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Reframing the 2020 Health Care Debate

Posted on by The Progressive Policy Institute

“Health care and poverty are inseparable issues and no program to improve the nation’s health will be effective unless we understand the conditions of injustice which underlie disease. It is illusory to think that we can cure a sickly child and ignore his need for enough food to eat.” Robert Kennedy, 1968

Reframing the 2020 Health Care Debate by the Honorable John A Kitzhaber, M.D.

Last month’s Democratic debates demonstrate how central health care will be in the 2020 election. Indeed, health care, more than any other issue, propelled the Democrats to regain control of the House of Representatives in 2018. Whether the upcoming election leads to meaningful relief for the millions of families struggling under the escalating financial burden of medical care, however, depends largely on how the issue is framed and on the clarity with which we see our policy goal and the steps necessary to achieve it.

Today the vast majority of dollars in our health care system are spent on the after-the-fact treatment of acute and chronic medical conditions rather than on investments that could prevent these conditions in the first place.

If we could reduce our health care spending from the current 18 percent of the GDP to the 12 percent average of most other industrialized nations, it would free up well over a trillion dollars a year for the social investments that actually improve health (1).

What concerns voters most about health care and, by a wide margin, is the cost — but, and this is important — not the cost of the overall U.S. health care system, but the cost to them as individuals (2). Most voters believe, to some extent in the abstract, that everyone should have access to affordable health care, but they are far more concerned that they as individuals have access to affordable health care. This is understandable because, at the end of the day, health care is intensely personal.

And yet, it is fair to say that nobody wants to need medical care or to be a “patient.” When you are sick or injured it is important that you have timely access to care at a cost you can afford, but we also know that among the factors contributing most to lifetime health status, our medical system is a relatively minor contributor. Far more important are things like healthy pregnancies, affordable housing, nutrition, stable families, good jobs, safe communities and the other “social determinants of health” (3),(4).

Therefore, our policy goal should be to improve the health of our people through a system that is financially stable, ensures that all Americans have timely access to effective, affordable, quality medical care; and also makes, strategic long-term investments in the social determinants of health. A system that can achieve this goal must include five core elements: 1. Universal coverage; 2. an affordable defined benefit; 3. a delivery system that assumes risk and accountability for quality and outcomes; 4. a global budget indexed to a sustainable rate of growth; and 5. savings reinvested upstream in the community to address the social determinants of health.

A system that incorporates these elements can take many forms, but without all five we cannot achieve our goal of improving health care in a financially sustainable way.

The most significant obstacle to achieving this goal is the total cost of care and the structure of the delivery system that is driving it. Health care is the only economic sector that produces goods and services none of its consumers can afford. Such a system only works because the care for individuals is heavily subsidized—increasingly with public resources—either directly through public insurance programs like Medicare and Medicaid; or indirectly through the tax exclusion for employer sponsored health insurance; and the public subsidies for those purchasing insurance through the Affordable Care Act (ACA) exchanges.

For decades, the national health care debate has been focused on these subsidies—on who pays them and how much they pay—rather than on why health care costs are so much in the first place. The political paralysis around this issue is due largely to the fact that neither Republicans nor Democrats assume any change in the health care delivery model: we either pay for it or we don’t, creating a false choice between cost and access. Republicans want to spend less on health care (e.g. “repeal and replace” the ACA) while Democrats want to spend more (e.g. Medicare for All). Neither approach directly addresses the total cost of care.

The burden of rising health care costs on individuals manifests itself in a variety of ways: rising insurance premiums and deductibles, short-term insurance policies that actually cover very little, the denial of coverage based on preexisting medical conditions, surprise billing, and the high cost of prescription drugs. It is not surprising, then, that most Democratic voters blame insurance companies and drug companies for the high cost of care. Generally, consumers do not blame health care providers, the delivery system itself, or the many new health care related startups and huge private equity firms that are making a profit off the $3.5 trillion health care budget (5).

And while Democrats are right to go after short-term junk health insurance policies, huge drug price increases, and surprise health care bills, these fixes only address shortcomings with health insurance rather than the total cost of medical care. The total cost of care is the primary driver of increases in insurance premiums as well as the increase in copayments and deductibles.

Since none of the current proposals address the systemic cost of care, they cannot prevent cost shifting onto individuals. All of these short-term fixes are worth making, but they are treating symptoms of the problem, not the problem itself.

The problem is illustrated by viewing our health care system through the lens of five questions or “variables”: 1. who is covered (eligibility); 2. what is covered (benefit); 3. how much is covered (cost-sharing—e.g. premiums, copayments, deductibles); 4. how much are we paying (reimbursement); and 5. how much is borrowed (debt financing).

When the total cost of care exceeds the ability/ willingness of the major third-party payers (government and private sector employers) to pay for it, instead of seeking to reduce the cost of care, payers use one of five strategies to shift the cost to individuals who cannot afford it; or to future generations. These strategies include: reducing eligibility, reducing benefits and/or raising premiums, copayments and deductibles— all of which shift cost to individuals; reducing provider reimbursement which often results in efforts by providers to avoid caring for those who cannot pay; and pushing the cost of care into the national debt, shifting cost to future generations.

Cost shifting is the way we avoid directly confronting both the reality of fiscal limits and the fact that health care in the United States has simply become unaffordable for individuals, employers and the government. Cost shifting does not reduce the total cost of medical care. Furthermore, at 18 percent of our GDP, the cost of medical care, more than anything else, is undermining our ability to invest in children and families, housing, economic opportunity and the many other things that contribute to health. This is the primary reason why the U.S. has such embarrassingly poor population health statistics when compared to other industrialized nations that spend far less on medical care and far more on the social determinants (6).

The one indispensable step in moving toward a realistic and effective solution is to cap the total cost of care through a global budget indexed to a sustainable annual growth rate, while requiring providers to assume financial risk and accountability for quality and outcomes within that budget. Taking this step will fundamentally shift the debate from the subsidies to the delivery system. As long as we allow an ever-increasing share of our public resources to be spent paying whatever prices are demanded—whether for prescription drugs, hospital care or to grow profits of private equity funds—American families will continue to struggle under the burden of medical costs and this crisis will deepen.

Capping the total cost of care will allow us to expand coverage for a basic benefit package to all Americans (universal coverage); and to begin to invest upstream in the social determinants of health. The only way to expand access and to make room in the federal budget for serious investment in the social determinants of health is to reduce the total cost of care.

We already have two very successful examples of how global budgets work to bring down the total cost of care: Oregon’s Coordinated Care Organizations, which manage the state’s Medicaid program, and Medicare Advantage, that today serves more than 20 million seniors. Under these care models, providers receive a fixed amount of money for a defined population, without sacrificing quality (7). If the global budget is exceeded in any given year, the providers are at financial risk for the difference. In short, these care models begin to change the system incentives from rewarding sickness to rewarding wellness.

Extending these models more broadly across the U.S. health care system will reduce the total cost of care and free up resources to invest in the social determinants of health. It’s not necessary at this point in the 2020 election cycle to be prescriptive about how providers, insurers and other stakeholders in the current system will operate under a global budget cap indexed to a sustainable growth rate, but setting a target effective date for such a cap would fundamentally change the nature and the focus of the health care debate from where we want to go to how we are going to get there.

That is exactly what President John F. Kennedy did in 1962, when he challenged the nation to put a man on the moon. He did not give us a roadmap, he gave us a destination and, in so doing, unleashed American ingenuity and technological innovation to serve a common cause. Fifty years ago, this month, we achieved that goal. We succeeded in going to the moon because we were clear on our destination and because we imagined it; because the story preceded the accomplishment.

