The Progressive Policy Institute (PPI) released the following statement by PPI President Will Marshall in reaction to the announcement of a deal on the bipartisan infrastructure framework:
“Bravo to President Biden and the bipartisan group of U.S. Senators who after weeks of hard bargaining reached a deal today on a $550 billion investment in modernizing America’s economic infrastructure.
“Special kudos to Sens. Kyrsten Sinema and Rob Portman, who persevered in the face of skepticism and harsh criticism from obdurate partisans in their own parties to forge the agreement. The first-term Senator from Arizona and retiring veteran from Ohio showed our fractured country what real leadership and patriotism look like.
“We hope Democrats and pragmatic progressives will rally behind the agreement, which is worth supporting for three solid reasons:
“First, America urgently needs to repair and upgrade our country’s foundations for vibrant economic growth, innovation and competitiveness. The bill is not perfect – no legislative compromise ever is – but it’s what we need to get our country moving again and outcompete China for economic and technological leadership.
“Second, the deal fulfills President Biden’s pledge to govern for the good of all Americans, not just those who voted for him. He’s stood firm not only against the usual right-wing obstructionists, but also left-wing naysayers who confuse the search for political common ground with an abandonment of principle.
“Third, if Congress approves the agreement, it will send a powerful signal at home and abroad about the resilience of American democracy. For more than a decade, both parties have talked about going big on infrastructure to no result. Donald Trump, who fancied himself a master negotiator, got precisely nowhere on the issue over four chaotic years in office. In only six months, Biden and the Senate group have set the stage for bipartisan action to advance a critically important national interest.
“Now it’s up to the Senate and House to show that our democracy can deliver tangible benefits to the American people. We don’t underestimate the political obstacle course that must still be run to turn a promising legislative deal into reality. But that’s no reason not to cheer a long overdue outbreak of governing competence in Washington.”
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.
While President Biden has called for higher taxes on wealthy Americans and corporations to finance a $3.5 trillion budget agreement, some Democrats in Congress are undermining this agenda by demanding that the agreement cut taxes on their affluent constituents. These lawmakers argue that the $10,000 cap on the state and local tax (SALT) deduction created by the GOP’s 2017 tax law undermines their states’ ability to raise revenue through progressive tax policy.
But in reality, any effort to weaken or repeal the cap would simply be a pointless giveaway to the rich. Democrats should reject this regressive tax cut that would draw critical resources away from needed public investments.
Last night, the Progressive Policy Institute, based in Washington, D.C., and the McKell Institute, based in Sydney, Australia, hosted an event focused on global technology and democracy, featuring U.S. Representative Joe Courtney (CT-02), and the Hon. Ed Husic MP (Australian Labor Party).
The event, titled “Global Tech, Global Democracy: How Has Tech Broken Down International Boundaries?” focused on how the U.S., Australia, and their international partners can develop international solutions to ensure that we benefit from technology’s promise while avoiding its dangers. The lawmakers and an expert panel discussed civic integrity, the importance of combating online misinformation, protecting freedom of speech, and the role tech has played in elections.
Watch the twitter livestream here:
Representative Joe Courtney is a Democrat representing Connecticut’s 2nd Congressional District, and is the Co-Chair of the Friends of Australia Caucus. He serves on the House Armed Services Committee and the Education and the Workforce Committee.
The Honorable Ed Husic is a member of the Australian House of Representatives for Chifley and a member of the Australian Labor Party. He is the Shadow Minister for Industry and Innovation.
They were joined by an expert international panel on technology innovation, including Sunita Bose, Managing Director of DIGI, Damian Kassabgi, Executive Vice President, Public Policy and Communications, of Afterpay, and Mike Masnick, Editor of TechDirt. The event was moderated by Michael Mandel, Chief Economic Strategist at PPI and Michael Buckland, President of the McKell Institute, and featured welcoming remarks by Alec Stapp, Director of Technology Policy at PPI.
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 McKell Institute is a progressive research institute based in Sydney, Australia, dedicated to providing practical and innovative solutions to contemporary policy challenges. Since its establishment in 2011, the Institute has played an important role in shaping the public policy agenda at both state and federal level. Learn more about the McKell Institute by visiting mckellinstitute.org.au.
The Democratic Party must fend off extremes and hold on to responsible, center-left politics.
Ideologues of all stripes are perennially frustrated with America’s two-party “duopoly.” They say it stifles voices of radical reform, fails to offer voters meaningful choices, and delivers only tepid incrementalism. Many yearn for the doctrinal coherence and discipline shown by parties in Europe, where multiparty systems are the rule.
