issue: Economy

Bloomberg Businessweek: Amazon’s $34 Billion Makes it an ‘Investment Hero,’ Study Says

Posted on by The Progressive Policy Institute

Amazon’s $34 Billion Makes It an ‘Investment Hero,’ Study Says

The e-commerce giant was far and away the leader in U.S. capital spending in 2020, according to a Progressive Policy Institute analysis.

By Peter Coy

Democratic and Republican politicians alike are dumping on Amazon.com Inc. over its ceaseless expansion—marked most recently by its agreement to buy the movie studio with the roaring lion logo, Metro-Goldwyn-Mayer. Representative David Cicilline, a Rhode Island Democrat, says “they are laser-focused on expanding and entrenching their monopoly power,” while Senator Josh Hawley, a Missouri Republican, tweets that Amazon “shouldn’t be able to buy anything else. Period.”

But not everybody is mad at Amazon. A new study from the Progressive Policy Institute, which was founded in 1989 as a centrist Democratic think tank and promises “radically pragmatic thinking,” calls Amazon its No. 1 “investment hero.” It estimates that Amazon boosted its U.S. capital spending by 75% in 2020, to $33.8 billion, from the year earlier, which was more than twice that of any other company.

The study names 25 investment heroes based on their U.S. capital spending. The rest of the top five for 2020 are Verizon Communications, $16.1 billion; AT&T, $15.6 billion; Google’s parent Alphabet, $14 billion; and Intel, $12.5 billion.

“The willingness of these companies to keep spending essentially made it possible for large chunks of the economy to move forward despite the pandemic,” says the report. “Investment by broadband and tech companies kept people connected at home during the shock of the lockdown; and the investment by e-commerce firms helped keep essential goods flowing while many Americans could not go out shopping.”

The report is by Michael Mandel, the institute’s chief economic strategist, and Elliott Long, a senior economic policy analyst. Mandel was chief economist of BusinessWeek, the predecessor to Bloomberg Businessweek (making him my former boss). He is also a senior fellow at the Mack Institute for Innovation Management of the Wharton School at the University of Pennsylvania.

Critics of Amazon say it costs jobs by putting smaller retailers out of business. But in an email exchange, Mandel wrote that “the number of workers added by e-commerce exceeds jobs lost by brick and mortar.” The main reason, he wrote, is that e-commerce customers are creating jobs for drivers, warehouse workers, and others, who are freeing them from having to shop in person. “Investment in e-commerce is job-creating because it replaces unpaid household shopping hours, which have fallen dramatically,” Mandel wrote.

This is the 10th annual edition of the investment heroes report by the Progressive Policy Institute. It’s based on gross investment—i.e., before accounting for the effects of depreciation. The numbers come from company reports. The authors made estimates when the companies didn’t break out U.S. investment separately. Most financial companies, excluding health insurance companies, were excluded. For Amazon, which relies heavily on finance leases, the report included principal repayment on those leases as a form of investment.

The report takes a shot at critics in the camp of Cicilline and Hawley, without naming names. “It seems odd that Congress seems more interested in sharply questioning companies that are investing heavily in America, rather than those that have reduced investment or actually disinvested in this country,” it says.

The Progressive Policy Institute gets general funding from some of the companies on the heroes list, Mandel wrote in an email. But he says “the methodology only uses publicly available data and a consistent procedure that can be replicated.”

The MGM deal was announced after the report was completed. (Acquisitions don’t count toward companies’ capital spending numbers in the report.) In an email, Mandel wrote, “This deal potentially increases the level of competition in the growing market for streaming content. The key is to watch Amazon’s investment behavior. If Amazon invests in producing more content based on MGM intellectual property, as seems likely, that means lower prices for consumers and more content production jobs.”

In announcing the deal on May 26, the company stated, “Amazon will help preserve MGM’s heritage and catalog of films, and provide customers with greater access to these existing works.” Amazon didn’t immediately respond to a request for comment on this story.

