Category: Uncategorized

Ritz in Politico: Tax bill passes committee, so now what?

Posted on by Alex Terr

A MINORITY POINT OF VIEW: One of the big questions about the big tax negotiation of 2025, perhaps somewhat counterintuitively, is how narrow it might be.

That’s because Republicans largely want to preserve all of the individual provisions from their 2017 tax law, while President Joe Biden repeatedly has vowed not to raise taxes on any households making less than $400,000 a year.

Other Democrats haven’t really pushed to dissuade the White House from that position, though it’s clearly also quite possible that Donald Trump will be in the Oval Office for those 2025 talks.

In any event, Ben Ritz of the Progressive Policy Institute is out with a new paper arguing that Democrats should get rid of that pledge, even if it means that more middle-income people pay more in taxes.

There are fiscal reasons for that, according to Ritz, who argues that deficits currently at an unsustainable path, with long-term mismatches between spending and revenues that will require higher taxes on more than just the wealthiest.

But it’s not just a numbers issue either, Ritz maintains — a government where the very few end up providing the money to pay for a wide range of services just won’t work over the long haul, because those who aren’t providing the resources won’t care enough about whether those services are needed or well run.

“Pragmatic progressives must pressure the Biden administration to soften the president’s misguided tax pledge heading into a potential second term. They must start making the case to voters why progressive programs are worth paying for,” Ritz writes.

Read more in Politico.

PPI Statement on the 51st Anniversary of Roe v. Wade

Posted on by The Progressive Policy Institute

Erin Delaney, Director of Health Care Policy at the Progressive Policy Institute (PPI), released the following statement on the would-be 51st anniversary of the passage of Roe v. Wade, the United States Supreme Court’s landmark decision that recognized the constitutional right to an abortion and legalized the procedure nationwide:

“Thanks to former President Donald Trump and his appointments of right-wing activist judges to the Supreme Court, a new generation of Americans are now living with a reversal of rights that their parents and grandparents fought for. The onslaught of restrictions and bans to reproductive health care that have come in the wake of Dobbs further inflicts suffering on families and their ability to make their own decisions about their own health and when and how to grow their family.

“The Republican Party is out of touch with working-class Americans who are increasingly distressed about the state of abortion access since the end of Roe. In PPI’s Winning Back Working America poll, 56% of participants said they are concerned about abortion access. Republican’s relentless effort to curtail access to reproductive health care is directly opposed to the majority of Americans’ wishes, eroding the foundation of democracy and their personal liberty.

“Democrats must continue to expand their majority by appealing to working-class voters, including Independents and Republicans who are anxious about the fragile state of access to reproductive care in the 2024 election and beyond.

“PPI firmly believes in and will always defend reproductive freedom by fighting against far-right extremism and working to expand access to comprehensive reproductive health care for all Americans.”

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

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Media Contact: Amelia Fox, afox@ppionline.org

Marshall for Democracy Journal: Don’t Kill Bill

Posted on by Max Sherrill

By Will Marshall

This essay is the first part of an exchange with historian Nelson Lichtenstein. Read responses 2, 3, and 4.

Is it really necessary to debate progressives again over Bill Clinton’s legacy? With a vengeful Donald Trump thrashing about our political waters like a blood-frenzied shark, it seems like a distraction.

What’s more, the left’s revisionist history of the Clinton years strikes me as a facile exercise in presentism—reinterpreting the past to score present-day ideological points. Nonetheless, the “neoliberal” legend seems to be gaining currency outside the activist and academic circles from which it sprang.

In a widely noted speech last April, National Security Adviser Jake Sullivan took errant potshots at Clinton’s trade policies by way of touting the Biden Administration’s turn to industrial policy as a bold new departure in economic philosophy. Rolling out Bidenomics in July, President Biden confusingly described it as a rejection of the “trickle-down economics” that has supposedly held sway for the last 40 years—a period that includes the eight years of the Obama-Biden Administration.

Read more in Democracy Journal.

How the $400K Tax Pledge Undermines Policymaking

Posted on by Alyssa Brown

INTRODUCTION

Americans have always understood that our nation’s prosperity rests on two pillars: A vibrant free-enterprise system that rewards innovation and risk-taking, and a fiscally responsible government that invests in basic public goods and services that cannot be provided by the private sector. But to benefit from these investments, citizens must pay sufficient taxes to finance them — and for more than two decades now, U.S. political leaders have not asked them to do so.

Last year alone, the federal government spent $2 trillion more than it raised in tax revenue. Our country can afford to borrow when addressing temporary emergencies, but it cannot sustain debts growing faster than our economy in perpetuity. Unfortunately, that’s the path we’re on today, as the costs of health-care and retirement programs such as Medicare and Social Security continue growing faster than the revenues needed to finance them. If this structural mismatch between taxes and spending continues unabated, rapidly rising interest costs will further crowd out critical public investments and smother our economy.

Anti-tax zealots on the right have argued the imbalance can be solved entirely through spending cuts. Yet they have been unable to produce a plausible plan to do so without eviscerating core functions of government, such as food safety and basic scientific research that plants the seeds for innovation. The reality is some higher tax revenue is necessary to finance the needs of our aging population.

