A core component of the Trump campaign’s pitch to working Americans is a package of costly tax cuts that sound targeted toward their interests, such as exempting income from tips and overtime pay from taxation. But amongst the many problems with these budget-busting proposals, they wouldn’t meaningfully increase the take-home pay of the many working-class individuals, who have little to no income tax liabilities at all.
A better way for Democrats to boost the incomes of working Americans is to ensure they are actually paid what they are owed in the first place. Tackling wage theft, a crime that takes thousands of dollars out of working Americans’ pockets each year, will do far more to improve the lives of the millions of tipped and overtime workers who are at risk of being cheated than misguided tax proposals.
TRADE FACT OF THE WEEK: Tariffs are a poor form of taxation.
THE NUMBERS: Countries’ reliance on tariffs as share of government revenue* –
County / Region
Percentage
Gambia
41.6%
West Bank and Gaza (pre-war)
37.6%
Liberia
30.0%
St. Lucia
29.2%
United States Trump/Vance proposal
25.6%?**
Argentina
24.6%
Bahamas
19.6%
Somalia
18.0%
India
4.5%
China
2.9%
Brazil
2.0%
United States current
1.8%
Canada
1.6%
Korea
1.4%
New Zealand
1.3%
Japan
1.2%
United Kingdom
0.7%
European Union
0.5%
* World Bank, Taxes on International Trade (% of Revenue)
** Assuming the $2.18 trillion personal income tax is scrapped and replaced with a tariff yielding the maximum feasible revenue, likely $780 billion at rates of 50%.
WHAT THEY MEAN:
In PPI’s newest paper, It’s Not 1789 Anymore: Why Trump’s Tariff Agenda Would Hurt America, Fiscal Policy Analyst Laura Duffy examines the Trump campaign’s apparent hope to replace the U.S. income tax with a much higher tariff. Drawing from modern analysis and the Tariff Act of 1789 — Congress’ first-ever tax bill — she bluntly concludes that:
“Contrary to Trump’s claims that imposing Depression-Era level tariffs will restore America to a supposed former state of greatness, leaders of the past long recognized the weaknesses of relying on tariffs for revenue, and their concerns offer valuable lessons today. In particular, tariffs:
1. Fail to raise enough revenue to finance a modern federal government
2. Are especially non-transparent taxes that invite preferential treatment
3. Undermine equity by imposing arbitrarily unequal tax burdens on different households
4. Cause damage to downstream industries and the economy as a whole.”
Background: At least twice this fall, Mr. Trump has suggested replacing the U.S. personal income tax, and possibly the corporate income tax, with tariff revenue. This would scrap a broad-based revenue tax and swap in a big national surcharge on energy, OTC medicines, clothes, food, and other goods purchased abroad. His argument for this is a claim that in the 19th century (until the creation of estate and income taxes in the 1913 and 1916 Revenue Acts), the U.S. government relied mainly on tariffs for revenue; that during the 1890s, a period of particularly high tariff rates, the U.S. was the “wealthiest we ever were” (quite wrong: see “Further Reading” for a look at that impoverished and unpleasant decade); and that 19th-century tax policy is therefore right for 21st-century America.
To put real-world numbers to this, in 2023, the personal income tax raised $2.18 trillion. This was just under half of the Treasury’s $4.44 trillion total. Tariffs got $0.08 trillion, or 1.8%. Tax scholars report that the most money a theoretical high-tariff system could raise (setting aside the trade policy* and other economic problems it could cause) is about $780 billion. Assuming repeal of personal income taxes but no other tax changes, this would mean about 25.6% of U.S. revenue. No “developed” country now uses tariffs for more than 2.7% of revenue; World Bank tables find Gambia, whose government gets 41.6% of its money from tariffs, the most tariff-reliant country in the world. At 25.6%, the U.S. would be below Gambia, but in the neighborhood of tariff-heavy jurisdictions such as Somalia, the Bahamas, pre-war West Bank and Gaza, Nepal, and Ethiopia — that is, countries too small, politically disordered, and/or poor to operate professional bureaucracies able to assess and collect revenue from broader sources such as income, wealth, or consumption.
Going to the really primary sources, Duffy notes that the original U.S. tax writers in 1789 — sophisticated analysts such as then-House of Representatives figures James Madison and his Federalist sparring partner Alexander Hamilton at the Treasury Department — did not choose tariffs as the main early-republic and 19th-century revenue source because they believed tariffs were a particularly great form of taxation. Nor did they think a tariff would somehow off-load taxation onto foreigners. (With the Tea Party events and “taxation without representation” in recent memory, no early-republic politician would ever make such a claim.) Rather — much like governments in today’s high-tariff small island state and least-developed countries — they were aware that with no professional civil service and no way to calculate income or consumption, the U.S. could not tap broader revenue sources. By contrast, tariffs are easy to collect – seaports are few, and ship arrivals easy to monitor – and therefore the best of their unattractive options.
What would happen if someone tried to cut and paste this 18th- and 19th-century approach into the 21st century? Duffy makes the obvious point that it is not 1789 anymore, our options are better than theirs, and a Trump-like attempt to return to the distant tariff-based tax past would immediately run into one big problem and then cause another three:
(1) Tariffs can’t raise enough money: Very high tariff rates cause trade to collapse rather than raising money; with $3.1 trillion in goods imports and the theoretical maximum tariff revenue at $0.78 trillion, the income tax/tariff arithmetic doesn’t work at all. Replacing a $2.18 trillion income tax with an $0.78 trillion tariff system would nearly double annual U.S. fiscal deficits to $3.1 trillion — even before adding in the effects of lower growth, foreign retaliation, and the Trump/Vance campaign’s many additional trillions of dollars in tax cuts and spending increases over the next decade. The likely result is fiscal crisis and some combination of interest spike, inflation, and collapse of public services.
