Category: Uncategorized

Can US Hold Its Lead on 3D Printing?

Posted on by The Progressive Policy Institute

Everyone is abuzz about 3D printing. President Obama gave it a shout out in his most recent State of the Union address. The Economist hailed it as a harbinger of a “3rd industrial revolution.” UPS is putting 3D printers in its retail stores. Some analysts think it’s the key to reviving advanced manufacturing in America.

With 60% of the global market, there’s no doubt that U.S. firms dominate the fledgling market for 3D printers. But as with other breakthrough technologies hatched in America, there’s no guarantee that our competitors – yes, especially China – won’t catch up and eventually surpass us. After all, China is a manufacturing powerhouse that desperately wants to move up the value chain, and has few scruples about filching U.S. technology.

Although 3D printing is still in its infancy, Washington needs a strategy for maintaining U.S. leadership as other countries strive to catch up. Its key elements should include robust public investment in 3D research, and beefed up safeguards against intellectual property theft. Continue reading “Can US Hold Its Lead on 3D Printing?” →

Tax Reform – Make It Simple, Use Common Sense

Posted on by The Progressive Policy Institute

Our tax code is broken. It’s a simple fact, yet year after year our government leaders fail to address it. Meanwhile, the consequences of the overly complex and poorly designed system are felt by middle-class families and entrepreneurs alike. They benefit little from the existing array of incentives and loopholes, which are mainly targeted to special interests and the wealthy.

This week, House Ways and Means Chairman Dave Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont., are visiting San Francisco and Santa Clara to hear directly from the California high-tech community about the inefficiencies of the system, and the potential effects of several of the proposed reforms.

One thing everyone agrees with is the need for simplification, especially simplifying everyday provisions that would make tax reform real for most taxpayers. Not only would a simpler code reduce red tape, it would also create a better economic environment for businesses of all sizes, raise revenues for deficit reduction and incentivize urgent investments in our nation’s future.

Simplification, however, should never abandon the principle of progressive taxation. One example of a misguided reform is what’s called the “flat tax.” It sounds simple, but in order to keep tax revenue stable the rate would be considerably higher than the 15 percent rate most taxpayers pay today. That means the majority of Americans would pay higher taxes in the name of simplification.

Also in the mix are political gimmicks such as “return-free filing,” in which the IRS would calculate your taxes for you. Such a system would only hide the inefficiencies and dysfunction of the system from many Americans, reducing support for desperately needed reform. In addition, there is an inherent conflict of interest in having the tax man do your taxes: If there’s any question about how to apply the tax code, the IRS is likely to choose the interpretation that brings in more taxes.

If Congress and the Obama administration are serious about simplifying the tax code, any plan must:

Promote economic efficiency and growth to help speed economic recovery, bring down unemployment and shrink the national debt.

Reduce the number of tax incentives to rebuild the nation’s revenue base. Each tax loophole is fiercely guarded by the special interests whom it benefits. Closing tax breaks en masse will not be easy, but it is essential both to lower tax rates for middle-class families today and to whittle down public debts that impose harmful tax burdens on our children tomorrow.

Maintain progressivity. Most tax incentives today make it less progressive, not more. Eliminating many tax incentives and using the savings for lower rates can, in conjunction with maintaining (and maybe even expanding) the Earned Income Tax Credit, maintain or improve progressivity in the tax code.

Reduce errors and avoidance. Tax law complexity often leads to perverse results. There are 14 different incentives for college, 11 types of IRAS, and three major incentives to help defray the cost of raising children. Common-sense simplification would make tax reform meaningful for average working American families.

Better align federal and state tax rules. Simplification will never be maximized unless federal and state governments can work together to reduce paperwork, streamline the filing process and create less opportunity for gaming the tax system.

There is a moment of opportunity in this Congress and this administration to do great good in making our tax system more rational, understandable and effective. We need to seize it.

Find the article at San Francisco Chronicle.

The Foolish Push to Scrap Fannie Mae and Freddie Mac

Posted on by The Progressive Policy Institute

It appears that Washington is finally getting around to grappling with the largest unresolved question left over from America’s housing meltdown: What’s to become of the government-backed mortgage giants, Fannie Mae and Freddie Mac? Their fate has been in limbo since the federal government bailed them out and put them in conservatorship in 2008.