President Joe Biden at least partially grasps this reality and has called for raising taxes by almost $5 trillion over the next decade. However, his approach also is marred by political expediency. In Biden’s telling, our current spending trajectory can largely be sustained — and even raised — simply by raising taxes on the top 2% of income-earners, without any contribution from the vast majority of Americans. During his 2020 presidential campaign, Biden famously pledged not to raise taxes on households making under $400,000 (hereafter referred to as “the $400K pledge”). Since taking office, his administration has reinforced this pledge by saying no household earning under $400,000 will pay a penny more in taxes from his policies and proposing to prevent $1.7 trillion of temporary tax cuts that benefit these households from expiring.

Biden is right that the rich need to pay more in taxes but that simply isn’t enough. As this report demonstrates, raising taxes only on households with incomes over $400,000 is insufficient to fund current promises, let alone the new initiatives Biden has proposed during his presidency or the wish list of expanded programs sought by progressives. In addition to starving the government of needed revenue, the $400K pledge prevents the adoption of commonsense tax simplification measures and efficient revenue-raisers that most other advanced economies use to fund their welfare states

But the final problem with the $400K pledge is perhaps the most serious: it destabilizes our democracy. Asking fewer than 3 million households to bear the burden of financing a government meant to serve 330 million people is neither fair nor practical. It removes the incentive for prudent fiscal policy by severing the crucial link between citizens’ demands for more government spending and their willingness to pay for it. After all, why should voters care about wasteful or corrupt government spending if “somebody else” is paying for it? Meanwhile, the few households that are footing the bill will likely reduce their output in response to confiscatory levels of taxation. Government programs in a democratic society can only be sustained if most of the citizens who can contribute are willing to do so.

Pragmatic progressives must pressure the Biden administration to soften the president’s misguided tax pledge heading into a potential second term. They must start making the case to voters why progressive programs are worth paying for. That means advocating for not only progressive tax increases, but also for broadening the tax base to close inefficient loopholes — even those that benefit the middle class — and adopting new taxes, such as the consumption taxes that fund European welfare states. Beyond that, progressives must propose to modernize rather than expand existing spending programs, because the public’s tolerance for taxation only goes so high. Bringing spending into alignment with revenues at a sustainable level voters truly support is essential for Biden to establish a durable legacy.

READ THE FULL REPORT. 

Duffy for The Messenger: New Tax Deal Imperfectly Invests in Our Future

Posted on by Max Sherrill

By Laura Duffy

After years of uncertainty, Congress may be on the verge of passing a $78 billion tax package to partially revive an expanded Child Tax Credit and business tax incentives for research and development that expired at the end of 2021. These popular — yet costly — provisions became linked in 2022 by Democrats arguing that benefits for working families should accompany tax breaks for businesses, but compromise has remained elusive until now. Although the deal, introduced Monday by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Chairman Jason Smith (R-Mo.), is imperfect, it would temporarily reduce child poverty, incentivize innovation and minimally add to the national debt.

Expanding the Child Tax Credit (CTC) can play a key role in reducing child poverty, which is both a moral imperative and a smart investment in children’s health, educational and economic outcomes later in life. In 2021, Congress temporarily provided a pandemic-era expansion to the CTC to all families. These changes were expensive: If made permanent, they would have cost $1.6 trillion between 2022 and 2031. Yet, instead of adjusting the policy to provide more targeted support, lawmakers allowed the changes to completely expire.

Currently, the full $2,000-per-child value of the CTC isn’t available to many families that need it most.

Read more.

This op-ed was originally published in The Messenger on January 20, 2024.

Sykes and Brown for The Messenger: Uncompromising Activism: The New Threat to the Environment, Geopolitics and the Biden Administration

Posted on by Max Sherrill

By Elan Sykes and Neel Brown

Under pressure from green activists, the Biden administration is considering adopting a climate test in permits for new liquefied natural gas (LNG) export facilities. Coming out of the pandemic-driven supply shocks and Russia’s invasion of Ukraine, American LNG exports were the largest of any single country in 2023 and served crucial roles in the U.S. economy, the environment and geopolitical support for European allies.

The activists hope to stop LNG infrastructure projects in spite of these benefits, apparently out of misguided trust for a single study and seemingly without concern for the political backlash among working-class and swing-state voters at home and allies abroad. The form of policy demand these left-wing activists have adopted is to require the inclusion of climate impacts in the federal government’s calculation of public interest in permits for LNG export facilities. Based on an unreviewed paper with what we view as overly narrow calculations and sorely outdated evidence, it seems the activists assume that the inclusion of climate criteria in the permit decision would end the export of LNG — which they believe would constitute climate progress. But gas is cleaner than coal, and because U.S. gas is relatively clean and getting even cleaner due to signature Biden policies, the climate calculus of growing liquefied gas exports does not mean that a comprehensive test of their impact would bear out the anti-export position of some environmental activists.

The economic and political risk for Democrats is enormous. President Biden knows that his political future is tied directly to issues like inflation and to winning back working-class voters in swing states like Pennsylvania. Remember that Biden made a late 2020 campaign stop in Pennsylvania for the explicit purpose of letting voters know that he was not against fracking. To allow the far left to derail the natural gas successes of this administration would be electorally disastrous.

Read more.

This story was originally published by The Messenger on January 18, 2024.

Uncompromising Activism: The New Threat to the Environment, Geopolitics and the Biden Administration

Posted on by Max Sherrill

Under pressure from green activists, the Biden administration is considering adopting a climate test in permits for new liquefied natural gas (LNG) export facilities. Coming out of the pandemic-driven supply shocks and Russia’s invasion of Ukraine, American LNG exports were the largest of any single country in 2023 and served crucial roles in the U.S. economy, the environment and geopolitical support for European allies.

