On the first episode of RAS Reports, Co-Director of PPI’s Reinventing America’s Schools Project Curtis Valentine sits down with RAS Advisory Board Member and Fort Worth, Texas School Board Leader Cinto Ramos to explore the importance of school boards among students, parents, and local leaders. What challenges do school boards face post-COVID? And what opportunities are created from having to reinvent the wheel?
In addition, Curtis and Cinto dive into Texas SB 1882, as well as the 2021 Virginia Gubernatorial election that helped catapult school board leaders and the education debate into the national spotlight.
Learn more about the Reinventing America’s Schools Project here.
The Progressive Policy Institute (PPI) released a new report today outlining several root causes of the lack of affordable and accessible higher education in America. Report authors Paul Weinstein Jr. and Veronica Goodman propose increasing price transparency and ensuring prospective students get the credit they’ve earned before beginning their degree.
“Far too often, proposals to address the skyrocketing financial costs facing college bound students involve subsidizing an already broken system with more taxpayer dollars,” said Paul Weinstein, Jr., Senior Fellow at the Progressive Policy Institute. “PPI’s recommendations for policymakers constitute an actionable, pragmatic roadmap for substantive change that will give more students opportunities to succeed without bankrupting their financial future”.
The skyrocketing cost of higher education affects young people across the country, with more than one in five U.S. households holding a student loan and the increased costs of college outpacing inflation nearly fivefold since 1983. Policymakers’ increased focus on proposals to expand financial aid and loans – or cancel them entirely – neglects the reality that these remedies would not prevent the problem from repeating itself year after year.
The report proposes the following reforms to expand access to higher education and increase affordability:
The White House should push for legislation that gives the Department of Education greater authority to establish policies for Advanced Placement (AP), International Baccalaureate (IB), and dual enrollment course credit and ensure that these credits transfer automatically.
Colleges should be required to disclose before a student matriculates the number of credits, including through AP, IB, or from community college coursework, that will be accepted.
The Department of Education should require that colleges provide easy access to information on transfer credits.
States should set clear standards for minimum test scores on AP tests and GPA-level coursework required to earn college credits.
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.
Over the last 30 years, college tuition has skyrocketed. From 1988 to 2018, tuition at public four-year institutions (in real terms) rose 213%. The numbers for private tuition are also stark, with a jump from 1988 to 2018. Students at public four-year institutions paid an average of $3,190 in tuition for the 1987-1988 school year, with prices adjusted to reflect 2017 dollars. Thirty years later, that average has risen to $9,970 for the 2017-2018 school year.
The price jump at private schools has also been significant. In 1988, the average tuition for a private nonprofit four-year institution was $15,160, in 2017 dollars. For the 2017-2018 school year, it’s $34,740, a 129% upsurge.
In response to the exponential surge in the cost of higher education, policymakers have focused increasingly on proposals to expand financial aid and loans, and canceling the vast sums of debt that college students have accumulated. Calls for canceling student debt are understandably popular with those burdened with those loans. But student loan forgiveness is a one-off gift to one generation of borrowers, that does nothing to prevent the problem from repeating itself year after year.
The first step to make college more affordable and expand access to more Americans is to increase price transparency about the true cost of college, and ensure prospective students get credit for college-level work they have completed before starting their degree.
Presently, students lack the information they need to make smart choices about if and where they should go to college. Colleges and universities are not transparent about the true cost of tuition and fees and are opaque about how much credit (if any) students can earn before enrolling (which in turn can reduce the cost). As a result, too many students aren’t getting the college credit they have earned and are being forced to pay and borrow more than they should.
As the pandemic abates, higher education institutions must commit to holding down the cost of tuition and helping students reduce the amount they have to borrow. For example, colleges should guarantee up to two semesters worth of credit for successful completion of Advanced Placement (AP), International Baccalaureate (IB), and college courses taken in high school. They should also make the transfer of credits from community colleges more seamless.
This paper offers a series of pragmatic steps policymakers could take immediately to curb college costs and borrowing. The federal government should use the leverage of billions in financial support for higher education to increase transparency around tuition price, credit transfers, and acceptances so that students can make more informed decisions around college costs:
1.) The White House should push for legislation that gives the Department of Education greater authority to establish policies for AP, IB, and dual enrollment course credit and ensure that these credits transfer automatically.
2.) Colleges should be required to disclose before a student matriculates the number of credits, including through AP, IB, or from community college coursework, that will be accepted.
3.) The Department of Education should require that colleges provide easy access to information on transfer credits.
4.) States should set clear standards for minimum tests scores on AP tests and GPA-level coursework required to earn college credits.
BACKGROUND
The skyrocketing cost of higher education has become a millstone around the necks of young Americans. More than one in five U.S. households hold a student loan, up from one in 10 in 1989.1 According to the Bureau of Labor Statistics, the cost of college has increased by nearly five times the rate of inflation since 1983.2
These increases depend on the type of institution a student attends, and tuition hikes have been most pronounced among four-year private universities.3 Overall, researchers point to state disinvestment in colleges and rising administrative costs as key drivers of higher education costs.
