Popovian, Delaney, and Mandel for Medium: Are we on the cusp of a new drug pricing paradigm?

By Dr. Robert Popovian, Erin Delaney, and Dr. Michael Mandel

We may be on the verge of a titanic shift in how drug prices are set. It’s been led by a dramatic decline in insulin prices, but it’s spreading to other brand drugs as well. This new paradigm is the unintended but welcome result of legislative, regulatory, and market pressures exerted on the biopharmaceutical industry.

The big change: the three major insulin manufacturers decided to sell their medicines at a set low out-of-pocket price for all patients. The previous list prices offered for insulin were bloated by all manners of rebates, discounts, and fees necessary for the byzantine rebate contracting model promoted by the pharmacy benefit managers (PBM) and state Medicaid programs. The new list prices are stripped of all the extraneous baggage and now closely reflect the actual net payments received by manufacturers. In other words, with a straightforward move, pharmaceutical companies LillySanofi, and Novo Nordisk cut out the middlemen, the PBMs, and others who benefit handsomely by keeping some or all of the rebates, discounts, and fees provided by those companies.

But that’s not all: another brand manufacturer has started selling its brand-name diabetes medicine directly to patients at a significant discount through an innovative retail pharmacy outfit. The reduced price is 50% of the drug’s average retail price. This move helps patients saddled with substantial deductibles and co-insurance since those out-of-pocket costs are calculated based on the inflated retail prices when they utilize their insurance benefit — not the significantly lower prices negotiated by the PBMs that never reach the pocketbook of patients who are consuming those medicines. Furthermore, patients can continue to benefit from patient assistance programs offered by biopharmaceutical manufacturers.

Read more in Medium.

Ritz for Forbes: Finding A Budget Compromise Despite Republican Extremism

By Ben Ritz

Republicans have refused to raise or suspend the debt limit – which multiple independent forecasters have warned could cause the government to default on its debts for the first time in history as soon as June 1st – unless “substantive reforms” to federal spending are made. Biden spent most of this year refusing to indulge in the GOP’s hostage-taking but agreed to negotiate on a broader budget deal once Republicans made an opening offer. After Republicans coalesced around a position by passing the Limit, Save, Grow Act through the House, both sides began negotiations this week in the hopes of striking a deal that Republicans could claim is a precursor to raising the debt limit and Democrats could claim is independent.

Part of the challenge is that Republicans have entered into the negotiation with extreme positions that no Democrat could ever accommodate. The GOP’s bill would raise the debt limit through early next year and pair that increase with $4.5 trillion of spending cuts over the coming decade and other conservative policy changes. Cuts of this magnitude might make sense in the context of a balanced and comprehensive package that addresses all areas of the budget, including raising new revenues – particularly at a time when inflation remains high and our projected long-term debt growth is unsustainable. But the conditions Republicans have imposed to target these cuts are unrealistic at best and economically ruinous at worst.

Read more in Forbes

Ainsley on The Power Test: Is Labour ready?

Political commentators Sam Freedman and Ayesha Hazarika are joined by Alistair Campbell, and Keir Starmer’s former policy advisor Claire Ainsley, for the first episode of The Power Test – a political podcast that asks if it’s really all over for the Tories, and what Labour should do to win and change Britain for the better.

With the help of invited guests, each week Sam and Ayesha bring the biggest, trickiest and most difficult political issues into focus and put fresh ideas, messages and policies to the test to see if they are capable of winning popular support and delivering real change in government.

In this first episode, Sam and Ayesha speak with two former senior Labour figures about how the party is doing, and what Labour needs to do to get into power.

 

The Future of Schools, Part 1

In part 1 of this two part series, PPI’s Reinventing America’s Schools (RAS) Project Co-Director Curtis Valentine, in collaboration with EdChoice, sits down for a live panel conversation and podcast recording at the ASU+GSV Summit in San Diego with Nina Gilbert, Executive Director of the Center for Excellence in Education at Morehouse College, and Sharhonda Bossier, Chief Executive Officer of Education Leaders of Color. They discuss the future of education, the future of teaching, and importance of school choice for families across America.

 

Learn more about the Reinventing America’s Schools Project here.

Learn more about the Progressive Policy Institute here.

Learn more about EdChoice here.

PPI’s Trade Fact of the Week: Height of papers needed to qualify T-shirt as ‘CAFTA duty-free’: ~ four inches

FACT: Height of papers needed to qualify T-shirt as ‘CAFTA duty-free’: ~ four inches.

THE NUMBERS: U.S. clothing import growth, 2005-2022* –
World             +$30.2 billion
Vietnam             +$15.7 billion
Bangladesh               +$7.3 billion
China               +$4.0 billion
Cambodia               +$2.8 billion
India               +$2.8 billion
Indonesia               +$2.8 billion
Pakistan               +$1.6 billion
CAFTA/DR**               +$1.4 billion
Jordan               +$0.9 billion
Egypt               +$0.8 billion
Italy               +$0.8 billion
Haiti               +$0.6 billion
Kenya               +$0.3 billion
Ethiopia               +$0.3 billion
Peru               +$0.2 billion
Colombia               -$0.3 billion
Korea               -$1.0 billion
Mexico               -$2.6 billion
Hong Kong               -$3.5 billion

* * Counting from completion of CAFTA/DR. See below for a more recent count of change 2012-2022.
** Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and the Dominican Republic as a group.  More detail: Nicaragua +$2.0 billion, Honduras +$0.6 billion, El Salvador +$0.3 billion, Guatemala +$0.1 billion, Costa Rica -$0.5 billion, Dominican Republic -$1.2 billion.


