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The Winner-Take-All Economy

The Winner-Take-All Economy

Recent news has highlighted that employment numbers continue to improve, with the 5.8 percent unemployment rate announced Friday morning—the lowest rate since July 2008, before many of us felt the impact of the Global Financial Crisis. So why don’t we feel better off?

While in the aggregate things are looking up – the U.S. economy grew 3.5 percent in the year ending September, beating forecasts –  the benefits of the economic recovery (and of economic growth in general for the past 20 years) are being felt by a smaller and smaller segment of the population. As Federal Reserve chair Janet Yellen said last month: “Unfortunately, the past several decades of widening inequality has often involved stagnant or falling living standards for many families.” We’ve gone from an economy where everyone benefits from growth to one where the “winners” take all, and the rest of us are left out.

Chart One

Unemployment has broadly improved since it peaked at 10 percent in October 2009.  But while these numbers are looking good, labor participation numbers are not. Unemployment measures how many people who are looking for a job find a job, whereas the labor participation rate measures how many of us in the country as a whole are looking for jobs at all.

Previously, when unemployment has improved after a recession, the labor force participation rate has gone up – as more people find jobs, more people who weren’t looking start to look. You can see this in the first chart: After the last big recession in the early 80s, the red participation line goes up as the blue unemployment line goes down sharply.

This time around, that hasn’t happened. As the unemployment rate has gone down, the labor participation rate has actually continued to go down at a rate faster than before the Great Recession. This means that even though more people looking for jobs are finding jobs, fewer people are looking for jobs than ever before.

And while overall unemployment has been rough during the Great Recession, employment numbers for those without the skills necessary to compete in the modern economy have been even worse.

Chart 1

The unemployment rate of those who haven’t completed high school has been significantly higher than the overall unemployment rate and at the peak was triple the unemployment rate of college graduates. Those without high school diplomas are much more likely to drop out of the workforce entirely, becoming dependent on family and friends and keeping the labor participation rate low.

Chart 2

This comes against a background where income for everyone outside of the upper class (the much disparaged 1 percent, to borrow from Occupy Wall Street) has stagnated over the past 20+ years.

An easy way to measure inequality is an indicator called the Gini Ratio, which measures how “unequal” a society is. At zero, everyone earns the same as everyone else; at 1, no one earns the same amount, and each citizen can be ordered between the richest and poorest members of society. Over the past 20 years, the Gini Ratio in the United States has crept up steadily, indeed almost constantly since the Federal Reserve began tracking it in the early 70s. This is during an era when other countries seen as case studies of inequality – like Brazil or Mexico – have seen their Gini Ratios decline.

Two forces that complement and can substitute for each other have driven this: globalization and automation. Globalization is the transition of manufacturing jobs from the United States to other countries with cheaper wages (such as China) in exchange for cheaper goods here at home. Automation is the transition of jobs from human employees to automated processes and robots. The bottom line of these two forces is that while it feels like it has been tough to find a job for the past 6 years, things have really been getting tougher over the past 20 to 30.

The bad news? It’s getting worse. Automation and offshoring have already hollowed out the American blue collar, but they are now beginning to make the American white collar tradable, and hollowing that out, as well. Previously protected industries such as law and medicine are being pressured by legal services provided by back offices in India and telemedicine from anywhere in the world. And automation is moving up the value chain from factory-line assembly work to algorithms that can replace decision makers in even the most white-collar professions. Deep Knowledge Ventures, a Singapore-based VC firm, has even appointed an algorithm to its board of directors, complete with voting power.

So while we’ve seen it tough for anyone who isn’t the most highly skilled to find jobs since the Great Recession, there is a bigger, longer-term trend showing that gains in the economy have been going to those at the top of the income scale. This combination of a jobless recovery and an economic model shifting benefits away from labor (in the form of jobs and salaries) and towards those who hold the scarcer resources in the economy: capital and innovative ideas. As Fed chair Yellen says, this raises bigger questions: “I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.” These winners are taking all the gains from our economy, and undermining what makes us great as a nation.

Mike Derham is a partner at Novus Pontis and a Fellow of the Truman National Security Project. Views expressed are his own.

Photo: peoplesworld via Flickr

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Five Key House Races For National Security

Five Key House Races For National Security

Conventional wisdom holds that the midterms are driven by economics and outrage, yet some commentators argue that national security — by way of fear — will be a decisive force in this year’s elections. In any case, real, concrete national security issues should matter when Americans head to the polls this November. So ignore the drivel about Ebola-slobbering terrorists coming to destroy the fabric of Americana, and check out the races below. These candidates know veterans’ issues, military, energy, and other matters of national security, and are fighting for smart solutions to real challenges.

