Larry Summers, leader of President Obama’s National Economic Council from 2009 to 2010 and former Harvard University President, made a forceful case last week at the Brookings Institution to end the 39-year-old crude oil exports ban. The ban, which was put in place in 1975 in response to the Arab oil embargo, reflects policy stuck in the 1970s. We have an opportunity to promote U.S. economic development through a booming energy renaissance that demands a very different policy some 40 years later. Permitting U.S. oil exports will lower gasoline prices at the pump, provide Americans with new jobs, lower unemployment, and strengthen the nation’s flexibility in international policy. Mr. Summers believes President Obama should act now. His case is straightforward: “We should not have prohibitions without a reason. We need all the economic benefits we can get.”
Mr. Summers spoke at the release of a new report by the Energy Security Initiative (ESI) at Brookings, entitled “Changing Markets: Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports.” The study supports his argument for exports. U.S. refineries cannot handle the dramatic increase in domestic crude oil production that has resulted from the domestic shale boom. Mr. Summers also makes clear that his support for ending the export ban is not an argument against climate change or the need to address it. The US is already making surprising progress in limiting carbon, he observes. Retaining a ban on exports is not the solution to additional changes that may be considered in well construction and wastewater disposal, associated with hydraulic fracturing. Ending the ban on oil exports will drive economic growth with new jobs and increased disposable personal income that comes from savings at the pump. Improved efficiencies in the refining process are also likely.
Without increased market access via international exports, the study warns that U.S. production will decline. Crude stockpiles climbed to a record high on the U.S. Gulf Coast earlier this year, a trend that will continue so long as the industry believes that the export ban might be lifted. With broader market access, however, oil production in the Gulf Coast alone could increase by over 1.5 million barrels per day. Brookings gets it right: “We think the key lesson of our economic history in the energy space is that the U.S. economy works better by embracing market forces than trying to resist them.”
Mr. Summers’ succinct comments are the latest example in a growing trend of influential American leaders who wish to revisit the ban. Obama Administration officials—including Energy Secretary Ernest Moniz—have asked to reexamine the ban’s utility. Several high-profile lawmakers, for example Sens. Mary Landrieu (D-La.), Lisa Murkowski (R-Alaska), and Rep. Joe Barton (R-Texas), have followed suit. According to an Associated Press poll conducted this year, ninety percent of economists surveyed believed allowing crude oil exports would improve the economy.
Additionally, the comments by Summers and the release of the Brooking’s report come on the heels of the Commerce Department’s decision earlier this summer to allow the export of lightly processed condensate, a first step that further bolsters Summers’s argument. Brookings believes President Obama has the authority to remove the ban without consulting Congress, meaning he could capitalize on the increasing momentum without getting weighed down in a political battle in Congress.
The President has the clear authority to act. The American people stand to gain substantially from ending the ban. The U. S. stands to gain additional international foreign policy leverage in a world where oil and natural gas exports provide power to some and constrain others in the continued European and Russian dance over the Ukraine. Lawmakers and policy wonks are loudly supporting a rational crude oil export policy. It is now time for President Obama to capitalize on this momentum and end the ban on crude oil exports.
Education policy has initiated some bipartisanship on Capitol Hill. This week, the U.S. Senate followed up on the action of the House’s massive vote of 360-45 on charter school education. The House’s bill, The Success and Opportunity through Quality Charter Schools Act, H.R. 10, passed right before this week’s recess and now its companion bill in the Senate introduced by Senators Mark Kirk (R-IL), Mary Landrieu (D-LA), Lamar Alexander (R-TN), and Michael Bennett (D-CO) Expanding Opportunity Through Quality Charter Schools Actis gaining traction. The purpose of the bill is to reauthorize the federal Charter Schools program. Ultimately, encouraging more educational options for America’s school children and their parents, which benefits expand to the broader economy.
H.R. 10 consolidated two federal charter school programs and allocated $300M in funding that encouraged states to expand charter schools. The Senate bill differs only slightly in that it prioritizes grants to states that have policies to help charter schools acquire or lease facilities, contains no cap on funding, and allocates a higher percentage of funding to the highest-performing networks for their expansion.