WHAT THEY MEAN:

CBP’s “border encounter” statistics show about 34,000 Central Americans reaching the U.S.’ southern border each month so far this year. Ten years ago, following their trek north in his book The Beast* (2010) Salvadoran journalist Oscar Martinez recounts stories of gang kidnappings and extortion, rape and sexual abuse, fatal falls from the roofs of trains along the way, and likely arrest at the end. Asking himself in closing why anyone would make such a trip, Martinez decides that the largest cause is simple:

“They’re unable to accept that miserable routine of waking up at five in the morning to travel two hours on a dangerous public transit system to get to a fast-food restaurant or a market or a warehouse in San Salvador, or Tegucigalpa, or Guatemala City, where they spend the whole day toiling away at undignified work only to return to their small homes, dog-tired, making a measly minimum wage that barely lets them afford beans and tortillas for their children.”

Vice President Kamala Harris makes a similar comment in a February conference on the “Northern Triangle” (Guatemala, Honduras, and El Salvador):

“[P]eople generally do not want to leave home.  And when they do, it is because they are either fleeing some harm or because staying home will mean that they cannot satisfy the basic needs of their family and themselves.”

The conclusion drawn from their comments — that if the U.S. has a particular interest easing political stress and migration pressure in Central America, American policy should encourage investment and higher-quality employment — has a forty-year history. Four decades ago, the Ronald Reagan/Tip O’Neill “Caribbean Basin Initiative” aimed to encourage clothing-making in Central America by waiving U.S. tariffs under a complex legal formula known as “Section 807,” which offered buyers of Central American-made clothes duty-free treatment so long as the shirts, blouses, etc. were made of U.S.-produced fabric. The hope was that a growing garment industry would create many jobs, dampen the economic volatility arising from heavy reliance on fruit and coffee exports, reduce the social temperature, and so ease peace-making. A decade later, Central American maquiladora factories — long lines of sewing machines operated by young women; complementary male employment in factory repair, and transport — provided $4.8 billion of America’s $39.4 billion in clothing imports, or about eighth (by value) of the total.

After 20 years, the “CAFTA-DR” – the full and permanent Free Trade Agreement now joining the U.S. with Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and the Dominican Republic – replaced the CBI in phases from 2005 through 2009. Its hope was that a permanent agreement would make the region more competitive and build buyer confidence. But in practice, this hasn’t exactly happened. Though Central America’s clothing trade has grown a bit in dollar terms, despite its tariff advantage the region’s share of U.S. imports has dropped from 12.3% in 2005 to 10.1% in 2022. Though CAFTA-DR clothes have no tariff, while as of 2022 Asian clothes were taxed at an average of 18.8%,** most new clothing imports in the last two decades have come from Asia. (China in the 2000s, Vietnam and Bangladesh in the 2010s and 2020s). Also a bit striking: imports from FTA partner Jordan and ‘preference’ beneficiary Haiti (which operates under another upgrade of CBI rather than a free trade agreement), though smaller overall, have grown much faster than imports from the CAFTA-DR countries.

Why?  A plausible explanation is the complexity and costliness of the CAFTA/DR agreement. Like its CBI predecessor, CAFTA-DR retains a clause — known as a “yarn-forward rule” in apparel-trade jargon — requiring nearly all of (say) a T-shirt’s cloth and yarn*** to be made in the U.S. or a CAFTA country to qualify it for duty-free status. This means very restricted supply options for garment factories — to cite FTA partners only, no high-quality Peruvian cotton, no Colombian cloth, no Korean yarn or thread. Furthermore, CAFTA/DR includes a 143-page list of “product-specific rules of origin” writing special provisions for individual products meant to suit the very specific business models of many individual U.S. firms as of 2005. As a case in point, the agreement’s denim rules were meant to guide Central American manufacturers to fabric from a particular U.S. mill in North Carolina. As a sample of the daunting legal language this entails, here’s a passage drawn from the 2007 “textile amendment” requiring users to monitor the width of wool in the lining of jackets and skirts down to the half-micron:

“Chapter Rule 1 Except for fabrics classified in tariff item 5408.22.aa, 5408.23.aa, 5408.23.bb, or 5408.24.aa, the fabrics identified in the following headings and subheadings, when used as visible lining material in certain men’s and women’s suits, suit-type jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles, other than men’s and boys’ and women’s and girls’ suits, trousers, suit-type jackets and blazers, vests, and women’s and girls’ skirts of wool fabric, of subheadings 6203.11, 6203.31, 6203.41, 6204.11, 6204.31, 6204.51, 6204.61, 6211.39, or 6211.41, provided that such goods are not made of carded wool fabric or made from wool yarn having an average fiber diameter of less than or equal to 18.5 microns, must be both formed from yarn and finished in the territory of one or more of the Parties: 51.11 through 51.12, 5208.31 through 5208.59, 5209.31 through 5209.59, 5210.31 through 5210.59, 5211.31 through 5211.59, 5212.13 through 5212.15, 5212.23 through 5212.25, 5407.42 through 5407.44, 5407.52 through 5407.54, 5407.61, 5407.72 through 5407.74, 5407.82 through 5407.84, 5407.92 through 5407.94, 5408.22 through 5408.24, 5408.32 through 5408.34, 5512.19, 5512.29, 5512.99, 5513.21 through 5513.49, 5514.21 through 5515.99, 5516.12 through 5516.14, 5516.22 through 5516.24, 5516.32 through 5516.34, 5516.42 through 5516.44, 5516.92 through 5516.94, 6001.10, 6001.92, 6005.31 through 6005.44, or 6006.10 through 6006.44.