Now, however, the two government-sponsored enterprises (GSEs) are reaping enormous profits as housing markets rebound. This has gotten lawmakers’ attention. House Republicans have introduced a typically radical bill that would eliminate Fannie and Freddie altogether.  A bipartisan Senate proposal would wind down Fannie and Freddie over five years and replace them with a similar functioning institution that charges a fee to insure loans in the event of catastrophic losses.  And President Obama weighed in recently as well, saying it’s time to end Fannie and Freddie “as we know them.” Though widely misinterpreted as a call to eliminate the GSEs, this artfully ambiguous formulation actually left the president a lot of wiggle room.

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

Experts Project Home Values Index to End 2013 with Prices Up by 6.7 Percent

Posted on by The Progressive Policy Institute

On Thursday, Zillow released its quarterly Home Price Expectations Survey showing forecasters expect the website’s Home Value Index to end 2013 with prices up 6.7%. The numbers surveyed from 106 real estate experts across the country (I am a panel member), showed a significant jump from the 5.4% reported by the survey last quarter.

While price appreciation looks like it will show continuing strength through the end of the year, panelists mostly agreed that the sharp rise in prices we have seen over the last 12-18 months will begin a slower pace through 2017.

“Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory. Combined, these factors will continue putting upward pressure on home values for the next few months,” said Zillow Senior Economist Dr. Svenja Gudell. “But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available. Over the next few years, these trends will help the market stabilize and will bring home value appreciation more in line with historic norms. As long as mortgage interest rates don’t rise too far and too fast, most markets should be able to absorb these changing dynamics while still remaining healthy.”

Panelist were also asked if a recent rise in mortgage rates, almost 100 basis points in the last 3 months, posed a serious threat to the recovery. A whopping 88% said no, and of those more than 60% said rates would need to hit 6% (currently around 4.5%) to reverse the bullish trend.

PPI Releases New Report on U.S. Energy, Motor Vehicles Attracting Foreign Investors

Posted on by The Progressive Policy Institute

U.S. Energy, Motor Vehicles Attracting Foreign Investors

WASHINGTON — Seeking to capitalize on America’s shale gas boom, foreign companies are making major investments in the U.S. energy sector, a new PPI study shows. And while foreign investors still see making motor vehicles in the United States as good business, they seem less willing to place their bets on America’s greatly heralded manufacturing renaissance.

These are key findings of “Non-US Investment Heroes: Foreign Companies Betting on America” by PPI Economist Diana G. Carew. In the first study of its kind, Carew identified the top non-US based companies in three key industries – energy, motor vehicles, and industrial manufacturing – by their level of U.S. investment in 2011 and 2012.

In energy, the top company investing in America by their cumulative 2011 and 2012 capital expenditures was BP, followed by Shell, Statoil, and Total.

In the two remaining industries, we could not produce a ranking due to limitations in publicly available financial data. Still, we identified six motor vehicle and industrial manufacturers that had significant U.S. investment in 2011 and 2012 (listed in alphabetical order): BMW, Honda, Robert Bosch, Samsung, ThyssenKrupp, and Volvo. To obtain these results, PPI analyzed publicly available financial statements.

In general, the report found that foreign direct investment in the United States is still well below its pre-recession high of $310 billion. “We need investment from overseas to propel the U.S. economy, but we continue to be stuck in an investment drought,” Carew says.

However, as Carew notes, a paucity of good data on investment from many non-U.S. based companies, particularly those outside of the energy sector, presents a challenge for designing effective U.S. investment policy.

This report is part of our “Investment Heroes” series, and follows from our 2012 report “U.S. Investment Heroes: Who’s Betting on America’s Future?”

Unpaid Internships Aren’t so Black and White

Posted on by The Progressive Policy Institute

Does having a paid internship make the difference between getting a job and sitting home after college? It depends.

Unpaid internships have been criticized as a waste of students’ time,  effort, and money. Now it appears holding an unpaid internship won’t even help a student on the job market. An upcoming study from the National Association of Colleges and Employers (NACE) on the graduating class of 2013 found 63.1% of graduating college students who had paid internships received a job offer, compared with 37.0% of those who took only unpaid internships and 35.2% of students who had taken no internships.

