issue: Building American Resilience

Teaching Students What It Means to Be an American: Strengthening Our Liberal Democracy

Posted on by Max Sherrill

Washington, D.C. — Liberal democracy in the United States faces unprecedented challenges from both ends of the political spectrum. On the right, actions to undermine the peaceful transfer of power and suggestions to suspend the Constitution pose severe risks. Meanwhile, on the left, cultural forces on campuses are creating an environment where liberal students increasingly find it acceptable to block opposing views. But why is it happening now? And what can be done about it?

Today, the Progressive Policy Institute (PPI) released a vital framework that offers a diagnosis and a solution.  The report titled “Teaching Students What It Means to Be an American” pins the decline of liberal democracy on the rise of identity politics that causes extremists on both ends of the political spectrum to erode liberal democratic values. Report author Richard Kahlenberg, Director of the American Identity Project, offers a comprehensive solution to strengthen liberal democratic values through education. The report outlines nine actionable strategies at the K-12 and college levels to teach students a common American identity, including:

1. Providing more resources and accountability for teaching civics and American history

2. Spending more time teaching students about life in nondemocratic societies

3. Offering an honest account of American history, acknowledging both its flaws and redemptive qualities

4. Overhauling diversity, equity, and inclusion and ethnic studies programs to uplift without demonizing

5. Emphasizing what makes America exceptional

6. Integrating schools by race and income through public school choice

7. Promoting community service and national service

8. Teaching the art of civil discourse

9. Securing federal support for these educational efforts

The report’s release aligns with the upcoming Independence Day, serving as a reminder of the enduring importance of American democratic principles. It also underscores the urgent need to address divisive educational practices, particularly given the rise in antisemitism on campuses.

“The key to preserving our liberal democracy lies in educating our youth about the values that unite us as Americans,” said Richard Kahlenberg. “As we approach Independence Day, it’s a critical moment to reflect on our democracy and take decisive steps to fortify it. The American Identity Project will provide policymakers with practical tools to promote social cohesion and democratic resilience.”

Note: This report is the first in a series. It provides an overview, and subsequent reports will delve deeper into each of the nine policy ideas briefly listed above.

Read and download the report 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. Find an expert at PPI and follow us on Twitter.

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Media Contact: Ian O’Keefe – iokeefe@ppionline.org

Teaching Students What It Means to Be an American: It Provides the Key to Preserving Our Liberal Democracy

Posted on by Max Sherrill

Executive Summary

Almost 250 years after the nation’s founding, there is broad agreement that American liberal democracy is in deep trouble. The leading Republican candidate for president has tried to thwart the peaceful transfer of power and speaks of suspending the Constitution, while activists on the left shout down speakers with whom they disagree and create a climate where large majorities feel they can’t speak their minds. Illiberal tendencies are worse on the political right than the left because they invoke the power of the state, while the left invokes the power of culture, but both are profoundly troubling and feed off of one another.

It has long been observed that authoritarian tendencies are greatest among those with less education and income, but today illiberalism on the left actually rises with increased education, the opposite of what one would hope. Disturbingly, the willingness to give up on democracy is much greater among young people than those who are older.

Why now? After a long period in which the Civil Rights movement helped make the country more democratic, why is America now backsliding? Central to the problem is the loss of a common American identity. White identity politics on the right, and racial identity politics on the left, make fights seem existential, which justifies cutting corners on democratic norms. Voters on the right are more likely to excuse authoritarian actions when they feel as though they are losing control of the country. Meanwhile, the left promotes critical race theory and antiracism policies that say racial oppression is a permanent feature of American life that can only be countered by discrimination in favor of oppressed groups.

These theories about the centrality of racial identity lead to an eerie convergence on the left and the right that questions a series of fundamental liberal democratic principles. For different reasons, both sides have become skeptical about treating Americans as individuals rather than members of racial groups. They both question concepts like advancement based on merit and the possibility of discerning objective truth. The hard right and the hard left agree that school integration makes little sense; and they both, in their own ways, are skeptical about free speech, press freedom, and the freedom to read controversial books. For different reasons, they both question academic freedom, and are both willing to embrace antisemitic beliefs.

What is the path out? Historically, public schools in America accomplished two pretty miraculous objectives. By placing a priority on teaching students the importance of liberal democratic principles, they helped keep a democratic republic going for over two centuries; and by instilling a common American identity, they provided the glue that held together people whose ancestors came from all corners of the world. In recent years, K-12 schools and colleges have moved away from this vision. They’ve placed more focus on economic competitiveness than democratic citizenship. And many focus on a vision of American and world history that divides the racial and ethnic groups neatly into categories of oppressed and oppressors, and undercut a shared American identity through poorly implemented ethnic studies programs. This new emphasis within public schools, in turn, promotes calls on the right for privatization of public education, which will only Balkanize the country further.

This report is the first in a series that will offer nine ways to once again teach students what it means to be an American.

The stakes of teaching American identity are enormous. Human beings have a natural yearning for identity and a larger purpose and if educators don’t provide young people with a love of country, authoritarians will offer false alternatives, often centered around race or ethnicity. The good news is that the public supports a better path. Instilling a renewed sense of American identity could inspire a “patriotism dividend” that could put the country on a better path for the next 250 years. Among the towering issues of our time, few are as important as this one.

Read the full report.

PPI and Rep. Kuster Celebrate Investments in America and in Workforce Development

Posted on by Alyssa Brown

This week, the Progressive Policy Institute (PPI) hosted an event celebrating the release of PPI’s annual report “Investment Heroes 2023.” New Democrat Coalition Chair, Representative Annie Kuster (NH-02) provided closing remarks on the importance of investing in America’s workforce.

“New Dems believe that American businesses are the key to providing the jobs and opportunities necessary to strengthen our economy and improve hardworking families’ lives,” said New Democrat Coalition Chair Annie Kuster (NH-02). “It’s heartening to see the work U.S. companies are doing to support their workers, create opportunities, and grow the economy. In Congress, New Dems are committed to continuing our work with the private sector to address the challenges facing our nation and to build a better economy for all communities.”

Prior to Representative Kuster’s remarks, Taylor Maag, Director of Workforce Policy and the New Skills for a New Economy Project at PPI, hosted a panel featuring Simone Drakes, Managing Director of Calibrate at United Airlines; Sandy Gordon, VP of People, Experience, and Technology at Amazon, and Ryan Keating, Director of Government Relations at Duke Energy. The panel spoke on the importance of upskilling and investing in the economic advantage of American workers, providing additional training opportunities for current employees, and how to recruit and retain a diverse workforce.

“Employers like Amazon, Duke Energy and United Airlines demonstrate the importance of private sector investment in human capital — especially workforce development. These three companies, all on PPI’s Investment Heroes list, are investing not only in their current workers but in future workers to ensure they are building strong talent pipelines to in-demand jobs. It’s clear these industry leaders are committed to not only maintaining their competitive edge but ensuring more workers share in the economic opportunities their companies have to offer,” said Taylor Maag.

Investment Heroes is an annual report published by PPI since 2012 and analyzes publicly available data to identify the top 25 U.S. companies investing in America, powering job growth, and raising living standards. The theme of this year’s Investment Heroes report is the recovery of the U.S. capital investment from the shock of the COVID-19 pandemic and the benefits these investments provide to workers.

Read and download the full report here.

The Progressive Policy Institute (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. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

Find an expert at PPI.

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Media Contact: Amelia Fox, afox@ppionline.org

Investment Heroes 2023: How Investments from U.S. Companies are Benefiting Workers

Posted on by Alyssa Brown

Today, the Progressive Policy Institute (PPI) released its annual report “Investment Heroes 2023.” The report, published annually since 2012, analyzes publicly available data to identify the top 25 U.S. companies investing in America, powering job growth, and raising living standards. The theme of this year’s Investment Heroes report is the recovery of U.S. capital investment from the shock of the COVID-19 pandemic and the benefits these investments provide to workers.