(2) Tariffs are less transparent than income or consumption taxes: Since tariffs are more ‘opaque’ than income, consumption, or other broad-based taxes, more reliance on tariffs would mean less public understanding of taxation. On the government and policy side, the Treasury Department publishes no annual analysis of tariff revenue by product or incidence by income level; in daily life, American shoppers never learn how much the tariff system adds to the prices they pay for shoes, food, bicycles, etc. The extreme complexity of nearly all tariff systems amplifies this failing. Even the 1789 Tariff Act, Duffy shows, immediately evolved from the simple across-the-board 5% rate Madison proposed to an unwieldy system awarding well-connected industries with especially high rates on nearly a hundred products — from rope, beer, nails and tacks, to soap and shoes. The 1789 Act’s descendant, today’s 11,414-line U.S. Harmonized Tariff Schedule, is far worse (though less important as a revenue source), with only a few specialists knowing the main rates and fewer still knowing who pays. Trumpist ideas, with their new layers of complexity, would spread this opacity across half the tax system.
(3) Tariffs are by nature regressive and typically get worse over time: Reliance on tariffs makes taxation more ‘regressive’ and tougher on low-income and working people. In principle, as a tax on goods but not services, a tariff system taxes low-income families more heavily than wealthy households, because lower-income families spend more of their income on clothes, food, and home goods. Likewise, tariffs tax goods-intensive businesses (e.g., retail, manufacturing, construction, and farming) more than they tax investment- or service-buying industries such as real estate, law, or financial services. And in real life, 19th-century experts — say, Albert Gallatin, Treasury Secretary for the Jefferson and Madison administrations — knew by experience that the opacity of the tariff systems makes them easy for wealthy people and businesses with direct connections to government to manipulate. This means tariff systems usually grow more regressive over time, as rates fall on expensive luxuries but stay high for cheap goods whose buyers don’t know they’re paying. Again, the contemporary U.S. Harmonized Tariff Schedule illustrates the point, taxing cheap stainless steel spoons much more heavily than sterling, infant formula more than champagne, polyester shirts more than silks, and women’s clothes more than men’s.
(4) Economic harm: Finally, tariff increases invite economic harm — directly through damage to ‘downstream’ industries buying tariffed goods, and indirectly by encouraging foreign governments to retaliate against successful U.S. industries. Mr. Trump’s tariff increase on fertilizer, for example, will raise farming costs and simultaneously invite angry foreign governments to block American agricultural exports. In the same way, a new tax on metals, paint, and wiring, meanwhile, means higher costs and lost competitiveness for American auto plants and machinery manufacturers, higher prices for families buying homes, and more retaliation.
All this set out, here’s Ms. Duffy’s close:
“Replacing tariffs with direct taxes on incomes [in the 1913 and 1916 bills] was a huge step in making American public finance more rational and equitable. … Returning to tariff-heavy policies, as suggested by Trump, would be fiscally irresponsible and counterproductive. Beyond their revenue-generating limitations, tariffs are extremely susceptible to lobbying from protected industries at the expense of other businesses, workers, and consumers. Finally, the distortionary effects of returning to pre-modern tariff rates would be extremely damaging to the American economy and undermine the strong wage and job gains the country has seen in the past three years.”
* For example, abrogation of international agreements, and of basic Constitutional principles if a hypothetical Trump administration attempted to impose a tariff by decree; unprovoked harm to U.S. allies; retaliation against successful U.S. farm and manufacturing industries; etc.
FURTHER READING
Laura Duffy on Trumpism, tariffs as taxation, the Tariff Act of 1789, transparency and regressivity, and the folly of using tariffs as a 21st-century revenue source.
U.S. background:
Revenue from income taxes, tariffs, and other sources from OMB’s Historical Tables. See Table 2.1 for overall revenue shares, and Table 2.5 for “other revenue” sources for tariffs, excises, and other small taxes.
And the 1890s weren’t a good time at all. Four points:
Life and health: An American’s average life expectancy in 1900 (Table 13) was 47. To put this figure in context, World Bank tables find the world’s lowest current national life expectancies in Chad and Lesotho, both at 53. The short lives of 1890s Americans reflected very high infant mortality — more than one child in ten died before the age of one — and frequent death in early life and middle age to accident, infection, and contagious disease. (No vaccines, blood transfusion, antibiotics, or anti-inflammatory drugs.)
Wealth and poverty: Americans were poor and spent most of their money on life necessities. Per BLS’ “100 Years of Consumer Spending,” the average family spent 58% of its income on food and clothes as against today’s 12%. Even the top end of “Gilded Age” society had only 8,000 automobile owners and 600,000 mostly communal telephones, in a country of 76 million.
Civil rights: Work and daily life in 1890s America were deeply unjust and getting rapidly worse. Between 1890 and 1895, 16 states adopted segregationist constitutions and laws covering marriage, voting, education, railroads, streetcars, and other matters, validated by the Supreme Court’s 1896 “Plessy v. Ferguson” decision. The National Archives remembers.