However, although job offers may seem like a straightforward measure of an internship’s impact, but the reality is not so black and white. There are many factors that influence whether a college graduate has a job offer at graduation, of which internships are just one. Moreover, there is also a wide variety of internships, and an equally diverse number of reasons students chose to take them.

Certainly not all internships are created equal.  For some employers, internships are explicitly used as a screening process for new hires. These employers may invest more time and effort to see which interns would make good employees, and so provide interns with substantive tasks and compensation.

Such ‘screening’ internship programs make the most sense for employers who continually need new hires with a technical skill set. So it is little surprise that the majority of paid internships are for majors who are typically hired in large numbers at entry-level. As the chart below shows, engineering majors, computer science majors, engineering technology majors, and business- related majors were far more likely to have a paid internships- with comparatively high wages- than other majors. The data is from Intern Bridge’s 2012 survey of college students.

But by itself this chart can be misleading.  Some majors’ career paths are inherently different than others, and this is not reflected in either the Intern Bridge or NACE data. For example, neither one reports the percent of students who intend to go straight to graduate school rather than enter the workforce. For some students, the primary purpose of an internship is not to receive an immediate job offer, but rather to build a professional network or explore a particular field of work.

The reality is the payoff for participating in an internship – whether paid or unpaid – varies from student to student. The greatest benefit of an internship is not measurable in wages, but by how much it furthers a student’s career aspirations. It would be a mistake for college students to use the NACE and Intern Bridge survey results as an excuse to sit home and do nothing. That will almost assuredly hurt their job prospects.

 

Tax Reform: Make It Simple

Posted on by The Progressive Policy Institute

Our tax code is broken. It’s a simple fact that nearly everyone agrees on, yet year after year our government leaders fail to address it. Meanwhile, the consequences of the overly complex and poorly designed system are felt by middle-class families and entrepreneurs. They benefit little from the existing array of incentives and loopholes, which are mainly targeted to special interests and the wealthy.

However, the hard work of tax reform is now underway. House Ways & Means Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) are barnstorming the country to hear directly from Americans – learning first-hand about the inefficiencies of the current system, and how taxpayers will be impacted by an array of proposed reforms.

Ultimately, the most likely feedback they will hear is the need for simplification of a system that has simply grown too complex for most Americans to understand, with damaging consequences to the nation’s economy. The tax code’s byzantine complexity costs business and individuals hundreds of billions in compliance. The IRS’s National Taxpayer Advocate estimated that individual and business taxpayers spend 6.1 billion hours to complete filings. This is money and time wasted.

Continue reading at The Hill’s Congress Blog.

Non-US Investment Heroes: Foreign Companies Betting on America

Posted on by The Progressive Policy Institute

Foreign Direct Investment (FDI)—investment in the United States by foreign-based companies—has yet to recover to pre-recessionary levels. In 2011, FDI remained 25 percent below 2008 levels, and preliminary 2012 figures suggest an even further drop.

Indeed, almost 6 years after the Great Recession began, the United States continues to wallow in an investment drought. Such weak investment—both from U.S. and non-U.S. based companies—is almost certainly a key factor behind today’s slow-growth economy.

Investment is a critical part of any high-growth strategy. It is the building block for innovation and economic growth. Investment that increases U.S. production— of goods, services and data—creates high-skill, globally competitive jobs and raises incomes.

This report highlights several important facts about foreign investment that shed light on sectors of the U.S. economy. First, energy is one of the fastest growing areas for foreign investment in America, just as it is for U.S.-based company investment. Official data shows foreign direct investment in “petroleum”—oil and gas extraction, refining, and distribution—more than doubled from 2008 to 2011.

Second, our research shows the United States continues to be an important platform for non-U.S. motor vehicle manufacturers. Moderate investment by non-U.S. motor vehicle manufacturers to upgrade and expand existing production lines show the U.S. market continues to be an important part of their business model.

Third, relatively low investment by non-U.S. industrial manufacturers suggests the greatly heralded manufacturing renaissance may not be as robust as some believe. Our research shows companies in this sector engaged in relatively little U.S. investment activity, and in some cases previous U.S. investments were unsuccessful. Such lackluster investment should be considered by policymakers on federal and state levels designing pro-investment growth strategies that target manufacturing.

