Category: Uncategorized

Telecom and oil companies top ‘Investment Heroes’ list

Posted on by The Progressive Policy Institute

The Washington Post covers Diana Carew’s and Michael Mandel’s Investment Heroes paper, focusing on the strong telecoms and energy presence amongst the leading companies.

AT&T, Exxon Mobil and Wal-Mart are leaders among a top 25 list of corporations still investing within U.S. borders, according to a new study from a progressive think tank.

These “Investment Heroes,” according to the Progressive Policy Institute (PPI), continue to invest domestically in buildings, equipment and software — something most companies have slowed or stopped throughout the lackluster economic recovery. However, telecom and energy companies, which are ubiquitous on the list, are still building broadband infrastructure to keep up with demand and are investing in the discovery of new sources of oil and gas.

The report’s authors, PPI economists Diana Carew and Michael Mandel, have no misconceptions that these companies are doing everything right — they are often criticized for environmental issues, privacy concerns and low tax rates, among other things — but want to point out the positive impact these companies are having when it comes to creating jobs and growth through their domestic investment.

Read the full story here.

Manufacturing and Inflation

Posted on by The Progressive Policy Institute

PPI’s Michael Mandel was cited over at Slate about the potential to decrease unemployment through an increase in manufacturing jobs in the United States. While Slate’s Yglesias views this as unlikely, the proposal is nevertheless intriguing.

It might seem odd for the United States to be running such a large trade deficit amid such high unemployment. One of the main reasons to import goods rather than make them yourself is that by importing goods you free up scarce labor to do other things. But right now we’ve freed up labor to enter the unemployment sector. Bad news.

One potentially useful way of thinking about this is through the calculation Michael Mandel deploys to ask what the economy-wide consequences would be of balancing America’s trade in nonoil manufactured goods (PDF). He thinks it would take 3.5 million to 4 million workers to make the requisite stuff. Potentially that would be a very costly change if it involved 4 million fewer people working in hospitals, schools, and restaurants just to get our hands on material goods that we already have. But unemployment is high. So under present circumstances, he writes that this could “reduce unemployment by about 2.3-2.6 percentage points,” which would be a lot.

However, firms don’t locate production abroad for no reason. They do it because it’s cheaper. So if we relied more on domestically made goods, prices would have to be higher

Read the entire article HERE

Can Eminent Domain Help Underwater Homeowners?

Posted on by The Progressive Policy Institute

Several California counties are considering a controversial proposal to use their eminent domain powers to offer relief to underwater homeowners. The plan is quietly being shopped to counties hit hardest by the housing crisis, and it seems local politicians are listening.“We have a very large problem that’s causing severe economic problems and part of our exploring ways to deal with it is hearing from people like those representatives of the securities industry,” said San Bernardino County Chief Executive Officer Greg Devereaux.

This has provoked a sharp reaction from Wall Street banks. In a letter to San Bernardino Supervisors, a coalition of securities investors said “Such an action would likely significantly reduce access to credit for mortgage borrowers in the San Bernardino area and other areas that undertake similar actions.”

It’s hard not to sympathize with the the Riverside-San Bernardino-Ontario metro area, where half the mortgages are underwater and the unemployment rate for May was 11.8%. And some progressives may find it hard to be sensitive to the plight of the Wall Street banks that hold most of the underwater mortgages in San Bernardino.

But the basic policy question here is whether the proposed cure would be worse than the disease. Using government’s eminent domain powers to force investors to eat the losses on underwater mortgages is a very drastic remedy to the problem of negative equity. While it could ease the burden on some homeowners, it could also drive private investment out of California housing markets. This would only prolong the housing slump and deepen the state’s economic malaise.

Download the entire brief HERE

Libor Scandal and Public Data Manipulation

Posted on by The Progressive Policy Institute

Editor’s Note: This item is cross-posted from Innovation and Growth.

I found myself reacting to the Libor scandal more strongly than a lot of the earlier revelations of financial institutions misdeeds. First, the banks were just blatant out-and-out lying about a simple number.

Second, their lying led to a distortion of a crucial piece of publicly available data–the Libor rate. In a market economy, intentional misrepresentation of a market price is not a victimless crime –in fact, the victims are everyone who relied on that price to make decisions.  That includes regulators who presumably watched Libor as one of their guides to the amount of stress in the global banking system. Here’s a chart of Libor across the key period (downloaded fromhttps://www.fedprimerate.com ).

Continue reading “Libor Scandal and Public Data Manipulation” →

Libor scandal and public data manipulation

Posted on by The Progressive Policy Institute

I found myself reacting to the Libor scandal more strongly than a lot of the earlier revelations of financial institutions misdeeds. First, the banks were just blatant out-and-out lying about a simple number.