Economy: Whatever the impact of high tariffs, the 1890s economy was bad. The decade’s main economic event, the four-year Depression following the “Panic of 1893,” introduced the word ‘unemployment’ to common English-language discourse. It also prompted the first mass protest in U.S. history, when “Coxey’s Army” of 6,000 desperate Ohio and Pennsylvania workers marched to the National Mall to appeal (unsuccessfully) for federal relief.
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.
Remedies are a critical part of merger enforcement and policy. Despite this, current policy on merger remedies lacks coherence and certain features work against the broader goal of vigorous merger enforcement that promotes competition and protects consumers. This article explains why merger remedies, especially divestitures, are in disarray. This is supported by growing evidence of failed divestitures; the unintended consequences of “litigating the fix;” a track record of experienced buyers; the unintended consequences of “litigating the fix;” a track record of experienced buyers; and new concerns around private equity buyers and buyers with past records of antitrust violations. The article closes with a number of recommendations on updating and strengthening remedies policy.
WASHINGTON —Throughout his 2024 campaign, former President Donald Trump has made imposing a double-digit tariff on all imports and a 60% tariff on goods from China a central pitch to voters, and has even suggested replacing the income tax with tariff revenue. The Progressive Policy Institute(PPI) today released a critical new report, “It’s Not 1789 Anymore: Why Trump’s Backwards Tariff Agenda Would Hurt America,” authored by Laura Duffy of PPI’s Center for Funding America’s Future, which warns of the steep costs of Trump’s plans to impose taxes on all imports at levels not seen since the Great Depression.
In the report, Duffy draws striking parallels between Trump’s plan and the debates over and effects of historical tariff policies going back to 1789. She argues returning to tariff-heavy strategies would not only make it impossible to fund government spending commitments that have grown since the country’s founding, but would also harm downstream industries and greatly burden American taxpayers and workers.
“When the United States was much poorer and less developed, tariffs were one of the only feasible ways to collect revenue. But even as far back as 1789, leaders recognized the weaknesses of relying on tariffs as a basis of our tax system,” said Duffy. “Today, no developed country relies on tariffs as a major revenue source, and Trump’s tariff proposals would be fiscally irresponsible, economically destructive, and costly to American families.”
Duffy outlines four main problems with Trump’s tariff proposal:
Inadequate Revenue Generation: Modern government spending levels cannot be supported by tariffs alone, which generate far less revenue compared to income taxes.
Non-Transparency: Tariffs are complex and hidden, making them vulnerable to special interests and rent-seeking by domestic industries.
Equity Concerns: Tariffs likely place a disproportionate burden on low-income households, which tend to spend more on imported goods.
Economic Disruption: Tariffs raise costs for industries relying on imports and invite retaliation from other countries, leading to reduced production and lost jobs.
Because of these issues with tariffs, Duffy argues that the shift to tax income instead of trade was a success for progressive policy goals and the United States’ growing global leadership role alike. Instead of turning back the clock to a much earlier (and less prosperous) era of American history as Trump suggests, Duffy recommends the United States address its budget deficits and promote equity by shifting the tax code towards fairer and less destructive taxes like a value-added tax.
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. Find an expert at PPI and follow us on Twitter.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org
“[W]e should find no advantage in saying that every man should be obliged to furnish himself, by his own labor, with those accommodations which depend on the mechanic arts, instead of employing his neighbor, who could do it for him on better terms.”
— James Madison
In a stark break from nearly a century of fiscal and trade policy, former president Donald Trump has made imposing significant import tariffs a central part of his policy agenda for a second term. At various times, he has campaigned to put a 10% to 20% tariff on all imports and a 60% tariff on goods from China, and he has even speculated about completely replacing the income tax with tariff revenue. If he were elected and made good on these promises, the average tariff rate would soar to levels not seen since Congress imposed the Smoot-Hawley Tariff of 1930.
Though Trump’s proposals to base the tax system on tariffs have been virtually unheard of in the post-World War II era, debates over tariffs are as old as our country itself. During the 18th and 19th centuries, when the federal government’s obligations were dramatically smaller than today, tariffs were indeed the major source of tax revenue. Contrary to Trump’s claims that imposing Depression-Era level tariffs will restore America to a supposed former state of greatness, leaders of the past long recognized the weaknesses of relying on tariffs for revenue, and their concerns offer valuable lessons today. In particular, tariffs:
1. Fail to raise enough revenue to finance a modern federal government.
2. Are especially non-transparent taxes that invite preferential treatment.
3. Undermine equity by imposing arbitrarily unequal tax burdens on different households.
4. Cause damage to downstream industries and the economy as a whole.
As a result of these weaknesses, the United States (in line with every other advanced economy) largely abandoned tariff-heavy fiscal policy by the mid-20th century to facilitate the federal government’s expanding socioeconomic goals and greater role in the world. Revisiting the contentious history of tariffs in the United States — going all the way back to the Tariff Act of 1789 — reveals why Trump’s promise to return to using tariffs as a basis of tax policy would severely undermine the United States’ fiscal stability, tax fairness, and economic growth today.
An argumentative edge is a risky thing, especially in a book of history, even popular history. We want authors to have views—to see their material in a fresh light, to tell us what’s important, and to impose a frame on the raw facts that deepens our understanding of the past. Some readers even seek out history told from a particular point of view—Marxist history, for example, or postmodern history. But it’s easy for a historian to go too far, for a point of view to start to feel like a tendentious slant. Readers looking for truth quickly come to mistrust a writer who they feel has an ax to grind—especially when the case being made is an argument about genocide.