Surely, we can imagine linking the total cost of medical care to a sustainable growth rate within the next few years, then work backwards to create a health system that meets the objectives of both Democrats and Republicans: expanding coverage and improving health and quality; while reducing the rate of medical inflation through fiscal discipline and responsibility.

That’s the challenge. It’s not a challenge of technology—it is a challenge of political will and human compassion. And it’s not nearly as difficult as going to the moon.

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ENDNOTES

  1. Stuart M. Butler, Dayna Bowen Matthew, and Marcela Cabello, “Re-balancing Medical and Social Spending to Promote Health: Increasing State Flexibility to Improve Health Through Housing,” February 2017. https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2017/02/15/re-balancing-medical-and-social-spending-to-promote-health-increasing-state-flexibility-to-improve-health-through-housing/
  2. Ashley Kirzinger, Cailey Muñana, Bryan Wu, and Mollyann Brodie, “Data Note: Americans’ Challenges with Health Care Costs,” The Henry J Kaiser Family Foundation, June 11, 2019, https://www.kff.org/health-costs/issue-brief/data-note-americans-challenges-health-care-costs/
  3. Len M. Nichols and Lauren A. Taylor, “Social Determinants as Public Goods: A New Approach to Financing Key Investments in Health Communities,” Health Affaits, August 2018,https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2018.0039
  4. Ara Ohanian, “The ROI of Addressing Social Determinants of Health,” American Journal of Managed Care, January 11, 2018, https://www.ajmc.com/contributor/ara-ohanian/2018/01/the-roi-of-addressing-social-determinants-of-health
  5. Rabah Kamal and Cynthia Cox, “Total health expenditures have increased substantially over the past several decades,” Peterson-Kaiser Health System Tracker, December 10, 2018, https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changedtime/#item-total-health-expenditures-have-increased-substantially-over-the-past-several-decades_2017
  6. Carlyn M. Hood, Keith P. Gennuso, Geoffrey R. Swain, Bridget B. Catlin, “County Health Rankings: Relationships Between Determinant Factors and Health Outcomes,” American Journal of Preventive Medicine, 2015. https://www.countyhealthrankings.org/sites/default/files/Hood_AmJPrevMed_2015.pdf
  7. The Institute of Medicine defines quality as “the degree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.”

Regulatory Reform Could Revitalize Sluggish Business Creation

Posted on by The Progressive Policy Institute

The U.S. economy recently marked 10 years of economic expansion – its longest in history – but there’s an important exception: new business creation. In recent decades, the American entrepreneurial engine has decelerated. Regulatory reform could help revive American entrepreneurship, reducing the burden on new businesses and realizing gains in economic growth. That doesn’t necessarily mean deregulation, but rather streamlining and updating old or obsolete rules to provide entrepreneurs with flexibility in today’s fast-changing world.

New and young businesses are the foundation of the United States’ economy, creating jobs and spreading wealth across our society. “Together, startups and high-growth firms (which are disproportionately young) account for about 70 percent of firm-level gross job creation in a typical year,” write entrepreneurship researchers Decker et al. Many of these young companies go on to become the next generation of small businesses, which employ 48 percent of private sector employees.

Unfortunately, the rate at which new businesses are being created has fallen off in the wake of the Great Recession. While firm deaths have returned to their pre-recession levels, firm births are down 22 percent compared to 2006 levels. And, for the first time since the Census Bureau began collecting data, firm deaths exceeded firm births from 2009 to 2011.

Smart policy can help increase the number of new businesses that are created and the number that scale up, though. Regulation is one area where policy can be made more efficient. A 2017 National Small Business Association survey estimated that the average small business owner spends at least $12,000 every year on compliance, with nearly one in three spending more than 80 hours every year dealing with federal regulation.

We know from research by Victor Bennett and Ronnie Chatterji that many people have entrepreneurial aspirations, but fail at many steps along their path to move to actual business formation. While many fail at early stages, such as basic market research, others undoubtedly run up against these mountainous regulatory costs and say, “not worth it.”

One way to reduce these costs is to focus on the steady buildup of regulation, or regulatory accumulation. The Code of Federal Regulations, where rules promulgated by the federal government are published annually, swelled by 17 percent from 2008 to 2018 alone. While Washington has dozens of agencies that issue new rules, not one institution is dedicated to streamlining the accumulated body of regulations. That’s why PPI proposed the Regulatory Improvement Commission (RIC). The RIC would fill an institutional vacuum in regulation policy by creating a mechanism for the periodic clearing out of obsolete rules.

Modeled on the Base Realignment and Closure Commission (BRAC) and comprised of a bipartisan group of highly qualified stakeholder appointees, the RIC would be an independent commission of eight members, appointed by the President and Congress, with regulatory expertise across industry and government. It would meet as authorized by Congress to review and, following a public comment period of 60 days, draw up a list of 15 to 20 rules for elimination or modification. The package would be sent to Congress for an up-or-down vote, and the RIC would be disbanded. If the proposed changes pass Congress, they would go to the president’s desk for signature or veto.

In 2015, bipartisan groups of lawmakers introduced bills in the House and Senate to establish the RIC based on the BRAC model. House cosponsors included Mick Mulvaney (R-SC), now acting White House Chief of Staff, and Kyrsten Sinema (D-AZ), now a Democratic Senator from Arizona.

Startup-friendly policies such as the RIC can help reduce compliance and opportunity costs, catalyzing a rebound in America’s startup rate and spurring economic growth. Streamlining regulation would help inventors and entrepreneurs spend less time and resources on regulatory compliance and focus instead on delivering goods and services and scaling their enterprises.

Research assistance was provided by Roman Darker, economics intern at the Progressive Policy Institute.

A Preliminary Analysis of Pricing by App Stores

Posted on by The Progressive Policy Institute

Summary

How much do the Apple App Store and Google Play, the two major mobile application stores, charge? The short and obvious answer is that Apple and Google levy a fee of 30% of the revenue from downloading paid apps; 30% of revenue from in-app purchases of digital goods and services; and a lower charge of 15% for renewed subscriptions.

But this answer is at best incomplete, and perhaps wrong. The two major app stores also provide a distribution and download service for millions of “free” apps—including testing them for malware—while charging only a minimal fixed fee to each developer. These free apps can potentially generate a big benefit for consumers and a large return for their owners.

To put it more precisely, the app stores provide a distribution, search and validation service to all app developers and app owners for nearly nothing. This service is the equivalent of a major retailer like Walmart providing free shelf space to millions of different goods owned and sold by other companies.

The average price charged by Apple and Google is therefore much less than the face value of 30%, if we take into account the large number of free apps. Our preliminary scenario analysis suggests that the revenues collected by the app stores could be in the range of 4-7% of the value generated by all apps in the app stores, including both free and paid.

Read “A Preliminary Analysis of Pricing by App Stores”

 

Marshall for Medium: “First Debate Spotlights Democrats’ Vulnerabilities”

Posted on by The Progressive Policy Institute

Bombarded by all-over-the-map questions by no less than five NBC interlocuters, the 10 candidates didn’t have time to go deep on anything.

Nonetheless, the low-key encounter was revealing. On the plus side, all those on the stage showed they are better qualified by intellect and temperament to be president than Donald Trump. On the minus side, the conversation highlighted four large political vulnerabilities Democrats must confront if they are serious about evicting Trump from the White House.

 

Read the full piece on Medium by clicking here. 