The activists hope to stop LNG infrastructure projects in spite of these benefits apparently out of misguided trust for a single study and seemingly without concern for the political backlash among working-class and swing-state voters at home and allies abroad. The form of policy demand these left-wing activists have adopted is to require the inclusion of climate impacts in the federal government’s calculation of public interest in permits for LNG export facilities. Based on an unreviewed paper with what we view as overly narrow calculations and sorely outdated evidence, it seems the activists assume that the inclusion of climate criteria in the permit decision would end the export of LNG — which they believe would constitute climate progress. But gas is cleaner than coal, and because U.S. gas is relatively clean and getting even cleaner due to signature Biden policies, the climate calculus of growing liquefied gas exports does not mean that a comprehensive test of their impact would bear out the anti-export position of some environmental activists.

The economic and political risk for Democrats is enormous. President Biden knows that his political future is tied directly to issues like inflation and to winning back working-class voters in swing states like Pennsylvania. Remember that Biden made a late 2020 campaign stop in Pennsylvania for the explicit purpose of letting voters know that he was not against fracking. To allow the far left to derail the natural gas successes of this administration would be electorally disastrous.

Furthermore, world energy markets and our allies in Europe and East Asia are relying on the U.S. to serve as a clean backstop supplier of LNG exports to avoid market shocks like COVID-19 and Russia’s invasion of Ukraine.

Because American natural gas exports provide such significant geopolitical and economic benefits, and because they provide world markets that lack other coal substitutes with a key source of lower-polluting LNG, a well-constructed test for the climate impact of LNG exports would not be the death knell of the export industry supposed by both sides of this debate. If the groups pushing for a test were to write it themselves, the simplistic result could cause significant damage to the global environment and world energy markets.

By contrast, a well-designed calculation could serve as a rigorous and transparent benchmark for assessing the relative climate benefits of U.S. natural gas and the development of differentiated markets for lower-methane gas with like-minded green importing allies. An honest approach to evaluating the climate and geopolitical impacts of LNG facilities would take into account the climate costs of mining more coal, burning more coal and using coal as a chemical feedstock. A fair test would acknowledge air pollution differences and coal mine methane leaks that exceed natural gas methane emissions by likely underestimated official measurements. It would account for the boon to Putin if U.S. LNG shipments to Europe and Asia declined, sending those markets back into the fold of the Russian petrostate.

The U.S. reduced greenhouse gas emissions by 2% in 2023, largely as a result of lower coal use. The U.S. was instrumental in averting an energy catastrophe in Europe following Putin’s invasion of Ukraine. There is finally a path forward to help Asia reduce its dependence on coal by switching to cleaner U.S. LNG. The synergies of natural gas electricity production with intermittent wind and solar are paying huge climate benefits. And future technology deployments in carbon capture and hydrogen may require infrastructure innovations developed in gas transport.

Some far-left environmentalists seem willing to throw all of that away in a misguided attempt to just keep all of the oil and gas in the ground. Who benefits from this new push to stymie the U.S. LNG infrastructure buildout? Ultimately, it would be the coal industry and Putin. Out of a misguided fear of stranded assets and infrastructure lock-in, some greens believe that turning off U.S. exports will reduce emissions, simple as that. However, America exports LNG to meet real global energy demand, and simply cutting off supplies of gas does not mean that demand disappears; instead, energy importers will be forced to buy dirtier fuels and are likely to reward autocratic suppliers like Russia.

The energy transition is a global and gradual process that cannot be implemented immediately with only good intentions to power it. We have no choice but to build our way through the energy transition with the energy system we have.

There are credible environmental organizations working on pragmatic greenhouse gas reductions from energy supply chains in concert with industry, such as the Environmental Defense Fund (EDF), and ambitious policies in the Inflation Reduction Act will allow the Biden administration to push already declining emissions down even further. The real absurdity here lies in an unreviewed working paper using 30-year-old numbers that, in a matter of months, has ascended to seemingly steer national policy at the highest levels of the Biden administration. Our geopolitical allies, the climate, the U.S. economy and the electoral future of the Democrats depend on better policy.

This op-ed was originally published in The Messenger.

PPI’s Trade Fact of the Week: 55 countries have ratified the WTO’s 2022 fishery subsidies agreement. They need 55 more by late February.

Posted on by Max Sherrill

FACT: 55 countries have ratified the WTO’s 2022 fishery subsidies agreement. They need 55 more by late February.

THE NUMBERS: ‘Capture fisheries’ annual tonnage by country, 2021 –
Country Total Ratified WTO Fisheries Agreement?
World: 92.2 million tons —
China 13.1 million tons Yes
Indonesia 7.1 million tons Not yet
Peru 6.6 million tons Yes
Russia 5.2 million tons Not yet
India 5.0 million tons Not yet
U.S. 4.3 million tons Yes
European Union* 3.7 million tons Yes
Vietnam 3.5 million tons Not yet
Japan 3.1 million tons Yes
Norway 2.6 million tons Not yet
All other ~34.5 million tons 26 yes, 104 not yet
Non-WTO members** ~1.5 million tons n/a

* Represents itself and the 27 member states.
** Among countries and territories outside the WTO, top capture fisheries include Iran at 0.8 million tons, Micronesia 0.2 million tons, North Korea 0.2 million tons (World Bank’s estimate), Marshall Islands 0.10 million, Nauru 0.1 million tons, and a group of smaller fisheries countries – Ethiopia, South Sudan, Somalia, Tuvalu, Kiribati, Bahamas – collectively at about 0.3 million tons.

