Reihan Salam

One of the scariest notions about America’s sluggish labor market recovery is that it doesn’t represent an aberration, but rather a new reality in which good jobs are few and far between, particularly for those with limited skills. It is certainly possible that the future will be brighter than we think, and that we will soon enter a new economic Golden Age in which people with low education levels will flourish as employers clamor for their services at ever-higher wages. But if this happy outcome does not come to pass, as the current evidence suggests, the United States and other market democracies will have to come up with a Plan B.

A number of interrelated developments, from automation to organizational innovation to off-shoring, appear to have reduced the willingness of employers to pay middle-income wages to less-skilled workers. That is, the problem is not that there is no wage at which employers will take on less-skilled workers. If this were the case, agriculture and hospitality companies wouldn’t be pressing lawmakers for an immigration overhaul that would allow for a large influx of less-skilled workers from abroad.

Rather, the problem we face is that employers are only willing to employ less-skilled workers at very low wages, including wages that the voting public considers unacceptably low. Public support for raising the federal minimum wage, now at $7.25, is overwhelming. A Gallup survey released on Monday finds that 76 percent of voters favor a $9 per hour minimum wage, and one assumes that support for an even higher minimum wage would be almost as robust.

Many will argue that an increase in the minimum wage to $9 will not have a dramatic effect on the number of low-wage employees or on hours worked, and that may well be true. Yet it is possible that job growth might decline in the wake of minimum wage increases, as new research by Jonathan Meer and Jeremy West of Texas A&M University suggests. Nicole M. Coomer of RTI International and Walter J. Wessels of North Carolina State University, meanwhile, have explored the possibility that while increases in the minimum wage don’t appear to have a significant impact on total employment levels, they might cause workers to shift from jobs subject to the minimum wage to those that are not subject to the minimum wage. For example, the minimum wage for tipped employees, like restaurant servers, is lower than the standard minimum wage. Regardless, the minimum wage debate won’t get resolved any time soon.

What we do know, however, is that in market democracies with high effective minimum wages, whether established by statute or centralized collective bargaining, the lowest-wage employees tend to be more productive than their lowest-wage counterparts in the United States. This implies that as minimum wages increase, employers might become more inclined to substitute capital for labor and that they will be somewhat more reluctant to hold on to employees who can’t handle a steep learning curve. Earlier this year, Sarah O’Connor of the Financial Times wrote a brilliant account of Amazon UK’s Rugeley fulfillment center, where many employees are drawn from the ranks of the region’s long-term unemployed. Workers who can handle the intense workload are made full-time Amazon UK employees. Those who can’t are let go, and quickly. What O’Connor doesn’t explore is the very real possibility that Amazon UK’s personnel policies flow from Britain’s hourly minimum wage, which at 6.19 pounds ($9.84) is substantially higher than the U.S. minimum wage. The UK wage essentially mandates a reasonably high level of productivity that young workers, workers with limited English language proficiency, or workers taking on their first jobs a long spell of unemployment might struggle to reach.

This week, President Barack Obama offered an apology (of sorts) to Americans who believed him when he repeatedly assured the public that anyone who liked their current health insurance plan could keep it under the Affordable Care Act. In an interview with Chuck Todd of NBC News, the president said, “I am sorry that they are finding themselves in this situation based on assurances they got from me.”

Up until now, the president and his allies have insisted that the “keep your plan” promise had been misinterpreted, and that the plans that were being cancelled were “junk plans” that belonged on the scrap heap, a claim that many insurance beneficiaries found objectionable. Keith Hennessey, a veteran of the Bush White House, constructed a flowchart of the “keep your plan” defenses made by the president and his allies, the complexity of which spoke to the president’s political dilemma. One of the architects of the Affordable Care Act, Ezekiel Emanuel, struggled to defend the veracity of the “keep your plan” promise in a recent episode of Fox News Sunday. So the president’s apology will surely come as a relief to those tasked with maintaining that the “keep your plan” promise wasn’t at least slightly misleading.