The education debt crisis has disproportionately affected millennials4, who are already saddled with lower wages and lingering economic pains from the Great Recession. Of young adults aged 25 to 34, or the bulk of millennials, approximately one-third hold a student loan.5 Collectively, as of 2019, 15.1 million millennial borrowers hold $497.6 billion in outstanding loans.6 Economists have pointed to this massive debt burden as a key reason why millennials are not buying houses, starting small businesses, or saving for retirement in the same way as past generations, and it is to the overall detriment of the economy.7
Those who have borrowed for degrees are more likely to be lower-income, Black, and less likely to have family wealth to fall back on. Thus, they are more likely to default, exacerbating poverty and the racial wealth gap. According to the U.S. Department of Education, 20% of borrowers are in default, and a million more go into default each year. Two-thirds of borrowers who default never completed their college degrees or earned only a certificate and owe a comparatively low average amount of $9,625.8 Those who default include veterans, parents, and first-generation college students.9 This “debt with no degree” syndrome leaves borrowers in the hole without access to the earning power associated with a postsecondary degree.
Pell Grant recipients from lower-income households represent an exceptionally high percentage of defaulted borrowers. For example, close to 90% of defaulters received a Pell Grant at one point.10 Of this group, even those who earned a bachelor’s degree are three times more likely to default than students from families that don’t qualify for a Pell Grant.11
For young people who borrow heavily and get in over their heads, default often has catastrophic implications for future access to credit. Many have their wages garnished and tax records seized, starting adulthood and careers on the wrong foot.12
DIMINISHING CREDIT FOR COLLEGE LEVEL COURSEWORK COMPLETED IN HIGH SCHOOL
More high school students are graduating with college-level coursework that could help alleviate some of these costs. High schools with AP and IB programs, as well as Early College high schools,13 give students a head start on advance credits. But many colleges are not transparent about which of these credits will transfer once students matriculate.
According to data from the National Center for Education Statistics, nearly 71% of community college students intend to, at some point, pursue a baccalaureate degree.14
Adding to their data, studies from the Center reveal that approximately 20-50% of new university students are actually transfer students from community college. As students move between institutions, they find it very difficult to navigate the system of credit transfers and agreements.
In fact, colleges have made it increasingly difficult to receive course credit for AP, IB, and work completed at community colleges.15 Some schools (Dartmouth, Brown, and Williams, to name a few) have stopped granting course credit entirely for AP. Furthermore, only 20 states have statewide policies for AP course credit, and more often than not, those that do have statewide policies do not have a minimum score guaranteeing credit transfer.
Why are schools restricting the use of AP? Many claim AP courses are not an actual substitute for college courses. Yet most of these schools that restrict credit are willing to grant those same students’ waivers out of many college courses, which underscores that AP courses are perfectly acceptable substitutes for college courses. A more likely reason is revenue, as more and more schools have become dependent on tuition in order to keep operating.
HIGHER EDUCATION’S TRANSPARENCY PROBLEM
To say that higher education has a transparency problem is an understatement. No industry, with the possible exception of health care, makes it more difficult to compare costs and lock-in an actual price.
Many have long recognized this problem, but efforts to get schools to provide basic pricing information has lagged. For example, work conducted by researchers at the University of Pennsylvania noted that some colleges do not comply with federal rules requiring net-price calculators, while others offer “misleading,” “incomplete,” or dated information about price.16
Another problem is inconsistent financial aid offers — sometimes loaded with obscure and overly complex language, or sometimes omitting the cost of attendance altogether, according to New America and uAspire’s report, Decoding the Cost of College.17
Students looking for information on credits for Advanced Placement work or courses completed at community colleges often have to wait until they arrive on campus. Most schools have made it increasingly difficult to figure out how much AP credit will be awarded, with many leaving that decision to university and college departments. And more and more schools are offering only waivers or exemptions, instead of actual course credit that can reduce the cost of tuition.
What information schools do provide is often vague and confusing. As the reprint below of an agreement between Johns Hopkins and Prince George’s Community College on course transfers highlights, many school websites provide no more than a low-quality copy of legal language that raises more questions than it answers.
The federal government has attempted to address some of these issues, but most of these reforms have proven ineffective because neither party is willing to use the billions in federal support for higher education as leverage.19
MAKING FEDERAL AID CONTINGENT ON PRICING AND ADVANCED CREDIT TRANSPARENCY
During his campaign, President-elect Joe Biden proposed creating a more seamless process for earning credit for college-level work completed prior to enrolling as an undergraduate (dual enrollment). The Biden administration should fast track this effort in two steps.
First, President Biden should direct the Department of Education to create a federal website where prospective undergraduates could access simple and clear information on the AP, IB, and dual enrollment policies of undergraduate institutions. Trying to find whether your AP test score or that community college class you took will earn you credit at a particular college is like looking for a needle in a haystack. Schools often bury this information on their website, or even worse, don’t provide it all. This lack of transparency can often deter prospective students from even trying to get credit for work that should qualify.
Second, the Biden administration should require schools that receive federal aid to provide admitted students with a detailed spreadsheet of how much credit they will or won’t receive from AP, IB, and dual enrollments prior to their matriculation. No student should have to wait until they arrive on campus to learn how many courses they need to take (and how much money they will have to spend) to graduate.
Accessing early college coursework opportunities can make high school more relevant, increase college-going, make higher education more affordable, and provide a financial lifeline to eligible colleges struggling with depressed enrollments. College-level coursework through AP, IB, and dual enrollment can be motivating to disadvantaged students. It facilitates completing a degree faster and at lower total cost to students and their families.
Of course, neither of these policies would reverse the impact of those colleges and universities that have made it increasingly difficult to get actual course credit for AP, IB, and work completed at community colleges. To truly bring down the cost of tuition and the debt burden on future students without relying completely on federal subsidies, a Biden-Harris administration will need to push for legislation that gives the Department of Education greater authority to establish policies for AP, IB, and dual enrollment course credit.