WHAT THEY MEAN:

It’s been sadly difficult to get countries to agree on good things in this century, but as the 164 members of the World Trade Organization prepare for their 13th Ministerial Conference at the end of February, they have a chance.  It has to do with fish:

Fish, Boats, and Money: The world’s fishing fleet — 45,000 big factory-style vessels and 4.1 million small boats — hauls in 80 million tons of “capture” on the high seas and off the world’s seacoasts, and 10 million tons from lakes and rivers. To put this figure in context, all humans put together weigh about 500 million tons (~60 kilos per person x 8 billion people). Various gloomy studies report the consequences: About 100 million sharks are taken each year, declines of up to 90% in counts of large fish, and more than a third of the world’s fishing grounds are unsustainably depleted.

What to Do? In a world of 8 billion humans and their need for protein, shrinking forests and land habitat, and limited new farmland options, no single solution for pressure on marine life seems likely. Aquaculture, limits on particular species, bycatch reduction, bans on especially destructive fishing technologies, etc. all have their part. For the last 25 years, though, the WTO members have been circling around a partial solution, which at least in principle is among the simplest and easiest of all: stop paying people to fish more than they should.

Subsidies: One reason fish counts fall is that governments are paying fishing fleets to get bigger and catch more of them. A widely used count of world subsidies to fishing fleets, done in 2019 by a group of academics at the University of British Columbia (Sumaila et al), yields a figure of $35.4 billion. This is about a tenth of the world’s $400 billion annual fishing industry, and a quarter of the $150 billion in annual fish trade. About $28 billion goes to large boats — pretty easily identified as the least needy recipients; by purpose, $22 billion goes to make fishing fleets larger, and another $7 billion to give them cheap fuel.  By region and top eight countries (counting the EU as a single economy), their rundown of subsidies looks like this:

World Total $35.4 billion
Asia $19.5 billion
                China   $7.5 billion
                Korea   $3.2 billion
                Japan   $2.9 billion
                Thailand   $1.1 billion
                Indonesia   $0.9 billion
Europe   $6.4 billion
                EU members   $3.8 billion
                Russia   $1.5 billion
U.S./Canada/Mexico   $4.4 billion
                U.S.   $3.4 billion
South/Central America   $2.0 billion
Africa   $2.1 billion
Pacific countries   $0.8 billion

 

The WTO: The WTO is well-placed to do something about this, given its mission and since its members includes 49 of the world’s top 50 capture fishery countries, and account for about 97% of world fishing. (The one big fishing country not in the WTO is Iran, whose fisheries account for 0.8 million tons annually or 1% of the total.)  Having debated fishery subsidy controls since 1998, they took a big first step at the 12th Ministerial Conference in June 2022, which “prohibits support for illegal, unreported and unregulated (IUU) fishing, bans support for fishing overfished stocks, and ends subsidies for fishing on the unregulated high seas,” and now have two opportunities this February:

(a) Bring the 2022 agreement into force. So far, this remains an agreement on paper rather than something that is actually starting to bring down subsidies.  Its entry into force requires ratification by two-thirds of the WTO’s 164 members, or 110 in total.  As of mid-January, 55 have done so. Another 109 — including five of the world’s ten largest fishery countries – have not. Five of the top ten capture fishery countries including the U.S., China, EU, Japan, and Peru have ratified; the other five so far have not. India, Vietnam, Russia, Norway, and Indonesia — and a bit further down the scale, the Philippines, Bangladesh, Thailand, and others — you have 40 days left before the Ministerial.

(b) Finish the work left incomplete last year: The 2022 agreement did not include limits on subsidies contributing to “overcapacity” in national shipping fleets, or to overfishing.  The WTO members (or at least the right-minded ones) hope to complete this by the Ministerial conference in February, working from a text that requires members (with exceptions for least-developed countries and countries such as small islands whose fishing tonnage is very low) to abandon eight kinds of subsidies contributing to overcapacity — ship construction; machinery and technology purchases; fuel, ice, and bait; subsidies for required benefits; salaries and income support for crew; fish prices; at-sea support; and vessel loss or damage — and regular notifications to the WTO of all subsidies with justification for sustainability.

As a final exclamation point, the 2022 agreement — if actually brought into force — lasts only four years and self-terminates if the WTO members can’t agree on the overcapacity limit. If successful, the fisheries subsidy agreements will be something people remember quite a long time into the future, as an example of governments willing to make modest political sacrifices for the general good. If not, well, that would also be something to remember about this generation of political leaders.

FURTHER READING

The WTO:

The WTO’s 2022 agreement on fishery subsidies reduction.

… Director-General Ngozi Okonjo-Iweala takes recent ratifications from the U.K. and Gambia.

… and Fisheries Committee Chairman Gunnarsson updates on progress toward a broader agreement.

Subsidy counts:

Rashid Sumaila et al. in Science Direct tabulate a worldwide $35.4 billion in fishery subsidies by region, purpose, large vs. small ships, and more.

… while NGO Oceana reports that $5.4 billion worth of subsidies, or a fifth of the world total, goes to support fleets operating in other countries’ water, and $800 million for high-seas operations.

… and UNCTAD looks at subsidies and sustainability.

Fish & boats:

The World Bank has ‘capture’ fishery totals by country, in tons.

