welfare benefits, that slow European economies down. The Nordic welfare states of Denmark, Finland, Norway and Sweden offer generous family-assistance programs, including free child care and a year of paid parental leave. But all four economies have grown faster than the United States over the last 15 years, and Finland and Sweden have been pioneers in knowledge-based, high-technology industrial sectors like telecommunications. 7 If you compare continental European countries with the U.S. and Britain, you can say that in exchange for more social protection and poverty reduction, theyve had to pay a price in employment and growth. But once you throw Nordic countries into the mix, you dont see that trade-off at all, says Jonas Pontusson, a professor of politics at Princeton University.

Continued from p. 654

Kennedy was assassinated, in 1963, before he could follow through. His successor, Lyndon B. Johnson who had begun his own congressional career as a Roosevelt Democrat determined that his legacy would be an unconditional War on Poverty. Eventually, it embraced programs such as Head Start, Medicaid, job training and free legal assistance, proving enormously popular with its

target population as well as with liberal Democrats. Some scholars say that the War on Poverty came to be mischaracterized as a series of giant programs to pay poor people for not working. In fact, the guiding doctrine of Office of Economic Opportunity (OEO), the agency that administered the antipoverty initiative, was to provide the means for poor people to climb the socioeconomic ladder.

Johnson launched his war simultaneously with another major initiative, the Great Society. The two are often confused, but Great Society programs were aimed largely at the middle class and included highway beautification, public broadcasting and federal aid to education. Johnson, like Roosevelt, wanted to give people the tools to enter the work force, or to rise within it. Johnsons fundamental conception was that this

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ing on consumption, Vaisse The key, he says, is that observes. Its very bad ecothe Scandinavian countries dont try to guarantee job nomics. Europeans tend to see security with rigid rules benefits like unemployment against firing, like the compensation as a well-earned right, not charity, he adds. French, but offer serious job They wouldnt find it norretraining in new skills mal that someone laid off along with unemployment insurance to ease the tranfor which theyre not resition to new jobs. sponsible should be misThen-French Prime Minister Dominique de Villepin visits a When it comes to povercompany child-care center near Paris in December 2006. erable without the collective France spends twice as much of its gross domestic product system making up for at least ty, the United States leads on social programs as the United States. part of it. wealthy countries with more than twice as big a share of Sarah Glazer its population as continental Europe in poverty and almost triple the Nordic countries share. 8 The most important factor in preventing poverty, research finds, is mothers who contribute 1 Marcus Walker and Roger Thurow, U.S., Europe Are an Ocean Apart on to the family income, assisted by good-quality, free child care, Human Toll of Joblessness, The Wall Street Journal, May 7, 2009, http://on line.wsj.com. as in Sweden, according to Gosta Esping-Andersen, a sociolo- 2 Ibid. The 59 weeks is an extension in Illinois of the usual 26 weeks as gist at Pompeu Fabra University in Barcelona, Spain. And be- part of stimulus measures. cause so many fewer children in Sweden are in poverty than 3 Unemployment Insurance Benefits, 2005, from Benefits and Wages, 2007, most countries, Pontusson says, theyre more capable of taking Organization for Economic Co-operation and Development, Table 1.1 www.oecd.org. advantage of Swedens free, high-quality education system, 4 Ibid. which in turn is an engine of high-wage economic growth. 5 Walker and Thurow, op. cit. France spends twice as big a share of its gross domestic 6 John Schmitt, et al., U.S. Unemployment Now as High as Europe, Center product on social programs as the United States. 9 How do for Economic Policy Research, May 2009, www.cepr.net. they afford it? Health care imposes less of a burden on the 7 Jonas Pontusson, Once Again a Model: Nordic Social Democracy in a Globalized World, January 2009, forthcoming in James Cronin, et al., eds., economy for Europeans, and their family-benefit system doesnt Futures of the Left. Average annual growth of real gross domestic product have the perverse incentives of the U.S. welfare system, since (GDP) per capita 1995-2007 was 2.8 percent for the United States and avchild benefits go to all families, not just to single, impover- eraged 3.2 percent for Denmark, Finland, Norway and Sweden. 8 ished mothers who dont work, says Princeton sociologist 9 Ibid. Total public social expenditure was 16 percent of GDP in the U.S. and Paul Starr. 28.7 percent of GDP in France in 2003. Society at a Glance: OECD Social American observers have heard surprisingly little talk from Indicators, 2006 Edition. Organization for Economic Co-operation and DeEuropean politicians about cutting back welfare benefits in deal- velopment (2007), ww.oecd.org/els/social/indicators/SAG. 10 ing with the economic crisis. 10 Its precisely when theres a theAn exception is President Nicolas Sarkozys recent proposal to increase retirement age in France, aimed at Frances long-term problem of a crisis that you dont want to reduce payments to people spend- dwindling population of young workers to support retirees.

should not be a handout but what he called a hand up, historian Dallek, a Johnson biographer, told National Public Radio in 2004. 33 Johnsons programs failed to completely meet that standard. While the share of the population living in poverty fell from 19 percent in 1964 to 12.8 percent in 1968, this was done . . . by getting them on to expanding welfare rolls, Dallek said. 34

The most dramatic increase came in the Aid to Families with Dependent Children (AFDC) program typically referred to simply as welfare which saw its caseload soar 230 percent from 1963 to 1973. 35 Much of the growth occurred under Johnsons Republican successor, Richard M. Nixon. In fact, Nixon also proposed a Family Assistance Plan that would have revolutionized the welfare system by granting a min-

imum income to every family through a small payment of $1,600 a year. To Haskins the proposal evidences Nixons proto-liberal tendency on domestic policy. But liberal journalist Elizabeth Drew says the diary of Nixon aide H. R. Haldeman indicates Nixon never had any intention of pushing the bill through Congress, where it died in 1970. 36

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W Workfare
he traditional system of providing cash to single mothers who had no official income had prompted skepticism even while Johnson was still in office. The key figure urging a retooling of welfare was Daniel Patrick Moynihan, who as a member of the Labor Departments Office of Policy Planning and Research had written a 1965 report that aroused a storm of controversy. The Negro Family: The Case for National Action concluded that family structures among AfricanAmericans were eroding. High unemployment for males and welfare payments acted as both cause and effect of family disintegration, wrote Moynihan (later a longtime Democratic U.S. senator from New York). We have shown a clear relation between male employment, the socalled Moynihan Report said, and the number of welfare-dependent children. Employment in turn reflects educational achievement, which depends in large part on family stability, which reflects employment. 37 The majority of black children received welfare assistance at one point or another, Moynihan reported. In at least one city, Chicago, recipients of nearly 90 percent of Aid to Families with Dependent Children were black. And the share of welfare families in which the father had deserted the home had climbed from one-third when AFDC began in 1935, to two-thirds. 38 The report reverberated not only because it emphasized the importance of work over welfare but also because it connected welfare policy and race a connection that still resounds in debates over poverty and safety nets. The policy effects of the Moynihan Report began in California in the 1970s, when Gov. Ronald W. Reagan championed a workfare program in his states 1971 Welfare Reform Act.

Unemployment Claims Rose Fourfold


About 9.5 million Americans have claimed unemployment benets in 2009, nearly a fourfold increase from 2007. Number of Americans Claiming Unemployment Benets, 2007 and 2009
No. in millions

10 8 6 4 2 0
2.5 million

9.5 million

2007

2009

Source: Department of Labor

The three-year pilot program formally the Community Work Experience Program required welfare recipients to get jobs. Popular politically, the program failed to make headway on the ground. William Bagley, the former Republican legislator who helped fashion the legislation, told the Los Angeles Times that counties essentially ignored the program. There are only so many people who can rake leaves, he said. A 1976 study by the state Employment Development Department, concluded that workfare did not prove to be administratively feasible and practical. 39 Reagans successor as governor, Democrat Edmund G. Brown Jr., allowed the program to die. But once in the White House, Reagan touted Californias experiment as a rousing success. And as a candidate in the 1976 presidential primary, Reagan made opposition to welfare one of his selling points. He didnt shy away from lump-

ing various safety-net programs together as objectionable nor did he avoid racial stereotypes. Reagan told a Fort Lauderdale rally of working peoples outrage when standing in supermarket checkout lines and seeing a strapping young buck buying Tbone steaks with food stamps. In those days, the term was an unmistakable, and racially charged, reference. 40 Reagan lost that primary. But when he finally won the presidency in 1980, his California law became a template for changes in welfare that he demanded from Congress. A competing bill in the Democrat-controlled House proposed expanding access to benefits. Moynihan, who had been elected to the Senate in 1976, worked out a compromise. He summed up his legislation to the Los Angeles Times: Welfare mothers need work. Fathers have to support their families. Children need care. Our purpose is to free these women and children from the stigma of dependency. 41 Congress passed the Family Support Act in 1988. But even at the time, experts said that the reshaping of welfare would require years. Moynihan himself said that work requirements would be phased in so gradually that significant results wouldnt appear until 2000. 42 At the heart of the Family Support Act of 1988 was the Jobs Opportunities and Basic Skills Training Program, known as JOBS. Each state was required to establish its own JOBS program by y 1990, with education, vocational training and placement, along with support services such as child care. 43 As soon as it was enacted, some liberals called the changes minor. Conservatives, for their part, argued that the law was too benefits-oriented. And the nonpartisan Congressional Budget Office forecast in 1989 that the law w would reduce welfare rolls by only y 50,000 people over five years far r from the major decrease that conservatives had been demanding.

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In fact, as the economy went into recession in 1989, state welfare caseloads increased. As of December 1991, the nations welfare population had grown more than 20 percent, to more than 4.5 million families a bigger uptick than the increases registered during the three other recessions that had occurred since 1970.

Unemployment Rates Steadily Rising


The governments ofcial unemployment rate in May 2009 was more than two percentage points higher than just ve months earlier. During the same period, so-called effective unemployment* approached 19 percent, a rise of nearly four percentage points. Ofcial and Effective Unemployment Rates, December 2008-May 2009
20% 15 10 5 0
Dec. 2008 Jan. 2009 Feb. 2009 March 2009 April 2009 May 2009
15.24% 7.19% 15.87% 7.56% 16.70% 8.08% 17.39% 8.54% 17.75% 8.87% 18.68% 9.36%

W Welfare Reform
he 1988 law whetted political appetites for a much tougher approach to rewriting welfare law. While Reagan and other politicians had been denouncing the welfare system for encouraging long-term dependency, a pool of generally conservative policy experts had been busy gathering the intellectual ammunition for a comprehensive overhaul of the system. 44 A key source of data for conservatives was a study by two Harvard social scientists, which showed that 65 percent of welfare recipients at any given moment would be on the rolls for at least eight years. Charles Murray, a fellow of the American Enterprise Institute, wrote extensively about illegitimate births as a major cause of poverty. He said that births outside marriage were also a consequence of safety-net programs that provided extra support for each additional child born to an unwed mother. The Brookings Institutions Haskins, who was staff director of the House Ways and Means Human Resources Subcommittee when it was under Republican control in 1995-1996, wrote later that Murrays claim of a welfareillegitimacy link was weak and somewhat inconsistent. But Haskins conceded that the claim rang true to the public at large, and conservatives used it to fire up anti-welfare sentiment. Some Democrats recognized the political appeal of attacking the welfare system. Running for president in

* Includes those too discouraged to look for work and part-time employees working fewer hours than desired. Source: Not Out of the Woods, New America Foundation, June 2009

Official Effective

1992, Democrat Bill Clinton vowed to end welfare as we know it. But for the first two years after Clinton took office, his administration treated welfare-law changes with little urgency, in the view of those pushing for major overhaul. A White House proposal did emerge in 1994. The Clinton plan would have given welfare recipients two years from enrollment to find work. Federally subsidized jobs would be open to those who failed to get work. As a money-saving measure, Clinton proposed covering only welfare recipients born after 1971. The proposal found little support among liberals, who opposed the twoyear limit. Republicans responded harshly. They pointed to the failure to cover the entire caseload, and to what they called too much flexibility in enforcing time limits. Republicans also objected to what they called ineffective measures to discourage illegitimate births. A Republican sweep in the 1994 congressional elections changed the entire political climate on welfare. Now in control of both houses of Congress, the GOP set itself the goal of producing the kind of welfare law for

which it had been pushing for the better part of three decades. The key elements of what became known as welfare reform fundamentally a Republican product included: the end of AFDC, which was replaced by TANF; a five-year time limit on assistance, which would only be granted in the first place to a parent who prepares for employment and gets a job; and a limit on federal assistance to state welfare programs effectively y preventing them from simply growing as caseload demand increases. Moreover, thanks to provisions allowing states flexibility in designing their r own welfare programs, about half the states prohibited increasing benefits to recipient mothers who had additional children while in TANF a measure designed to discourage illegitimate births. The Senate passed the legislation 78-21; the House vote, on July 31, was 328-101. Clinton signed it into law on Aug. 22, 1996. That didnt end debate, however. In August, Wendell E. Primus, a deputy y assistant secretary of Health and Human Services, resigned in opposition to Clintons enactment of the law,

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which Primus office had predicted would add 1 million children to the poverty population. He was followed out the door by assistant secretaries of Health and Human Services Edelman and Mary Jo Bane. 45 And Sen. Moynihan opposed the law, which he had fought in the Senate as punitive and risky. Attacking a later proposal to overhaul Social Security, he called that effort a consequence of the welfare law and its abolition of the social contract of the 1930s, in which we undertook the care of the elderly, the unemployed, the children. 46 Nevertheless, the first five years of TANF didnt produce the social catastrophe critics had predicted, even as the national caseload dropped by more than 50 percent from its peak in 1994. The economic boom of the late 1990s certainly played a role by producing millions of service-sector jobs that former recipients could fill. But, at the five-year mark, critics noted that 40 percent of former recipients who were forced off the rolls still werent working. And the potential effects of a major recession on the TANF system and its participants remained a source of concern. In California, where the budget crisis had forced the state to issue IOUs to some contractors and vendors, a new state budget has shut off enrollments to new applicants in the states Healthy Families program for children from lowincome families. Some advocates say the move could deny medical care to 400,000-570,000 children, according to competing estimates by state officials and child advocates. 47 Elsewhere, Louisiana and North Carolina said theyd run out of money to finance previously authorized expansions in their child-health programs. And lawmakers in Alaska, Delaware, Georgia, Missouri, Rhode Island and Texas rejected attempts to expand eligibility for their states programs. 48 To be sure, other states did find the money to open their programs to more children, including Alabama, Arkansas, Indiana, Iowa, Montana, Nebraska, North Dakota, Oklahoma, Oregon and West Virginia. Ohio may do likewise. Our economy is tough here, Democratic Alabama state Sen. Roger H. Bedford Jr. said. But our decision was to fund the health-care needs of our children because a healthy child learns better, and they dont show up at the emergency room needing acute care. 49 Arguments over childrens health care aside, the budget shortfalls in all but two states are revealing the vast differences in how states administer safety-net programs. Much of the safety net is partly funded by the federal and state governments but run by states, to which most programs give great latitude in making rules and setting eligibility standards. According to a survey by The New York Times, the differences run deep. In California, 50 percent of those eligible for food stamps receive them, versus 98 percent in Missouri. Unemployment Insurance goes to 67 percent of laid-off workers in Idaho but only 19 percent in South Dakota. 50 The only rule among state programs is inconsistency, The Times concluded. Youve got this kind of jigsaw puzzle that doesnt really fit together, conservative social-policy expert Stewart Butler, vice president for r domestic and economic policy studies at the Heritage Foundation, told The e Times. 51 As often happens with major national issues, California provides the most dramatic examples of the collision between safety-net programs and hard-pressed state government. For decades, California has enjoyed a high national ranking in providing for its least well-off citizens. In 2002 (the most recent data available), the state spent 70 percent more per capita on social services than the rest of the country. 52 But the budget crisis seems certain to slash safety-net programs. In Oakland, an economically struggling city y in the San Francisco Bay Area, advocates for low-income residents say y many of their clients are nearing the point of desperation. Recipients of general assistance available to single people who cant work but dont qualify for other programs were expecting to see their r aid cut from year-round to three months. What are they going to do for the remaining nine? asks Ed Barnes, director r of income practice at the East Bay Community Law Center. When youre telling people on General Assistance that for r nine months theyre going to have nothing, some are going to get sick, some are going to die, some are going to break into your house and mine and steal your plumbing. Funding for CalWorks, Californias TANF program, was slashed under the new budget. Republican Gov. Arnold Schwarzenegger said that applying eligibility rules more strictly would save $753 million this year, and $1.5 billion starting in 2010. The new standards, he said, would end waste, fraud and abuse of your hard-earned tax dollars. 53
Continued on p. 662

CURRENT SITUATION
State Nets Fraying y g
eeling from declining revenues as home prices drop and jobs disappear, state governments are having a harder time keeping up their safety-net programs. Budget crises in statehouses across the country are showing the extent to which programs created by the federal government depend on state money and administration.