For example, colleges and universities should be prohibited from capping the amount of credits one can earn towards their degree outside from AP or community college coursework. As long as the students meet the minimum requirements, credit should be granted automatically.
In addition, schools would be required to agree to a universal minimum test score for all AP subject matter tests and a GPA level for coursework at a community college.
These two reforms would help millions of future college students reduce their tuition bill and get them into the job market or graduate school sooner.
CONCLUSION
Promises of massive debt cancellation and increased federal aid are popular with students, but they won’t fix the higher education system’s broken financial model. Instead, they’ll pour more taxpayer money into an opaque, high-inflation college sector and generate new waves of debtladen students and families. We need to break this pernicious cycle by rethinking transparency in higher education with a focus on bringing down costs through a more seamless and transparent process for credit transfers.
Policymakers should require increased transparency on AP and IB credits as part of acceptance packages, as well as ensure that credits transfer more easily between institutions. These will help students and families better plan for the cost of a postsecondary education, and reduce the bills for those who matriculate or transfer with college-level coursework.
ABOUT THE AUTHORS
Paul Weinstein Jr. is a Senior Fellow at the Progressive Policy Institute and Director of the Graduate Program in Public Management at Johns Hopkins University.
Veronica Goodman is the former Director of Social Policy at the Progressive Policy Institute.
REFERENCES
1 Venoo Kakar, Gerald Eric Daniels, and Olga Petrovska, “Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition
Analysis,” Journal of Consumer Affairs 53, no. 4 (2019): pp. 1920-1947, https://doi.org/10.1111/joca.12271.
2 “Not What It Used to Be,” The Economist, December 1, 2012, https://www.economist.com/united-states/2012/12/01/not-what-it-used-to-be
3 “The Rising Cost of College,” The Hamilton Project, December 3, 2010, https://www.hamiltonproject.org/charts/the_rising_cost_of_college.
4 “The Biden Plan for Education beyond High School,” Joe Biden for President: Official Campaign Website, August 2020,
https://joebiden.com/beyondhs/.
5 Ben Miller et al., “Addressing the $1.5 Trillion in Federal Student Loan Debt,” New America (The Emerging Millennial Wealth Gap, October
2019), https://www.newamerica.org/millennials/reports/emerging-millennial-wealth-gap/addressing-the-15-trillion-in-federal-studentloan-debt/.
6 Wesley Whistle, “The Emerging Millennial Wealth Gap,” New America (The Emerging Millennial Wealth Gap, October 2019),
https://www.newamerica.org/millennials/reports/emerging-millennial-wealth-gap/millennials-and-student-loans-rising-debts-and-disparities/.
7 Christopher Ingraham, “Millennials’ Share of the U.S. Housing Market: Small and Shrinking,” The Washington Post, January 20, 2020,
https://www.washingtonpost.com/business/2020/01/20/millennials-share-us-housing-market-small-shrinking/.
8 Ben Miller et al., “Addressing the $1.5 Trillion.”
9 Colleen Campbell, “The Forgotten Faces of Student Loan Default,” Center for American Progress, October 16, 2018,
https://americanprogress.org/article/forgotten-faces-student-loan-default/.
10 Ben Miller, “Who Are Student Loan Defaulters?”, Center for American Progress, December 14, 2017,
https://americanprogress.org/article/student-loan-defaulters/.
11 Ben Miller et al., “Addressing the $1.5 Trillion.”
12 Ben Miller et al., “Addressing the $1.5 Trillion.”
13 Joel Vargas, Caesar Mickens, and Sarah Hooker, “Early College,” Jobs for the Future, https://www.jff.org/what-we-do/impact-stories/
early-college/.
14 Ellen M. Bradburn, David G. Hurst, and Samuel Peng, “Community College Transfer Rates to 4-Year Institutions Using Alternative
Definitions of Transfer,” U.S. Department of Education (Research and Development Report, June 2001), https://nces.ed.gov/
pubs2001/2001197.pdf.
15 Paul Weinstein, “How Biden Can Cut the Cost of College,” Forbes, December 14, 2020, https://www.forbes.com/sites/
paulweinstein/2020/12/14/how-biden-can-cut-the-cost-of-college/?sh=43214ce936a8.
16 Laura W. Perna, “It’s Time to Tell Students How Much College Costs,” The Hill, May 18, 2021, https://thehill.com/blogs/congress-blog/
education/553650-its-time-to-tell-students-how-much-college-costs.
17 Stephen Burd et al., “Decoding the Cost of College,” New America, June 5, 2018, https://www.newamerica.org/education-policy/policypapers/decoding-cost-college/.
18 Paul Weinstein, “Diminishing Credit: How Colleges and Universities Restrict the Use of Advanced Placement,” Progressive Policy Institute,
September 2016, https://www.progressivepolicy.org/wp-content/uploads/2016/09/MEMO-Weinstein-AP.pdf.
19 “Two Decades of Change in Federal and State Higher Education Funding,” The Pew Charitable Trusts, October 15, 2019, https://www.
pewtrusts.org/en/research-and-analysis/issue-briefs/2019/10/two-decades-of-change-in-federal-and-state-higher-education-funding.
Trump tariff increases contribution to inflation: ~0.5%?
