Ben Ritz, Director of the Center for Funding America’s Future project at the Progressive Policy Institute (PPI) released the following statement:
“Earlier this week, PPI encouraged Congressional Democrats to give high priority to passing the U.S. Innovation and Competition Act (USICA) and a reconciliation bill that includes significant deficit reduction and clean energy provisions. Unfortunately, media accounts suggest that both initiatives are shrinking.
“We shared Sen. Manchin’s concerns about the original reconciliation bill’s overreaching and likely impact on inflation. But walking away from a bill with roughly half a trillion dollars of deficit reduction and significant investments in increasing energy supply would squander the best chance Congress has to help the Federal Reserve rein in rising prices. We hope he and Sen. Schumer will not give up on negotiating a compromise on these components of a reconciliation bill.
“Pro-growth Democrats who want to see the United States outcompete China also should be concerned about reports of a plan to vote next week on a bill that only includes funding for semiconductor subsidies. Losing government R&D funds and other key provisions in the U.S. Innovation and Competition Act (USICA) would be an enormous setback for America’s innovation and scientific prowess.
“We understand that Senate Minority Leader Mitch McConnell’s blindly partisan decision to withhold Republican support from a conferenced innovation bill complicates its path to passage. But retreating to a CHIPS-only approach would unnecessarily doom many higher priority pro-innovation policies. Instead, we urge Speaker Pelosi to put the full Senate-passed USICA on the floor for a vote in the House to circumvent McConnell’s obstructionism.
“Democrats must not snatch defeat from the jaws of victory.”
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
Today, the Progressive Policy Institute(PPI) released its annual Investment Heroes report, which shows companies with high and sustained capital investment in the United States have helped hold down price increases in the digital sector throughout the past year of otherwise record inflation. The report, titled “Investment Heroes: Fighting Inflation with Capital Investment”is authored by Dr. Michael Mandel, Vice President and Chief Economist at PPI, and Jordan Shapiro, Data and Economic Analyst at PPI.
Nine of the 11 companies topping this year’s Investment Heroes list are in tech, broadband, or e-commerce. Amazon invested an amazing $46.7 billion in the U.S. in 2021, according to PPI estimates. AT&T and Verizon tied for second place at $20.3 billion, and Alphabet invested $18.7 billion in the U.S. in 2021.
PPI has created a unique methodology using publicly available financial statements from non-financial Fortune 200 companies to independently identify the top companies that were investing in the United States. These companies — our “Investment Heroes” — have helped to create good jobs, boost capacity, and reduce inflation as we recover from the aftershocks of the COVID-19 pandemic.
“Policymakers should praise and encourage those companies who invest in the United States, keep prices low, and reduce vulnerability against future shocks. That’s a clearcut win for consumers, workers, and the American economy,” write report authors Dr. Michael Mandel and Jordan Shapiro.
“Conversely, government leaders can’t pursue policies that reduce or discourage domestic capital investment and then complain when we don’t have enough capacity to meet our changing needs at an affordable price, whether it’s energy or semiconductor chips or anything else. In particular, it’s perplexing that Congress is putting so much energy into tech antitrust, when the sector has been a low-inflation, high-investment star performer,” the authors conclude.
See the full list of PPI’s 2022 Investment Heroes:
Read and download the full report here:
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
The theme of this year’s Investment Heroes report is the powerful link between high investment and low inflation. Every year, the Progressive Policy Institute (PPI) analyzes the financial reports of large U.S. companies and ranks them by their capital investment in the United States. Nine of the top 11 companies on this year’s Investment Heroes list are in tech, broadband, or e-commerce industries. Amazon is at the top of the list, investing $46.7 billion in the United States in 2021 according to estimates by PPI. Tied for second are AT&T and Verizon, followed by Alphabet, Meta Platforms, Microsoft, Intel, Walmart, Comcast, Duke Energy, and Apple.
But here’s an important point for policymakers: As shown in a recent PPI paper, inflation in these digital industries has been extraordinarily low.1 High and sustained investment in new equipment and technology has created enough capacity to hold down most price increases in the digital sector, even as inflation has soared in other parts of the economy. For example, the price of wireless services at the consumer level was down by 0.7% in the year ending May 2022. In the year ending May 2022, the price of online advertising by internet publishing and web search portals only rose 0.6%.2
Policymakers should note that the link between investment and inflation works in the other direction as well: Low-investment industries are typically supply-constrained and more likely to boost prices when hit by an unexpected shock. Indeed, low-investment industries — including most of manufacturing, construction, trucking, air transportation, accommodations and food service, and mining — have all shown moderate to high inflation rates. And it’s generally agreed that domestic capital investment in the semiconductor industry has lagged, one of the few sectors of the digital economy contributing to inflation.3
For better or for worse, the case of the oil and natural gas industry illustrates the ways that low investment can lead to higher inflation.
Domestic investment in oil and gas drilling and exploration peaked in 2014 and collapsed by nearly two-thirds by 2016, according to data from the Bureau of Economic Analysis (BEA), as oil and gas companies faced a combination of low prices, pressures to use less fossil fuels for environmental reasons, and problems of pipeline and refinery capacity. And even though several energy production companies are still on our Investment Heroes list, their domestic capital outlays have continued to fall in the face of clear signals discouraging investment in fossil fuels. Exxon Mobil, in particular, decreased its U.S. capital spending by 43% from $11.2 billion in 2020 to $6.4 billion in 2021. This left the U.S. vulnerable to rising oil and gas demand and the unexpected shock of Russia’s invasion of Ukraine.
The key word here is “vulnerable.” No one is denying that free trade and globalization helped hold down prices for years. But when globalization is accompanied by a lack of domestic investment, the result is an inevitable increase in vulnerability and a loss of resilience. American workers become more vulnerable to foreign competition and downward pressure on real wages; American consumers become more vulnerable to domestic and international shocks and higher inflation; the country as a whole becomes more vulnerable from a national security perspective.
The policy and political implications are clear: Policymakers should praise and encourage those companies who invest in the United States, keep prices low, and reduce vulnerability against future shocks. That’s a clearcut win for consumers, workers, and the American economy. In some cases, like the semiconductor industry, it may be appropriate to use government funds to support domestic investment.
Conversely, government leaders can’t pursue policies that reduce or discourage domestic capital investment and then complain when we don’t have enough capacity to meet our changing needs at an affordable price, whether it’s energy or semiconductor chips or anything else. In particular, it is perplexing that Congress is putting so much energy into tech antitrust, when the sector has been a low-inflation, high-investment star performer. We would be better off as a country if other industries followed the tech/ecommerce/broadband lead and invested in America.
THE LINK BETWEEN INVESTMENT AND INFLATION
Over the past four years, Amazon, the top company on our list this year, has invested more than $115 billion in the United States, according to PPI estimates. This level of capital spending has powered unprecedented job creation, as Amazon operates e-commerce fulfillment centers across the country, and now employs more than 1.1 million workers in the United States.4
But perhaps equally important to U.S. consumers, Amazon’s investments in new logistics capacity have also helped keep down inflation, despite pandemic-related shocks. According to the Bureau of Labor Statistics (BLS), margins in “electronic and mail-order shopping” have shrunk by 6.4% in the year ending May 2022, compared to a 9.3% increase in margins for retail overall.5 Narrower margins for e-commerce means lower prices for consumers who shop online.
Indeed, tech, broadband, and ecommerce have all shown extraordinarily high long-term growth in their stock of productive capital (Table 1). For example, from 2007 to 2020, the stock of productive equipment in the information and data processing services rose by 720%, compared to a 44% increase for the private sector as a whole. The second biggest percentage gain was in the telecommunications and broadcasting industry, and the third biggest percentage gain was in the warehousing industry, which reflects the growth of e-commerce fulfillment centers.