Finally, a lack of good data on investment from many non-U.S. based companies, particularly those outside of the energy sector, presents a challenge for designing effective U.S. investment policy. Not having access to quality information on the U.S. activities of large non-U.S. companies makes it difficult to why certain companies are investing while others are not.

For this report, PPI considered three categories of investment: energy, motor vehicle, and non-motor vehicle industrial manufacturing. We chose these categories because of their importance to facilitating broader growth in the U.S. economy. We calculated the U.S. capital expenditures for companies in each category in 2011 and 2012, using publicly available financial reports.

This report is part of our “Investment Heroes” series, and follows from our 2012 report “U.S. Investment Heroes: Who’s Betting on America’s Future?” that ranked U.S.-based companies by their 2011 U.S. capital expenditures.

Download policy brief.

Why America’s Youth Aren’t Finding Jobs

Posted on by The Progressive Policy Institute

Writing on youth unemployment, Fortune’s Nin-Hai Tseng quotes Diana Carew:

“They’re not in school, so what are they doing?” says Diana Carew, economist at Progressive Policy Institute, who studies youth unemployment. She points out that July’s jobs report shows that the share of unemployed 16- to 24-year-olds not in school stood at 17.1%, compared with 11% six years ago. And while workers in general have been leaving the labor force, partly because they’re aging into retirement, it’s especially worrisome when young people drop out: In July, 8.4 million 16- to 24-year-olds stopped looking for work altogether, a rise from 6.8 million a year earlier.

However slowly the economy has been creating jobs, it’s still surprising why so many young people, particularly those who aren’t in school, are still having a tough time. The bulk of jobs created in July were in retail, restaurants, and bars. These certainly aren’t the highest-paying gigs, but they demand fewer skills and would naturally attract those with less education. What’s played out is what Carew calls “The Great Squeeze,” where the dearth of middle-skilled jobs have forced many workers to settle for whatever they can get, taking lower-skilled jobs for less pay and therefore squeezing those with less education and experience out of the workforce.

Read the entire article here.

Declining Industries vs Growing Jobs: What the WaPo Deal Tells Us About Innovation

Posted on by The Progressive Policy Institute

Does innovation create or destroy jobs?  The rush of new ideas and new technologies can turn formerly rock-solid companies into sand that melts away even as we watch.  The sale of the Washington Post is a case in point. By making that deal,  the Graham family is acknowledging that they could not see a good strategy for survival.

We know what will happen next: Fewer journalists will be working at the Post a year from now than today.  The Grahams allowed the operation to run mammoth losses which Jeff Bezos, rich as he is, will not tolerate.  Many people will suffer.

But remember this: Old industries can decline even as new jobs growth. In fact, the field of journalism is going through a massive innovative spurt that is creating jobs even as others are being destroyed. About a month ago I did a post on exactly this subject, where I looked at unpublished BLS data and help-wanted data from The Conference Board.  Here’s what I found:

  • Employment at newspapers is  down about 5% over the past year.
  • The number of help-wanted ads for “news analysts, reporters, and correspondents” is up 15% compared to a year ago.
  • More people are telling the BLS that they are working as a news analyst, reporter, or correspondent compared to a year ago.
  • Roughly half the want-ads for news analysts, reporters and correspondents contain the words ‘digital’, ‘internet’, ‘online’, or ‘mobile’.

Let me do this as a chart.This chart plots employment in the newspaper and periodical industry (the blue line) against want ads for “news analysts, reporters, and correspondents” (the red line) We start with June 2007, right before the recession started, and go to June 2013.

We see that print media employment and demand for journalists track pretty well through December 2009. Both drop around 20%. The annual data from the BLS CPS survey (not shown on chart) tells roughly the same story. From 2007 to 2009 employed “news analysts, reporters and correspondents” dropped from 84K to 65K, also roughly a 20% decline.

 

 

Ah, but starting with 2010, we see a divergence. Employment in the legacy print media business continues to drop, with no sign of a turnaround. Both newspapers and periodicals continue to close and lay off workers, undermined by online competition in both the news and ad business.