THE NUMBERS:
U.S. tariff collection
2021: $85.5 billion?* 2016: $32.2 billion
* Estimated, based on available tariff data for January-September 2021
WHAT THEY MEAN:
The Bureau of Labor Statistics’ startling October 2021 Consumer Price Index report found “the largest 12-month increase [in consumer prices] since the period ending November 1990” — specifically, price inflation of 6.2% from October 2020 through October 2021. The report’s finer detail shows inflation at different rates in different parts of the economy: 30% for energy, 3.2% for services, 5.3% for food, 8.4% for goods excluding food and energy, 9.2% for automobiles, and so on. What sort of role (if any) did tariffs play in this?
Some data first: In 2016, the U.S. “trade-weighted average” tariff was 1.4%. (Taking that year’s $32 billion in tariff revenue, and dividing it by the U.S.’ $2.21 trillion in goods imports.) In January 2017, the Congressional Budget Office projected that at the same rates, tariff revenue in 2021 would be $42 billion, with income rising slowly along with economic growth. Then, from late 2018 through mid-2020, the Trump administration imposed a series of tariffs: “Section 301” tariffs from 7.5% to 25% on about $350 billion in Chinese imports and “Section 232” tariffs of 25% on steel and 10% on aluminum, along with unusual “safeguard” and “countervailing duty” tariffs on washing machines, solar panels, and Canadian lumber, which are more typical trade policy steps. By 2019, the U.S.’ average tariff had doubled to 2.8%, bringing in a likely $86 billion on about $2.9 trillion in goods imports this year. Of the extra $54 billion, $46 billion comes from tariffs on Chinese goods, and $1.9 billion from tariffs on steel and aluminum (excluding Chinese-produced metals.)
The “232” and “301” tariffs (so-called for the sections of U.S. trade law used to impose them) differ from the U.S.’ permanent “MFN” tariff system in an important way. The permanent U.S. tariff system mainly taxes retailers and shoppers, since its high tariffs are dominated by clothes, shoes, and a few other home goods. On the other hand, it imposes relatively few taxes on industrial inputs and raw materials, and almost none of those it does charge are very high. The Trump tariffs, while they also cover many consumer products, hit many more industrial inputs and capital goods. A few examples, again annualizing 2021 revenue figures from the available 9 months of data, illustrate the sources of the extra $54 billion in some detail:
These sorts of things, obviously, are bought more by industrial customers making various other products — machinery manufacturers, automakers, construction firms, air conditioner factories (and repair shops) — than by families. Economists typically find that import prices of products subject to tariffs did not fall, so the buyers absorbed pretty much the full cost of the tariffs, meaning in turn that they will eventually raise prices of the things they make. A study of the tariff increases on Chinese goods in by San Francisco Federal Reserve staff economists in March 2019 – about halfway through the cycle of tariffs and retaliations — predicted as much, finding a likely consumer price increase of 0.1% economy-wide, and a business investment goods price increase of 0.4%. It also noted that more tariffs would mean more inflation, up to 0.4% in consumer prices and 1.4% in business investment goods were the administration to impose an across-the-board tariff of 25% on all Chinese goods.
More China tariffs did follow over the course of 2019, but not to that hypothetical level; on the other hand, the S.F. Fed study didn’t cover the metals tariffs. Taking this as a guide, the actual tariff contribution to inflation would be likely lie somewhere between the study’s initial 0.1% economy-wide estimate and its hypothetical 0.4%. Adding in the metals might reasonably bring it to 0.5%. Essentially, a secondary but noticeable contribution, presumably with a somewhat higher contribution to the BLS’ actual 8.4% inflation in goods-excluding energy and food.
FURTHER READING
The Bureau of Labor Statistics on the Consumer Price Index for October 2020 to October 2021 can be read here.
San Francisco Federal Reserve staff study potential inflationary impacts of tariffs, March 2019. Read more here.
The Congressional Budget Office looks at broader economic impacts, August 2019. (Conclusion: “On balance, in CBO’s projections, the trade barriers imposed since January 2018 reduce both real output and real household income. By 2020, they reduce the level of real U.S. GDP by roughly 0.3 percent and reduce average real household income by $580 (in 2019 dollars. Beyond 2020, CBO expects those effects to wane as businesses adjust their supply chains. By 2029, in CBO’s projections, the tariffs lower the level of real U.S. GDP by 0.1 percent and the level of real household income by 0.2 percent.”) Read the CBO’s take.
Academics Pablo Fajgenbaum, Pinelopi Goldberg, Patrick Kennedy, and Amit Khandelwal examine the tariffs and their impact, finding (among much else) that U.S. buyers pay it all.
Peterson Institute’s Chad Bown in depth on the China tariffs can be read here.
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.
With clean energy a central component of the Biden Administration’s climate strategy, any divestment from existing oil and gas projects should go hand in hand with exploring geothermal energy, a largely untapped renewable resource, argues a new report from the Progressive Policy Institute (PPI)’s Innovation Frontier Project.
The report, authored by Daniel Oberhaus and Caleb Watney and titled “Geothermal Everywhere: A New Path for American Renewable Energy Leadership,” identifies the technological, political, and economic reasons that the U.S. has failed to utilize its valuable geothermal resources, along with actionable policy recommendations to lay a new foundation for green energy and international geothermal expansion.
“The far-reaching potential of geothermal energy provides a rare opportunity for the United States to capitalize upon a new renewable energy pathway, not just for domestic production but sustainable development globally. With strong leadership and smart policy–as Oberhaus and Watney identify–we can rapidly accelerate the development of geothermal projects, leading the world on climate while encouraging innovation and creating jobs,” said Jack Karsten, Managing Director of the Innovation Frontier Project at PPI.