At the same time, the tech, broadband and e-commerce industries have shown extraordinarily low rates of price increases during this inflationary surge. In addition to the shrinking margins in e-commerce already mentioned, the price of broadband access is down by 0.2% at the producer price level in the year ending May 2022. Overall, prices in the telecommunications and broadcasting industry have only risen by 0.5% in the year ending the first quarter of 2022, according to the BEA, despite everyone’s increased need for broadband and wireless connections. Prices in the information and data processing industry, which includes most internet companies, are up by only 1.3% in the year ending with the first quarter of 2022.
On the other hand, low-investment industries are more likely to be prone to inflation. Consider the paper and wood product industries. Since the pandemic began, Americans have been bedeviled by a series of seemingly inexplicable shortages of paper products, running from the great toilet paper gap of early 2020, to more recent shortages of disposable coffee cups6 and tampons.7 The shortages become less surprising when you realize that paper product companies have reduced their domestic manufacturing capacity by 17% since the beginning of the financial crisis in 2007. Capacity in the domestic wood product manufacturing industry is down 23% over the same period.8
Moreover, anyone who studied the economics of supply and demand in college won’t be surprised that prices rose in the paper and wood industries as paper mills closed and capacity shrank. Producer prices in the paper industry have soared by 16% over the past year. And since the pandemic began, producer prices in the wood industry are up a startling 67%.
And the disinvestment continues. Consider paper-making giant Georgia-Pacific, part of privately-owned Koch Industries. In March 2022, GP executives announced that they were shutting down a paper mill in Green Bay, Wisconsin, that had been making tissues and toilet paper since 1901.9 This followed a string of other paper mills and related manufacturing facilities that Georgia-Pacific’s managers had closed in recent years, including GP’s January 2021 announcement that it was shutting a Dixie Cup factory in Easton, Pennsylvania.10 GP has announced specific investments, but the private company is not required to release its overall capital investment figures publicly.
Overall, domestic manufacturing capacity, outside of high-tech, peaked in 2007, and since then has fallen by almost 10% (Figure 1). Over the same period, consumer purchases of goods, outside of high-tech, are up about 45%. With this growing mismatch between supply and demand, the U.S. has become ever more vulnerable to shocks in the global trading system.
Similarly, domestic iron and steel product capacity peaked in 2009, and since then has fallen by 25%, including a continued decline during the pandemic. Not surprisingly, the domestic price of steel has skyrocketed, because there is much less domestic capacity that can be brought online when needed.
When we look outside of manufacturing, we see the same pattern: For example, the stock of equipment such as airplanes owned by the air transportation industry rose by only 18% from 2007 to 2020, far slower than the 44% gain for the private sector as a whole.11 Not surprisingly, producer prices charged by the airline industry, including passengers and freight, jumped by 27% in the year ending May 2022 to their highest levels ever.
THE BIG PICTURE
The United States entered the pandemic struggling with a capital investment drought that had lasted more than a decade. During the financial crisis of 2008-2009, domestic nonresidential investment in structures and equipment plunged as a share of gross domestic product, and never really recovered. As a result, the rate of U.S. capital stock growth fell in half, going from an average annual rate of 2.6% from 1990 to 2007, to only 1.3% from 2007 to 2019.
Meanwhile the capital stock in China has been growing at an 11% annual rate. As long as global supply chains worked well, the U.S. domestic investment shortfall didn’t matter too much to consumers (though it did matter to U.S. workers whose productivity and real wages weren’t rising). Inflation was low, held down by a flood of cheap goods coming out of China, the rest of East Asia and Europe.
However, this capital investment drought set up the conditions under which the United States has become more vulnerable to inflation, just like a dried-out forest is ready to burst into flames from an errant spark or lightning strike. Any kind of a shock — like the pandemic, supply chain disruptions, armed conflicts — can translate into price increases.
But some companies have been fighting the prevailing trend of capital spending weakness. Since 2012, PPI has provided unique estimates of domestic capital spending for individual major U.S. companies. Currently, accounting rules do not require companies to report their U.S. capital spending separately. To fill this gap in the data, we created a methodology using publicly available financial statements from non-financial Fortune 200 companies to identify the top companies that were investing in the United States.
We call these companies “Investment Heroes” because their capital spending is helping to create good jobs, boost capacity, and reduce inflation across the country. In 2021, the 25 companies on our list invested $260 billion in the U.S. This year’s list includes 10 tech, broadband, and e-commerce companies; seven energy production and distribution companies; two transportation companies; three automotive companies; two retail companies; and one health care company (Table 3). Later in this paper, we discuss the methodology that we use to estimate these figures.
Let’s look at each company on the list individually:
1. Amazon’s 2021 estimated U.S. capital spending was $46.7 billion, a 38% increase compared to its already impressive 2020 total. Principally, its increase in spending was directed toward augmenting the capacity of its fulfillment centers and growing its cloud services.
2. (tie) AT&T was tied for second with Verizon, spending an estimated $20.3 billion in the U.S. in 2021, up from $17.8 billion in 2020 (adjusted for the change in methodology described below). Its U.S. investment focused on expanding its network capacity.
2. (tie) Verizon Communications, tied for second with AT&T, increased its domestic capital expenditures to $20.3 billion in 2021, up from $18.2 billion in 2020 (adjusted for the change in methodology described below). The company continued to invest in adding capacity and density to its 4G network while building out its 5G network.
4. We estimate that Alphabet invested $18.8 billion dollars on U.S. capital expenditures in 2021. The company directed its investments toward technical infrastructure including servers, network equipment, and data center construction as well as office facilities and building improvements.
5. Meta Platforms came in fifth this year with an estimated $15.6 billion in U.S. capital spending. The social media company continues to invest in data center capacity, servers, network infrastructure, and office facilities. In 2021, the company increased metaverse-related investments.
6. Sixth is Microsoft with an estimated $13.1 billion in domestic capital spending based on its July 2021 10-K, the most recent available. The software company continues to invest in new facilities, data centers, computer systems for research and development, and its cloud offerings.
7. Intel slightly increased its domestic capital expenditure in 2021 to $12.9 billion, up from our estimate of $12.5 billion in 2020. Intel started work on two new fabs in Arizona, and announced investments in Ohio and New Mexico.
8. Walmart spent a reported $10.6 billion on U.S. capital expenditures in its fiscal year ending January 31, 2022, up sharply from $7.8 billion the previous fiscal year. Its investments were principally directed toward supply chain and customer service improvements. In addition, the company invested in online grocery services and selected Spartanburg County, South Carolina, as the location for its new hightech grocery distribution center.12
9. We estimate in 2021 that Comcast invested $10.1 billion in the U.S. Increases in capital spending were directed toward scalable infrastructure and line extensions.
10. Duke Energy invested $9.7 billion, slightly less than its 2020 figure. The decrease in spending was due to lower investment in the commercial renewables segment.
11. Apple is eleventh on this year’s list, investing an estimated $8.1 billion, a 37% increase in domestic capital spending from the previous year. Our estimates are based on Apple’s October 2021 10-K, which is the most recent annual report. The company began plans for a North Carolina campus with 3,000 employees.13
12. Exelon spent $8.0 billion on capital investments in 2021, a slight decrease from 2020.
13. PG&E invested $7.7 billion in 2021, about even with 2020 levels. In 2021, the company announced the beginning of a decade of spending to bury its powerlines as a wildfire prevention strategy.23
14. Fourteenth on the list is Charter Communications with domestic capital expenditures of $7.6 billion, a slight increase from the 2020 figure of $7.4 billion. The increase is due to payments for scalable infrastructure and network upgrades.
15. Exxon Mobil decreased its U.S. capital spending by 43% from $11.2 billion in 2020 to $6.4 billion in 2021. The company decreased its upstream, downstream, and chemical spending. In 2022, the company announced plans for a carbon capture and storage project in Baytown, Texas.