Eugene Finkel, now a professor of international affairs at the Johns Hopkins School of Advanced International Studies, was born in Lviv, in western Ukraine, into a Jewish family deeply scarred by the Holocaust. As he tells us in his new book, Intent to Destroy, his grandfather Lev Finkel returned home from fighting in World War II to find that his extended family—parents, sisters, brothers-in-law, nieces and nephews—had perished. Eugene, born in 1977, went on to become a scholar of the Shoah, studying first in Israel, then the U.S. In 2017, he produced a well-received scholarly book, Ordinary Jews: Choice and Survival During the Holocaust. Clearly, he knows a great deal about genocide and has some authority to make a case about the violence being perpetrated by Russia in Ukraine.
What he doesn’t seem to grasp is just how overused and muddy the word genocide has become, and how it might undermine rather than strengthen his case about Russia’s brutal aggression against Ukraine.
WASHINGTON — The Progressive Policy Institute (PPI) today released a new report, “How Teaching American Identity Can Strengthen Working America,” authored by Richard D. Kahlenberg, Director of PPI’s American Identity Project. This report underscores the significance of instilling a shared sense of American identity to bridge cultural divides, promote unity, and support the economic and social needs of working-class Americans.
This new publication is the seventh in a series of papers published in PPI’s Campaign for Working America, which was launched earlier this year in partnership with former U.S. Representative Tim Ryan of Ohio. The Campaign aims to develop and test new themes, ideas, and policy proposals that help Democrats and other center-left leaders make a compelling economic offer to working Americans, bridge divides on culturally sensitive issues like immigration and education, and rally public support for the defense of democracy and freedom globally. Other papers cover career paths for non-college workers, housing, and competition.
Kahlenberg’s report highlights a critical gap in American public education — the failure to promote a common civic identity. It calls for policies that counteract divisive identity politics on both ends of the political spectrum and advocates for a return to a cohesive, patriotic narrative that champions shared values.
While it is true that working Americans care deeply about kitchen table economic concerns, polling suggests they care enormously about how the larger American story is told.
“Many working-class Americans feel disillusioned by a lack of unity and patriotism in our society,” said Kahlenberg. “Reinstating an educational emphasis on our national story can strengthen social cohesion, enhance economic opportunities, and equip working families with the tools to pursue the American Dream.” Advances in economic opportunity for working Americans are most likely to occur, Kahlenberg said, when policies are tied to a larger patriotic vision.
The report, which builds upon earlier work, outlines a robust agenda for policymakers focused on revitalizing American identity and patriotism in public schools, with nine key recommendations, including:
Prioritize Civics Education: Increase resources and ensure students graduate with a strong understanding of U.S. history and civics, critical for democracy
Teach Global Context: Educate students on life in non-democratic nations to foster appreciation for American freedoms
Promote a Balanced History: Provide a fair account of American history, highlighting both struggles and achievements
Reform DEI and Ethnic Studies Programs: Shift Diversity, Equity, and Inclusion programs to emphasize shared values over divisive narratives
Teach American Exceptionalism Thoughtfully: Introduce thinkers on American Exceptionalism, focusing on what makes the U.S. unique as a nation built on ideas
Support School Integration Efforts: Encourage voluntary socio-economic integration in schools to foster equality and inclusivity
Expand Community and National Service Programs: Create programs that unite young Americans in shared service and commitment to their country
Encourage Civil Discourse: Teach principles of free speech and respectful debate to equip students for constructive democratic engagement
Provide Federal Support for Civic Education Programs: Offer federal grants to strengthen civics education and foster patriotism across communities
This approach not only aligns with Vice President Kamala Harris’s campaign vision of “patriotism for all” but also rejects divisive educational ideologies, instead emphasizing a balanced, unifying narrative that reflects America’s complex history while celebrating its potential for redemption and progress.
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 visitingprogressivepolicy.org.Find an expertat PPI andfollow uson Twitter.
American liberal democracy is being threatened in a way not seen in generations, in large measure, because white identity politics on the right, and racial identity politics on the left, make fights over policy seem existential. When policy battles appear to be part of a larger war rooted in a clash of ethnic and racial identity groups, both sides are more willing to disregard long-standing liberal democratic norms.
On the right, Donald Trump tried to disrupt the peaceful transition of power after he lost the 2020 presidential election, and he talks of suspending the Constitution if he becomes president again. Left-wing activists, meanwhile, shout down speakers and create a chilling environment where people feel they can’t freely speak their minds.
Pundits often assume that working Americans, who must prioritize kitchen-table economic concerns, don’t care about these systemic issues. In fact, however, working Americans are especially affected by the breakdown in national unity and the decline in patriotism that serve as root causes of the erosion in liberal democratic beliefs.
To begin with, the decline in American patriotism directly offends the value systems of many non-college-educated voters. Polls reveal a patriotism gap between progressive elites and working Americans of all races. While 69% of working-class voters said that America is the greatest country in the world, among progressive activists, only 28% agreed.