The president’s apology didn’t prevent him from making other misleading statements during the same interview. Once again, he insisted that the disruption of existing insurance arrangements applied only to people in the individual insurance market, which represents a relatively small share of insurance beneficiaries. But the Affordable Care Act imposes new regulations on employer-sponsored plans, which have the potential to disrupt the insurance arrangements of many more Americans, and the law’s grandfathering provisions are quite narrow. Fortunately for the president, the apology itself will draw enough attention to distract from this looming issue, which could prove far more politically potent than what some are describing, perhaps prematurely, as the slow-motion collapse of the individual market.

Next week’s election will be an important one for the future of the GOP. In New Jersey, Republican Gov. Chris Christie is up for re-election, and by all accounts he is set to defeat his Democratic opponent, state Sen. Barbara Buono, by a wide margin. Christie is widely considered a serious candidate for the Republican presidential nomination in 2016, and his ability to win support among independents and Democrats in his home state will be a central part of his appeal.

But in Virginia, it increasingly looks as though Terry McAuliffe, an entrepreneur and investor best known as a political ally of former President Bill Clinton, will defeat Ken Cuccinelli, a staunch conservative much admired by the Tea Party right. At least some conservative activists saw Cuccinelli, who as Virginia’s attorney general played a leading role in constitutional challenges against the Affordable Care Act and other Obama administration initiatives, as a potential presidential contender. A bruising defeat against McAuliffe will put an end to such talk.

There are many things that separate Christie from Cuccinelli. Having served as governor for the better part of the last four years, Christie is a familiar figure. He began his tenure with a series of polarizing confrontations with New Jersey’s powerful public employee unions, yet he has spent the last year on a more conciliatory note, motivated in part by a desire to help his state recover from the damage wrought by Hurricane Sandy. In a heavily Democratic state, Christie has distanced himself from congressional Republicans, and he has framed himself as a pragmatic reformer who stands above the political fray. This position is particularly valuable in light of parlous state of the GOP brand. The most recent NBC/Wall Street Journal poll finds that the Republican party now has a 22 percent positive rating and a 53 percent negative rating across the country, and it’s a safe bet that the picture is even worse in New Jersey.

The Obamacare debate is entering a new phase. The problems plaguing the insurance exchanges have raised serious questions about the viability of the president’s health reform effort. The Obama administration and its allies insist that the exchanges will soon be up and running, and that they’ve already been successful. Yet at least some liberals are starting to wonder if the exchange model should be abandoned in favor of a single-payer, Medicare-for-all approach. John Cassidy of the New Yorker, an occasional Obamacare critic from the left, is just one of many liberals who’ve touted the virtues of a single-payer system, and it is easy to imagine future Democratic presidential candidates doing the same. Conservatives, meanwhile, have tended to characterize the failure of the exchanges as a reflection of the limits of government. Patrick Ruffini, a well-regarded conservative strategist, captured the views of many on the right in a short piece titled “How Healthcare.gov Discredits Liberalism.” We’re nowhere near a consensus on whether the kludgy mess that is Obamacare ought to be replaced. But serious questions are being raised across the political spectrum.

One idea that hasn’t drawn much attention is the role that default insurance might play in a future U.S. health system. This is despite the fact that low-cost default insurance might be the most straightforward way for the U.S. to achieve universal coverage at a price all Americans can afford.

Almost everyone, including President Obama, accepts that the process of signing up for insurance on the exchanges has proven quite difficult. But it hasn’t been impossible. A decent number of determined consumers have been able to sign up for coverage after many false starts. The concern is that the most determined consumers are presumably the ones who have the most to gain from insurance coverage, which is to say consumers who expect to have high health costs. The goal of the exchanges, and specifically of the generous federal subsidies offered to low- and middle-income people seeking coverage, has been to attract as many young and healthy consumers as possible, to ease the burden of providing medical care for the old and sick. There is still time to fix the exchanges, and the experience is gradually improving. Nevertheless, the initial hiccups have led to renewed calls for delaying implementation of the individual mandate. Until recently, these calls have been limited to Republican critics of Obamacare. Now, however, Democrats like Rep. John Barrow (D-GA), Rep. Gerry Connolly (D-VA) and Sen. Mark Begich (D-AK) have joined the chorus. To be sure, these Democrats, many of whom represent Republican states, are calling for a delay if and only if problems with the exchanges persist. But the prospects for delaying the individual mandate have greatly improved. And such a delay will make it even less likely that young and healthy consumers will sign up for coverage.

