Category: Uncategorized

Lewis in the The Hill: Move deliberately and rebuild American tech leadership

Posted on by The Progressive Policy Institute

By Lindsay Mark Lewis, for The Hill

Facebook’s long-time unofficial motto was “move fast and break things.” We now see that this was a mistaken approach to building and governing a content platform. But some members of Congress who are seeking to hit back at Facebook seem to have been inspired by this same motto. Rather than taking a thoughtful approach and examining the consequences of new antitrust regulation on U.S. competitiveness and national security, the motto of these lawmakers seems to be: “Move fast, break the American tech industry and see what happens.”

We’ve tried the “move fast and break things” approach. It’s time for a new, more deliberate approach — a real effort to grapple with the benefits and harms of the tech industry and to build a regulatory framework to govern and promote the sustainable growth of American technology companies, while squarely taking on the challenge from techno-authoritarian states such as China and Russia.

What we should not do is overreact to the “Facebook Files” by passing recent bills introduced by Rep. David Cicilline (R-R.I.) and Sen. Amy Klobuchar (D-Minn.) that have nothing to do with the harms described by Facebook whistleblower Frances Haugen. These bills threaten to exacerbate those harms by creating hundreds of even less scrupulous mini-Facebooks that are beyond the reach of U.S. law enforcement and would eliminate the ability of consumers to rely on app stores to provide protection against the next social media harm.

Read the full piece in The Hill.

Progressive Policy Institute’s Statement on House Passage of President Biden’s Bipartisan Infrastructure Bill

Posted on by The Progressive Policy Institute

Will Marshall, President of the Progressive Policy Institute, released the following statement in reaction to the House passage of the Biden Administration’s bipartisan infrastructure framework:

“Congratulations to Speaker Pelosi and House Democrats for passing tonight a landmark infrastructure bill that is a key pillar of President Biden’s Build Back Better agenda for an inclusive economic recovery. The president has succeeded where previous administrations have failed, and this long overdue investment in modernizing American infrastructure will create good jobs, spur economic innovation and help U.S. workers and companies outcompete China for economic and technological leadership in this century.

“It is also a rarity in Washington – a major bipartisan achievement that fulfills President Biden’s pledge to make our government work for all Americans again. The infrastructure bill enjoys broad public support, including among voters in battleground districts and states likely to determine the outcome of next year’s midterm elections.

“We were also glad to see the Progressive Caucus retreat from their counterproductive and unsuccessful strategy of holding the bill hostage to their demands for higher spending. With a second landmark accomplishment under his belt, President Biden and the party can now move on to passing a transformative Build Back Better bill that can measurably improve Americans’ lives.

“To accomplish this goal, PPI urges lawmakers to focus on delivering a few core priorities well instead of trying to enact the full progressive wish list of spending programs on a half-funded and temporary basis. We remain concerned that the House bill – as currently written – tries to do too much with too little, wastes precious resources on tax cuts for the rich, and is not offset in a sustainable way. We encourage our friends in Congress to compromise and prioritize so they can deliver a durable progressive win for the American people.”

Read PPI’s statement on the agreement to the Build Back Better framework here.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

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Marshall for The Hill: Will America fight for Taiwan?

Posted on by The Progressive Policy Institute

By Will Marshall, for The Hill

Twice in recent months President Biden has publicly affirmed a U.S. commitment to defend Taiwan should China attack. Both times, the White House walked his comments back, admitting that no such formal obligation exists.

While the media was quick to pounce on Biden’s “gaffes,” it’s likely that the Chinese received his message loud and clear: America has Taiwan’s back.

The United States has no mutual defense treaty with Taiwan, as we do with Japan and South Korea. On the contrary, since the 1979 Taiwan Relations Act, Washington has explicitly recognized the island as a part of China. Since then, “strategic ambiguity” has governed U.S. Taiwan policy: Washington won’t support the island’s independence so long as China refrains from seizing it by force.

Read the full piece in The Hill. 

Marshall for NYDN: Democrats Must Change Course: Here Are Four Steps to Right the Ship

Posted on by The Progressive Policy Institute

By Will Marshall

The odd-year contests in Virginia and New Jersey often offer an early test of how voters think the incumbent president is doing and a foretaste of the public mood heading into the next year’s midterm elections. For Democrats, who did badly in both states last night, the message is clear: It’s time for a major course correction.

The Republican sweep of Virginia’s top offices, a year after President Biden’s 10-point victory there, was propelled by a host of factors. Former Gov. Terry McAuliffe ran a generally negative and uninspiring campaign focused mainly on trying to depict Republican Glenn Youngkin as a Donald Trump clone.

Read the full piece in the New York Daily News.

PPI’s Trade Fact of the Week: The U.S. economy has gotten lighter – Nov. 3, 2021

Posted on by Alyssa Brown

FACT:

The U.S. economy has gotten lighter.

THE NUMBERS: 

Tons of steel used per billion dollars of constant-dollar* GDP:

2018-2020:     5,360 tons
1993-1997:     9,190 tons
1968-1972:   18,850 tons

* U.S. Geological Survey reports of “apparent consumption” of steel, divided by BEA’s calculation of GDP in constant 2012 dollars.  Five-year averages attempt to dampen the effects of single-year booms or crashes.