But the demand for journalists picks up sharply. According to data from The Conference Board, the number of want ads for news analysts, reporter, and correspondents more than doubled from early 2010 to today! Moreover, it is noteworthy that the BLS annual series show a 25% gain in the number of working journalists from 2009 to 2012 (not shown on chart)

Now, let’s be realistic. I’m not saying that the true demand for journalists doubled between the beginning of 2009 and today, although given that no one was hiring in the depths of the recession, that statement might be literally true. In fact, the help-wanted series is an example of naturally-generated ‘big data’, meaning that it can be affected by changes in business practices, such as the way jobs are posted. The nature of journalism jobs may also be changing.

However, there seems little doubt that technology and innovation in journalism is creating new jobs in different industries even as the old companies and old industries are being undermined. I’m pretty sure that jobs at Politico are not being reported not in the same industry as jobs at the Washington Post, even if Politico hires a WaPo reporter to cover more or less the same things.

As innovation accelerates, we’ll see more examples of this kind of divergence: Declining old industries, growing new jobs.  Our task is to identify where the new jobs are and encourage them.

 

No Recovery for Young People?

Posted on by The Progressive Policy Institute

In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007. It’s no secret that young people are struggling economically, but my analysis of Friday’s BLS release sheds light to what extent. The fact that so many young people are not realizing their true earnings potential in these formative years could have serious long-term consequences.

Friday’s numbers are the latest sign the recovery is passing young Americans by. The below chart shows the share of young Americans not enrolled in school working full-time fell with the recession and have yet to return to 2007 levels. This is true even if we divide it by age – that is, for both young Americans age 16-19 and age 20-24 not enrolled in school in July.

While the initial drop in full-time employment is not surprising, what is startling is that is that either age group is showing much, if any, improvement since the recovery began four years ago. The same trend holds even if we look at months where more students are enrolled in school (i.e., January). The non-recovery is also true if we look at total employment and overall labor force participation.

What’s more, education matters in how likely young people are to work full-time. As shown in the next chart, for those with less than a high school diploma, 14 percent worked full-time, compared to 66 percent with a Bachelor’s degree or higher. This re-emphasizes the importance of higher education in successfully finding full-time work in today’s economy.

Of the 17 million Americans age 16-24 not enrolled in school or working full-time in July 2013, 5.6 million were working part-time, 3.2 million were unemployed – a 17.1 percent unemployment rate – and another 8.4 million were not in the labor force altogether.

Together, these charts suggest the problem facing young Americans is structural. If worsening labor market conditions were a temporary effect of the recession, we would have expected to see improvement with the recovery. Instead, young Americans appear stuck in their post-recessionary state.

What could be behind the stubborn labor market for young Americans? One explanation is the Great Squeeze, which I’ve written about before. The dearth of middle-skill jobs is forcing workers unqualified for today’s high-skill, high-wage jobs to take lower skill jobs for less pay, squeezing those with less education and experience down and out of the workforce.

The struggles facing young Americans should not be ignored. It’s clear the policies in place now to prepare and integrate young Americans into the workforce are not sufficient. If we are serious about moving from a slow-growth economy to a high-growth economy, it’s something policymakers will have to address.

Note: For those interested in the effect of rising college enrollment on overall labor force participation of young people, there are several points to consider. One, in July most college students are not enrolled, and would be counted here. Second, the number of young Americans age 16-24 not enrolled in school and not working continues to rise. In July 2007 labor force participation for this group was 73.3 percent; in July 2013 it was 68.8 percent. Third, college enrollment has actually been falling for the last two years, with the decline actually accelerating. Finally, many college students also work. According to the same BLS data 42 percent of people age 16-24 enrolled in school also were in the labor force in July 2013.

A Simple Solution for America’s Looming Commercial Debt Crisis

Posted on by The Progressive Policy Institute

As the housing sector continues its apparent recovery, some U.S. lawmakers are turning their attention to a looming crisis in the commercial real estate market, which is threatened by an avalanche of debt as loans made during the heady days of the early aughts start coming due over the next five years.