It is good news, therefore, that Vice President Kamala Harris has, in her campaign for president, embraced a full-throated patriotism that puts her on the side of working Americans. At the Democratic convention, Harris advanced a powerful visions of liberal patriotism that identified the United States as “the greatest democracy in the history of the world.” She said America is an inspiration to people across the planet because in this country, “anything is possible. Nothing is out of reach.” She called for national unity, declaring, “We have so much more in common that what separates us.” She didn’t mention white privilege, and instead focused on “the privilege and pride of being an American.” She concluded that America has “the most extraordinary story ever told.”
Some highly educated elites may believe their less elevated view of America is related to a greater degree of sophistication and knowledge of America’s sins. But in fact, racial minorities, who presumably have an acute cognizance of racial injustice, are very likely to express patriotic feelings. Some 62% of Asian Americans, 70% of Black Americans, and 76% of Hispanic Americans said they were “proud to be an American,” compared with just 34% of progressive activists.
To the extent that many non-college-educated voters have immigrant roots, their patriotism may actually be based on a higher level of sophistication about the realities of the world outside the United States than educated leftists who are quick to find fault with the United States. Polls find that immigrants have more patriotic beliefs than those who were born in the United States. This patriotism may well stem from their first-hand experience with the repressive systems of government that are found in many other countries.
In addition, the decline in American patriotism and social cohesion is bad for non-college-educated Americans because it inhibits their efforts to fight for a fairer society. Emphasizing racial division typically hurts working Americans. In fact, the oldest story of American politics is one in which conservatives use racial division to keep working Americans from cooperating across racial lines to smooth out the roughest edges of democratic capitalism. By contrast, the great advances for working-class people have come when Democratic politicians, such as Franklin Roosevelt, appealed to patriotism and national unity. As John Judis and Ruy Teixeira note in their book, Where Have All the Democrats Gone?, New Deal Democrats “extolled ‘the American way of life’ (a term popularized in the 1930s); they used patriotic symbols like the ‘Blue Eagle’ to promote their programs. In 1940, Roosevelt’s official campaign song was Irving Berlin’s ‘God Bless America.’” Only when Americans feel a sense of common mission is their sense of a shared responsibility for the fate of their fellow Americans activated.
Finally, non-college-educated voters are particularly hurt by a decline in American identity and patriotism because these realities are being used by right-wing advocates to undermine American public education — which has historically provided a critical path for social mobility for working Americans. In recent years, race-essentialist left-wing ideologies, such as critical race theory, which sees racism as endemic and permanent, and anti-racism, which posits that the only remedy to discrimination is more discrimination, have had an enormous impact on teacher schools of education, which then translates into what young public schoolchildren are taught. These approaches have understandably promoted a backlash. The appropriate response is to institute broadly-
supported teachings that frankly acknowledge America’s history of slavery and segregation, but also teach that because of our liberal, democratic structures, redemption has been possible.
Right-wing advocates, however, have used the cultural disconnect between what most Americans believe and left-wing indoctrination by some teachers as an excuse to discard the entire enterprise of public education. In the past few years, red states have adopted an unprecedented number of school privatization initiatives. Evidence shows that recent success with privatization efforts is driven by the perception that schools are feeding left-wing ideology to students.
Privatization, in turn, hurts working families in two ways. First, research shows that private school voucher programs can cause a decline in academic achievement compared with public district and public charter schools, robbing working-class students of the skills they need to advance. Second, a system of private school education, in which 80% of students will go off to be educated in particularly religious traditions, with no mandate to teach common American values, removes one of the few remaining vehicles in America for forging social cohesion and national unity.
What is to be done? In an in-depth Progressive Policy report, I outline nine ideas for local, state, and federal policymakers can adopt to help public schools — and colleges — return to the central goal of public education.11 The primary mission, encapsulated by the late president of the American Federation of Teachers, Albert Shanker, is to “teach children what it means to be an American,” by which he meant “a common set of values and beliefs” expressed most vividly in the Declaration of Independence and the U.S. Constitution.
The official line from Starmer’s government is unwavering: London will work constructively with whoever wins the presidential contest.
But sources see similarities between Starmer and Harris’ backgrounds, ideologies and paths to power – and several of Starmer’s allies are hoping the strategy that worked for him will help Harris too.
“There are some really striking parallels,” Claire Ainsley, Starmer’s former executive director of policy, told CNN. “The voters that Harris needs to persuade and motivate are very similar to the description of the voters that Labour needed to persuade and motivate.”
Ainsley, who now heads the Project on Center-Left Renewal at the Progressive Policy Institute think tank, presented findings from Labour’s electoral victory to senior Democratic strategists and pollsters in Washington DC last month.
Her trip was part of a wider sharing of information between the two camps that is longstanding – and cuts both ways – but which is irking former President Donald Trump in the final stretches of the campaign. Trump launched an extraordinary spat with Labour on Wednesday, claiming through a lawyer they had been interfering in the election.
Legacy admissions have long been a practice at US universities, more commonly at private or selective universities. The practice first began at Ivy League schools in the 1920s, according to research from the sociologists Deborah L Coe and James D Davidson. It was primarily used as an antisemitic policy to limit the number of Jewish students who were enrolling. Schools would weigh criteria including “good character”, namely having “proper ethnic and non Jewish affiliations”, previous attendance at private schools, and attending chapel services, Coe and Davidson wrote.
Though universities no longer explicitly discriminate against Jewish applicants in legacy admissions, many still have legacy policies to maintain alumni relations, and to secure funding from alumni, despite research disputing that legacy admissions increase donations, said Richard Kahlenberg of the Progressive Policy Institute, a liberal thinktank. Beyond boosting admissions, some schools, namely state flagship colleges, also offer scholarships solely to legacy admissions, another way of increasing that demographic.