From the earliest discussions of charter schools, a primary reason for my support has been encouraging innovation and providing lower income and minority school age children the same options that are available already to majority white and wealthier families. The unfortunate reality is Black and Hispanic children still trail their White classmates by substantial margins in their performance, and still underperform White children in reach proficiency in subjects such as mathematics.
In the most recent 2013 National Assessment of Educational Progress (NAEP) scores for fourth grade mathematics proficiency, only 18% of Black fourth-graders and 26% of Hispanic fourth-graders had scored at the proficient level, whereas 54% of White students scored proficient. By eighth grade, all three groups had fallen further behind, with Black school children trailing their White counterparts by 31 percentage points (14% versus 45%) and Hispanics’ trailing by 24 percentage points (21% proficient versus 45%). Similar results were evident in fourth and eighth grade reading proficiency.
Penley on Education and Energy has previously reported the substantial difference in scores for minority children in reading and mathematics proficiency. These differences matter to all of us – not just the parents and children who are non-White. As the demographics of this country continue to shift away from a white majority to a White minority, our economic prosperity will depend on Hispanic and Black professionals and Hispanic and Black workers in all types of jobs. Their capacity to perform the needed skills for employment and for access to higher education will determine the country’s future.
Charter schools represent a means for access to choice in education. This is the same choice that many White and wealthier families of all ethnic origins now have – the ability to pay extra for parochial or private schools of choice. All parents deserve that same option. In the late nineties, I supported choice in education long before it was popular, when I chaired an education task force. It mattered then before we understood fully the dramatic changes in U.S. demography. It matters far more now as we more precisely understand the face of this country in this Century along with the very substantial improvement in economic competitiveness of emerging and developing economies.
Thankfully, a bipartisan effort is underway to encourage further development of needed charter schools. Let’s hope that we can continue to find solutions to improve our economic and competitive future by focusing on education opportunities for all.
Recently I commented in Roll Call on budget politics, energy and the value of moving ahead with fundamental growth driving tax reform. Chairman of the House Ways and Means Committee, Dave Camp (R-MI) had recently introduced a tax reform package that can make a real difference in growth, including the already dynamic but threatened energy industry in the U.S.
Many have called Chairman Camp’s package from the House a tremendous long shot in light of extreme congressional partisanship, the control of the two houses by different parties, and Chairman Camp’s impending retirement from the House. But perhaps tax reform is not such a long shot after all. And the reason is Senator Ron Wyden (D-OR), who now chairs the Senate’s Finance Committee. He has made tax reform a priority as well.
Mr. Wyden has stated in his blog, “The U.S. tax code is clearly in need of reform.” Calling the current tax code a “rotting carcass that smells worse every year,” he has supported a flat corporate tax rate. He has also supported simplification of the tax code, and he has linked tax reform to job growth. Continuing his comments about the need for reform in his blog, he added, “We need comprehensive tax reform that simplifies the corporate and the individual code at the same time so that no U.S. business or taxpayer is left out.”
Chairman Wyden has frequently commented on the energy-related aspects of the US tax code. More often than not, he has supported tax incentives for renewables from the perspective of parity between traditional sources of energy and renewable sources. Among the energy tax issues he has addressed are master limited partnerships (MLP), which have encouraged development and job growth for traditional energy companies. And traditional energy companies have delivered for the benefit of the US economy, having created 148,000 jobs in 2011, 37,000 of which were direct jobs within the industry.
In discussing his approach to energy-related tax reform, Chairman Wyden said tax reform could present two options for the industry when it comes to MLPs. Congress could pare them back for existing recipients as Chairman Camp proposed in his recently drafted tax reform package, thereby raising revenue with a commensurate reduction in the top-line corporate tax rate. Alternatively tax reform could extend to all sectors, as would happen under the “MLP Parity Act” sponsored by, among others, Senators Chris Coons (D-DE) and Jerry Moran (R-KS), along with House Representatives Ted Poe (R-TX) and Mike Thompson (D-CA).
The choices open for tax reform are many. But consideration has to be given to how the US assures its continued progress toward energy independence, which formerly was considered a dream. As Penley on Education and Energyreported almost two years ago, there is increasing available evidence that US energy independence has finally become a realistic possibility. And whether energy independence is a reality or not, the value of the US energy industry is enormous for US economic growth and improvements in US balance of payments.