Tammy Duckworth

Name: Tammy Duckworth

Status: Incumbent running for second term

Constituency: Illinois’s 8th congressional district

Committee Memberships: Armed Services; Oversight and Government Reform

Service Experience: Duckworth is an Iraq War veteran deployed in 2004. She earned a Purple Heart for her service when a rocket propelled grenade nearly downed her Black Hawk helicopter. Duckworth chose to enter public service while recovering from a double amputation in Walter Reed.

Key Achievements: Before joining the legislative fray, Duckworth made strides working at the Illinois and national VA. Her idea of a tax credit for businesses that hire veterans in Illinois was copied into Congress’s 2009 stimulus bill, and she had a special focus on developing tailored resources for female vets and working to end veteran homelessness.

What’s Next? Duckworth has pushed for a smart and measured approach to countering the ISIS threat, and she is pushing for a clear (though politically difficult) public argument and vote on a new Authorization for the Use of Military Force in Iraq and Syria. Her voice will be critical in forcing Congress towards this essential action.

Scott Peters

Name: Scott Peters

Status: Incumbent running for second term

Constituency: California’s 52nd congressional district

Committee Memberships: Armed Services; Science, Space, and Technology

Service Experience: N/A

Key Achievements: Peters has secured more than $1.2 million in benefits for veterans and military families in his home district. He also partnered with Senator Mark Udall (D-CO) to introduce the Department of Defense Energy Security Act (DODESA), and later worked key provisions addressing the military’s energy security and innovation into the 2014 National Defense Authorization Act.

What’s Next? With the threat of sequestration hanging like the Sword of Damocles above the DoD, Peters promises to be a strong advocate against cuts across the board that would otherwise create a hollow force. He also will be an essential proponent of foreign aid, pushing back against his opponent’s characterization of democracy and development assistance abroad as “bloated and wasteful.”

Paul Cook

Name: Paul Cook

Status: Incumbent running for a second term

Constituency: California’s 8th congressional district

Committee Memberships: Armed Services; Foreign Affairs; Veterans’ Affairs

Service Experience: Cook is a U.S. Marine who served as an infantry officer during the Vietnam War. He earned a Bronze Star and two Purple Hearts in his 26 years of service.

Key Achievements: Cook reached across the aisle to partner with Rep. Mark Takano (D-CA) to secure $2 million in aid to hire over 3,100 National Guard, Reserve and veterans in California. He also helped broker a deal to expand the vital Marine Corps training base located in Twentynine Palms, CA, while adhering to the unique needs of his constituency.

What’s Next? Cook will be using his position on the Armed Services Committee to authorize an innovative direct placement model for National Guard, Reserve and veterans employment, based on California’s successful Work for Warriors program. Cook included this concept in an amendment to the FY15 House National Defense Authorization Act.

Photo via Wikimedia Commons

Photo via Wikimedia Commons

Name: Seth Moulton

Status: Challenger (after unseating incumbent Rep. John F. Tierney in a primary)

Constituency: Massachusetts’ 6th congressional district

Committee Memberships: N/A

Service Experience: Moulton served four tours in Iraq as a U.S. Marine. The Boston Globe only recently discovered that he was awarded the Bronze Star and Navy and Marine Corps commendation — an achievement about which Moulton has been so quietly humble that his parents were surprised to learn of the news via the paper’s report.

Key Achievements: Moulton drew inspiration from his service in Iraq to seek infrastructure reform at home. As the managing director of the Texas Central Railway, he supervised the preliminary engineering and planning of a 240-mile high-speed rail line between Dallas and Houston.

What’s Next? Moulton has indicated that he wants to bring VA health care reform back to the top of Congress’s to-do list because it is essential rather than politically expedient. He has pushed for increased funding to the department on the campaign trail as well as expanded educational opportunities in the GI Bill. He will be a leading voice on issues facing post-9/11 veterans.

Tulsi Gabbard

Name: Tulsi Gabbard

Status: Incumbent running for a second term

Constituency: Hawaii’s 2nd congressional district

Committee Memberships: Foreign Affairs; Homeland Security; Armed Services

Service Experience: Gabbard served two tours of duty in Iraq, actually stepping down from the Hawaii State Legislature (of which she was the youngest member ever elected) for her deployment. She is still a member of the U.S. Army National Guard at present.

Key Achievements: Gabbard sponsored the Helping Heroes Fly Act of 2013, which provided for expedited screening for severely injured or disabled active duty military or veterans. She also introduced, along with Rep. Scott Perry (R-PA), a bill suspending the visa waiver program for any country that has identified passport holders fighting with ISIS and other extremist organizations.

What’s Next? Gabbard’s work on the Military Justice Improvement Act in 2013 indicates that she will continue to work for reform of how the military prosecutes sexual assault cases. Being from Hawaii, she also will be leading legislative efforts to support the Obama administration’s strategic emphasis on the Asia-Pacific region via advocacy for missile defense and naval funding.