The UN Food and Agricultural Organization’s State of World Fisheries and Aquaculture 2022 reports on fish take, fleets and employment, sustainability, and more.  The 80 million tons of ocean capture looks like this:

*    67 million tons of fish, led by anchovies, Alaska pollock, and skipjack tuna;
*    5.6 million tons of crustaceans, mostly varieties of shrimp and crab;
*    5.9 million tons of mollusks, topped by squid;
*    0.5 million tons of edible jellyfish, sea urchins, sea cucumbers, and miscellaneous other sea life.

It concludes that “the fraction of fishery stocks within biologically sustainable levels decreased to 64.6% in 2019” from nearly 90% in 1974, and that 35.4% of world fisheries are overfished — take the dead Atlantic cod grounds off New England and Canada as an example — while 57.3% are at “maximum yield” and only 7.2% are “underfished.”

UNCTAD’s World Maritime Review 2023 tracks the world’s merchant fleet.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week.

Kilander for The Messenger: Republican Budget Concessions Enrich Tax Cheats and Increase the Deficit

Posted on by Max Sherrill

By Alex Kilander

The budget deal recently struck by congressional leaders would be a bittersweet resolution to this year’s spending fight. On the one hand, it prevents a harmful government shutdown and adheres to the spending levels in the Fiscal Responsibility Act (FRA) negotiated by President Biden and former House Speaker Kevin McCarthy (R-Calif.)  in June. But it rewards Republicans for threatening to renege on the agreement they already made and may help wealthy tax cheats in the process. Moreover, it avoids any real discussion about what is needed to remedy our nation’s fiscal imbalance.

The bipartisan agreement calls for just under $1.66 trillion in discretionary spending for fiscal year 2024, split between domestic and defense programs. Defense spending will be set at $886 billion, a 3% increase over the previous year, while non-defense spending will be set at $773 billion, roughly flat from the previous year. After accounting for inflation, this amounts to roughly flat defense spending with a 3.4% cut for non-defense spending.

Most importantly, this deal averts a harmful shutdown that would interrupt important federal programs and create a costly disruption to the nation’s economy through higher unemployment, lower GDP and disruptions to important sectors. Depending on their length, previous government shutdowns have cost the economy as high as $20 billion.

Read more.

This story was originally published in The Messenger on January 16, 2024.

Marshall for The Hill: Beyond partisan deadlock, there’s a nation in search of ‘can do’ democracy

Posted on by Alyssa Brown

By Will Marshall

Campaign 2024 is just getting underway, but President Biden already has framed it as a fight to save American democracy. That’s true no matter who wins the Republican presidential nomination.

If it’s Donald Trump, the threat to democracy is obvious. Having already instigated one failed coup attempt, he won’t hesitate to reject the voters’ verdict if he’s defeated again in November.

And if he wins, Trump has vowed to sic the Justice Department on his political enemies and pardon the Jan. 6 rioters, defining treason down for future insurrectionists.

Even a Biden victory, though, would only be a reprieve from our deeper dilemma: Public confidence in democracy is cratering.

Read more in The Hill.

Moss in Vox: Trump says a lot of stuff about the economy. What would he actually do?

Posted on by Alex Terr

Antitrust enforcement has been ticking up since the Obama administration, said Diana Moss, vice president and director of competition policy at the Progressive Policy Institute, a progressive think tank. The question with Trump, however, is whether in his next administration he would try to use antitrust laws and agencies to go after perceived enemies.

“He weaponized antitrust for sure, which I think will happen again should he come back into power,” Moss said. She pointed to reports of Trump’s attempts to block the AT&T-Time Warner merger because of his hate for CNN and to the Trump Department of Justice’s investigation into automakers that made a deal with California on emissions (the investigation was later dropped).

Read more in Vox.

Jacoby for The Wall Street Journal: Will Ukraine’s Refugees Want to Go Back Home?

Posted on by Max Sherrill

By Tamar Jacoby

The startling news slipped by almost unnoticed in the last minutes of President Volodymyr Zelensky’s year-end press conference in December. Asked about the 6.2 million Ukrainians—nearly 15% of the population—who have fled the country over the past two years, Zelensky dashed off a list of incentives to encourage their return: cash payments, subsidized mortgages, startup business loans. But he devoted most of his answer to a very different idea: multiple citizenship. The goal would be to allow Ukrainians who live and work elsewhere to continue visiting, investing and otherwise contributing to the nation’s life.

It’s not a new concept, but hearing it from Zelensky was surprising. Was he acknowledging that many Ukrainian refugees may never return? The stakes are high: If the refugees don’t come back, demographic projections suggest that the country’s population, already shrinking before the war, could contract by 25% in decades ahead. Surveys suggest that the people who left Ukraine are better educated than the population at large, with two-thirds having completed higher education, so their absence would be a devastating economic blow for a country struggling to rebuild.

Zelensky expects European nations to encourage Ukrainians to return, including by tapering benefits for refugees except those in what he called “dire” circumstances. Czechia, Ireland and Switzerland are already considering travel subsidies to help Ukrainians go home when the fighting stops. Still, no one is talking about forcing them to return.

Read more in The Wall Street Journal.

PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses

Posted on by Max Sherrill

FACT: PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses.