Like Chairman Camp and Chairman Wyden recognizes that delivering on tax reform while driving growth will not be easy. But the combination of a reforming Democrat from the Senate and reforming Republicans in the House of Representatives may make tax reform a real possibility. Both retiring Representative Camp and Senator Wyden recognize the benefits of growth and the limitations on growth represented by our current tax code.
For the sake of the energy industry and widespread opportunity for growth from all sectors of our economy, tax reform may not be so out of reach after all.
Energy demand is growing globally, and growth is likely to continue. The International Energy Agency (IEA) projections are for a continuing dominant role for fossil fuels in the next decade. These projections for fossil fuels come despite projections for commensurate growth of renewable sources of energy. Coal remains one of those very important fossil fuels for which growth is projected, and its increasing use is evident especially in emerging markets where it is relatively cheap and plentiful.
While we in the US are seeing a shift away from coal in US power plants to cleaner (fewer greenhouse gas emissions) fuels such as natural gas, this is not the case in developing countries. In much of the developing world, especially in emerging markets, coal is and will increasingly be a major source of energy that is critical to those markets’ development. That growth outside Europe, Japan and North America represents a major global issue for many. But it need not represent the problem imagined by some if policy supports the needed research on clean coal.
Technology can change the future of coal – both at home and globally. Technological innovation can mean that coal continues to become a much cleaner fossil fuel with the emission of fewer particulates and greenhouse gases. For example, clean technologies have the capacity to increase the efficiency of coal’s use in power generation and to alter favorably the impact of coal on the environment. Among those technological advances has been the gasification of coal along with co-gasification of coal and biomass. Gasification, (see the Department of Energy) is a controlled process that uses heat and pressure to set in motion chemical reactions that produce “syngas,” which is primarily hydrogen and carbon monoxide. Rather than a process of burning the coal to produce the gas, gasification is a process that partially oxidizes the coal to produce the syngas.
Recent additional research in this area by two scientists, Natalia Howaniec and Adam Smolinski, is representative of the potential from policy that supports research and the technological innovation that can come from it. Ms. Howaniec and Mr. Smolinski used a laboratory fixed-bed reactor with steam for co-gasification of coal and biomass. Their conclusion was that the laboratory process offers several advantages, including the chemical synergies associated with using biomass in conjunction with coal. Those advantages include the stability of the fuel supplies, the scalability of the process, and emission reduction.
This stream of research is especially important in light of the anticipated, continued growth in use of coal globally and coal’s potential to address substantial energy needs of emerging markets. As coal transitions to a cleaner source of energy, it is important that we examine new regulatory requirements imposed on coal fired power plants in terms of their consistency with continued research into the next generation of clean coal technologies. The EPA’s recent new source performance standard (NSPS) for new units effectively required carbon capture and storage (CCS) technology in order for plants to achieve emissions standards of no more than 1,100 lbs. of CO2 emitted per megawatt-hour of electricity produced. There are many critics who argue that this technology is currently in a developmental stage and is not broadly commercially available. Until it is more widely adopted and improved upon, its costs will remain too high for commercial viability.
What is needed at the policy level is a willingness to put further, additional resources behind research associated with clean coal. With that kind of research, it is reasonable to believe that commercially viable clean coal will become available. Because of the abundance of coal and the development of emerging economies, coal will remain a widely used fossil fuel and major source of energy for the next decade. Carefully drawn policy in support of clean coal will determine coal’s impact over that decade.
In an earlier posting on Penley on Education and Energy– The Common Core and Business – I pointed out the need for our business leaders to use language that can be understand readily about the need for K-12 change. It’s about raising school accountability – not insisting that teachers do the same thing with common standards around the country. Yes it is common core, but it is common core at the local level with real teachers teaching. It also matters for business leaders to see and be able to discuss what common core really means at the classroom level. Recently, I saw the value in educating business leaders on the impact of Arizona’s College and Career Readiness Standards.
The Rodel Foundation of Arizona held one of its most important public events: All A’s for Arizona. Among the speakers that evening was John Huppenthal, State Superintendent of Public Instruction. But I am sure that Mr. Huppentahal would agree that the most important speakers were five K-12 teachers: Stacey Hicks and Jorge Ontiveros (Paradise Valley Unified District), Tiffany Thompson (Mesa Public Schools), Veronica Villegas (Flagstaff Unified District), and Amanda McAdams (Glendale Union High School District).