16. Dominion Energy invested $6.1 billion on U.S. capital expenditures, a slight decrease from $6.3 billion in 2020. Dominion is involved in the construction of an American-built wind turbine installation vessel.
17. Chevron’s reported U.S. capital expenditure in 2021 was $5.8 billion, a slight decrease from $6.1 billion in 2020.
18. General Motors invested $4.9 billion dollars in the U.S. in 2021 according to our estimates, a 28% increase from 2020. The company has announced large investments in electric vehicles and battery plants.
19. FedEx’s domestic capital expenditures in 2021 were estimated at $4.5 billion, a very small decrease from our 2020 estimate, based on its July 2021 10-K. The company’s capital spending was directed toward package handling and sorting as well as to aircraft and vehicle spending in their transportation segment.
20. The twentieth company on the list this year is Ford Motor with an estimated $4.3 billion in U.S. capital spending in 2021. The company announced new factories in Kentucky and Tennessee to support electric vehicle production.15
21. ConocoPhillips increased its U.S. capital spending by 41% in 2021 to $4.2 billion. Development activities included investment in the Permian, Eagle Ford, and Bakken regions.
22. Tesla is No. 22 with a big increase in estimated domestic capital spending to $4.1 billion. The increase is due to the construction of a Gigafactory in Texas and expansion of a factory in Fremont, California.
23. HCA Healthcare directed $3.6 billion to capital investments in 2021, an increase from 2020. HCA announced plans to build 3 new hospitals in Florida and 5 in Texas.
24. Target invested $3.5 billion in the United States this year, up 34%.The additional spending was targeted at store remodels, store reopening, and supply chain initiatives. In 2021, the company remodeled 145 stores around the country and expanded digital fulfillment capabilities.
25. The twenty-fifth company to make the list is Delta Airlines with an estimated $3.2 billion in U.S. capital expenditures in 2021. The airline’s capital spending was primarily related to aircraft and airport improvements, in mid-2021, it announced adding 30 new Airbus A321neo models to its fleet.16
METHODOLOGY
Our U.S. Investment Heroes ranking for 2022 follows the same methodology as our most recent report in 2021, with a few small tweaks. We started with the top 200 companies of the 2021 Fortune 500 list as our universe of companies, expanded from the previous 150 companies. We removed all financial companies and all insurance companies except health insurance companies. We also omitted the financing operations of non-finance companies when possible.
Except as noted, we use the global capital expenditure reported on the most recent 10-K through April 2022 as the starting point for the analysis. In this report, we refer to all estimates as “2021,” even if the fiscal year ended in 2022. Capital expenditures generally cover plant, equipment, and capitalized software costs. For energy production companies, capital expenditures can include exploration as well.
For wireless companies, we did not include their often sizable spending on purchases of wireless spectrum as part of capital expenditures, since that category is not counted as investment spending by the economists at the Bureau of Economic Analysis. Companies purchasing spectrum in 2021 notably includes Verizon (which paid $45.5 billion for the licenses it won in a February 2021 spectrum auction) and AT&T (which paid $22.9 billion for spectrum won at the same auction).
The companies in these rankings are all based in the United States. Non-U.S.-based companies were not included in this list because of data comparability issues, although there are many non-U.S. companies that invest in America. Notably, T-Mobile US, with more than $12 billion in purchases of property and equipment in 2021, would have made the Investment Heroes list if it was not owned by Deutsche Telekom.
For transportation companies, our report estimates the booked location of spending on capital expenditures for the company’s most recent fiscal year, rather than how much of those acquired assets are actually being used within the U.S.
Most multinational companies do not provide a breakdown of capital expenditures by country in their financial reports. However, PPI has developed a methodology for estimating U.S. capital expenditures based on the information provided in the companies’ annual 10-K statements and other financial documents. After developing our internal estimate, we contact the investor relations offices of the companies on our top 25 list to ask them to point us to any additional public information that might be relevant. Notwithstanding these queries, we acknowledge that the figures in this report are estimates based on limited information.
Our estimation procedure goes as follows:
If a company has no foreign operations, we allocated all capital spending to the United States.
If a company reported U.S. capital spending separately, we used that figure.
If a company did not report U.S. capital spending separately, but did report changes in global and U.S. long-lived assets or plant and equipment, we used that information plus depreciation to estimate domestic capital spending. As appropriate, we adjust for large acquisitions. That was not necessary this year.
If a company has small foreign operations that were not reported separately, or if the company’s net capital stock is falling, we allocated capital spending proportionally to domestic versus foreign assets, revenues, or employees.
Some adjustments of note:
For Amazon, the methodological issue was their extensive use of finance leases. We chose to specify global capital expenditures as purchases of property and equipment (net of proceeds from sales and incentives) plus principal repayments of finance leases. We then used reported changes in U.S. and non-U.S. property and equipment, net, and operating leases to allocate global capital expenditures, taking into account depreciation and removing the effect of operating leases.
Similarly, as part of our process for estimating domestic capital spending for Microsoft, Meta Platforms, UPS, and Kroger, we included principal repayments on finance leases reported on the company’s 10K, or amortization of finance leases based on 10K data, as part of capital spending.
In previous years for Verizon, we made a small adjustment for foreign operations, even though non-U.S. assets or revenues are not broken out in the company’s 10K. This year we made the judgment call to stop making that adjustment, which had the effect of somewhat increasing Verizon’s estimated domestic capital spending.
AT&T reported vendor-financed purchases of equipment separately from capital expenditures. We made the decision this year to add them back in. We allocated capital spending domestically in proportion to the U.S. share of net property, plant, and equipment.
In the case of Comcast, we allocated all of its cable operations and corporate capital expenditures, including cash paid for intangible assets such as capitalized software, to the U.S. NBC Universal’s capital expenditures was allocated to the U.S. in proportion to our estimate of the US share of NBC Universal’s revenues.
For consistency, we omitted capital spending by the finance arm of companies such as General Motors and Ford, which reflects the financing of leased equipment rather than actual direct investment.We then used our estimates to construct two lists, the main list (Table 3) and an additional list (Table 4) which omits non-energy companies. The second list is relevant because capital spending by energy exploration and extraction companies tend to fluctuate sharply with the price of energy.
5. Based on Producer Price Index data released by the Bureau of Labor Statistics on Jun 14, 2022.
6. Mike Pomranz, “Starbucks Is Struggling to Keep Stores Stocked with Coffee Cups,” Food & Wine, February 10, 2022, https://www. foodandwine.com/news/disposable-paper-cup-shortage-starbucks.
7. Taylor Telford, “Yes, There’s a Tampon Shortage. Here’s Why,” The Washington Post, June 13, 2022, https://www.washingtonpost.com/ business/2022/06/13/tampon-shortage-product-shortages-inflation-supply-chain/
10. “GP to Expand Dixie Capacity in Lexington, Ky.; Will Close Operations in Easton, Pa., End of 2021,” Georgia-Pacific News, https://news. gp.com/2021/01/gp-to-expand-dixie-capacity-in-lexington-ky-will-close-operations-in-easton-pa-end-of-2021
11. A sizable number of planes are owned by leasing companies. But even taking those into account, the capital stock of aircraft only rose by 26% over this period, well below the average for the private sector as a whole.
12. “Walmart Selects Spartanburg County for New, High-Tech Grocery Distribution Center,” South Carolina Office of the Governor Henry McMaster, October 19, 2021, https://governor.sc.gov/news/2021-10/walmart-selects-spartanburg-county-new-high-tech-grocerydistribution-center.
13. Stephen Nellis, “Apple to Establish North Carolina Campus, Increase U.S. Spending Targets,” Reuters, April 26, 2021, https://www. reuters.com/technology/apple-establish-north-carolina-campus-increase-us-spending-targets-2021-04-26/.