Eight of the top 10 companies on this year’s ranking are in the technology, broadband, or ecommerce industries, with Amazon leading the list, investing $46.5 billion in the United States in 2022. Report authors, Dr. Michael Mandel, Vice President and Chief Economist at PPI, and Jordan Shapiro, Director of the Innovation Frontier Project at PPI, analyzed capital spending in “high-investment” sectors and compared the spending levels for the same companies in 2019. Their analysis found that the great majority of companies on the Investment Heroes list have high and growing levels of domestic capital investment, compared to before the pandemic.

“Since our first Investment Heroes report in 2012, the companies featured on the list have drastically changed. Back then, only one out of the top 10 companies was in the tech/internet sector. Fast forward to 2022, and we’ve seen new companies rise to the top of the list because of innovation and growth,” said Dr. Michael Mandel. “The dramatic evolution of the Investment Heroes list shows the ever-changing competitive nature of the U.S. economy.”

PPI’s analysis found that capital investment is associated with massive job creation. Between 2019-2022, our high-investment sectors added 1.3 million net new jobs, more than the entire rest of the private sector put together. Not only that, but many companies are investing back into training and education for their employees and new workers.

“The 2023 Investment Heroes list and analysis show it is important to recognize not only what companies are investing in America, but also what companies are investing in workers,” said Jordan Shapiro.

The 2023 top nonfinancial companies by estimated U.S. capital expenditure:

Read and download the full report here.

The Progressive Policy Institute (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. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

Find an expert at PPI.

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Media Contact: Amelia Fox, afox@ppionline.org

Investment Heroes 2023

Posted on by Alyssa Brown

INTRODUCTION

The theme of this year’s Investment Heroes report is the recovery of U.S. capital investment from the shock of the pandemic and the benefits for workers. Every year, the Progressive Policy Institute (PPI) analyzes the financial reports of large U.S. companies and ranks them by their capital investment in the United States. Eight of the top 10 companies on this year’s Investment Heroes list are in tech, broadband, or e-commerce industries. Amazon is at the top of the list, investing $46.5 billion in the United States in 2022, according to estimates by PPI. Next comes Meta, Alphabet, AT&T and Verizon, followed by Microsoft, Intel, Walmart, Comcast, and Duke Energy.

All told, the 25 companies in the Investment Heroes list invested $324 billion in the U.S. in 2022 (Table 1).

But it is not simply that the companies on the list invest the most in the U.S. — they also show faster recovery from the pandemic. Since 2019, domestic capital expenditures by the 25 companies on this year’s list has risen 38%, without adjusting for inflation. By comparison, overall nonresidential investment as measured by the Bureau of Economic Analysis rose by only 15% over the same period, also without adjusting for inflation.

And while this report focuses only on U.S.-based companies, the difference was not being made up by money from abroad. New direct investment by foreign companies in the U.S. actually fell by 20% from 2019 to 2022.

The domestic capital investment by the companies on the list is the lifeblood of the economy, producing job and income gains, and setting the country on a path to a greener future. It ranges from e-commerce fulfillment centers employing thousands of workers at good wages, to data centers supporting small businesses across the country, to 5G and broadband networks linking rural areas, to factories building batteries for the next generation of electric vehicles, to new fabs, to new fuel-efficient planes.

It should be noted that the financial data we use for our list focuses mainly on spending on structures and equipment — what’s known as tangible investment. But the government’s definition of investment includes key intangibles such as software and research and development. Very few companies report software spending, and not all companies break out their R&D expenditures. But the ones that do tend to show big gains. For example, Alphabet boosted its spending on R&D by more than 50% from 2019 to 2022, compared to a 32% gain in overall private R&D spending. Apple showed a 62% increase in R&D spending from FY 2019 to FY 2022. General Motors increased its R&D spending by 44%. Such increases fuel new product development and innovation, which shows up as faster growth going forward.

From the perspective of policy, it’s worth comparing the U.S. capital investment performance during the pandemic years with Europe’s. Europe has consistently adopted a more aggressive regulatory stance. Has it paid off in the form of higher investment?

The short answer is no. When the European Investment Bank (EIB) did its comparison of U.S. and European investment spending in a February 2023 report, it focused on a measure called “non-construction investment” — basically machinery, equipment and intellectual property assets such as software and R&D. Using the EIB’s methodology, we calculated that nonconstruction investment in the United States rose by 20% from 2019 to 2022, compared to only 12% in the European Union. Overall, the EIB study finds a widening gap between the US and Europe in terms of productive investment.

Before we dive into the details of this year’s study, it’s worth taking a long-run perspective. Our first Investment Heroes report, released in 2012, tracked 2011 domestic capital spending. Five out of the top ten companies that year were energy companies. The only tech company in the top ten was Intel. Google and Apple were 24 and 25 on the list, respectively, and Amazon was nowhere to be found. Neither was Microsoft or Meta. It was a completely different list.

Figure 1 shows the full history of aggregate capital spending of the Investment Heroes list on a year-by-year basis (right axis), plotted against annual U.S. nonresidential investment (left axis). From 2011 to 2017 the two figures rose by the same amount, 36% without adjusting for inflation.

But after 2017, the situation changed. The companies on the Investment Heroes list began driving national capital expenditures. From 2017 to 2022, domestic capital expenditures by PPI’s Investment Heroes rose by 75%, compared to 29% for the BEA’s nonresidential investment figures.

The key leader was Amazon. In the five years ending with 2022, the company invested the staggering sum of $162 billion in the United States, creating hundreds of thousands of jobs in the process and creating massive gains in consumer welfare.

But it wasn’t simply Amazon. Table 2 sums our 2022 Investment Hero estimates into seven economic sectors: tech/ internet; broadband/ wireless; ecommerce/retail; energy distribution; energy exploration; transportation; and automotive. We call these the “high-investment” sectors. We then compare capital spending in those sectors with our estimates of domestic capital spending for those same companies in 2019.

For six out of seven economic sectors, we find significant growth in domestic capital spending from 2019 to 2022. In other words, the companies on our Investment Heroes List typically have high and growing levels of domestic capital investment compared to before the pandemic.

In addition, our analysis shows that capital investment creates jobs and raises wages. Between 2019 and 2022, the high-investment sectors on our list added more net new jobs than the entire rest of the private sector put together. We calculate this number by looking at the employment in domestic industries corresponding to the seven sectors in Table 2, as reported by the BLS. (We use industry data because domestic employment data is not available for all companies. The industry-level data also accounts for broader impacts of investment).

By our estimate, the high-investment sectors added 1.3 million net new jobs between 2019 and 2022, accounting for 55% of private sector job creation. Employment in the high-investment sectors grew by almost 5%, compared to a 1% gain in the rest of the private sector.

The leader was the ecommerce/retail sector, which added more than 800,000 jobs between 2019 and 2022, as job gains in ecommerce fulfillment and delivery more than made up for any losses in brick-and-mortar retail. Next was the combined tech/internet/broadband/wireless sector, which added almost 500,000 jobs.

What about pay? Real wages per worker in the ecommerce/retail sector rose by 7% from 2019 to 2022 (using QCEW data from the BLS and the PCE deflator). Overall, real wages per worker in the high-investment sectors rose by about 6%, a slightly larger gain than the rest of the private sector.

We also note the importance of investment in human capital — the training and education of workers. Companies are not required to report spending on training and education, but it’s more essential today than ever before.

READ THE FULL REPORT.