WHAT THEY MEAN:

Provisionally settling the dispute sparked by the Trump administration’s 2018 “national security” tariffs on steel and aluminum, the U.S. and European Union agreed last Saturday to a formula: 3.3 million tons of European steel products covered by the tariffs, and 18,000 tons of aluminum, will come in duty-free, with legacy tariffs of 25% and 10% still covering any additional tonnage.  Official papers on this and a bit more below, but some background to the argument:

In long-term context, tariffs on aluminum tariffs were relatively new.  The tariffs on steel, though using an unusual law, have a very long back-story.  Analogous earlier policies, bringing analogous protest from U.S. metal-buying industries and foreign governments, date back at least to the 1970s, and range from minimum prices for imports in the Carter administration, to import quotas and “voluntary restraint agreements” in the Reagan administration, and “safeguard” tariffs in the second Bush administration.  Along with these big, global, once-a-decade efforts, “trade remedy” litigation brings about a dozen anti-dumping and countervailing duty penalties per year on wire rod, welded pipe, cold-drawn alloy tube, etc., from individual countries.

What explains such a long, recurrent pattern?  One obvious phenomenon, also about half a century old: the U.S. economy is getting “lighter” by using less raw materials generally, and steel use in particular hasn’t grown since the 1960s.  Single-year bookends illustrate the point:

> Left bookend: In the turbulent boom-year 1968, U.S. GDP in constant dollars (using BEA’s real-GDP series) hit $4.8 trillion and employed 69 million workers. That year, Americans used 106 million tons of steel for construction projects valued at 4.4% of GDP (Lake Point Tower, the Desmond Bridge at Long Beach, the Tower of the Americas in San Antonio), finish up the Eisenhower-era National Highway System, and provide the framework for 10.8 million cars and trucks.

> Right bookend: In 2019, the constant-dollar pre-COVID economy hit $19 trillion and employed 152 million workers.  It used 100 million tons of steel for construction projects valued at a slightly lower 4.2% of GDP, along with 10.9 million autos, and so on.  In COVID-stricken 2020, use dropped to 82 million tons.

More systematically, since the late 1960s U.S. steel use has remained flat in total tonnage, and relative to economic output has dropped by about 75%.  The totals look like this, using five-year averages to avoid distortions by 1968-like booms or 2020-like busts:  an average of 95 million tons of steel per year from 1968-1972, in a real-GDP U.S. economy of about $5 trillion; 98 million tons from 1993-1997, in an economy that had doubled in real terms to $10 trillion; and again 95 million tons a year in 2016-2020, for an economy of $18.4 trillion.  Or, relative to real-dollar output, a half-century ago $1 billion of constant-dollar GDP meant orders for 18,850 tons of steel; in the mid-1990s it meant 9,200 tons; today, it means 5,400 tons.

In such circumstances, absent a structural solution in new demand at home or abroad — the logical candidate just now is larger long-term public infrastructure investment — any increase in imports feels like it’s coming at the expense of local production. Hence, presumably, the constant return to import limits.

 

 

FURTHER READING

USTR and the Department of Commerce announce a U.S.-EU agreement, with details and quota numbers in the links at bottom of this section.

Why would steel use fall?  It is tempting, but at minimum not the whole answer, to say that the use of import restrictions is itself part of the reason.  The logic would be that minimum import prices, VRAs, safeguards, 232 tariffs, etc. push up steel prices, upset ‘downstream’ industries like construction firms and machinery makers, and when sustained over time convince them to substitute other materials.  But if so, we’d expect use of other metals and materials to rise as steel use drops.  In fact, though, U.S. use of other metals — and raw materials in general — is also flat in absolute terms and down relative to output.   Relative to constant-dollar GDP, lead use is down by about 66%, cement by 60%, copper 75%, crushed stone 50%, crude oil by 66%, and tin more than 80%.  So if import limits haven’t been solutions, they also don’t look like the main problem.

Instead, the U.S. economy as a whole has become steadily ‘lighter’: in aggregate, the GDP shares of information, professional and business services, health, arts, and education have risen from 13.1% of GDP in 1970 to 22.1% in 1995 and 27.9% in 2020; simultaneously, the GDP shares of big metals-buyers in durable-goods manufacturing and construction have dropped from 18.3%in 1970 to 13.3% in 1995 and 10.2% in 2020.

The U.S. Geological Survey reports on production, imports, consumption, etc. of 124 metals and minerals from 1900 forward (use “Mineral Commodity Summaries” for 2016-2020 data), which can be found here.

… and for data before 2018, use this link.

USITC’s list of anti-dumping and countervailing duties in force can be found here.

The World Steel Association has production data in detail from 2002 forward, found here.

For perspective, a 1984 National Bureau of Economic Research report on steel import limits can be found 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.

Read the full email and sign up for the Trade Fact of the Week

How Tech is Building a New Middle Class

Posted on by The Progressive Policy Institute

The death of the American middle class has been a potent theme in political discourse and on the pages of mainstream publications for decades. Good jobs for “middle-skill” workers were pulled down by the implosion of manufacturing employment, on the one hand, and the growth of the poorly paid and perpetually-squeezed health care sector, on the other. The classic “steelworker to nurse or health technician” story ends up requiring much more education for the roughly the same pay. Steel production workers earn an average of $23 per hour, according to BLS figures, while licensed practical and vocational nurses, which require at least a year of extra education, earn an average of $24 per hour.

But for those pundits searching for the new middle class, there is good news. The tech-ecommerce boom has become the biggest source of “good jobs” both nationally and in most states. Since September 2017 to September 2021, the tech-ecommerce ecosystem — composed of thousands of small and large firms in addition to the big tech companies — created 1.4 million jobs in the United States. That’s three times as many as health care, the previous champ of job creation, which added 500,000 jobs over that same stretch. The rest of the economy lost 900,000 jobs.