14. Bryan Pietsch, “After a Slew of Disastrous Wildfires, PG&E Will Bury 10,000 Miles of California Power Lines,” The Washington Post, July 22, 2021, https://www.washingtonpost.com/nation/2021/07/22/pge-power-lines-california-wildfires/.
15. Phoebe Wall Howard, “Ford to Build New Plants in Tennessee, Kentucky in $11 Billion Investment in Electric Vehicles,” Detroit Free Press, September 28, 2021, https://www.freep.com/story/money/cars/2021/09/28/ford-motor-company-electric-vehicle-plants-batterieskentucky-tennessee/5896095001/.
16. Woodrow Bellamy, “Delta Air Lines Expands Fleet with New Airbus A321neo Order,” Aviation Today, August 24, 2021, https://www. aviationtoday.com/2021/08/24/delta-air-lines-expands-fleet-new-airbus-a321neo-order/
Today’s surging oil and gas prices confront progressive climate activists with a discomfiting truth: Their campaign to vilify and suppress fossil fuel production has crashed headlong into Americans’ urgent appetite for affordable energy.
The green left is not happy with President Biden, who is pulling out all the stops to give Americans some temporary relief from punishingly high fuel prices. That includes jawboning U.S. oil companies to drill more, a widely panned proposal to suspend the federal gas tax and Thursday’s controversial visit to Saudi Arabia, whose leaders the White House has implored to boost production to stabilize world oil markets.
It’s true that high fuel prices are heightening the contradiction at the heart of the Biden administration’s climate and energy policies. If your overriding aim is to drive down consumption of fossil fuels, high prices are a good thing. But that’s a hard sell to working families struggling with $5 a gallon gas and soaring utility bills.
With the midterm elections looming, activists shouldn’t be too quick to pillory Biden — especially since it’s their premature if not utopian demands to abolish fossil fuels as soon as possible that have landed him and his party in this predicament.
FACT: World shipping container capacity has grown six-fold since 2000
THE NUMBERS: World container-shipping fleet capacity, in TEUs* –
2022 25.8 million TEU
2010 12.8 million TEU
2000 4.3 million TEU
1990 1.2 million TEU
1980 0.5 million TEU
* “Twenty-foot Equivalent Units.” A TEU represents one 20 x 8 x 8.5 foot shipping container; a 40-foot container is two TEUs.
WHAT THEY MEAN:
A quick modern maritime trade history, in three ships:
1. The Warrior: In 1954, the National Academy of Sciences studied the voyage of a “general cargo” freighter from New York to Hamburg. The Warrior, measuring 142 meters long, 19 wide, and 32 deep, had a crew of 44. On this voyage it carried 194,582 individual pieces of cargo, which weighed 5,015 tons and arrived at the port in a kaleidoscopic 15 types of “packaging.” The study’s author counted 24,036 bags, 10,671 boxes, 717 cartons, 74,908 cases, 5 “reels”, 815 barrels, 888 cans, 15,38 drums, 2,877 packages, 2,634 pieces, 21 crates, 10 transporters, 2,880 bundles, 53 wheeled vehicles, and 1,525 “undetermined” types of packages. A 22-person “longshore gang” took 35 days to pack this cargo in wooden pallets in New York and load it onto the ship. The German crew at the other end of the trip needed 4 days to unload it after arrival.
2. The Ideal-X: The first container ship, a retrofitted World War II freighter renamed Ideal-X, launched in April 1956 from Newark on a trip to Houston. It was about the same size as the Warrior — 160 meters long, 9 wide, and 21 deep — and carried 58 proto-containers holding 10,572 tons of cargo. Malcolm McLean, the North Carolina trucking executive who designed it, is said to have calculated that traditional “breakbulk” loading of Warrior-type ships cost $5.83 per ton of cargo. (“Breakbulk”: Loading individual cargo items into ship holds after packing them in wooden pallets; see below for a real-life case study in this.) Simply disconnecting a truck’s trailer from the chassis and putting it on deck, by contrast, cut this cost by 97%, to 16 cents per ton. Ideal-X took eight hours to load.
By 1990, a worldwide fleet of 1169 container-ships was carrying around over 1.2 million TEU, or an average of over 1,000 twenty-foot containers per ship. A decade-old but still striking paper (Daniel Bernhofen, Zouheir el-Sahli, Richard Kindner) investigated the effects of the shift from break-bulk to containerized cargo, concluding that it had been about twice as powerful a driver of trade growth as tariff cuts and trade agreements. Specifically:
a. Participation in the two multilateral GATT agreements of the era — the “Kennedy Round” of 1968 and the “Tokyo Round” of 1979, which applied to 94 countries as of 1990 — raised trade volume 285%, or three-fold.
b. Participation in free trade agreements (meaning in practice the creation of the European Economic Community in the late 1950s, its expansion from the original six members to 12 between 1973 and 1985, plus the U.S.-Canada auto pact of 1965, the U.S.-Israel FTA of 1985, and the U.S.-Canada FTA of 1988) raised trade about 45% or half-fold. (If “half-fold” is a word).
c. Adoption of container shipping raised trade 790%, or nine-fold.
3. The Ever Alot: Since Mclean’s ingenious low-tech innovation, container shipping has followed a sort of Moore’s Law-like expansion curve, with capacity at least doubling every decade. By 2000, fleet capacity had reached 2400 ships carrying 4.3 million TEU, and by 2010, 4700 ships and 12.8 million TEU. The 6,406 container ships active as of mid-2022 carry 25.8 million TEU, meaning an average of over 4,000 containers per ship. A median-size container vessel is said to take about 15 hours to load and unload.
The largest container ship yet built — unpoetically but accurately named Ever Alot – is owned by Taiwan’s Evergreen lines, and went into service on June 22. It is 400 meters long, 61.5 meters wide, and 100 meters deep; requires a crew of 25; and can carry 24,004 TEU. At maximum weight, this would be about half a million tons of cargo, equivalent to 100 Warriors or 50 Ideal-X’s. Ever Alot arrives at Malaysia’s Tanjung Pelepas port tomorrow.
FURTHER READINGS:
UNCTAD’s 2021 Review of Maritime Transport has data and trends for container ships, oil tankers, port efficiency, and more about the 99,8000 large commercial vessels on the water this year.
A decade-old but still compelling visualization of the maritime world.
Bernhofen, el-Sahli, and Kindner on the trade impact of conversion to container shipping 1960-1990. No similar study appears to have been done so far on the impact of the larger scale of container shipping in the subsequent thirty years.
A dissenting view: Container modernization is accelerating too fast; very big ships are forcing unhealthy shipping-line consolidation and creating a capacity glut.
Then and now
The Ever Alot,launched three weeks ago, carries 24,004 containers.
Though the National Academy study of the Warrior appears unavailable online, Marc Levinson’s The Box (2005), written for the 50th anniversary of the Ideal-X’s journey, has a summary of the survey, as well as a large-scale review of the invention, spread, and implications of container shipping, 1956 to 2005:
A bit more perspective — Ideal-X was innovative, but not very large. The largest 19th century clipper ship, the 1853 Great Republic, was just a bit smaller, and could carry nearly as much cargo as the Warrior: 102 meters long, 16 wide, 25 deep and able to carry about 3,500 tons of cargo. From the Smithsonian’s American History Museum.
And two more book recommendations:
Horatio Clare’s Down to the Sea in Ships (2015) recounts a trip on the Gerd Maersk, a 6,600-TEU ship built in 2006, from the U.K.’s Felixstowe port through the Suez Canal, to Malaysia, Vietnam, and China, and ending at Los Angeles. Detail on crew life (Filipino ratings, European and Indian officers; no alcohol at any time), cargo loading, rules for avoiding piracy, the approach to the Port of L.A. etc.
