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December 2016

The FCC’s New Playbook

[Commentary] While a change in policies at the Federal Communications Commission appears to be in the cards, how that gets carried out is a little more complicated.

Two of Chairman Tom Wheeler’s landmark rules at the FCC — the network neutrality rule and the recently-passed broadband privacy rule — would be a target of a GOP-led FCC, but would require a formal rulemaking process to “reverse.” This means going through the Administrative Procedures Act process of a notice of proposed rulemaking, a public comment period and an FCC vote to approve any changes. A GOP-led FCC would have the votes to change the rules, but the rulemaking process would be played out in the public with strong opposition from those that originally supported them. This politically charged rulemaking environment may draw attention away from the Trump administration’s higher-priority issues. Another less drastic — and less political — mechanism a GOP-led FCC could use to lighten the impact of the rules is to take a more laissez-faire approach to enforcement.

A legislative solution is another much-discussed option to roll back the impact of the net neutrality and privacy rules. Could such legislation pass? This does not appear to be a high priority for the GOP or the Trump administration, which are are focused on tax reform, trade policy, immigration and health care as priority areas early in the president’s first term. The GOP also does not have the 60 votes needed in the Senate to break a filibuster, so it might be difficult to pass legislation unless there is some Democratic support, which may arrive if there is a view that a compromise is the only way to maintain Net Neutrality. The other strategy for the GOP may be to wait until after 2018, when 10 Senate Democrats are up for re-election. The GOP could potentially have a filibuster-breaking majority after 2018, when they could push through the legislation they want.

[David Sapin is technology, media and telecommunications risk and regulatory leader at PwC]

Trump’s Infrastructure Mistake

[Commentary] Divining what Trumponomics will look like is guesswork at this stage, but there is one prominent exception. Late in the campaign, two of Donald Trump’s top economic advisers—Peter Navarro and Wilbur Ross, who is now the nominee for commerce secretary—offered a detailed infrastructure plan. Unsurprisingly, the program seems more about rewarding private-equity investors than about rebuilding America’s crumbling infrastructure. The Trump plan would rely more on private investors motivated by huge tax breaks. Follow the money. Peter Navarro and Wilbur Ross, who is now the nominee for commerce secretary, propose an 82 percent tax credit to attract private-equity investors into the infrastructure business. Yes, 82 percent! A $3 billion public-private “partnership,” according to their plan, could be financed like this: $2.5 billion in municipal bonds, $410 million in tax credits from the federal government, and $90 million in private equity. This means $90 million in private money winds up controlling a $3 billion asset. President-elect Trump likes leverage, but isn’t 33-to-1 a little ridiculous?

And under the Trump plan, project selection would be left to profit-seeking investors, using the same criteria they use to decide which hotels to build, for example. Ironically, Navarro and Ross criticize President Obama’s modest 2015 infrastructure proposals because, “These will not fix the 237,600 water mains that break each year. Nor will they stop the 46 billion gallons of water lost each day from pipe leaks.” Does the Trump team really think private-equity investors will swoon over repairing plumbing?

[Blinder and Krueger are professors of economics at Princeton University]

President Obama blames the media for, well, everything

President Barack Obama didn't get terribly animated during his annual year-end news conference Dec 16. Except, that is, when talking about how the media covered the 2016 election.

Asked about the Russian hacking of the Democratic National Committee and some top operatives in Hillary Clinton's campaign, President Obama offered up a media critique: "This was an obsession that dominated the news coverage. So I do think it is worth us reflecting how it is that a presidential election of such importance, of such moment, with so many big issues at stake and such a contrast between the candidates came to be dominated by a bunch of these leaks." President Obama was then asked about Clinton and whether her loss could be laid at the feet of the Russian hack. Again, he turned to a media-focused answer: "I couldn't be prouder of Secretary Clinton, her outstanding service, and she's worked tirelessly on behalf of the American people, and I don't think she was treated fairly during the election. I think the coverage of her and the issues was troubling."

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