Reps. Kevin Brady, R-Texas and Joseph Crowley, D-N.Y., this week introduced a bill that would make it easier to finance this coming wave of debt. Following similar proposals in the Senate and President Obama’s budget, it would stop penalizing foreign investors in U.S. commercial property.

Here’s the problem they’re trying to solve: colossal amounts of real estate loans – totaling more than $1.7 trillion – are due to mature from now to 2018. Commercial mortgages are not like your average home mortgage. They aren’t fixed at a rate for 30 years. The standard commercial loan must be refinanced, paid down or sold after 10 years. What’s coming now is a huge wave of commercial debt that originated in the bubble years between 2003-2008.

Back then, real estate values were inflated and lending standards much looser. That means we can expect significant volumes of maturing mortgages to be in some sort of distressed state. In a 2010 Congressional oversight report, lawmaker’s panel served up this scary scenario:

A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American. Empty office complexes, hotels, and retail stores could lead directly to lost jobs. Foreclosures on apartment complexes could push families out of their residences, even if they had never missed a rent payment.

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

Why we should say ‘yes’ to the data-driven economy

Posted on by The Progressive Policy Institute

This is what progress looks like: Not easy, not pretty, but indispensable.

An article in the Wall Street Journal, Google’s Data-Trove Dance, graphically outlines the internal conflicts within Google about privacy versus more extensive of use of data. The article said.

under increased regulatory scrutiny in the U.S. and Europe, executives are engaged in wide-ranging internal debates and in some cases slowing product launches to address privacy concerns

The debates within Google mirror the debates in the broader society. On the one hand,  embracing the data-driven economy will increase quality of life, create jobs, and improve fiscal trade-offs.  On the other hand, the data-driven economy raises important privacy concerns that cannot be wished away.

What’s going on here? In the data-driven economy, data is an important new input to economic activity. In fact, just today the BEA  released an important new revision to GDP  which counts investment in ‘intangibles’.

The benefits of data are profound. Because people are  contributing their data about their location, you know which traffic-clogged roads to avoid, and which restaurants to patronize. Because people are contributing their data about jobs and skills, we have much more transparency about career paths and the job market, so potential workers can  learn what kind of education and training they need.   Because people are contributing their words and pictures, we’ve been able to build  communities that go beyond our immediate geographical borders.

Back in 2005, Benjamin Friedman of Harvard released a fascinating book entitled The Moral Consequences of Economic Growth. Friedman argued that “our conventional thinking about economic growth fails to reflect the breadth of what growth, or its absence, means for a society.”  Growth encourages social virtues such as fairness, tolerance, and mobility, while the absence of growth  undercuts social virtues such as democracy.

So the debate is not simply about privacy vs growth. We care about privacy, but we also care about the social benefits generated by growth. And that’s why I believe we should say ‘yes’ to the data-driven economy.

 

 

 

 

 

 

 

Senators King and Blunt Introduce Regulatory Improvement Commission, Modeled After PPI Proposal

Posted on by The Progressive Policy Institute

Today Senators King and Blunt introduced the Regulatory Improvement Act of 2013, which “would create a Regulatory Improvement Commission to review outdated regulations with the goal of modifying, consolidating, or repealing regulations in order to reduce compliance costs, encourage growth and innovation, and improve competitiveness.”

The framework for this new commission is modeled after PPI’s proposal for an independent Regulatory Improvement Commission (RIC). Under this proposal the RIC would review duplicative and outdated federal regulations as submitted by the public with the intention to either remove or improve them. The Commission would be authorized by Congress on an as-needed basis, with bipartisan participation, and would require complete transparency during each stage of the review process. At the end of the review, the RIC would submit a package of regulatory changes to Congress for an up or down vote.

The Regulatory Improvement Act of 2013 is a significant proposal that could have a tremendous economic impact. Regulatory accumulation – the natural accumulation of federal regulations over time – imposes an unintended but significant cost to businesses to businesses and economic growth. No satisfactory process currently exists for retrospectively improving or removing regulations.

PPI congratulates Senators King and Blunt for introducing a bill that could finally address this long-standing issue that affects the ability of America’s businesses to grow, invest, innovate, and succeed.