And Richard Hughes’ In Hazard (1938), the great novel of the logistics industry, recounts the fictional passage of a small British general-cargo vessel (Chinese ratings, U.K. and American officers) from Virginia into a gigantic Caribbean hurricane.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
In a high-inflation environment, railroads are one of the few positive notes. Adjusting for the rising price of inputs like energy, so-called “value-added” prices of rail services are down by 2.6% over the last year. Meanwhile, value-added prices for air freight and passenger services are up by 20.5%, and value-added prices for trucking services are up by 33.4%, also adjusting for the price of inputs such as energy.
That’s why the current bargaining impasse in the railroad industry is distressing. The national railroads and rail labor unions are in a 30-day “cooling off period” that ends July 18. To avoid a strike or a lock-out, President Biden is likely to appoint a Presidential Emergency Board (PEB) to make settlement recommendations before a final cooling off period ends in mid-September.
While not directly part of the national negotiations, an important backdrop that the Tier 1 rail carriers have invested more than $11 billion in installing Positive Train Control (PTC), a system that makes rail movements much safer. The carriers propose to use this new technology to operate more efficiently by redeploying many conductors out of trains to ground-based positions. The rail unions are resisting this change at the individual carrier level, while demanding higher wages at the national level.
To work their way through the complicated puzzle of technology, wages, and productivity, President Biden needs to appoint PEB members who understand the railroad industry, and who are experienced arbitrators. That is the best route towards achieving a fair outcome that doesn’t disrupt the economy and further fuel inflation.
Progressive Policy Institute President Will Marshall and Center for Funding America’s Future Director Ben Ritz today urged Congressional Democrats to focus on four top legislative priorities ahead of the looming August recess break.
In a memo to Democrats, Marshall and Ritz argue Congress should seize the opportunity to:
Protect our democracy with Electoral Count Act reform;
Tackle inflation, energy, and health care costs through reconciliation;
Help America outcompete China by passing the bipartisan U.S. Innovation and Competition Act (USICA); and
Fill all 77 judicial vacancies
With control of both the House and Senate up for grabs in the fall, this could be the last chance to pass these crucial reforms before the usual midterm losses put MAGA extremists in a position to block any national progress for the remainder of President Biden’s first term,” Will Marshall and Ben Ritz write. “By taking action before the August recess on these four urgent priorities, Congressional Democrats could compile an impressive record of progressive reform and governing competence to run on in November.
Read the memo below:
MEMORANDUM
TO: Congressional Democrats
FROM: Will Marshall and Ben Ritz, PPI
RE: Four Legislative Priorities Before the August Recess
Under Democratic leadership, the 117th Congress has produced major wins for the American people. Nearly 70% of Americans are “fully vaccinated” against COVID and 80% have had at least one dose. The United States is enjoying its strongest job recovery ever and wages are rising. The bipartisan infrastructure law increased domestic infrastructure spending by $550 billion, the largest investment in America’s productive capacity in a generation. Congress approved President Biden’s request for military aid to help Ukraine defend itself against Russian aggression. The U.S. Senate confirmed Ketanji Brown Jackson as the first Black woman on the Supreme Court. And a determined Congress just passed the bipartisan Safer Communities Act — the first national gun safety bill in over 30 years.
Before they leave for August recess, Congressional Democrats should seize the opportunity to build on this solid record of accomplishment by acting to safeguard our democracy, ease inflationary pressure, expand America’s high-tech lead, create new jobs in clean energy, and lower health care premiums. With control of both the House and Senate up for grabs in the fall, this could be the last chance to pass these crucial reforms before the usual midterm losses put MAGA extremists in a position to block any national progress for the remainder of President Biden’s first term.
Therefore, we urge Congressional Democrats to focus on these four vitally important priorities over the next month:
PROTECT DEMOCRACY WITH ELECTORAL COUNT ACT REFORM
The top priority should be to reinforce the guardrails around America’s Constitutional democracy. Although his violent Jan. 6 coup attempt failed, ex-president Donald Trump continues to undermine the integrity of U.S. elections. In a blatant bid to rig future elections in advance, he’s backing MAGA election deniers running for Congress as well as governor and secretary of state in the key battleground states he lost in 2020. Congress must update the Electoral Count Act to make it impossible for defeated presidents and their accomplices to overrule American voters and steal a national election.
TACKLE INFLATION, ENERGY, AND HEALTH CARE COSTS THROUGH RECONCILIATION
Americans across the political spectrum agree that inflation is the greatest economic challenge we face today. The new, more focused reconciliation bill Democratic leaders are crafting with Sen. Joe Manchin could help reduce the cost of living while also salvaging some key elements of last year’s overreaching Build Back Better blueprint. It would cut budget deficits by roughly $500 billion, making it easier for the Federal Reserve to rein in rising prices without triggering a recession.
The new reconciliation bill also should include an ambitious set of consumer and business tax incentives for dozens of clean energy technologies, based on a $325 billion, 10-year package of clean energy tax incentive bill approved by the Senate Finance Committee last year, a version of which has already passed the House. These measures would stimulate hundreds of billions of dollars in private sector clean technology investment throughout the economy while creating millions of new jobs. They are also very popular with voters.
Congress made health insurance more affordable for over 13 million Americans this year when it increased the subsidies for plans purchased through the Affordable Care Act exchanges as part of the American Rescue Plan. But the increase was temporary, and if lawmakers let it expire, premiums will increase 53% on average. To make matters worse for Democrats, rate increase notices will be sent out in October, even if they don’t go into effect until January. It is unlikely that the full increase can be made permanent because of its high costs, but Democrats can blunt the pain and permanently fix the ACA “subsidy cliff” that existed before this year for less than $150 billion over 10 years as part of a sustainably financed reconciliation bill.
It’s essential that Democratic leaders and Sen. Manchin get to “yes” on a radically pragmatic reconciliation bill that unites their ideologically diverse party and delivers a major win for President Biden’s domestic agenda. They should resist pressure from the progressive left to enact other gimmicky giveaways that would squander these savings and undermine the bill’s inflation-fighting potential.
HELP AMERICA OUTCOMPETE CHINA BY PASSING THE BIPARTISAN INNOVATION BILL
Lawmakers have yet to finish conferencing the U.S. Innovation and Competition Act (USICA) passed last year by the Senate with the House-passed America COMPETES Act. This bipartisan innovation bill would make an historic investment in semiconductor manufacturing capacity, research and development, STEM workforce development, and supply chain resilience. By passing it, Congress would signal its determination to keep America ahead of China in the race for scientific and technological leadership.
USICA also presents an opportunity for Congress to set up a more robust and equitable system of career pathways for non-college workers. The COMPETES Act, for example, would expand apprenticeship opportunities to reach historically underserved populations, including youth and people re-entering their community after incarceration. It would also promote apprenticeships in non-traditional industries, creating nearly one million additional opportunities in new and emerging fields over the next five years.
But the House version of the bill unfortunately was larded with extraneous trade provisions that are unrelated to the bill’s core emphasis on boosting U.S. innovation and competitiveness. These should be set aside and argued out in some other legislative context. Meanwhile, Senate Minority Leader Mitch McConnell has vowed to pull his party’s support from the conference as long as Democrats continue work on passing a budget reconciliation bill. Although there are elements of the Senate bill that could be improved in a conference committee, the best way to circumvent McConnell’s blatant obstructionism may be for House Democrats to simply vote to send the Senate-passed USICA to President Biden’s desk, negating the need for further negotiations.
FILL COURT VACANCIES FASTER
The Supreme Court’s recent flurry of deeply polarizing decisions underscores the perils of allowing Republicans to pack federal courts with far-right ideologues. Although President Biden has nominated and confirmed more temperate federal judges at a record pace, it hasn’t been fast enough to keep up the rate of judicial retirements. To fill all 77 vacancies, he and Senate leaders must pick up the pace.
By taking action before the August recess on these four urgent priorities, Congressional Democrats could compile an impressive record of progressive reform and governing competence to put before the voters in November.
Will Marshall is the President and Founder of the Progressive Policy Institute.
