Category: Uncategorized

CNN: What Democrats should talk about Friday

Posted on by The Progressive Policy Institute

Compared to the Republicans’ presidential cattle calls, the next Democratic debate will be an intimate affair, since the field has shrunk to just three candidates. They will gather in South Carolina Friday for a “candidate forum” moderated by MSNBC’s uber-progressive Rachel Maddow.

That sounds like a recipe for another rousing round of populism, business-bashing and exhortations by Sen. Bernie Sanders to Americans to stop worrying and learn to love democratic socialism. If so, it will spell trouble for the candidate everyone expects to emerge with the prize — Hillary Clinton.

After their first debate in Las Vegas, Democrats congratulated themselves on having been more substantive than the Republicans. True enough: No sentient viewer could confuse the GOP Gong Show with the PBS NewsHour.

But amid all the wonkery, something big was missing — a sense of economic optimism, buttressed by fresh ideas for stimulating innovation and growth. Working Americans want to know how they and their children can find opportunities and win in the global knowledge economy. Instead, Democrats dwelled at great length on how badly they are losing. They had plenty to say about inequality, but almost nothing about how to create new jobs, enterprises and wealth.

Continue reading at CNN.

Mandel on Uber’s True Innovation

Posted on by The Progressive Policy Institute

PPI’s Cheif Economic Strategist Michael Mandel was quoted by Sam Shead of Business Insider regarding the rise and impact of Uber:

Uber’s most significant innovation is not its widely-used taxi hailing app, an economist from a US think-tank said on Tuesday.

Speaking at the FT Innovate conference in London, Michael Mandel, chief economic strategist at the Progressive Policy Institute in Washington DC, suggested that ‘Uber’s real innovation has been in working with governments around the world’ where it has been ‘outstanding.’

Read the article in its entirety at Business Insider. 

Quartz: The TPP could help tiny companies become global exporters

Posted on by The Progressive Policy Institute

Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, was quoted by Ana Campoy of Quartz talking about the importance and influence of Obama’s proposed Trans-Pacific Partnership:

Aside from the lower tariffs that are part of any run-of-the-mill trade agreement, TPP has a whole chapter on international e-commerce, and another on small- and medium-sized companies. The specific provisions of the pact have not been released yet, but a public summary of its contents shows that the TPP ‘could be potentially transformative,’ Ed Gerwin, a trade expert at the Progressive Policy Institute, tells Quartz.

For example, the treaty promises to speed up the process of getting merchandise across borders by making import rules more easily accessible and transparent. If the agreement is approved, express packages would be expedited and customs officials would be encouraged to adopt time-saving measures such as electronic forms and signatures.

‘That stuff is a big deal,’ says Gerwin. ‘Having uniform rules is really important.’”

Read the article in its entirety at Quartz.

How the Ex-Im Bank Serves Main Street

Posted on by The Progressive Policy Institute

On real Main Streets across America, from Idaho to California to Maine, the Ex-Im Bank supports U.S. jobs.

On Main Streets across America, small businesses are a critical source of economic growth and good jobs. Over the past two decades, entrepreneurs and small firms have generated an astounding 65 percent of America’s net new jobs. Small businesses that export drive even greater growth.

According to shipping firm UPS, small firms engaged in global trade are 20 percent more productive and produce 20 percent greater job growth when compared to non-exporters. And because only about 4 percent of U.S. small businesses export, boosting small business trade can pay huge dividends for local communities and the overall American economy.

U.S. Export-Import Bank plays a key role in helping American small businesses seize export opportunities in foreign markets. Over the past four years, it has completed over 12,000 financing transactions for small firms—supporting nearly $50 billion in small business exports and well over 100,000 small business jobs—and has hosted over 75 small business export forums in communities nationwide. In 2014, 90 percent of the Ex-Im Bank’s transactions benefitted small businesses.

Despite this, critics like House Financial Services Chairman Jeb Hensarling (R-TX) have suggested that gutting the Ex-Im Bank would somehow be a victory for the “Main Street competitive economy.”