Understanding the Chip Export Controls

Posted on by Alyssa Brown

The development and production of leading-edge semiconductors is a difficult, expensive, and risky endeavor. Case in point: Intel, once the world’s top chipmaker, has fallen behind Taiwan-based TSMC and Korea-based Samsung in mass-producing the latest, most powerful generation of chips, used in applications such as artificial intelligence, autonomous vehicles, and high-end weapons systems.

Moreover, each new generation of chips requires comparable advances in related technologies like software for designing chips (primarily made by U.S.-based companies such as Cadence or Synopsys) and ultra-precise photolithography equipment from companies like Netherlands-based ASML and Japan-based Nikon that are essential to the chip-making process.

So far, there are no Chinese companies on the very short list of global businesses contributing key technologies to leading-edge advanced chips, which aren’t easy even for companies like Intel. However, Chinese manufacturing facilities have become key producers of “mainstream” or “legacy” chips, which are powerful but “not-the-latest-model” chips that run everything from appliances to tire sensors on cars.

Against the background of this complex global chip ecosystem, the United States is pursuing a clear policy: To “maintain as large of a lead as possible” over competitors in “key technologies,” in the words of President Biden’s National Security Advisor, Jake Sullivan. In particular, this goal reflects mounting concern in Washington about China’s long-term strategic threat, both military and economic. Notably, the ruling Chinese Communist Party is doubling down on a “military-civil fusion” research and development strategy that links civilian and military modernization and technology development. The immediacy of the threat can be argued, but not its nature.

The new policy has two parts and a difficult choice. The first part is to slow down the transfer of Western knowledge and capabilities to the Chinese semiconductor industry. This goes under the name “export controls,” but it really means a series of actions, described below, aiming at slowing down or stopping the conveyor belt that for the past two decades has swiftly and efficiently carried technology from the Western countries to the broad swathe of thriving Chinese factories, including those supplying the Chinese military.

The second part of the new policy must be aimed at maintaining and even accelerating advanced Western chip progress. The CHIPS Act is a start, but as noted earlier, the cutting-edge of semiconductor technology is a dangerous and expensive place to be. The U.S. is still the leader, but it can’t expect to go it alone. Other countries have unique knowledge and capabilities that must be appreciated and respected. For example, ASML is the only company in the world making extreme ultraviolet (EUV) lithography equipment, without which the most powerful chips would not be possible.

The difficult choice is how far to extend the new controls in practice. There is a general consensus (though in some cases grudging) that China should be denied the latest and greatest chip technologies. To that end, the Commerce Department’s Bureau of Industry and Security (BIS) is prohibiting the transfer of advanced semiconductor technologies to any Chinese company or fab that manufactures chips for supercomputers and other military applications is included. Moreover, American workers and companies that operate or service advanced chipmaking equipment in China henceforth will require a special waiver to continue their work. The new controls also require non-U.S. companies to comply with the new restrictions or risk being cut off from using American semiconductor technology. Indeed, the U.S. was able to convince the governments of the Netherlands and Japan, home to key suppliers, to ban the export of leading-edge technologies.

This policy, directed toward advanced chips, could well be successful in slowing China’s semiconductor progress. No matter how much China spends on semiconductor R&D, it may not be able to easily match the combined intellectual and scientific heft of the U.S., Europe, Japan, Taiwan, and Korea working together.

But the consensus begins to fray once the policy conversation turns to putting similar controls on mainstream or legacy chips. On the one hand, mainstream semiconductors are still very powerful in historical terms, and the technologies used to make them can be potentially adapted to produce more advanced chips. An argument can be made that to be truly effective, controls have to be both broad and tight. One example of potentially tight controls: The Commerce Department just proposed a set of “guardrails” that would prohibit recipients of CHIPS Act funds from expanding the capacity of their existing legacy manufacturing plants in China by more than 10% from today’s level. That would effectively put a permanent cap on U.S. production of legacy chips in China for export-oriented products.

On the other hand, these chips, used by the bucketful in all sorts of modern applications, are low-margin, and therefore a low-cost country like China logically has a comparative advantage. Moreover, automakers, aerospace companies, and other U.S. businesses benefit from the ability to import these chips at a low price, which then in turn benefits U.S. consumers.

How to escape this conundrum? The key is to look ahead toward the future. The technical bar for each new chip generation gets higher and higher, so the more hands the better when it comes to pushing the frontier forward. The Semiconductor Industry Association estimates that meeting future semiconductor needs will require $3 trillion in investments over the next decade for R&D, supply chain resiliency, and new fabs, both for advanced and mainstream chips. To put this in perspective, Intel’s total capital investment and R&D budget in 2022 came to $42 billion, suggesting what is needed is about 10 Intels.

On a global basis, that’s doable. What’s needed is a “coalition of growth” with no single country monopolizing the funding, expertise, blueprint, or supply chain for manufacturing semiconductors. This diffusion of technical know-how necessitates a balanced approach to address national security needs, safeguard semiconductor supply, and advance semiconductor technology and equipment, as the Department of Commerce and BIS are doing by soliciting public comment on the new restrictions.

The importance of semiconductors will only continue to rise in a digitized society. No one disputes the importance of semiconductors for national security. The United States cannot compromise on ensuring a secure global environment. However, the essential nature of chips will require a roadmap that integrates national security needs with chip advancement and innovation.

 

Applying Antitrust Law to the U.S. Tech Sector: A critique of the American Innovation and Choice Online Act

Posted on by Alyssa Brown

EXECUTIVE SUMMARY

In 2019, the House Judiciary Committee initiated an investigation into the state of competition in digital markets, looking particularly at the dominance of America’s biggest online platforms. Three years later, a slew of bills have been introduced at both federal and state level intended to curb the power of “Big Tech.” The driving force behind many of these efforts is the claim that companies like Google, Amazon, Facebook (Meta), and Apple are simply too big, with their size posing a competitive threat to smaller tech companies. A handful of these bills are being introduced with the purpose of updating America’s antitrust laws to meet the challenge of today’s supposed tech monopolies.

The American Innovation and Choice Online Act (S. 2992) sponsored by Senators Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa, for example, is being sold to Congress and the American public as being comprehensive antitrust legislation to rein in the power of “Big Tech.” Whatever its merits, however, the bill isn’t really based in antitrust law and policy. Rather, it’s an ad hoc set of new rules which replace the current standards for antitrust enforcement based on market power and consumer welfare with a more generalized approach which targets just one industry — online platforms. The Senate bill looks at platforms with a large number of users and assumes excessive market power as a result of size, forgoing the need for economic analysis required to prove illegal monopoly power. The bill then imposes additional competitive requirements onto this predetermined set of companies.

A genuine antitrust analysis would examine not just firm size, but the conditions of the market in which a company operates, the presence of direct competitors, and its potential for consumer harm. Instead, the Senate bill takes a cookie cutter approach to antitrust enforcement: An online platform that hosts third party business users with over 50 million U.S. monthly active users (or 100,000 business users) and a market capitalization or net annual sales over $550 billion should be subject to different rules regarding competition. Essentially, a company-specific carveout without precedent in antitrust law.

There is a demonstrated need for changes in how antitrust law is enforced in order to encompass the business models of today’s digital platforms and e-commerce sites. However, the Senate bill fails to offer a rigorous economic analysis of digital markets, fundamentally changing enforcement methods in ways unacknowledged by the bill’s supporters.

This report explores three ways in which the Senate bill falls short:

• For the past 40 years, U.S. antitrust enforcement has been based on the assessment of quantifiable harm resulting from a firm’s market power, which most often takes the form of price effects. Supporters of the Senate bill, however, make no such assessment.

• In addition to being incompatible with current antitrust law and practice, the American Innovation and Choice Online Act’s size-based model would put American companies at a competitive disadvantage against other big competitors in global markets.