The PPI report is lukewarm on President Joe Biden’s American Jobs Plan. The authors praise its provisions for investment in infrastructure, research and development, and manufacturing. But they write that the corporate income tax increases in the plan “could discourage business investment at a time when capital spending is already weak.”

Not every economist agrees with that. Thomas Philippon, a finance professor at New York University’s Stern School of Business, argues that for many companies, a higher tax on their profits would not induce them to decrease investment significantly because a substantial share of their profits are “excess”—meaning they’re above what companies require to justify investment for growth. (Excess profits, an economic concept rather than an accounting one, are generated by companies with monopolies or near-monopolies in their market sectors.)

Mandel wrote, “The weight of the evidence shows that corporate tax rates adversely affect investment.”

Read the story here.

Investment Heroes 2021: Capital Spending During the Pandemic

Posted on by The Progressive Policy Institute

INTRODUCTION

In 2020 U.S. businesses cut back domestic capital investment by seven percent, in response to the Covid-19 pandemic, lockdowns and recession. The decline was broad-based, from transportation equipment to industrial equipment to energy investment.

But amidst this slowdown, Amazon boosted its domestic capital expenditures by 75 percent in 2020, according to new estimates by the Progressive Policy Institute (PPI). The ecommerce giant invested a stunning $33.8 billion in the United States last year, a record for the 10 years that PPI has been doing the Investment Heroes report.

Amazon’s capital investment performance illustrates just how critical the tech-broadband- ecommerce sector has been to keeping people working and propping up the economy. The second company on our list, Verizon, invested $16.1 billion in the U.S. in 2020, AT&T $15.6 billion, Alphabet $14 billion, and Intel $12.5 billion. Eight out of the top 10 companies in our list—Amazon, Verizon, AT&T, Alphabet, Intel, Facebook, Microsoft and Comcast—are in the tech, ecommerce, and broadband sectors.

The willingness of these companies to keep spending essentially made it possible for large chunks of the economy to move forward despite the pandemic.

Capital investment is critical because it enables the creation of high-productivity, well-paying jobs. Collectively the top 10 companies in the Investment Heroes list added 483,000 jobs in 2020, led by Amazon’s dramatic leap from 798,000 workers in 2019 to 1,298,000 workers in 2020. Just looking domestically, the industries represented by the top 10 Investment Heroes added 234,000 jobs between the start of the pandemic in February 2020 and April 2021, while the rest of the private sector lost more than 6 million jobs.1

Capital investment is also essential for creating more production, communications and distribution capacity. This was essential during the pandemic, when investment by broadband and tech companies kept people connected at home during the shock of the lockdown; and the investment by ecommerce firms helped keep essential goods flowing while many Americans could not go out shopping.

As the Broadband Internet Technical Advisory Group wrote in an April 2021 report, “available data suggests that the Internet has performed well during the pandemic…. and is a testament to the importance of continued investment in robust Internet infrastructure in all parts of the ecosystem.”2 The report went on to note that “ISPs reacted to the sudden demand increase by rapidly adding extraordinary amounts of new capacity and pledging to Keep Americans Connected.”

Capital investment also helps hold down prices by creating more supply—and the lack of investment creates the conditions for overall price inflation. Prices in the tech-broadband-ecommerce sector were mostly flat or down in 2020, as investments in new capacity helped meet soaring demand. For example, the surge of new broadband capacity meant that the price of telecommunications services to consumers fell by 2 percent in 2020, and the price of Internet access fell by 1 percent, according to data from the Bureau of Economic Analysis.

Similarly, one big reason for the recent return of inflation in 2021 has been production and supply bottlenecks caused by a lack of investment during 2020. Net domestic business investment totaled an anemic 1.9 percent of net domestic product in 2020.3 To put this in perspective, that was a sharp fall-off from 2.8 percent, which was net domestic business investment’s average share of net domestic product from 2008 to 2019. And that in turn was down from the business cycles running from 1991 to 2000 and 2001 to 2007, when net domestic business investment’s share of net domestic product averaged 4.5 and 3.5 percent, respectively (Figure 1).