Ben Ritz is the Director of PPI’s Center for Funding America’s Future.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
TO: Congressional Democrats
FROM: Will Marshall and Ben Ritz, PPI
RE: Four Legislative Priorities Before the August Recess
Under Democratic leadership, the 117th Congress has produced major wins for the American people. Nearly 70% of Americans are “fully vaccinated” against COVID and 80% have had at least one dose. The United States is enjoying its strongest job recovery ever and wages are rising. The bipartisan infrastructure law increased domestic infrastructure spending by $550 billion, the largest investment in America’s productive capacity in a generation. Congress approved President Biden’s request for military aid to help Ukraine defend itself against Russian aggression. The U.S. Senate confirmed Ketanji Brown Jackson as the first Black woman on the Supreme Court. And a determined Congress just passed the bipartisan Safer Communities Act — the first national gun safety bill in over 30 years.
Before they leave for August recess, Congressional Democrats should seize the opportunity to build on this solid record of accomplishment by acting to safeguard our democracy, ease inflationary pressure, expand America’s high-tech lead, create new jobs in clean energy, and lower health care premiums. With control of both the House and Senate up for grabs in the fall, this could be the last chance to pass these crucial reforms before the usual midterm losses put MAGA extremists in a position to block any national progress for the remainder of President Biden’s first term.
Therefore, we urge Congressional Democrats to focus on these four vitally important priorities over the next month:
PROTECT DEMOCRACY WITH ELECTORAL COUNT ACT REFORM
The top priority should be to reinforce the guardrails around America’s Constitutional democracy. Although his violent Jan. 6 coup attempt failed, ex-president Donald Trump continues to undermine the integrity of U.S. elections. In a blatant bid to rig future elections in advance, he’s backing MAGA election deniers running for Congress as well as governor and secretary of state in the key battleground states he lost in 2020. Congress must update the Electoral Count Act to make it impossible for defeated presidents and their accomplices to overrule American voters and steal a national election.
TACKLE INFLATION, ENERGY, AND HEALTH CARE COSTS THROUGH RECONCILIATION
Americans across the political spectrum agree that inflation is the greatest economic challenge we face today. The new, more focused reconciliation bill Democratic leaders are crafting with Sen. Joe Manchin could help reduce the cost of living while also salvaging some key elements of last year’s overreaching Build Back Better blueprint. It would cut budget deficits by roughly $500 billion, making it easier for the Federal Reserve to rein in rising prices without triggering a recession.
The new reconciliation bill also should include an ambitious set of consumer and business tax incentives for dozens of clean energy technologies, based on a $325 billion, 10-year package of clean energy tax incentive bill approved by the Senate Finance Committee last year, a version of which has already passed the House. These measures would stimulate hundreds of billions of dollars in private sector clean technology investment throughout the economy while creating millions of new jobs. They are also very popular with voters.
Congress made health insurance more affordable for over 13 million Americans this year when it increased the subsidies for plans purchased through the Affordable Care Act exchanges as part of the American Rescue Plan. But the increase was temporary, and if lawmakers let it expire, premiums will increase 53% on average. To make matters worse for Democrats, rate increase notices will be sent out in October, even if they don’t go into effect until January. It is unlikely that the full increase can be made permanent because of its high costs, but Democrats can blunt the pain and permanently fix the ACA “subsidy cliff” that existed before this year for less than $150 billion over 10 years as part of a sustainably financed reconciliation bill.
It’s essential that Democratic leaders and Sen. Manchin get to “yes” on a radically pragmatic reconciliation bill that unites their ideologically diverse party and delivers a major win for President Biden’s domestic agenda. They should resist pressure from the progressive left to enact other gimmicky giveaways that would squander these savings and undermine the bill’s inflation-fighting potential.
HELP AMERICA OUTCOMPETE CHINA BY PASSING THE BIPARTISAN INNOVATION BILL
Lawmakers have yet to finish conferencing the U.S. Innovation and Competition Act (USICA) passed last year by the Senate with the House-passed America COMPETES Act. This bipartisan innovation bill would make an historic investment in semiconductor manufacturing capacity, research and development, STEM workforce development, and supply chain resilience. By passing it, Congress would signal its determination to keep America ahead of China in the race for scientific and technological leadership.
USICA also presents an opportunity for Congress to set up a more robust and equitable system of career pathways for non-college workers. The COMPETES Act, for example, would expand apprenticeship opportunities to reach historically underserved populations, including youth and people re-entering their community after incarceration. It would also promote apprenticeships in non-traditional industries, creating nearly one million additional opportunities in new and emerging fields over the next five years.
But the House version of the bill unfortunately was larded with extraneous trade provisions that are unrelated to the bill’s core emphasis on boosting U.S. innovation and competitiveness. These should be set aside and argued out in some other legislative context. Meanwhile, Senate Minority Leader Mitch McConnell has vowed to pull his party’s support from the conference as long as Democrats continue work on passing a budget reconciliation bill. Although there are elements of the Senate bill that could be improved in a conference committee, the best way to circumvent McConnell’s blatant obstructionism may be for House Democrats to simply vote to send the Senate-passed USICA to President Biden’s desk, negating the need for further negotiations.
FILL COURT VACANCIES FASTER
The Supreme Court’s recent flurry of deeply polarizing decisions underscores the perils of allowing Republicans to pack federal courts with far-right ideologues. Although President Biden has nominated and confirmed more temperate federal judges at a record pace, it hasn’t been fast enough to keep up the rate of judicial retirements. To fill all 77 vacancies, he and Senate leaders must pick up the pace.
By taking action before the August recess on these four urgent priorities, Congressional Democrats could compile an impressive record of progressive reform and governing competence to put before the voters in November.
Will Marshall is the President and Founder of the Progressive Policy Institute.
Ben Ritz is the Director of PPI’s Center for Funding America’s Future.
After the Fourth, Yorktown, the Treaty of Paris, and the Constitution, they began to argue …
Nobody really knows how large America’s early-republic economy was. The website www.measuringworth.com, an economic history project at the University of Illinois, nonetheless makes an admirable try, estimating a U.S. GDP of $189 million in 1790. We do know trade figures, though: that year, Alexander Hamilton’s newly hired Customs agents counted $23 million in imports and $20 million in exports.
Assuming the GDP estimate is about right, goods trade would have been equal to a bit less than 23% of the economy. Today’s trade and GDP stats, counted in trillions rather than millions of dollars, are about 100,000 times bigger. But measured against one another, they make the 21st-century and 18th-century economies look eerily similar. With the Bureau of Economic Analysis estimating U.S. GDP at $25 trillion this year and Census trade data suggesting $3.5 trillion in goods imports and $2.1 trillion in exports, the 2022 goods-trade-to-GDP ratio is just above 22%, almost identical to that of 1790.
Similar circumstances can elicit similar ideas and responses. In this post-Fourth week, here are some post-Independence perspectives, each with its own contemporary echoes and advocates:
1. Alexander Hamilton’s Report on Manufactures (1791) the first U.S. government paper on trade policy, was also the first on the topic now termed “competitiveness.” Then serving as Treasury Secretary, Hamilton rebuts arguments that low-wage foreign competition (from textile, machinery, and other factories in Industrial Revolution Britain and Europe) made it impossible for the U.S. to compete in manufacturing:
“While in the article of wages the comparison certainly turns against the United States … the degree of disparity is diminished in proportion to the use which can be made of machinery. To illustrate this last idea: let it be supposed that the difference in price in two countries of a given quantity of manual labor requisite to the fabrication of a given article is as ten, and that some mechanic power is introduced into both countries which, performing half the necessary labor, leaves only half to be done by hand, it is evident that the difference in the cost of the fabrication of the article in question, as far as it is connected with the price of labor, will be reduced from ten to five.”