But results on increasing diversity among students by decreasing legacy admissions have been mixed.
A healthy U.S. economy is finally emerging from inflation’s shadow, enabling Americans to see and feel its underlying strengths. Is the good news coming in time to give Vice President Kamala Harris a boost in the November election?
Normally, a vibrant economy lifts political incumbents, but polls show U.S. voters are still preoccupied with high living costs. Harris offers a slew of proposals for driving down the cost of housing, food, health care and other necessities.
That’s essential, but with inflation and interest rates falling, Democrats have a stronger economic hand to play. They can point at growing evidence that working families are benefiting from the U.S. economic boom, and point out that Donald Trump’s slapdash economic ideas and frantic pandering threaten to derail it.
Research by my colleague Michael Mandel shows that with inflation easing, wages for working-class Americans have risen higher than they were on Election Day 2020. In other words, U.S. workers are better off today than they were under Trump.
In addition to milder headwinds from inflation, Mandel attributes the rise in real wages to a revival of U.S. productivity growth, driven by a combination of strong government and corporate investment since 2020.
New analysis sheds light on how charter schools are making strides in leveling the academic playing field for students in low-income areas, suggesting a brighter future for these children in areas that don’t shy away from school choice.
The Progressive Policy Institute’s (PPI’s) report titled “Searching for the Tipping Point: Scaling Up Public School Choice Spurs Citywide Gains,” authored by educational equity advocate Tressa Pankovits, suggested cities with robust public charter school options for low-income families are seeing beneficial outcomes for all students.
Charter schools, according to the Georgia Department of Education, are publicly funded schools that operate “under the terms of a charter, or contract, with an authorizer, such as the state and local boards of education,” but receive flexibility in certain areas “in exchange for a higher degree of accountability for raising student achievement.”
“Our report belies the oft-heard but unfounded criticism that charters somehow drain legacy schools of the ‘best’ students and resources, to the detriment of those left behind,” Pankovits’ analysis states. “Evidently, the growth of enrollment in charter schools creates a positive competitive dynamic with the traditional district schools, which have to up their game to attract parents and students.”
WASHINGTON — With major provisions of the Tax Cuts and Jobs Act set to expire at the end of next year, the president and Congress elected less than two weeks from today will have a historic opportunity to craft a new tax code that is fairer, more pro-growth, and more fiscally responsible. The Progressive Policy Institute (PPI) today released a new report, “A Real Tax Cut for Working Americans: Repealing and Replacing the Payroll Tax,” that offers a bold proposal to do just that by repealing the regressive and anti-work payroll tax, which is the biggest tax 123 million American households pay on their hard-earned wages.
This new publication, which is authored by Ben Ritz, Vice President of Policy Development for PPI, and Laura Duffy, a Policy Analyst at PPI’s Center for Funding America’s Future, is a key output of PPI’s Campaign for Working America, launched earlier this year in partnership with former U.S. Representative Tim Ryan of Ohio. The Campaign aims to develop and test new themes, ideas, and policy proposals that help Democrats and other center-left leaders make a compelling economic offer to working Americans, bridge divides on cultural issues like immigration and education, and rally public support for the defense of democracy and freedom globally.
“Donald Trump has spent months pandering to workers by offering to exempt everything from tips to overtime pay from taxation. But these proposals would collectively add trillions of dollars to inflationary budget deficits while providing little benefit to the overwhelming majority of working Americans who earn most of their income through ordinary wages,” said Ritz. “PPI’s proposal, on the other hand, would increase most workers’ take-home pay while reducing our nation’s unsustainable deficits.”
The report proposes adopting a value-added tax to replace the revenue lost by repealing the payroll tax, which would spread the burden of taxation from workers’ wages to other forms of business income and previously accumulated wealth. PPI estimates that the swap could increase after-tax income for up to 90% of working families while also reducing annual budget deficits by up to $300 billion. It would also lower marginal tax rates on most workers’ wages, boosting individuals’ incentives to work and driving the innovations that grow our economy.
“Virtually all of the United States’ peer countries rely on value-added taxes to finance their social programs because they’re good at raising revenue in a relatively pro-work and pro-growth way,” Duffy added. “Transforming the U.S. tax code to tax consumption instead of payrolls would therefore be a progressive and fiscally responsible way to reward work and improve the lives of working families.”
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 visitingprogressivepolicy.org.Find an expertat PPI andfollow uson Twitter.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org
Regardless of who wins in November, the next president and Congress will have to rewrite our nation’s tax code. At the end of 2025, the individual tax provisions in the Tax Cuts and Jobs Act (TCJA) enacted by Republicans in the first year of Donald Trump’s first term will expire. Simply extending all the expiring provisions would saddle future generations with at least $4.6 trillion in debt over the next ten years, with nearly half of the benefit going to the top 5% of households. Working Americans will pay the price for any unfunded extension of these tax cuts, whether it is through higher inflation today or higher taxes needed to fund larger interest payments on the ballooning national debt down the road.
Donald Trump seems to be hoping that working Americans will give him a second term and overlook the costs of extending his 2017 tax cuts by sweetening the pot with additional tax cuts that sound better targeted toward their interests, such as by exempting tips and overtime pay from taxation. But while working-class Americans disproportionately work jobs with hourly wages that are supplemented by tips and overtime pay, many have income tax liabilities that are too low to significantly benefit from such a tax cut. Meanwhile, many working Americans who don’t earn tip income or overtime pay would end up facing higher tax burdens than higher-earning workers who do, such as service workers at high-end establishments.