THE REPORT

Which companies are fighting this downward trend? Since 2012 PPI has provided unique estimates of domestic capital spending for individual major U.S. companies. Currently, accounting rules do not require companies to report their U.S. capital spending separately. To fill this gap in the data, we created a methodology using publicly-available financial statements from non-financial Fortune 150 companies to identify the top companies that were investing in the United States.

We call these companies “Investment Heroes” because their capital spending is helping create good jobs and boost capacity across the country. In 2020, the 25 companies on our list invested $216 billion in the U.S. This year’s list includes 11 tech, broadband and ecommerce companies; six energy production and distribution companies; three transportation companies; two automotive companies; two retail companies; and one entertainment company.

In terms of government policy, U.S. regulators and policymakers have an ambivalent attitude towards corporate capital investment. On the one hand, companies that don’t invest are decried as suffering from “short-termism,” being more concerned about current profits than long-term growth.4

On the other hand, the tech, broadband, and ecommerce companies that do make long- term investments in American workers and the American economy are often accused of unfair competition and monopolistic business practices, precisely because of their large capital expenditures. It seems odd that Congress seems more interested in sharply questioning companies that are investing heavily in America, rather than those that have reduced investment or actually disinvested in this country.

President Biden’s American Jobs Plan shows the same ambivalence towards business investment leaders. The plan would spend $2 trillion over the next decade on infrastructure, research and development, and manufacturing among other public investments.5 The avowed goal is to stimulate productivity-enhancing investments in the U.S., which is a goal that PPI favors.

On the other hand, the plan would pay for these proposals by raising the federal corporate income tax rate from 21 to 28 percent and imposing a 21 percent minimum tax on overseas corporate profits among other tax changes. While the package would generate $2.1 trillion over a decade, these tax increases could discourage business investment at a time when capital spending is already weak.

U.S. INVESTMENT HEROES: THE 2020 LIST

Using the methodology described in the appendix, we estimate domestic capital spending for large U.S. non-financial companies based on publicly available data. We then rank the companies to give us the top 25 Investment Heroes.

The top 25 Investment Heroes invested $216 billion in the U.S. in 2020, according to our estimates (which are based on companies’ most recent fiscal year through January 31, 2021). That’s a decrease of 11 percent compared to last year. 18 of our 25 Investment Heroes posted a decrease in U.S. capital expenditures relative to our 2019 estimates, with an average decline of 21 percent.

Amazon by far leads our Investment Heroes this year, spending an estimated $33.8 billion on domestic capital expenditures in 2020. Second is Verizon Communications, investing an estimated $16.1 billion on capital expenditures in the U.S. on the basis of increased broadband spending. AT&T came in third, spending an estimated $15.6 billion on domestic capital expenditures. Alphabet and Intel are fourth and fifth, respectively, investing $14 billion and $12.5 billion.

Four “newcomers” made our list this year. We estimate that Lumen Technologies (formerly CenturyLink) spent $3.7 billion on U.S. capital expenditures in 2020, a three percent increase compared to our estimates for CenturyLink’s 2019 domestic capital spending. Disney returns to the top 25 this year for the first time since our 2013 report. Kroger makes our list this year, investing an estimated $3 billion on domestic capital expenditures in 2020. And Union Pacific cracks the top 25 after making our non-energy list the last two years.

Four companies from our 2019 list didn’t make our 2020 list. Southern Company fell out of the Fortune 150 and thus out of the purview of our analysis. Marathon Petroleum cut its U.S. capital expenditures by more than $2 billion in 2020 compared to 2019 by our estimates. Delta Air Lines decreased its domestic capital expenditures by more than 60 percent according to our estimates as fears of Covid ravaged the travel industry. And ConocoPhillips missed our top 25 list by $8 million.