This stunning job growth, surprisingly underappreciated and even mocked by many progressives, is building a new middle class across the United States. The key is that tech and e-commerce companies pay “middle-skill” Americans a better wage than they can get at other employers, including hospitals and senior citizen facilities. Our analysis of government data shows that workers with some college, including an associate’s degree, earn 32% more in tech-ecommerce than in the economy as a whole. Average pay in tech-ecommerce — including all positions from coders to fulfillment center workers — varies from state to state, but it is higher than average pay in manufacturing in 42 states, and higher than average pay in health care in every state.

This central role of tech-ecommerce in generating well-paid middle-skill jobs is new. During the 1990s tech boom, which I wrote about extensively as economics editor and then chief economist at BusinessWeek, the great majority of new tech jobs required a college education. Software developer jobs in Silicon Valley were not a viable replacement for the manufacturing middle class.

But today, tech-ecommerce firms are creating a broader array of jobs. As of 2019, tech-ecommerce companies employed 1.8 million American workers with some college, in occupations like computer support specialists and network and computer system administrators. (That figure is based on our tabulations of the March 2020 Annual Social and Economic Supplement to the Current Population Survey, covering 2019 earnings and employment). The higher pay and job creation is being fueled by huge productivity gains in the tech-ecommerce sector, which are being passed onto workers, just as economic theory would predict.

Here’s where the growth of the new tech-ecommerce middle class intersects with policy. Although I have always been an avid supporter of tech-driven growth, tech has never been the unalloyed panacea that many in the industry claimed. In 2000 I wrote a book entitled “The Coming Internet Depression,” that emphasized the volatility of tech jobs.  More recently, it’s become clear that the tech-ecommerce ecosystem would benefit from more regulation.

But not all forms of regulation are created equal. The most radical of the antitrust bills now being considered by Congress, including the new legislation sponsored by Senator Amy Klobuchar (D-Minn.), titled “The American Innovation and Choice Online Act,” are specifically designed to change the way that big tech companies do business, and to protect less efficient competitors.

Tech critics are engaged in the equivalent of ripping random parts out of a smoothly running car engine, while assuring the passengers — American workers, in this case — that the parts aren’t necessary and that the car still runs just as fast.

Some have accused Big Tech of engaging in labor market “monopsony,” meaning that they control the demand side of job markets. But if tech firms were behaving like labor market monopsonists, they would be holding down hiring and wages. That’s so clearly not happening, it’s laughable. Between 2012 and today, the five big tech firms went from 300,000 to almost 1.9 million workers globally, in perhaps the biggest surge of “good job” hiring in recorded history.   Other tech company employment grew as well. Salesforce went from 8,000 workers to 56,000. Cognizant, an IT consulting firm with a large global footprint, went from 27,000 U.S. workers to 44,000.

In September, Amazon announced plans to hire 125,000 new workers, at an average starting pay of $18 per hour, which translates into $36,000 per year for full-time work, without counting overtime or bonuses. To put that in perspective, two parents starting at an Amazon fulfillment center would earn $72,000 per year together, roughly comparable to the $68,000 median household income reported by the Census Bureau.

What’s happening is that tech-ecommerce is filling the middle-skill job hole in the economy that health care failed to fill. Health care is a low-productivity industry which overworks and underpays its employees, as you might expect given its highly regulated nature. The average pay for tech-ecommerce workers with some college (including an associate’s degree) is roughly $59,000, compared to $41,000 for people with a similar education in the health care and social assistance sector. The average pay for tech-ecommerce workers with a high school diploma is $42,000, compared to $31,000 for people with a similar education in the health care and social assistance sector. To put it by occupation, health technologists and technicians get paid a median hourly wage of $21.93, while computer support specialists get paid a substantially higher wage of $26.69.

What about manufacturing? Let’s consider Eastman Kodak, a “progressive” company featured by Rick Wartzman of the Drucker Institute in his 2017 book on the “good jobs” of the past. Kodak, which employed 145,000 workers globally at its peak paid its workers well above the national average and provided a fleet of benefits. Kodak’s founder, George Eastman, introduced a form of profit sharing — the so-called wage dividend — in 1912. In the 20 years from 1959 to 1979, Kodak’s workforce doubled in size, and real average pay for employees doubled as well.

Kodak’s ability to sustain well-paying jobs for its workers was closely linked to its willingness to invest in new technology. Kodak pursued an active research agenda, patenting new inventions that kept it ahead of rivals and potential entrants. “By the time rivals found ways around the current technology,” wrote one study from the Brookings Institution, “Kodak was on to the next technology.” One surprising example: Kodak was the original company behind Super Glue, which it later licensed.

Despite decades of antitrust actions and consent degrees, Kodak still controlled 80% of the amateur photographic film market in 1979.  According to researcher Kamal Munir of Cambridge Judge Business School, “gross margins on film ran close to 70%, and its success was further underpinned by a massive distribution network and one of the strongest brands in the world.”

Would workers have been even better off if Kodak had been broken up for antitrust reasons? One could debate that question endlessly. But one thing is clear: Production workers at Kodak benefited from being part of a large company that excelled at R&D and marketing, and that actually manufactured products in the United States. That helped create good jobs.