Whatever the merits of these complaints, it’s true that America’s two-party system seems immutably entrenched. Third parties come and go; but except for the Republicans in the 1850s, none has succeeded in supplanting either of the two major parties—and it took the Civil War to make that happen.
Most U.S. voters reasonably figure that if they want their vote to count, they’d better line up with Democrats or Republicans. As duopoly critics note, that arrangement doesn’t give the public an ideological choice, since both parties normally offer variations on America’s classically liberal creed. But party allegiance isn’t strictly a matter of intellectual conviction; it’s also influenced by sectional, family, ethnic, class, and religious ties.
Historically, the two major parties have been broad, loose, and shifting coalitions. That feature has given them a pragmatic bent, since today’s political foe could become tomorrow’s convert. It’s reinforced by a presidential system designed to diffuse and share power rather than alternate one-party rule.
To prevent untrammeled majority rule, the Founders created structural incentives for compromise so that minority interests get taken into account. But heterogeneous and pragmatic parties don’t suit Americans with more dogmatic dispositions. These Americans demand adherence to fixed principles, typically expressed as moral absolutes. Not for them the tedious drilling of hard boards; they want the romance of revolution.
There is good news inside the beltway — for a pleasant change. Lawmakers are close to a deal on “hard” infrastructure, including a $65 billion commitment to closing our digital divide.
The emerging consensus is to build world-class broadband networks where they don’t already exist, and invest in a low-income broadband subsidy — an extension of the Emergency Broadband Benefit (EBB) launched in May that has already signed up more than 3.5 million households. Its annual cost would be roughly $5 billion.
This is a big deal for several reasons.
First, the broadband sections of the massive infrastructure deal are well crafted to avoid the waste and mismanagement that doomed earlier efforts to close the digital divide. This time around, drafters created smart targeting and clear safeguards should ensure we build new networks only where they are most needed. That is enough reason to cheer.
Second, this compromise — should it survive the procedural squabble this week — also reminds us that bipartisan governance is alive and that the two parties can put aside their polemics and social media sanctimony and come together to serve the voters that elected them to office in the first place. That’s also reason for celebration.
But third — and all Democrats should take note — this bipartisan deal actually commits Republicans to its success. And that may be the single most important aspect. Republican support will make it hard to grandstand and whine about the project from the partisan sidelines, and hard for successive Republican administrations to repeal.
Instead, the GOP now is on record supporting this compromise with skin in the game to make it work. That dynamic, coupled with the bill’s smart design, bodes well for success.
But every good party brings a skunk who wants to upset it. And in this case, leftist ideologues that are finding audience within the administration are pushing for price controls on mobile and broadband connection fees that would very likely sabotage the bipartisan deal.
That would be a shame, since price controls aren’t necessary to ensure that low-income Americans can connect at low subscription rates. Almost all major broadband providers already offer low-income households a discounted tier around $10-20 a month — and these remarkably successful programs have already connected more than 14 million low-income Americans. So, it’s hard to see what this rear-guard action actually accomplishes.
Worse, price controls have a long and sorrowful history of not working, failing to anticipate technological advances, and sidelining infrastructure investment. Applied to the U.S. broadband marketplace, price controls could upend the investment engine that has already delivered faster speeds, more reliable and resilient networks, and more widespread deployment in rural areas than we see in Europe. It’s the big reason why speeds continue to accelerate each year even as prices at any given speed level keep falling.
To understand this risk, it’s worth considering a paper authored last year by Jonathan Nuechterlein (formerly general counsel at the FTC under President Obama and deputy general counsel at the FCC under President Clinton) and Howard Shelanski (formerly administrator of OIRA and head of the FTC’s Bureau of Economics under President Obama). No conservatives are they.
They make a pretty persuasive case on the problems with price controls and counterproductive, virtue-signaling regulatory diktats: “In many respects, the [2010 National] Broadband Plan was a case study in regulatory humility. It recognized that broadband progress was ‘[f]ueled primarily by private sector investment and innovation’; that ‘government cannot predict the future’; that ‘the role of government is and should remain limited’; and that policymakers should thus focus not on imposing price controls or behavioral restrictions, but on ‘encourag[ing] more private innovation and investment.’ This advice, which the FCC has generally followed, has fared well under the test of time.”
This successful light-touch approach stands in sharp contrast with Europe’s experience with heavier-handed price regulation and forced line-sharing. Networks investment has suffered as a result — Europe’s per capita broadband investment is less than one-third that of the U.S.