Oberhaus and Watney argue that while less than 0.5% of U.S. electricity generation is derived from geothermal resources, our abundant hot rock resources and deep talent pool in the oil and gas sector uniquely prepare us to lead on that technology. They conclude that with the right policy implementations, geothermal energy production could increase 26-fold by 2050.
The report makes the following recommendations for incentivizing geothermal investment and expanding production capacity:
Streamline the federal permitting process for geothermal projects.
Increase the federal budget for large scale geothermal R&D projects, particularly those led by public-private partnerships.
Create incentives for geothermal generation in state electricity markets.
Establish federal innovation prizes, or related mechanisms, for the development of key geothermal technologies.
Reskill oil and gas workers for geothermal projects through federal jobs programs and private investment.
Read the report and expanded policy recommendations here:
Based in Washington, D.C., and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is managed by Jack Karsten. Learn more by visiting innovationfrontier.org.
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.
* Counted in TEUs (“twenty-foot equivalent units”, for the standard 20’ x 8’ x 8.5’ shipping container)
WHAT THEY MEAN:
D.C.’s taxi cabs and their dispatchers obey a public-interest rule: If you wish to serve the lucrative routes — say, Dulles-to-Mayflower Hotel and back — you must also agree to pick up fares from the neighborhoods. Representatives John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.), in their proposed Ocean Shipping Reform Act, pose a question: Shouldn’t the world’s container ships live by a similar rule, requiring them to carry American export cargoes as well as inbound containers?
Statistics put out monthly by American container ports suggest why they ask this question. From January through October, the Port of Los Angeles — the busiest U.S. container port — took in 4.72 million containers (again in TEUs). This is a bigger total than all but one of LA’s full-year incoming container counts, and based on a daily average of about 15,500 arriving containers, the 4.87 million-TEU record set in 2018 probably fell two weeks ago. Statistics are much the same at the second-busiest port — Long Beach, ten minutes’ drive east on the Seaside Freeway — which likely broke its own annual record last weekend. Meanwhile, truckers and warehouse workers have been leaving their jobs all year for better options: 1.4 million workers in the Bureau of Labor Statistics’ transport/warehousing/utility sector have quit through September, easily breaking the 1.1 million full-year record set in 2002. So with record arrivals on one hand and bottlenecks on the other, the ports have clogged up. The resulting worries about Christmas inventories and intra-U.S. supply bottlenecks are intense enough to worry even the President of the United States.
A less publicized consequence of the incoming-container surge is a perverse incentive for shipping companies: they’re tempted to ignore U.S. exporters. Fees to ferry a container from Asia to the West Coast, normally between $2,000 and $3,000, have run at $15,000 for much of this year and at times hit $20,000. With import income so high, a ship can often earn more money by turning around empty to refill in Asia than by loading a waiting U.S. export cargo for $3,000 or so. September’s Port of Los Angeles container report provides a vivid illustration: it counted 434,294 outbound containers, of which 358,351 traveled empty, and only 75,713 carrying U.S. cargo — the Port’s lowest count of full export containers since the autumn of 2002.
This hits farm exporters who use containers especially hard, as producers of meats, dairy, wines, tree nuts, and specialty crops often require quick pickup of perishable goods. As of mid-year they reported losing $1.5 billion in exports. To put this in perspective, calculations by the Department of Agriculture’s Economic Research Service done for 2019 suggest that each $1.5 billion in agricultural exports meant about $1.7 billion in economic activity for the U.S., including about 12,000 jobs and $500 million in farm income.
Hence, the bill Reps. Garamendi and Johnson propose. Returning to the taxicab analogy, a D.C. taxi company fielding a request for dispatch must accept the fare (unless the customer is belligerent, intoxicated, etc.) or face a $250 civil penalty. Maritime shipping operates on an obviously different scale — a single medium-sized container ship could carry all 7,151 D.C. cabs if it wanted to**, and there are 6,293 such ships on the water — but also has some similarities. Like taxicabs, the mighty vessels run by Maersk, Evergreen, COSCO, MSC et al. are “common carriers” given a right to serve U.S. ports. Under the bill, this right would come with a complementary responsibility to serve American exporters and could not “unreasonably decline export cargo bookings if such cargo can be loaded safety and timely and carried on a vessel scheduled for such cargo’s immediate destination” without becoming liable to penalties by the Federal Maritime Commission.
** Yes, we know, not a likely real-world scenario. Cars aren’t easy to squish into containers (though it can be done if necessary), and usually travel on roll-on/roll-off ships. Just meant as a visual.
The Federal Maritime Commission, tasked with regulating ocean carriers and (should the Garamendi/Johnson bill pass) enforcing new rules.
Agriculture and the export economy
Farm Bureau economist Daniel Munch on the West Coast port challenges and their impact on American agriculture, read the piece here.
The New York Times’ Ana Swanson (subs. req.) has the view from the California dairy farm, read the piece here.
And the USDA’s most recent investigation of ag exports and their economic impact at home can be read here.
Ports and ships
Container statistics from the Port of Los Angeles can be found here.
UNCTAD’s 2021 Review of Maritime Transport, with examinations of the impact of COVID-19 on 2020 shipping and cargo, the 2021 rebound, and some glum detail on U.S. ports. The three busiest U.S. container ports – Los Angeles, Long Beach, and New York – handle 25 million containers per year, about as many as China’s 4th-busiest port (Shenzhen) does all by itself. The world’s top two — Shanghai and Singapore — manage 44 million TEU and 37 million TEU, respectively.