PPI’s complete proposal for a Regulatory Improvement Commission is outlined in the report “Regulatory Improvement Commission: A Politically-Viable Approach to U.S. Regulatory Reform.”

Will the GDP revisions help or hurt Obama?

Posted on by The Progressive Policy Institute

The GDP revisions which come out on Wednesday are likely to reshape our perception of the Great Recession. The BEA will have new data available, notably on corporate profits. Moreover, the BEA  is adding in R&D and other intangible investments into GDP for the first time.

The BEA is a completely professional and nonpolitical organization, doing their best to improve statistics with a limited budget.  Nevertheless,  my best guess is that these changes will have several politically significant consequences. I could be very wrong, but I expect that: (added)

1. The savings rate will be revised up, something for President Obama to boost about.

2. The fall into recession in 2008 and 2009 will look steeper, as companies cut scientists and engineers.  The President and his economists will highlight this drop as a sign that the situation was worse than it seemed when he took office.

3. The recovery will look weaker, as domestic business R&D has apparently languished. Not good news for the President.

4. Productivity gains will be slower.

Added: Let me reiterate: All of the statistical agencies, including the BEA, are devoted to producing the best possible statistics on a limited budget, with no politics involved. Nevertheless, whenever big revisions change our view of the economy, these will have political consequences.

Further addition: When the budget for statistics are cut, policy suffers. (See for example https://directorsblog.blogs.census.gov/2013/06/19/census-bureau-budget-update-2/).

 

 

 

 

 

 

Simplify, Simplify, Simplify: The First Principle of Tax Reform

Posted on by The Progressive Policy Institute

Overhauling the federal tax system is one of the most important steps U.S. political leaders can take to promote economic growth and fairness. It is also that rarest of issues in today’s Washington—one that commands broad support on both sides of the political aisle. For these reasons, the Progressive Policy Institute urges the White House and Congress to give top priority to fixing our broken tax system over the next 12 months.

Everyone knows our tax code is too complicated, too inefficient and too riddled with preferences for special interests. Americans deserve better. PPI believes we need a federal tax system that is simpler and more progressive; that steers investment into productive, job-creating activity; that enables U.S. workers and companies to compete on an even footing in world markets; and, that serves the most basic purpose of any tax system—raising enough revenue to finance the government while ensuring fairness to taxpayers.

Comprehensive tax reform obviously poses daunting political obstacles. Nevertheless, it’s a goal Democrats and Republicans share. The Senate Finance Committee has published 10 papers on various options while the House Ways and Means Committee has organized 11 subgroups to consider different areas of the tax law. Over 1000 comments have been filed. With Sen. Max Baucus retiring this year, and Rep. Dave Camp term-limited as chair of the House Ways and Means Committee, the two most important players on tax policy are strongly motivated to get something done.

This paper will not offer a sweeping blueprint for reform. Instead it focuses on one crucial aspect of reform: Simplification. PPI has long argued that our tax system is too complex and ill-fitted to the needs of middle-class families and small entrepreneurs. They benefit little from the existing array of incentives and loopholes, which are mainly targeted on special interests or people with a level of income and wealth they can only dream about. The code’s byzantine complexity also costs business and individuals hundreds of billions in compliance. In a recently released annual report to Congress, the IRS’s National Taxpayer Advocate, Nina Olson, estimated that individual and business taxpayers spent 6.1 billion hours to complete filings. The bloated federal code contains almost four million words and on average has more than one new provision added to it daily.

The code is so complex that nearly 60 percent of taxpayers hire paid preparers and another 30 percent rely on commercial software to prepare their returns.

In fact, according to PricewaterhouseCoopers, only four nations have more pages of “primary tax legislation” than does the United States. And the World Bank’s www.doingbusiness.org ranks 61 nations as having tax systems friendlier to business than does the United States, while the World Economic Forum puts the U.S. tax system in 107th place in a ranking of the efficiency of 117 national tax regimes.

Congress perennially fiddles with the code, and it takes a full-time army of lobbyists to keep track of all the changes: the Treasury Department reports that there have been more than 14,400 revisions since 1986. It is imperative, then, that any comprehensive overhaul of the federal tax system not make the code even bigger and more complicated. Tax reform without dramatic simplification should not be considered genuine reform.

Download the policy brief.