Lawmakers would be wise to take note before taking the bait on bringing European-style, blunt-instrument price regulations to the U.S. The White House should also not give the regulation-addled, far left voices an ear.
The emerging bipartisan framework offers a much smarter (and cost-effective) approach to closing digital divides in both rural and urban communities. Success is at their fingertips, if they are only willing to say yes.
Lindsay Lewis is executive director of the Progressive Policy Institute.
America is at a COVID-19 crossroads.For the first time since the highly effective vaccines became widely available in the spring,the new case rate is back on the rise due to the spread of the more contagious delta variantand the stalled effort to vaccinate people in many parts of the country.
According to medical experts, reaching herd immunity will require that 70% to 90% of the U.S. population be fully vaccinated. But despite having enough vaccines available to inoculate every eligible American age 12 and up, just under 50% of the U.S. population is fully vaccinated.
Worse, at the current vaccination rate of roughly 500,000 per day, it will take nine more months to cover just 75% of the population. This would give dangerous and more contagious COVID variants a chance to gain a foothold and perpetuate the pandemic.
Contain COVID at transportation hubs
President Joe Biden and COVID czar Jeff Zients deserve tremendous creditfor making the COVID-19 vaccines widely availableand bringing focus and discipline to the White House pandemic dysfunction they inherited from former President Donald Trump. But a reliance on incentives and awareness can only get us so far, especially when some irresponsible politicians have been stoking vaccine skepticism and outright hostility.
To get to herd immunity within a reasonable time frame, the Biden administration is going to need to add to its arsenal some targeted vaccine mandates— and the obvious first step is to require proof of vaccination when embarking on an airplane.
According to a number of legal experts, the president has the authority – from laws establishing the Centers for Disease Control and Prevention and the Federal Aviation Administration, as well as the Commerce Clause of the Constitution – to require all airlines to ask ticket holders to provide proof of full vaccination.
By disrupting the spread of COVID-19 at transportation hubs where individuals gather and connect to other geographic regions, and by creating another incentive for adult vaccination, an airline vaccine requirement would help bring the pandemic to an end.
No doubt even a targeted mandate for airline passengers will stoke the outrage machine at Fox News and other right-wing propaganda outlets. Republicans eager for Trump’s favor and anti-vaxxers can be expected to decry any vaccine requirement as an attack on Americans’ basic “freedoms.”
Nowhere in the Constitution’s Bill of Rights will conservatives find a right to infect others with a deadly disease. In addition to defending our civil liberties, government is responsible for promoting the general welfare and protecting citizens from harm. No rational person considers requiring a license to drive a car or fly a plane a form of tyranny.
Citizens have responsibilities, too – to each other, their communities and their country. In times of war and other national emergencies, Americans have always proved willing to sacrifice their private interests and pursuits for the common good. Amid a resurgence of COVID-19 and pervasive vaccine hesitancy, we face just such an emergency today.
Treading cautiously isn’t working
That’s why it is deeply unpatriotic for anti-vaxxers to feed the public misinformation about the efficacy and safety of vaccines. It’s also reckless. More than 99% of people dying from COVID-19 are unvaccinated, according to Surgeon General Vivek Murthy.
President Biden would be on solid ground in invoking the principle of mutual responsibility as a counter to the right’s strangely anti-social conception of freedom. A vaccine requirement for air passengers wouldn’t force anyone to get vaccinated; it would leave them to choose whether refusing the vaccine is more important to them than being able to fly.
In purely legal terms, the Biden administration is well within its authority to protect the health and safety of passengers and citizens. Politically, the president and the COVID-19 vaccines are already under attack by extremists, and this will only get worse should cases rise again and we see the return of mask mandates, such as the one just reinstated in Los Angeles County.
The debate over vaccinations is polarized, and the Biden administration has been right to tread cautiously. But if the best we can do under our current strategy is less than what we need for herd immunity, then reasonable, targeted mandates will be needed in order to end the pandemic and ensure the health and safety of all Americans.
Paul Weinstein Jr. is a senior fellow at the Progressive Policy Institute and directs the M.A. program in public management at Johns Hopkins University. Will Marshall (@Will_PPI) is the president of the Progressive Policy Institute.
On this week’s Radically Pragmatic Podcast, Veronica Goodman, Director of Social Policy at the Progressive Policy Institute (PPI), sits down with Representative Veronica Escobar (TX-16), to discuss the Child Tax Credit.