Those five teachers did something that I wish the larger public could experience. They demonstrated how a teacher used Arizona’s College and Career Readiness Standards (Arizona’s version of common core) to teach. They taught various lessons using the Standards, and they engaged their business and education audience as the students.
Here is what we – the audience – learned. Arizona’s standards are very challenging for students – or adults who have been out of school for a while. Arizona’s standards build on one another across the K-12 grades, leading to improved college and career readiness. Arizona’s standards demand that students read and understand difficult material – more difficult than I encountered in the public schools of Kingsport TN decades ago. Arizona’s third grade math standards and the approach taken facilitate considerably learning fractions, knowledge essential but difficult for many 8-9 year olds. And they emphasize that a student must think critically with multiple perspectives employed in analyzing a problem.
Raising accountability of our schools is essential. Doing so with even more challenging material – and standards – that demands critical reasoning and analysis will serve students well. It was just more than a month ago that I wrote in Penley on Education and Energy about the Economist’s vision of the future impact of technology. That future will challenge traditionally educated citizens. But Arizona’s Standards demand from K-12 students the kind of analytical and reasoning skills essential for that future.
It is time to move on – and adopt standards that will raise the college and career readiness of US students. Without change, we are destined to continue to lag other countries, imperiling our long term economic prosperity and global competitiveness.
That technology is once again altering the economy and world of work is evident. The Economist has written a timely, relevant analysis in its article, “The Onrushing Wave” that further examines this intersection. The technological transformation has implications for education – in what individuals can do to prosper and what kind of education society needs. Technology-generated changes to the economy are already capturing the public’s attention, and the primary expression of this attention is concern with growing income equality and lower-than-desired mobility. Right now discussion appears to make the primary remedies seem political.
Responses to the technological change must be more precisely directed if we are to address the impact of the change. It is education that will make the difference in which individuals prosper in the transformation. How educational systems and institutions respond to the transformation will determine whether society’s needs are met.
Once again we face an apparent repetition of the economic disruption that came in the 18th and 19th centuries. Disruption led to the disappearance of some jobs and the creation of others. But consumers benefitted substantially. The Economist concluded,
Everyone should be able to benefit from productivity gains—in that, Keynes was united with his successors. His worry about technological unemployment was mainly a worry about a “temporary phase of maladjustment” as society and the economy adjusted to ever greater levels of productivity. So it could well prove. However, society may find itself sorely tested if, as seems possible, growth and innovation deliver handsome gains to the skilled, while the rest cling to dwindling employment opportunities at stagnant wages.
Which skills will matter and what kind of education is needed? The economic challenges that come from the on-going disruption point to the value of education – but not to any traditional skills. Rather than traditional skills, the disruption points to the need for adaptability. What will matter for individuals are the analytical skills associated with dealing with complexity and developing adaptive responses. Education will serve society’s needs if it is focused on the creation of a learning environment that develops critical thinking and entrepreneurial adaptability.
At the K-12 level, this is why implementation of the new common core in the U.S. is so serious. Critical thinking skills are at the heart of the common core; see the work of Achieve in this area. At higher education levels, alterations in pedagogy are essential as well. Digital technology provides for, after capital costs, a cost-effective substitute for lectures. Coupled with more intensive use of application-driven learning – via digital and in-person media – higher education can support similar needed skill development. While we will not escape the transformation described in the analysis by The Economist, we can educate to that transformation rather than attempt to forestall it or politically manipulate its impact.
The abundant availability of energy in 2014 is encouraging – in very many ways. New technology associated with accessing and extracting natural gas and oil has created an energy boom along with new jobs. The Economist likened the boom in energy to the California gold rush. But this boom is very different in its technology and the very particular political challenges it faces – for both traditional fossil fuels and renewable energy.
Beyond creating new jobs and new sources of energy, the “boom” has leveled prices of natural gas and oil. It has also moved the United States closer to what multiple presidents have called for in historic, campaign political statements – energy independence and energy self-sufficiency for America. For consumers, access to widespread, available oil and natural gas means price stability, including months of decline during 2013 in the price of gasoline at American gas stations.
Of course, there is no guarantee that international issues will not alter current supplies and threaten recent price stability. Both supplies and price are particularly vulnerable to the continued instability in the Middle East and the uncertainty over persistent, volatile political issues on the Korean peninsula and old territorial disputes between China and Japan. Historic trends in prices have frequently been disrupted by political volatility.