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At Issue: Iss
Does Europe have a better safety-net system than the U.S.?
yes

PETER EDELMAN
DIRECTOR, CENTER ON POVERTY, R Y INEQUALITY AND PUBLIC POLICY GEORGETOWN LAW CENTER
WRITTEN FOR CQ RESEARCHER, JULY 13, 2009

LAWRENCE M. MEAD
PROFESSOR OF POLITICS AND PUBLIC POLICY, NEW YORK UNIVERSITY Y
WRITTEN FOR CQ RESEARCHER, JULY 15, 2009

n some ways it s a really easy question. Every European its question country has universal health coverage. Most have far better systems of child care than we have. And so on. Some say the European systems are too good, especially with regard to income support too generous and consequently too expensive, requiring unacceptably high taxes, etc. But you dont see the kind of extreme poverty in Europe that we have in the United States. More than 15 million people in the U.S. over 5 percent of our population have incomes more than halfway below the poverty line below $8,500 for a family of three. Thats pretty shocking. European countries typically have a family allowance or a child allowance that creates a floor of income that prevents the rather unbelievable situati A critique of the European systems is that they make it too easy for people to stay out of the labor market. Of course the other side of that coin is that the Europeans can live with higher unemployment rates than was the norm for the U.S. in g p y recent years because they have a more adequate safety net than we do. Nonetheless, there is an issue. The United Kingdom and the United States both came to the conclusion in the mid1990s that they had people receiving cash assistance who could be working. But they responded in basically opposite ways, and I think the U.K. got it right. The American solution was to shrink the welfare rolls by getting tough. Each state was largely allowed to decide for itself, but the basic idea was to make it harder for people to get help, unpleasant for those who manage to receive help and easier to push people off who fail to cooperate in some way. The Brits said, lets make it more remunerative for people to work than to be on the dole, and lets do that not by cutting benefits or pushing people away, but by beefing up the income supplementation that we make available to low-wage workers so they can have a living income. Its like what weve done with the Earned-Income Tax Credit, but much more so. The United States would do well to emulate the Europeans approach to health care and child care. But in the area of income support for non-disabled people of working age, or at least those with children, the most important lesson is the one that comes from the United Kingdom.
no

y yes no
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he chief difference between the American and European safety nets is that the United States typically provides less assistance to those of working age. Our unemployment insurance is relatively restrictive, and benefits are time-limited. In Europe, unemployment coverage is wider and open-ended, at least for the low-income. In America, cash welfare is confined largely to the disabled and needy single mothers. Other lowincome people get only wage subsidies or food stamps (now called the Supplemental Nutrition Assistance Program) for buying groceries. In contrast, Europe typically provides some form of guaranteed income to all needy people, in cash. The European system assures broad security but fosters long-term dependency. Single mothers and the jobless can live on the government indefinitely without taking serious steps to support themselves. There is widespread fraud, with many people claiming benefits who could work. America minimizes dependency because unemployment and welfare claimants face more pressure to move into jobs. Thus, a higher share of the population works in America than in many European countries. That promotes social integration and limits poverty, since few of the steadily employed are poor. Critics demand that a minimum income be guaranteed to everyone, regardless of work effort, but Congress has repeatedly refused to enact it. This reflects public opinion. Americans want government to help the poor, but they also demand that adult recipients work alongside taxpayers. In the 1990s welfare reform strengthened work tests for welfare mothers, causing most of them to leave welfare for jobs. Recently, Europe has also begun to demand work of people on unemployment and welfare benefits. There, as here, the main motivation is not to save money but to promote social integration and curb non-work and poverty, especially for children. The very image of a safety net implies that the employable actively seek work, needing help only if they fail. With its emphasis on short-term aid, Americas system is truer to that image than Europes, where people have been supported apart from employment. On both continents, low-paid jobs are widely available. Immigrants, often illegal, are doing many of them. The message of welfare reform is that those who need income should first take available jobs, and only then look to government. In hard times like now, jobs will be less available, so public aid is needed. But assistance should not become, as in Europe, a right that people claim without any serious effort to work.

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Continued from p. 660

Homelessness

ig-city Americans may have gotten used to congregations of homeless individuals in downtowns across the country. But a growth in families with kids without shelter may not be so easy to overlook, or accept. he longstanding conflict over the The most recent Housing and Urban governments social responsibility y Development Department (HUD) ancould reignite next year, when the nual survey of homelessness reported 1996 welfare law comes back before a considerable rise in families withCongress. Scheduled reauthorization out shelter. The estimated number inof the law would provide an opporcreased by 43,000 people, to more than tunity for critics and supporters to fight 516,000 from 2007 to 2008, accounting their battle in the new context profor nearly one-third of populations in vided by the recession. shelters. 54 Reauthorization a The rise in homecongressional device for r less families is antaking a new look at a law w other indication of doesnt always occur, how the recession even when a reauthoriza which is closely tion date is built into a linked to falling statute. Some laws simply y home prices and remain in effect. That hapforeclosures is pened with a scheduled hurting families. In TANF reauthorization in addition to fewer 2002. But those on both people coming from sides of the safety-net situations in which debates are operating on they already were the assumption that the homeless, more 2010 TANF reauthorization came from situations debate will take place. that previously had Legal Momentum, a been relatively staliberal womens-rights ble, the report said. advocacy organization, One advocate has already started orsays the new homeganizing to use reautholess are coming rization as a vehicle to California teachers and supporters in Los Angeles protest from the low-wage make major changes in state and local budget cuts on Jan. 29, 2009. workforce. Its poor the law. people who are becoming homeless, pointing to homelessness as a problem Reauthorization offers a fresh opsays Nan Roman, president of the Na- thats surged only over the past 30 years. portunity for advocates to press Contional Alliance to End Homelessness. In an innovative approach, Robert gress for measures to make TANF reThey had no cushion. Work for them Lerman, a professor of economics at sponsive to the mothers and children is a paycheck-to-paycheck deal. American University in Washington, the program is intended to serve, the Nevertheless, Roman hopes an ad- proposes that the federal government organization says on its Web site. 55 ditional $1.5 billion provided in the buy homes at their present low prices Zedlewski of the Center on Budstimulus law will benefit at least and subsidize part of the mortgage get and Policy Priorities, says she ex300,000 families. The money will be payments for people otherwise eligible pects a lot of conversation about how disbursed over two years to the feder- for rent assistance. we should be serving low-income

al Homelessness Prevention and Rapid Rehousing Program, which provides rent assistance to prevent evictions or help renters acquire new housing before they become homeless. Housing instability frequently is ignored as a safety-net matter, Roman says. But the causes and effects of homelessness place it squarely in the same cluster of socioeconomic issues as layoffs and hunger. Its hard to think about getting a job or staying employed, or keeping the kids in school, without stable housing, she says. Rental rates increased more than take-home pay in most parts of the country, Roman and others argue,

We would expand demand for r owner-occupied dwellings, and lower the share of eligible low-income people on the waiting list for housing, Lerman argues. Wed kill two birds with one stone.

Reauthorization

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Getty Images/David McNew

families with a tentative attachment to the labor market that falls apart during periods of high unemployment. Brookings Haskins, one of the top strategists behind the TANF law, sees a chance at raising a closely related issue mothers who have lost their eligibility for cash assistance but who also have failed to find work. Typically, these former TANF participants face a series of obstacles to employment, such as finding reliable and affordable child care and being able to afford transportation to and from work. Generally, research shows that if she just has one barrier, she can overcome it, Haskins says. Not if there are more. Whatever attempts are made at changing TANF in 2010, they wont be the first efforts undertaken via reauthorization. In 2002-2005, fights over whether and how to change welfareto-work requirements in the law stalled reauthorization, which stayed in force under temporary arrangements. Another of these arrangements was made in 2005. 56 The Heritage Foundations Rector argues that the reauthorization fights of the early 2000s seriously weakened the 1996 welfare reforms by effectively loosening work requirements. During next years reauthorization process, he says, Every indication is that, far from strengthening those work requirements, they will make them weaker.

OUTLOOK
New Approach? pp
orecasts concerning government safety-net programs often diverge sharply, depending on experts view of todays picture.

Mead of NYU rejects talk of the recession as a world-shaking event. In the slowdown of the early 1980s, he says, There was much more of a sense that the world was coming apart. Ten percent was the highest unemployment wed seen since the Great Depression. And we were losing factory jobs much more rapidly than we are now. What I sense now is the lack of acute distress of the kind we saw then. And the upshot was that the country soared out of trouble and became wealthier in the 1990s, Mead argues. Ten years from now, Mead says the present recession will also have blown over. I think were going to go on as we are. Were likely to see continuing reliance on low-wage employment as the main safety net. Those on the other side of the ideological divide are less optimistic. Welfare reform has been basically an effort of moving people from very low levels of public benefits to very low levels of wages, says McHugh, of the National Employment Law Project. That doesnt really address poverty. McHugh sees a possibility that future developments may weaken one of the central doctrines of the 1996 welfare law and perhaps prompt a different approach. The TANF model is based on the idea that attitudinal or cultural reasons get in the way of people going to work. But at this point in Michigan weve got a lot of families where the parents actually have skills, they have degrees, and now theyre 45 or 50 and they dont have the prospect of getting reemployment in fields in which theyve got experience. The growth in population of laidoff industrial workers may lead to programs to develop meaningful employment for factory hands and white-collar workers laid off from the auto industry and its offshoots, McHugh says.

Economist Lerman of American University cautions that progress on that front may be slow, given the difficulties of designing such programs. I think well probably do a bit better over time, he says. I would like to see constructive efforts to improve peoples earning outcomes. As one of the architects of the 1996 law, Haskins of Brookings sees a need to move to social engineering that promotes social mobility not just employment. That is a very tough one. Education is going to be very y important a more technical kind of education, as opposed to a fouryear degree. 57 But plans for educational expansion depend on government funding, which is highly uncertain, Haskins acknowledges. The thing that would really precipitate a crisis would be a failure to sell our [U.S. Treasury] bonds, he says, arguing that the danger is real. Whatever the next step may be, Haskins maintains that the 1996 law w laid a good foundation. We are going to have millions of low-wage workers, and many of them are going to be parents, especially single moms, he says. It is much better r to have them working than wasting away on welfare. Weve built a pretty y good system. Georgetowns Edelman, who opposed the 1996 law to the point of f quitting the Clinton administration in protest, argues that it reflected disdain for single mothers who for a variety y of reasons werent able to work. We have this national attitude that there is something wrong if theyre receiving cash assistance on any kind of continuing basis, he says. We really y need to talk about that again. We had that debate and it came out the other r way. That shouldnt be the end. The best solution for them is a guaranteed minimum income of the kind proposed during the Nixon administration, Edelman says, noting

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that it could be designed to encourage work. Edelman agrees with some of his adversaries, however, that another big challenge of the future will center on lowwage workers. We have to be aware of the possibility that in the 21st century in a globalized world we may have full employment, but the median wage may not improve all that much.
4

Notes
1

Heather Boushey, et al., Understanding Low-Wage Work in the United States, The Mobility Agenda, March 2007, www.mobility agenda.org/lowwagework.pdf; May 2008 National Occupational Employment and Wage Estimates, U.S. Bureau of Labor Statistics, www.bls.gov/oes/2008/may/oes_nat.htm#b000000. 2 Combined TANF and SSP-MOE, Total Number of Child Recipients, Total Number of Families, Administration for Children and Families, updated May 19, 2009, www.acf.hhs.gov/pro grams/ofa/data-reports/caseload/caseload_recent. html. 3 Job Openings and Labor Turnover Summary, U.S. Bureau of Labor Statistics, July 7, 2009, www.bls.gov/news.release/jolts.nr0.htm; Employment Situation Summary, U.S. Bureau of Labor Statistics, July 2, 2009, www.bls.gov/news. release/empsit.nr0.htm; Databases, hires, http://data.bls.gov/PDQ/servlet/SurveyOutputServlet;jsessionid=a230513c648019747a85; Databases, layoffs and discharges, http://data.bls. gov/PDQ/servlet/SurveyOutputServlet;jsessionid =a2302412b9b6645207b7.