“We learned very early on when we passed the Child Tax Credit, just what a resounding, powerful impact it would make in our effort to combat child poverty,” said Rep. Escobar on the podcast. “Something that should be the utmost priority for every lawmaker is to ensure that children don’t go hungry, that children are not homeless, that children have every opportunity possible to live prosperous, wonderful lives.”
Congresswoman Escobar is a member of the New Democrat Coalition. She is a Vice Chair for the Democratic Women’s Caucus and serves on the prestigious House Judiciary Committee, House Armed Services Committee, House Ethics Committee, and the House Select Committee on the Climate Crisis. In addition, she serves as Vice Chair of the House Armed Services Subcommittee on Military Personnel.
The American Rescue Plan Act, crafted by the Biden Administration and passed by Congressional Democrats, included a historic expansion of the Child Tax Credit (CTC). Qualifying families will see an increased tax credit of $3,000 for each child between the ages of six and 17 years old and $3,600 for each child under the age of six. The increased credit funds — $250 for children between six and 17, and $300 for each child under six — will be provided monthly, giving over 36 million eligible families relief as we recover from the pandemic. The expansion of the Child Tax Credit could lift one-half of all children in America out of poverty.
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.
As talks on a bipartisan infrastructure deal continue, it’s critical to our country’s ongoing economic recovery that workforce development funding – specifically the $100 billion set aside in the American Jobs Plan – not be sidelined. To ensure a labor market recovery for all American workers, including those who have been left behind in the past, we need to invest in employment opportunities for those who have struggled during the pandemic and those who face challenges, no matter the economic conditions.
Many signs point to a labor market in recovery. The current unemployment rate is 5.9 percent, down considerably from historic highs in 2020 but still above pre-pandemic levels. Last week, initial unemployment claims were at the lowest level since March 2020 — welcome progress thanks to the success of the administration’s American Rescue Plan and aggressive vaccination campaign.
But the recovery has remained uneven across education levels and for certain groups. The unemployment rate for Black, Hispanic and non-college educated workers follows past trends and is elevated compared to those with a Bachelor’s degree or higher. In June 2021, the unemployment rate for those with a high school degree and no college was double (7 percent) that of workers with a bachelor’s degree or higher (3.5 percent).
Long spells of unemployment and becoming disconnected from the labor market have profoundly negative effects on families’ overall economic security, including the children of those workers, and can stunt local economies. It is in everyone’s economic interest not just to provide opportunities for workers across the economic distribution but to ensure that our workforce development infrastructure prioritizes good outcomes. The pandemic recovery is an opportunity to make workforce development more inclusive.
Senate Democrats have promised that both the $579 billion Bipartisan Infrastructure Framework and the $3.5 trillion budget blueprint they are advancing this week will be “fully paid for.” While there’s a case for borrowing to finance the most pro-growth infrastructure investments when interest rates are low, lawmakers’ commitment to fiscal discipline is reassuring at a time when the national debt is at record levels and inflation concerns are heating up. But signs are emerging that lawmakers will struggle to keep that promise as they flesh out the details. The upcoming budget resolution is an important opportunity to begin developing clearer financing plans and safeguards to uphold the agreements.
President Joe Biden initially proposed tax increases on corporations and wealthy households that would raise roughly $3.3 trillion in new revenue over the next 10 years to finance his American Jobs and Families Plans. That revenue would almost be enough to pay for the $3.5 trillion in new spending agreed to by Senate Democratic leadership last week, but several key lawmakers have already called for reducing the scope of those tax hikes.
Meanwhile, on the spending side, the budget agreement incorporates provisions — such as a costly Medicare expansion — that weren’t included in either the Jobs or Families Plan. Negotiators have said they will keep the bill’s sticker price under $3.5 trillion by setting the duration of some programs, including an expansion of the Child Tax Credit, to arbitrarily expire after a few years. But this move would be nothing more than a gimmick: The Committee for a Responsible Federal Budget estimates the package could cost up to $5.5 trillion over the coming decade if lawmakers allowed all the policies slated for inclusion in the budget blueprint to become permanent (as is clearly their ultimate intention).
Similar problems with fuzzy accounting plague the Bipartisan Infrastructure Framework. For example, negotiators have said they will pay for $70 billion of spending by cutting fraud from unemployment benefits even though the Congressional Budget Office estimates that overpayments over the next decade will be less than half that amount. The framework also counts offsets such as selling the strategic petroleum reserve, which may need to be bought back at a higher price, and sales of spectrum that have already occurred or would occur under current law. The situation worsened over the weekend when Republicans demanded that increased funding to help the IRS collect unpaid taxes — one of the few legitimate sources of real revenue included in the bipartisan deal — be dropped from the package. .