In real “Main Street” communities across America, however, small businesses and workers that have benefitted from Ex-Im Bank financing support would certainly disagree. Indeed, more than a few of the small firms that the Ex-Im Bank has supported in recent years are actually located on “Main Streets” across America. Here are just a few examples:

The Ex-Im Bank provides these and many other local companies with the real-world help they need to grow, support their communities, and create good jobs by selling globally. For instance, Ex-Im Bank loan guarantees enable NOW International, a small producer of dietary supplements in Bloomingdale, Illinois and Sparks, Nevada, to gain financial backing from local lenders for exports that directly support 35 jobs at the company.

And the benefits of Ex-Im support for larger companies like Boeing also flow to the thousands of U.S. suppliers and workers that participate in large company supply chains, including businesses that line the “Main Streets” of communities throughout America.

There are, no doubt, scores of government programs that need to be replaced or reformed. But the Ex-Im Bank isn’t one of them. Rather, the Ex-Im Bank is an efficient and prudent institution that drives exports and economic growth and supports good American jobs, all while actually making a $2 billion profit for the U.S. Treasury over the past five years. If that’s not a model for good governance, what is?

Main Street America is already increasingly frustrated with Washington. Let’s not fuel the fire by eliminating worthwhile programs that directly address Main Street’s real needs.

This piece was originally published in Republic 3.0.

RealClearEnergy: Nuclear Power Going Dark in New England

Posted on by The Progressive Policy Institute

The U.S. commercial nuclear fleet will shrink by one more plant, as Entergy Corp. recently announced its plans to close the Pilgrim Nuclear Power Station in Plymouth, Mass. While some environmental and anti-nuclear activists are no doubt popping corks, it’s bad news from a climate perspective.

And it’s part of a trend. Pilgrim is the fifth nuclear power station slated for shuttering over the past two years. Entergy, which announced it would shut down Vermont Yankee in 2013, cites falling revenues and rising operational costs for its decision to close Pilgrim. What’s happening in energy markets that’s tilting the playing field against nuclear power?

For the last few years, nuclear industry leaders have warned that decreasing electricity demand, low natural gas prices, and price regulation are making it uneconomical to keep small nuclear plants (600 megawatts or less) up and running. Specifically, they complain that regulators don’t allow them to reap the full value of the services nuclear energy brings to consumers — reliability, efficiency and grid stability which permits the smoother integration of renewable energy. That makes it difficult to defray operations and maintenance costs, which have risen because of new regulations imposed by the Nuclear Regulatory Commission after Japan’s Fukushima crisis.

The economic viability of nuclear power plants is also threatened by state energy policies that subsidize renewable energy projects. For example, Entergy cited a Massachusetts proposal that would require utilities to buy hydro-electric power from Canada at above-market prices. The amount of electricity they would be required to buy would amount to about one-third of the state’s electricity demand.

Continue reading at RealClearEnergy.

 

The Daily Beast: Hillary’s Trade Flip-Flop

Posted on by The Progressive Policy Institute

Hillary Clinton’s decision to oppose President Obama’s top trade priority is beyond disappointing. It devalues two of her real assets – foreign policy expertise and political loyalty – while aligning her with the most economically retrograde voices on the “populist” left.

Political reporters naturally played up Clinton’s “break” with Obama, who has just wrapped up the Trans-Pacific Partnership (TPP) after five years of arduous negotiations with 11 other Pacific Rim countries. Her untimely defection to the anti-trade camp will compound the president’s already difficult task of rallying Democratic support in Congress for TPP.

More troubling, though, is Clinton’s break with herself.  As Obama’s first Secretary of State, she was a key architect of the administration’s strategy of “rebalancing” America toward the Asia Pacific.  Integral to that strategy is TPP, which would create an economic counterweight to China – a vast free trade zone encompassing 40 percent of global GDP that includes advanced economies like Japan and Australia, and emerging markets like Malaysia and Vietnam.