THE NUMBERS:
U.S. private-sector employment, 2021: 124.38 million
… at foreign-owned businesses: 7.94 million
… U.K.-owned: 1.22 million
… German-owned: 0.92 million
… Canadian-owned: 0.87 million
… Japanese-owned: 0.96 million
… all other countries: 3.97 million

 

WHAT THEY MEAN:

Anxiety-filled comment from Sen. J.D. Vance, an Ohio Republican, last month in response to U.S. Steel’s acceptance of a $14 billion purchase offer from Tokyo-based Nippon Steel:

““Today, a critical piece of America’s defense industrial base was auctioned off to foreigners for cash …”

In fact of course the company was not at “auction” as a sort of estate sale or distressed asset, Japan is not a random group of unknown foreigners but a core U.S. ally, and Nippon Steel is a long-term participant in U.S. metals production. A more temperate comment from Lael Brainard, running the White House’s National Economic Council, says these sorts of transactions can have implications beyond the capital markets, and that the U.S. government has a well-established process for examining them:

“This looks like the type of transaction that the interagency committee on foreign investment Congress empowered and the Biden Administration strengthened is set up to carefully investigate. This Administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”

Here’s some background:

Steel Output: The world’s steel mills pour about 1.9 billion glowing tons of metal a year.  The World Steel Association’s “World Steel in Figures 2023” summary places China’s 1.018 billion tons at more than half of 2022’s 1.885 billion-ton total, with India a distant second at 125 million tons, Japan third at 89 million tons, and the U.S. fourth at 80.5 million tons.  Six of the world’s 10 largest producers are Chinese; the remaining four include two Japanese firms, one Korean company, and the equivocal Arcelor-Mittal, which is based in Luxembourg but Indian by origin and management. Nippon Steel’s 44.4 million tons of output placed it fourth in the world.  U.S. Steel’s 14.5 million tons ranked 27th worldwide and third in the U.S. after Nucor’s 20.6 million tons and Cleveland-Cliffs’ 16.8 million.

Foreign Investment in the United States: The Commerce Department’s Bureau of Economic Analysis, meanwhile, tracks U.S. business investment abroad and foreign investment here. Its most recent annual tally, out last August and covering the year 2021, reports that international businesses employed 7.94 million American workers in 2021 – that is, a modest 6.2% share of that year’s 124.3 million private-sector workers. The international role in U.S. manufacturing is a lot larger, though: 2.81 million American manufacturing workers — about 23% of 2021’s 12.35 million total — go to work daily for international businesses. This includes 153,000 of Ohio’s 675,000 manufacturing workers, mirroring the national 23% employment share and the fourth-largest total of any state.  In Ohio as nationwide, Japanese firms are the top employer and Germans second. By country of origin, the largest groups are:

All manufacturing workers: 12.35 million
U.S.-based firms: 9.54 million
International firms total: 2.81 million
Japanese firms: 0.54 million
German firms: 0.32 million
British firms: 0.24 million
French firms: 0.21 million
Swiss firms: 0.18 million
Canadian firms: 0.15 million

 

By industry, the single largest group of workers at international manufacturers — 512,000 — are in automaking, followed by 426,000 in chemicals and 334,000 in food production.  In “primary metals” (which in BEA’s reports are combined as a group – steel, copper, aluminum, lead, etc.) BEA finds international firms producing $7.1 billion of 2021’s $74 billion in value-added U.S. output and employing 62,000 of the 357,000 total American metal workers. As an example, the Calvert mill in Alabama, with a 5.3 million ton annual capacity, has operated as a joint venture by Nippon Steel and Arcelor-Mittal since 2014, after its 2010 launch by German industrial conglomerate Thyssen-Krupp.

BEA’s “primary metals” employment figure is actually a bit low in historical terms — noticeably down from the 95,000 workers of 2000 and the 92,000 of 2019.  The post-2019 decline appears mainly to reflect Arcelor-Mittal’s 2020 sale of most of its U.S. steel assets (but not the Alabama site) to Cleveland-Cliffs. This event wasn’t especially unusual for FDI transactions, in which ownership occasionally shifts back and forth among the U.S., Canada, Europe, and Japan.  In autos, for example, Fiat’s current ownership of the venerable Chrysler Motors factories — now operating under the name “Stellantis”, with French producer Peugeot also a partner – followed a period of sole U.S. ownership from 2007-2014; and this in turn succeeded the company’s 1998-2007 incarnation as DaimlerChrysler.

U.S. Policy & Institutions: With all this in the background, (a) international participation in U.S. heavy industry in general, or metals specifically, isn’t new, and (b) some purchases, of course, are sensitive by the nature of the industry or the prospective buyer.  To examine and answer the questions they raise — for the defense industry, critical infrastructure, intellectual property, and research, or other reasons — and take such action as might be necessary (if any is needed), the U.S. government uses the long-functioning interagency group Dr. Brainard’s comment cites.

Known as the Committee on Foreign Investment in the United States, “CFIUS”, this is a permanent executive-branch expert group composed of nine agencies — the Treasury Department as the chair, along with the Departments of State, Justice, Commerce, Homeland Security, Energy, and Defense, plus the U.S. Trade Representative and the White House’s Office of Science and Technology Policy. CFIUS reviewed 154 FDI deals in 2022 (some easily decided to be non-controversial, others requiring more investigation), a total slightly below the 164 reviews of 2021 and a bit above the 120 of 2020.  These involved facilities and enterprises ranging from auto parts, metalworking, pharmaceuticals, and boat-building through the information sector such as software publishing and data processing to telecommunications, financial services, and medical labs.