• Businesses such as internet platforms with low costs and significant network effects require a more sophisticated approach to examining consumer harm which accounts for damage to consumers other than rising prices. This might include adverse changes to company policies or reduction in accessibility of a service and may, in the end, warrant additional regulation. The current proposed legislation does not make such a case.

Today’s dominant technology companies may warrant scrutiny under antitrust law, but to investigate the merits of this claim it is critical that assessment of an illegal monopoly is based on market power rather than size. By considering metrics of consumer harm beyond price effects, it is possible to evaluate harmful market power in a way that considers the nature of these growing industries without discounting the additional value to the consumer presented by companies with large network effects.

READ THE FULL REPORT

Keep Eyes on the Prize: Skip the Small and Controversial and Pass USICA/Competes Act

Posted on by Alyssa Brown

The chapters on trade included in the Senate and House COMPETES Act/USICA raise some good ideas, but also some very questionable ones. A good principle here is: “simpler is better.” If the good can be salvaged, fair enough. But overall, the trade chapters’ contentious elements are not important enough to justify slowing the CHIPS Act, support for R&D and STEM workforce development, supply chain resilience, and the bill’s other major benefits.

On the positive side, the Senate’s renewal of an “exclusion” program for the Trump administration’s China tariffs is appropriate, helping to ease the burden these tariffs place on U.S. manufacturers and farmers. Likewise, it’s good that Congress is committed to renew the Generalized System of Preferences, though as PPI noted before, both the Senate and House bills overreach in adding many new eligibility criteria; these should be pared back to a more focused list and balanced with additional benefits as Reps. Stephanie Murphy and Jackie Walorski have proposed. Other ideas are best dropped.

For example, giving businesses wider openings to file trade lawsuits of the type that have recently derailed U.S. investment in solar energy, and banning families from getting “de minimis” tariff waivers for packages originating in China, are questionable on the merits, and also likely to put some additional upward pressure on prices when we need to do the opposite. They should be dropped in the interest of speeding the conclusion of the larger bill.

More fundamentally, the bills’ trade chapters seem to be missing the forest for the trees, or even the shrubs. Is it, for example, acceptable that the Biden administration is not seeking market access for American exporters, or more generally, designing a program ambitious enough to match China’s RCEP and Belt and Road (in its European, Asian, and Latin American trade “initiatives”?).

With the “301” tariffs having failed to change the direction of the U.S.-China relationship, is there a justification for continuing to ask American businesses and families to keep paying them? Did Congress surrender its rights by allowing presidents to personally impose tariffs through the “Section 301” and “Section 232” laws, and if so, should they be changed? And, as the administration investigates the effects of trade and trade policy on America’s low-income workers and communities, is there a role for pro-poor reform of the U.S.’ own trade regime?

These are the trade policy questions we hope Congress will begin asking, once it completes its competitiveness bill work.

To prepare for the future of the digital economy, we need to increase chip manufacturing

Posted on by Alyssa Brown

Congress has the opportunity to increase chip manufacturing in the United States through the United States Innovation and Competition Act from the Senate, or the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology and Economic Strength (COMPETES) Act from the House. Unfortunately, a stalemate over semi-unrelated trade provisions in the bill are preventing its passage, delaying $52 billion in funding provisioned to increase production in the United States. Continued stalemate is bad news for the future of the American economy.

Computer chips, or semiconductors, live in almost every electronic device we use on a daily basis. They’re needed for cars, cellphones, medical equipment, and national security. The growing thirst for chips came to a head in 2021 and 2022, when a national shortage drove up the prices of cars and other essential electronics.

The United States is the main designer of semiconductor chips with almost 50% of global sales, according to the Department of Commerce. But designing the chip is not the same as actually building it. Despite the dominance of U.S. design, only one U.S.-owned semiconductor foundry, or factory, exists in the United States, run by Infineon in Minnesota. Surprisingly, the U.S. lost its once supreme position in semiconductors by not investing in semiconductor “fabs,” leading it to only produce 11% of global semiconductors in 2019. Instead, Taiwan is the global leader in semiconductor manufacturing with two of the largest semiconductor foundries in the world, UMC and TSMC.

Moreover, the U.S. has fallen behind in two distinct ways. U.S. companies have fallen behind in the cutting-edge technologies that are used to make the “advanced” chips that power smartphones and game consoles. TSMC and Samsung are the only general-use chip manufacturers that can produce the most advanced chips.

Meanwhile, the U.S. has also not invested in the facilities that make the “mainstream” chips that power, among other systems, speedometers or car brakes. Chips for cars, while easier to manufacture, are cheaper and have a lower profit compared to smartphone and computer chips, which are the state-of-the-art versions that drive innovation in computing capabilities.

Chipmaking requires a lot of investment, resources, and research and development to keep up with the needs of computing. The global chip shortage demonstrated the challenges for digital societies in keeping up with demand; the European Union passed The European Chips Act in February 2022 in response to the shortage.

Congressional leaders have been negotiating to discuss differences in the Senate and House bills, which are extensive. Provisions around issues, such as the denial of “de minimis” tariff waivers on small packages from China, eased filing of anti-dumping lawsuits such as those recently targeting solar panel imports, digital trade negotiating goals, energy and research, space, green energy, and more are the subjects of disagreement. In contrast, only one major provision separates the two chambers on chips: PAYGO, with the House in support and the Senate against the budget provision.

In light of the importance of chips for everyday life and for future innovations, resolving the single disagreement over chips is both more pragmatic and necessary to increase American competitiveness and security in this sector.

Beyond “Buy American”: Why U.S. Manufacturing Needs A National Resilience Council

Posted on by The Progressive Policy Institute

We strongly support President Biden’s signing of the Executive Order beefing up Buy American provisions for federal purchases. The executive order would use “the full force of current domestic preferences to support America’s workers and businesses.

But much more needs to be done, since domestic manufacturing is much weaker than most people realize.  Most important, multifactor productivity in domestic manufacturing–the broadest measure of the ability of U.S. factories to turn inputs into useful goods–actually fell from the previous business cycle peak in 2007 to 2019, before the Covid recession started.  In other words, domestic manufacturing is becoming less competitive, not more competitive.

That’s why Biden needs to go beyond Buy American in order to boost domestic manufacturing. In our August 2020 report on how to “Spur Digital Manufacturing in America,” we propose a  “National Resilience Council” to lead a push to stimulate local production, shorten supply chains, create high-wage factory jobs and make our manufacturing sector more resilient in crises.

The National Resilience Council would be tasked with identifying those industries and capabilities that are strategic, in the sense of improving the ability of the economy to deal with shocks like pandemics, wars, and climate changes. These areas are likely to be underinvested by private sector companies, who quite naturally don’t have an incentive to tackle these sorts of large-scale risks.

The goal would be a resilient manufacturing recovery,  based on flexible, local, distributed manufacturing—relatively small efficient factories that are spread around the country, using new technology, knitted together by manufacturing platforms that digitally route orders to the nearest or best supplier. To achieve this goal, we make four concrete proposals:

  • First, we should double the National Science Foundation’s roughly $8 billion budget, with more of an emphasis on manufacturing-related areas such as materials sciences.
  • Second, the government can shore up the nation’s supplier base by providing $200 million in low-cost loans and grants to help small and medium manufacturers test and adopt new production technologies, including digital advances such as robotics and additive manufacturing. Even in a low-interest rate environment, capital is relatively scarce for companies that are too small to tap the bond market
  • Third, the National Resilience Council should sponsor a Manufacturing Regulatory Improvement Commission, along the lines that PPI has suggested in the past. We have no desire to roll back essential environmental and occupational health regulations. But we do want to consider whether rules governing manufacturing have become so restrictive as to unnecessarily force out jobs
  • Fourth, the federal government should take the lead to create a common “language” so that product designers, manufacturers, and suppliers can more easily work together online, just like DARPA helped create the basic structure of the Internet in the late 1960s. Just as a young person can write an app, put it online, and find users around the world, it should be possible to create a design for a new product and easily find potential local manufacturers.