Ben S. Bernanke, The Economic Outlook, testimony before Joint Economic Committee, May 5, 2009, www.federalreserve.gov/newsevents/testimony/bernanke20090505a.htm. 5 Quoted in Kevin Sack, Defying Slump, 13 States Insure More Children, The New York Times, July 18, 2009, www.nytimes.com/2009/ 07/19/us/19chip.html?%2334;Kevin Sack=&_r= 1&sq=&st=cse&%2334;=&scp=2&pagewanted=all. 6 Sara Murray, Numbers on Welfare See Sharp Increase, The Wall Street Journal, June 22, 2009, l http://online.wsj.com/article/SB124562449457235 503.html. TANF Caseloads Increase in Most Big States, National Conference of State Legislatures, undated, www.ncsl.org/default.aspx? TabId=17772. 7 Evan Halper and Shane Goldmacher, Governor, legislative leaders start building support for their budget pact, Los Angeles Times, July 21, 2009, www.latimes.com/news/local/la-mecalifornia-budget22-2009jul22,0,1856950.story. 8 Climbing Caseloads, The Wall Street Journal, l June 22, 2009, http://s.wsj.net/public/resources/ documents/st_WELFAREINCREASE0906_200906 19.html. 9 Supplemental Nutritional Assistance Program: Number of Persons Participating, U.S. Food and Nutrition Service, updated June 30, 2009, www.fns.usda.gov/pd/29SNAPcurrPP.htm. 10 Ibid. 11 Employment Situation Summary, op. cit. 12 Gene Falk, The Potential Role of the Temporary Assistance for Needy Families (TANF) Block Grant in the Recession, Congressional Research Service, pp. 16-18, http://assets. opencrs.com/rpts/R40157_20090224.pdf. 13 Ibid., pp. 1,4. 14 American Recovery and Reinvestment Act of 2009, U.S. Food and Nutrition Service, undated, www.fns.usda.gov/fns/recovery/recovery-snap. htm.

15

About the Author


Peter Katel is a CQ Researcher staff writer who previously reported on Haiti and Latin America for Time and Newsweek and covered the Southwest for newspapers in New Mexico. He has received several journalism awards, including the Bartolom Mitre Award for coverage of drug trafficking, from the Inter-American Press Association. He holds an A.B. in university studies from the University of New Mexico. His recent reports include Mexicos Drug War, Homeland Security and Legalizing Marijuana.

Alison M. Shelton, et al., Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009, Congressional Research Service, March 4, 2009, http://assets.opencrs.com/rpts/R40368_200903 04.pdf; Federal Stimulus Funding Produces Unprecedented Wave of Unemployment Insurance Reforms, National Employment Law w Project, June 16, 2009, www.nelp.org/page//UI/UIMA.Roundup.June.09.pdf?nocdn=. 16 Robert E. Rector and Katherine Bradley, Welfare Spendathon: House Stimulus Bill Will Cost Taxpayers $787 Billion in New Welfare Spending, Heritage Foundation, Feb. 6, 2009, www.heritage.org/research/economy/upload/ / wm_2276.pdf. 17 Mickey Kaus, The Money Liberal Conspiracy At Work, Slate, Feb. 10, 2009, www.slate. com/blogs/blogs/kausfiles/default.aspx. 18 Falk, op. cit. 19 Indicator 4, Rates of Participation in MeansTested Assistance Programs table IND 4a, in 2008 Indicators of Welfare Dependence, Health and Human Services Department, Chapter II, http://aspe.hhs.gov/hsp/indicators08/ch2.shtml. 20 Business Employment Dynamics, U.S. Bureau of Labor Statistics, May 19, 2009, p. 3, www.bls.gov/news.release/pdf/cewbd.pdf. 21 Remarks by the President on the American Graduation Initiative, The White House, July 14, 2009, www.whitehouse.gov/the_press_office/ / Remarks-by-the-President-on-the-American-Gradu ation-Initiative-in-Warren-MI/. 22 Remarks by the President on Job Creation and Job Training, The White House, May 8, 2009, www.whitehouse.gov/the_press_office/ Remarks-by-the-President-on-Job-Creation-andJob-Training-5/8/09. 23 Madeleine Brand, 40th Anniversary of LBJs War on Poverty, National Public Radio, Jan. 8, 2004, www.npr.org/templates/story/story.php? storyId=1589416. 24 House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies, CQ Congressional Transcripts, May 12, 2009. 25 Senate Health, Education, Labor and Pensions Committee Holds Hearing on Green Skills Training for Workers, CQ Congressional Transcripts, April 21, 2009; Employment Situation Summary, op. cit. 26 Arthur Schlesinger Jr., The Hundred Days of FDR, The New York Times, April 10, 1983, Sect. 3, p. 1. Unless otherwise indicated, this subsection also draws on William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal l

664

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(1963). For background, see Peter Katel, Van6 ishing Jobs, CQ Researcher, March 13, 2009, r pp. 225-248. 27 Quoted in Leuchtenburg, op. cit., p. 122. 28 Quoted in ibid., p. 124. 29 B. Putney, Politics and Business in 1936, Editorial Research Reports, Jan. 4, 1936, available at CQ Researcher Plus Archives. 30 Quoted in Presidential Candidates, 1936, Editorial Research Reports, Feb. 18, 1936. 31 Quoted in Louis Galambos and Daun van Ee, A Presidents First Term: Eisenhowers Pursuit of The Middle Way, Humanities, JanuaryFebruary, 2001, www.neh.gov/news/humani ties/2001-01/eisenhower.html. 32 Brendon OConnor, A Political History of the American Welfare System: Where Ideas Have Consequences (2004), pp. 22, 55-57. 33 Brand, op. cit. 34 Ibid. Also see Historical Poverty Tables, U.S. Census Bureau, www.census.gov/hhes/ www/poverty/histpov/hstpov2.html. 35 For background, see Sarah Glazer, Welfare Reform, CQ Researcher, Aug. 3, 2001, pp. r 601-632. 36 Ron Haskins, Work Over Welfare: The Inside Story of the 1996 Welfare Reform Law (2006), pp. 1, 5; Elizabeth Drew, Richard M. Nixon (2007), pp. 53-54. 37 The Negro Family: The Case for National Action, U.S. Department of Labor, March, 1965, Chapt. V, www.dol.gov/oasam/programs/history/webid-meynihan.htm. For attribution of the report to Moynihan, see History at the Department, Documents, www. dol.gov/oasam/programs/history/webidrpage. htm. 38 Ibid., Chapt. II. 39 Quoted in Richard Padock, Gov. Reagans Workfare: No Gang Busters In a Short Life, Los Angeles Times, Feb. 10, 1986, p. A3. For background, see Kenneth Jost, Welfare Reform, CQ Researcher, April 10, 1992, pp. 313-336. r 40 Quoted in Robert G. Kaiser, On Welfare: Democrat Bullish, Republican Bearish (but Less Now), Oct. 23, 1980, p. A2. See also Jason DeParle, The W Word, Re-Engaged, The New York Times, Feb. 8, 2009, Week in Review, p. 1. 41 Quoted in William J. Eaton, New Welfare Plan Stresses Work, Family Responsibility, Los Angeles Times, May 15, 1988, p. A14. 42 William K. Stevens, Welfare Bills Radical Goals Would Take Years, The New York Times, Oct. 2, 1988, p. A20. 43 Ibid.

FOR MORE INFORMATION


Administration for Children and Families, 370 LEnfant Promenade, S.W., Washington, DC 20447; www.acf.hhs.go. An agency of the Department of Health and Human Services that produces statistical information on TANF. American Enterprise Institute, 1150 17th St., N.W., Washington, DC 20036; (202) 862-5800; www.aei.org/ra/35. A conservative think tank that studies welfare policy. Brookings Institution, 1775 Massachusetts Ave., N.W, Washington, DC 20036; (202) 797-6000; www.brookings.ed. A centrist think tank that studies social policy. Center on Budget and Policy Priorities, 820 1st St., N.E., Suite 510, Washington, DC 20002; (202) 408-1080 www.cbpp.org. A liberal think tank that studies the effectiveness of safety-net programs. Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, DC 20002; (202) 546-4400; www.heritage.org/research/welfare. A conservative think tank that advocates work requirements for welfare recipients. U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., N.E., Washington, DC 20212; (202) 691-5200; www.bls.gov. The government agency responsible for researching all aspects of the labor market. Urban Institute, 2100 M St., N.W., Washington, DC 20037; (202) 833-7200; urban.org/welfare/index. A liberal think tank that studies safety-net programs.
44

Except where otherwise indicated, this subsection draws from Haskins, op. cit. For background, see Chris Conte, Welfare, Work and the States, CQ Researcher, Dec. 6, 1996, pp. r 1057-1080; and Glazer, op. cit. 45 Alison Mitchell, Two Clinton Aides Resign to Protest New Welfare Law, The New York Times, Sept. 12, 1996, p. A1. 46 Daniel Patrick Moynihan, Social Security, As We Knew It, The New York Times, Jan. 5, 1997, p. A13. 47 Sack, op. cit.; Judy Lin, Schwarzenegger, lawmakers restart budget talks, The Associated Press, July 17, 2009, http://news.yahoo.com/s/ ap/20090717/ap_on_re_us/us_california_budget. 48 Sack, op. cit. 49 Quoted in ibid. 50 Jason DeParle, For Victims of Recession, Patchwork State Aid, The New York Times, May 9, 2009, www.nytimes.com/2009/05/10/us/ 10safetynet.html?pagewanted=all. 51 Quoted in ibid. 52 Steve Gorman, Californias needy may bear brunt of budget crisis, Reuters, July 15, 2009, http://news.yahoo.com/s/nm/20090715/us_nm /us_usa_states_budget_california. 53 Quoted in ibid.

54

The 2008 Annual Homeless Assessment Report to Congress, Department of Housing and Urban Development, July 2009, pp. 18-19, www.hudhre.info/documents/4thHomeless AssessmentReport.pdf. 55 TANF Reauthorization, Legal Momentum, undated, www.legalmomentum.org/our-work/ / social-safety-net/tanf-reauthorization-2010.html. 56 Vee Burke and Gene Falk, TANF Reauthorization: Side-by-Side Comparison of Current Law and Two Versions of H.R. 4 (108th Congress), Congressional Research Service, March 1, 2005, www.nationalaglawcenter.org/ / assets/crs/RL32210.pdf; Gene Falk, TANF, Child Care, Marriage Promotion, and Responsible Fatherhood Provisions in the Deficit Reduction Act of 2005, Congressional Research Service, March 1, 2007, http://wikileaks.org/leak/ / crs/RS22369.pdf. 57 For background, see the following CQ Researchers: Alan Greenblatt, Upward Mobility, April 29, 2005, pp. 369-392; Kenneth Jost, Downward Mobility, July 23, 1993, pp. 625648; and Thomas J. Billitteri, Middle-Class Squeeze, March 6, 2009, pp. 201-224.

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Bibliography ogr p y g
Selected Sources
Books
Edelman, Peter, Searching for Americas Heart: RFK and the Renewal of Hope, Houghton Mifflin, 2001. The director of the Center on Poverty, Inequality, and Public Policy at Georgetown Law Center contrasts the poverty-fighting record of one former boss, Sen. Robert F. Kennedy, with a more recent one, President Bill Clinton; Clinton comes in second. Haskins, Ron, Work Over Welfare: The Inside Story of the 1996 Welfare Reform Law, Brookings Institution Press, 2006. A former top congressional staffer who was an architect of the 1996 welfare law recounts the story of its passage. OConnor, Brendon, A Political History of the American Welfare System: When Ideas Have Consequences, Rowman & Littlefield, 2004. An Australian specialist in U.S. politics examines the doctrines and legislation that created and changed the safety net. Wilson, William Julius, When Work Disappears: The World of the New Urban Poor, Vintage Books, 1997. A Harvard sociologist who is a leading scholar of AfricanAmerican society examines the early results of the deindustrialization of the American economy. com/news/local/la-me-budget21-2009jul21,0,5521044. story. California politicians cut safety-net programs to balance the budget. Pugh, Tony, Americas humming economy leaves more and more behind as poverty deepens to record levels, The Miami Herald, Feb. 25, 2007, p. A1. This detailed report on growing poverty came out before the recession began. Strom, Stephanie, Financial Safety Net of Nonprofit Organizations is Fraying, Survey Finds, The New York Times, March 26, 2009, p. A17. Nonprofit social-service providers are facing budget shortfalls even as demand rises.

Reports and Studies


The 2008 Annual Homeless Assessment Report to Congress, Department of Housing and Urban Development, July 2009, www.hudhre.info/documents/4thHomeless AssessmentReport.pdf. The annual report on homelessness highlights the possibility that the recession is forcing people into shelters who never before had faced eviction. Can We Put Poor Men to Work? conference transcript, American Enterprise Institute, May 27, 2009, www.aei. org/docLib/CanWePutPoorMentoWork-EventTranscript.pdf. Experts of varying views discuss solutions to employment problems involving low-income men. Bradley, Katherine, and Robert Rector, Stronger Welfare Work Requirements Can Help Ailing State Budgets, Heritage Foundation, June 19, 2009, www.heritage.org/Re search/welfare/wm2496.cfm. The authors call for toughening work requirements they say have been weakened in recent years. Falk, Gene, The Potential Role of the Temporary Assistance for Needy Families (TANF) Block Grant in the Recession, Congressional Research Service, Feb. 24, 2009, http://assets.opencrs.com/rpts/R40157_20090224.pdf. A social-policy specialist examines the effectiveness of a major safety-net program in the face of the economic crisis. Sherman, Arloc, Safety Net Effective at Fighting Poverty but Has Weakened for the Very Poorest, Center on Budget and Policy Priorities, July 6, 2009, www.cbpp.org/files/76-09pov.pdf. A welfare system expert concludes the safety net doesnt extend to people in deep poverty.

Articles
Bosman, Julie, As More Apply for Welfare, Concern for Those Denied, The New York Times, April 29, 2009, p. A19. New York state welfare enrollment had been decreasing even though applications were on the rise, leaving advocates concerned about overly restrictive eligibility standards. Cauchon, Dennis, Benefit spending soars to new high, USA Today, June 4, 2009, p. A1. The percentage of Americans relying on government assistance has increased to a record level. DeParle, Jason, As Ranks of Unemployed Swell, Wait for Benefits Worsens Pain, The New York Times, July 24, 2009, p. A1. Inefficiencies and revenue shortfalls in the unemployment insurance system hurt recipients. Eckholm, Erik, States Slashing Social Programs For Vulnerable, The New York Times, April 12, 2009, p. A1. Budget shortfalls are leading to major cutbacks in state funding of safety-net programs. Goldmacher, Shane, and Evan Halper, Budget accord reached, Los Angeles Times, July 21, 2009, www.latimes.

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CHAPTER

11

THE NATIONAL DEBT


BY MARCIA CLEMMITT

Excerpted from Marcia Clemmitt, CQ Researcher (November 14, 2008), pp. 937-960.