At the sector-level, our 11 tech, broadband and ecommerce companies invested an estimated $141.4 billion in domestic capital expenditures (Table 2). This category comprises six tech and ecommerce companies (Amazon, Alphabet, Intel, Facebook, Microsoft, and Apple) and five broadband companies (Verizon Communications, AT&T, Comcast, Charter Communications, and “newcomer” Lumen Technologies).

The next category includes six energy production and distribution companies, with total estimated domestic capital expenditures of $42.2 billion. This category is made up of Exxon Mobil, Chevron, Duke Energy, Exelon, Energy Transfer, and Enterprise Product Partners.

Coming in third is transportation, spending a total of $11.2 billion on U.S. capital expenditures by our estimates. This category consists of FedEx, UPS, and “newcomer” Union Pacific.
The retail sector, which included Walmart and “newcomer” Kroger, came in fourth. These retailers invested a combined $10.8 billion by our estimates, a 37 percent increase compared to 2019 as a result of Kroger making our list.

The last two categories were automotive and entertainment. Our automotive category was made up of General Motors and Ford Motor, investing an estimated $3.8 billion and $3.2 billion respectively. The lone entertainment company to make our list was Disney, investing $3.3 billion by our estimates.

COMPANIES

Next we delve deeper into each of our Investment Heroes’ capital spending.

Amazon spent an estimated $33.8 billion on U.S. capital expenditures in 2020, a 75 percent increase compared to 2019 as
the ecommerce company sought to meet increased demand from Covid protocols like social distancing and work from home. We note that Amazon turned in a historically high investment performance. The company’s global capital expenditure of $45.7 billion (the sum of purchases of property and equipment, net of proceeds from sales and incentives, plus principal repayments of finance leases) exceeds the peak capital spending by such industrial giants as General Motors, General Electric, and IBM, even after adjusting for inflation.6

Verizon Communications spent an estimated $16.1 billion on U.S. capital expenditures in 2020, up slightly relative to our 2019 estimates. Verizon continued to invest in expanding its 4G LTE network and deploying its 5G and Intelligent Edge networks, despite the pandemic.

Third was AT&T, spending an estimated $15.6 billion in 2020. AT&T continues to invest in expanding its networks.

Alphabet invested $14 billion on U.S. capital expenditures in 2020 by our estimates. “We continue to make significant R&D investments in areas of strategic focus such as advertising, cloud, machine learning, and search, as well as in new products and services. In addition, we expect to continue to invest in land and buildings for data centers and offices, and information technology assets, which includes servers and network equipment, to support the long-term growth of our business,” the company writes in its 10-K.

Coming in fifth was Intel, spending an estimated $12.5 billion on U.S. capital expenditures in 2020, a decrease of 7 percent relative to our 2019 estimates.

Facebook spent an estimated $11.8 billion on U.S. capital expenditures in 2020, a decrease of 6 percent from our 2019 estimates. The social media company continues to invest in data center capacity, servers, network infrastructure, and office facilities.

Seventh was Exxon Mobil, investing $11.2 billion on U.S. capital expenditures in 2020 by our estimates. That’s a decrease of 33 percent compared to our 2019 estimates. The energy company cut its upstream capital investment in the U.S. by nearly $5 billion in 2020 according to its 10-K.

Microsoft spent an estimated $11.1 billion on U.S. capital expenditures during the fiscal year ending June 2020, the mostrecent 10-K available. The software company continues to invest in new facilities, data centers, computer systems for research and development, and its cloud offerings. We note that this estimate has not been updated from our previous Investment Heroes report, because we moved up the timing of the report.

Duke Energy invested $9.9 billion on U.S. capital expenditures in 2020 by our estimates, a decrease of 11 percent compared to 2019. The energy company decreased capital investment in its electric utilities, gas utilities, and commercial renewables segments.

Comcast invested $9.6 billion on U.S. capital expenditures by our estimates. Comcast continued to spend on customer premise equipment, scalable infrastructure, line extensions, and support capital.