Kim for Governing: “Anti-Fluoride Activism is Bad, and Not Just for Public Health”

Posted on by The Progressive Policy Institute

In 1901, a Colorado Springs dentist named Frederick McKay noticed many of his patients had peculiarly mottled brown teeth — but far fewer cavities than the norm. The cause, Dr. McKay determined after years of investigation, was high levels of natural fluoride in the town’s water. His discovery eventually led to the widespread fluoridation of public water systems across America and a dramatic decline in tooth decay over the past 70 years.

Numerous studies have shown the protective effects of adding fluoride to water, especially for kids, and the Centers for Disease Control and Prevention hails community water fluoridation as one of the 20th century’s top 10 public health achievements. State and local budgets have benefited too, thanks to lower public expenditures for dental care.

 

Read the full piece on Governing by clicking here. 

Kim for Medium: “The Next Step in Criminal Justice Reform”

Posted on by The Progressive Policy Institute

For many Americans, one traffic ticket could be all it takes to derail their financial security — and perhaps even their livelihood.

Loathe to raise taxes, many states and cities are increasingly relying on fines and fees — whether for traffic offenses, court costs or misdemeanors such as littering — to fill their coffers. The amounts demanded are often exorbitant, and fall disproportionately on low-and moderate-income Americans who can least afford to pay. In California, for instance, the Lawyers’ Committee for Civil Rights found that a $100 traffic ticket can ultimately cost a motorist as much as $815 after various surcharges, “administrative” fees and late penalties are factored in — a cripplingly large figure even for someone who is relatively wealthy.

 

Read the full piece on Medium by clicking here. 

San Francisco Facial Recognition Ban

Posted on by The Progressive Policy Institute

Wouldn’t you want to shorten the amount of time it takes to go through an airport, or allow concert venues to spot out possible dangerous people, or access a safe with only your face like in the movies? Airports, banks, Walmart, and even our own phones use facial recognition software for identification and security. With this technology that seemingly safeguards our most important information, why has the city of San Francisco banned it?

There are about 50 million surveillance cameras around the US in addition to the millions of cameras we all carry in our pockets (1). With the advancement of technology’s capacities and impacts, those cameras can turn into devices used for facial recognition. Facial recognition software can use video, photos, and real-time footage to detect a face, extract/translate those features into code to be compared to find a match. The databases used to compare the facial recognition software’s findings can come from voluntarily submitted photos users upload for security purposes. Software can also be used for comparing mugshots, driver’s license photos and passport photos. According to the Georgetown Center for Privacy and Law, approximately 117 million people’s photos are included in facial recognition databases (2).

The biggest user of facial recognition software is the government. Law enforcement agencies use facial recognition software for surveillance to find suspects in a crime and track down crime victims. Another example of police use of the technology was in 2015 to find and arrest protesters in Baltimore after the death of Freddie Grey (3). This use of facial recognition software was criticized for impeding on people’s First Amendment right to protest.

In 2019, San Francisco became the first city in the world to ban facial recognition software for local public entities. “It shall be unlawful for any Department to obtain, retain, access, or use: 1) any Face Recognition Technology; or 2) any information obtained from Face Recognition Technology”. The ban only reaches city government agencies, including the San Francisco Police Department (4). The ban does not apply to state and federal government agencies operating within the city, as well as private entities such as Facebook, Apple, and banking institutions.

San Francisco’s decision to ban the technology for local law enforcement agencies was to counteract the many issues with the technology, and its impact on certain communities. The provision cites inequalities in surveillance technology and their impact on civil liberties and civil rights. The bill’s sponsor, Aaron Peskin said its purpose is to “keep law enforcement from a burgeoning technology that has been blamed for inaccuracies — particularly when it comes to identifying minorities — and is largely unregulated in the United States.” (5)

In the case of Baltimore using facial recognition software to identify and arrest protesters after the death of Freddie Grey, a vast majority of the protesters were African-American, and they were exercising their right to protest after a police shooting of an unarmed black man. Many felt the use of the technology was another way for police to encroach on an already marginalized community and continue the breakdown of trust between the police and that community.

The technology itself has issues that impact certain communities. The software has many troubles with the recognition of women and people of color. MIT researcher, Joy Buolamwini, works on the issues with facial recognition software, particularly its weaknesses recognizing women and people of color. Her testing of different facial recognition software finished with 1% of error when identifying white men, but 30% of error identifying women of color (2). The programs also have problems properly identifying transgender people. These misidentifications from facial recognition software have serious, real-life consequences, including incarceration, deportation, and even death.

There are also many concerns with police departments’ use of the technology. Facial recognition software works best when comparing high quality photos with the correct lighting. Unfortunately, many police departments may not have access to those quality photos when searching for a suspect, so they use what they have access to, including sketches and celebrity look-a-likes (2). The technology cannot work properly for policing if these are the images used to identify an individual.

The main problem with facial recognition software and its infringement of civil liberties is that the technology is used without consent and without the need for probable cause. The 4th amendment requires probable cause for a warrant to be issued in order to search a person or their property. A person’s face falls under that guideline, yet there are no regulations as to when/for what reason law enforcement agencies can use facial recognition.

An example of how far facial recognition software could go in relation to civil liberties is China. China is one of the biggest implementers of facial recognition software. The government monitors citizens through some 170 million CCTV cameras. In China, facial recognition software enables citizens to withdraw money, check in at the airport, and pay for goods all with the scan of their face. Though much of the technology is used to streamline daily tasks, the technology is also used for intense surveillance by the Chinese government, recently being implemented in the persecution of muslim minorities. (6)

Law enforcement agencies have pushed back on the San Francisco ban, citing the technology’s use for better policing by using software instead of looking through hundreds of mugshot books in order to identify a suspect. It was useful for the FBI in 2014 when identifying a fugitive living in Nepal (7). It can also be useful for government agencies when identifying disaster victims, helping to inform and unify families (8). Though many law enforcement agencies argue for using facial recognition, many understand the negative impacts of the technology and welcome regulation and even a moratorium until the issues relating to misidentification can be resolved.

Many of the issues with facial recognition can be solved over time, including teaching the software to better identify women, people of color, and transgender people with more diverse data sets and more people from those communities contributing to the technology’s creation. There should be more regulation of the technology, including requiring consent and probable cause. Policing with facial recognition cannot be 100% effective unless departments create policies that dictate what types of images are being fed into the software and requiring more evidence to prove a person’s guilt. Facial recognition can be a great supplementive tool for convictions, but it should not be the sole form of obtaining evidence.

In addition to San Francisco, other governments in the US and around the world have also begun the process of regulating facial recognition software, but none to the extent of San Francisco’s ban. In 2008, Illinois passed the Biometric Information Privacy Act, which requires private entities to obtain explicit consent from the consumer before using their biometric data (including their face) (9). Illinois’ law only pertains to private entities and does not apply to the government. This law was used as a reference for the European Union’s General Data Protection Regulation (GDPR) which also prohibits the processing of personal data (genetic data and biometric data) unless “the data subject has given explicit consent to the processing of those personal data for one or more specified purposes”(10)

Oakland and the state of Massachusetts both have bills in the works, similar to San Francisco, that would ban the use of facial recognition software by government officials. A bill introduced to Congress by Senators Roy Blunt (R-MO) and Brian Schatz (D-HI) would also regulate the use of facial recognition software on a federal level.(Citation)

There are a number of unknowns with this new technology and San Francisco’s ban is just the start to a global conversation on the uses and impacts of facial recognition. I will be keeping an eye out for new developments and forthcoming legislation relating to it. Governments need to catch up to ever growing and evolving technology and the impact on citizens’ lives.