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The National Debt


BY MARCIA CLEMMITT

THE ISSUES

cent string of annual federal budget deficits which have persisted even in ecosama bin Laden is nomic good times and skynot Americas rocketing health-care costs, gravest threat, says which threaten to swamp former Comptroller General Medicare, Medicaid and the David M. Walker. private health-care system The most serious threat over the next several decades. to the United States is not As alarming as the size someone hiding in a cave of our current debt is, it exin Afghanistan or Pakistan cludes many items, includbut our own fiscal irreing the gap between future sponsibility, Walker told promised and funded Social CBS News earlier this year. Security and Medicare ben We r e s p e n d i n g m o r e efits, veterans health care money than we make. . . . and a range of other comWere charging it to the mitments and contingencies credit card . . . and expecting that the federal government our grandchildren to pay has pledged to support in for it. And thats absolutely the future thus underoutrageous. 1 stating the true magnitude of In February, Walker quit budget problems, Walker told his job as head of the Govthe Senate Budget CommitPresident Bushs $2.9 trillion budget proposal for fiscal ernment Accountability Oftee in January. 5 2008 fills four volumes (2,186 pages) and weighs about fice (GAO) the nations When countries have 10 pounds. In October the annual federal budget deficit hit a record $455 billion. The continuing string auditing agency to barnobligations they couldnt of annual budget deficits has pushed the storm the country full time otherwise meet, rather than national debt to more than $10 trillion. as president of the Peter G. raise taxes or cut programs Peterson Foundation. The to save money, governments new organization, founded by invest- tirement and Medicare benefits will that already carry substantial debt burment banker and Nixon administration strain federal coffers. 2 dens have a tendency to simply print In October the annual federal bud- more money called monetizing Secretary of Commerce Peterson, is dedicated to alerting the public to an get deficit hit a record $455 billion, up debt. But with more cash available, approaching tidal wave of budget from the previous record of $413 bil- demand for goods and services swells deficits just as waves of retiring baby lion in 2004. The increase alarmed many and prices rise higher in an inflaboomers begin claiming trillions of budget analysts, not only because it tionary cycle, says Herbert I. London, dollars in Social Security and Medicare continued the recent series of deficits president of the conservative Hudson but also because it came before the Institute, a Washington think tank. benefits. The sum of deficits year after year economy and financial markets nose- And when it comes to Social Securi including money raised by selling dived, prompting Congress to approve ty and Medicare, the government is Treasury securities here and abroad a $700 billion bailout in October. 3 not going to cut these programs, so is the national debt, now more than Also in October the National Debt monetizing may prove irresistible, Clock in New York Citys Times London says. $10 trillion. In a year of catastrophic financial Square topped $10 trillion for the first Much as with any other debt, such news, three milestones stand out. In time double the national debt when as credit-card debt, the national debt February, 62-year-old retired Mary- President George W. Bush took office matters because the government has land teacher Kathleen Casey-Kirschling eight years ago. 4 to pay interest on it each year, exMost analysts agree with Walker that plains Michael Hudson, a research became the first baby boomer to receive a Social Security check, usher- two budget issues especially threaten the professor of economics at the Uniing in a flood of retirees whose re- nations future financial health: The re- versity of Missouri, Kansas City, and
Getty Images/Congressional Quarterly/Scott J. Ferrell

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National Debt Doubled in Last Decade
The total public debt of the United States has steadily increased from $5 trillion in 1997 to $10 trillion this year (line graph). Roughly half the debt is held by the Social Security Trust Fund (SSTF) and other U.S. government programs and half by outside individuals and groups, including foreign governments (inset). U.S. National Debt 1997-2008
(in $ trillions)

$10

Who Holds U.S. Debt


(in $ billions)

$5 4 $4685.8 $4806.2 3 2 1 0
SSTF, other Foreign government governments, programs other outside groups

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Financial Management Service, Department of the Treasury

president of the Institute for the Study of Long-Term Economic Trends, in Forest Hills, N.Y. If the debt rises too high, interest payments can crowd out other things the government might want to do, he says. Were already spending twice as much on debt interest as on the Iraq War or over $400 billion a year points out Andrew L. Yarrow, author of the 2008 book Forgive Us Our Debts: The Intergenerational Dangers of Fiscal Irresponsibility. 6 And with foreign central banks now holding a sizable portion of Americas debt in the form of Treasury securities, those interest payments dont end up back in Americans pockets as they did in the past, when we mostly owed the debt to ourselves, says Linda Bilmes, a professor of public budgeting at Harvard Universitys John F. Kennedy School of Government and coauthor of The Three Trillion Dollar

War: The True Cost of the Iraq Conflict. 7 Unlike government spending on items like roads, for example, interest payments made to the central bank of China dont help build the nation or the economy, Bilmes says. The recent practice of running deficits during both good economic times and bad disturbs most economists. In a healthy economy, deficits typically increase during economic downturns when tax revenues fall and shrink during boom times. But in the mid-2000s the economy grew, but deficits grew too, as Congress continued to spend while giving out tax breaks, says Hashem Dezhbakhsh, a professor of economics at Emory University in Atlanta. This is a structural deficit, which not only causes the total debt to balloon but indicates that the government isnt behaving conscientiously, he says.

Worse, over the past quarter-century the federal government has run deficits almost every year, even though large, annual Social Security surpluses were borrowed to help shore up federal finances during the entire period. The government has used this accounting legerdemain borrowing Social Security surpluses to fund programs, including wars and tax cuts says Yarrow, who is vice president of the nonpartisan, public opinion research group Public Agenda. As baby boomers reach retirement age, those IOUs will come due as Social Security is forced to pay promised benefits. When that happens, the government will have to make some tough choices to cope with the loss of ready cash, he says. Despite concerns, particularly among skeptical younger Americans who fear Social Security will be broke by the time they retire, most economists say it can survive the fiscal tsunami with only some tweaks. Sometime in the next few decades, Congress will have to either increase Social Security taxes paid by workers and employers or cut the benefits, but the change neednt be drastic, says Roberton Williams, a principal research associate in tax policy at the nonpartisan, mainly center-left-leaning Urban Institute. Well probably have to work a little longer or see our benefits cut a little bit, he says. But the health-care system Medicare and Medicaid as well as other public and private services is another matter. Health costs have been rising faster than the rest of the economy for decades a trend widely seen as unsustainable. One hundred percent of the problem with the nations fiscal future lies in health care, says Henry J. Aaron, a senior fellow in economics at the Brookings Institution, a centrist think tank. If we solve the health-care problem, there wont be a long-term fiscal problem, he says.

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The health-care system must be redesigned to offer incentives for providing only the most effective and cost-effective care, but we dont know yet what effective care is, says James R. Horney, director of fiscal policy at the liberal-leaning Center on Budget and Policy Priorities. Medicare spending growth rates reflect not only the burgeoning beneficiary population but also health-care costs that are growing faster than the inflation rate, said former Comptroller General Walker. Total health-care spending, he said, is absorbing an increasing share of our nations GDP [gross domestic product] the total amount of goods and services the country produces in a year. It has risen from about 8 percent of GDP in 1976 to 16 percent in 2006, and is projected to reach about 20 percent of GDP in 2016 crowding out other vital spending. 8 As growing budget deficits and recession threaten to increase the national debt, here are some of the questions being asked: Is the national debt too big? The national debt now exceeds $10 trillion or about 70 percent of the nations $14.4 trillion gross domestic product. Although some economists find that level of debt alarming, others say it is not overwhelming by international or historical standards. The debt-to-GDP ratio which economists say is the most important measurement is well within historical limits and still gives the U.S. room to maneuver today, says Steven Sheffrin, a professor of economics at the University of California-Davis. (See graph, p. 945.) By world standards, Americas 70 percent debt-to-GDP ratio is not entirely out of line. Japans ratio has long been well over 100 percent, and, as of 2007, Belgium, Norway and Israel had debt-toGDP ratios of 80 percent or higher. In comparison, the ratio in Germany, Canada and France was over 60 percent. 9

Rising Health Spending to Boost Debt


National health expenditures are expected to exceed $4 trillion in 2017 or four times more than the nation spent in 1993, the year the U.S. shifted to managed care. The impact on the national debt is expected to be severe.
(in $ trillions) $5 4 3 2 1 0

U.S. Health-Care Expenditures, 1993-2017

1993

2005

2006

2007*

2008*

2012*

2017*

* projected Source: Sean Keehan, et al., Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare, Health Affairs, February 2008

Total U.S. healthcare spending Private funds Public funds

Moreover, the ratio isnt up appreciably this year, says the Brookings Institutions Aaron. Were heading into a deep recession, which will add to deficits, but were not in a danger zone, he says. Russell Roberts, a professor of economics at George Mason University in Fairfax, Va., calls the size of the national debt a bit of a red herring, since citizens will pay for government spending through either current or future taxes. More important, he says, is whether the money is being spent wisely, whether its spent on important things. Furthermore, with the economy facing a deep recession, and financial markets in trouble, most analysts agree that for the time being the United States will run more though hopefully temporary deficits in order to stimulate the economy. Economists normally argue that when a government goes into deficit mode and has to borrow money, it will raise the interest rates it offers on Treasury securi-

ties, thus crowding out borrowing by private businesses and slowing the economy, says Dean Baker, co-director of the liberal Center for Economic and Policy Research. But in a recession, government borrowing doesnt have that negative effect, since private investors arent looking to fund new projects anyway, he says. On the contrary, in a recession the answer is for the government to spend money, even if that temporarily increases deficits, because the economy needs new demand to begin percolating again, Baker says. Consumption drives the economy, and if consumers are confident and keep buying, business will be happy and the economy will perk up, says Robert E. Wright, a clinical associate professor of economics at New York Universitys Stern School of Business. It would be very difficult to pay down the debt in the next year or so, because the government must spend money in order to help consumers spend and create economy-stimulating demand, he

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says, and because tax revenues will fall For example, if wed had a smaller is worrisome that the federal governnational debt, we might have put up ment currently spends more than it as the recession continues. Even organizations that favor debt $2 trillion rather than $700 billion takes in each year, even when the reduction generally agree that cutting in the recent financial-market economy is strong. Politicians generally . . . should the budget in a recession is not a bailout, he says. Furthermore, if would-be creditors not have the pleasure of spending good idea. In the current climate, if the federal government had to bal- such as foreign central banks (getting votes) without the pain of taxance the budget, that would damp- begin to worry the United States will ing (losing votes), wrote public-finance en the economy, especially since a have trouble paying back its debts consultant and former Treasury official lot of states are at the point where or will have to pay them back in in- Francis X. Cavanaugh. We need that theyve having to lay people off and flated dollars that have less buying accountability to ensure that the spendstop projects, says Susan Tanaka, di- power then the United States may ing is justified that the taxpayers rector of citizen education and en- have to raise its interest rates, which are willing to pay for it. 11 gagement at the Peterson Foundation. makes future borrowing more expenEspecially during the Bush adminOur message would be: Were not sive, says George Masons Roberts. istration, politicians have come to rouso much focused tinely ignore prudent budon the short term geting by spending and as on the long cutting taxes at the same term when it time, many economic anacomes to budget lysts say. [President Ronald] balancing. Reagan proved that deficits Current cirdont matter, Vice Presicumstances aside, dent Dick Cheney reporthowever, many edly remarked in 2002, economists worry when Treasury Secretary the debt-to-GDP Paul ONeill objected to new ratio could be ristax-cut proposals. 12 Public opinion encouring to dangerous ages politicians to be fislevels. cally careless, says Tanaka, In 2006, the of the Peterson Foundation. World Economic We expect the public secForum downtor to do more than we graded the Unitare willing to pay for, and ed States from the Retired Maryland teacher Kathleen Casey-Kirschling, 62, becomes the first baby boomer to file for her Social Security retirement benefits, widespread fear of the Tmost-competitive on Oct. 15, 2007. The national debt will be strained in coming years word taxes means economy in the as millions more boomers sign up to receive that lawmakers arent ever world to the sixthretirement and Medicare benefits. rewarded for being fiscally most-competitive In the past, despite the debts size, conservative. economy, Senate Budget Committee Chairman Kent Conrad, D-N.D., said its economic impact was small, he says, Will Social Security bust the federal last year. Interest payments on the debt but today it is getting a little scary. Interest payments on the debt budget? were crowding out spending on inThe nations debt has increased, acfrastructure, schools and other invest- make up the governments fourthments that could boost productivity, largest budget item. So many of the cording to some analysts, because the things we want from aid to cities government has gotten in the habit of he noted. 10 A large debt can be dangerous, to a better air-traffic-control system paying some of its bills by borrowing much as a fat guy in a small boat are being stung by cutbacks, says money from Social Security surpluses, is vulnerable, says Wright. When a Harvards Bilmes, because federal dol- which have exceeded benefits being big wave comes by, hes more likely lars are being used to pay interest on paid out since the mid-1980s. But that to be overturned. Too much debt the debt. situation is expected to change after limits the governments ability to Many analysts agree that, whether about 2017. Continued on p. 944 spend big during a crisis, says Wright. or not the current debt is too high, it
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Expert Diagnosis: Rationing Health Care Is Inevitable


America spends twice as much as other developed nations.
hen it comes to Americas skyrocketing debt, health could be saved by getting high-cost care providers to treat patients care is the big enchilada, says Andrew L. Yarrow, the same way that low-cost but still good-quality providers author of the 2008 book Forgive Us Our Debts: The do, said Orszag. That estimate would suggest that nearly 5 perIntergenerational Dangers of Fiscal Irresponsibility. America is cent of [gross domestic product] or roughly $700 billion each spending twice as much as any other developed country with- year goes to health-care spending that cannot be shown to imout providing appreciably better care, according to international prove health outcomes, he said. 3 Most countries with national health-care systems, such as the health statistics, and that spending track will break the bank soonUnited Kingdom, Canada, the Netherlands and Chile, attempt to er rather than later. There has to be systemic reform. Furthermore, its not a matter of making Medicare work bet- gauge the cost-effectiveness of medical care and prioritize what theyll pay for on that basis, usually with ter or reducing Medicaid doctor paysome kind of public input on which care ments, says James R. Horney, direcshould be favored. Most health-policy tor of federal fiscal policy at the analysts believe that its time the United liberal-leaning Center on Budget and States developed such a system, but the Policy Priorities. For both publicly and barriers to doing so are steep. privately insured people, health-care Among the obstacles are the ultraspending has been growing faster than quick dispersal of new technologies the economy overall for decades, and throughout the U.S. health system, inwe dont know what to do, he says. cluding technologies with limited impact Reining in rising costs wont be on outcomes, and a more is better culeasy, says Robert L. Bixby, executive ture, according to the Institute for Healthdirector of the Concord Coalition, which care Improvement in Cambridge, Mass. 4 advocates for fiscal responsibility. A group of public-health analysts from The kind of thing you hear from the City University of New York (CUNY) politicians are these painless, costargues that Americans have shown they saving ideas like wellness programs are ready to make some hard choices. and electronic medical recordkeeping, Robert L. Bixby, Executive Director, For example, in a research project and that makes me laugh, since such Concord Coalition. called Choosing Health Plans All Together measures would barely dent the prob(CHAT) in which citizens deliberate lem, he says. No one likes the term rationing, but it is unlikely that we together about prioritizing scarce health-care funding all the can afford to provide every U.S. citizen with every treatment members of a Minnesota citizens group said they were willthat has a positive benefit, no matter how small, said Katherine ing to accept some cuts to their own health-care benefits to Baicker, a professor of health economics at the Harvard School help fund coverage for uninsured children. And a majority said of Public Health. The question is what that rationing mecha- theyd accept benefit reductions to cover uninsured adults. nism will be . . . ability to pay, waiting in line or program Medicare beneficiaries participating in CHAT were willing to forgo coverage for experimental treatments in exchange for rules based on comparative effectiveness. 1 Data from Medicare tell us that a great deal of health care pharmacy, dental and long-term care benefits and to extend currently used in the United States may be unnecessary, Peter coverage to more uninsured people. 5 Contrary to what many Washington policy makers believe, R. Orszag, director of the nonpartisan Congressional Budget Americans understand and are prepared to engage the issues Office, told the House Budget Committee in July. Even at top university medical centers, he said, the cost per that arise when setting priorities and imposing limits for healthelderly patient during the last six months of life varies by near- care programs, the CUNY authors said. ly a two-to-one ratio from $26,330 for the average patient 1 Katherine Baicker, Formula for Compromise: Expanding Coverage and treated by the Mayo Clinic, for example, to $50,522 for a patient Promoting High-Value Care, Health Affairs, May/June 2008, p. 661. at the University of California-Los Angeles, Medical Center. Further- 2 Testimony before House Committee on the Budget, July 16, 2008. more, the Mayo Clinic actually scores somewhat higher on 3 Ibid. quality-of-care measures than UCLA. 2 4 Donald M. Berwick, Thomas W. Nolan and John Whittington, The Triple Although pinpointing and eliminating the unnecessary care with- Aim: Care, Health, and Cost, Health Affairs, May/June 2008, p. 761. out inadvertently eliminating good care would be difficult, re- 5 Marthe R. Gold, Shoshanna Sofaer and Taryn Siegelberg, Medicare and searchers estimate that nearly 30 percent of current health-care costs Cost-Effectiveness Analysis: Time to Ask the Taxpayers, Health Affairs, September/October 2007, p. 1399.
Getty Images/Congressional Quarterly/Scott J. Ferrell