Andreas Mueller and Shawn VanDiver are members of the Truman National Security Project. Mueller is the co-chair of the Cybersecurity Expert Group, and VanDiver is a leading member of the San Diego chapter. Views expressed are their own. 

Photo: Diliff via Wikimedia Commons

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The Nuclear Arsenal We Don’t Need

The Nuclear Arsenal We Don’t Need

Russia has invaded Ukraine. Tough sanctions and a unified negotiating front are proving the only tactics able to slow Iran’s previous march to the bomb. And Pakistan, the world’s most unstable nuclear power, might be overthrown by thousands of fanatical protesters led by a cricketer-cum-cleric.

Don’t we have a nuclear deterrent to prevent these sorts of things from happening? As we contemplate spending a third of a trillion dollars updating our nuclear weapons, perhaps it’s time to rethink whether our Cold War strategy still works in a post-9/11 world.

Our nuclear arsenal needs updating. We have 450 Minuteman-III ICBMs that started rolling off the line in 1970. We commissioned the Ohio class nuclear submarines in 1981. The B-52s were built in the ’60s, and their more controversial B-2 cousins date back to 1989. Many of these armaments — technological marvels in their time — were built so we’d never use them, but they won’t last forever. If we don’t deal with our aging stockpile of Armageddon, we might end up nuking ourselves.

We’ve got about 4,800 nuclear bombs nearing their sell-by dates, and now we have to modernize this arsenal that we never intend to use. And it’s not just the missiles themselves — the subs and the bombers also contribute to what’s called the “strategic triad.” Add in the chillingly euphemistic “tactical” nukes (weapons optimized especially for short-range fighting), and the price tag for updating our Cold War rumpus room is staggering.

The Congressional Budget Office says modernizing our nuclear arsenal will cost us $355 billion over the next decade. And because they’re the experts on estimating what things will really cost in Washington, the CBO included $59 billion in expected cost overruns. Apparently we just expect to get robbed by our own defense contractors now and write it into the budget.

As if that weren’t enough, a recent panel of former government and military officials stated that spending on nuclear weapons could hit $1 trillion over the next 30 years. That’s trillion, with a “t.”

Just so we’re clear, we are going to borrow billions of dollars from China to pay defense contractors to overcharge us to dismantle weapons we never used to make room for new weapons we’ll never use to… well, to do what, exactly?

Sure, as long as other states possess nuclear weapons, the United States should possess a core arsenal to deter a potential, though extremely unlikely, nuclear attack. But Kingston Reif, the Director of Nuclear Non-Proliferation at the Center for Arms Control and Non-Proliferation, raised a good point in a recent column for Real Clear Defense: Our arsenal was built to counter the one in Russia, which is still the only other country with more than 300 nuclear warheads. And while you don’t need to look into Vladimir Putin’s eyes to tell that we ain’t exactly friends these days, the nature of our enmity has changed radically in that, as Reif notes, we aren’t “global ideological rivals” anymore.

No longer a godless horde of Commies — or the Soviet Union, for that matter — Russia is now worried about Islamic terrorism and dependent on the price of oil, just like we are. We only exist as a jealous counterpoint in Russia’s popular thinking as the ones responsible for their current low state.

Putin’s recent incursions into Georgia and Ukraine — both non-NATO countries — were expressions of a yearning for Russia’s former greatness, not aggression towards the United States. This would be like if the U.S. was overcompensating for feelings of inadequacy by invading Toronto because they have a baseball team. Picking on Ukraine makes Putin look desperate for validation; his actions are more tantrum than realpolitik.

And how are we countering this? The Obama administration is speaking softly and imposing big sanctions. Thanks to banking regulations put in place to stop terrorists from moving money, we have the power to systematically shut down Russia’s economy. And with the cooperation of our European allies, that’s exactly what is happening. For the last two months, Russia’s economy has shrunk as the country moves into a recession.

Our economies are far more interconnected than they were in the Cold War. We make more progress with diplomacy, foreign trade, and international economic development — the tools of soft power — than we ever did threatening mutually assured destruction. And our entire budget for the State Department and foreign operations is $49 billion, less than even the expected cost overruns for modernizing our nuclear arsenal.

Our missiles are aimed into the past at a world that has changed, but our bills will extend not just ten years into the future, but as long as the debt stays on our books. It’s high time to ask why we are rearming for a war we’ll never have with an enemy that no longer exists at a cost we can’t afford.

Jason Stanford is a partner with the Truman National Security Project. He is also a national Democratic consultant based in Austin, Texas, and writes regular columns for The Austin American-Statesman and The Quorum Report.