Conversely, business strategies that separate out production from R&D and product development have proved to be a disaster for less educated workers, who fare better when they are part of the “mother ship” and entitled to the same benefits and pay structure as their highly educated counterparts.

That’s what makes the progressive attack on tech the ultimate self-destructive act politically and economically. They are undercutting the very middle-income workers that progressives claim to care about.

No one denies that Big Tech merits closer regulatory attention. But we have to remember that progressive historically has two meanings. One strand is the fight against corporate corruption, which is essential to keep capitalism on the rails. The other strand is about economic progress and raising living standards. We have to balance the two.

 

Ritz and McDermott for The Hill: Shortening programs won’t help Democrats build back better

Posted on by The Progressive Policy Institute

The Build Back Better Framework released by the White House on Oct. 28 would make some potentially transformative investments in American society. But those investments are severely weakened because most are scheduled to expire after only a few years to make the 10-year cost of the bill seem smaller than it really is. Advocates of this tactic hope that these temporary programs will prove so popular that a future Congress will extend them. But this risky bet would make it easier for a Republican-controlled Congress to kill the Democrats’ accomplishments without actually addressing the concerns of their fiscally pragmatic members.

While today’s lawmakers may like their own proposals, they cannot be sure that a future Congress will continue funding programs that are scheduled to expire. Making the Democratic agenda temporary empowers Republicans who want to repeal it.

Read the full piece in The Hill.

PPI Statement on President Biden’s Build Back Better Framework

Posted on by The Progressive Policy Institute

Will Marshall, President of the Progressive Policy Institute, released the following statement in reaction to President Biden’s announcement of a deal on the Build Back Better framework and imminent vote on the bipartisan infrastructure package:

“President Biden today unveiled a revised Build Back Better framework that better reflects his party’s diverse coalition, and he urged Democratic lawmakers to proceed to a vote on his bipartisan infrastructure bill.

“PPI applauds the president’s diligent efforts to forge a new consensus behind a more balanced and realistic reconciliation bill. While we are concerned that the new framework tries to do too much with too little, we believe all progressives need to compromise to help President Biden deliver on his core commitments to working Americans.

“We call on the House Progressive Caucus to stop threatening to vote down the president’s infrastructure bill. They have been heard for months and many of their demands have found their way into the new framework.

“The new $1.8 trillion framework in important respects resembles one PPI published earlier this month as a pragmatic alternative to the left’s $3.5 trillion wish list. Our package cost just under $2 trillion, with roughly half the money focused on helping working families, one third on combatting climate change and the remainder being used to cover the uninsured and lower premiums for those with health insurance.

“Unfortunately, many of these core priorities are cut short because the new White House framework tries to enact too many programs on a temporary basis instead of prioritizing a few robust and transformative initiatives. We think many of these programs merit further study and deliberation and that they should be taken up in subsequent legislation rather than depriving core initiatives of permanent funding in the current bill. We also have serious concerns about whether the tax policies included in the framework will actually produce enough revenue to fully pay for the spending, particularly if all these ostensibly temporary programs are eventually extended or made permanent.

“As the framework is translated into legislative language, we hope to see further refinements aimed at allaying such concerns. In the meantime, we commend President Biden for patiently brokering the compromises necessary to get his Build Back Better bills across the finish line. Together with the American Rescue Plan, they would have a transformative impact on American jobs, innovation and competitiveness, and would ensure a more inclusive economic recovery that helps those hit hardest by the pandemic.

“It’s past time to stop debating and take the first step by passing the bipartisan infrastructure bill.”

Earlier this month, the Progressive Policy Institute released a focused blueprint for delivering on President Biden’s promise to Build Back Better while addressing the concerns of moderates who cannot support $3.5 trillion of new spending. The report, titled “Reconciling with Reality: The top priorities for building back better,” outlines a bold plan to deliver on three urgent priorities of the Democratic party within the confines of a roughly $2 trillion bill: supporting working families, combating climate change, and expanding access to affordable health care for those in need. Read it here. 

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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PPI’S TRADE FACT OF THE WEEK: U.S. trade deficit up ~60% since 2016 – OCT. 27, 2021

Posted on by The Progressive Policy Institute

FACT:

The U.S. trade deficit is up ~60% since 2016.

THE NUMBERS: 

$1.05 trillion*: U.S. manufacturing trade deficit, 2021
$0.90 trillion: U.S. manufacturing trade deficit, 2020
$0.65 billion: U.S. manufacturing trade deficit, 2016

* Educated guesswork for a volatile post-COVID closure period, based on 8 months of available data for 2021

WHAT THEY MEAN:

Each February, the Office of the U.S. Trade Representative puts out a report entitled “The President’s Trade Agenda,” meant to set out administration goals for the coming year.  The 2017 edition, the first of the Trump administration, cited U.S. trade balance statistics as proof that early administrations got things wrong: “In 2000, the U.S. trade deficit in manufactured goods was $317 billion.  Last year it was $648 billion — an increase of 100%.”  The next one, in 2018, used “bilateral” trade balance to (a) claim failure for the North American Free Trade Agreement (“our goods trade balance with Mexico, until 1994 characterized by reciprocal trade flows, almost immediately soured after NAFTA implementation, with a deficit of over $15 billion in 1995, and over $71 billion by 2017”) and (b) define a goal for a renegotiated “USMCA”: “USTR has set as its primary objective for these renegotiations to improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.”