The balance of the Report calls for a program of importing labor-saving machines, passage of a patent law to stimulate American inventors, incentives for high-skilled immigration, cash prizes for innovative American factories, and an infant-industry trade protection scheme using temporarily high tariffs or exclusions for products ranging from starched wigs, bell-metal, and glue to whiskey, whale-oil, pewter cups and bowls, furniture, chocolate, rifles, and books. Hamilton’s former Federalist Papers partner, James Madison, was by then leader of an opposition party in the House of Representatives, and made sure the program got nowhere.
2. Thomas Jefferson’s Report on Foreign Commerce (1793), from a different angle two years later, is the first U.S. government catalogue of foreign trade barriers. Reviewing tariff rates, product exclusions, state trading monopolies, and shipping (“navigation”) restrictions in the U.K., France, Spain, Portugal, Denmark, Sweden, and the Netherlands along with their colonial possessions in Latin America, Canada, and the Caribbean, Jefferson as Secretary of State combines theoretical support for open markets with reciprocity in practice:
“Instead of embarrassing commerce under piles of regulating laws, duties, and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surplusses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered. Would even a single nation begin with the United States this system of free commerce, it would be advisable to begin it with that nation; since it is one by one only that it can be extended to all. … But should any nation, contrary to our wishes, suppose it may better find its advantage by continuing its system of prohibitions, duties and regulations, it behooves us to protect our citizens, their commerce and navigation, by counter prohibitions, duties and regulations, also. Free commerce and navigation are not to be given in exchange for restrictions and vexations; nor are they likely to produce a relaxation of them.”
A sample of the findings:
“Our bread stuff is at most times under prohibitory duties in England, and considerably dutied on re-exportation from Spain to her colonies. Our tobaccoes are heavily dutied in England, Sweden and France, and prohibited in Spain and Portugal. Our rice is heavily dutied in England and Sweden, and prohibited in Portugal. Our fish and salted provisions are prohibited in England, and under prohibitory duties in France. Our whale oils are prohibited in England and Portugal. And our vessels are denied naturalization in England, and of late in France. … Spain and Portugal refuse, to all those parts of America which they govern, all direct intercourse with any people but themselves. … We can carry no article, not of our own production, to the British ports in Europe, nor even our own produce to her American possessions.”
3. Thomas Paine and economic integration as a support for peace: And from a non-government, dissenting-intellectual perspective, Paine argues in The Rights of Man (1790) for international economic integration as a deterrent to war:
“I have been an advocate for commerce, because I am a friend to its effects. It is a pacific system, operating to cordialise mankind, by rendering nations, as well as individuals, useful to each other. If commerce were permitted to act to the universal extent it is capable, it would extirpate the system of war, and produce a revolution in the uncivilised state of governments. … Commerce is no other than the traffic of two individuals, multiplied on a scale of numbers; and by the same rule that nature intended for the intercourse of two, she intended that of all. For this purpose she has distributed the materials of manufactures and commerce, in various and distant parts of a nation and of the world; and as they cannot be procured by war so cheaply or so commodiously as by commerce, she has rendered the latter the means of extirpating the former.”
FURTHER READINGS:
Quick postscript: Advocates looking to enlist the Founders on their sides of today’s global-economy debates should do so with care. As first-generation policymakers, they were learning on the job and changed their minds a lot. Hamilton’s take on the 1794 “Jay Treaty” with the U.K., the first post-Constitution U.S. trade agreement, diverged radically from the proposals he made in the Report on Manufactures. Jefferson likewise took at least three irreconcilable positions over a 30-year career in politics, from a Paine-like unilateral free-trade view as Ambassador to France in the 1780s, to the reciprocity-minded policies of the Report on Foreign Commerce in the 1790s, and an ill-fated enthusiasm for trade sanctions as a foreign policy tool as President in the 1800s.
… and the U.S. Trade Representative’s 2022 National Trade Estimate, covering 64 partners (counting the European Union and the Arab League as one each).
Paine’s The Rights of Man, 1790, with the commerce passage in chapter 5.
“Measuring Worth” tries to track GDP, wages, per capita income, and other stats for the U.S., Australia, the United Kingdom, and Spain back to the 1790s. Australia in 1790, two years after the Botany Bay colony foundation, has a GDP of 23,000 pounds.
And how exactly did we get modern economic macro-stats? BEA looks back on pre-GDP government economics, the giant brain of Simon Kuznets, and the invention of national economic measurement in the Commerce Department of the 1930s.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
As the July 4 holiday approaches, Americans can be forgiven for taking a break from today’s incendiary politics of partisan hatred and performative outrage. But it’s also the right occasion for citizens to think about their duty to reinforce the rules that make our democracy work.
Polls show rampant inflation is the voters’ top concern in this midterm election year. But it won’t be the most important issue on the ballot.
More consequential than soaring prices, crime, climate change or any other pressing national problem is the resilience of our constitutional framework for self-government. If it cracks under pressure from political extremists, we can kiss our liberties and democracy goodbye.
This Independence Day, America doesn’t feel so free. The Supreme Court’s decision to overturn Roe v. Wade is already causing real harm to go along with the widespread anguish.
It’s also causing political fallout. At least three new congressional polls show support for Democrats is soaring. That’s good news for the Party, but it also offers a cautionary lesson.
While the marquee debate around choice leading up to November will center on reproductive choice, there are signs that more U.S. parents are rallying in favor of a different kind of choice: The right to choose the best school for their child. And, it’s not just parents. About 72% of registered voters support school choice.
Paul Bledsoe, Energy and Climate Fellow for the Progressive Policy Institute, released the following statement in reaction to the U.S. Supreme Court ruling limiting the EPA’s authority to regulate greenhouse gases from power plants:
“The Supreme Court decision today significantly undermines the regulatory authority of the Environmental Protection Agency and Biden Administration to limit carbon dioxide, the main greenhouse gas. Yet the Court ignores the fact that climate change increasingly represents a clear and present danger to American public safety, our economy and national security, and should be addressed by all reasonable means.
“The ruling means Congress must act, once and for all, to provide certainty regarding U.S. and global climate protection so it is never again subject to the whims of a radical right-wing court.
“For three decades, Republicans have opposed all serious action, while Democrats have failed to create the broad-based political coalition needed to pass comprehensive climate legislation through Congress.
“In response to previous failures, the Biden Administration and Democrats in Congress have created new clean energy tax incentives and a positive agenda of economic opportunities for both workers and consumers.
“This approach is not about demonizing fossil fuels we will need for years or feeding a culture war. Instead, these policies would jumpstart innovation and our energy economy, creating millions of jobs. And these policies are very popular with Americans, since they do not involve politically challenged energy taxes, and will in fact reduce long-term consumer energy prices.
“This approach has already passed the House, and is reflected in legislation pending in the Senate. The Senate should adopt these measures with all deliberate speed to protect the American people from the increasing prospect of climate calamity, and prevent the radical right from endangering our nation and the world.”
On a new episode of the Progressive Policy Institute’s Radically Pragmatic podcast, PPI’s Director of Health Care Arielle Kane sits down with Everytown for Gun Safety’s Legal Director Jonas Oransky to discuss the latest developments in the bipartisan movement to pass gun safety legislation. The episode, titled “Dueling Decisions in the Fight for Gun Safety,” comes as President Biden signs a new bipartisan gun safety bill into law — the first in almost 30 years — against the backdrop of horrific mass shootings and a dangerous reversal of commonsense gun laws from the U.S. Supreme Court.
“These are provisions in the concealed carry laws of several states that SCOTUS struck down last week, that have helped those states have some of the lowest gun violence rates nationwide. New York’s law was on the books for over a century. It’s just a really disturbing turn of events also, that the Supreme Court is rewriting the process for how you evaluate whether common sense laws are allowed under the Constitution,” said Jonas Oransky.