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Japan Holds Most U.S. Treasury Securities
Japan holds nearly a quarter of the $2.74 trillion in U.S. Treasury securities held by other nations. Japan, China and the United Kingdom together hold more than half the total.
(in $ billions) $800 700 600 500 400 300 200 100 0
Japan China Caribbean Brazil United Oil Kingdom exporters* banking centers** Russia Germany Mexico Canada Others

$585.9

Major Foreign Holders of U.S. Treasury Securities (as of August 2008)


$541

$655.2

$307.4 $179.8

Total: $2,740.3
$147.7 $146.2 $74.4 $41.5 $33.5 $27.7

* Includes Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Algeria, Gabon, Libya and Nigeria. ** Includes Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama and British Virgin Islands. Source: Department of the Treasury
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The federal government borrows from Social Security by selling interest-deferred Treasury bonds to the Social Security Administration, which holds them like an IOU. This intragovernmental portion of the national debt accounts for about half of the total; the other half the so-called public portion of the national debt is held by individuals and organizations outside the U.S. government, including foreign governments. But in about 2017, when annual Social Security benefit payments are projected to begin exceeding revenues, the Treasury will have to begin paying back some of the deferred interest accumulated on the bonds held by the Social Security Trust Fund. And after 2026, government accountants say, the Social Security System will have to begin asking the government to pay back the principal of the Treasury bonds it holds a scenario that poses two major debt-related problems.

First, since the government will no longer be able to borrow from Social Security to pay for other priorities, it will either have to raise taxes or cut spending. When Social Security starts to go into default, well be reminded of the IOUs in a very dramatic fashion, says financial analyst Addison Wiggin, who is a coauthor with Walker of the 2008 book, I.O.U.S.A.: One Nation. Under Stress. In Debt. Second, many people arent aware that Social Security funds have been used in place of taxes to shore up the rest of the government for decades, and through this accounting trick . . . youve been making it sound like the debt is less serious than it is, says Emory Universitys Dezhbakhsh. Today our deficits and debts, relatively speaking, are in pretty good shape, so the government can do what its doing for example, on the financial-markets bailout with relative ease, says the Peterson Foundations Tanaka. But when

Social Security stops running surpluses, we will not have the resources to act so flexibly if crises arise, she says. And, because of growth in Social Security and Medicare payments, budgetary pressures will be severe not just on the next president but on the next two or three presidents, says London of the Hudson Institute. When Social Security can no longer lend its surpluses to the federal government, the government will have to make serious budget adjustments. But that doesnt mean Social Security itself is on wobbly ground, say many economists. The policy change necessary to avoid . . . calamities [in Social Security] is not that severe, said Rudolph Penner, an Urban Institute senior fellow and former Congressional Budget Office director. Social Security payroll tax revenues will grow with the economy and will probably be sufficient to give the next generation higher dollar benefits than people get today, though those benefits will represent a smaller proportion of recipients pre-Social Security income. They wont get the benefits theyre promised, but they will get benefits, he says. Social Security wont disappear. 13 By redeeming its Treasury bonds, Social Security can pay all its promised benefits through the year 2049, and can extend that period for 75 years with fixes smaller than those enacted in the 1950s and 80s, says Mark Weisbrot, codirector of the Center for Economic Policy and Research. The idea that Social Security is in danger of going bankrupt is an urban legend, he says. Promised benefits that wont be covered amount to less than seven-tenths of 1 percent of the countrys projected future income, a very small fraction. Its close to crazy to imagine that at some point in the future the government would just stop paying benefits, says the centers Baker. Its highly unlikely that Congress would still be building roads and paying for defense

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but would stop paying benefits to millions of voters. The U.S. government has never defaulted on its bonds in our nations entire history. By 2041 the Social Security Trust Fund will have no more Treasury bonds left to redeem, according to Chad Stone, chief economist, and Robert Greenstein, executive director, of the Center on Budget and Policy Priorities. After that, the fund will be able to pay 78 percent of currently promised benefits, dropping gradually to 75 percent in 2082. 14 Furthermore, future generations may be substantially wealthier than we are today, so asking them to pay a bit more in taxes would still leave them with a much higher after-tax income and standards of living than current generations enjoy, they added. 15 While experts continue to disagree over the severity of the Social Security problem, theres universal agreement that rapidly rising health-care costs will force large changes in Medicare and Medicaid in coming decades, not to mention the nations overall financial picture. The share of the economy taken up by health care is large and rising, but once weve said, Well cover you when youre old, that becomes a promise people rely on, says the Urban Institutes Williams. Basically, well need some way to ration health care. Debate continues between those who say reforming government programs like Medicare is the key to controlling the coming budget tsunami and those who argue that it will also require reining in steeply rising health-care costs for privately insured Americans. 16 Brian Riedl, lead tax and budget analyst at the conservative Heritage Foundation, says the nations top three budgetary priorities today are: first, make sure the current economic downturn is small; second, reform Medicare and Medicaid and Social Security; third, modernize the federal government because the government wastes a lot of money on unimportant things.

U.S. Debt Tracks Other Industrial Nations


Americas $10 trillion national debt is more than two-thirds the nations gross domestic product (GDP). While the percentage is among the highest in the world, it is generally in keeping with the debt-to-GDP ratio of other industrialized nations. Japans public debt is the highest among first world nations. Public Debt as a Percentage of Gross Domestic Product (among selected nations, 2007 estimates)
Japan 104.0% Italy 80.6% Israel 70.0%* United States 64.9% Germany 64.2% Canada 63.9% France 45.1% Brazil 43.6% United Kingdom 31.3% South Africa 24.3% Saudi Arabia 22.8% Mexico 18.4% China 15.6% Australia Russia 5.9% 0% 50 100 150
* 2008 Source: The World Factbook, Central Intelligence Agency

170.0%

200

But many other commentators caution that trimming spending on Medicare and Medicaid alone wont work. We have a private health-care system, Baker says. Medicare and Medicaid are paying almost exclusively for private health care so unless private-sector costs are reined in, overall costs will continue rising out of control. Do foreigners hold too much of our national debt? In the 1940s and 50s, when America was paying off its World War II debt, most of the bonds were bought by Americans, who had a much higher savings rate than today, says financial analyst Wiggin.

But over the past decade alone, the national savings rate has declined from an average 4.5 percent of Americans annual income to 1 percent or less, and foreign capital has financed much more of the debt, said Peter R. Orszag, director of Congress nonpartisan budgetanalysis arm, the Congressional Budget Office. 17 In 2008, foreign central banks and investment funds held more than $2.7 trillion in U.S. Treasury bonds. 18 (See graph, p. 944.) Over the years, many economists have argued that other nations willingness to invest in U.S. bonds is a win-win situation. It is a mystery to me why . . . it is regarded as a sign of Japanese strength and American weakness that the Japanese find it more

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attractive to invest in the U.S. than Japan, influential Nobel Prize-winning freemarket economist Milton Friedman of the University of Chicago said in 1988. Surely it is precisely the reverse. 19 America has been able to increase its debt because a lot of people around the world are happy to hold Treasury bonds, says the Urban Institutes Williams. In recent years, the Chinese were seeing 10 to 15 percent growth a year and chose U.S. Treasury bonds over other places to stash their cash, he says. In addition, foreign central banks strong demand for U.S. debt has allowed the United States to finance a larger deficit at lower cost because Treasury bond buyers dont have to be enticed with high interest rates, Brad Setser, senior economist for the New York research firm Roubini Global Economics, told the House Budget Committee last year. Longstanding concerns that these imbalances will severely damage U.S. economic and financial performance . . . are overblown, Bank of America Chief Economist Mickey D. Levy told the House panel. Foreign investors are attracted by Americas rule of law and historic stability and benefit just as much from their investments in U.S. dollar-denominated assets as the U.S. benefits from the net foreign capital inflows, he said. 20 U.S. and global economic growth and standards of living are improved by capital that flows internationally from excess savers, said Levy. Decadeslong worries that foreign investors will abruptly sell their U.S. assets are misplaced. Foreign nations that have accumulated U.S. debt will not shift out of dollars quickly in a way that would jar financial markets unless there is a dramatic shift . . . in U.S. policies perceived to be damaging to U.S. economic or financial performance. 21 Foreign debt holdings dont expose the country to the risk of foreign governments using their massive leverage to precipitate a wholesale financial collapse in the United States, as some fear, said Kenneth Rogoff, a professor of economics and public policy at Harvard University. Doing so would almost certainly backfire, by causing the U.S. dollar to plummet on world markets, dramatically reducing the value of those countries huge dollar holdings, he said. 22 Many analysts warn, however, that if the trend of rising annual budget deficits continues, doubts could grow about the economys strength, and foreign investors might avoid U.S. bonds in the future. The United States is not just a borrowing nation. It has a long history of lending money to foreign governments as well. The U.S. net debt position the gap between what the U.S. has borrowed from the world and what the U.S has lent to the world has deteriorated dramatically over the past six years, said Setser. Going forward . . . the United States should not expect foreigners including foreign governments to finance the United States on as generous terms as the U.S. has enjoyed over the past few years. 23 Indeed, Rogoff says, the countrys continued dependence on foreign borrowing is a significant vulnerability that could leave the United States scrambling if large sums of money were needed to meet some immediate crisis. 24 We no longer fund our own government with our personal savings by buying Treasury bonds, such as U.S. Savings Bonds and if consumption picks up in India, China and Japan, those governments may not have as much money in savings to invest in America, says Wiggin. That would require the United States to offer higher interest on its bonds to attract borrowers, he says, which would make running a deficit much more expensive and potentially force the government to change its fiscal ways. Developing countries have long faced international demands to reform their economies and governments in line with the priorities of creditor nations like the United States, and thats the risk any country runs if it is perceived as a risky borrower, says author Yarrow at Public Agenda. For the United States, the shoe could be on the other foot in the nottoo-distant future if large budget deficits and economic woes continue. Overreliance on a seemingly endless pool of foreign capital also may be lulling the United States into a fiscal stupor, said Setser, with the government unwilling to get its own fiscal house in order and encourage more domestic savings to meet accelerating budget demands that will accompany the baby boomers retirement. 25

BACKGROUND
Founding Debtors
lmost as long as there have been nations, citizens have argued about how heavily into debt government should go to finance activities ranging from building roads to fighting wars. To get cash, they have three choices: tax their citizens, borrow or print more money. And while few say that debt is always a bad choice, debt skeptics worry that borrowing, because it seems like the easy way out, can lead to careless government fiscal behavior. 26 Printing money is generally the last resort because it causes inflation a rise in prices as more money chases goods and services. As prices inflate, the dollar is unable to buy as much as in the past. That leaves a choice between borrowing and raising taxes. But both are essentially taxes, says George Mason Universitys Roberts. Debts are just taxes tomorrow, he says. Nevertheless, being able to run up debt means that lawmakers can meet
Continued on p. 948

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Chronology
1790s-1920s
into the general budget, masking the actual size of future deficits. 1981-1982 Severe recession helps run up debt. 1983 Short-term Social Security financing crisis prompts Congress to raise the payroll tax and increase the eligibility age to build surpluses to help fund baby boomer retirement. 1985 With annual deficits topping $200 billion, Congress passes the Gramm-Rudman-Hollings law, hoping to wipe out deficits in five years through across-theboard spending cuts. 1986 Interest payments on debt become the biggest federal budget item.

The governments budget grows, but national debt increases substantially only in wartime. 1790 Treasury Secretary Alexander Hamilton announces the first national debt tally $75.5 million. 1919 Government posts its highest annual deficit to date, nearly $13.4 billion.

2000s

Tax cuts and spending increases swell the debt. 2000 National debt is $5.7 trillion. 2001 Congress passes President George W. Bushs first round of tax cuts. 2002 Pay-go rule expires. 2003 Tax cuts on dividends and capital gains are enacted. 2006 Federal spending rises from continuing wars in Iraq and Afghanistan and a new Medicare drug benefit, but tax rates are kept low. 2008 First baby boomers begin collecting Social Security benefits. . . . Government reports a record-high deficit of $455 billion. . . . National debt passes $10 trillion. . . . Federal efforts to stem financial-market chaos may add $1 trillion or more to national debt. . . . Economists say government has no choice but to increase debt levels to help end a potentially severe recession.

1930s-1940s

As Depression begins, government tries to keep budget balanced. 1937 Social Security begins providing benefits to a growing elderly population. 1946 Postwar national debt totals about $250 billion, 108.6 percent of gross national product (GNP).

1990s

Bipartisan effort to eliminate deficit leads to surpluses. 1990 Congress passes Budget Enforcement Act, whose pay-go rule requires lawmakers to pay for tax cuts or spending increases. 1992 Independent presidential candidate Ross Perot calls attention to the risks of deficits. 1997 Balanced Budget Act cutting Medicare and Medicaid is enacted with bipartisan support. 1998-2001 Government runs first budget surpluses since 1969.

1950s-1970s

National debt keeps growing, but economic growth shrinks the debt-to-GDP ratio, which holds at around 33 percent in the 1970s. 1965 Medicare and Medicaid are created. 1979 Debt reaches $829 billion, 33 percent of gross domestic product.

2010s

Health-care costs are projected to swamp the economy. 2011 First baby boomers become eligible for Medicare. 2017 Health-care costs are projected to equal 20 percent of GDP.