Few economists see trade balance as a useful way to judge trade policy, whether in terms of the content of agreements, or the nature of permanent systems like tariff schedules and antidumping laws.  In the standard Econ 101 equations, a country’s trade balance will always match the difference between its savings and its investment; since the mid-1970s, Americans have been investing more than we save; ergo, deficits result. In this view, very high deficits can cause alarm as indicators of unsustainable booms and potential financial shocks, but the appropriate response is long-term measures to raise savings rates.  Trade policy, meanwhile, should be judged against hopes for growth, job quality, control of inflation, raising living standards for low-income families, business competitiveness and innovation, and so on.

But shoving such high-minded quibbling aside, how do the Trump legacy policies — tariffs on metals and Chinese goods, withdrawal from the World Trade Organization’s Dispute Settlement Body, the new USMCA, etc. — look when judged by the standards the 2017 and 2018 reports set?

1. By 2020, the U.S. deficit in manufactured goods had hit $900 billion.  This is a four-year jump of $252 billion, not much below the $331 billion 16-year increase cited in the 2017 report.  Barring some unexpected economic shock this November, the 2021 figure will easily top $1 trillion.

  1. With respect to Mexico specifically, the bilateral goods deficit in 2020 was $114 billion. The 2021 figure looks about the same.  Adding Canada gets a total north of $150 billion.So by these standards, not too good.  Not what the policies’ authors predicted. And some grounds for high-minded quibblers to smirk.

 

FURTHER READING

Data:

Compare this data against the Census Bureau’s U.S. monthly trade data, through August 2021.
… and for the U.S. with Canada and Mexico, specifically.

… and for the big picture, U.S. exports, imports, and balances from 1960-2020 on one convenient page.

What happened?  

Trumpism leaves a larger deficit overall, and more concentrated in manufacturing than the 2016 figures.  The basic figures are, pulling the lens steadily back:

(a) The U.S. “goods” deficit — exports of manufacturing, energy, agriculture, scrap and waste and uncategorized small-scale shipments minus the equivalent imports — was $749 billion in 2016 and $922 billion in 2020.  The manufacturing deficit was equivalent to 86% of the 2016 total, and by 2020 had risen to 98% of the total.  A 2021 annualization suggests a total goods deficit around $1.05 trillion in 2021, with manufacturing more than 100% of the total and other goods in small net surplus.

(b) A broader measure, counting services trade (generally in surplus for the United States) as well as goods, finds a goods/services trade deficit up from $481 billion in 2016 to $677 billion in 2020.  The 2021 figure is likely to be around $900 billion.

(c) Relative to GDP (more meaningful), a deficit of 2.7% of GDP in 2016 rose to 3.1% in 2020, and a likely 4% in 2021.  This would be the highest since the modern-era peaks of 5.7% in 2005 and 2006.

Why the jump?  Tax policy is the obvious suspect.  Three of the four upward ratchets in U.S. trade deficits since the 1970s followed tax-cut bills — one in the first Reagan term, another in the second Bush administration, and the third in 2017.  Bills of this sort bring higher government deficits.  Unless a rise in family or business savings offsets this public dis-savings, overall U.S. savings will fall, and all else equal, by virtue of the “savings – investment = trade balance” identity, trade deficits rise.  So the higher 2020 and 2021 deficits likely emerge from the 2017 tax bill.

The Trump-era tariffs likely had relatively little trade-balance impact, but do seem to have had two outcomes.  One is a shift in import patterns: imports from China, though slightly above 2016 levels in dollar terms, have dropped from 21.6% of goods imports to 18.1% in 2020 and 2021, as clothes, consumer electronics, etc. from Vietnam, India, Taiwan, and so forth replace some Chinese-origin goods.  Second, some shift in composition, with relatively more manufacturing deficits and relatively less energy.  Where the permanent U.S. tariff system is mostly a way to tax clothing and shoes and so falls mainly on retailers and families, Trump-era tariffs on steel, aluminum, and Chinese goods were more concentrated in industrial inputs such as metals, auto parts, electrical converters, etc. As an example, tariff revenue on insulated electric conductors rose from $56 million in 2017 to $322 million in 2020.  As U.S. manufacturers absorb these costs, the likely result is marginal loss of competitiveness both for exporters trying to sell to foreign buyers and for firms competing against imports at home (and of course exporters facing retaliation by foreign countries responding to tariffs), pushing more of the U.S deficit into manufacturing.

The two reports:

Read the 2017 “President’s Trade Agenda” report.

… and also read the 2018 follow-up (with a wildly wrong claim that the 2017 tax bill “has the potential to reduce the U.S. trade deficit by reducing artificial profit shifting”).

And so … “House on fire! Bring more kerosene!” In the Economist last month, Trump-era lead trade negotiator Robert Lighthizer again laments high trade deficit, skates around the 2017-2021 rise, and suggests more of the 2018-2020 approach will bring it down this time. Read the Economist piece here.

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Popovian for Outsourced Pharma: Benefit Design In Medicare Exacerbates Vaccine Access Inequity

Posted on by The Progressive Policy Institute

There is a massive amount of wasteful spending in healthcare. Credible research suggests that roughly one-quarter of our total healthcare spending is wasted on low-value care, administrative complexity, including prior authorization processing, and failure of care delivery.

However, there is at least one area in healthcare that is indisputably high value: vaccines. Vaccines are widely regarded as the most cost-beneficial intervention in healthcare. Unfortunately, and counterintuitively, current cost-sharing policies discourage our most vulnerable population – seniors – from accessing vaccines.