At issue is whether the burgeoning Pacific economy will play by China’s mercantilist rules, or merge into the liberal, rules-based trading system championed by the United States and Europe. The stakes for U.S. workers and companies are enormous. In 2011, Clinton called TPP a model for future trade agreements, and indeed other Asian economies, such as South Korea, Taiwan, the Philippines and Thailand, have expressed interest in joining.

So TPP isn’t just another trade deal; it’s an impressive feat of U.S. economic diplomacy and leadership. Its rejection by Congress would deal a heavy blow to America’s influence in the region.

It would also damage America’s growth prospects. The U.S. economy is stuck in low gear, averaging a paltry two percent growth per year since 2000. Over the last decade, productivity growth also has slowed, which economists say goes a long way toward explaining why wage gains for most U.S. workers have been so meager. Our economy needs a lift – and TPP’s market-opening provisions will stimulate foreign demand for U.S. products.

Continue reading at The Daily Beast.

Should the United States Adopt an Innovation Box?: The Post-BEPS Landscape

Posted on by The Progressive Policy Institute

This policy brief examines the positives and negatives of the patent/IP/ innovation box. This issue is increasingly relevant given the OECD’s recent release of new principles governing the global tax system.

On October 5, the OECD released the final reports of their Base Erosion and Profit Sharing (BEPS) Project. The comprehensive recommendations in the reports are designed to force multinationals to pay more taxes by substantially eliminating many of the tax avoidance strategies they currently use.

However, the BEPS reports do effectively bless one way to reduce taxes—the granting of tax incentives for innovation and R&D-related activities. As one BEPS report says:

“…it is recognized that IP-intensive industries are a key driver of growth and employment and that countries are free to provide tax incentives for re-search and development (R&D) activities, provided that they are granted according to the principle agreed by the [BEPS Report].”

In broad terms, there are two types of innovation-related tax incentives: R&D tax credits, and patent/IP/innovation boxes. The first provides a credit for R&D spending, whether or not it results in a useful product. The second provides for a lower rate on corporate profits that arise from innovation-related investment. In other words, the patent/IP/innovation boxes favor those companies who are successful with their innovation.

The terminology difference between a patent box, an IP box, and an innovation box reflects the breadth of the intangibles covered, ranging from simply patents, to other types of intellectual property such as copyrights, or a broader range of spending related to innovation. The OECD uses the technical term ‘IP regime’ to cover all three.

Download “2015.10-Mandel-Di-Ionno_Should-the-US-Adopt-an-Innovation-Box_The-Post-BEPS-Landscape”

PRESS RELEASE: PPI Statement On Secretary Clinton’s Opposition to TPP

Posted on by The Progressive Policy Institute

WASHINGTON— The Progressive Policy Institute issued the following statement in response to Secretary Clinton’s announced opposition to the Trans-Pacific Partnership trade agreement:

“Progressives—and all Americans—seek an economic future with good jobs and more inclusive economic growth. The Trans-Pacific Partnership can help achieve both of these important goals. The TPP would expand U.S. trade to growing Asia-Pacific markets in innovative and important sectors where America is strong, supporting higher-paying jobs. At the same time, the TPP’s groundbreaking provisions on the digital economy and small business trade could boost export opportunities for American entrepreneurs and smaller exporters which, in turn, can help spread gains from trade more broadly throughout the American economy.

“The TPP would also help assure that this growing trade would happen under enforceable, high-standard commitments to protect labor rights, preserve the environment, ensure an open Internet, reduce corruption, and increase transparency. These and other TPP commitments would help level the international playing field for American exporters and their workers, while providing tangible help to workers and people in all TPP countries.

“In light of these and other anticipated benefits from TPP, PPI is disappointed that Secretary Clinton has expressed her opposition to the agreement—and we hope that she’ll reconsider this initial view once the TPP’s full text is released. Like any negotiated agreement, the TPP is certainly far from perfect. But it has significant potential to support smarter and more inclusive growth and to orient U.S. trade towards new markets, new opportunities and a rapidly changing global economy—and to do so in a way that advances key American values. And, as Secretary Clinton well knows, the TPP could also deliver critical geopolitical benefits for the United States and our key allies in the Pacific region.