A more extensive set of policies to enhance the resilience of US manufacturing can be found here.

This blog was also posted to Medium. 

 

The GOP’s Pivot Away From Fiscal Relief Hurts Millions of Americans

Posted on by The Progressive Policy Institute

At every turn, the Trump administration and Republicans in Congress have bungled the coronavirus pandemic and shortchanged our recovery. For the first month after most programs created by the CARES Act – the last major stimulus bill passed by Congress back in March – expired, the GOP wasted valuable time on half-measures that could not pass and executive orders that do not help. Washington Republicans have now completely abandoned work on further relief measures so they can focus on a partisan gambit to pack the Supreme Court with yet another right-wing justice before voters have a chance to make their voices heard in just five weeks.

It didn’t have to be this way. Back in May, House Democrats passed the $3 trillion HEROES Act that they intended to be a follow-up to the CARES Act. Although the bill had many flaws, it offered a starting point for negotiations. Their Republican counterparts in the Senate, on the other hand, spent two months doing literally nothing to advance any additional relief legislation. It was only a full month after the major provisions in the CARES Act had expired that the Republican-controlled Senate voted on a partisan $500 billion “skinny” stimulus bill, which then failed to pass the chamber. Negotiations have now stalled due to GOP’s insistence on penny-pinching for a critical stimulus bill that, it should be noted, would almost certainly be less expensive than the wasteful $2 trillion tax cut the party enacted at the height of our most recent economic expansion.

In an attempt to cover for his party’s fecklessness, President Trump issued a series of executive orders ostensibly designed to fill the needs for further relief unmet by Congress. But as is too often the case with Trump, these actions were almost entirely superficial – and in some cases, actively harmful to the people supposedly helped. Rather than playing these pointless partisan games, Republicans need to join Democrats at the negotiating table and deliver a real solution for the millions of Americans struggling to survive amidst a global pandemic and the worst economic crisis since the Great Depression.

Anyone at Risk of Contracting Coronavirus

The first priority for policymakers must be controlling the pandemic, as our economy cannot fully recover until people feel safe going in public to work or spend money. Adequate testing and tracing are essential to preventing the virus from spreading until a vaccine is found, but delays in test results have already undermined our COVID response. Democrats proposed $75 billion for coronavirus testing and contact tracing as part of their stimulus proposal in the HEROES Act, while Republicans proposed a much-smaller $25 billion investment, including just $16 billion of new funding not reallocated from CARES Act programs. But without a deal, neither side gets any investment – and the virus continues to spread through our communities.

People Who Have Lost Their Jobs

Up to 26 million Americans remain unemployed thanks to the pandemic. In normal times, unemployment benefits typically only cover 34-54 percent of lost wages for a limited period of time. These benefits, however, are woefully insufficient during a prolonged period when few job openings are available to be filled. The CARES Act sought to address this problem by increasing UI benefits by $600/week through the end of July and extending the maximum number of weeks someone could claim unemployment benefits until December.

Democrats proposed to continue the full $600/week until January (or tie the extension of benefits to real economic indicators), while Republicans wanted to replace it with a $300/week supplement through the election). There was a very reasonable middle-ground here, as both sides agreed that supplemental unemployment benefits should not be allowed to expire in their entirety – but because no agreement was reached, that is exactly what happened.

Trump claimed to resolve the problem with an executive order letting states use Federal Emergency Management Agency (FEMA) money to establish a supplement for unemployment insurance. But this approach was riddled with problems: it depended on state unemployment offices, which are already burdened with crushing caseloads and obsolete information technology, to set up new administrative structures, delaying the receipt of benefits. The new supplement was worth only half as much as the one authorized by the CARES Act, and was not made available to low-income workers who receive less than $100/week in normal unemployment benefits. Finally, the FEMA fund only had enough money to fund benefits for six weeks – and required drawing upon funds that will likely be needed to fight wildfires out west and repair damage from hurricanes in the south.

Landlords and Lenders

Failure to adequately support unemployed Americans will have cascading effects throughout the economy. Because the unemployed then cannot spend as much money as usual, the businesses that rely on their patronage also lose income, which hurts workers throughout the broader economy and deepens the recession. They are also more likely to fall behind on payments for rents, utilities, or mortgages. The CARES Act included a temporary moratorium on evictions, but now that it is expired, millions of American families are at risk of losing their homes by the end of the year. Democrats  have proposed imposing an even broader moratorium than was included in the CARES Act. The Trump administration, meanwhile, ordered the Centers for Disease Control to enact a limited moratorium on evictions until the end of the year for low- and middle-class renters.

Although a moratorium may give at-risk renters some temporary relief, it fails to resolve the underlying issue: lost income. Trump’s moratorium simply delays the inevitable for any renter who is behind on rent and would otherwise face eviction. Meanwhile, smaller landlords will lose out on income they need to pay for mortgages and property taxes, which puts them at risk of default. Lenders may also face significant losses from landlords and homeowners unable to make their required payments. If Congress were to instead provide adequate income support for people who have lost their incomes in the pandemic, they would ensure people can afford to remain in their homes without creating these new burdens.

Small Businesses and Their Workers

The CARES Act included a Payroll Protection Program (PPP), which gave small- and medium sized-businesses money to retain their workforce. That funding dried up when the program ended on August 8th. Here, Congressional Republicans actually want to be more generous, proposing almost $360 billion in small business support, loans, and employee retention provisions, while Democrats proposed $290 billion. But without a deal, small businesses – many of which are operating in industries, such as dining and hospitality, that have been particularly hurt by the pandemic – have not gotten any more support.

The only support for small businesses in President Trump’s executive orders was a counterproductive payroll tax holiday. Neither party in Congress supported Trump’s previous proposals to temporarily cut the payroll tax, so instead he used his limited authority to defer collection of some payroll taxes until next year. But since workers will still owe that money in 2021, many employers are just withholding the tax anyway. Meanwhile, federal workers – including those in the military – who cannot opt out of deferral are being advised not to spend the money so they aren’t financially flattened by the massive tax bill for back taxes they will receive next year.

State and Local Governments

The coronavirus pandemic has blown a massive hole in the budgets of state and local governments: income and sales taxes are drying up while spending on safety-net programs, such unemployment insurance and Medicaid, have increased dramatically. Because most state and local governments are required to balance their budget, this fiscal squeeze will compel them to cut their budgets right when people and businesses need government support the most.

Although Congress included some aid for state and local governments as part of the CARES Act, it only allowed this money to be spent on new coronavirus-related expenses, not to replace lost revenues. Republicans have proposed to loosen rules on how states could spend this aid, but offered no additional funding. Democrats, meanwhile, included almost $1 trillion in new funding for state and local governments in the HEROES Act.

Many on the right have argued that providing further aid would be a “bailout” for the finances of poorly-managed states, but this criticism is at best deeply misguided. PPI projects that state and local governments will need at least $250 billion in additional support beyond what was already appropriated before the end of 2021 just absorb the pandemic’s financial impacts without making deep cuts to essential services – and this figure could be even higher if the economic impact of this unpredictable crisis is worse than current projections. Rather than argue over an arbitrary dollar amount, Congress can easily address the concerns of both Democrats and Republicans by designing programs that provide aid to state and local governments based on the real pandemic-induced shortfalls realized on their balance sheets.

Parents and Families

The pandemic has taken a particularly brutal toll on parents who are unable to send their children back to school this fall. It is difficult for workers to do their jobs, either remotely or in-person, when they are unable to access child care that they usually could depend on at this time of year. It also poses a special burden on students from low-income families who lack the internet access necessary to participate in online classes.