Trump has also proposed income tax cuts for high-income Social Security beneficiaries that would do nothing for working families other than hasten the insolvency of the program and put their benefits in greater jeopardy. The hole will be even deeper because Trump has also called for repealing one of the few TCJA provisions that actually raised revenue — a $10,000 limit on the amount of state and local taxes that itemizers can deduct from their federal taxes, which would effectively result in a $2 trillion transfer from working families and future generations to the highest-income households. Altogether, the pandering grab bag of Trump Tax Cuts 2.0 would more than double the cost of extending the original.
But Trump’s “plan” to pay for all this by imposing staggeringly high tariffs of 10% to 20% on all imports and up to 60% on goods from China is potentially his worst idea so far. Tariffs are largely passed through to consumers, so Trump’s tariff plan would raise the prices of everyday goods bought disproportionately by working families. It would also cause far greater economic harm by raising input prices for domestic industries, weakening the market for American exports, inviting retaliatory tariffs from other countries, and redirecting investment away from heavily impacted industries such that it would destroy far more jobs than it creates. Plus, the declines in both trade and household incomes that Trump’s tariff would cause mean that his idea would come nowhere close to paying for all of his other tax cuts, leaving current and future generations of working families to foot the bill.
Instead of expanding TCJA’s regressive and costly tax provisions, PPI proposes what would actually be the biggest tax cut on working Americans’ wages in history: repealing the regressive payroll tax. Unlike Donald Trump, who would add the cost of his unaffordable and inflationary tax cuts to the national debt, PPI proposes to more than make up for the lost revenue by adopting a progressive consumption tax. This transformational shift in the tax code would slash taxes for the vast majority of American workers, particularly the 123 million lower- and middle-income households who pay more in payroll taxes than in income taxes, while also reducing the deficit. Our approach would put working families first with a tax code that is both more progressive and more pro-growth.
TRADE FACT OF THE WEEK: The U.S. economy has grown by 13.5% since 2020 and employs 17 million more workers.
THE NUMBERS: 2024 vs. 2020 & 2019 –
2024
GDP (real 2023 dollars)
$28.2 trillion?*
Employment
159 million jobs
2020
GDP (real 2023 dollars)
$24.8 trillion
Employment
142 million jobs
2019
GDP (real 2023 dollars)
$25.3 trillion
Employment
149 million jobs
* International Monetary Fund, using their April 2024 World Economic Outlook database’s estimates of a $27.36 trillion GDP for the U.S. in 2023, and 2.7% real growth in 2024. Data for 2020 and 2019 from the Bureau of Economic Analysis database, with GDP converted from BEA’s “constant 2017 dollars” to “constant 2023 dollars.”
WHAT THEY MEAN:
Are we better off? In some ways, the question is harder to answer than usual, since the COVID pandemic can make comparisons of output, employment, and associated data for 2020 misleading. So accepting this and trying to provide the appropriate context when necessary, here are four then-to-now comparisons plus one optimistic bit of future-oriented data:
Size: The economy is noticeably larger. Measured by “GDP,” the U.S. economy of 2024 is likely to come in at about $28.1 trillion in “real,” inflation-adjusted, 2023 dollars or perhaps a little more depending on the last two quarters’ growth rates. In these “real dollars,” this is about 13.5% larger than the $24.8 trillion of 2020, and 11% larger than the $25.3 trillion of 2019. Put another way, the $3.4 trillion or so added since 2020 is slightly below the IMF’s forecast for India’s $3.9 trillion total GDP and the UK’s $3.5 trillion, and nearly double Russia’s $2.05 trillion.
Employment: More Americans are working. This autumn, 159 million workers, execs, and interns go to offices, labs, factories, construction sites, and so forth each morning. (Or to the restaurant kitchen in the evening, the farm or home office any time of day, the hospital ward or security office for a night shift.) That’s 17 million jobs, more than the 142 million of January 2021, and 10 million more than the pre-COVID 149 million of January 2020. An additional 10 million workers, as a point of comparison, is the same as the total labor force of the Netherlands; 17 million would fall between Australia’s 14 million workers and Canada’s 22 million.
Income: The “distribution” of money to all these people has become a bit less skewed, as we noted earlier this month, and a bit better for hourly-wage workers. The Census Bureau’s data for “median family income” — that is, income for the family in the exact middle of America’s 131 million households — provides one angle: median income (again in “real” inflation-adjusted dollars) at $80,610 as of 2023, up $1,050 from the $79,560 of 2020, with African American family median income growing fastest at $2,650. Or, taking the “worker” rather than the “household” perspective, the Bureau of Labor Statistics’ “real wage” reports show something similar: wages are up about 2% on average from the levels of early 2020 just before the pandemic, with especially fast growth in some blue-collar fields: 9% real wage growth for gas station attendants, 5% for clothing retail staff, 7% for hotel workers, 8.7% in auto repair shops, and 8.0% for beauty shop and hair salon specialist.