Most private insurance policies or Affordable Care Act (ACA) plans provide coverage for vaccines without any out-of-pocket cost to the patient to encourage patients to be vaccinated. Regrettably, the same cannot be said for Medicare. Medicare coverage of vaccines for seniors is a tale of two cities. Vaccines paid for through Medicare Part B that are recommended by the Advisory Committee on Immunization Practices (ACIP) require zero out-of-pocket costs for patients. However, newer vaccines recommended by ACIP, except those for COVID-19, are covered under the Medicare Part D benefit and require an out-of-pocket expense for the beneficiary that can range from a few dollars to the entire cost of the vaccine.

Read the full piece on Outsourced Pharma

PPI Statement on Historic Nomination of Jessica Rosenworcel to Lead FCC

Posted on by The Progressive Policy Institute

Lindsay Mark Lewis, Executive Director of the Progressive Policy Institute, released the following statement in response to President Biden’s historic designation of Jessica Rosenworcel to serve as the Chair of the Federal Communications Commission and his nomination of Rosenworcel to serve another term:

“The Progressive Policy Institute applauds Jessica Rosenworcel’s designation to serve as Chair of the FCC — the first woman to lead the agency. Jessica Rosenworcel is a pragmatic, common sense leader who will move the agency forward in this pivotal period of recovery from the pandemic. With her help, the FCC and the Biden Administration will ensure every American family, worker, student, and entrepreneur has the tools they need to succeed in the 21st century economy. Once confirmed, we look forward to working with the FCC under Ms. Rosenworcel’s leadership to shape radically pragmatic policies that get our communities connected.”

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.

Follow the Progressive Policy Institute.

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Media Contact: Aaron White – awhite@ppionline.org

MOSAIC MOMENT: Growing Women-Owned Businesses Through Private Capital

Posted on by The Progressive Policy Institute

On today’s episode of Radically Pragmatic, PPI’s Mosaic Economic Project brought together a panel of women to discuss the intersection of access to private capital formation for new and small businesses owned by women and particularly minority women; how the response to the pandemic (government stimulus intervention including PPP) has impacted entrepreneurs and what policies looking forward can and will make a difference in accessing private capital for women entrepreneurs.

Joining Jasmine Stoughton, Project Manager of the Mosaic Economic Project is Emily Egan, a graduate of Mosaic’s Women Changing Policy Working and Director of Strategic Initiatives at the Albert Lepage Center for Entrepreneurship and Innovation at Tulane University; Kim Armor, Chief Financial Officer and Managing Director at Comcast Ventures; and Emily Waldorf, Senior Vice President of Strategic Development at Comcast.

Learn more about the Mosaic Economic Project here: https://www.progressivepolicy.org/project/the-mosaic-project/

Learn more about the Progressive Policy Institute here: https://www.progressivepolicy.org/

Marshall for The Hill: Remember, Democrats: Business isn’t the enemy

Posted on by The Progressive Policy Institute

Republicans are following the Pied Piper of Mar-a-Lago down a twisted trail of sedition and anti-democratic extremism. That’s weakening the party’s historically strong bond with U.S. business leaders, who are appalled by former President Trump’s delusional bid to void the 2020 election, as well as a concerted push by red state officials to make it harder to vote, get a legal abortion or protect school children from unvaccinated adults.

In Texas, for example, leading local corporations such as American Airlines and Southwest Airlines are flouting Republican Governor Greg Abbott’s executive order banning private companies from requiring their workers to get COVID-19 vaccines, while iconic Georgia firms such as Coca Cola and Delta Airlines condemned the Republican legislature’s passage of a severely restrictive voting law last Spring.

The growing rift between business and a Trumpified GOP marinating in grievance and paranoia should be opening doors for Democrats. But they’ve got a business problem of their own, namely the high media profile of leftwing activists who are reflexively hostile to our largest and most successful companies.

Read the full piece in The Hill.

Girls Need Better Access to Menstrual Products in School

Posted on by The Progressive Policy Institute

Menstrual products are as necessary as toilet paper and soap. Yet, one in four women and girls in the U.S. struggle to pay for them. This lack of access to these products amongst school-aged female students directly impacts the quality of their education and well-being. A 2021 study conducted by the University of Pennsylvania found that 80% of female students have missed all or part of a class or know someone who had to miss class because they did not have access to menstrual hygiene products. Implementing programs that provide no-cost menstrual hygiene products in all public school restrooms will benefit girls’ education, especially for students of color and those with a lower-income background who tend to be more impacted by this issue.

“Period poverty.” or the inability to afford and lack access to menstrual and sanitary products, can also worsen the social stigma around menstruation. Cultural shame attached to menstruation and a shortage of menstrual hygiene resources prevents many women and girls from carrying out their daily routines. Without constant, reliable access to menstrual products at school, students are forced to ask the school nurse or their friends, who might only have a limited supply of products. Some prefer to skip classes entirely because of the discomfort of not having access to these products. All of these disruptions can lead to learning loss and educational barriers for female students.

Beyond impacting education, period poverty can also affect students’ mental and physical health. Roughly 68% of students who experienced monthly period poverty reported moderate to severe depression. Furthermore, researchers found that 50% of students who could ill afford to buy the disposable products, in an effort to stretch their dollars, did not change them out every four to eight hours as recommended by the Food and Drug Administration. This increases the risk of a rare but deadly reaction known as “Toxic Shock Syndrome” and other bacterial infections.