Compliance with these rules requires 31 classes of documents ranging from bills of lading and employee time-cards to contracts with dyers and finishers, invoices, proofs of payment and so on; the resulting sheaf of paper is said typically to be about four inches high. Apart from the cost and lawyer-hours involved in verifying all this, rules designed for specific products from particular factories tend to lose relevance over time. In the denim case, the plant in question closed after a chemical accident in 2017, and since then Guatemala, El Salvador, and Honduras have stopped selling jeans to the U.S.

Thus CAFTA producers have been treading water as full-tariff competitors in Southeast Asia boomed. The Jordan agreement and the Haiti programs, simpler as they require only a showing of local added value rather than requiring detailed sourcing, appear much more successful.

Turning back now to Martinez’ journalism and Vice President Harris’ observation, the main point – to lower social temperatures and reduce migration pressure — still seems like a strong one. With it in mind, can we do better?  Could individual pieces of the CAFTA/DR that are no longer relevant – perhaps the denim piece — be scrapped? Could Congress allow Central American factories to use cloth and yarn from FTA partners, or Latin America generally? Or perhaps the whole thing might be redone, merged with the “USMCA” and the string of smaller FTAs going south from Panama to Colombia, Peru, and Chile?

* A bit dated as a description of the migrant route around 2010, but still relevant. ‘The Beast’, La Bestia, is a migrant nickname for southern Mexican freight trains.
** Counting Chinese products, many of which are subject to the Trump administration’s additional “301” tariffs. The 2022 rate for Asian clothes excluding Chinese-made goods was 16.6%.
*** Using a cotton T-shirt because this (HTS 61091000) is the top import from the CAFTA/DR countries, at $2.8 billion of the U.S.’ $35 billion in total imports (everything, clothes, coffee, oil, mangoes, etc.) from these countries last year. 

 

FURTHER READING:

Harris on Central America strategy this February.

The White House’s “Root Causes of Migration” strategy document.

And Ronald Reagan’s 1982 Caribbean Basin Initiative message.

Book recs: 

On migrants: Martinez’ The Beast: Riding the Rails and Dodging Narcos on the Migrant Trail.

… and for clothing-trade background: (as with Martinez’ book, slightly dated but still full of insights), Pietra Rivoli’s Travels of a T-shirt in the Global Economy (2005).

Data:

Customs and Border Patrol tabulate border ‘encounters’.

Clothing and textile import data in various forms from the Commerce Department’s Office of Textiles and Apparel.

The CAFTA/DR:

Full agreement text for CAFTA/DR; see Chapter 4, Annex 4.1 and “Textiles Amendment” for clothing rules.

An alternative clothing-import table:

The chart at the top counts from the signature of CAFTA/DR in 2005. A more recent count, looking at the decade 2012 to 2022 would be somewhat different, with China down rather than up, Vietnam and Bangladesh getting almost 2/3 of all new imports, and slightly higher growth for the CAFTA/DR countries. Same table, though a bit shorter:

World  +$23.6 billion
Vietnam  +$11.3 billion
Bangladesh +$5.3 billion
India +$2.8 billion
CAFTA/DR   +$2.7 billion*
Cambodia +$2.0 billion
Pakistan +$1.4 billion
Jordan +$1.0 billion
Italy +$1.0 billion
Sri Lanka +$0.7 billion
Indonesia +$0.7 billion
Turkey +$0.7 billion
Egypt  +$0.5 billion
Haiti +$0.6 billion
Peru +$0.4 billion
Madagascar +$0.4 billion
Burma +$0.4 billion
Kenya +$0.3 billion
Ethiopia +$0.3 billion
Colombia +$0.1 billion
Mexico -$0.2 billion
China -$8.4 billion

*Within CAFTA/DR, totals are Nicaragua +$1.4 billion, Guatemala +$0.7 billion, Honduras +$0.6 billion, El Salvador +$0.1billion, Dominican Republic unchanged, Costa Rica -$0.2 billion.

 

 

 

 

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 Progressive Economy 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

WHAT’S NEXT: The Future is Now! Featuring Janelle Wood

PPI’s Reinventing America’s Schools (RAS) Project has a new podcast series on titled “WHAT NEXT: The Future is Now!” recorded at the SXSW Education conference in Austin, Texas. In the fifth and final episode of this five-part series, RAS co-director sits down with Janelle Wood, Founder and CEO of the Black Mothers Forum.

 

Learn more about the Black Mothers Forum here.

Learn more about the Reinventing America’s Schools Project here.

Learn more about the Progressive Policy Institute here.

The National Security Advisor’s Disquieting Global-Economy Speech: Some Worried Reactions By A Friend

National Security Advisor Jake Sullivan’s April 27 speech at the Brookings Institution, explaining the Biden administration’s global-economy policies, is an odd piece at an important time. Mr. Sullivan covers a lot of ground in a lengthy (4,981-word) speech: “industrial strategy” and subsidies; trade and tariffs; the U.S. relationship with China; brief excursions into finance, aid, and infrastructure, and so on. Parts of it work well, in particular his passage on China policy. Some other parts less so. That on trade especially is a sort of study in breezy mis-summarization of history, muddy elucidation of current choices, and unclear future direction.

Most important, when taken as a whole and given its timing just as the 2024 presidential campaign begins, the speech seems to be politically out of tune and picking the wrong targets. It is vigorous if defensive in rebuking the Biden administration’s liberal-internationalist friends for their worries that it may be overreaching in industrial strategy and under-reaching in trade policy. It is premature at best in positing that the administration’s global-economy agenda has achieved consensus status as the “project of the 2020s and 2030s,” and does not recognize — despite warnings from allies as important and close to the subject as Japan — the strength of the Chinese counter-“project.” And while spending lots of time in an argument with the 1990s, it elides not only the recent Trump administration record but the domestic political challenge from the administration’s Trumpist/isolationist enemies — which, in a few months, will seek to end the Biden administration, and with it not only Sullivan’s version of international economics but the 80-year liberal-internationalist legacy the speech rightly praises.