What are container ships really like? 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, on a UK-through-Suez-to-Malaysia-Vietnam-China-to-Los Angeles rout. 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. The average (mean) capacity of a container ship this year is about 4,000 TEU, placing Gerd Maersk in the larger-than-average class able in theory to carry *nearly* all of D.C.’s taxicabs. The biggest current ships are the three Japanese-built 23,992-TEU Ace series delivered to Taiwan’s Evergreen line this year; 1,312 feet long, 212 feet wide, and 108 feet deep, they could carry the whole D.C. cab fleet and still be two-thirds empty.
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.
Left-wing pundits have created a narrative around Biden’s presidency — small-time actions, disappointment and betrayals. The Young Turks’ Cenk Uygur calls Biden a “corporate Democrat” and claims that the Build Back Better bill is “trash” that contains “nothing for progressives.” Some progressive groups claim that the bipartisan infrastructure bill “makes things worse,” compared to doing nothing. This is a long-running theme with left-wing criticism. Progressive darling Nina Turner compared Donald Trump to eating a bowl of excrement, then compared Biden to eating half a bowl — as though the two were remotely comparable. These critics paint Biden as unwilling to take bold actions, to break from Trump or to go big.
These criticisms are fundamentally wrong. Far from playing small ball, Joe Biden is having one of the most impressive and transformative first years of any president in generations. Biden deserves far more credit for going big and getting things done.
The headline of a November 18 article in Ars Technica says it all: “FAA forced delay in 5G rollout despite having no proof of harm to aviation: US delays even as 40 countries use C-band with no reports of harm to altimeters.”
What’s the story here? An interagency squabble between the FAA and the FCC could damage the US ability to implement 5G service, just as the economy is starting to accelerate. 5G provides essential new capabilities for businesses in areas from digital manufacturing to logistics to agriculture. A 2020 PPI report projected that 5G-enabled enterprises could create 4.6 million jobs over the next 15 years, and hundreds of thousands of jobs in the near-term. The Biden Administration must step in and make sure that this issue is settled as quickly as possible, in a way that accounts for safety without holding back growth.
Mobile providers have just spent $80 billion on licenses for what is known as C-band spectrum, which has very desirable characteristics for 5G service, in terms of speed and coverage. The issue is that aircraft altimeters, which measure the altitude of a plane, utilize frequencies that are close to the C-band spectrum used for 5G. Aware of this problem, the FCC put in a large “guard band” of unused spectrum between the 5G frequencies and the altimeter frequencies.
The FAA decided that the FCC’s actions weren’t good enough, and warned of “potential adverse effects on radio altimeters.” This forced Verizon and AT&T to delay their planned roll-out of the new 5G capabilities for at least a month while the agencies duked it out.
But here’s the thing. This C-band spectrum is already in use in 40 other countries which have experienced no problems with altimeters. Moreover, US airlines continue to fly to these countries As Roger Entner wrote, if the interference problem is as dire as the FAA says, “why have the airlines and aeronautics manufacturers not grounded planes” in those countries?
Moreover, the FAA is relying on studies which appear to be using unrealistic assumptions. Based on these assumptions, existing systems would already be interfering with altimeters. For example, Peter Rysavy writes that
Navy radar, such as the AN/SPN-43 radar, operates in mid-band frequencies at extremely high power with ground transmitters pointing at aircraft in geographical areas where U.S. planes operate. Such potential interference, however, has not been a problem in the real world.
This is not the time for agency parochialism. The Biden Administration has to make sure that this problem gets resolved quickly and in accordance with science and good engineering practice.
At the 11th hour of climate negotiations in Scotland last week, the U.S. and China released a “Joint Glasgow Declaration on Enhancing Climate Action in the 2020s” outlining increased cooperation on a wide range of climate and clean energy topics. The communique’s careful language was redolent of Cold War détente documents, increasing a sense that climate change bargaining with China, Russia and other adversaries is becoming like Cold War nuclear nonproliferation negotiations: failure could be catastrophic, so enhanced cooperation is crucial, but often slow-going.
For Virginia Democrats like me, the odd-year elections earlier this month were like a gruesome coda to Halloween. Republicans swept the top three statewide offices, took over the House of Delegates and knocked the Old Dominion back into swing state status.
As painful as they were, however, the Democratic losses in Virginia and close shave in New Jersey have had one salutary effect: They seem to have popped the progressive bubble — the activist left’s claims, credulously accepted by many media commentators, to be the authentic voice and future of the Democratic Party.
Post-election analysis has highlighted the pitfalls for Democrats of heeding only that voice. The protracted battle in Washington over progressives’ big social spending demands has reinforced public doubts about President Biden. Republicans also made notable gains among parents angry over school closures, falling standards and academic “antiracism” theories promoted by progressive social justice warriors.
The Progressive Policy Institute’s Innovation Frontier Project released a comprehensive research deck on the threats facing American innovation. The authors of the deck, innovation experts Ashish Arora and Sharon Belenzon of Duke University, found the United States has lost a substantial amount of corporate research since the 1980s, with only a handful of present-day U.S.-based companies investing in research at a meaningful level.
The deck also lays out clear political implications for lawmakers. The Biden Administration’s top strategic economic priorities are based on a foundation of strong U.S. competitiveness and innovation, yet Congress’s percolating anti-tech antitrust legislation would undermine these priorities by impairing the ability of America’s few leading R&D performers to develop new products and enter new markets. The restrictions on these companies will reduce our national investment in R&D and hurt American economic prosperity and national security.