The good news here is that both parties have proposed about $100 billion in additional support for schools. But they disagree on what it should be used for: the Trump administration would use this money to pressure school districts across the country to return to in-person classes, the even though doing so would be unsafe without the proper public health safeguards in place. The Democrats’ proposal, on the other hand, would also enable schools to stand up high-quality remote learning to keep their students learning while school buildings remain closed.

Unfortunately, these nuances don’t even matter at the moment: because Congress failed to reach a broader agreement, schools have received no additional federal support. Even worse, the looming shortfalls facing state and local budgets are likely to result in deep cuts to education spending (as they did following the 2008 financial crisis), further jeopardizing the long-term opportunities for children and families.

Voters

State and local governments face an unprecedented challenge administering a national election in the midst of a pandemic, made even worse by foreign governments threatening to interfere again like they did in 2016. The HEROES Act included $3.6 billion to support election integrity and vote-by-mail operations to make sure every vote is counted, while the Senate bill included nothing. As we enter the final stretch of what is perhaps the most contentious presidential election in modern history against the backdrop of several overlapping national crises, the failure of federal policymakers to support election infrastructure jeopardizes the bedrock of our democracy.

Conclusion

Although neither party’s proposals have been perfect, only one is making any serious effort to find common ground and support our economy in a time of unprecedented crisis. While House Democrats prepare to vote this week on a new package of proposals that is more moderate than the HEROES Act they passed four months ago, President Trump and Senate Republicans are leaving millions of Americans in the lurch by prioritizing partisan court packing over any further fiscal relief. Democratic candidates for office and all stakeholders, from the worker who is at risk of losing her home along with her unemployment benefits to the parent who cannot save his small business and give his child a decent education at the same time, should pressure Republicans to return to the negotiating table and work in the public interest – or face severe consequences in November.

The Covid-19 Crisis Shows Why We Need A National Resilience Council

Posted on by The Progressive Policy Institute

The Progressive Policy Institute, where I serve as chief economic strategist, just put out a report entitled “Building American Resilience: A Roadmap for Recovery After COVID-19.” The report covers a wide range of topics, ranging from manufacturing (discussed below), to education, to health care, to small business, to metro area fiscal policy to the gig economy.

The report makes the argument that resilience—the ability to respond well to disruptive shocks such as pandemics, wars, and climate changes—is a public good that benefits everyone. Left to their own devices, private sector businesses will underinvest in resilience because they can’t capture all the benefits. Just to give an obvious example, no rational company would build an extra production line for N95 mask or mask material that isn’t needed in normal times, just on the off chance of a pandemic. Nor would a rational company invest in developing a process for making N95 masks faster and more cheaply.

Resilience rightly needs to be an explicit goal of public policy. That’s why the report advocates setting up a high-level National Resilience Council, tasked with identifying those industries and capabilities that are strategic, in the sense of improving the ability of the U.S. economy to deal with disruptive shocks. The National Resilience Council would certainly not be anti-trade, because globalization is often a good way to distribute risk. But it would follow a rigorous process of scrutinizing the reliance of the U.S. on foreign suppliers who might not be available in a crisis.

Read more here.

How to build American resilience

Posted on by The Progressive Policy Institute

For Americans and much of the world, 2020 has been an annus horribilis. To contain the coronavirus pandemic, nations have been forced to order mass quarantines, freezing economic activity and social life. It likely will take decades to calculate the full human, economic and psychic costs of this still-unfolding global calamity.

Few countries have been spared the ravages of COVID-19, but no country has been hit harder than the United States. A quarter of the 20 million people the virus has infected globally are American, and at 165,000, our death toll is by far the world’s largest.

The plague has put the world’s biggest economy on life support. After shrinking by 5 percent in the first quarter of 2020, U.S. output plunged by nearly 10 percent in the second quarter. Since March, more than 42 million Americans have filed for unemployment, and as many as one in six (about 25 million) remain out of full-time work.

Amid this unprecedented public health and economic crisis an old American dilemma – racial injustice – has reared its head. The senseless killings of George Floyd, Breonna Taylor and other Black Americans by police has triggered widespread public outrage and sometimes violent protests.

Intensifying all three of these shocks is a catastrophic failure of national leadership. In America’s past tribulations, extraordinary leaders have arisen to steer our republic through the storm. Not this time. President Trump has run the ship of state aground.

His incompetent handling of COVID-19 has prolonged the pandemic and pushed our economy to the brink of collapse. As demonstrations against police brutality and racial discrimination tear at the nation’s social fabric, Trump has displayed a perverse talent for inciting social rancor and pitting Americans against each other.

Now, with a crucial national election approaching this fall, Trump is trying to deny Americans the right to vote safely at home. He’s falsely crying fraud to undermine public confidence in the legitimacy of our electoral system.

No wonder Americans’ nerves are frayed. The impression grows, here and abroad, that our country is becoming a failed state.

But that’s wrong. The United States remains a resourceful and dynamic country capable of swift course corrections. Time and again, we’ve showed that a free people can bounce back from adversity stronger than before. Now it’s time to reinvent ourselves again.

Read the full piece here.

Make America #1 in Electric Vehicles

Posted on by The Progressive Policy Institute

Achieving U.S. climate resilience requires a dynamic and unprecedented American clean energy transition, including large investments in zero-emissions infrastructure and clean energy manufacturing — the fastest growing global manufacturing sector set to attract $10 trillion in investment by 2050.

A new report from the Progressive Policy Institute finds the U.S. has the opportunity to build tens of millions of new electric vehicles, charging stations, and the advanced electric grid to serve them, as well as upgrading our roads, bridges, high-speed internet, ports, and public transport to fulfill this clean energy vision. The Covid-19 economic and unemployment crisis has only intensified the political imperative to create millions of these new, clean energy jobs, with a particular emphasis on well-paid manufacturing.

In his 2016 campaign, Donald Trump famously promised to revitalize American manufacturing and rebuild our crumbling infrastructure. But as president he has done neither one. In fact, U.S. manufacturing declined deeply during each quarter of 2019, long before the coronavirus reached our country.

Now former Vice President Joe Biden and other Democrats have put clean energy at the center of bold blueprints for reviving the comatose U.S. economy. The House last month passed a $1.5 trillion infrastructure and tax package, and Biden recently unveiled his $2 trillion “Build Back Better” plan. But ambitious as these proposals are, they do not offer a detailed roadmap for making America the global leader in the key clean energy technologies, especially electric vehicles, and related technologies like an advanced electricity grid and storage.

Yet the mass commercialization of electric vehicles is key to cutting the largest source of U.S. greenhouse gas emissions, making America’s air cleaner and healthier, ending dependence on foreign oil, and bringing about a resurgence of the U.S. auto industry and American manufacturing jobs.

Until we are producing American-made vehicles that can beat oil-burning cars on price and consumer appeal over the long-term, the clean energy transition in the key transport sector will not gain speed. We need a muscular new vision of America’s clean energy infrastructure and manufacturing sector creating millions of good new jobs. This is modern equivalent of Franklin D. Roosevelt’s “Arsenal of Democracy”— helping to solve many of our economic, manufacturing, trade and environmental problems together.

The United States can’t afford to forfeit the lead on electric vehicles to China, as has happened with other clean energy technologies. For example, China in 2008 devoted half its total $650 billion stimulus to manufacturing PV solar panels and lithium ion batteries, growing China’s PV solar panel global market share from less than 30% to about 70% today.

Cars are far more important to America’s economy and national identity than solar panels. Thanks to heavy investments in electric vehicle technology, China already is dominating the emerging global EV market, with over 50% of global production, and 73% of the EV battery market. Meanwhile, the US produces fewer than 20% of EVs. Industry experts predict that electric vehicles will be the key to auto industry growth over the next years and decades—from less than two million EVs today to more than 30 million by 2030—representing the world’s most important new manufacturing market.