There is momentum across the country to address this issue. Currently, legislation to make menstrual hygiene products available in all public school restrooms has passed in states such as Rhode Island, Nevada, Washington, and California. This past May, Congresswoman Grace Meng (D-N.Y.) introduced the federal Menstrual Equity for All Act of 2021 (H.R. 3614) that would require public elementary and secondary schools to provide free menstrual products for its students by amending the Elementary and Secondary Education Act of 1965.

Young women across the country deserve to attend school without fear or shame about how menstruation might impact their education and health. Policymakers at the state and federal level should work to ensure that there are free or affordable menstrual products available in all public school bathrooms so that our most vulnerable female students can go about their school day without interruptions or social stigma.

Understanding the negative impact of the Klobuchar-Grassley bill on tech services

Posted on by The Progressive Policy Institute

Senator Amy Klobuchar (D-Minn.) and Senator Chuck Grassley (R-Iowa) have unveiled their tech antitrust legislation, entitled The American Innovation and Choice Online Act. At first glance, the goals of the Klobuchar-Grassley bill seem unobjectionable, and the bill is presented as a commonsense solution to an obvious problem. As the Klobuchar press release says, the point of the legislation is to prohibit large digital platforms from “favoring their own products or services” or “disadvantaging rivals,” as well as discouraging a wide array of other discriminatory conduct.

But the bill’s combination of broad language, very high fines, and no safe harbor means that even good faith efforts to adhere to the bill’s intentions could result in a huge financial hit to major American firms such as Apple, Alphabet, and Amazon.  That threat, in turn, will lead these companies to substantially reduce or alter the services they offer to minimize opportunities to be fined.

In order to understand this problem, I’m going to step through one example here in detail related to Amazon. Amazon offers its Prime customers free two-day delivery, which they love.  For a price, it also offers third party sellers Fulfillment by Amazon (FBA), which gives them access to Prime delivery services for their products.

Sounds like a good deal, right? It’s highly unusual for a major retailer to give rivals access to its cutting-edge logistic operations, including handling returns.  But this access was a win-win-win proposition. It was great for consumers, great for sellers, and great for workers, who Amazon has been hiring at a furious rate.

But under the Klobuchar-Grassley bill, regulators would have to ask the question: Does the price that Amazon charges for FBA discriminate against third-party sellers? Amazon has to set the price for FBA taking into account its marginal cost of handling the product, both during normal time and peak season. It also has to factor in the fixed costs of the fulfillment infrastructure—the warehouses, the robots, the trucks and the computer systems.

Setting the FBA price is a complicated calculation with no single right answer. In fact, if I lined up four economists and logistics analysts, they would likely give at least four different answers.  One price might be the average cost of providing the logistic services, including all the infrastructure needed for the e-commerce peaks. Another price might be the price of buying the same fulfillment services on the open market.  A third price might be Amazon’s marginal cost of handling the product during normal season. A fourth price might be zero — because, after all, some people might argue that charging third-party sellers anything for logistics services would “self-preference” Amazon.

There is no language in the bill that guides regulators about which price to use, and no safe harbor. In particular, the usual antitrust presumption in favor of consumer welfare is nowhere to be found.  So as sure as the sun rises in the east, as soon as this bill is passed and signed into law, Amazon will be accused of setting the price of FBA “too high” — that is, greater than zero — exposing the company to fines as high as 15% of revenue.

Facing this threat, Amazon can choose to keep Prime in place, and run the risk of huge, business-killing fines. More likely, it could reduce the quality of its delivery promise, and offer the same lower-quality logistic service to everyone, including Prime customers.  Or it could close down its third-party selling market, so it’s not exposed to fines.

But no matter what Amazon does, the loser would be consumers and workers. The legislation would break a successful business model that makes consumers happy and provides hundreds of thousands of jobs for workers, and for what purpose?

The exact same issues arise for other important services provided by large platform companies covered by the Klobuchar-Grassley legislation. The broad language, lack of safe harbor, and high fines would force them to reduce the services they provide. Consumers will be worse off, and so will be workers.

 

PPI’s Trade Fact of the Week: Liberalism is worth defending – Oct. 20, 2021

Posted on by The Progressive Policy Institute

FACT:

Liberalism is Worth Defending

THE NUMBERS: 

COVID vaccinations per week, worldwide: 150 million
Workers escaping deep poverty, 2000-2019: 440 million
International students in the U.S., 2020: 1.07 million

WHAT THEY MEAN:

PPI re-launches this Trade Fact series under the political equivalent of storm warnings and lowering clouds, in the U.S and worldwide.  Looking abroad, publics abroad appear more tempted than at any time in decades to believe that their country’s gain must entail another’s loss.  Looking inward, they seem increasingly at risk from authoritarian populists and illiberal political parties.  And on a different level of analysis, trust among big-power governments has eroded; and the institutions and agreements built up since the Second World War to safeguard security and promote shared growth – whether NATO, the World Trade Organization, the European Union – accordingly seem ever more fragile.

Against this ominous backdrop, in concert with like-minded policymakers and intellectuals in the U.S. and elsewhere, PPI aspires to help – by (a) offering new ideas and projects for a liberalism besieged and in need of revitalization; (b) rebutting unfounded cynicism and pessimism, which often are more the cause than the reflection of deteriorating ideals and institutions; and (c) highlighting the successes of active government joined with open exchange of goods, services, and ideas.  In this spirit, the first in this new Trade Fact series notes three successes of liberalism-writ-large:

Half the World’s People Have Received COVID-19 Vaccinations This Year:  22 months after the discovery of a previously unknown coronavirus in Wuhan, government, non-profit, and private-sector investment in medicine development, production technologies, and distribution has provided vaccination shots to 47.8% of the world’s public – that is, 3.7 billion people – with 150 million more shots going into arms each week.