Some economists and politicians would argue that the policies in these packages don’t need to be paid for because they are public investments in the future. On the one hand, it makes sense to borrow from future generations to pay for investments they will benefit from, particularly when interest rates are low. But on the other, the federal government is currently on track to spend roughly $8 trillion more on programs that aren’t public investment than it will collect in taxes over the next decade, and some of the policies under discussion would further add to that category of spending. Interest rates are also likely to rise between now and when the money in these bills is actually spent. Even if lawmakers are content to borrow $4 trillion for public investment, they should pair it with $4 trillion of revenue to reduce the “consumption deficit” that no responsible leader can defend.
Deficit spending, even for worthwhile long-term investments, could also have negative short- and medium-term consequences if it occurs at a time when the economy is overheating. Much of the $2 trillion spent on the American Rescue Plan earlier this year was necessary to help our economy recover from the pandemic recession, but it has also likely contributed to higher-than-expected inflation. Although most economists believe these recent spikes are likely transitory, nobody can know for sure until later this year or early next. Lawmakers should therefore be wary of committing to a massive new spending bill in the near future before having a plausible plan for how to pay for it.
The Senate will soon vote on a budget resolution that includes instructions telling Congressional committees how much their policies can add to the deficit in a reconciliation bill (the legislative vehicle that will allow Democrats to pass their $3.5 trillion agreement without any Republican votes). Even though lawmakers could pass a reconciliation bill that increases the deficit by less than the amount allowed by the budget resolution, neither the American Rescue Plan nor the 2017 Trump tax cuts left anything on the table.
Therefore, if Congress is serious about paying for the upcoming spending bills, it should safeguard the agreement by passing a budget resolution that instructs the reconciliation process not to increase total budget deficits at all (there could still be some modest deficit-spending in a bipartisan infrastructure bill). Lawmakers must also eschew timing gimmicks that hide the true cost of the policies they are enacting and create uncertainty for working families who may plan their lives around new programs. A broader menu of revenue options, such as a carbon tax, inheritance tax, or progressive consumption tax, should be on the table to cover the costs of these policies. And if lawmakers cannot get consensus on a revenue package big enough to cover their spending ambitions, they should prioritize the most pro-growth public investments and cut what they are unwilling to pay for.
The $3.5 trillion budget blueprint unveiled earlier this week by Senate Democrats would fund many policies from President Joe Biden’s American Jobs and Families Plans not covered by the $579 billion Bipartisan Infrastructure Framework. But among many worthwhile public investments is a new proposal that should give lawmakers pause: a costly expansion of Medicare paid for entirely by young Americans. Although lawmakers should be open to thoughtful improvements to Medicare, any changes must be financed in a way that is fair to Americans of all ages.
There are two possible changes to Medicare that Sen. Bernie Sanders, I-Vt., the chairman of the Senate Budget Committee, wants to include in the next major spending bill. The first proposal is to offer vision, dental, and hearing services not currently covered by Medicare at no additional cost to beneficiaries. The second proposal is to give Americans ages 60-64 the option to enroll in Medicare with the same premiums and benefits currently available to those over age 65 (which are heavily subsidized by income and payroll taxes paid by younger workers).
The problem with these proposals is that Medicare is already struggling to pay for the current suite of benefits it offers. Medicare Part A, which offers hospital insurance that is supposed to be fully funded by payroll taxes, will face a 10% budget shortfall five years from now. The amount of general revenue needed to subsidize Medicare Parts B and D, which cover physician services and prescription drug benefits, is projected to nearly double as a percent of gross domestic product over the next 20 years. These costs will impose a significant burden on young Americans, either by crowding out investments in their future or requiring them to pay higher taxes than current retirees did when they were in the workforce.
Giving today’s seniors, who have collectively enjoyed greater gains in income and wealth than younger Americans, a suite of new benefits they didn’t finance over their working lives or in retirement would only compound the intergenerational inequity built into current policy. That’s especially true if the Senate blueprint foregoes some investments in clean energy or child welfare, such as a permanent expansion of the Child Tax Credit, to make room for this costly expansion of Medicare.
There are better alternatives. Americans ages 60-64 could be allowed to buy into Medicare at a premium that covers the full cost of their coverage rather than the heavily subsidized one currently paid by people aged 65 and over. This option would still be cheaper for most beneficiaries than private insurance because Medicare is able to negotiate lower prices for services than private insurers. Any new vision, dental, or hearing benefits should have a significant share of the cost covered by income-based premiums and co-pays, as is currently the case for Parts B and D. A broad-based consumption tax that is paid by all consumers regardless of age could also help finance benefits in a way that doesn’t place the burden on anyone generation. Lawmakers should also consider pairing or preceding any benefit expansion with measures to close the existing financial shortfall in Medicare, such as the bipartisan TRUST Act.