Second, their lying led to a distortion of a crucial piece of publicly available data–the Libor rate. In a market economy, intentional misrepresentation of a market price is not a victimless crime –in fact, the victims are everyone who relied on that price to make decisions.  That includes regulators who presumably watched Libor as one of their guides to the amount of stress in the global banking system. Here’s a chart of Libor across the key period (downloaded fromhttps://www.fedprimerate.com ).

Would Libor have shown more signs of stress sooner if it wasn’t being manipulated in 2007 and 2008? And would banks, regulators, and investors reacted sooner? We’ll never know.

But this confirms what I’ve written in the past–the financial crisis was in part a data crisis, where all sorts of numbers were sending misleading signals. In particular, the strength of the financial position of the banks was overstated.

The question is whether the Libor scandal is a vestige of the past, or a sign of future troubles to come. My sense is that we’ll see a lot more opportunities for manipulation of private data to send misleading public signals. Forget about financial markets for the moment. I’m thinking now about the way that websites continually try to game Google’s search algorithms in order to get a higher ranking. Hotels and restaurants have a big incentive to try and manipulate their reviews on consumer sites such as Yelp. App developers have an incentive to game their reviews on the Apple and Google app stores.

Will the bad information drive out the good? Or can we build information aggregation mechanisms that are more difficult to manipulate?

This item is cross-posted from Michael Mandel’s blog, Mandel On Innovation and Growth.

Telecom Giants Top List of Companies Investing in U.S.

Posted on by The Progressive Policy Institute

PPI’s recent report on Investment Heroes has continued to be picked up by major media outlets.  This time, National Journal focused on the investment in the U.S. economy made by telecom companies.

AT&T and Verizon top a list of 25 major companies investing in the United States, according to a report released by the Progressive Policy Institute.

The think tank named its top 25 “investment heroes” that are spending resources domestically.The list of non-financial companies also includes tech and telecom giants such as Intel, IBM, Comcast, Time Warner, Sprint, Google, and Apple.

Tech companies like Apple have faced scrutiny over their outsourcing policies as domestic joblessness remains high. Other companies have cited their relative economic strength and contributions to the broader economy as reasons why lawmakers should be hesitant to impose new regulations on issues like privacy, cybersecurity, or antitrust.

Read the entire article HERE

 

 

 

Betting On America: How Much Do Apple and Google Invest at Home?

Posted on by The Progressive Policy Institute

The Atlantic recently published a piece on PPI’s most recent policy report Investment Heroes. The article provides analysis of the implications of Google and Apple’s investment and placement on Michael Mandel and Diana Carew’s list.

One of the more frustrating aspects of the thriving U.S. tech sector is that while its leading companies generate fabulous profits, they don’t actually employ that many American workers — especially compared to industrial titans of yore. At its 1970s peak, General Motors had more than 600,000 U.S. workers on its payroll. Apple, by comparison, claims just 47,000, most of whom are part of its retail operations. Google has about 18,500. They’ve perfected the low-employment, high-profit business model.

But measuring a tech company’s economic impact by its headcount alone is more than a bit misleading, in part for reasons I’ve written about previously. Michael Mandel of the Progressive Policy Institute, an occasional Atlantic contributor, has done some of the most interesting work on the topic, showing how California’s tech behemoths indirectly support hundreds of thousands of workers who produce and market mobile apps.

This week, Mandel and his PPI colleage Diana Carew, are out with a new report that illustrates another key way in which tech companies inject life into the economy: business investment, otherwise known as capital expenditures. That’s the money firms spend to upgrade and expand their operations, for instance by buying machinery, upgrading servers, or building new factories and offices. Google and Apple were numbers 24 and 25 on PPI’s list of companies investing most in the United States, right after Chrysler, and not far off from General Motors or Target (Their list excludes financial firms).

Read the entire article HERE.

American Economy: Points of Light

Posted on by The Progressive Policy Institute

PPI’s Chief Economic Strategist Michael Mandel was cited in The Economist this week regarding the growth and potential in America’s mobile technology sector. The Economist points to Mandel’s numbers as a promising aspect of the growing U.S. services exported around the world.

Services have long been an American strength, consistently making up 30% of its exports. Within that sector, though, the share held by lower-value tourism and travel has slipped, while royalties and so-called private services—such as scientific, engineering and other consulting, plus financial services—have advanced. Exports of such services to Brazil, India and China nearly doubled between 2006 and 2010.

This trend has been pushed on by digital technology, which makes effortless the sale of many services across borders. Michael Mandel of the Progressive Policy Institute, a think-tank, reckons there are now 311,000 people employed making applications, games and so forth for smart devices such as Apple’s iPhone, and for Facebook. Zynga, one of the largest makers of online games and mobile entertainment applications, recorded $1.1 billion in revenue last year, largely from the sales of virtual goods in its games. A third of this came from players who live outside America.

Read the entire article HERE.

Where Are The Women Wonks?