 

 

 

References:

1. Gonzalez, Oscar. “Millions of Surveillance Cameras Could Become AI Security Guards, ACLU Warns.” CNET, CNET, 13 June 2019, www.cnet.com/news/millions-of-surveillance-cameras-could-become-ai-security-guards-aclu-warns/

2. Clare Garvie et al., “The Perpetual Line-Up: Unregulated Police Face Recognition in America,” Center on Privacy & Technology, Georgetown Law, Oct. 18, 2016

3. Facial Recognition Technology- Hearing before Oversight and Reform Committee. House of Representatives, 116th Congress (2019)

4. San Francisco Board of Supervisors, Administrative Code – Acquisition of Surveillance Technology. 190110, Enacted 7/1/2019

5. Thadani, Trisha. “SF Could Ban Facial Recognition Software – Opinion Is Divided over Whether That’s Good.” SFChronicle.com, San Francisco Chronicle, 14 May 2019, www.sfchronicle.com/politics/article/SF-could-ban-facial-recognition-software-13842657.php.

6. The Economist, director. China: Facial Recognition and State Control | The Economist. YouTube, YouTube, 24 Oct. 2018, www.youtube.com/watch?v=lH2gMNrUuEY.

7. “Long-Time Fugitive Neil Stammer Captured.” FBI, FBI, 12 Aug. 2014, www.fbi.gov/news/stories/long-time-fugitive-neil-stammer-captured.

8. Broach, John, et al. “Use of Facial Recognition Software to Identify Disaster Victims With Facial Injuries.” Disaster Medicine and Public Health Preparedness, vol. 11, no. 5, 2017, pp. 568–572., doi:10.1017/dmp.2016.207.

9. Illinois General Assembly, Civil Liabilities: Biometric Information Privacy Act. (740 ILCS 14/) 2009

10. EU General Data Protection Regulation (GDPR): Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016. Chapter II Article 9.

11. United States. Cong. Senate. Commercial Facial Recognition Privacy Act of 2019. 116th Cong. S.847.

Osborne for The Washington Post, “‘Privatization’ doesn’t make charter schools bad. It makes them like Obamacare and Medicare.”

Posted on by The Progressive Policy Institute

When Sen. Bernie Sanders (I-Vt.) recently unveiled his education reform plan, it predictably castigated charter schools, claiming that they were “privatizing public schools.” Sanders joined a long line of leaders who tar charters with the privatization brush. Before, during and after the Los Angeles teachers strike last winter, union President Alex Caputo-Pearl did so repeatedly. “The charter school movement,” he declared, is “a vehicle for billionaires to privatize the system and undermine the public district.”

His teachers constantly repeated the charge. Even Rep. Alexandria Ocasio-Cortez (D-N.Y.), who represents the Bronx and part of Queens, threw in her two cents, tweeting in support of “these LA teachers striking against privatization.”

National union leaders Randi Weingarten of the American Federation of Teachers and Lily Eskelsen García of the National Education Association regularly add to the chorus. From the picket line in Los Angeles, Eskelsen García went so far as to announce that “the billionaires who are behind this [chartering], the venture capitalists, the Wall Street guys, are out to make money on public schools.” (For the record, California outlawed for-profit charters last year.) And in the District of Columbia, Washington Teachers’ Union leaders raised the issue against Chancellor Lewis D. Ferebee during his nomination hearings. “My real concern here is privatization of public education,” Washington Teachers’ Union executive board member Signe Nelson told the D.C. Council.

Continue reading at The Washington Post.

The Economic Implications of State-Based Chemical Regulation: Two Approaches

Posted on by The Progressive Policy Institute

We are seeing two important, and in some ways, potentially contradictory trends in manufacturing these days. On the one hand, there are signs of a transformation and rebirth in domestic manufacturing. Technological innovations such as 3D printing and robotics are lowering the cost of manufacturing at home, while global trade tensions are leading companies to shorten their supply chains (1). This raises the possibility of a new round of job creation in local domestic manufacturing.

At the same time, states are increasingly moving to tighten their oversight and regulation of chemicals, especially those in consumer products. For example, the state of Washington just adopted “The Pollution Prevention for Our Future Act,” billed as the strongest such measure in the country. The New York State legislature has recently passed legislation regulating chemicals in children’s products. In the same vein, Vermont’s legislature just passed a bill strengthening and broadening existing rules for disclosure of chemicals in children’s products.

Increased attention to safety is not a bad thing. We can have innovation and safety in manufacturing, while still encouraging growth and jobs.

But let’s be honest: state governments do not have the budgetary resources to assess the risk of hundreds of chemicals. As a result, state regulators and legislatures are reaching out globally and relying on lists of chemicals assembled by highly trusted authorities around the world, in addition to any information from the U.S. federal government. For example, in the U.S., states such as Maine, Minnesota, and California, among others, have relied on the E.U.’s conclusions about certain chemicals when crafting their Chemicals of Concern lists, which prioritize chemicals for further reporting, study, and/or possible regulation. Canada and Australia also have agencies that are well respected in assessing potential risks from chemicals.

In drawing on other parts of the world, states must be aware that these authorities can analyze the same data and come to different –and even conflicting – conclusions depending on the principles their regulatory regime is founded on. The E.U., for example, tends to take a “hazard-based” approach founded on the precautionary principle, which holds that “when an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically” (2). The precautionary principle generally leads to more skepticism about innovative materials and technologies. As a result, the E.U. identifies chemicals as “Substances of Very High Concern” (SVHC) purely on the basis of their hazardous properties, such as being very persistent and very bioaccumulative (vPvB).

By contrast, Canada, Australia, and the U.S. have tended more towards a risk-based approach to regulation. A risk-based approach focuses not only on the theoretical potential for harm, but actual harm. If no actual harms can be measured, the action or product is allowed, and no regulatory action is taken.

Thus, a state’s choice of reference for regulating chemicals is not purely a technical matter. It is important for states to realize the different approaches to chemicals regulation at hand, and the economic consequences the approach they opt for could have. Chemicals are a sizeable industry in the U.S. economy, with total sales of $493.4 billion in 2017, according to a 2018 industry report (3).

More importantly, the approaches states take to chemicals regulation has powerful implications for jobs and economic growth in the future. The next wave of tech-based innovation will come in such physical industries as manufacturing and will be driven in part by new materials and new processes. Excessively stringent regulatory regimes or blacklisting certain chemicals will unnecessarily squelch innovations that could establish a new digital manufacturing sector that creates local jobs.

This paper will first describe how states use their limited resources to focus their chemical regulation. We will then contrast the precautionary principle with the risk-based approach, using siloxanes as an example. Specifically, as the Progressive Policy Institute wrote in a previous paper, siloxanes octamethylcyclotetrasiloxane (also known as “D4”), decamethylcyclopentasiloxane (also known as “D5”), and dodecamethylcyclohexasiloxane (also known as “D6”) have been assessed by the E.U., Canada, and Australia for their impact on human health and the environment (4). In the U.S., states such as Maine, Minnesota, and California, among others, have relied on the E.U.’s conclusions when crafting their own Chemicals of Concern lists. Contrastingly, Canada has chosen not to restrict the use of siloxanes, and other states, including Washington State and Oregon, have removed siloxanes from their lists due to the lack of evidence of real-world harm.

Finally, we will examine the economic implications of the differing regulatory approaches.

 

The Limited Resources of States

State governments simply do not have the budgetary resources to test chemicals themselves. As a result, they rely on federal or international governments to conduct the scientific research that forms the rationale for much of their health and environmental legislation and regulation. After all, why would states duplicate research that those governments have already done?

One example of this is in state Chemicals of Concern lists, where some U.S. states have imported lists of chemicals from trusted sources such as the U.S. federal government, the E.U., and Canada. For instance, Maine includes chemicals on its Chemicals of Concern list that have been listed by another authoritative governmental entity as being harmful to human health or the environment (5). These entities include the U.S. Department of Health and Human Services (HHS), Food and Drug Administration, Centers for Disease Control and Prevention, EPA, and the European Chemicals Agency, among others.