A few days ago, an older and wiser friend of mine and I had a lengthy conversation about divorce, that most cheerful of subjects. He noted that one of the surest signs of a marriage in trouble was that both parties were convinced that they had been forgiving of various betrayals and accommodating of various foibles, yet this generosity hadn’t been reciprocated. Naturally, this brought to mind the increasingly strained relationship between Tea Party conservatives and Republican regulars. What better way to describe how Ted Cruz must feel about John Boehner, the sellout, and how John Boehner must feel about Ted Cruz, the zealot?

Molly Ball of the Atlantic recounts the quasi-mutinous musings of various conservative luminaries, like Glenn Beck of TheBlaze, Erick Erickson of RedState.com, and Sean Hannity of Fox News, among others. As recently as 2010, the notion that the Tea Party movement would bolt from the GOP to establish a party of its own would have seemed absurd. But now, in the wake of a fiscal showdown that’s proven to be an utter fiasco for congressional Republicans, the idea of a bona fide divorce is gaining credence. Among the Tea Party faithful, there is a widespread conviction that the effort to defund Obamacare would have proven successful had Speaker Boehner and his anxious allies been tougher, and more willing to risk breaching the debt ceiling. Republican regulars, meanwhile, are largely convinced that the defund Obamacare effort was a hopeless indulgence that exacted a real political cost. At least one critic of the Tea Party movement, David Frum of the Daily Beast and CNN, has argued that Republicans would benefit if “the Sarah Palins and the Ted Cruzes who have done so much harm to their hopes over the past three election cycles” were to bolt.

This isn’t the first time libertarian-minded conservatives have contemplated a formal exit from the GOP. In the 1970s, William A. Rusher, the publisher of National Review and a staunch, Rockefeller-hating Goldwaterite, frequently made the case for a new conservative party, which he hoped would be led by Ronald Reagan. After Reagan’s narrow defeat in the 1976 contest for the Republican presidential nomination, however, the former California governor stood by his moderate rival Gerald Ford, and in doing so he dashed the hopes of Rusher and other third-party enthusiasts. The Libertarian Party, established in the early 1970s, has long been divided over whether to appeal to disaffected Republicans or hippies. In the 1980 presidential election, the Libertarians achieved great success by espousing a pacifist, left-leaning brand of “low-tax liberalism,” while in 1988 the party turned to Ron Paul, the libertarian populist who would later make waves as a Republican presidential candidate in 2008 and 2012. The 2012 Libertarian presidential nominee, former New Mexico Gov. Gary Johnson, an unpretentious Republican who combined familiar Tea Party bromides with a commitment to ending the War on Drugs, had some promise as an alternative to Mitt Romney, but in the end his candidacy proved to be a footnote, in part because the septuagenarian Paul stole his thunder. The Constitution Party, first established as the U.S. Taxpayers’ Party in 1991, is a vehicle for a hard-edged Christian conservative politics that has never found much success. And in 2000, Pat Buchanan tried to transform Ross Perot’s Reform Party into a nationalist conservative party in line with his own idiosyncratic, anti-trade populism.

As the government shutdown grinds on, the Republican leadership in the House is struggling to unite GOP lawmakers around a fiscal deal that Senate Democrats and the Obama administration would be willing to accept. Speaker John Boehner has reportedly said that he is willing to rely on Democratic votes if necessary to pass an increase in the debt ceiling. Yet he also insists that he will fight for spending cuts and entitlement reform in any debt ceiling bill, in a nod to conservative members who are convinced that he is eager to sell them out.

Whether or not Boehner succeeds, it is increasingly difficult to deny that the Republican negotiating position is being constrained if not dictated by a small minority of 30 or so members from safe seats who seem largely indifferent to leadership demands, or rather leadership requests. The result is that the much-derided Republican establishment is in a state of panic, sensing that GOP intransigence will lead the party to squander the political opportunity created by the president’s declining fortunes and the persistent unpopularity of Obamacare. How has party discipline broken down to this extent, and what, if anything, can Republicans do to restore it?