For too long, Washington has allowed the growth of retirement programs to crowd out critical public investments in infrastructure, education, and scientific research. The new budget agreement is a once-in-a-generation opportunity to right this intergenerational wrong. It would be shameful for lawmakers to choose affluent retirees over working families yet again. Any expansion of Medicare should require some contribution by those who would benefit, or it should be dropped from the budget agreement altogether.
Today, the Progressive Policy Institutehosted a virtual event with U.S. Representatives Ami Bera (D-CA) and Gerry Connolly (D-VA), and MEP Reinhard Bütikofer (Germany, Greens/European Free Alliance group). The event focused on how to craft a stronger transatlantic response to China as Beijing advances Chinese influence around the world.
“Following on President Biden’s visit to Europe, PPI is facilitating conversations between leading U.S. and European policymakers on how to present a unified transatlantic response to China’s multifaceted challenge to liberal democracy. Today’s conversation focused on China’s suppression of freedom in Hong Kong, ethnic cleansing of the Uighur minority, predatory trade practices, and attempts to steal or force transfer of advanced technology to Chinese companies. It’s another sign that leading democracies are determined to resist China’s divide-and-conquer tactics and aggressive efforts to silence international criticism,” said Will Marshall, President of PPI and moderator for the event.
Watch the event livestream here.
Representatives Bera and Connolly are both members of the House Foreign Affairs Committee. Additionally, Rep. Bera serves on the House Committee on Science, Space and Technology. Representative Connolly also serves on the House Committee on Oversight and Reform.
MEP Bütikofer is a member of the German Green Party. He chairs a European Parliament committee focused on EU relations with China, and has been the leading voice in Brussels for a tougher European response to China. He serves on the Committee of Industry, Research and Energy, and is a substitute member of the Committee on Foreign Affairs and the Subcommittee on Security and Defense.
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.
As Congressional lawmakers continue to debate the eventual contents of an infrastructure bill, much focus has rightfully been placed on the rail transportation portions of the package. According to the White House, the bipartisan infrastructure framework, if passed into law, will be “the largest federal investment in public transit in history and is the largest federal investment in passenger rail since the creation of Amtrak.” All told, the framework proposes $49 billion in public transit spending, which includes mass rapid transit, and $66 billion in passenger and freight rail spending.
The importance of these provisions cannot be understated. The low cost of rail travel along certain routes means that it is one of the most equitable forms of transportation America has at its disposal. Along routes such as the Northeast Corridor, it is the most time-efficient. It is also one of the cleanest: According to the U.S. Department of Transportation, rail transit has on average less than one-third the carbon footprint of private automobile travel and less than half the carbon footprint of bus transit.
However, despite the promise of rail, for decades America has struggled to expand and invest in it efficiently and affordably. California’s high-profile attempt to build a high-speed rail line ended tens of billions of dollars over budget and hundreds of miles short of its original vision to connect San Francisco and Los Angeles. The cost-per-mile to expand commuter rail in New York City is the most expensive of any mass transportation system in the world. Amtrak’s marquee high-speed rail service, Acela, in fact takes longer to go from New York to D.C. than its predecessor Metroliner did decades ago.
On this week’s episode, the Neoliberal Project joined Radically Pragmatic, a PPI Podcast to talk about their week of action and the exciting events that are happening across the country and around the globe. Jeremiah Johnson, Policy Director for the Center for New Liberalism and Director of the Neoliberal Project, and Markose Butler, Organizing Director for the Neoliberal Project and the State and Local Outreach Director for PPI, joined Aaron White, Director of Communications for PPI, to explain who the Neoliberal Project is, what they do, and why the week of action is so important. The Neoliberal Project has over 70 local chapters in 12 different countries, many of which are participating in the week of action and promoting the exciting work the Neoliberal Project does year-round.
Between 2015 and 2020, total wages and salaries in Washington state rose by 41%, the biggest gain of any state, and almost double the 21% gain for the country as a whole. (See Table 1). This was not simply a pandemic effect, since Washington wage and salary growth was also first in the country in the 2014-2019 period as well.