1980s

Surplus Social Security payments begin to flow

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Most Experts Say Ignore the Debt for Now


Need to stimulate economy called most important consideration.

ne things for sure over the next year or two: The federal budget will run big deficits, and the national debt will rise steeply. The debt is going to go up rather dramatically in the short term in response to this crisis of financial-market turmoil combined with recession, says Robert L. Bixby, executive director of the Concord Coalition, a grassroots group that advocates for fiscal responsibility. Remarkably, however, even deficit hawks like Bixby wont call for an immediate halt to deficit spending. Thats because, for the first time in memory, a high debt and deficit are occurring simultaneously with a potentially severe economic recession and a near meltdown of the worlds financial markets. 1 Most economists say increasing the deficit and debt are acceptable in the near future to cope with those twin crises. I want to make sure that the next president has a sound banking system and that probably means pouring some money into it, says Bixby. In addition, he favors an economic stimulus plan to help push the economy out of recession. During a recession or a downturn, it is good policy to let the government deficit increase and to have an increase in the debtto-GDP ratio, says Steven Sheffrin, a professor of economics at the University of California-Davis. The sinking economy began taking its toll on the debt early in 2008, and theres more to come, says Chad Stone, chief economist at the liberal-leaning Center on Budget and Policy Priorities (CBPP). Early in the year, the debt was already running up from the recession, as tax revenues slowed with the declining economy and claims on programs like food stamps and unemployment insurance rose, he says. An additional very rapid run-up of the debt will occur over the next several months due to ongoing efforts to shore

up financial markets, says James R. Horney, CBPPs director of federal fiscal policy. But that is not quite as bad as it sounds, since some of the money may be used to buy financial assets, such as mortgage-backed securities, which eventually would give taxpayers some return for the money. Most economists emphasize, however, that deficits, while needed, must be temporary. We may decide to do something in the short run such as tax cuts or increased government spending to help shore up the economy, but we need to ensure that it really is in the short run, says Roberton Williams, a principal research associate in tax policy at the nonpartisan Urban Institute. For example, if you didnt extend the Bush tax cuts in some form, youd have a very negative effect on the economy. However, that doesnt mean all for everybody, but judiciously allowing some people to keep the lower tax rates while rescinding them for others, he says. We should be cautious and not pile on dubious stimulus policies, says Sheffrin. Temporary tax rebates, as we have recently seen, have limited economic impacts and can be very costly. They should only be used if the economy stumbles badly, and monetary policy such as interest-rate cuts to encourage lending has reached its limits. So, do let the deficit increase as tax revenues fall, but avoid piling on new programs, he says. A strong ideological divide exists over whether government should mainly cut taxes on investment or attempt to stimulate spending. Tax breaks and spending programs aimed at keeping lowand middle-income consumers buying are only a redistribution of money from high-income savers to low-income spenders and reduce government revenues without sparking needed

Continued from p. 946

national needs in tough times, Roberts says. Unlike with an individual who cant get a mortgage when unemployed, for example the U.S. government can borrow money even during a recession, since the world knows that we can tax our citizens later to pay it back, he says. Throughout history, many thinkers have been skeptical of large public debts. The British philosopher Adam Smith, author of the 1776 classic The Wealth of Nations the first book on economic theory argued that the ease of incurring debt compared to impos-

ing taxes could spawn bad national tendencies, including a love for war. Unwilling to fund wars entirely with taxes, 18th-century England borrowed money for several wars. The result, claimed Smith: Citizens who would have become disgusted with wars if taxes were raised to pay for them enthusiastically supported the governments military adventures. 27 Founding Fathers Alexander Hamilton and Thomas Jefferson famously squabbled over whether debts incurred to finance the Revolutionary War and to buy additional territories should be paid off quickly.

Hamilton, the first secretary of the Treasury, advocated debt. A national debt, if it is not excessive, will be to us a national blessing, he said. It will be a powerful cement to our union because citizens who own government bonds will want to see the country stable and prosperous. 28 Jefferson, the third president, who struggled with personal debt all his life, argued that the principle of spending money to be paid by posterity . . . is but swindling futurity on a large scale. 29 Despite their well-known disagreement, both men were fiscally conser-

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economic growth, says Brian Riedl, lead tax and budget analyst for the conservative Heritage Foundation. In the 2001 economic downturn, low-income tax cuts such as the increased tax credit for families with children sapped federal revenues more than tax cuts for richer people without boosting the savings and investment vital to economic growth, he argues. On the other hand, the right tax cuts such as cutting capital-gains taxes and eliminating the estate tax can add substantially to the economys supply side of productive resources: capital and labor are economy boosters, he said. 2 Other economists say that Riedl has it backwards. In an economic downturn, tax breaks for those who would invest the money wont help because businesses are not looking to make investments in a slump; they will only make investments add on to their plants, hire workers, etc. if people are coming into the stores and buying products, says CBPPs Stone. When unemployment is rising, you want to prop up aggregate demand through government spending or assistance to people who will buy, he says. For example, an expansion of food stamps means that a local store doesnt have to lay off a worker, so not only the food-stamp recipient but other store employees can spend to keep businesses on their feet, Stone says. Down the road, when the economy emerges from the slump, is the time to cut taxes on savings and investment, not today, Stone says. It would be good to get some money to state and local governments to help prevent public-sector layoffs and help states provide services for people hit hard by the downturn, says Dean Baker, co-director of the liberal Center for Economic and Policy Research.

Such government spending and tax cuts for low- and middleincome people have by far the most bang for the buck in turning around a slump, said Mark Zandi, chief economist of the financial research firm Moodys Economy.com. A dollars worth of federal spending to temporarily expand the food stamp program would increase the annual GDP by $1.73, a nearly 75 percent return on investment, Zandi told the House Committee on Small Business in July. 3 GDP would rise by $1.64 for each dollar spent on extending unemployment benefits; by $1.59 for increased infrastructure spending; and by $1.36 for general aid to state governments. On the other hand, a $1 cut in corporate tax rates would yield only 30 cents worth of economic expansion, according to Zandi. 4 Ironically, though, the recession might actually ease some long-term budget pressure, said Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvanias Wharton School. With 401(k) retirement stock-market accounts way down and home equity shrinking, there will be a fair amount of interest in working longer and delaying retirement among baby boomers, she predicted. 5
For background, see Kenneth Jost, Financial Crisis, CQ Researcher, May 9, 2008, pp. 409-432; Thomas J. Billitteri, Financial Bailout, CQ Researcher, Oct. 24. 2008, pp. 865-887; and Kenneth Jost, Stimulating the Economy, CQ Researcher, Jan. 10, 2003, pp. 1-24. 2 Brian M. Riedl, Ten Myths About the Bush Tax Cuts, Heritage Foundation Backgrounder, Jan. 29. 2007, www.heritage.org. 3 Mark Zandi, testimony before the House Committee on Small Business, July 24, 2008. 4 Ibid. 5 Quoted in Avoiding the Tough Issues: The Candidates on Health Care and Entitlements, Knowledge @ Wharton, Oct. 15, 2008, http://knowledge.wharton.upenn.edu.
1

vative by todays standards, says New York Universitys Wright. Both wanted small government, and Hamilton wanted to pay off the debt, too, just more slowly, he says. Throughout American history, the debt has generally trended up, but the government has repeatedly paid down its large wartime debts quickly. Overall, the country has been debtfree for only two years, 1834 and 1835, and the debt has gradually grown from $75.5 million in 1790 to around $10.5 trillion today. However, as the debt grew, so did the economy, keeping the important debt-to-GDP ratio relatively low,

except in wartime. For example, the debt reached 108.6 percent of GDP in 1946 right after World War II but quickly dropped to pre-war levels.

Who Owns the IOUs?

he U.S. national debt consists of interest-paying federal government securities bonds sold on the open market to anybody who will buy them, either here or abroad, explains Public Agendas Yarrow. In earlier times, including the 1940s and 50s, when America was paying

off war debts, the buyers were mostly Americans, who saved at a much higher rate than today and saw bonds as safe and paying reasonably good returns, says financial analyst Wiggin. Over the years, however, U.S. savings rates have dropped, international trade has increased and the dollar has become the worlds chief currency. As foreign governments purchased more U.S. Treasury securities, they came to own a larger and larger portion of U.S. debt, which they held as reserves in their central banks. This change, together with 1983 legislation that created large annual surpluses in the Social Security Trust Fund,

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led U.S. policy makers to However, the United view rising debt more States like any other casually than in the past, country cannot contineconomists say. ue accumulating debt at a A series of economrate faster than its ability ic events led to the curto repay it. At some point rent high level of foreign foreign investors will beinvestment in U.S. pubcome less willing to keep lic debt. During the 1950s adding to their holdings and 60s, the American of U.S. public debt and government spent heavother American assets, ily on wars in Korea and Orszag said. 32 Vietnam, and other countries took in more U.S. dollars in exchange for their military goods and services than they spent buying U.S.-produced esides skyrocketing goods. That created a foreign-held debt, the defense-related balancefederal government since of-payments deficit for the 1980s has borrowed inthe United States, says the creasing amounts of money University of Missouris from certain government Hudson. agencies, mainly the Social At first, countries Security Trust Fund. could redeem their extra In 1935, when the fund dollars for gold, but in was created, lawmakers un1971 President Richard derstood that the payroll tax M. Nixon removed the that funds Social Security In 1971 President Richard M. Nixon removed the dollar from the dollar from the gold would generate more annual gold standard the monetary system that required each paper standard the monerevenues than it was paydollar to be backed by gold. No longer able to turn in their tary system in which each ing out in benefits. The law surplus dollars for gold, European and Asian central banks paper dollar must be decreed the excess revbegan investing in U.S. Treasury bonds. backed by a specific enues must be invested in As a result, foreign holdings of U.S. Treasury bonds, which Social Security amount of gold held in the countrys vaults, said Hudson. Once European Treasury debt rose rapidly, increasing would later redeem to pay future beneand Asian central banks could no longer by nearly 50 percent between 2003 and fits, just like any other bondholder. turn in their surplus dollars for gold, 2006, according to the Congressional As a result, each years surplus they essentially had only one choice Budget Office (CBO). Social Security revenues become part To some extent, thats good of the governments general budget, to invest in U.S. Treasury bonds in other words, to lend money to the news, CBO Director Peter R. Orszag where they help to pay for initiatives, told the House Budget Committee such as wars and tax cuts. And while American government, he said. Central banks dont invest in the last year. The willingness of foreign this intragovernmental debt is counted stock market, they dont buy real es- investors to buy U.S. debts . . . re- as part of the total national debt, the tate and they dont buy companies. They flects the attractiveness of the United annual borrowing from Social Security buy government securities because those States as a destination for international and other federal trust funds isnt added investment because of its stable po- into the reported annual federal deficit. are the most secure, he said. 30 As U.S. savings rates were dropping, litical environment, developed legal That potentially confuses the public and foreign countries especially oil pro- institutions, deep and liquid capital hampers lawmakers efforts to focus the ducers were stashing away huge market and strong banking and fi- nations attention on fiscal problems, amounts of money, with relatively few nancial systems, among other ad- Senate Budget Committee Chairman vantages, he said. 31 good places to invest the money. Conrad said in January. 33
Getty Images/National Archives (Feb. 19, 1970)

Bank of Social Security

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Americans Say Theyd Help Balance the Budget


But first policy makers have to earn their trust.
mericans say they are ready and willing to help Washington achieve a healthy federal budget, but first policy makers must earn back their trust. Thats pollsters conclusion after conducting 12 day-long public conversations with randomly chosen citizens around the country. The pollsters concluded that the main obstacle to building public support for the difficult choices we face is not lack of interest nor public opposition to tax increases or program cuts. Whats holding back progress, rather, is a deeply felt and pervasive mistrust of government, according to pollsters for several nonprofit organizations pushing for more responsible Washington budgeting, including the Concord Coalition, Heritage Foundation and Brookings Institution. 1 According to the poll by the San Diego-based public-opinion firm Viewpoint Learning: 63 percent of the people interviewed supported limiting Medicares coverage of experimental treatments and covering only services scientifically proven effective; 66 percent supported asking wealthier Medicare recipients to pay more for coverage; 84 percent supported asking higher-income people to pay more payroll taxes into Social Security, by raising or eliminating the FICA tax cap; 61 percent supported cutting defense spending to reduce deficits; and 67 percent supported lowering domestic spending for deficit reduction. 2 Other groups also are working to engage the public in deliberating budget matters. For example, several online simulation games pit players wits against red ink as they strive to achieve policy goals while balancing budgets: The NYC Budget Game lets players tackle a large local budget (www.gothamgazette.com/budgetgame/budgetgame.html); The Kentucky State Budget Game invites players to take a crack at the even more complicated budget of an entire state (www.kltprc.net/budgetgame/BUDGAME.HTM); Budget Hero, created by American Public Radio, challenges players to confront the daunting policy tradeoffs that face Congress and the president (http://marketplace.publicradio.org/features/budget_hero). In no case are the choices easy. Government budgets seem far from citizens individual concerns, but the questions always affect individuals in the end, says Susan Tanaka, director of citizen education and engage-

ment at the New York City-based Peter G. Peterson Foundation, which promotes fiscal responsibility. If Medicare benefits are trimmed, for example, people will need to begin saving more for their retirement needs years in advance, she says. The question really is, How much would you personally be willing to contribute to address the problem you, not other people? Tanaka says. How much would you raise your own taxes? What public benefits would you be willing to give up? How much more would you be willing to contribute to your parents and grandparents support? But one persons sensible solution often sounds hair-raising to someone else. Postponing retirement to age 65 and beyond would pump more dollars into the Social Security fund and also reduce benefits paid, making it a useful and even patriotic step, says Andrew L. Yarrow, author of the 2008 book Forgive Us Our Debts: The Intergenerational Dangers of Fiscal Irresponsibility. Early retirement is a relatively new and fiscally questionable phenomenon, says Yarrow. When President John F. Kennedy was inaugurated in January 1961, the average retirement age was 66, but then it dropped to 62, paying out benefits to people who, in the past, would probably have been working, Yarrow says. But when he criticized early retirement as potentially selfish in newspaper op-eds, Yarrow, a visiting professor of history at American University, got an earful from other Americans about the ideas flaws. Professor Yarrow, perhaps if everyone had a dream job like yours, with three-month vacations, we would be willing to work until we dropped dead, wrote Philadelphia paralegal Patricia Sicilia on the community publishing site Associated Content. But you can only stand on concrete floors or be subservient support staff to psychotic lawyers . . . for so long, said Sicilia. We are the only country in the world that expects their people to work until they drop dead! Our vacation and benefits are the worst in the world. And now you want us to work until were 72 so we can bulk up the economy? Please. 3
1 Changing Expectations; Americans Deliberate Our Nations Finances and Future, The Brookings Institution/The Concord Coalition/The Heritage Foundation/Public Agenda/Viewpoint Learning, September 2008, www.viewpointlearning.com/publications/reports/AWW_FINAL-1.pdf. 2 Ibid. 3 Patricia Sicilia, Open Letter to Andrew Yarrow, Ph.D., Regarding Selfish, Unpatriotic, Early Retirees, Associated Content Web site, www.associatedcontent.com.