Similarly, Minnesota’s Chemicals of High Concern list was sourced by “reviewing the hazard characteristics of chemicals studied by other state, national and international agencies” (6). These agencies include Maine’s Chemicals of Concern List, the U.S. HHS, the U.S. EPA, and the European Parliament’s Authorization List under the REACH regulation (7).

California imports chemicals for its Candidate Chemicals List based on their inclusion on other authoritative lists, such as the E.U.’s substance of very high concern (SVHC) list, Canada’s Domestic Substances List, and the U.S. EPA’s Integrated Risk Information System, among others (8).

Vermont’s existing Chemicals of High Concern to Children list requires the Vermont Health Commissioner to review the list every two years to determine if additional chemicals should be added, considering “designations made by other states, the federal government, other countries, or other governmental agencies,” including the E.U.’s SVHC list (9). The state’s new legislation would make it even easier to add chemicals to the list.

Washington State uses “authoritative sources that identify chemical toxicity…and evidence of potential for exposure” to craft its Chemicals of Very High Concern to Children list.10 The authoritative sources include the U.S. EPA’s Integrated Risk Information System, the E.U.’s SVHC list, and the International Agency for Research on Cancer, among others.

And Oregon’s Health Authority uses “guidance developed by the State of Washington and other federal, state and nongovernmental organizations” to create its Chemicals of Concern for Children’s Health list (11).

 

The Risk-Based Approach vs. The Precautionary Principle

However, the importation of chemicals lists from different authoritative sources can lead to different outcomes for states, depending on the principles the regulatory regime of the authoritative source is founded on. Regulation in the E.U. tends to be rooted in a hazard-based approach that is founded on the precautionary principle, or the belief that “when an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically” (12). This hazard-based approach is consistent with the E.U.’s skeptical approach to innovation in general.

Conversely, Canada and Australia tend to opt for a risk-based approach where all available scientific evidence is evaluated. A risk-based approach requires harms to be identified and measured. Harms can include impact to human health, the environment, or to the economy. If no harms can be identified, the product or action is permitted to continue, and no regulatory action is taken.

Take for example siloxanes, which the E.U. added to its SVHC list based on characterizing them as “persistent, bioaccumulative and toxic” (PBT) or “very persistent and very bioaccumulative:” (vPvB). Some states have drawn on the E.U.’s assessment when creating their own chemicals of concern lists (13). California includes siloxanes D4, D5, and D6 on its Candidate Chemicals List, based on the siloxanes’ presence on the E.U.’s SVHC list (14,15,16,17).

Maine uses the presence of a chemical on its Chemicals of Concern (COC) list that meets additional toxicity and exposure criteria for inclusion on its Chemicals of High Concern (CHC) list (18). As a result, D4 has been included on the state’s most recent 2015 CHC list based on the E.U.’s toxicity assessment (19). Similarly, D5 has remained on Maine’s Chemicals of Concern list based on E.U. findings. Contrastingly, D6 was removed from Maine’s COC list because of the lack of assessments by authoritative institutions (20).

In Minnesota, D4 was included on its most recent 2016 Chemicals of High Concern list based on appearing on Maine’s 2015 Chemicals of High Concern list.21 And D4 is listed on Vermont’s list of Chemicals of High Concern to Children. Like Maine, the inclusion is based on its assessment by the E.U (22).

Contrastingly, Canadian regulators initially found D4 and D5 to be harmful to the environment and, as such, both substances could possibly have been subject to regulatory measures to lessen the substances’ impact on the environment (23, 24). However, an independent review board of experts analyzed a wealth of available data, including studies that showed the real-world behavior of D5, and concluded “there is no evidence to demonstrate that Siloxane D5 is toxic to any organism tested up to the limit of solubility in any environmental matrix” (25).

In terms of D4, a government-funded environmental monitoring study, which measured real-world concentrations of D4, D5, and D6 in the environment, found very low levels of D4 in Canadian surface waters (26). Rather than restricting or banning the substance’s use in consumer or industrial products, the Canadian government required certain facilities that use D4 to implement pollution prevention plans (27).

Australian regulators came to similar conclusions when they determined that product restrictions or bans on D4, D5, and D6 were not necessary because evidence demonstrated that “[t]he direct risks to aquatic life from exposure to these chemicals at expected surface water concentrations are not likely to be significant” (28).

Similarly, some states have revised their Chemicals of Concerns lists, based on additional study by other authoritative bodies. Washington State initially included D4 on its Chemicals of High Concern to Children (CHCC) list based on its inclusion on the E.U.’s priority list for Category 1 Endocrine Disruptors. But following a detailed review of the available evidence, including a study funded by the U.S. National Institutes of Health, the Washington State Department of
Ecology concluded (30):

“D4 is present on the European Commission (EC) Category 1 list, based on a single study, showing an increase in uterine weight (McKim et al, 2007). However, a more recent study shows no effect on uterine weight by D4 (Lee et al, 2015). These mixed results, along with biomarker and in vitro data for D4 (He et al, 2003; Quinn et al, 2007; Lee et al, 2015) are not sufficient for CHCC listing…D4 is not listed by any of the other CSPA authoritative sources. D4 does not meet the CHCC listing criteria” (31).

And, because Oregon’s list is primarily sourced from Washington State’s list, Oregon also removed D4 from its High Priority Chemicals of Concern for Children’s Health list (32).

The authoritative sources that states use when crafting their own chemicals of concern lists has resulted in binary outcomes. A regulatory approach founded on precaution (such as California, Maine, and Minnesota have imported) inherently prohibits innovation. States like California, Maine, Minnesota, and Vermont, who have crafted their lists from inclusion based on the E.U.’s Category 1 Endocrine Disruptor program or SVHC lists, have taken a step toward identifying the chemicals as priority chemicals, putting siloxanes or products containing them on the road to regulation and potential ban.

Moreover, manufacturers do not want to be associated with any listed chemicals, so they stay away from them even if chemicals have not been officially banned.

For example, in Vermont, manufacturers of children’s products using chemicals of high concern to children are required to report to the state when the chemicals are used in a significant amount, and the law allows the Health Commissioner to consider banning the sale of products including the chemical (33).

In California, inclusion on the Candidate Chemicals List is an action toward listing products as a “priority product,” which would require businesses manufacturing the siloxanes to notify the California Department of Toxic Substances Control (DTSC) if their product is listed. The designation would also allow the DTSC to take other regulatory actions such as limiting the siloxanes’ use or requiring companies to replace it with an alternative (34).

Meanwhile, Washington State removed siloxanes from its list after taking a “weight of evidence” approach and analyzing all available evidence for real-world harm to human health or the environment. This approach permits advancements in innovation and growth to be realized unless evidence of real-world harm can be found.

 

Economic Implications of Chemical Regulation

The regulatory approach states take to silicones regulation has implications for jobs and economic growth not just today, but also in the future. Indeed, silicones are an input in many industries including construction, electronics, health care, household products, renewable energy technologies and personal care products, to name a few. A 2016 industry report estimated total sales of silicones products in the Americas to be $3.1 billion in 2013, with the highest consuming industries being industrial processes, construction, and personal care and consumer products (35). Restricting these materials will raise prices for both manufacturers and the industries that utilize silicones.