Composition: The economy has shifted a bit. The Commerce Department’s Bureau of Economic Analysis (the official GDP tracker) reports that growth has been fastest in information and services industries, making them now somewhat larger relative to the other parts of the economy than they were four or five years ago. Using 2019 as a base, BEA’s “GDP by Industry” reports show “information industries” — internet, computer networks, media – up by 36% or by $380 billion in real, inflation-adjusted terms, as the digital economy has grown about four times as fast as the rest of the economy. A related BEA category, with the vague and expansive title of “miscellaneous professional, scientific, and technical services,” is up 32% or by $300 billion. Elsewhere, real estate is up by 17% or (given its large original base) $410 billion), manufacturing by 12% or $200 billion, retail likewise by 12% and $150 billion; restaurants and food service, are still not fully recovered from their especially severe pandemic shock, are down by -1% or by $6 billion.
Science: Finally, looking ahead, the research-and-development workforce has boomed. Since January 2021, 150,000 new R&D scientists have joined the sci/tech workforce — 885,000 now, 735,000 then. If you start at pre-COVID January 2020, the jump is even higher: 190,000 net new lab rats. Figures for R&D spending take a few years to tabulate, but the National Science Foundation’s reports show U.S. R&D spending up from 3.0% of GDP in 2019 to 3.4% in 2022 — about 30% of all world research, and relative to the economy the U.S. ranks fourth in the world, behind only South Korea, Taiwan, and Sweden. All this hints at new inventions and rising productivity in the late 2020s and early 2030s.
So: To answer the basic question, yes, we do seem better off: a larger economy, with inflation down after the Treasury and Federal Reserve’s successful pandemic-aftermath macro management; more and better-paid workers and unemployment rates low; faster income growth in the lower tiers of the income tables; and reason for optimism about what’s coming next. The country is by no means short of problems to fix and policies that could be improved or replaced. But as the campaign season nears its end, some of the country’s largest risks come from bad ideas — trade and security isolationism, for example — or problems left untended such as long-term debt buildup. Or, put another way, from costly mistakes that voters can prevent, and from long-term challenges governments can address if they choose. In general, a pretty good record, and lots of reasons for optimism.
Ed Gresser on the risk of the Trump campaign’s economic and political isolationism, trade and hourly-wage America, and Vice President Harris’ opportunity.
Using currency-basis comparisons (current 2024 dollars, so the U.S.’ figure is slightly larger than the 2023-dollar estimate above), here’s their data on the U.S. in the larger world economy of 2024:
World
$110.4 trillion
United States
$28.8 trillion
European Union
$19.0 trillion
China
$18.5 trillion
Latin America & Caribbean
$7.0 trillion
Middle East & Central Asia
$5.0 trillion
Japan
$4.2 trillion
ASEAN-10
$4.1 trillion
United Kingdom
$3.5 trillion
India
$3.9 trillion
Canada
$2.2 trillion
Russia
$2.1 trillion
Korea
$1.8 trillion
Australia
$1.8 trillion
Sub-Saharan Africa
$1.5 trillion
All Other
$3.7 trillion
This year’s 26.2% U.S. share of world output is up from the 25.5% share of 2020, and the 24.6% share of 2019, reflecting the relatively stronger U.S. recovery after the COVID pandemic and also relatively high dollar values vis-à-vis other currencies. Note that this currency-basis approach, affected by foreign exchange rates, gives the U.S. an especially large GDP share, though. The alternative “purchasing-power parities” (avoiding currency-value distortions, and trying to calculate a world in which basic services cost as much in lower- and middle-income countries as in wealthier countries) makes the world economy much bigger — $187 trillion, with China, India, Latin America, ASEAN, Africa, and the Middle East all larger — while the U.S. count is identical and the EU, UK, Canada, Japan, Australia, and Korea pretty much the same.
The global App Economy was born 16 years ago, in July 2008, when Apple unveiled the first App Store. Soon after, Google opened the Android Market, which later became Google Play. In this way, Apple and Google created a whole new global market for mobile applications, leading to an unprecedented wave of mobile apps in gaming, entertainment, social media, finance, e-commerce, productivity, health, and other areas.
In addition to benefiting smartphone users, the App Economy has become a potent source of job growth worldwide and in Argentina. Starting from zero 16 years ago, the Progressive Policy Institute (PPI) estimates that Argentina’s App Economy includes 28,000 workers as of September 2024. These include workers who help develop, maintain, and support mobile applications and keep them safe and secure.
One of the hottest new areas of the App Economy has been the application of artificial intelligence (AI) to mobile apps. We will see a wide variety of AI-enabled mobile applications developed to improve efficiency and userfriendliness in areas such as health care, manufacturing, agriculture, mining, and government. Such applications of AI to mobile apps may be easier and quicker to develop than more massive “foundational” systems, such as ChatGPT and its competitors.
From the perspective of Argentina — which is fighting a serious economic downturn as of the date of this paper — this trend offers new opportunities for the country to participate in the global tech boom. President Javier Milei, who took office in December 2023, has been encouraging investment and hiring by global tech firms and positioning Argentina as a potential global AI hub. One way Milei’s effort could succeed is by using the combination of AI and the App Economy to help boost the IT sector
This paper takes an initial look at the potential convergence of AI and the App Economy in Argentina. First, the paper estimates the number of workers employed in Argentina’s App Economy, using a methodology we have applied globally. We estimate the size of the iOS and Android ecosystems and give examples of App Economy jobs in Argentina. Second, the paper estimates the number of workers employed in AI-related jobs in Argentina using the same methodology and gives examples of AI-related jobs. Third, the paper discusses how AI can help grow Argentina’s App Economy.