Social Security has faced its own fiscal crises whenever benefits were imminently projected to outrun revenues; each time, Congress restabilized the program by tweaking the benefits and rev-

enue formulas. The last such fix in 1983 was especially large and generated huge surpluses that have helped fuel government spending and tax cuts, especially over the last eight years.

Over the past 20 to 30 years, everybody has been aware that this money would [have to] go back to Social Security, but the fact played little part in policy makers actions

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because it didnt matter just yet, says Horney at the Center on Budget and Policy Priorities. I dont think the 83 reforms were well thought out from the perspective of what would happen to Social Securitys annual surpluses, says Robert L. Bixby, executive director of the nonpartisan Concord Coalition, a grassroots group that advocates fiscal responsibility. Washington wanted a big fix, just to bring in a lot of money, but there really wasnt a plan for what to do with the extra income, he says. As a result, the rest of the government snagged the cash, using it as an easy way to get immediate revenue without raising taxes or even while cutting them but not coming completely clean with voters about this fact, says Bixby. Maybe we should have had a lower payroll tax and not run the surpluses, he says. Its very hard for large government funds to actually put away cash for the future, he explains. Hoarded cash becomes worth less over time because of inflation, and governments seldom invest in private markets because theyre too risky and because huge governmental sums could influence those markets too much. spoil the fun, says the Concord Coalitions Bixby. 34 Im not sure when this happened in the private sector, but the lack of concern about budget deficits on the government side is fairly recent. In the 1980s and 90s lots of the fights in Washington saw both Democrats and Republicans arguing that federal deficits were too big, he continues. There were strong disagreements about what exact mix of taxes and spending was the right one, but many in both parties believed fiscal caution was important, Bixby says. In the late 90s, a booming economy and fiscal prudence by a Democratic president and a Republican Congress led to four years of surpluses. But then people got lazy and thought that problems had been solved, he says. In 2000, Vice President Al Gore, running for the presidency, warned that the four annual surpluses only one of which did not depend on borrowing from the Social Security Trust Fund should be used to pay down the national debt in preparation for baby boomers retirement. But when George W. Bush was elected, he quickly opted for other priorities. As a recession depressed revenues and the administration pushed tax cuts, it became a matter of partisan pride among Republicans once the party of fervent deficit hawks that deficits didnt matter, Bixby says. The Bush administration has lots to answer for. By insisting that all Republican priorities be enacted, regardless of budgetary effects or opposition, They encouraged Democrats to do the same. Fiscal concern broke down completely during the Bush administration with the totally inconsistent actions of cutting taxes, going to war and adding a prescription drug benefit to Medicare all at the same time, he continues. Thats the definition of fiscal irresponsibility. Particularly troubling was funding a war by borrowing, says Harvards Bilmes. Bush sent his war funding requests to Capitol Hill in the form of emergency supplemental appropriations, a spending category the law stipulates be used only for new programs that begin midway through a fiscal year and for unforeseen emergencies that require speedy dispersal of funds, Bilmes says. All scrutiny is suspended for emergency supplemental requests, which led to high levels of waste, corruption and incautious spending, she says. For example, soldiers in sandcovered northern Iraq used sandbags manufactured in the United States, shipped to be filled in Kuwait and then shipped over the Iraq-Kuwait border on trucks. If you tried to think of the most expensive way to provide the sandbags, you probably couldnt even imagine that one, she says. 35 Besides its immediate costs, the wars in Iraq and Afghanistan also create future government-spending obligations for veterans health care and replenishing military equipment, she says. These add to the longterm obligations in Social Security and Medicare, raising future budget demands even higher. At the turn of the century, when things were really going good, we had a federal debt of $5 trillion, and now its doubled, says the Urban Institutes Williams. Bush said hed cut taxes and spending, but he only did half the job. Weve got this situation because we cut taxes but still spent more. You cant grow your way out of the size of deficits well have when the baby boomers retire, says Bixby. People are used to cyclical deficits, but today we have an unprecedented and growing structural, not cyclical, deficit that persists in good economic times as well as bad.
Continued on p. 954

The Bush Era

ver the next few decades, the need to reimburse the Social Security Trust Fund and provide Medicare benefits for baby boomers will force the nation to focus, at last, on budget priorities. Unfortunately, many economists say the government has actually become far less budget conscious over the past eight years than before, which will make it harder to cope with future demands. Americans generally have become much more comfortable with debt both public and private branding cautious borrowers as worrywarts who

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At Issue:
Should Congress reform entitlement programs to solve longterm debt problems?
Yes

ALISON ACOSTA FRASER


DIRECTOR, ROE INSTITUTE FOR ECONOMIC POLICY STUDIES, HERITAGE FOUNDATION
FROM TESTIMONY BEFORE HOUSE COMMITTEE ON THE BUDGET, JUNE 24, 2008

HENRY J. AARON
SENIOR FELLOW, THE BROOKINGS INSTITUTION
FROM TESTIMONY BEFORE HOUSE COMMITTEE ON THE BUDGET, JUNE 24, 2008

he Congressional Budget Offices (CBO) latest analysis projects that maintaining current tax policy and with tax levels rising just above the historical average of 18.3 percent of GDP total [federal] spending including interest skyrockets from 20 percent of GDP in 2007 to 75.4 percent in 2082. Clearly, this is an unsustainable budget path, and it is driven by entitlement spending. The entitlement tsunami is driven by huge increases in future spending on programs for middleclass retirees: Medicare, Medicaid and Social Security. It is not driven by falling tax levels. Social Security and Medicare have promised $42.9 trillion more in benefits to senior and disabled workers than the programs will be able to pay. Social Securitys long-term unfunded obligations are $6.6 trillion; Medicares are $36.3 trillion. The spending problem is so massive that federal tax rates would have to rise to staggering levels to close the gap. CBO estimates that todays income tax rates would have to more than double. Such tax rates would come at a tremendous cost to the economy. The [proposed] Safe Commission Act (HR 3654) could break the entitlement logjam. It would create a bipartisan commission to address the unsustainable imbalance between federal commitments and revenues while making the budget process give greater emphasis to long-term fiscal issues. Focusing on slowing the growth in entitlement spending, along with changes to strengthen assistance for the needy, the commissions proposal should appeal to those who worry that surging middle-class entitlement spending will crowd out spending on other priorities. Public engagement is a vital feature of this commission. It would hold hearings to discuss the entitlement challenge in town hall-style meetings across the nation to speak frankly about the fiscal challenge and the tough options for fixing it. This would help to build public acceptance of the need to fix entitlements and support for ultimate plans to modernize the programs. . . . In todays political environment, it is extremely difficult and uncomfortable for many, if not most, members of Congress to explicitly discuss the colossal fiscal challenge that entitlements present. The highly partisan environment often seeks to push discussions further and further from real action. The end result is that succeeding Congresses merely kick the can down the road. The Safe Commission Act would change these underlying dynamics so that entitlements can be tackled and a huge economic disaster prevented.
No

yes no
Nov. 14, 2008 CQ Press Custom Books - Page237

he premise of HR 3654 [the Safe Commission Act], which would establish a federal budget commission to reform tax policy and entitlement benefit programs and ensure a sound fiscal future, is correct in part. The United States faces daunting projected fiscal deficits. However, the bill mischaracterizes the source of these deficits. They derive entirely from projected increases in national health-care spending, affecting private as well as public spending, not from problems peculiar to government health care. Materially slowing the growth of Medicare and Medicaid apart from general health-system reform is impossible, unless the nation reneges on its commitment to assure the elderly, disabled and poor health care roughly comparable to that available to the rest of the nation. Nearly all the projected growth of federal budget deficits is traceable to added spending on Medicare and Medicaid. The Congressional Budget Offices projections indicate that apart from the fiscal impact of Medicare and Medicaid, the federal budget will remain in approximate balance through 2050. . . . Spending on Medicare and Medicaid is driven mostly by forces outside of these programs. The most important is the projected growth of per-person health-care spending. Growth of Medicare spending per person has closely tracked growth of per-person spending on health care in general. Increases in spending per person account for about three-quarters of projected increases in Medicare and Medicaid outlays. Holding growth of per-person spending on Medicare and Medicaid below that for the general population would imply the gradual abandonment of the national commitment to assure the elderly, disabled and poor standard health care. Growth in the number of enrollees accounts for less than a third of projected spending increases. The only way to offset this source of growth would be a) to increase the age of Medicare eligibility or b) to tighten the already stringent income and asset tests for Medicaid eligibility. Increasing the age of eligibility has a surprisingly small effect because the young elderly are relatively inexpensive. Raising the age from 65 to 67 would reduce spending about 2 percent; raising it to age 70 would reduce spending about 9 percent. Furthermore, until and unless American workers can be encouraged to retire at later ages, raising the eligibility age would exacerbate an already serious problem gaps in insurance for those who lose employment-based coverage before they are old enough for Medicare.

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Continued from p. 952

CURRENT SITUATION
Obama and the Budget

ith a new president and a new Congress both taking office in January, the budgetary style of the next four years is still unclear. But many budget analysts are pleading for Washington to abandon the deficits-dontmatter philosophy. Once the current economic downturn abates, the bottom line on taxes is that they need to cover whatever were going to spend, says the Concord Coalitions Bixby. That concept tends to get lost as people look at taxes as a different issue, separate from the benefits government offers. I think both Sen. Obama and Sen. McCain have been David M. Walker, then head of the Government Accountability Office, totally unrealistic on warns the Senate Budget Committee in January that the nation faces a financial crisis because of continuing deficit spending and a flood of taxes, both promising impending health-care and other expenses. Walker quit soon cuts. You have to afterward to head the new Peter G. Peterson Foundation, shake your head and which urges Americans to spend less and save more. ask, How does that he budget path make sense? Congress will take Obama proposed several revenueThe new president will have to realso remains unclear. form both health care and Social Se- boosting schemes, including: It wouldnt be surprising if fiscal Closing tax loopholes for large corcurity, says author Yarrow of Public discipline went by the boards, with porations; Agenda, but especially health care. Trimming payments to private in- Democrats saying, We want to do our The next president will be inheritsurance plans operating in laundry list of items that Bush iging a fiscal and economic mess of hisnored, says Bixby, warning that trouMedicare; toric proportions the legacy of Pres Allowing the federal government ble is ahead if we do that by runident Bushs failed policies record to negotiate with drug companies ning bigger deficits. deficits and record debt, said Senate For the past two years, a Republifor lower Medicare prices; Budget Committee Chairman Conrad. It Withdrawing troops from Iraq; and can White House with a veto pen and will take years to dig our way out. 36
Getty Images/Chip Somodevilla

An important component of any presidents fiscal plan is the ratio between tax revenues and GDP. Historically, that level has hovered at about 18.3 percent in the United States, though it dropped during the Bush administration. Obamas tax plan would bring in revenues estimated at between 18.2 and 18.4 percent of GDP, according to an analysis by the nonpartisan Tax Policy Center jointly run by the Urban Institute and the Brookings Institution. 37 Thats considerably more revenue than would have been garnered by McCains tax plan which was off the charts low, says Bixby, yielding revenues of only 16 to 17 percent of GDP.

Auctioning permits to companies to emit greenhouse gases as part of an effort to limit overall greenhousegas emissions. 38 Budget balancing would have to come after the economy returns to health, Obama said during his campaign. We are not going to be able to dig ourselves out of that hole in one or two years, he said. But if we can get on a path of sustained growth, end the war in Iraq, end some of the special-interest loopholes and earmarks that have been clogging the system, then I think we can return to a path of a balanced budget. 39 On the surface, Obama sounds weaker on fiscal austerity than McCain, who pledged not to leave office without balancing the federal budget, says Bixby. However, McCain also insisted that he could do his whole agenda while bringing in much lower tax revenues and still balancing the budget, which simply wouldnt be possible, Bixby says. Obama is probably more realistic, he says, but his spending proposals still would mean deficits.

Congress and the Budget

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a Senate Republican minority with enough votes to filibuster most proposals have fought bitterly over budget issues with the new Democratic congressional majority. In the past, such divided government has been a good thing for fiscal discipline, but not so more recently, according to longtime Washington budget reporter Stan Collender, now managing director at Qorvis Communications. In the late 1990s, when [President] Bill Clinton and the Republicancontrolled Congress fought to a draw, the stalemate halted both large tax cuts and large spending increases, creating rare federal budget surpluses, Collender said. 40 But not so in the past year and a half, said Collender. The Democratic Congress started out by pledging to apply so-called pay-go rules requirements that higher spending or tax cuts that increase budget deficits be paid for by slashing spending or increasing taxes a pay-as-you-go system. However, the unwillingness of the White House to negotiate with Congress . . . and the inability of Congress to deal with the administration meant that pay-go wasnt used, said Collender. For example, spending additions for Iraq and Afghanistan were slipped past pay-go classified as emergencies, even though military and other activities began long ago, he said. 41 Both parties accuse the other of using pay-go only when it suits their purposes. Beginning in 2001, when Republicans controlled both Congress and the White House, the GOP weakened the pay-go rule, and look what happened to the deficit afterward, said Senate Budget Chair Conrad, a Democrat. By contrast, the new Democratic majority has proposed spending cuts and revenue increases to pay for programs like tuition loans and childrens health care, he said. 42 But Sen. Judd Gregg, N.H., the highest-ranking Republican on Conrads panel, accused Democrats of waiving pay-go

every time it suited them. Democrats have either waived or gotten around pay-go on about 12 different occasions, representing billions of dollars to the American taxpayer, he said. The only thing they intend to use pay-go for is to force taxes to go up. 43

But some analysts say that forming a task force may just be a way for Congress to delay dealing with the toughest issues. Commissions never solve complex problems unless members of Congress are prepared to address the underlying source of those

The next president will be inheriting a fiscal and economic mess of historic proportions the legacy of President Bushs failed policies record deficits and record debt. Sen. Kent Conrad, D-N.D. Chairman, Senate Budget Committee
Exercising fiscal responsibility is virtually impossible in a charged partisan atmosphere, says Bixby. Measures like pay-go have to have a political consensus behind them, he says. If one party commits, but the other balks such as by insisting that pay-go apply only to taxes but not to spending, or vice versa then no such mechanism will work, Bixby says. Meanwhile, Democrats and Republicans on the House and Senate Budget panels have come together on legislation focused on longer-term budget problems. Two bills (HR 3654 and S 2063) would appoint bipartisan panels to develop legislative proposals for improving the budget outlook as baby boomers begin receiving Social Security, Medicare and Medicaid benefits. (See At Issue, p. 953.) It is critical that any solutions to our fiscal challenges be bipartisan and that both political parties are invested in the outcome, making a task force a good place to start, said Conrad and Gregg in a joint statement. 44 problems, says Brookings Aaron. 45 Perhaps the most crucial task for both Congress and the president will be to gain credibility with the public so that voters believe they can demand and expect accountability from policy makers, says Emorys Dezhbakhsh. Budget issues require delicate tradeoffs and public willingness to sacrifice that dont exist in an atmosphere of public distrust of Washington, he says. This recent episode of the financialmarket bailout shows that Americans dont trust the politicians now, a situation that could doom progress on the even tougher financial matters ahead.