What’s more, the rebirth of manufacturing jobs in the U.S. will rely on new technologies such as 3D printing, which themselves rest on the creation of new and reformulated materials. As the Progressive Policy Institute (PPI) pointed out in a 2018 paper, “the range of materials that can be 3D printed is constantly expanding. Desktop Metal is expected to come out with a metal 3D printing system for mass production in 2019. HP plans to launch a line of 3D printers that produce metal objects, an expansion from the company’s existing 3D printers that produce plastic-based products” (36).

Take German chemical company Wacker Chemie for example, who in 2016 discovered how to 3D print silicones, a process that requires heating and binding a material that is naturally heat-resistant to manufacture goods (37). This innovation will open up new markets for manufacturers in critical areas of application such as medicine, where silicone is considered to be bio-compatible and durable. Silicone 3D printing also enables manufacturers to cut production costs, become more efficient, and enable new business models upon which new U.S. manufacturing jobs would be based.

New and reformulated materials will also be needed to revitalize the construction sector, where productivity growth has lagged and the cost of construction has doubled since 2000, as PPI wrote in a 2017 report (38). One of the contributors to rising prices in the sector was the cost of materials, as certain asphalt products, paving mixtures, and steel products are nearly twice as expensive today as they were in 2000. Innovation in materials would help revitalize productivity and economic growth in the sector.

If states move to blacklist or even prohibit silicones based on the E.U.’s lists rooted in the precautionary principle rather than on real-world scientific evidence, that is not a good sign for the regulatory attitude toward new materials with less of a track record.

Indeed, the broader danger is that a strict precautionary approach to chemical listing
and regulation, as would be implied by tighter regulation of silicones, would have negative implications for the rebirth of manufacturing jobs in the U.S. After all, under states importing lists from the E.U., the companies that manufacture and use new materials would have to be able to conclusively prove their lack of impact on human health and the environment in order to continue using them.

 

Conclusion

State governments do not have the budgetary resources to test or evaluate chemicals themselves. As a result, they rely on national and international governments to conduct the research and assessments that form the basis of health and environmental regulation. But, depending on the underlying principles of the authoritative source’s regulatory regime, states could end up with different conclusions.

Siloxanes provide a prime example of these differences in approach. The E.U. has designated them as substances of very high concern and have moved to restrict the use of silicones in certain products, based on being “very persistent and very bioaccumulative.” By contrast, Canada and Australia have taken a weight of evidence approach, analyzing all the available evidence and requiring real-world harm to the environment or human health before taking regulatory action.

The result has led to different outcomes. While states relying on the E.U.’s SVHC list and related criteria have put D4, D5, and D6 on a path to regulation, states that have taken a weight-of-evidence approach similar to Canada and Australia have removed silicones from their Chemicals of Concern list and allowed the silicones unrestricted in the marketplace. If states are to develop Chemicals of Concern lists at all, state policymakers should consider basing those lists only on authorities that evaluate chemicals utilizing a risk-based approach. This would decrease instances where substances that pose little or no risk, like siloxanes, are blacklisted unnecessarily.

These divergent outcomes have implications for jobs and economic growth today and in the future. Silicones are a multi-billion-dollar industry in the Americas and an input in many goods and services, including industrial processes, construction, healthcare, and personal care and consumer products.

What’s more, the rebirth of manufacturing jobs in the U.S. will rely on new technologies such as 3D printing, which themselves require the creation of new and reformulated materials. Silicones will play a critical role in realizing new materials that will revitalize other industries such as manufacturing and construction, where productivity and job growth has lagged for years.

Indeed, precautionary regulation of silicones by states, rather than risk-based, does not indicate regulators are prioritizing innovation. Rather, it signals negative implications for the revitalization of historically important industries to the U.S. economy.

 

REFERENCES

1) Michael Mandel, “The Trade War Spreads to Mexico, And The Window Opens Wider for Digital Manufacturing,” https://www.forbes.com/sites/michaelmandel1/2019/05/31/the-trade-war-spreads-to-mexico-and-the-window-opens-wider-for-digital-manufacturing/#27a94a784589

2) “Wingspread Conference on the Precautionary Principle,” Science and Environmental Health Network, January 26, 1998.

3) “2018 Elements of the Business of Chemistry,” American Chemistry Council. https://www.americanchemistry.com/2018-Elements-of-the-Business-of-Chemistry.pdf

4) Elliott Long and Michael Mandel, “Science-based Regulation and Innovation: The Silicone Example,” Progressive Policy Institute, May 2018. https://www.progressivepolicy.org/wp-content/uploads/2018/05/PPI_Silicones-Paper-2018.pdf

5) “Chemicals of High Concern Triennial Update Documentation,” Maine Center for Disease Control and Prevention, July 21, 2015.

6) “Toxic Free Kids Act: Chemicals of High Concern – Frequently Asked Questions,” Minnesota Department of Health, July 2010. https://www.health.state.mn.us/communities/environment/childenvhealth/tfka/faq.html#how

7) “Minnesota Chemicals of High Concern List Methodology,” Minnesota Department of Health, July 1, 2010. https://www.health.state.mn.us/communities/environment/childenvhealth/docs/chlist/methodology.pdf

8) “§ 69502.2. Candidate Chemicals Identification,” California Department of Toxic Substances Control. https://dtsc.ca.gov/wp-content/uploads/sites/31/2018/10/69502-2-Candidate-Chemicals-Identification.pdf

9) “No. 188. An act relating to the regulation of toxic substances, §1773.” Vermont Department of Health. https://www.healthvermont.gov/sites/default/files/documents/2016/11/Env_CDP_ACT188_0.pdf

10) “Children’s Safe Products Reporting Rule Rationale for Reporting List of Chemicals of High Concern to Children 2011-2017,” State of Washington Department of Ecology, November 2018. https://fortress.wa.gov/ecy/publications/documents/1804025.pdf

11) “S.B. 478, the Toxic Free Kids Act,” 78th Oregon Legislative Assembly – 2015 Regular Session. https://olis.leg.state.or.us/liz/2015R1/Downloads/MeasureDocument/SB478

12) “Wingspread Conference on the Precautionary Principle,” Science and Environmental Health Network, January 26, 1998.

13) Regulation (Ec) No 1907/2006 Of The European Parliament And Of The Council

14) “Candidate Chemicals List,” California Department of Toxic Substances Control. https://dtsc.ca.gov/scp/authoritative-lists/

15) “Octamethylcyclotetrasiloxane (D4),” California Department of Toxic Substances Control. https://calsafer.dtsc.ca.gov/cms/candidate-chemical/?rid=21382&from=search

16) “Decamethylcyclopentasiloxane (D5),” California Department of Toxic Substances Control. https://calsafer.dtsc.ca.gov/cms/candidate-chemical/?rid=21353&from=search

17) “Dodecamethylcyclohexasiloxane (D6),” California Department of Toxic Substances Control. https://calsafer.dtsc.ca.gov/cms/candidate-chemical/?rid=21352&from=search

18) “Chemicals of High Concern Triennial Update Documentation,” Maine Center for Disease Control and Prevention, July 21, 2015.

19) “Chemicals of High Concern 2015 Triennial Update,” Maine Center for Disease Control and Prevention, July 21, 2015.