 

Read and Download the Full Response

PPI’s Trade Fact of the Week: Korea, the world’s most robotic country

FACT: Korea, the world’s most robotic country.

THE NUMBERS: Robot installations, 2021* –

“Industrial”                       517,000
  Electronics                    136,000
Automotive                   121,000
All other                        260,000

Specialized services        121,000
“Consumer”                     19 million

* International Federation of Robotics, 11/22


WHAT THEY MEAN:

Reporting from Guangzhou last November, Reuters finds Chinese workers losing interest in manufacturing work:

“More than 80% of Chinese manufacturers faced labor shortages ranging from hundreds to thousands of workers this year, equivalent to 10% to 30% of their workforce, a survey by CIIC Consulting showed. China’s Ministry of Education forecasts a shortage of nearly 30 million manufacturing workers by 2025.”

The article’s young blue-collar Chinese interlocutors now prefer additional education or finding jobs in services (and a startlingly large number, Reuters also says, are “adopting a minimal lifestyle known as ‘lying flat,’ doing just enough to get by and rejecting the rat race of China Inc.”) China’s factories seem, however, to be adapting – in part by trying to offer higher wages, but also by hiring metal and plastic stand-ins. The International Federation of Robotics’ annual snapshot of the robot universe, World Robotics 2022, reports that over half of last year’s 517,385 newly employed industrial robots last year went to work in China, and that Chinese factories are now more robot-heavy than America’s:

“Every other robot globally installed in 2021 ended up in China: Installations surged by 51% to 268,195 units.”  

On a broader scale, IFR’s report divides the new-robot picture into three parts:

Industrial robots: Last year’s Chinese robot surge was unusually large, but also reflects a trend sustained over the past decade. China is now by far the world’s top industrial-robot employer, home to 1.22 million working factory robots, or over a third of the world’s 3.48 million total. A contributor to this is the shifting industry-sector balance of robot use: auto plants (especially in the U.S., Japan, Korea, and Germany) were the first and historically the largest employers of robots, but have been surpassed at least in raw numbers by the electronics industry.

By this total count, China is the world’s robot metropolis. A different perspective — the ratio of robots to human workers — finds neighboring Korea easily eclipsing even China’s mighty robot army. The Korean government reports exactly 1,000 robots for every 10,000 Korean factory workers, far ahead of second-place Singapore’s 670 robots per 10,000 factory workers. After them comes Japan at 399 and Germany at 397; China is sixth at 322; and Taiwan and the U.S. essentially tie for eighth at 276 and 274 respectively. (The world average is 141.)  Japan, finally, is likely the industrial-robot production center; though this year’s report doesn’t have a figure, last year’s cited Japan as producing 45% of industrial robots.

Specialized services robots: Robot services professionals are fewer in numbers than their proletarian factory cousins — 121,000 new ones last year, about a quarter of the 517,000 new industrials — and (like the human “services sector”) are very diverse. The largest group, 49,500, went to work in logistics, carrying packages in warehouses and delivery centers, and moving industrial components through factories. Another 20,000 took “hospitality” jobs, such as ferrying food from kitchen to table in large restaurants* or greeting customers; 14,800 went to work in hospitals, clinics, or emergency medical services, 12,600 in industrial cleaning work, and about 8,000 in farms, dairy, and ranching. IFR’s report regrettably doesn’t have figures on the countries in which these high-skill robots are lighting up, but notes that (in some contrast to the industrial-robot world, where Japan is the largest producer and neighbors Korea and China the leading users), the U.S. is the largest services-robot manufacturer.

Homes: Finally, 19 million humble domestic robots went to work in homes, mainly for interior cleaning and vacuuming, but also for lawn-mowing.

* The Trade Fact series editor encountered two attentive and polite restaurant robots at a restaurant in Chiang Rai in the northern reaches of Thailand in February. Thai industrial-robot installation rose by 36% last year, to about 4,000.

 

FURTHER READING:

Chinese workers not so interested in factory jobs.

… but no worries, here are the metal and plastic replacements. Global highlights from the International Federation of Robotics’ World Robotics 2021.

… and IFR’s closer looks at industrial and services robots.

The New York-based Institute of Electrical and Electronics Engineers has a weekly new-robot video. Try the prototype seabed-cleaning jellyfish-robot.

… and also has a sentimental look back at Unimate, the first operating industrial robot (1961, GM plant, New Jersey).

Industry and research international: 

Most roboticized country: The Korean Association of Robot Industry.

Largest producer: The Robotics Society of Japan.

This one may not pan out: Thai gourmets develop a robot for verifying ingredient-authenticity, aroma, and general tastiness of tom yam.

A 17-point robotics and application plan from China’s Ministry of Industry and Information Technology.

Singapore has a robot-police patrol dedicated to scolding people.

A few looks ahead, and one look back, from robot arts and lit:

Capek’s R.U.R. (1921) invented the word “robot,” and the classic “robot uprising” plot. The title acronym stands for a fictional “Rossum’s Universal Robots” company, with “Rossum” a slightly modified version of the Czech word for “reason,” and “robot” likewise an adapted term for “worker.” A Penn State robotics academic looks at R.U.R. a century later.

In robot-friendly Japan, by contrast, Astro-Boy (said to be the first anime character) is a helpful friend to humanity.

Stanislaw Lem’s “Mortal Engines” collection speculates about machine intelligence. In “The Hunt”, a well-meaning human pilot volunteers to destroy a supposedly mad robot; next, in “Mask,” a troubled, self-aware female robot-assassin tracks down a political dissident.