Low-Income Work Has Contracted by Two Thirds Since 2000:  The International Labor Organization finds that in 2020, about 8% of the world’s 3.5 billion workers earned ‘extreme poverty’ wages.  That is, for 280 million workers, a day’s labor brought $1.90 or less in constant 2011 dollars.  In 2000, the ILO’s figure was 26% of 2.76 billion workers, or 720 million.  The difference – 440 million people – implies that, on average, every day since the turn of the millennium, 68,000 workers (and along with them, tens of thousands of their children and relatives), have escaped deep poverty.

1.07 Million International Students Are Enrolled in American Universities: Despite Trump-era efforts to close borders, America remains the world’s top choice for study abroad, home to 1.07 million of the world’s 5.8 million international students.  Their tuition and expenses count as an “export of services” in trade accounts; in 2020, this came to $39 billion.  (For context, this is 2% of the $2.13 trillion in total U.S. exports; alternatively, by comparison, U.S. farm exports totaled $150 billion in 2020 and auto exports $59 billion.)  Over the long term, the effects are likely larger.  Surveys from the mid-2010s suggest that about half of foreign grad students take U.S. jobs after their degree, contributing to consumer demand, business creation, and perhaps especially – given that half of them are in engineering, math, and science – to American science and technology.   Despite neo-Maoism and U.S.-China tension, 372,000 Chinese students make up the largest single cohort of the 1.07 million.  After classes and commencements, some will stay on to work, while others return to join China’s next-generation elites in business, civil service, arts and media, and so to help shape these institutions’ role in Chinese domestic policy, daily life, and international affairs.

To ignore storm warnings and lowering clouds is reckless.  The proper response to them is to identify those parts of a roof or a wall that may leak or give way in heavy weather, shore up their weaknesses or replace them with something better.  It is equally important, however, to identify areas of strength, build upon them, and draw on the lessons they offer.  Metaphorical examples appear, in the response of government, non-profit, and private-sector science to a unique medical emergency; in the road out of poverty a still largely open global economy offers the world’s poor; and in the short- and long-term good that can come from education and exchange of ideas.  In such things one can see breaks in the clouds, patches of sunlight ahead, and foundation for PPI’s belief that the liberal project remains vital, successful, and worth defending.

 

FURTHER READING

COVID resources –

Oxford University’s “Our World in Data” project summarizes the state of COVID vaccination, worldwide and by country.  Top performers are Portugal, with 86% of the public fully vaccinated, the United Arab Emirates at 84%, Iceland at 81%, and Spain at 79%.  The U.S. is at 56%, tied with Ecuador and just ahead of El Salvador’s 55%.  The chief challenge in the United States is the galling one of foolish ‘vaccine hesitancy’ and perverse policymaking (e.g. attempts by some state governments to stigmatize or even ban ‘vaccine mandates’, including those of private businesses). The chief challenge worldwide, by contrast, remains lack of access:  in very poor countries, on average, only 2.8% of people are vaccinated.  Our World in Data on COVID-19 vaccinations by country: https://ourworldindata.org/covid-vaccinations

The State Department outlines U.S. donations of vaccines to developing countries:  https://www.state.gov/covid-19-recovery/vaccine-deliveries/

Peterson Institute scholar Chad Bown and CFR analyst Thomas Bollyky examine the multinational supply chains – U.S., France, Switzerland, U.K., Spain, India, South Africa, Korea, etc. – that created the vaccines, production centers, and delivery systems:  https://www.piie.com/publications/working-papers/how-covid-19-vaccine-supply-chains-emerged-midst-pandemic

The working poor –

The International Labour Organization’s Employment and Social Outlook 2021 examines the world labor market and the impact of Covid, with working-poor figures through 2020.  From 2019 to 2020, the estimate of men and women in extreme low-income work rose from 6.6% to 7.8% of all workers, implying that the Covid pandemic pushed about 35 million workers back into deep poverty last year:  https://www.ilo.org/global/research/global-reports/weso/trends2021/WCMS_795453/lang–en/index.htm

Also from the ILO, a closer look from 2019 at the state of extreme-low-income work, comparing slightly dated with figures up to 2000-2018: https://ilo.org/wcmsp5/groups/public/—dgreports/—stat/documents/publication/wcms_696387.pdf

 Students –

For international students, education is a long-term investment; in trade statistics, it is a form of “exports of services” and a source of revenue.  The annual “Open Doors” statistical review looks at international students in the U.S. (and American students abroad) by state and university of study, country of origin, and more: https://opendoorsdata.org/annual-release/

 Principles –

PPI’s Trade and Global Markets Project supports American leadership to build a fairer, more stable, more prosperous world economy.  To this end, through publications, events, and commentary, and in concert with likeminded intellectuals and policymakers at home and worldwide, we will advocate open markets, support for scientific and technological innovation, and individual choice; environmental sustainability; and special concern for the poor at home and abroad.  Complementing this future agenda, we will oppose and critique isolationist populism and nativism; call for reform of regressive, antiquated, and ill-conceived elements of the U.S. trade regime; and offer positive approaches to the social stresses of globalization.

 

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.

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