Read PPI’s full statement on the passage of the bipartisan gun safety bill here.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
On a new episode of Radically Pragmatic, PPI’s Director of Health Care Arielle Kane sits down with Everytown for Gun Safety’s Legal Director Jonas Oransky to discuss the latest developments in the bipartisan movement to pass gun safety legislation. Their conversation comes as President Biden signs a new bipartisan gun safety bill into law — the first in almost 30 years — against the backdrop of horrific mass shootings and a dangerous reversal of commonsense gun laws from the U.S. Supreme Court.
FACT: The U.S. collects about as much tariff money on Pakistani goods as on British goods.
THE NUMBERS:
Imports from U.K., 2021
$56.6 billion
Imports from Pakistan, 2021
$5.3 billion
Tariffs on U.K. goods, 2021
$566 million
Tariffs on Pakistani goods, 2021
$523 million
WHAT THEY MEAN:
Looking at the U.S. tariff system as domestic tax policy for an International Trade Commission hearing last week, PPI’s Ed Gresser found much to dislike. In this role, it turns out to be mainly a way to tax cheap clothes, shoes, and other consumer goods, many of them not made in the United States for decades. As such, it is a remarkably regressive way to raise money, and not obviously effective as a job or production protector.
How does it look from the other side of the border? The complicated answer is, it basically depends where you are on the other side. For most countries U.S. tariffs turn out to be pretty modest, in a range from close to zero to about 5%. For low-income Asian countries reliant on clothing and textile exports, it is very restrictive; for China and to some extent for the world, it has changed a lot since 2017. As a starting point, a quick list (using trade-weighted averages, i.e., tariff payments divided by the value of goods imports) illustrates the world averages of 2017 and 2021, and the variation among countries:
Bangladesh
14.7%
China, 2021
11.3%
Sri Lanka
10.9%
Pakistan
9.8%
Cambodia
8.3%
Vietnam
4.8%
Indonesia
4.5%
World, 2021
3.0%
Ukraine
2.8%
China, 2017
2.7%
Thailand
1.9%
Egypt
1.7%
Samoa
1.5%
Japan
1.5%
World, 2017
1.4%
Brazil
1.0%
Philippines
1.5%
Germany
1.4%
European Union, 2021
1.4%
European Union, 2017
1.3%
El Salvador
1.2%
United Kingdom
1.0%
Argentina
0.9%
New Zealand
0.7%
Lebanon
0.6%
Uzbekistan
0.6%
Norway
0.5%
Haiti
0.4%
Jordan
0.3%
Kenya
0.3%
Ghana
0.2%
Kuwait
0.2%
Fiji
0.2%
South Korea
0.2%
Jamaica
0.1%
Canada
0.1%
Colombia
0.1%
Liberia
0.01%
What explains these patterns?
High tariffs on low-income Asia: The low-income Asian countries at the top of the list — Bangladesh, Cambodia, Pakistan, and Sri Lanka — specialize in exports of clothing and home textiles. Tariffs on these goods average over 11%, and spike to 32% (as one example, for polyester shirts). By comparison, IT goods, medical equipment, natural resources like oil and fish, and primary agricultural commodities are zero, while heavy-industry and sophisticated consumer goods generally get low tariffs. Thus the startling fact that buyers of Pakistan’s modest $5.3 billion worth of shirts, towels, and similar goods pay almost as much as buyers of $56.6 billion in British medicines, aircraft parts, automobiles, and art auction prizes. Likewise, buyers of struggling Sri Lanka’s underwear and clothing paid $325 million last year; the bill for buyers of Norway’s $6.7 billion in salmon, oil, and pharmaceuticals was $34 million, an order of magnitude smaller.
Low-to-medium rate on others:If the highest rates show up in low-income Asia, the lowest are for countries of several different types: (a) energy and natural resource exporters (oil for Kuwait, fish for Fiji, and so on); (b) the 20 U.S. FTA partners, where Canada, Jordan, El Salvador and Colombia stand in for the larger group; and (c) countries enrolled in the African Growth and Opportunity Act or the Caribbean Basin Initiative, such as Kenya, South Africa, Liberia, Haiti, and Jamaica. Larger wealthy and middle-income countries (the U.K., Germany, Brazil, Argentina, Thailand, Japan, etc) have diversified export mixes, typically with a lot of zero-tariff products, a lot of mid-tariff products, and some high-tariff goods, and typically wind up in a range from 1% to 3%.
Changing rates for the world and China: Finally, the system has changed substantially over the last five years, with the worldwide average rate doubling from 1.4% in 2017 to 3.0% in 2021. This is principally due to the Trump administration’s “301” tariffs on Chinese goods. The “232” tariffs on steel and aluminum, though equally controversial, affect only about 1.5% of imports, and changed overall averages only very modestly for the world or large partners like the EU or Japan. For Chinese goods specifically, average rates have jumped from 2.7% in 2017 to 11.3% in 2021 – very high in comparison to the vast majority of countries, but still actually below the normal, permanent rates for products from Bangladesh.
FURTHER READINGS:
Gresser on the tariff system and American underserved and underrepresented communities.
A long view: The U.S. International Trade Commission tracks U.S. tariff rates from the McKinley Tariff of 1890 to 2020.
… and analyzes the 11,414 U.S. tariff lines — How many are zero? How many duty-free under FTAs and preferences? How many are “specific duties,” or flat fees, instead of percentages? — etc.
The World Bank’s interactive table of average tariff rates worldwide and by country uses “simple averages” (the rates for each single tariff line in a country’s “schedule” added up, then divided by the total number of tariff lines) rather than the “trade-weighted” averages above. This approach has grown less useful as a gauge generally (as more countries use FTAs and other special programs), and especially for the U.S. since the 301 and 232 tariffs.
This noted, the table reports a worldwide average of 5.2% as of 2017, down by about 2/3 from the 15.6% average of 1993, and by about half from the 10.8 percent world average of 2000. The world’s highest rate is the Bahamas’ 23.7%, with a few other small islands and countries (the Cayman Islands, Bermuda, and Djibouti) next. The lowest are the zeroes for Hong Kong and Macao, with very slightly higher 0.1% averages in Brunei and Singapore.
The WTO’s World Tariff Profiles 2021 has a much more detailed look, with simple averages, trade-weighted averages, “tariff peak” counts, ag vs. non-ag., and more for 151 countries.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
The Progressive Policy Institute (PPI) released a new paper today arguing United States policymakers should consider more aggressive ways to obtain health care pricing information from hospitals, which could effectively boost price transparency for patients. The paper is titled,“Rethinking health insurance: Can price transparency and cash pay help consumers?” and is authored by Arielle Kane, Director of Health Care for the Progressive Policy Institute.
“For price transparency rules to work, they need to be enforced,” writes report author Arielle Kane. “When people have a serious accident or medical emergency, they aren’t inclined to comparison price shop. But most medical visits are for less than urgent care. When people do have time and inclination to compare prices, they should be able to do so. And allowing researchers and journalists to review pricing data can help expose the predatory billing practices that some providers engage in. Public scrutiny could help the industry move toward ethical, and transparent, billing practices.”
Only 14% of hospitals are in compliance with a 2021 rule from U.S. Center for Medicare and Medicaid Services (CMS) requiring hospitals post the prices for 300 so-called “shoppable” services, online. This rule, which was intended to encourage competition between hospitals and provide price transparency for consumers, has limited enforcement mechanisms. As the next chapter of this rule goes into effect this week, requiring insurers to disclose the rates they pay hospitals, there is the potential to improve the shopping experience for consumers – but only if it is enforced.
Kane’s report reviews the history and status of the price transparency regulation and finds that greater enforcement is needed to achieve the full potential of price transparency. After reviewing cash-pay data from 14 of the 300 “shoppable” billing codes, PPI finds that on average, hospitals charge 120% of the commercial insurance rates to patients paying with cash. However, there is evidence to suggest that hospitals are inflating their publicly reported “cash-pay” rates.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