To a large extent, Washington’s country-leading position in labor income is being driven by job and wage gains in the tech-ecommerce sector. Building on previous research and recent blog posts, we define the tech-ecommerce sector as including five tech industries and three ecommerce industries. The tech industries are computer and electronic production manufacturing (NAICS 334); software publishing (NAICS 5112); data processing and hosting (NAICS 518); Internet publishing and search, and other information services (NAICS 519); and computer systems design and programming (NAICS 5415). The three ecommerce industries are electronic shopping and mail order houses (NAICS 4541); local delivery (NAICS 492); and ecommerce fulfillment and warehousing (NAICS 493). We draw on Bureau of Labor Statistics data from the Quarterly Census of Employment and Wages (QCEW). This dataset reports on all jobs in each industry, as well as wages, salaries, and bonuses, including ordinary income from exercised stock options.
Let’s look at jobs first. From 2015 to 2020, the tech-ecommerce sector added over 100,000 new jobs to the Washington economy. Tech-ecommerce accounted for more than three-quarters of total job creation over that span, far outpacing the contribution of the healthcare and social assistance sector, which has long been the most dependable source of job growth (table 2).
Within the new jobs created by tech-ecommerce, roughly about half of those were in tech industries, and about half were in ecommerce industries (note that the BLS generally assigns establishments to industries according to the type of work being done at that establishment, not the industry of the parent company. So that an ecommerce fulfillment center is typically categorized in warehousing, no matter who owns it).
It’s important to note that the roughly 52,000 jobs being created in ecommerce over the past five years far exceeds the 10,000 jobs lost in brick-and-mortar retail in Washington. Average annual pay in the local delivery and warehousing industries in Washington came to about 30% higher than average annual pay in brick-and-mortar retail in the state. That’s the typical spread we found nationally in past research.
Now consider labor income in the state. Total wage and salary payments in Washington’s tech-ecommerce sector rose by $34 billion from 2015 to 2020, according to BLS data. That’s compared to the $73 billion increase in total wage and salary payments across the state. To put it another way, the tech-ecommerce sector accounted for 46% of the increase in wages and salaries in Washington from 2015 to 2020. (Table 3)
Finally, we turn to the question of the impact of the tech-ecommerce sector on state tax revenues in Washington. Tax collections have come in much stronger than expected, with forecasts repeatedly being raised. In particular, taxes for the 2020-21 fiscal year are currently forecast to come in 13.4% higher than the 2019-2020 fiscal year, and roughly 60% above 2014-2015 levels (See June 2021 Revenue Review from the Washington State Economic and Revenue Forecast Council, page 27).
How much of that gain is accounted for by the tech-ecommerce sector? There are several issues with making this calculation. The state government reports and forecasts tax revenue data on a fiscal year basis, while our data on the tech-ecommerce sector is on a calendar year basis and stops with 2020. In addition, states with a personal income tax have a direct connection between wage and salary payments and state tax revenues Washington, however, has no personal income tax, and relies instead on a variety of other taxes, including a retail sales taxes, a business and occupation tax, a property tax, and a real estate excise tax.
Usually we think of taxes like these as being less immediately responsive to changes in wages and salaries than an income tax would be. Indeed, there was a stretch, around the time of the financial crisis and the years after, when the state’s “General Fund” tax revenues languished, even as the state’s wages and salaries started to rebound.
In recent years, however, the combined and diverse flows of tax revenues into the state’s coffers appear to be rising more or less in parallel with the QCEW wage and salary measure, when adjusted for fiscal years. That makes it plausible that we can use the tech-ecommerce share of wage and salary growth as a proxy for tech-ecommerce share of tax revenue gains.
There are two possible tax revenue measures we can use for our back-of-envelope calculations — either “General Fund” taxes, or a somewhat broader category of state tax revenues, which starts with “General Fund” taxes and then adds in several taxes earmarked for education and training. That broader tax concept has been growing somewhat faster in recent years. Noting that Washington is on two-year budget cycles (also known as “Bienniums”), General Fund tax revenues rose by $17.1 billion from the 2013-15 budget cycle to the 2019-21 budget cycle, while the broader measure of tax revenues rose by $18.9 billion.
We then apply the 46% tech-ecommerce share of wage and salary growth to the increases in the two measures of tax revenues. We estimate that the growth of tech-ecommerce jobs and incomes accounts for $8.0-8.8 billion in higher tax revenues funding the 2019-21 budget cycle compared to the 2013-15 budget cycle. This should be viewed as a roughly estimate and not a final figure.