“Many who routinely oppose new trade agreements—like those who repeatedly vow to “repeal and replace” the Affordable Care Act—are often long on rhetoric and short on practical and achievable solutions. It would be unfortunate for a thoughtful leader like Secretary Clinton to make common cause with reflexive anti-traders—in both parties—whose zero-sum views on the global economy are rooted in the failed policies of the past. We hope, instead, that Secretary Clinton will work to support agreements to expand trade and other policies—including investments in education, training and infrastructure—that will help orient the American economy towards the future and bring trade’s undeniable benefits to more Americans.”

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The Washington Post: The mysterious investment bust

Posted on by The Progressive Policy Institute

Referencing a recent report by Michael Mandel, The Washington Posts‘ Robert J. Samuelson discusses corporate investment:

Of course, businesses haven’t stopped investing entirely. In 2014, they spent $2.2 trillion on buildings, equipment (computers, machinery, trucks), software and research. For many large firms, the amounts are huge, estimates economist Michael Mandel of the Progressive Policy Institute, a left-leaning think tank. In 2014, AT&T led in business investment in the United States at $21.2 billion, followed by Verizon at $16 billion and Exxon Mobil at $12.4 billion.

Read the article in its entirety at The Washington Post.

The End of Safe Harbor and the Rise of Digital Protectionism

Posted on by The Progressive Policy Institute

Today the European Court of Justice invalidated the “Safe Harbor” agreement that allowed thousands of  US companies to transfer personal data from Europe to the US, including personal data of employees at their European subsidiaries. As the WSJ wrote:

In a victory for privacy advocates, the European Court of Justice ruled that national regulators in the EU can override the 15-year-old “Safe Harbor” pact used by about 4,500 companies, including Apple Inc. and Alphabet Inc.’s Google, because it violates the privacy rights of Europeans by exposing them to allegedly indiscriminate surveillance by the U.S. government.

Leaving aside the legalities, this ruling indicates a rising mood of digital protectionism which is likely to hurt Europe far more than the US. Data traffic flows both ways, after all, and efforts to keep personal data inside the EU is likely to end up keeping useful data  out as well. The future belongs to those countries who participate fully in the global digital economy.

A Tale of Two School Systems

Posted on by The Progressive Policy Institute

In public education, the District of Columbia may be the nation’s most interesting laboratory. It is the only city with two public school systems of roughly equal size, each with a different governance model. The results of this competition have profound implications for the future of public education nationwide.

The older of the two, the District of Columbia Public Schools, uses the “unified” governance model that emerged more than a century ago, in which the district operates all but one of its 113 schools and employs all the staff, with central control and most policies applied equally to most schools. Since 2007, when Michelle Rhee became chancellor, the district has gone to extraordinary lengths to wring performance out of its schools, pursuing the most aggressive reforms of any unified urban district in America.

The other system, overseen by the Public Charter School Board, is largely a 21st century creation. Under this governance model, the board does not own or operate schools. Instead, it contracts with 62 independent organizations – all of them nonprofits – to operate 115 schools. It negotiates performance contracts (charters) with operators, lets parents choose their schools, shuts down schools that fail to perform and replicates those that succeed.

Under both models, student performance is improving. Comparisons are tricky, because their demographics are slightly different. Charter students are poorer: 82 percent qualify for a free or reduced price lunch, compared to 75 percent in the public school district. The latter also has more white students: 12 percent compared to charters’ 5 percent. And its schools get $7,000 to $9,000 more per student each year than charters, mostly for buildings and pensions.