Photo: An unarmed U.S. Air Force LGM-30G Minuteman III intercontinental ballistic missile launches during an operational test at Vandenberg Air Force Base, Calif., Dec. 17, 2013 (A1C Yvonne Morales/Wikimedia Commons)

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From ‘Grand Old’ To ‘Shameless New’ — Trading National Security For Political Gain

From ‘Grand Old’ To ‘Shameless New’ — Trading National Security For Political Gain

One would think that on the weekend of the 70th anniversary of the invasion of Normandy – a day on which almost 10,000 fathers, brothers, and sons of our greatest generation were killed as they began the liberation of Europe – the Republican political establishment would at least press “pause” on partisan attacks that use our men and women in uniform as political pawns. Even Vladimir Putin, bogeyman du jour, paused his nationalist rants to recognize the occasion.

Rather than stopping to consider those who have made the ultimate sacrifice, supporters of New York State Republican gubernatorial candidate Robert Astorino launched an ad that used the graves of U.S. soldiers as a backdrop and urged viewers “to honor their sacrifice” and “remove tyrants,” with the latter message plastered over pictures of Democratic governor Andrew Cuomo. Instead of commemorating an epic struggle between fundamentally good and evil forces, Astorino’s supporters ran with the much simpler message that Cuomo is a modern-day Mussolini or Hitler.

This is, however, not an isolated event. The GOP establishment – both elected members and their media arms – have been on a roll of politicking with matters of national security of late. This circus detracts from critical policy discussions and legitimate critiques.

As with anything the Obama administration says or does, a political firestorm has erupted surrounding the return of Army Sgt. Bowe Bergdahl from Afghanistan earlier this week. While there are legitimate debates to have over how the White House prosecutes the war in Afghanistan, handles detainees at Guantánamo, and works with Congress, the tenor of the attacks has been outwardly partisan and at times disrespectful of our men and women in uniform.

With regards to the Bergdahl situation, Fox News commentator Kimberly Guilfoyle argued on air that Bowe Bergdahl was lucky that his rescuers didn’t bring him home “in a body bag.” The insinuation – even the mere suggestion – that members of the U.S. military would deliberately murder their own and betray the oaths they took to uphold and defend the Constitution of the United States is so offensive that it defies words.

In perhaps the crown jewel of the week’s insensitive behavior, Senator Rand Paul (R-KY), after noting that Hillary Clinton’s “involvement” with Benghazi should “disqualify” her from being president, had the extraordinarily poor taste to say on Friday to the Republican Party of Texas Conference: “Mr. President, let’s set up a new trade. Instead of five Taliban, let’s trade five Democrats.”

Paul’s lack of deference cheapens the lives of Americans in captivity by “laughing” away the importance of bringing home American personnel who have endured brutal conditions in Korea, Vietnam, and Afghanistan. The notion that the Commander-in-Chief’s responsibility to “leave no man behind” is somehow a joke – or in any way conditional – truly does disqualify someone from being president.

Perhaps the saddest thing about all this damning rhetoric is that these are the logical conclusions of a broken system rather than a particularly bad but isolated day for Republican messaging. From calling the President of the United States a “Socialistic dictator” and the “Kommandant-in-Chef [sic],” to the never-ending part-kangaroo court, part-fundraising circus surrounding the tragic events in Benghazi, to the continued narrative that President Obama hates or even “wants out” of America, the far right simply cannot stop itself from spouting vitriolic and divisive rhetoric.

There was a time when national security was the exclusive purview of the Republican Party, and any attempts by Democrats — no matter their credentials — to penetrate that sphere were either squashed by flagrant politicking or flopped on account of disastrous PR blunders. Conventional wisdom simply insisted that Democrats were “soft” and Republicans were “tough.”

However, nothing drives home the resurgence of a progressive foreign and defense policy more than the insensitive, disrespectful, and frankly out-of-touch messaging coming from the loudest voices on the right. The Republican establishment has apparently lost its respect for the office of the presidency and the United States military, and it is up to moderate voices to correct the gross excesses of the day.

There can be genuine disagreements over our military and national security, including on the subject of recent events in Afghanistan. Likewise, politics – even partisan politics – are an important part of the American political system. But we must remember those brave souls at Normandy gave their lives 70 years ago this week for the principles and values that sustain that system, and their efforts will be in vain if it continues down a track of such perversion.

However disenchanted members of the political minority may be with the current state of American politics, language of disrespect to those who serve and have served shown by all of these radical individuals crosses the line. It is our responsibility to voice our collective outrage and demand accountability for these ugly statements purely and poorly aimed at producing partisan gains.

Dr. Mark R. Jacobson is a Senior Advisor to the Truman National Security Project and has previously worked on Capitol Hill and at the Department of Defense.  From 2009-11 he served as the Deputy NATO Representative in Kabul, Afghanistan. Views expressed are his own.

Photo: Gage Skidmore via Flickr

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