OUTLOOK
Look to Health Care
ith the debt and deficits rising and the economy and financial system struggling, the country faces

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tough fiscal times. After the smoke of the current troubles clears, however, job one for policy makers will be coping with soaring health-care costs. Helping states and localities through the economic downturn also will take a heavy toll on government revenues. State and local governments will truly feel constrained in the coming years, says the University of Californias Sheffrin. The states are highly impacted by rising health-care costs and other costdrivers that are straining budgets, he says. Moreover, the current financial situation will mean that many of the states favorite budgetary gimmicks, such as securitizing income streams to borrow from the future, will become more problematic. Their program costs will continue to rise, but their revenues will fall. Until recently, only health economists worried about controlling health costs, but today policy analysts of all kinds see that as job one, says the Urban Institutes Williams. I keep asking [Congressional Budget Office chief] Peter Orszag when hes going to rename it the Congressional Health Office, he quips. Unfortunately, if it were simple to rein in health costs, we would have figured it out by now, says Williams. Basically, we need some way to ration it, he says. Do I do preventive care, for example? The answer seems simple until you ask whether you then are obliged to treat all the conditions that you found when you did tests. Figuring out how to sensibly and fairly ration care is where a lot of effort needs to be concentrated. Health care is the defining problem of the next 20 years. Short of a constitutional amendment to require a balanced budget, there simply has to be concerted action [by Congress and the president] to control Medicare and Medicaid costs, and soon, says Pete Sepp, vice president for policy and communications at the National Taxpayers Union, a nonprofit that advocates for tax cuts and smaller government. Even small changes could make a lot of difference, he says. All theyve got to do is start. Creating better public understanding of budget dilemmas is crucial, however, since lawmakers cant propose belt tightening unless citizens understand why fiscal responsibility is needed, says financial analyst Wiggin, the co-author of I.O.U.S.A.: One Nation. Under Stress. In Debt. Currently, Theres an inability for individual lawmakers to bring it up because they get punished immediately [by voters] if they do, he says. That could be the silver lining in the current economic situation. Maybe this crisis is just what we need to get our act together.
2008-02-12-boomer-social-security_N.htm. Richard Simon, Federal Deficit Hits Record $455 Billion, Los Angeles Times, Oct. 15, 2008, www.latimes.com/news/politics/la-na-deficit152008oct15,0,2519168.story; for background, see Kenneth Jost, Financial Crisis, CQ Researcher, May 9, 2008, pp. 409-432; Thomas J. Billitteri, Financial Bailout, CQ Researcher, Oct. 24, 2008, pp. 865-887. 4 M. J. Stephey, The Times Square National Debt Clock, Time, Oct. 14, 2008, www.time. com/time/business/article/0,8599,1850269,00.html. 5 David M. Walker, testimony before Senate Budget Committee, Jan. 29, 2008, www.gao.gov. 6 For background, see Peter Katel, The Cost of the Iraq War, CQ Researcher, April 25, 2008, pp. 361-384. 7 Linda Bilmes and Joseph Steiglitz, The Three Trillion Dollar War: The True Cost of the Iraq Conflict (2008). 8 Walker, op. cit. 9 Rank Order Public Debt, The World Factbook, Central Intelligence Agency, www.cia.gov. 10 Remarks before Senate Budget Committee, Feb. 1, 2007, www.senate.gov/~budget. 11 Francis X. Cavanaugh, The Truth About the National Debt: Five Myths and One Reality (1996), p. 123. 12 Quoted in John Cassidy, Taxing, The New Yorker, Jan. 26, 2004. 13 Five Questions for Rudolph Penner, Urban Institute Web site, Sept. 17, 2008, www.urban.org. 14 Chad Stone and Robert Greenstein, What the 2008 Trustees Report Shows About Social Security, Center on Budget and Policy Priorities, March 27, 2008, www.cbpp.org. 15 Ibid. 16 For background, see Marcia Clemmitt, Rising Health Costs, CQ Researcher, April 7, 2006, pp. 289-312, and Mary H. Cooper, Social Security Reform, CQ Researcher, Sept. 24, 2004, pp. 781-804. 17 Peter R. Orszag, testimony before House Budget Committee, June 26, 2007, http://budget.house.gov. 18 Major Foreign Holders of Treasury Securities, U.S. Department of the Treasury, www.ustreas.gov/tic/mfh.txt. 19 Quoted in Steve Conover, The Truth About the National Debt, The Skeptical Optimist blog, April 19, 2006, www.optimist123.com/optimist/2006/04/the_truth_about.html. 20 Mickey D. Levy, testimony before House Budget Committee, June 26, 2007, http://budget.house.gov. For background, see Peter Behr, The Troubled Dollar, CQ Global Researcher, October 2008.
3

Notes
1

U.S. Heading for Financial Trouble, 60 Minutes, CBS News, July 8, 2007, www.cbs news.com. 2 First Baby Boomer Receives First Social Security Payment, USA Today, Feb. 15, 2008, www.usatoday.com/money/perfi/retirement/

About the Author


Staff writer Marcia Clemmitt is a veteran social-policy reporter who previously served as editor in chief of Medicine & Health and staff writer for The Scientist. She has also been a high-school math and physics teacher. She holds a liberal arts and sciences degree from St. Johns College, Annapolis, and a masters degree in English from Georgetown University. Her recent reports include Regulating Credit Cards, Climate Change, Health Care Costs and Preventing Memory Loss.

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Ibid. Kenneth Rogoff, Foreign Holdings of U.S. Debt: Is Our Economy Vulnerable? Brookings Institution Web site, June 26, 2007, www.brookings.edu. 23 Brad Setser, testimony before House Budget Committee, June 26, 2007, http://budget.house.gov. 24 Rogoff, op. cit. 25 Brad Setser, Brad Setsers blog, June 26, 2007, www.rgemonitor.com. 26 For background, see Marcia Clemmitt, Budget Deficit, CQ Researcher, Dec. 9. 2005, pp. 1029-1052. 27 For background, see Robert E. Wright, One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe (2008); also see Marc Labonte and Gail E. Makinen, The National Debt: Who Bears Its Burden? Congressional Research Service, Feb. 28, 2008, http://assets.opencrs.com/rpts/RL30520_20080 228.pdf. 28 Quoted in Wright, op. cit., p. 14. 29 Ibid. 30 Ibid. 31 Orszag, op. cit. 32 Ibid. 33 Kent Conrad, remarks before Senate Committee on the Budget, Jan. 24, 2008. 34 For background, see Marcia Clemmitt, Regulating Credit Cards, CQ Researcher, Oct. 10, 2008, pp. 817-840; and Barbara Mantel, Consumer Debt, CQ Researcher, March 2, 2007, pp. 193-216. 35 See Katel, op. cit. 36 Kent Conrad, press statement, Oct. 14, 2008. 37 Roberton Williams and Howard Gleckman, An Updated Analysis of the 2008 Presidential Candidates Tax Plans, Tax Policy Center, Sept. 15, 2008. 38 Promises, Promises: A Fiscal Voter Guide to the 2008 Election, US Budget Watch, Committee for a Responsible Federal Budget, August 2008. 39 Quoted in Candidates on Fiscal Responsibility, Candidate Issue Index, Opportunity 08, Brookings Institution. 40 Stan Collender, A Review of 2007, Budget Battles, NationalJournal.com, Dec. 18. 2007. 41 Ibid. 42 Kent Conrad, statement on Senate floor, Sept. 12, 2007. 43 Judd Gregg, statement on Senate floor, July 31, 2007. 44 Kent Conrad and Judd Gregg, press release, Sept. 18, 2007. 45 Henry J. Aaron, testimony before House Committee on the Budget, June 24, 2008.
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FOR MORE INFORMATION


Brookings Institution, 1775 Massachusetts Ave., N.W., Washington, DC 20036; (202) 797-6000; www.brookings.org. A nonprofit, center-left think tank that analyzes tax and budget issues. Budget Battles Archive, National Journal, www.nationaljournal.com/members/ buzz/2007/budget. A collection of columns by budget reporter Stan Collender that chronicles recent Washington budget history through 2007. Cato Institute, 1000 Massachusetts Ave., N.W., Washington, DC 20001; (202) 8420200; www.cato.org. A libertarian think tank favoring individual liberties and limited government that analyzes budget and tax issues. Center on Budget and Policy Priorities, 820 1st St., N.W., Suite 510, Washington, DC 20001; (202) 408-1080; www.cbpp.org. Liberal-leaning think tank that analyzes the impact of government budget and tax policy on states and localities, the elderly, and low-income and working families. Committee for Economic Development, 2000 L St., N.W., Suite 700, Washington, DC 20036; (800) 676-7353; www.ced.org. Nonpartisan advocacy organization of business and education leaders that distributes information and policy papers on the budget and other issues. Center for Economic and Policy Research, 1611 Connecticut Ave., N.W., Suite 400, Washington, DC 20009; (202) 293-5380; www.cepr.net. Left-leaning think tank that analyzes a wide range of economic and budgetary issues. Concord Coalition, 1011 Arlington Blvd., Suite 300, Arlington, VA. 22209; (703) 894-6222; www.concordcoalition.org. A nonpartisan membership organization that advocates for fiscal responsibility in federal budgeting. Congressional Budget Office, Ford House Office Bldg., 4th Floor, 2nd and D Sts., S.W., Washington, DC 20515; (202) 226-2602; www.cbo.gov. A nonpartisan government office that analyzes how proposed legislation and fiscal and budget policies affect the budget. Economic Policy Institute, 1660 L St, N.W., Suite 1200, Washington, DC 20036; (202) 775-8810; www.epi.org. A liberal think tank that examines how budget policies affect low- and middle-income families and workers. Facing Up to the Nations Finances, www.facingup.org. A budget-education Web site run by a group of think tanks that provides news, data, expert commentary, discussion forums and student contests. Heritage Foundation, 214 Massachusetts Ave., N.W., Washington, DC 20002; (202) 546-4400; www.heritage.org. A conservative think tank that provides a wide range of budget analysis. Office of Management and Budget, 725 17th St., N.W., Washington, DC 20503; (202) 395-3080; www.whitehouse.gov/omb/. A White House office that prepares the presidents annual budget and analyzes and oversees federal fiscal management. OMB Watch, 1742 Connecticut Ave., N.W., Washington, D.C. 20009; (202) 234-8494; www.ombwatch.org. A nonprofit group that advocates for more transparent and responsible budgeting and provides online news and commentary.

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Bibliography
Selected Sources
Books
Rivlin, Alice M., and Joseph R. Antos, eds, Restoring Fiscal Sanity: The Health Spending Challenge, Brookings Institution Press, 2007. Economists from the center-left Brookings Institution and the free-market-oriented American Enterprise Institute assemble a panel of 10 health-care analysts from across the political spectrum to outline the political and policy questions that complicate attempts to rein in rising health costs. Rivlin, Alice M., and Isabel V. Sawhill, eds., Restoring Fiscal Sanity: How to Balance the Budget, Brookings Institution Press, 2004. Two economists from the center-left Brookings Institution assemble budget analysts from across the political spectrum to discuss the policy choices and political barriers involved with deficit trimming. Wiggin, Addison, Kate Incontrera and David M. Walker, I.O.U.S.A.: One Nation. Under Stress. In Debt, Wiley, 2008. In a companion book to the 2008 documentary film of the same name, financial writers and a former U.S. comptroller general (Walker) argue that the budget must be a primary U.S. concern. Wright, Robert E., One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe, McGraw Hill, 2008. A professor of financial history at New York University chronicles the benefits and risks of public debt in the early United States. The State of the Unions Finances, Peter G. Peterson Foundation, July 2008, www.pgpf.org/resources/PGPFCitizensGuide.pdf. A new foundation that advocates for fiscal prudence offers a laypersons guide to the federal budget. Taking Back Our Fiscal Future, Brookings Institution/ Heritage Foundation, April 2008, www.brookings.edu/papers/2008/04_fiscal_future.aspx. Budget analysts recommend enactment of explicit, longterm budgets for Medicare, Medicaid and Social Security to ensure the programs are sustainable. Twelve Principles for Fiscal Responsibility, US Budget Watch, Committee for a Responsible Federal Budget, May 2008, www.usbudgetwatch.org/files/crfb/crfb12principles.pdf. Nonpartisan budget experts outline steps needed to avert a long-term budget crisis. Frenzel, William, Charles W. Stenholm, G. William Hoagland and Isabel V. Sawhill, Taming the Deficit: Forging a Grand Compromise for a Sustainable Future, Opportunity 08, Brookings Institution, February 2007. Economic and political analysts discuss potential points of compromise for a bipartisan balanced-budget solution. Kogan, Richard, Matt Fiedler, Aviva Aron-Dine and James Horney, The Long-Term Fiscal Outlook is Bleak, Center on Budget and Policy Priorities, Jan. 29, 2007, www.cbpp.org. If current budget policies are continued, federal deficits will rise to about 20 percent of the countrys annual income by 2050. Labonte, Marc, and Gail E. Makinen, The National Debt: Who Bears Its Burden? Congressional Research Service, Feb. 28, 2008, http://assets.opencrs.com/rpts/RL30520_ 20080228.pdf. Congress nonpartisan research and analysis arm chronicles the history of the national debt and outlines key arguments on the extent to which the debt burdens future generations. Riedl, Brian, Ten Myths About Budget Deficits and the Debt, Backgrounder No. 2178, The Heritage Foundation, Sept. 8, 2008, www.heritage.org/Research/Budget/bg2178.cfm. A conservative analyst argues that future Social Security and Medicare costs pose enormous risks but that the national debt level isnt harming the economy. Stone, Chad, and Robert Greenstein, What the 2008 Trustees Report Shows About Social Security, Center on Budget and Policy Priorities, March 27, 2008, www.cbpp.org/3-27-08socsec.htm. Social Securitys future shortfalls will be large but manageable.

Articles
Mannes, George, Why We Need to Cut Seniors Benefits, CNNMoney.com, Oct. 24, 2008. Shifting some federal spending away from retirees and toward children could improve future generations ability to care for themselves, their parents and grandparents. Beck, Glenn, David Walker Interview About the Economy, The Glenn Beck Program, Jan. 18, 2008, www.glennbeck. com/content/articles/article/196/4595. A conservative commentator discusses the budget with thenComptroller General Walker.

Reports and Studies


A Balanced Approach to Restoring Fiscal Responsibility, Brookings Institution/Center on Budget and Policy Priorities, July 2008, www.cbpp.org/7-9-08bud.pdf. Analysts argue that health care overall, not just Medicare and Medicaid, must be overhauled to save the nations fiscal future.

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