On the other hand, all charter families make an active choice of schools, while only about half of District of Columbia Public Schools families do, so some believe charter students are more motivated. Most experts agree that the district has more students “in crisis” – homeless, coming out of jail, former dropouts and so on – because families in crisis don’t usually make the effort to apply for charters. And many charters don’t accept students midway through the school year or “backfill” seats after students leave, while most district schools do. Far more students leave charters for district schools during the school year than the reverse, and sometimes the new entrants set back schools’ test scores, graduation rates and attendance rates.

It is hard to say just how these realities balance out. Fortunately, there is one study that tries to compensate for student demographics (but not for other factors). Stanford University’s Center for Research on Education Outcomes is a respected academic organization that has published extensive studies comparing charter and traditional public school performance on standardized tests. Its methodology compares charter students to demographically similar students in traditional public schools who have had similar test scores in the past.

The center found that between 2007-08 and 2010-11, charter students gained an average of 72 more days of learning per year in reading than traditional school students and 101 days in math – more than half an academic year.

Continue reading at U.S. News & World Report.

PRESS RELEASE: PPI Statement on Announcement of TPP Deal

Posted on by The Progressive Policy Institute

WASHINGTON— Ed Gerwin, Senior Fellow for Trade and Global Opportunity at the Progressive Policy Institute (PPI), today released the following statement in response to Monday’s announcement that top trade officials from the 12 Trans-Pacific Partnership countries have successfully completed their negotiations:

“PPI welcomes Monday’s announcement that the United States and its 11 negotiating partners have successfully concluded negotiations on the Trans Pacific Partnership (TPP) trade agreement.

“If done right, modern trade agreements like TPP have significant potential to increase American exports to key foreign markets; to forge international consensus on high standards for open rulemaking, environmental protection, and labor rights; and to support digital commerce and other tools for broader and more inclusive trade.

“We appreciate the tireless efforts of Ambassador Froman, the Obama Administration’s trade team, and trade supporters in Congress in seeking a TPP agreement that will achieve these and other key priorities for the United States.

“We look forward to reviewing the text of the completed agreement. And we are particularly grateful to Congressional trade leaders—particularly Senator Ron Wyden (D-Ore.), Congressman Ron Kind (D-Wisc.), and other pro-trade Democrats—for writing strong, new rules that will assure an extensive, informed and transparent debate on the detailed provisions of the TPP.”

Understanding the Meaning of BEPS for the United States

Posted on by The Progressive Policy Institute

Multinationals are about to get hit with a big tax penalty for operating in the United States. Is it finally time for corporate tax reform?

On Monday October 5 the OECD will release the “final package of measures for a co-ordinated international approach to reform the international tax system.”  These BEPS recommendations (standing for Base Erosion and Profit Shifting) are intended to address “gaps and mismatches in existing rules which allow corporate profits to ‘’disappear’’ or shift to low/no-tax locations, where no real value creation takes place.”  In other words, the goal is to make sure that multinationals pay their fair share of taxes globally. This is a laudable objective.

But BEPS also exposes the huge difference between the U.S. corporate tax rate, and that of many of our rivals. According to KPMG, the posted U.S.  corporate tax rate, including both federal and state, stands at about 40%.  By comparison, the average corporate tax rate in the European Union is about 22%. That includes Ireland (12.5%),  United Kingdom (20%) and Germany (roughly 30%). To put this in perspective, a company earning an extra $1 billion in profits in the United States would pay roughly $400 million in corporate taxes, versus only $200 million in taxes if the profits were booked in the United Kingdom. That difference of $200 million could fund thousands of jobs.

Before BEPS, many U.S.-based multinationals were able to legally reduce their U.S. tax bills by  shifting income to other countries with lower rates. They used a variety of tax strategies. The result for the companies: Lower effective taxes. The result for the United States: Higher competitiveness, since multinationals could avoid the full brunt of the excessively high U.S. corporate income tax rate. Continue reading “Understanding the Meaning of BEPS for the United States” →

RealClearWorld: Does Labour Have a Death Wish?

Posted on by The Progressive Policy Institute

All political parties struggle to reconcile their core convictions with their desire to win elections. But apparently there’s one party so pristinely principled that it despises its own electoral successes.