In sum: International businesses are a large and lively part of the U.S. economy, particularly in manufacturing. They carry on lots of research, make lots of cars and a significant amount of metal, and employ about a quarter of the American factory workforce. It’s perfectly reasonable nonetheless to examine new purchase proposals.  And given U.S. Steel’s unusually evocative history — sepia-tinged images of Carnegie, Morgan, and Schwab; mid-20th-century black-and-white reels tagged “Rooting for the Yankees is like …” — emotional reactions aren’t surprising. But neither the basic issues, nor Nippon Steel as a particular company given its significant participation in U.S. metals production over time, are novelties. As Brainard suggests, the government has a perfectly functional way to examine any questions the transaction might raise, and a hyperventilating response probably isn’t very useful.

FURTHER READING

Perspectives on metals:

Sen. J.D. Vance worries.

National Economic Council Chair Brainard suggests a review.

The World Steel Association’s most recent stat summary, with top producing and consuming countries, companies, and trends.

And the Alabama Department of Commerce on international steel investment at Calvert.

Data:

BEA’s summary of foreign multinationals’ U.S. affiliates.

… and data back to 2007.

Looking the other way, U.S.-based multinationals produced about $5.1 trillion worth of goods and services in the U.S. in 2021, and $1.5 trillion abroad, while employing 28.9 million workers in the U.S. and 14.0 million overseas.

And UNCTAD’s World Investment Report has global context.

And CFIUS explained:

U.S. Treasury Department’s background and foreign investment policy guidance.

… and CFIUS’ annual reports with stats and investigation summaries back to 2008.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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PPI Weighs in on FTC’s Junk Fee Rule: Encourages a Consumer Protection Rule that Supports Competition And Does Not Duplicate Other Regulations

Posted on by Max Sherrill

Washington, D.C. — Today, the Progressive Policy Institute’s Dr. Diana Moss, Vice President and Director of Competition Policy filed comments in the Federal Trade Commission’s Notice of Proposed Rulemaking on Unfair or Deceptive Fees. The proposed consumer protection rule responds to the mandate in the Biden Administration’s 2021 Executive Order on competition that calls out — among other anti-consumer and anti-competitive practices — murky price transparency and hidden fees. These “junk fees” can harm consumers directly by raising prices, and indirectly by preventing comparison shopping and stifling competition. PPI’s comments emphasize, however, that consumer protection policies and competition enforcement are both “pro-consumer” but they work very differently.

“PPI’s comments to the FTC signal support for policies that take on harmful practices of saddling consumers with junk fees,” said Dr. Diana Moss. “PPI is urging the Commission to ensure that where the consumer protection requirements of the junk fee rule impact competition the rule supports, and does not undermine, competition.”

The FTC’s proposed junk fee rule targets unfair or deceptive practices such as “bait and switch” schemes (i.e., hidden fees) and misrepresenting the nature and purpose of fees. The proposed requirements have significant implications for market participants, including consumers and businesses. They do not prohibit junk fees, but instead discourage businesses from levying junk fees on consumers in the first place. The rule, therefore, requires businesses to provide information about the total price of a product or service so that consumers can better understand what they are purchasing, for how much, and better compare prices across sellers.

PPI’s comments urge the FTC to take a closer look at three major issues before finalizing the proposed rule:

1. The junk fee rule targets businesses’ ability to levy unfair or deceptive fees. However, it does nothing to reduce incentives to engage in such practices. It is well known that incentives to exercise market power are best reduced through antitrust enforcement of harmful mergers and anticompetitive practices. There are good reasons for using consumer protection policy to combat junk fees but PPI’s comments stress that it should not displace or weaken the role of competition enforcement in getting to the root cause of junk fees. PPI asks the Commission to do more analysis of incentives to impose junk fees and how it will coordinate the agency’s competition and consumer protection missions in implementing the junk fee rule.

2. The junk fee rule includes requirements for businesses to disclose total prices and detailed information on fees. But in some markets, different pricing models — such as unbundled versus all-in pricing in airlines and some wireless services — are important for consumers. Different pricing methods can also be an important way that firms beneficially compete. PPI suggests that the rule be clarified to explain how the requirements affect consumers who benefit from different pricing models and how the rules will not interfere with them.

3. The junk fee rule leaves open the question of whether the rule should be applied to certain “covered” businesses and whether small businesses should be excluded. It calls out egregious junk fee practices in certain markets, such as live events, transportation, financial services, hotels, and telecommunications. The proposed rules may, however, be similar to regulatory and legislative initiatives that focus on price transparency in certain markets. PPI asks the Commission, therefore, to provide more analysis of other regulatory rules that could overlap with the proposed rule and explain how the proposed requirements do not duplicate, or conflict with those rules, with unintended consequences for consumers and competition.

PPI’s comments on the FTC’s junk fee rule conclude that — while it is headed in the right direction — the proposed rule is not yet ready for “prime time.”

To read PPI’s full comments to the FTC in the FTC’s Notice of Proposed Rulemaking on Unfair or Deceptive Fees, please click here.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

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Media Contact: Amelia Fox – afox@ppionline.org

PPI Comments on the FTC’s Proposed Rule on Unfair or Deceptive Fees

Posted on by Max Sherrill

The Progressive Policy Institute (PPI) is pleased to provide comments to the Federal Trade Commission (“FTC” or “Commission”) on the Notice of Proposed Rulemaking on Unfair or Deceptive Fees (“proposed rule”), issued on November 9, 2023 (R207011) in docket FTC-2023-24234. PPI is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin, and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. PPI is home to a center on competition advocacy that features expert analysis and commentary that is rooted in promoting competitive markets and the democratic values that support them.