First, it is important to recognize that this chaotic confrontation wasn’t supposed to happen. At the start of the year, congressional Republicans seemed eager to return to regular order, in which, essentially, the House majority brokers with the Senate majority to pass legislation, which the president can then sign or veto. Yuval Levin, writing for National Review Online, argued that for the right, the central political problem with the endless succession of fiscal showdowns is that they inevitably made the president, as a unitary figure, look better than the often-fractious House Republican conference. Regular order, in contrast, would demand that Senate Democrats put up or shut up by codifying their commitments, not all of which are popular in hotly-contested states, in real legislation. House Republicans and Senate Democrats would be on a relatively level playing field, while the president would be relegated to the sidelines. But the regular order strategy didn’t come to fruition, both because Senate Democrats were reluctant to play along and because a determined minority of House Republicans couldn’t reconcile themselves to the fact that the ordinary legislative process left them with very little leverage.

Next week, the new state-based health insurance exchanges established under the Affordable Care Act, better known as Obamacare, will be open for business. Or rather — some of them will be sort of open for business, as the exchanges have been plagued by a series of technical glitches and delays. The Obama administration is now characterizing October 1st as the beginning of a “soft launch,” during which federal and state officials will work out various kinks. And though this might sound like just another bureaucratic foul-up, the success of the exchanges in these first few months will have enormous implications for the ultimate success of Obamacare.

The exchanges are online marketplaces that will allow individuals and small firms to compare the coverage options and pricing of various health insurance plans. They are also the platform through which people will apply for income-based subsidies for purchasing health insurance. One of the biggest challenges facing the officials setting up the exchanges is that applications for subsidies are meant to be processed in real time, to make the experience as easy and accessible as possible. This is much easier said than done. In Massachusetts, which has been operating an exchange of its own since 2007, applying for subsidies is a time-consuming process that involves filling out a 15-page form and providing proof that one is eligible for subsidies in the first place, and then waiting for state officials to get back to you. While Massachusetts’ approach is slow-moving, it has the advantage of being tried and true, as it is very similar to the way the states have been determining Medicaid eligibility for years. Real-time verification, in contrast, represents a break with established practice, and it would be a miracle if it didn’t involve major hiccups.

If the exchanges work smoothly, they have a decent shot at enrolling large numbers of the young, healthy Americans the Obama administration is counting on to make its new coverage expansion effort economically viable. If the exchanges don’t work smoothly, however, they might deter all but the sickest, most vulnerable healthcare consumers from enrolling, and this in turn would make the new insurance pools far more expensive to cover.

On Tuesday afternoon, a small but influential slice of the inside-the-Beltway conservative intelligentsia gathered at the American Enterprise Institute, a D.C.-based conservative think tank, to hear Utah Sen. Mike Lee present his new tax reform plan, the “Family Fairness and Opportunity Tax Reform Act.” Though it is unlikely that the bill will become law, it represents genuinely new thinking about how Republicans ought to approach domestic policy. And as such, it has the potential to break the GOP out of its defensive crouch.

It is worth noting that Mike Lee isn’t exactly the most likely messenger for family-friendly tax reform. He first emerged on the national scene when he challenged three-term incumbent Sen. Bob Bennett, a Republican widely lauded for his willingness to work across the aisle, in a hard-fought primary race. Lee, a constitutional lawyer with a distinguished resume, ran as a Tea Party stalwart. As a senator, he has led the fight for a balanced budget amendment and against new gun control laws. Most recently, he has rallied Senate conservatives around the idea of defunding the Affordable Care Act, an effort that has been condemned by the Wall Street Journal editorial page and key members of the congressional Republican leadership as reckless and irresponsible. No one questions Lee’s conservative bona fides. What is new is Lee’s willingness to venture outside of his comfort zone. While many leading Republicans have insisted that conservatives do more to better the lives of middle-income voters — the bedrock of the GOP coalition — Lee is actually putting his money where his mouth is with his new tax plan.