Exelon spent an estimated $8 billion on U.S. capital expenditures in 2020, an increase of 11 percent relative to our 2019 estimates. The utility company increased capital investment in every segment except Exelon Generation.

Walmart spent an estimated $7.8 billion on U.S. capital expenditures in 2020. The retailer’s capital investments were relatively flat compared to our 2019 estimates.

Charter Communications invested $7.4 billion in domestic capital expenditures in 2020, a slight increase of 3 percent compared to 2019. The broadband company spent on line extensions and support capital according to its 10-K.

Chevron spent an estimated $6.1 billion on U.S. capital expenditures in 2020. That’s a 40 percent decline compared to 2019. The energy company spent about $3 billion dollars less in its upstream segment and about $800 million less in its downstream segment in 2020 compared to 2019.

Apple invested an estimated $5.9 billion on domestic capital expenditures in 2020. Apple’s figures are based on its latest 10-K for its fiscal year ending September 2020.

FedEx invested $4.6 billion in domestic capital expenditures by our estimates. The shipping company continued to spend on aircraft, equipment, vehicles, information technology, and facilities. We note that this estimate has not been updated from our previous report, as FedEx’s fiscal year ends on May 31st and thus their FY 2021 10-K was not published at the time of this writing.

General Motors spent an estimated $3.8 billion on U.S. capital expenditures in 2020, a 22 percent decline relative to our 2019 estimates.

Energy Transfer spent an estimated $3.8 billion on U.S. capital expenditures in 2020. Energy Transfer continued to invest in natural gas transportation and storage.

Lumen Technologies, formerly known as CenturyLink, invested $3.7 billion on domestic capital expenditures in 2020
by our estimates. That’s an increase of 3 percent compared to our 2019 estimates for CenturyLink. The broadband company continued to spend on enhancing network efficiencies and supporting new service developments.

UPS invested an estimated $3.6 billion on U.S. capital expenditures in 2020. UPS continued to spend on buildings, equipment, aircraft, vehicles, and information technology.

Enterprise Product Partners spent $3.3 billion on domestic capital expenditures in 2020 by our estimates, a 27 percent decline compared to our 2019 estimates. Enterprise Product Partners continued to invest in facilities and projects to gather, transport, and store natural gas and crude oil.

Disney invested an estimated $3.3 billion on U.S. capital expenditures in 2020, a decrease of 19 percent relative to our
2019 estimates. The entertainment company decreased spending in every segment except its direct-to-consumer and corporate segments.

Ford Motor invested $3.2 billion on domestic capital expenditures in 2020 according to our estimates, a decline of 50 percent compared to our 2019 estimates.

Kroger spent an estimated $3 billion on U.S. capital expenditures, a slight decline of 5 percent compared to 2019.

Union Pacific invested an estimated $2.9 billion on U.S. capital expenditures in 2020. Union Pacific continued to invest in new locomotives and freight cars, maintenance, and safety improvements.

INVESTMENT-RELATED POLICY

President Biden has proposed the American Jobs Plan, which includes $621 billion for transportation infrastructure, $300 billion to bolster manufacturing, $180 billion for research and development, and $100 billion for broadband among other proposals.7 Each of these areas has been an important source of economic growth historically. For example, manufacturing employment peaked in 1979 at nearly 20 million but has been on the decline since, employing about 12 million people
today.8 President Biden’s plan would restore manufacturing supply chains and provide capital to revitalize manufacturing.

Similarly, R&D investment is key to commercializing new technologies and fueling growth of industries. A few key innovations that were made possible by federal R&D funding include the internet, smartphone technologies, global positioning systems, the human genome project, and hydraulic fracturing.9 Unfortunately, federally sponsored R&D has declined from its peak of 1.8 percent of GDP in 1965 to .74 percent in 2020.10, 11 The American Jobs Plan’s $180 billion investment would provide additional funding for the National Science Foundation, the development of technology to address the climate crisis, and R&D that spurs innovation and job creation.