I refer, of course, to Britain’s Labour Party. In choosing as its new leader Jeremy Corbyn, a long-time fixture of the hard-left fringe, the party has emphatically repudiated the winning ways of “New Labour.”

Corbyn is a throwback to the doctrinaire socialism of the 1970s and 1980s, which became linked in the public mind to crippling strikes by imperious labor unions, economic stagnation, welfare dependence, reflexive anti-Americanism and enthusiasm for “revolutionary” forces around the world. An iconic image of the era: the actress and prominent “Trot” Vanessa Redgrave holding a Kalashnikov aloft while dancing with PLO gunmen.

The party’s thralldom to the “looney left” paved the way for Margaret Thatcher’s ascension and kept Labour out of power for 18 long years. Finally, in the early 90s, a band of young reformers led by Tony Blair and Gordon Brown jettisoned the party’s tired collectivist dogma and launched a drive to modernize the party’s image and governing philosophy. Inspired by Bill Clinton’s success here, they borrowed heavily from his “New Democrat” playbook.

Blair led Labour to a smashing victory in 1997, and went on to win two more elections. He and Brown served as Prime Minister for 13 years — Labour’s longest run in government ever.

While popular with British voters, New Labour’s attempts to define a modern and pragmatic progressivism were anathema to the party’s left. They disdained Blair as a glib and soulless centrist willing to sell out Labour’s socialist ideals for a mess of electoral pottage. That disdain curdled into intense hatred when Blair later supported George W. Bush’s invasion of Iraq.

Continue reading at RealClearWorld.

A simple way to grow America’s economy and create jobs

Posted on by The Progressive Policy Institute

It’s hard to find common ground between the two parties in Washington these days, but getting America out of this protracted entrepreneurial slump should be an urgent national priority. Here’s one idea that ought to appeal to both sides: Enable the nation’s credit unions to invest more in new and small businesses.

One of the most important measures of U.S. economic dynamism is the rate of new business creation. Unfortunately, the number of start-ups has been declining for three decades. In fact, more businesses are dying than being born.

According to the Kauffman Foundation, new businesses (those less than five years old) are responsible for nearly all net job creation in America. And businesses less than one year old have created an average of 1.5 million jobs per year for the last three decades.

And it’s not just jobs; start-ups also drive innovation. New enterprises “commercialized most of the seminal technologies of the past several centuries, including the car, the airplane, the telegraph, the telephone, the computer and the Internet search engine,” notes Brookings Institution economist Robert Litan.

Continue reading at The Hill.

 

 

U.S. Investment Heroes of 2015: Why Innovation Drives Investment

Posted on by The Progressive Policy Institute

Back in 2012, the Progressive Policy Institute identified the shortfall in business capital spending— or the “investment drought”, we termed it—as one of the major economic problems facing the U.S. economy. As we wrote then, “su1stainable economic growth, job creation, and rising real wages require domestic business investment.”

Unfortunately, three years later, the United States is still suffering from an investment drought. Capital per worker-hour has fallen since 2010, meaning that the average American worker has less equipment, buildings, and software to use, exactly the opposite of what we would want. More worrisome, this is not simply a short-run trend. In fact, the 10-year growth rate of productive capital is only 2 percent, by far the lowest in the post-war era (Figure 1).

Leading economists are increasingly concerned that the weakness in domestic investment is making it hard for businesses to boost productivity, measured by output per hour. The 10-year growth rate of nonfarm business labor productivity is only 1.3 percent, compared to 3 percent as recently as 2005. In a recent speech, Jason Furman, head of the White House Council of Economic Advisers called the decline in prod2uctivity growth “an investment- driven slowdown.”

A 2015 report by the OECD on productivity addresses the recent productivity slowdown and the question of whether it is temporary or “a sign of more permanent things to come.” They assert the importance of innovation for achieving growth, writing “productivity is expected to be the main driver of economic growth and well-being over the next 50 years, via investment in innovation and knowledge-based capital.”

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