But today, most Americans cannot afford the excellent but more expensive EVs that dominate the U.S. market. And the EVs that are affordable are not available in models—especially SUVs, minivans and light trucks—that most U.S. consumers prefer, and that provide higher profit margins for automakers.

America needs a new approach to the electrification of transport – a comprehensive program to jumpstart the production and purchase of the electric cars and trucks Americans want and can afford. The existing federal consumer tax credit of $7,500 per EV has reached a cap of 200,000 for GM and Telsa, the largest US producers. While Democrats
in Congress have proposed raising the cap per manufacturer, this minor change won’t drive large and rapid electrification of the U.S. fleet. And Republicans have (hypocritically but successfully) attacked the current tax credit as a government giveaway for “Tesla millionaires” that favor only the richest consumers.

Instead, Congress should provide average American consumers much larger tax credits for purchase of affordable U.S.-made EVs, including models Americans actually want, especially minivans, SUVs, and light trucks. This means dedicating large consumer tax credits to the purchase of more affordable EVs with an emphasis on high-volume model types on graduated scale as follows: $15K credit for vehicles under $35k: $7.5k for EVs under $50k; $2.5k under $75k and $1.5k under $100k. A version of this PPI approach has been crafted into legislation by US Rep. Jackie Speier; the bill has over 30 cosponsors but, the tax credit must be applied to SUVs and trucks to achieve volume and scale and gain broad bipartisan support.

Buyers should also get to use the EV credit over a 5-year period, or apply the credit at the point of sale, making it more applicable to average income buyers who lack large tax liability. Additional measures should include extra tax incentives for trade-in’s to rapidly turn over the non-EV fleet (“cash for clunkers”) and requiring the federal government fleet to purchase U.S.-made EVs. And infrastructure legislation must provide strong incentives for electric charging stations, advanced electric grid and storage.

The rapid retooling at GM and Ford to build ventilators and masks to address the Covid-19 crisis illustrates the ability of automakers to adapt to new market demands and government incentives. In fact, many these plants had been making hybrid car batteries.

With nearly 20 million people out of work, America must create millions of new jobs by investing in an infrastructure-led manufacturing recovery through federal legislation just as we did in the 1930s New Deal, the 1950s Interstate Highway System, 1960’s through NASA and the 2009 American Recovery and Reinvestment Act. We must also train workers in technology and manufacturing skills through high schools and community colleges, focused where unemployment is highest, in direct cooperation with EV and other clean energy employers.

America has led the world in auto innovation for most of the last century. We must do so again in a new era. U.S.-made EVs are crucial to climate resilience, the U.S. economic rebound and gaining broader political support for the clean energy transition. It’s time to act.

Weave a Stronger Safety Net Post-COVID

Posted on by The Progressive Policy Institute

The coronavirus pandemic has opened some gaping holes in our nation’s social safety net, especially where hunger and malnutrition are concerned. Millions of low-income workers have lost their jobs (and will soon lose expanded unemployment benefits if Congress fails to extend them) and millions of children in low-income families have lost access to school meals because the K-12 system has shutdown. These twin blows have triggered a dramatic rise in hunger and food insecurity in America.

Even before the pandemic hit, an estimated 37 million people, including 11 million children, reported experiencing food insecurity or hunger. Unless Covid-19 is contained, that estimate could reach 54 million by the end of 2020.

America’s most vulnerable populations – poor families with children, Black Americans, Hispanics and those living in rural areas and the South – are disproportionately affected by food insecurity and hunger. Their school-aged children also are more likely to rely on free and reduced-price school meals to meet their nutritional needs.

In March, Congress passed the Families First Coronavirus Response Act, which provided emergency food assistance and authorized the U.S. Department of Agriculture and the states to adapt the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) to meet the needs of the hungry during the crisis. According to a Center on Budget Policy Priorities report, almost all states have taken advantage of the flexibility the Act provides to maintain SNAP benefits to households with children missing school meals.

Before Covid-19, the national school lunch program on average served nearly 29 million students, and the school breakfast program served nearly 15 million students. When the schools closed in March, many school districts scrambled to keep feeding their students, by establishing “Grab and Go” sites for picking up meals, or establishing daily meal delivery routes using buses to deliver food rather than transport students.

Despite these improvisations, however, most school aged children apparently are not receiving as much food as they did before their schools closed. For example, a survey of school nutritional professionals found that 80 percent of school districts reported serving fewer meals since school closures. Of those districts, 59 percent have seen the number of meals served drop by 50% or more.

In response to the K-12 shutdown, the Families First Act created the Pandemic Electronic Benefit Transfer program that provides food to families that have lost access to free and reduced-priced meals. This one-time meal replacement benefit is added to an existing electronic benefits transfer card for families already receiving SNAP. Families with school-age children that don’t receive SNAP can also get a card.

SNAP historically has proven to be one of the nation’s most effective programs for providing low-income households with food during economic downturns. That makes it a powerful counter-cyclical policy tool. Research shows each $1 of SNAP benefits generates between $1.50 and $1.80 in total economic activity. Yet when Congress in April passed its next pandemic relief measure, the CARES Act, it increased more operational funding for SNAP operations but failed to increase SNAP direct benefits.

There are compelling moral and economic reasons why U.S. lawmakers should make offering more food aid a top priority as Covid-19 infections climb in most of the states, slowing economic recovery and causing more workers to file for unemployment. In the first place, hungry and malnourished people are more vulnerable to disease. There’s also a strong possibility that many K-12 students will not be able to go back to school in September, despite President Trump’s ill-considered calls for a general reopening. Additionally, by supporting food consumption by low-income families, more aid stimulates demand and keeps our stricken economy afloat.

To meet the immediate crisis, PPI endorses anti-hunger provisions of the HEROES Act that House Democrats passed in May, but is now blocked by Republican Senate Majority Leader Mitch McConnell. These include:

• Increasing the SNAP maximum benefit by 15 percent through September 30, 2021, which translates into an additional $25 per person each month;

• Raising the minimum monthly benefit from$16 to $30;

• Adding $3 billion for child nutrition programs; and,

• Extending the Pandemic Electronic Benefits program through the fall of next year.

MODERNIZING THE SAFETY NET

This is also the right time to look beyond the current crisis and ask how our country can build a more resilient system of social supports that can better protect our most vulnerable citizens against future pandemics and other emergencies.

“While it’s true that government safety net programs help tens of millions of Americans avoid starvation, homelessness, and other outcomes even more dreadful than everyday poverty, it is also true that, even in ‘normal times,’ government aid for non-wealthy people is generally a major hassle to obtain and to keep,” notes Joel Berg, CEO of Hunger Free America.

“Put yourself in the places of aid applicants for a moment,” Berg added. “You will need to go to one government office or web portal to apply for SNAP, a different government office to apply for housing assistance or UI, a separate WIC clinic to obtain WIC benefits, and a variety of other government offices to apply for other types of help—sometimes traveling long distances by public transportation or on foot to get there—and then once you’ve walked through the door, you are often forced to wait for hours at each office to be served. These administrative burdens fall the greatest on the least wealthy Americans.”

A survey of low-income households by Hunger Free America found that 42 percent said it was “time-consuming and/or difficult to apply” for Unemployment Insurance, and nearly a quarter said the same about applying for SNAP. In addition, “40 percent of respondents said they had problems reaching government offices while applying for SNAP, with 36 percent stating that they never received a call back after leaving
a message.”