Conservatives will find much to like in Lee’s plan. Though it is not a flat tax, an idea Lee has championed in the past, it does reduce the tax code from seven individual income tax rates to two, set at 15 percent and 35 percent. The first rate applies to income up to $87,850 for single filers and $175,700 for joint filers, and the second applies to all income above those thresholds. As of 2010, a single filer earning $87,850 would find herself in the 95th percentile of individual earners, while a married couple earning $175,700 would find themselves in the 87th percentile of married households. The plan also eliminates the taxes included in the Affordable Care Act and the Alternative Minimum Tax, the goal being to improve incentives to work and save.

Right now, it looks as though Larry Summers has the inside track to be named the next chairman of the Federal Reserve. This is despite the fact that many on the left, from Democratic lawmakers like Oregon Senator Jeff Merkley to influential activists like Mike Konczal of the Roosevelt Institute, are deeply skeptical of Summers, owing to his ties to the financial sector, his impolitic reputation, and the fear that he might be more concerned about the dormant threat of inflation than the very real scourge of long-term unemployment. The discouraging job growth numbers released by the Bureau of Labor Statistics earlier today can’t help his case. But Summers, the former chairman of President Obama’s National Economic Council, seems to have the trust and respect of his former boss, and that may be all he really needs to secure the most powerful economic policy-making job in the country.

So it is worth thinking through what Summers’ priorities might be as Fed chairman. Though the Federal Reserve is responsible for setting monetary policy, it also has a great deal of influence over the larger workings of the U.S. financial system. Zachary Goldfarb, a reporter for the Washington Post, reports that Summers hopes to use the Fed’s influence to restructure the financial system to better serve the interests of low- and middle-income households. This could be a ploy on the part of Summers’ allies, who understand that his reputation as a friend of Wall Street is his greatest political liability. If it’s more than that, however, Summers could use his bully pulpit to great effect.

One of the greatest challenges facing poor families is a lack of savings. Households that are “liquid-asset poor” are two to three times more likely to experience material hardship after a job loss, health emergency, or other moment of crisis than those with liquid assets. These moments of crisis are when many families are forced to turn to public assistance. In an ideal world, we’d want to find some way to prevent families from falling into crisis in the first place. The trouble is that merely transferring financial assets to households is not likely to yield the same benefits as cultivating the opportunities and habits that lead families to accumulate assets independently. The financial crisis profoundly damaged the balance sheets of U.S. households, which is one of the leading causes of stagnant growth. Addressing the underlying drivers behind weak balance sheets has the potential to yield significant benefits for the broader economy as well as for poor families.

ISTANBUL — It’s rare that I enjoy being stuck in traffic, but the slow ride from Istanbul’s main international airport to its central business district is a feast for the eyes. New shopping malls, apartment blocks, and office parks seem to stretch out in every direction, up and down the city’s formidable hills. But this week has served as a reminder that Turkey’s prosperity rests on a fragile foundation.

After over a decade in office, many Turks believe that the ruling AK Party has grown arrogant and unaccountable, and its brutal response to recent political protests has laid bare Prime Minister Recep Tayyip Erdogan’s unmistakable authoritarian streak. One nevertheless gets the impression that for most Turks, the fact that Erdogan has presided over the longest, most robust economic expansion since the golden age that stretched from 1960 to 1978 is reason enough to support him. From 2002 to 2012, inflation-adjusted GDP per capita increased by 43 percent, or an average of 3.6 percent per year. This is not quite as fast as some other middle-income countries, like Poland. But it has been fast enough to leave a deep imprint on Turkish society, and to give Turks, almost half of whom are under the age of 25, a new sense of what their country can accomplish.

A week from now, on September 7th, the International Olympic Committee will vote to determine which city will host the 2020 Olympics, and Istanbul is, along with Madrid and Tokyo, a finalist. There are a variety of reasons one might prefer Istanbul over its rivals. While Spain and Japan have both hosted the Olympics in recent decades, no city in Turkey, the Near East or a Muslim-majority country has ever done so. Just as the selection of Seoul and Beijing and Rio de Janeiro celebrated the rise of various rising economic powers, the selection of Turkey would send the signal that the country once derided as “the sick man of Europe” had finally arrived.