Read the comment on the FTC’s Proposed Rule on Unfair or Deceptive Fees.

Looking Forward: Pacific Strategy and U.S. Relations with Vietnam and Thailand

Posted on by Max Sherrill

Thoughts and Conclusions After Consultations in Hanoi and Bangkok, December 2023

Note: A five-person PPI staff group including Marshall and Gresser recently returned from a two-week visit to these two countries, with extensive consultations in Hanoi and Bangkok.  The following lays out some of the information and conclusions the group drew from these visits.

Vietnam and Thailand both possess strong and successful relationships with the U.S., but ones we can strengthen — particularly through more ambitious trade policy engagement.  As Americans look, in economics, to “de-risk,” “friend-shore,” and reduce single-source reliance on Chinese imports — and in politics to develop diplomatic and security relationships with strong and influential middle-sized Asian powers —both are attractive choices.

These are medium-sized countries by Asian standards, but large by anyone else’s: Thailand’s 70 million people and Vietnam’s 100 million together aren’t far below the 215 million combined for Germany, France, and the U.K. Though their economies are obviously smaller, Thailand is a prosperous upper-middle-income country and Vietnam a fast-growing lower-middle-income state.  Both countries, with their very different histories and political cultures, have all but eliminated absolute poverty and developed large and well-educated middle classes. It’s particularly striking to see that Vietnam, with 21,900 students now at American universities, sees the United States as the partner of choice in developing its next generation of leadership.

Both countries likewise have independent and carefully managed foreign policy strategies, whose core concerns are logical and compatible with U.S. goals. Vietnam is engaged in very high-stakes competition with China over maritime territorial claims, the main issue being a Chinese claim to vast areas of water and island chains quite far south of China’s coast and very near those of Vietnam, Malaysia, and the Philippines. Vietnamese policy sees a close political relationship with the United States as a way to ensure that China does not simply impose its view on the smaller countries to its south, and is also a way of reducing the risk that conflicting claims will erupt in crisis. Thailand, a long-time treaty ally of the United States, does not have territorial concerns and worries most about spillovers from instability in neighboring countries.  Like Vietnam, and with a deep tradition of bilateral military and intelligence cooperation, Thailand sees the United States as a valuable partner and contributor to regional stability.

Economically, the U.S. relationship with these countries is large and generally successful, but in some ways limited. Vietnam has been the “winner” of the Trump administration’s trade war, with U.S. imports rising from $46 billion in 2017 to a likely $110 billion this year with particularly rapid growth in consumer electronics such as cell phones and personal computers.  Much of this is, however, processing work that continues to rely on Chinese components — a business source estimated that only about 20% of Vietnam’s $370 billion in annual exports is local value, mostly in the form of skilled labor. Vietnam’s government and businesses are looking for ways to increase local value, diversify their own component sourcing, and become somewhat more of a “creative” economy and somewhat less of a “processing zone” exporter. And from an American perspective, the United States’ export figures to Vietnam remain quite small, around $10 billion annually.

Thailand is a smaller manufacturing exporter, but one with more developed local industries which add more value to the country’s export trade, especially in automotive and food production. The culturally and intellectually liberal Thai tradition — involving open media, independent universities, a lively civil society and NGO landscape, and close observation of policy trends in major countries — continues to make Bangkok mainland Southeast Asia’s center of transport, media, finance, and culture, and supports a creative class in strong fashion, design, and artistic industries.

The goals of both countries appear to mesh well, though in somewhat different ways, with the program Biden administration Cabinet Secretaries Yellen and Raimondo have laid out: diversification of sourcing, reduction of over-reliance on China especially for products critical to major supply chains, and successful competition with China over the longer term. With this in the background, interlocutors in both capitals were puzzled by the Biden administration’s decision to pull back from conclusion of the Trade Pillar of the “IPEF” (Indo-Pacific Economic Framework) it had launched early in 2022. This decision was particularly startling given the Pillar’s relatively modest goals in particular, the administration’s unwillingness to negotiate on tariff and market access issues.  Looking back at the experience, this choice meant IPEF elicited little enthusiasm in America’s exporting industries and farm sectors, and also left American negotiators with little leverage to entice IPEF’s other countries (including both Vietnam and Thailand) to make very sweeping commitments on the labor, environmental, and supply-chain issues the administration placed at the center of the talks.

The good news is that there is a lot of room for change, and still time to make it. U.S. export industries — medical technologies, agriculture, aerospace, machinery, energy — are competitive and successful, but in Southeast Asia, as in many parts of the world, face large market barriers. It is particularly frustrating, in the Vietnamese case, to see U.S. competitors taking advantage of the TPP commitments the Obama administration worked so hard to achieve while we lose ground.

And just as the export sector needs more, the case for avoiding tariffs on defensive grounds is very weak. The actual U.S. tariff schedules (as the New Democrat Coalition suggested last November) are plagued by regressivity and gender bias, ineffectual as job protectors, and ripe for a thorough review and purge even without international negotiations. Meanwhile, the Trump campaign is proposing a radical economic isolationism, with a Hoover-style tariff increase at the core, which rests on deep and groundless pessimism about U.S. workers’ competitiveness and threatens growth and innovation in the U.S. and abroad.  The Biden administration, though now entering its fourth year, still has the opportunity to respond with an optimistic, growth-oriented program that returns market access and export industries to the center of policy. Vietnam and Thailand are countries that will likely respond well to this, and they’re probably not alone in that.