Conclusion and Implications
The tech-ecommerce sector is a massive positive for jobs, incomes and taxes in the state of Washington. That suggests Washington-headquartered Amazon and Microsoft, rather than “blocking the sunlight” for other companies in the state, play a central role in a thriving ecosystem that benefits workers, raises wages and generates tax revenues. As the saying goes “if it ain’t broke, don’t fix it.”
Today, the Labor Department released a new batch of inflation data for the year ending in June. The headline number for the consumer price index has sparked panic in some quarters, as year-over-year inflation is now at 5.4%, the highest annual rate since 2008.
While this backward-looking measure is currently above its recent historical average, there is little cause for concern based on market forecasts of future inflation. Medium-term inflation expectations remain well-anchored, as bond prices show an expected average rate of inflation of 2.2% between 5 and 10 years from today.
This is a very clear market signal that inflation pressures are transitory and will abate as supply chain issues caused by the pandemic work themselves out. Notably, motor vehicles represented 60% of the month-over-month inflation increase in June. As the global semiconductor shortage ebbs, we can expect motor vehicle inflation to return to its historical average.
Another way to strip out the most volatile sectors of the economy and get a clearer picture of where inflation is heading is to look at median CPI, which includes only the middle changing item in the CPI’s basket of goods and services. In contrast to headline CPI, median CPI remains stable at 2.2% year-over-year. In the chart below you can see that CPI is more volatile than median CPI, and historically it has reverted toward median CPI after short deviations.
Lastly, year-over-year inflation numbers remain plagued by base effects, as the economy was depressed in June 2020 due to the poor handling of the pandemic by the Trump administration. Looking at two-year core inflation numbers shows that inflation is still within its historical range at 2.8%. This number is entirely consistent with the Federal Reserve’s average inflation targeting framework, which targets 2% average inflation over the business cycle with short periods of above average inflation making up for periods of below average inflation.
While there is not yet much reason to panic about long-run inflation, there are still things policymakers can do today to decrease the risk of inflation expectations becoming unmoored. For the first time in decades, we have sufficient demand in the economy to support rapid growth. Now we just need supply side investments and reforms to make sure that demand turns into real growth rather than increased inflation. Three items immediately spring to mind for policymakers to work on.
First, Congress should double down on its efforts to pass a bipartisan infrastructure package. While it may seem odd to spend more money to tamp down inflation, infrastructure spending is a special kind of spending. It’s an investment in the future productivity of our economy.
Second, the administration needs to follow through on many of the commitments it made last week in its executive order on promoting competition. Sectors like health care have been driving a disproportionate share of inflation in recent years. Encouraging more competition in that sector and others will have a disinflationary effect. Similarly, policymakers should avoid an unforced error by inadvertently harming sectors like tech and e-commerce, which have been holding down inflation in recent years.
Third, the Biden administration should begin to roll back tariffs implemented during the Trump presidency. These are taxes ultimately borne by American consumers and they raise the input costs for American manufacturers, making them less competitive in global markets.
By our analysis, Korea’s “App Economy” is one of the strongest in the world. In our 2018 study, the Progressive Policy Institute (PPI) estimated that Korea had 420,000 App Economy jobs, amounting to 1.6% of the workforce (see reproduced table below). This figure for “app intensity” was considerably higher than Japan, the United Kingdom, Germany, and even the U.S. at the time (though our latest estimate pegs American app intensity at 1.7% as of August 2020).
Moreover, as of 2020, 8 out of the top ten app companies in Korea were Korean-headquartered, according to download estimates from App Annie. By comparison, only 1 out of the top ten app companies in Germany were German-headquartered. Korea has a vibrant domestic App Economy that other countries would be envious of.
But despite this record of success, the Korean government is considering legislation that would dramatically change the app business environment. The legislation—which would amend Korea’s Telecommunications Business Act–would prohibit online app stores from requiring app developers to use the app store’s payment systems for in-app purchases. In effect, this would be equivalent to forcing a brick-and-mortar retailer to allow competitors to set up alternative checkout lanes in their stores.
The first question is: Why try to fix something that isn’t broken? Korean app developers are prospering under the current system and creating well-paying jobs. Why take the risk that a new system will turn out worse?
The second question is: Why undertake measures that would potentially accelerate “decoupling” Korea’s economy from the United States? The legislation under consideration would primarily affect U.S. tech companies, feeding the current American desire to shorten supply chains and build up internal tech production capacities. Korea and the U.S. will always be allies and friends, but in today’s political environment, lawmakers should pay attention to building bridges, not destroying them.
This table is reproduced from “Korea’s App Economy,” May 2018, Progressive Policy Institute. Data for other countries was current in 2018 when table was published. The latest numbers are available on request.