Philip K. Dick thought humans and robots would lose the ability to distinguish themselves from one another.

And Adrienne Mayer’s Gods and Robots: Myths, Machines, and Ancient Dreams of Technology takes the long look back, at visions of androids, flying cars, computers, and other semi-inventions in classical Greece, with comparators from India, Babylon, and the mechanical men of the Qin Dynasty court.

 

 

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 Progressive Economy 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

Ritz for Forbes: New June 1st Deadline Creates Pressure For A Two-Step Debt Limit Solution

By Ben Ritz

Both the Congressional Budget Office and the Treasury Department warned Monday that the federal government is likely to exhaust its authority to pay its bills on June 1st if Congress fails to raise or suspend the federal debt limit before the end of this month. The fast-approaching deadline, which previous projections placed far later in the summer or early fall, creates new urgency for President Joe Biden and House Speaker Kevin McCarthy to strike a deal. Republicans will either need to abandon their attempt to extract meaningful policy concessions in exchange for a debt limit increase or offer President Biden a short-term increase that creates room for a realistic negotiation process. Refusing to do so would be the height of irresponsibility and place the blame for causing the first-ever default on America’s national debt squarely on the GOP’s shoulders.

 

Read more in Forbes.

Strengthening America’s Workforce: The Path to 4 Million Apprenticeships

Apprenticeships have long been ingrained in America’s history, but today, America falls drastically behind other advanced nations despite the benefits the program brings to workers and employers alike. Apprenticeships — a training model that allows people to work and earn while they are learning the critical skills needed for the industry — are especially important today when most U.S. jobs require at least some postsecondary education and training, and there is a serious shortage of skilled workers in many fields.

Today, the Progressive Policy Institute (PPI) released a new policy brief titled, “Strengthening America’s Workforce: The Path to 4 Million Apprenticeships,” detailing how the United States needs to scale up apprenticeships to ensure more workers and businesses benefit from these opportunities. Report author Taylor Maag, PPI’s Director of The New Skills for a New Economy Project, recommends mobilizing intermediaries and boosting federal investment to create one million new apprenticeships per year — a roughly 10-fold increase — and requiring funding ties to performance.

“U.S. employers should follow other countries’ lead to create a significant number of apprenticeships to remain competitive in recruitment, workforce quality, and productivity. Apprenticeships are worthwhile for both workers and employers — increasing earnings, widening access to rewarding careers, increasing job satisfaction, ensuring a skilled workforce, and expanding the middle class,” said Taylor Maag. “Growing apprenticeship opportunities is the kind of tangible policies American workers deserve and should expect from their government.”

By the numbers:

  • There are currently 593,000 apprentices in the U.S. — only .03% of our labor force — compared to countries like the United Kingdom, Australia, and Germany that have roughly 10 times more.
  • Workers who participate in apprenticeships earn an average salary of $77,000, compared to an average salary of $55,000 for workers who do not. Those who complete an apprenticeship also earn an average of $300,000 more than those who don’t over the course of their career.
  • For every dollar spent on apprenticeship programs, employers get $1.47 back in increased productivity.

Download the policy brief 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.orgFind an expert at PPI and follow us on twitter.

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Media Contact: Amelia Fox; afox@ppionline.org

Strengthening America’s Workforce: The Path to 4 Million Apprenticeships

INTRODUCTION

Apprenticeship is engrained in America’s history — three of our Founding Fathers started their careers as apprentices. George Washington, for example, apprenticed as a land surveyor. Yet even with this 250-year runway, apprenticeships have not taken off in the United States as they have in other advanced nations.

In 2021, our country had 593,000 registered apprenticeships, mostly in traditional sectors such as building trades and heavy industry. As a share of their labor force, Great Britain, Australia, and Germany have roughly 10 times more opportunities. It is puzzling that the U.S. hasn’t followed its peers in scaling up apprenticeship, a training model that is also a job, allowing people to work and earn while they are learning the critical skills necessary for good jobs and careers. It’s an especially relevant model now, when most U.S. jobs require at least some postsecondary education and training, and when employers, even in our tight labor market, report a serious shortage of skilled workers in their fields.

While many progressives have seized on the panacea of “college for all,” the reality is that 62% of American adults have no bachelor’s degree, and that number rises to 72% for Black adults and 79% for Hispanic adults. Additionally, The college earnings premium appears to be declining for the first time in decades, with 40% of recent college graduates working in jobs that do not require a bachelor’s degree. Soaring college tuition costs, low completion rates, and heavy debt burdens are further pushing the American public to rethink the value proposition of a four-year degree.

Recent data proves this changing mindset. A fall 2021 survey of 1,000 high school students found that the likelihood of attending a four-year college dropped by nearly 20% in less than a year. In the spring of 2022, there were 662,000 fewer students enrolled in undergraduate programs than the previous spring, constituting a drop of 4.7%. And a report from the fall of 2022 elevated survey responses from more than 1,500 Gen Z youth and 600 employers, finding that 81% of employers think they should look at skills rather than degrees when hiring and 72% of employers stating they don’t see a degree as a reliable indicator of job preparedness.

It’s clear that America needs alternatives to a four-year degree that are affordable, trusted by employers, and help people learn the technical and digital skills that today’s jobs require. Our nation’s oldest pathway — apprenticeship — is a viable solution.