Posted on by The Progressive Policy Institute

PPI managing director for policy and strategy Anne Kim writes about the gender discrepancy amongst think tank staff in Washington for the Washington Monthly. She elicits why she thinks the particularly strong trend exists as it does.

 Every day in Washington, D.C., brings numerous announcements about the various policy events, forums, and conferences around town that serve as meet-and-greets for the city’s thinking elite. In addition to a prepackaged muffin or a stale sandwich and some badly brewed coffee, these events typically feature a slate of experts on whatever topic is the focus. Also typically, most of these experts are men.

One recent big-name panel on money in politics, for example, featured seven white men (including the moderator) and just one woman: Jane Harman, the Woodrow Wilson Center resident and former congresswoman. Another recent all-day, all-star conference on economic policy included only twelve women among the fifty featured speakers.

Certainly, some of the most powerful people in policy today are women, such as the Center for American Progress’s president, Neera Tanden, and Sarah Rosen Wartell, president of the Urban Institute. But male “brand-name” policy experts far outnumber the women. Men—white men—dominate the senior management at many of the most influential D.C. think tanks. And men—white men—dominate the ranks of “scholars” in many institutions.

Read the entire article here

Investment Heroes: Who’s Betting on America’s Future?

Posted on by The Progressive Policy Institute

American voters are finding it hard to get excited about this year’s presidential election. Job growth is slow. Economic growth is slow. Real wages have been essentially stagnant since 2009. It’s the same old story as when the recovery began three years ago. We are in an atmosphere of economic uncertainty. Voters—swing voters especially—are looking for news that will boost their confidence from all the economic doom and gloom going around. We are a country that needs to hear more (if not have more) economic successes.

Such successes begin at home with investment—business investment, government investment, and household investment. Government has to invest in infrastructure, education, and research. Households have to invest in their own human capital. And businesses have to invest in buildings, equipment, and software. All are essential—but in this report we will focus on business investment. Domestic business investment generates growth, raises productivity, increases wages and creates jobs for Americans. It can span the gamut from new office buildings to improved production lines to faster communications equipment to deeper natural gas wells.

Unfortunately, U.S. business investment tanked during the Great Recession, and has yet to recover. The graph below shows the extent of the drop-off—in 2011, non-residential investment remained more than 7% below 2007 levels, adjusting for prices. By comparison, personal consumption in real terms was higher in 2011 compared to 2007. We find ourselves in an investment drought, not a consumption drought.

Equally as important, before the recession companies were expanding their domestic investment at a rapid pace. In fact, we estimate there would have been a total of $1.4 trillion more in non-residential business investment over 2008-2011, in 2005 dollars, had business investment continued to grow at the same average annual rate in the ten years before the recession (4.8% over 1997-2007). That extra investment could have gone a long way creating jobs, boosting productivity, and enhancing U.S. competitiveness.

The decline and lackluster recovery in business investment has a wide range of causes, including globalization, regulatory barriers, and weak demand. Many companies are investing overseas rather than in the United States. Multiple layers of regulation, even if well-intentioned, have the impact of discouraging capital investment and innovation. And the continued weakness in demand at home makes it difficult to justify building new factories. But no matter what the reason, this weakness is having an adverse effect on economic growth and is one of the main reasons behind the job drought.

That’s why PPI wants to highlight those companies that are still investing domestically in buildings, equipment, and software. Using publicly available financial reports, PPI constructed a list of the top 25 nonfinancial U.S.-based companies ranked by their U.S. capital spending in 2011. In many cases this required detailed calculations and assumptions, since companies often report global capital spending without breaking it down by country. Financial companies were excluded because they do not publicly report their capital expenditures. (A more detailed explanation of our methodology can be found later in this memo.)

PPI calls these companies “Investment Heroes” to make a key point: the U.S. economy is at its best—in terms of growth and job creation—when companies and workers are partners with the same objectives. Half of the leading companies are telecom and energy, but the list also includes tech, retail, automotive, and entertainment companies.

Download the entire report.

Help Wanted: ‘Chief U.S. Investment Officer’

Posted on by The Progressive Policy Institute

Most people didn’t notice that Commerce Secretary Bryson resigned late last month. And why would they? The Commerce Department has long been one of the more obscure federal institutions, viewed by many as a hodge-podge of important but seemingly unrelated agencies like the Patent & Trademark Office, National Oceanic & Atmospheric Administration, Bureau of Economic Analysis, and Census Bureau. The agency is so partitioned that most Commerce employees probably haven’t noticed the unexpected departure.

That is a shame. Rather than being irrelevant, the Secretary of Commerce now plays a critical role as a champion for domestic investment – effectively America’s ‘Chief Investment Officer.’ Recent actions by President Obama put the Commerce Department at the forefront of encouraging U.S. investment.  That places a significant responsibility on the Department, since business spending on stuff like new office space and equipment is critical to stimulating economic growth.

Continue reading “Help Wanted: ‘Chief U.S. Investment Officer’” →