Jack Karsten, Managing Director of the Innovation Frontier Project, and Michael Mandel, Vice President and Chief Economic Strategist at PPI break down the deck’s research and discuss how antitrust legislation in Congress would devastate American technological leadership and innovation.
While the overarching Build Back Better package remains in limbo until Congress receives a score from the Congressional Budget Office (CBO), it appears that the Democrats have reached a deal on drug pricing. The compromise abandons H.R. 3’s more aggressive components and instead pulls from Senators Ron Wyden and Chuck Grassley’s drug pricing framework.
Democrats worked to thread the needle between progressives’ ambitions to protect seniors from high drug prices and moderates’ desires to protect the incentives to innovate new life savings therapies. They have moved away from initial plans to export drug pricing decisions to other countries — setting a formula based on what other countries had decided drugs are worth. This could have been easily gamed by drug makers but also would have left price decisions up to foreign policymakers instead of making the hard decisions at home.
Instead, the new drug pricing deal would:
Cap seniors’ out-of-pocket costs at $2,000 per year, spread across the year.
Cap insulin costs at $35 per month.
Allow Medicare to negotiate the cost for 10 of the most expensive drugs starting in 2025 increasing to 20 drugs per year by 2028.
Only allow Medicare to negotiate on drugs that have passed an initial market exclusivity period — 9 years for small molecule drugs and 12 years for biologics — addressing market failures when generics don’t create competition and drive down prices.
Use inflation caps in Medicare and the commercial market to limit drug price increases.
Change incentives for Part D insurers to negotiate drug prices more aggressively.
Because these policies will be phased in and are not as draconian as earlier proposals, they may not make a measurable difference to every consumer. But they will undoubtedly help the most vulnerable: seniors with exceptionally high-cost drugs. As PPI has explained in the past, capping out-of-pocket costs and spreading the costs across the year rather forcing seniors to pay huge deductibles up front will make it easier for vulnerable seniors to access lifesaving therapies. PPI has also pushed for reforming incentives for insurance middle-men but those provisions were watered down in the final agreement — instead policymakers settled for increased transparency requirements for pharmacy benefit managers.
This year, the whole world was reminded of the promise of pharmaceutical innovation. Because of the incentives in the U.S. market, Americans had widespread access to COVID-19 vaccines before much of the world. The United States rewards innovation and though the U.S. health care system is worse off on many health are metrics, it out performs other high-income counties on cancer care because of widespread access to new therapies.
Democrats worked together to form a package that preserves incentives to innovate while protecting seniors. We are hopeful that the CBO will provide realistic estimates of the impact the compromise deal that Democrats have coalesced around.
A package of antitrust legislation recently introduced in Congress aims to improve competition in the U.S. technology sector. The proposed provisions in these bills would limit digital platforms’ ability to integrate product features, promote new products, or even compete in new market segments.
We conclude that such restrictions will harm U.S. scientific and technological leadership, hurting U.S. competitiveness and living standards.
Antitrust regulations that reduces commercial scale and product scope weaken incentives for corporate research and undermine the ability to innovate.
We highlight how these limitations may affect American scientific and technological leadership in the world. We also consider the role of information technology firms in advancing U.S. technology, the foreign competition they face, and the fragile nature of the U.S. innovation ecosystem.
Today, the Innovation Frontier Project (IFP), a project of the Progressive Policy Institute, released a comprehensive research deck on the threats facing American innovation. The authors of the deck, innovation experts Ashish Arora and Sharon Belenzon of Duke University, found the United States has lost a substantial amount of corporate research since the 1980s, with only a handful of present-day U.S.-based companies investing in research at a meaningful level.
This deck also lays out clear political implications for lawmakers. The Biden Administration’s top strategic economic priorities are based on a foundation of strong U.S. competitiveness and innovation, yet Congress’s percolating anti-tech antitrust legislation would undermine these priorities by impairing the ability of America’s few leading R&D performers to develop new products and enter new markets. The restrictions on these companies will reduce our national investment in R&D and hurt American economic prosperity and national security.
“America’s technological leadership is being challenged, and if we undermine our business research leaders we risk losing this fight with China. The Biden Administration has identified key priorities in emerging technologies, but Congress’s anti-tech antitrust legislation would hurt these priorities. Our policymakers need to get smart about the steps needed to regain our footing as a technological leader,” said Dr.Michael Mandel, Chief Economist for the Progressive Policy Institute.
The deck findings issue a stark warning:
America’s technological leadership is under challenge.
The United States has lost a substantial amount of corporate research since the 1980s.
Corporate research is the source of many breakthrough innovations.
American leadership in emerging technologies depends on corporate research and only a few companies continue to invest in research at a meaningful level.
The antitrust proposals will impair the ability of these few leading R&D performers to develop new products and enter new markets.
The loss of tech companies with scale and scope would reduce U.S. investments in R&D and hurt American economic prosperity and security.
This deck was authored by Ashish Arora and Sharon Belenzon of Duke University. Mr. Arora is the Rex D. Adams Professor of Business Administration at the Duke Fuqua School of Business. He received his PhD in Economics from Stanford University in 1992, and was on the faculty at the Heinz School, Carnegie Mellon University, where he held the H. John Heinz Professorship, until 2009. Mr. Belenzon is a professor in the Strategy area at the Fuqua School of Business of Duke University and a Research Associate at the National Bureau of Economic Research (NBER). His research investigates the role of business in advancing science and has been featured in top academic journals, such as Management Science, Strategic Management Journal and American Economic Review. Mr. Belenzon received his PhD from the London School of Economics and Political Science and completed post-doctorate work at the University of Oxford, Nuffield College.