While apprenticeship pre-dated our nation, it wasn’t until 1937 that the U.S. passed the National Apprenticeship Act (NAA). This law established the Registered Apprenticeship Program (RAP) as it exists today. To meet the requirements of a registered apprenticeship, the U.S. Department of Labor (DOL), or a federally recognized state apprenticeship agency vets apprenticeships for quality and rigor. The work training curriculum must align with industry standards and enable apprentices to earn a portable, nationally recognized credential. Depending on the industry, Registered Apprenticeship can last from one to six years and typically includes 2,000 hours of on-the-job training and 144 hours of technical instruction. While originally developed for the skilled trades, these opportunities have been expanded into new and in-demand industries like health care, technology, and advanced manufacturing.

Even though the legislation is nearly a century old, registered apprenticeships continue to have an impact on economic security. Individuals who complete an apprenticeship earn an average annual salary of $77,000 compared to an average national salary of $55,000. Those who complete an apprenticeship program also earn an average of $300,000 more than those who don’t over the course of their career.

In addition to helping workers find good jobs and careers, these programs offer an array of benefits to employers. Apprenticeships help businesses boost recruitment; increase the diversity of their workforce; improve retention (94% of apprentices stay with their company after the apprenticeship wrap); preserve institutional knowledge; and leverage skilled, experienced workers close to retirement to serve as mentors and instructors. For roughly every dollar spent on apprenticeship, employers get an average of $1.47 back in increased productivity, reduced waste of time and cost, and greater front-line innovation.

Apprenticeship is a model employers can trust, helping to ensure talent is prepared for in-demand opportunities while also providing a quality postsecondary path for young Americans who are questioning the traditional four-year degree. It also is highly attractive to adult learners, who are older and have increased barriers to accessing and completing skill development opportunities due to child care or the need to keep working. Apprenticeships are the original work-education model, allowing adult learners to learn the skills they need without sacrificing a wage and providing education that is applied — ensuring learning connects immediately to the workforce.

To ensure more American workers and businesses benefit from these opportunities and keep pace with other partner nations, our country must dramatically scale up apprenticeship and create roughly 10 times more, reaching the end goal of 4 million apprentices in this country. To get to this number, it is not only a matter of boosting public investment, but also requires a new policy architecture in which public, nonprofit, and private intermediaries play a catalytic role in training and placing apprenticeships in companies.

 

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Marshall for The Hill: Want a sensible democracy? Look down under

By Will Marshall

The United States used to offer the world an attractive model for a free and prosperous society dedicated to the rule of law, civic inclusion and popular self-government. Now, when others look to America, they see democratic dysfunction, epitomized by paralyzing partisanship, national disunity and a defeated president’s attempted coup on Jan. 6, 2021.

That the man found to be the architect of that plot, former President Donald Trump, has the gall to again seek the office he betrayed, is another disconcerting sign. It shows that the antibodies that traditionally have protected our country against demagogues and extremism aren’t working.

But instead of dwelling on the dismal prospect that Republican voters may for a third time award Trump their party’s nomination, let’s imagine for a moment what living in a healthy democracy would be like.

Read more in The Hill. 

PPI joins coalition letter in support of site-neutral payment reform

The Progressive Policy Institute joined a coalition letter with 21 organizations and policy experts that supports site-neutral payment reform in Medicare and transparency in service billing in commercial insurance. PPI has long been supportive of site-neutral payment reform and legislative efforts to address this issue.

Medicare — and in many cases, commercial insurers — actually pay hospital-owned facilities higher rates than independent medical practices and other outpatient facilities for the exact same services. The letter explains that these higher payment rates actually create an incentive for hospitals to acquire these independent practices, resulting in higher prices charged to patients and taxpayers:

“Between 2013 and 2018, the share of physician practices that were hospital-owned more than doubled from 14 percent to 31 percent. By 2020, over half of physicians worked directly for a hospital or worked at a physician practice that was owned by a hospital, according to the AMA…An analysis by Northwestern University found the price of physician services increases 14 percent after a hospital purchases a physician practice.”

The Congressional Budget Office (CBO) estimates that these reforms would generate more than $140 billion in savings for taxpayers over ten years.

Hospitals are integral parts of our communities, but hospital care accounts for the largest health spending category in the United States. Americans should not be paying more out of pocket for medical services — like chemotherapy, cardiac imaging, and colonoscopies — because of where they received the services at. Implementing targeted site-neutral policies that promote hospital competition while still protecting rural hospitals and patient access will be critical as Congress considers advancing legislation on site-neutral payments and billing transparency.

Read the full letter here.

 

 

 

 

PPI’s Trade Fact of the Week: U.S. Customs seizes 75 shipments of counterfeit goods imports each day

FACT: U.S. Customs seizes 75 shipments of counterfeit goods imports each day.

THE NUMBERS: Counterfeit goods seizures by U.S. Customs* –

FY2021 value             $3.3 billion
Number of seizures    27,115

FY2016 value             $1.4 billion
Number of seizures    31,560

FY 2011 value            $1.1 billion
Number of seizures    24,792

* CBP data; “value” is at the “Manufacturers Suggested Retail Price” of an authentic item.


WHAT THEY MEAN:

Here’s fashion magazine Allure with a closeup on the criminal fringe of the global manufacturing economy, through the lens of a 2016 seizure of counterfeit perfume in New York:

“Five men have been arrested in New York by U.S. Immigration and Customs (ICE) for knowingly selling counterfeit designer perfumes made with ingredients including antifreeze and urine across at least seven states … The authorities reportedly recovered approximately 10,000 boxes of the faux scents, whose ingredients included the aforementioned urine and antifreeze along with ‘other unpleasant, flammable, or dangerous chemicals that burn when applied to the skin.’ ”  

Background: The most recent big-picture study of trade in counterfeits, a 2021 report from the OECD, estimated an upper limit of $464 billion worth of counterfeit goods flowing across borders in 2019.  This would have been 2.5% of that year’s $19.8 trillion in goods exports — not much different from the 3.3% counterfeit share they estimated for 2016 and the same as their 2.5% estimate for 2013. By the OECD’s account, 90% of counterfeit goods come from five places — China, Hong Kong, Singapore, Turkey, and the United Arab Emirates — and the most frequently counterfeited products include shoes, clothes, perfumes and cosmetics (making Allure‘s New York arrest story a pretty representative case), along with watches and leather products like luggage and handbags.