Despite the very good news for consumers and the U.S., reactions to the boom in energy availability have not been uniformly positive. Concern over the environment and the desire to avoid “energy production in my backyard” have led to voter restrictions on hydraulic fracturing or “fracking” – the extraction of natural gas from shale beds using the injection of water and chemicals. The public’s negative reaction is not restricted to gas wells; indeed, consumers have also reacted unenthusiastically to the presence of windmills that produce renewable energy and sometimes kill errant fowl. That same environmental concern has led to pressure on government to control energy production with new rules. Misplaced beliefs about the ability to restrict global markets has also led to pressure on the federal government to limit exports as well via licenses for ports associated with liquid natural gas.
In so many ways, the public has benefitted from the ingenuity that has come from the marketplace. That benefit has come in the form of stability in energy prices, new jobs in the fossil and renewable sectors of the industry, and increased availability of energy, globally and at home. The last decade has not only seen a boom in the oil industry with newly identified sources of oil and natural gas, but it has seen improved technology in the renewable energy sector as well. In addition to improvements in the technology associated with the generation of electricity via wind, progress has continued with greater efficiency of solar cells too.
Yet, the challenge to energy availability in 2014 is likely to continue. For those who support renewable energy and for those involved in traditional fossil fuels, there is a common interest. It is in limiting government restrictions on energy production and supporting R&D.
It was in late 2013 that the world received the most recent international comparisons in educational performance in math, reading and science. Results came from the Program for International Student Assessment (PISA). The results were discouraging for both students and educators in North America, and particularly so for those in the United States and Mexico. Despite the discouraging PISA results, there is significant pressure to stop or slow the implementation of the common core standards in the U.S.
Here are the poor results on the U.S. PISA scores:
- Fully more than a quarter of U. S. students were below minimal proficiency in math.
- Almost a fifth of U. S. students scored below minimal proficiency in science, and 17% were below minimal proficiency in reading.
- The proportion of U.S. students who scored well was also discouraging; only 9% of 15 year olds scored at a level 5 in math proficiency; even fewer were at this level of proficiency in science (7%), and 8% were at this level in reading.
Mexico also saw poor performance results withmore than half of its 15 year olds scoring below minimal proficiency in math. Forty-seven percent were similarly below minimal proficiency in science, but Mexican students scored slightly better than their U.S. neighbors in reading with 86% of 15 year olds scoring above minimal proficiency and 16% below. Rounding out North America was Canada where students performed somewhat better. Eighty-six percent of Canadian 15 year olds scored above minimal math proficiency; almost 90% were above minimal proficiency in science, and 97% were above minimal proficiency in reading.
Results in the U.S. and Mexico come along with continued opposition to reform in education. In Mexico it has come from teachers’ unions with a streak of protectionism for members. In the U.S. it has come from a variety of sources, but most recently, it has come from two directions. From the political right, opposition to common core standards has come in terms of fear of loss of district or state’s rights to set education standards – even though current standards fail to prepare educated citizens who are prepared for work or higher education. Opposition to reform is also coming from the left where there is criticism around too speedy implementation and criticism of the use of standardized tests to evaluate teachers and schools.
Both the right and the left are misguided when it comes to education reform needs. Implementation of the common core standards does not remove local control over how teachers teach. Moreover, implementation of common core is useless without measurement of outcomes. Higher standards of U.S. education are in our interest as a country – just as they are in the interest of Mexico or Canada. As a long-time educator, I have observed poorly prepared college freshmen for decades who struggle to meet the minimum requirements. Like all U.S. citizens, I deal with service employees who cannot give change nor complete basic alphabetization of products such as DVDs.
The greatest challenge in 2014 for education will be rooted in political opposition to reform. Education reform must work to avoid pressure from both the right and the left. Both sides are working to sidetrack us from educational reform by masking fear of the federal government in the guise of seemingly legitimate concerns about local control or by masking protectionism of teachers’ unions with seemingly legitimate concerns about standardized testing or the speed of implementation of reform.
A little more than two years ago, I speculated about the potential for Gainful Employment rulemaking to be applied to traditional colleges. The Department of Education (DoE) took a step closer to making my speculation a reality with its scheduling of the second session of negotiated rulemaking for the week of November 18.