20) Kyle Brown, “Silicone regulations evolve globally,” Rubber & Plastic News, April 30, 2018. https://www.rubbernews.com/article/20180430/NEWS/180509999/silicone-regulations-evolve-globally

21) “The 2016 Minnesota Chemicals of High Concern List,” Minnesota Department of Health. https://www.health.state.mn.us/communities/environment/childenvhealth/docs/chlist/mdhchc2016.pdf

22) “Octamethylcyclotetrasiloxane (D4),” Vermont Department of Health. https://www.healthvermont.gov/sites/default/files/documents/pdf/ENV_CDP_556_67_2_Octamethylcyclotetrasiloxane.pdf

23) “Siloxane D4 (Cyclotetrasiloxane, octamethyl-),” Government of Canada. https://www.canada.ca/en/health-canada/services/chemical-substances/challenge/batch-2/cyclotetrasiloxane-octamethyl.html

24) “Siloxane D5 (Cyclopentasiloxane, decamethyl-),” Government of Canada. https://www.canada.ca/en/health-canada/services/chemical-substances/challenge/batch-2/cyclopentasiloxane-decamethyl.html

25) “Report of the Board of Review for Decamethylcyclopentasiloxane (Siloxane D5),” Environment and Climate Change Canada. https://www.ec.gc.ca/lcpe-cepa/default.asp?lang=En&n=515887B7-1&offset=7&toc=show

26) De-Gao Wang, Helena Steer, Tara Tait, Zackery Williams, Grazina Pacepavicius, Teresa Young, Timothy Ng, Shirley Anne Smyth, Laura Kinsman, and Mehran Alaee. “Concentrations of cyclic volatile methylsiloxanes in biosolid amended soil, influent, effluent, receiving water, and sediment of wastewater treatment plants in Canada,” Chemosphere, November 2012.

27) “Siloxane D4 in industrial effluents: pollution prevention planning notice,” Environment and Climate Change Canada. https://www.canada.ca/en/environment-climate-change/services/pollution-prevention/planning-notices/performance-results/siloxane-d4-industrial-effluents-overview.html

28) https://www.nicnas.gov.au/chemical-information/imap-assessments/imap-assessments/tier-ii-environment-assessments/cvms

29) “Children’s Safe Products Reporting Rule: Rationale for Reporting List of Chemicals of High Concern to Children 2011-2017,” State of Washington Department of Ecology, November 2018. https://fortress.wa.gov/ecy/publications/documents/1804025.pdf

30) Lee D, Ahn C, An BS, Jeung EB. (2015) Induction of the estrogenic marker calbindn-d9k by octamethylcyclotetrasiloxane. Int J Environ Res Public Health 12:14610-25. https://www.ncbi.nlm.nih.gov/pubmed/14575643

31) “Concise Explanatory Statement, Chapter 173-334 WAC, Children’s Safe Products Reporting Rule: Summary of rulemaking and response to comments,” State of Washington Department of Ecology, September 2017. https://fortress.wa.gov/ecy/publications/documents/1704034.pdf

32) “U.S. – Oregon Amends Toxic-Free Kids Rule,” Intertek, October 02, 2018. https://www.intertek.com/consumer/insight-bulletins/oregon-amends-toxic-free-kids-rule/

33) “Safer Chemicals in Children’s Products Rules: Regulation of Chemical Use in Children’s Products: Chapter 880,” Maine Department of Environmental Protection. https://www.maine.gov/dep/safechem/rules.html

34) “How Do the Priority Products Affect Me?,” California Department of Toxic Substances Control. https://dtsc.ca.gov/scp/how-do-the-priority-products-affect-me/

35) “Socio-economic evaluation of the global silicones industry: regional summary – the Americas,” Global Silicones Council, March 2016. https://sehsc.americanchemistry.com/Socio-Economic-Evaluation-of-the-Global-Silicones-Industry-The-Americas.pdf

36) Michael Mandel, “The Rise of the Internet of Goods: A New Perspective on the Digital Future for Manufacturers,” MAPI Foundation and Progressive Policy Institute, August 7, 2018. https://www.progressivepolicy.org/wp-content/uploads/2018/08/Internetofgoods-reportPPI-2018 .pdf

37) “Silicone 3D Printer – All You Need to Know in 2019,” All3DP.com. https://all3dp.com/2/silicone-3d-printer-all-you-need-to-know/

38) Elliott Long, “Soaring Construction Costs Threaten Infrastructure Push,” Progressive Policy Institute, October 2017. https://www.progressivepolicy.org/wp-content/uploads/2017/10/PPI_Construction_2017.pdf

Marshall for Medium: “Trump’s Biggest Broken Promise”

Posted on by The Progressive Policy Institute

Unlike such polarizing issues as health care, immigration and climate change, repairing and updating our economic infrastructure is something both parties say they are for. Yet somehow our political leaders can’t get the job done.

President Trump often complains about the shabby state of America’s airports, highways and railways. “The only one to fix the infrastructure of our country is me — roads, airports, bridges,” he tweeted just before launching his 2016 presidential bid. “I know how to build, pols only know how to talk!”

Yet Trump’s lack of focus and discipline, along with his clownish political antics, keep sabotaging bipartisan progress on infrastructure. In a meeting with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer in April, Trump proposed to spend $2 trillion on infrastructure. But the deal quickly unraveled as Republican Senators made clear they wouldn’t support gas or other tax increases to pay for it.

 

Read the full piece on Medium by clicking here. 

Bledsoe for Forbes: “Tax Credits for Affordable Electric Vehicles Gain Speed, But Legislation Must Avoid Stop Signs

Posted on by The Progressive Policy Institute

As Congress begins to turn toward tax policies to help clean energy manufacturing, electric vehicle tax credits aimed directly at more affordable vehicles are gaining speed, just as a previous Forbes column and a Progressive Policy Institute (PPI) white paper urged several months ago.

The question now is will EV advocates in Congress, the U.S. auto industry and labor unions get the message and reform tax incentives to benefit middle-income Americans. Such revised tax credits focused on more affordable EVs will increase the chances new incentives become law, and will better allow the U.S. to reap the remarkable economic, health, manufacturing and environmental benefits of EVs. Yet as of now, new EV tax credits have been left entirely out of a so-called “tax extenders” outline circulating among House Ways and Means Committee members.

But a series of new developments are demonstrating that tax credits focused on affordable vehicles are gaining momentum.

 

Read the full piece on Forbes by clicking here. 

Valentine for Washington Informer: “Recognizing Donald Hense”

Posted on by The Progressive Policy Institute

The African American community’s fight for quality education is a 12-months-a-year struggle, and every month — not just Black History Month — is a great time to reflect on what’s working and who is successful in fighting for quality public education in our community. Donald Hense and the Friendship Charter Network are worthy of recognition.

Hense is founder and board chairman of the Friendship Charter Network, the largest African American-led charter school network in America. Hense’s accomplishment is significant, because, while over 80 percent of charter school students are Black or Latino, fewer than 10 percent of charter schools are founded and led by Blacks or Latinos, according to a study by the Brookings Institute.

Read Curtis’ full piece here.

Kim for Medium: “The Dismal State of America’s Working Class”

Posted on by The Progressive Policy Institute

President Donald Trump staked his successful claim to the U.S. presidency with his appeal to the discontents of blue-collar America — i.e., non-college-educated Americans who have perhaps been the hardest hit by globalization and technological change.

The same voters are the target of some of Trump’s Democratic 2020 challengers, most notably former Vice President Joe Biden. Biden, for instance, launched his campaign in a Pennsylvania union hall, declaring himself to be “a union man, period.”

Both Biden and Trump are right to focus their attentions on this group of Americans, whose fortunes have not risen with the overall economy but stagnated or even fallen. Without the benefit of higher education, working class Americans have been unable to compete for jobs demanding specialized technical skills, while the places they live have been hollowed out by shifts in global supply chains and the death of low-skilled manufacturing. So long as these workers feel left out of the economic mainstream, they will remain a potent political force, including in the upcoming 2020 election.

Read the full piece on Medium by clicking here. 