U.S. counterfeit seizure statistics likewise seem to show a fairly stable level of counterfeit trade (or at least of interdictions of counterfeit goods) over the past decade, after a sharp rise in the 2000s. CBP’s FY2011 report tallied 24,792 seizures of counterfeit shipments (about 70 each day), and the 2016 report noted a higher total, at nearly 32,000.  The 2021 total, at 27,115 seizures, was in between. Three ways to look at these totals:

(a) Number and kind of products: The 27,115 seizures in 2021 in turn brought in over 115,000 different “lines” of products, which reflect OECD’s report on the most frequently counterfeited goods fairly well: 73,367 seizures of counterfeit designer clothes, shoes, and luggage; 3,155 of personal products like the counterfeit perfumes, medicines, and medical products (including, in that troubled year, 35 million substandard masks and 38,154 useless or dangerous faux-COVID test kits); 5,380 sets of consumer electronics items, and 1,083 shipments of aircraft and auto parts.

(b) Origins: Here the U.S. statistics slightly differ from those of the OECD.  As with OECD, they report China and Hong Kong as the top sources, accounting for 51,787 of the 115,000 “lines” of counterfeit goods, and also have Turkey in third with 10,781 lines.  The remaining two are the Philippines with 6,416, and Colombia with 5,912.

(c) Transport methods: Counterfeit goods most frequently travel to the U.S. (assuming that CBP’s seizure statistics more or less accurately reflect the counterfeiting industry’s logistics choices) by express deliveries and mail shipments. CBP’s figures show 16,926 of the seized shipments arriving via express delivery, while 7,293 arrived by mail, 2,274 by maritime cargo, and 622 by unspecified other methods. The maritime cargo seizures, however, were apparently very large and valuable; weighted towards consumer electronics counterfeits, they accounted for $1.5 billion or half the total value of all seizures.

The amount of counterfeit goods which get all the way to consumers is by nature uncertain. The CDC, looking closely at medicine, says that “in high-income countries, such as the United States, less than 1% of medicines sold are counterfeit.” Medicines, though, are presumably an area where providers are especially cautious and law enforcement especially vigilant.  CBP’s advice to consumers (and the message implicit in Allure’s graphic description of counterfeit perfume ingredients), though, is to be careful with what you buy: “Counterfeit products are low quality and can cause injuries or even death when used.”

 

 

FURTHER READING:

Ewww – Allure (2016) on the gross ingredients and nasty side-effects of counterfeit perfume.

… and a similar report this week from CBP, on a seizure of 150 parcels containing 744 counterfeit Botox shipments this Monday in Louisville.

CBP’s one-page, three-point guide for consumer awareness.

CBP explains policy in Finance Committee testimony (2018).

… and from the U.S. Trade Representative Office, this morning’s “Special 301” report on intellectual property reviews counterfeiting law and enforcement on pp. 16-20.

U.S. seizure data: 

The Customs Service’s annual reports on counterfeit seizures, by country and type of good, back to FY2003.  Seizure counts rise steadily from the 5,973 of FY2003 to 14,675 in FY2007 and 19,959 in FY 2010, peak at above 31,000 in FYs 2016, 2017, and 2018, and then drop back a bit to the 27,115 of FY2002.  Next update likely in September.

And direct to last year’s figures.

World picture:

OECD on the $461 billion world of counterfeit trade as of 2019.

… and also from OECD, a close-up of counterfeiting in perfumes, cosmetics, and other especially risky products.

Medicine closeup:

The Food and Drug Administration on counterfeit medicine risks in the United States.

… and CDC guidance for buying medicine abroad.

And the World Health Organization’s home-page for counterfeit medicine.

And beyond the borders: 

Wealthy countries with sophisticated and efficient customs enforcement record most seizures of counterfeit goods; in lower-income regions, seizures are less systematic and counterfeits are much more likely to reach consumers. As an example, the UN’s Office of Crime and Drug Control reports that substandard or counterfeit medicine rates are above 40% in eight countries — Venezuela, Suriname, Mali, Ghana, Malawi, Nepal, Bhutan, and Vietnam — and between 20% and 39% in 15 more.  They published estimates this spring that these counterfeits contribute to as many as 267,000 annual deaths from malaria, and 169,000 deaths from childhood pneumonia. UNODC’s examination of counterfeit medicine in Africa, with a closeup on especially vulnerable low-income Sahelian states.

 

 

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 Progressive Economy 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

Statement from PPI’s Mosaic Project on Biden’s Reelection Campaign

Jasmine Stoughton, Project Director of the Mosaic Project at the Progressive Policy Institute (PPI), released the following response in reaction to President Biden’s reelection campaign:

“President Biden has led our country out of chaos, bigotry, and destruction from the Trump Administration, fighting to protect our democracy at every turn. As extremists across the country are working to take away our fundamental freedoms, President Biden continues to fight back.

“President Biden has made tremendous progress fighting for gender equality — from protecting reproductive rights, to increasing opportunities for women-owned small businesses, to prioritizing affordable and accessible childcare. We still have a long way to go, and we urge President Biden to continue creating equal opportunities for women across the country.