To reduce the high “opportunity costs” of being poor in America, the federal and state governments should adopt modern digital technologies that help low-income families apply once for public benefits without having to run a bureaucratic gauntlet of siloed programs for nutrition, housing, unemployment, job training, mental health services, and more. Specifically, as Berg proposed in a 2016 report for PPI, governments at all levels should cooperate to create online accounts from which families can apply remotely for all the benefits they qualify for, and into which they can deposit their public assistance.

This proposal is the centerpiece of a new bill introduced by U.S. Reps. Joe Morelle (D-NY) and Jim McGovern (D-Mass) and Senator Kirsten Gillibrand (D-NY). The Health, Opportunity, and Personal Empowerment (HOPE Act) would fund state and local pilot projects setting up online HOPE accounts to make it easier for low-income people to apply for multiple benefits programs with their computer or mobile phone. In addition to saving them time, money and aggravation, HOPE accounts enable people to manage their benefits – effectively becoming their own “case manager” – and easing their dependence on often inefficient and unresponsive social welfare bureaucracies.

In keeping with former Vice President Joe Biden’s “Build back better” theme, expanding food aid now to stem a surge in hunger, while deploying digital technology to give low-income Americans more control over their economic security, can help us weave a stronger and more resilient social safety net, rather than simply plugging holes in the old one.

Invest in a Healthier America

Posted on by The Progressive Policy Institute

The pandemic has thrown the shortcomings and inequities of America’s health care system into sharp relief. These include the extreme vulnerability of the elderly in nursing homes; the poor health status of impoverished and minority communities; regulatory obstacles to deploying telemedicine; and, a lack of basic medical equipment and surge capacity in hospitals.

There’s never been a better time to fundamentally change the way we deliver and pay for health care. Progressives should build on the foundation of the Affordable Care Act (ACA) to finish the job of universal coverage. But there’s an even bigger challenge: Driving down the exorbitant cost of medical treatment in America, which drives up insurance costs, lowers wages, and sucks up resources we need for social investments that promote public health.

It’s time for a new approach to regulated competition that caps medical prices and uses global budgets to create incentives for improving health on the front end to reduce the need for heroic interventions on the back end. These steps will generate large societal savings that we can invest in improving the “social determinants” of a healthier society – especially better housing, schools, nutrition, public safety and opportunities for our most vulnerable citizens.

The coronavirus pandemic has laid bare the weaknesses of the American health care system. Despite the fact that we spend far more on health care than any other advanced country in the world, we have worse outcomes. The United States spends 18 percent of its GDP — nearly twice as much as the average of the 11 OECD countries — yet has the lowest life expectancy and the most uninsured people. This grim reality set the stage for the novel coronavirus to rip through the population and take a particularly high toll on vulnerable populations.

The virus has disproportionately impacted the elderly, low-income people and people of color. According to the New York Times, 42 percent of the more than 130,000 U.S. coronavirus deaths are tied to nursing homes. A lack of resources, including testing and personal protective equipment, low-paid vulnerable direct care workers compounded with the defenseless elderly population they serve, was a tinderbox ignited by the virus.

In every age bracket, Black people are dying at rates equivalent to white people a decade older. There are likely a number of reasons for the variation in death rates.

For one, Black and Latinx citizens may be more likely to contract the virus because they are more likely to work in grocery stores, direct care, food processing and public transportation — jobs deemed “essential.” In addition, they are more likely to suffer from chronic conditions like hypertension, obesity, diabetes, and lung disease, and have less access to good health care services because of poverty and the legacy of racial discrimination.

The pandemic also has illuminated a fundamental lack of resilience America’s health care system. For example, more than five million Americans have lost their health coverage because it was tied to jobs they lost in the shutdown. They should be able to turn to Medicaid for coverage, but 13 states have refused to expand their Medicaid programs under the ACA. Thus the rise of uninsured is expected to hit these Republic-led states harder.

Covid-19, and the subsequent shelter in place orders, have exacerbated mental health conditions. Because many people couldn’t access their usual care, drug overdoses have increased during the pandemic. Treating patients via telehealth might not work for every condition, but it is effective for many mental health issues. Seeing this, many states have changed regulations to expand access to telehealth services.

Even as we fight to contain the Covid-19 pandemic today, U.S. policymakers should be looking ahead to constructing a more innovative health care system that covers everyone, holds medical costs down, creates healthier conditions in low-income communities and makes our society more resilient against future public health emergencies.

PPI has proposed a comprehensive architecture for health care reform. This report highlights two critically important steps forward: Plugging coverage gaps and adopting global budgeting to lower health care costs.

First, to make coverage truly universal, lawmakers should expand the Affordable Care Act’s subsidies, set up auto-enrollment mechanisms for the uninsured, and cap the price of medical services. The recent vote to approve Medicaid expansion in Oklahoma demonstrates that Republican resistance to expanding Medicaid as allowed by the ACA is slowly melting away.

In addition, PPI has endorsed a “Midlife Medicare” buy-in. As conceived by health care analyst and historian Paul Starr, Midlife Medicare would respect the traditional status of Medicare as a program for the elderly by allowing the not-quite retired (those aged 55-65) an opportunity to buy their benefits early. By taking many older, high-cost people out of the individual insurance market, Midlife Medicare would lower premiums for younger workers.

Second, we need to change the perverse incentives in our system for overspending on after-the-fact medical treatment so that we can invest more in upstream social determinants of health.

Getting everyone covered is essential, but it will not by itself address racial disparities in health. Health status is a product of more than medical care – things like public safety, housing, education, transportation, and nutrition all impact a person’s health. The United States spends roughly 18 percent of GDP on health care – the most of any OECD country. At the same time, America spends the least on social services.

Reducing U.S. health care spending to 12 percent of GDP – the amount that the second highest cost country, Switzerland, spends on health care – would free up roughly $1 trillion dollars to invest in a broad array of social services that are conducive to better health. For example, the data overwhelming demonstrate that access to affordable, quality, safe housing improves health outcomes.

As former Oregon Governor John Kitzhaber, MD argues, America needs to shift from an after-the-fact medical treatment model to a sickness-prevention and health promotion model. The only to break the back of health care cost inflation, he argues, is to embrace global budgeting:

“Doing so requires that everyone has timely access to effective, affordable, quality medical care; and that we have room in the budget to make strategic long-term investments in stable families, housing, nutrition, safe communities and economic opportunity. In other words, the key elements are universal coverage, financial sustainability and effective social investment. The economic reality is that the only way these three elements can exist together, is if universal coverage is accompanied by a reduction in the rate of medical inflation; and the only way we can effectively reduce medical inflation is through a global budget indexed to a sustainable growth rate.”

The key mechanism to reduce the cost of medical services is global budgeting. A global budget is a fixed amount of money all payers in a region agree to pay to deliver care to a defined population.

For example, hospitals in Maryland, which operate under a global budget, found themselves better positioned to weather the Covid storm because their revenues did not drastically change when elective procedures stopped and they continued receiving predictable revenue as they delivered care to Covid patients. Rural hospitals in Pennsylvania also recently moved to this model.

Global budgets also eliminate incentives for hospitals to inflate prices for Covid-19-related services to compensate for the loss of normal revenue. A recent analysis in JAMA outlines why these hospitals will be better positioned to bounce back from Covid-related economic hardship.

The federal government should take its cue from Maryland and Pennsylvania. Rather than set a federal cap on health care spending, Washington should encourage each state to set its own global budget and work with the payers and providers in its borders to work out the details.

Washington also should give States should also have greater flexibility to spend Medicaid dollars on housing and other social determinants that can reduce health care expenditures, as Oregon has done.

There is no question that dramatic reform of the health care system will be difficult. But the U.S. has long been the outlier of advanced countries – overpaying for poor health outcomes. We have a crisis that has laid bare the weaknesses of our system and policymakers should not let the moment pass without dramatically reforming our system more cost effective, productive and resilient for the future.