Gerwin for Medium: “Getting Democrats to ‘Yes’ on Trump’s New NAFTA”

Posted on by The Progressive Policy Institute

President Trump is apparently a trade alchemist. He’s taken the core of NAFTA (the “worst trade deal ever”), liberally sprinkled in modern rules from the Trans Pacific Partnership (a “potential disaster”), and created a “brand new” trade deal — the US-Mexico-Canada Agreement (USMCA).

Trump’s hyperbole aside, the USMCA, while not perfect, would do a creditable job of preserving the essential rules of the road for North America’s highly integrated, $22 trillion economy. It would also update the decades-old NAFTA by, among other things, adding enforceable labor and environmental rules, promoting digital commerce, and cutting red tape for small business. Given Trump’s years of railing against NAFTA and repeated threats to terminate the Agreement, this is a positive development.

For the USMCA to enter into force, it must be approved by Congress, including the Democratic-controlled House. In recent weeks, Trump hasn’t been helping this process. Insulting and trying to bulldoze House Democratic leaders and threatening damaging new tariffs on Mexico are hardly constructive strategies.

 

Read the full piece on Medium by clicking here.  

Joe Biden and Amazon

Posted on by The Progressive Policy Institute

Progressives say that they want Corporate America to think long-term rather than short-term: To invest in research and development, to spend more on domestic plant and equipment, and to hire more workers with decent pay and decent benefits. In fact, we’ve designed the tax system specifically to give companies incentives to do that.

That’s why Joe Biden should be applauding Amazon rather than criticizing it. In a tweet on Thursday, Biden wrote: “I have nothing against Amazon, but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth.”

But if there’s any company that’s about investing in America and American workers, it’s Amazon. Amazon was #3 in our 2017 list of the top companies ranked by U.S. capital spending, putting $12 billion into the U.S. economy that year alone. Because of the productivity gains from these investments, the company was able to institute a $15 minimum wage for all full-time, part-time and temporary workers, covering even low-wage states like Tennessee, where the hourly median wage for all workers is less than $17. The productivity gains have also sent the stock price soaring, putting billions of taxable dollars into the hands of Amazon employees in the form of restricted stock units. And Amazon funnels back billions of dollars each year in long-run R&D spending.

The federal tax system is intentionally designed to reward this type of corporate behavior and strong performance. For example, the 2017 changes to the tax code allow a company like Amazon to deduct much of its capital spending from its taxable income right away, lowering its tax bill. R&D spending gets a sizable tax credit from the federal government as well. And the rules covering the exercise of stock grants, while lowering Amazon’s tax bill, could be generating a great deal of personal tax revenue for the government.

Here’s why: A stock grant—which were given to many Amazon employees, and not just the top ranking executives—is more valuable the higher the stock goes. When the employee is granted stock, it is generally taxed by the government as ordinary income. Meanwhile, part of that cash is deducted from the company’s income, just like any other worker pay, lowering the company’s taxable income. In other words, the more successful the company is, in terms of a rising stock price, the more money flows to employees. And the more money that flows to employees, the more taxes are paid by the employees as personal taxes rather than corporate taxes.

So it’s not surprising that a successful company like Amazon that is investing in America is going to have a lower tax rate than workers—the tax system is designed that way. Conversely, a company that is not investing in R&D or capital spending, and has a falling stock price, may be paying a bigger share of its income in taxes—but is it really benefiting Americans?

Progressives may not be satisfied with everything that Amazon is doing. But Biden and other Democrats shouldn’t blame Amazon for investing in America, and then following the rules of a tax system that is specifically designed to encourage corporate investment. It’s good for workers and consumers.

 

PPI Previews Blueprint for Funding America’s Future at Fiscal Summit

Posted on by The Progressive Policy Institute

For the past eight months, PPI’s Center for Funding America’s Future has been developing a fiscal blueprint that would restore America’s commitment to public investment, rebalance the intergenerational compact for 21st-century demographics, and implement pro-growth tax reform that rewards work over wealth. We previewed the plan yesterday at the Peter G. Peterson Foundation’s 10th annual fiscal summit, which convenes economists and policymakers from across the political spectrum to discuss our nation’s fiscal challenges. Six other think tanks also presented their own budget proposals (which can be found here) at the summit: American Action Forum, American Enterprise Institute, Bipartisan Policy Center, Center for American Progress, Manhattan Institute, and Economic Policy Institute.

All seven groups produced plans that would put the national debt on a more sustainable trajectory than it is on under current law, with PPI’s plan achieving the second-largest amount of long-term debt reduction. But even more importantly, we created a unique and innovative blueprint that would once again make fiscal policy an instrument of economic and social progress.

When summarizing the plans, former Acting Director of the Congressional Budget Office Barry Anderson – who helped ensure the plans were being scored using similar methodologies – noted that PPI’s blueprint included the most funding for non-defense discretionary spending. NDD is the category of federal spending that includes most public investments in education, infrastructure, and scientific research. PPI’s blueprint increases funding for these investments that lay the foundation for long-term economic growth by more than 70 percent over current projections. This approach is consistent with a message echoed by the overwhelming majority of summit participants throughout the day: the United States is spending too much on consumption by the present generation and not enough on investment in the next.

The biggest difference among the groups was our approach to health care. Groups on the left proposed to put most or all Americans on government-run health insurance programs, which would give the federal government outsized ability to demand lower prices from providers. Groups on the right, meanwhile, proposed to bet on the private sector’s ability to contain health care costs through increased competition through reforms such as premium support for Medicare. PPI proposed to take the best of both approaches through a default-price health care system, under which the federal government would set benchmark prices but all allow private insurers to continue pursuing innovative ways to finance and manage care in a competitive market.

PPI also pursued a unique approach to reforming Social Security. Whereas most other groups proposed to raise payroll taxes on workers, PPI proposed to repeal the payroll tax entirely and fund the program through other revenue sources. Some groups on the right proposed to give everyone the same Social Security benefit regardless of their earnings history, while most other groups retained the current program structure (in which benefits are awarded based on a beneficiary’s 35 highest-earning years). Under a more egalitarian benefit formula developed by PPI, individuals would earn a flat “work credit” for each year they spent in the workforce regardless of what they were paid, meaning a low-skilled worker and their college-educated boss would receive the same benefit in retirement if they work hard for the same number of years.

Representatives from the other participating think tanks praised elements of this structure during a panel discussion, such as our decision to allow workers to earn up to five years of work credits for time taken out of the workforce to serve as a caregiver. We were also commended for our proposals to protect the economy from future recessions, which included automatic adjustments in spending on public investment and unemployment benefits when growth slows. Additionally, PPI proposed the creation of a dynamic value-added tax, which would be a consumption tax with a standard rate of 15 percent that automatically adjusts downward during recessions (and rises back up following recoveries). These policies together would stimulate demand and consumption when the economy needs it most.

Another PPI tax proposal that received praise was our recommendation to change the primary financing mechanism for highways in the United States from a tax on gasoline, which has been eroded by inflation and rising fuel efficiency, to a tax on vehicle-miles traveled. Nearly all groups, including PPI, agreed that the United States should adopt a carbon tax and repeal step-up basis for taxing inheritances, which allows wealthy investors to pass assets on to their heirs without anyone ever paying taxes on capital gains.

Next month, PPI will publish a full report with more-detailed recommendations than what we were able to present at the summit. In the interim, we thoroughly enjoyed this opportunity to discuss the ideas proposed by all seven participating organizations and promote our vision for a fiscally responsible progressivism that invests in our future without leaving the bill to young Americans. We also enjoyed hearing House Speaker Nancy Pelosi champion her commitment to a similar vision earlier in the day and hope she and the new majority can draw upon our recommendations to create a more prosperous and fiscally sustainable future for all Americans.

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