Based in Washington, D.C., and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is managed by Jack Karsten. Learn more about IFP by visiting innovationfrontier.org.
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.
111 million: Squid Game viewers, September/October 2021 70 million: World Series viewers, October/November 2021
WHAT THEY MEAN:
Korea-made drama Squid Game, which premiered Sept. 17 on Netflix, centers on a contest in which 456 impoverished and debt-ridden players compete for a ₩45.6 billion prize (~$38 million) in a series of children’s games. The losing players are ruthlessly executed. (Shot, stabbed, thrown off a bridge, etc.; more variety presumably in Season 2.) The show’s 9-episode Season 1 run logged over 111 million views, a count not only well above Netflix’s earlier 82-million-viewer record (the 2020 scheming-18th century-Brit-aristocrat series Bridgerton), but outpacing the Atlanta-v.-Houston World Series. Americans weren’t alone in their enthusiasm: Squid Game was also Netflix’s top show in Denmark, Bolivia, Kuwait and Bahrain, India, Bulgaria, and 44 other countries.
Not a unique triumph for Korean arts, Squid Game is an especially visible example of the much larger “Hallyu Wave” phenomenon. Hallyu, translated as “Korean Wave,” is shorthand for the international appeal of South Korean pop culture, first in Japan, China, Taiwan, and Southeast Asia and more recently in the U.S., Europe, Latin America, and the Middle East. At the cultural high end, last year’s Parasite — a satire on class disparity and wealth inequality, pitting scheming low-income moochers against a greedy and clueless rich family — was the first Asian and first non-English-language film to win a Best Picture Oscar. At the somewhat less-high end, five of Billboard’s 10 non-English No. 1 albums since 1958 have come since 2018 from K-Pop boy-band groups BTS and SuperM. In between are clothing styles, video games, cosmetics, band and artist merchandise, and other cultural and lifestyle products.
Korean government economists calculate the value of Hallyu exports at $12 billion in 2020. This would still be well below the $36 billion in exports from Korea’s mighty auto factories, but within sight and growing by 22 percent per year. More is presumably ahead; as one 2021 indicator, Netflix invested nearly $500 million in the Korean entertainment industry and opened two studio facilities in South Korea.
What explains Hallyu’s success? Some analysis credits Korean government support and organization. The Korea Herald, reporting on the creation of a “Hallyu Department” in the Ministry of Culture, Sports, and Tourism last year scoffs at this idea: “it is not the first time that the government is attempting to play a role in the promotion of the Korean wave, each time against resistance from the industry who feared government meddling in what is essentially a private sector initiative may have the opposite effect”. Rather, the success of Korean culture looks organic, matching (a) appealing plotting, cliffhanger endings, and striking visuals with (b) new forms of access as widespread Internet use, secure financial services, and open data flow enable online streaming services such as Netflix and Hulu to compete to offer their subscribers an array of films, music, and TV, and (c) devoted and highly organized international fan bases using social media to evangelize and market to one another.
FURTHER READING
Read Squid Game ratings and rankings by country from Netflix, here.Read more background about Hallyu Wave, here.
Policy or not?
The Carnegie Endowment looks at Korean government support for cultural industry and Hallyu as soft-power policy, read more here.
The Korea Economic Institute sides with the Herald, viewing government promotion Hallyu as largely “mistargeted,” “ineffectual,” and annoying to fans, read more here.
Fans and artists
Time on U.S. K-pop fans as a 2020 political force, read here.
Navigating through K-pop fandom with fan clubs and fan cafes, read here.
For insight on Korean filmmaking and its international appeal, read here.
And for the Korean Cultural Center/DC’s October Hallyu & K-Pop demo, click here.
Special note: Research and drafting for this Trade Fact by Lisa Ly, Social Policy Intern for the Progressive Policy Institute. Lisa is currently a Master of Public Policy candidate at The George Washington University.
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 tax bill passed by Republicans in 2017 mostly made our tax code worse, increasing the federal debt by up to $2 trillion and delivering the bulk of its tax cuts to corporations and the rich. But the bill contained one very good, very progressive provision: capping the State and Local Tax (SALT) deduction at $10,000 per household. Unfortunately, House Democrats just made a proposal that would compound the GOP tax bill’s regressiveness: increasing the SALT cap and giving multimillionaires a $25,000 per year tax cut. The Senate must not follow their lead.
The SALT deduction has been around in some form for a long time, dating all the way back to the Civil War. It allows taxpayers to deduct what they pay in state and local income, property and sales taxes from their federal taxes. But not all taxpayers get to reap the benefits of the SALT deduction. Taxpayers must itemize their tax returns to be able to claim the SALT deduction—and only the richest taxpayers tend to itemize. Most taxpayers tend to take the standard deduction rather than itemize, unless they make at least $500,000 in a single year. And as one becomes richer, and consequently pays more in state and local taxes, the dollar benefit of the SALT deduction becomes larger.
Until the 2017 Republican tax bill capped the SALT deduction at $10,000, there was no limit on the amount that could be deducted. The cap amounted to a tax hike that applied almost exclusively to the richest Americans. It raises about $85 billion each year, 90 percent of which comes from the richest 10 percent of Americans.