“Furthermore, it is with deeds not words that President Biden has proven his commitment to equality and diversity, creating one of the most representative cabinets in history. Appointing diverse and qualified leaders is among the most important elements of successful governance.”

The Mosaic Project is a network of diverse women with expertise in the fields of economics and technology. Mosaic programming aims to bring new voices to the policy arena by connecting cohort members with opportunities to engage with top industry leaders, lawmakers, and the media.

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.

Follow the Mosaic Project.

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Media Contact: Amelia Fox – afox@ppionline.org

Is Early Education a Great Equalizer? We have to Create National Standards First

In America, education has been famously coined the “great equalizer.” This should mean that regardless of who you are or where you are from, if you have access to education you can succeed and advance in our economy. While it is true that quality education from a young age ensures long-term prosperity and leaves people better off, not all education is created equal. Access to education, especially at an early age, is not only difficult to find, but varies greatly in quality.

The lack of effective learning opportunities for young children is a fundamental flaw in our nation’s education system. High-quality preschool and other early education options provide children with social, emotional, and motivational skills that close school-readiness gaps. These socio-emotional skills also have positive effects on an individual’s educational success and lifetime earnings, increasing upward social mobility across demographics.

While quality prekindergarten learning environments are critical to the future well-being of individuals, these opportunities are inaccessible to the majority of American families. Private programs have high tuition rates, and the publicly funded programs do not reach as many people as they should. The public program Head Start, which is available to families from low-economic backgrounds, reaches only 41% of income-eligible households. Aside from cost, availability is a huge roadblock for families — with 51% of the U.S. population residing in a child care desert.

In addition to access, quality education is also more difficult to find for low-income Americans. Lower-quality education reduces the impact of pre-K on a child’s development and later success. The quality of programming is critical but greatly varies depending on where you live. In economically disadvantaged communities, even when programs are available they face higher rates of negative student-teacher interactions and worse structural quality.

The federal government currently addresses early education through a patchwork of different programs and funding streams aimed at solving different challenges of the early care conundrum. The last federal appropriations bill, which funded the federal government and associated programs for the 2022 fiscal year, included $11 billion for Head Start and $6 billion for The Child Care Development Block Grant, which provides families from low-income backgrounds financial aid for child care. Additionally, the Preschool Development Grant Birth Through 5 Grant (PDGB-5) received only $290 million. This grant is for state and local governments to improve their preschool’s infrastructure, provide states with comprehensive evaluations of their current programs, and other general funding to improve learning outcomes.

Despite these investments, it is clear our country does not have a cohesive early education policy, which disrupts the reach and efficacy of existing programs. Even without a strong national effort, however, some states and districts across the country have figured out ways to expand access and offer high-quality early education programs. For example, Washington, D.C., subsidizes two years of full-day preschool for district residents. Since 2017, 9 out of 10 of D.C.’s four-year-olds have been enrolled in publicly and privately funded programs. Students in these public programs are effectively mirroring the population demographics, as the percentage of applicants and the percentage of matched students are almost equal across all races and income levels. Elementary students in D.C. have shown academic improvement in reading since 2007, outpacing the national average for large cities. Another example is Oklahoma. The state also boasts a successful pre-K program, serving 70% of the state’s four-year-olds. Today, third-graders in Oklahoma who attended its pre-K program had stronger socio-emotional skills, and performed better in math.

These outcomes demonstrate D.C. and Oklahoma’s ability to provide high-quality and far-reaching education. The state of Oklahoma meets 9 out of 10 quality standards of the Nation Institute for Early Education Research, including extensive professional development, small class sizes, and a continuous quality improvement system. Washington, D.C., has developed a comprehensive system called CLASS to evaluate their program on an annual basis, ensuring quality and consistency for the district’s students. While politically D.C. and Oklahoma could not be more different, leaders in both regions understand that early education is fundamental to the future success of their constituents and that this public investment yields strong return on investments.

Bipartisan support amongst the states can make it all the more possible to develop a comprehensive, national approach to early education. The federal government should define standards and create a quality evaluation system that encourages effective learning environments, addresses teacher-student ratios, cultural diversity, and minimum training requirements for teachers. Policymakers would not have to start from scratch either. Leaders can look to D.C. and Oklahoma, or to other national leaders like The National Association for the Education of Young Children, to ensure federally funded efforts have strong outcomes for pre-kindergarten students.

To effectively implement a national early education policy, federal leaders should coordinate and expand their current programs and funding streams to create a more comprehensive early education system that meets the needs of all young students. The PDBG-5 should be expanded and improved upon to enable and incentivize state and local governments to build education programs that meet the national standards established by the federal government. State programs need the resources and guidelines to create effective and far-reaching programs that lead to strong learning outcomes. Expanding support of state programs does not mean that Head Start has to go away, either. Recent studies argue that Head Start is successful at improving cognitive skills and school-readiness for students who would otherwise be learning at home. The funding for federal and state pre-kindergarten programs should be attached to quality standards, including a comprehensive annual evaluation system, which would help programs ensure stronger socio-economic outcomes and mobility for our nation’s most disadvantaged students. Federal and state programs should be designed to work together to reach every student from low- and middle- income homes, turning the current patchwork of programs and funding for early education into a wide-reaching system that works for all Americans.

Expanding access and developing quality standards needs to be addressed nationally. These efforts can help states and regions offer high quality early education programs that foster equality, collaboration, and consistency. Oklahoma, D.C., and federal programs like Head Start demonstrate that publicly funded programs with the right quality guardrails are successful and have strong impacts on child well-being and their future success. If we want to close readiness gaps in education and ensure upward mobility for all, we need to start with early education and development, making “education as a great equalizer” ring true for the generations to come.