The DoE’s revised draft of the Gainful Employment rule has the potential to affect community colleges rather significantly. The revised draft includes two new metrics that were not included in its August 2013 draft. The first measures the cohort default rate of former students in a specific program – those who completed and those who did not. The second is a measure of the repayment rate of the loan portfolio of a program cohort, and the principal must decrease by a minimum of $1 during a given year.
Traditional, nonprofit community colleges offer a variety of occupational programs in areas such as nursing, metalworking, fire fighting, etc. Community college programs have traditionally had relatively low completion rates. A report in my local Arizona Republic stated that six-year completion rates of the Maricopa Community College District had risen over a decade to 28%. The rate includes both students who obtained associate degrees with the intent of going onto a 4-year university and those who completed certificates and degrees closely associated with immediate, gainful employment.
Community colleges are intentionally designed to allow local students easy access to a program and the flexibility to complete courses toward certification at their own pace. Community colleges also are designed to be responsive to a broad range of working adults, including many who are from the American working class; their incomes are generally stretched to cover a wide range of family living expenses, including repayment of loans.
This round of negotiated rulemaking has the potential to result in changes at community colleges. Some of those may be positive as community colleges address the need to assure that students complete programs and find gainful employment. However, there may be negative outcomes for community colleges as well – from the implementation of restrictions on admission, less flexibility in program completion, etc. These negative outcomes could affect enrollment at community colleges. Whether the positive outcomes will outweigh the negative ones is not clear. And harm to community college enrollment has the potential to impact local economies with fewer employees with skills desired by employers. This may well be a time to analyze impacts more carefully before the planned announcement of the rule.
This past week, I experienced the enthusiasm that many Mexicans have for reform in education when I spoke at the U.S. Mexico Bar Association Annual Meeting and Conference. Reform is, of course, a subject of interest in Mexico in the area of energy as well but we have seen that education reform is much further along. Like the U.S., educational reform is essential for Mexico’s global competitiveness.
Both countries – the United States and Mexico – are challenged to compete globally and raise prosperity by the performance of their students when compared with other countries. The Organisation of Economic Co-operation and Development (OECD) will report new PISA (Program for International Student Assessment) scores on December 3. The previous report placed both countries well below desirable levels. Mexico ranked 48th among the countries tested in reading; the U. S. ranked 17th. In math, Mexico ranked 50th, and the U.S. was little better at 31st.
These low ranks for both countries represent a strong indication of the need for more educational reform. For many of us, educational reform has been part of our lives for decades but we still struggle to get reform right. Reform is essential if good teachers are to have the opportunity to do what good teachers can do – change students, indeed transform students. We can only hope that the new PISA scores will show some improvement for both countries.
Right now, neither Mexico nor the U.S. is globally competitive when it comes to how our students perform in reading, math and science. Primary and secondary education in the U.S. and Mexico still looks very familiar after decades of attempts to reform it. Teachers’ unions are still strong; especially in Mexico and it has been the struggle with teachers’ unions that has caught the most attention of many people who have watched the recent education reforms take place in Mexico.
Many teachers have feared competition, and the Mexican teachers’ union has fought reform. Competition, of course, is becoming more widely available to U.S. students via online schools, home schools, and charter schools. It is still rare in Mexico, but competition is more typical of many other countries. In the Netherlands, three-quarters of Dutch students study in private schools. Japan and Korea have an even larger proportion of their students in privately managed schools.
The good news in Mexico is that reform is underway. New standardized tests will become available for selecting teachers and for evaluating their performance. A new, national reporting system has increased transparency; the information system is called ENLACE (La Evaluacion Nacional de Logro Academico en Centros Escolares). In June, the Mexican government reported that ENLACE data covered 95% of students and 90% of Mexican schools. Scores on national tests are essential for making reforms work, and scores have to be based on a national average and be used to determine if a student is doing poorly as an anomaly in a class or school – or if the entire class or school is doing poorly relative to national averages. Mexico can now do this.
It was very positive to witness the enthusiasm for education reform this past week. That enthusiasm seemed to be driven by an understanding that reforms have to enable teachers to be more effective. Despite the reported reaction by teachers’ unions to educational reform in Mexico, it is teachers who will make educational reform lead to improved student performance.