These increases in infrastructure and other public spending are highly desirable for growth. However, the plan would pay for these proposals by raising the federal corporate income tax rate from 21 to 28 percent and imposing a 21 percent minimum tax on overseas corporate profits among other tax changes.12 While the plan would generate $2.1 trillion over a decade, policymakers should be mindful of potentially discouraging business investment, which would prolong the economic recovery. Raising the corporate income tax rate to 28 percent would create a federal-state combined corporate income tax rate of 32.8 percent, returning the U.S. to the highest combined rate in the OECD.13

We also note that policymakers often misunderstand the link between strong corporate investment and creation of good jobs. True, in some cases, companies have invested in automation that reduces employment. But more recently, we have seen that companies making the biggest capital investments, like Amazon, may also be the biggest job creators. In particular, Amazon’s spending on fulfillment center automation has boosted productivity, enabling the company to pay a minimum wage of $15 per hour that is comparable with advertised entry-level manufacturing hourly wages of $15-$17 in many parts of the country.14 Indeed, a recent PPI analysis shows that most Americans live in states where the tech-ecommerce ecosystem, including all positions and skill levels from fulfillment center and delivery workers to website designers, pays better than manufacturing.15

The bottom line: As the U.S. struggles out of recession, and faces the worries of inflation, we should be lauding companies that invest in America during the pandemic, rather than denigrating them.

APPENDIX: METHODOLOGY

Our U.S. Investment Heroes ranking for 2020 follows the same methodology as our most recent report in 2019. We started with the top 150 companies of the 2020 Fortune 500 list as our universe of companies. We removed all financial companies and all insurance companies except health insurance companies. We also omitted the financing operations of non- finance companies when possible.

Except as noted, we use the global capital expenditure reported on the most recent 10-K through January 31, 2021, as the starting point for the analysis. In this report, we refer to all estimates as “2020,” even if the fiscal year ended in 2021. Capital expenditures generally cover plant, equipment, and capitalized software costs. For energy production companies, capital expenditures can include exploration as well.

For broadband companies, we did not include their often sizable spending on purchases of wireless spectrum as part of capital expenditures, since that category is not counted as investment spending by the economists at the Bureau of Economic Analysis. Companies purchasing spectrum in 2020 include Verizon ($2.1 billion); AT&T ($1.6 billion); Comcast ($459 million); and Charter ($464 million).

The companies in these rankings are all based in the United States. Non-U.S. based companies were not included in this list because of data comparability issues, although there are many non-U.S. companies that invest in America.

For transportation companies our report estimates the booked location of spending on capital expenditures for the company’s most recent fiscal year, rather than how much of those acquired assets are actually being used within the U.S.

Most multinational companies do not provide a breakdown of capital expenditures by country in their financial reports. However, PPI has developed a methodology for estimating U.S. capital expenditures based on the information provided in the companies’ annual 10-K statements and other financial documents. After developing our internal estimate, we contact the companies on our top 25 list to ask them to point us to any additional public information that might be relevant. Notwithstanding these queries, we acknowledge that the figures in this report are estimates based on limited information.

Our estimation procedure goes as follows:

  • If a company has no foreign operations, we allocated all capital spending to the United States.
  • If a company reported U.S. capital spending separately, we used that figure.
  • If a company did not report U.S. capital spending separately, but did report changes in global and U.S. long-lived assets or plant and equipment, we used that information plus depreciation to estimate domestic capital spending. As appropriate, we adjust for large acquisitions.
  • If a company has small foreign operations that were not reported separately, we allocated capital spending proportionally to domestic versus foreign assets, revenues, or employees.Some adjustments of note:
  • For Amazon, the methodological issue was their extensive use of finance leases. We chose to specify global capital expenditures as purchases of property and equipment (net of proceeds from sales and incentives) plus principal repayments of finance leases. We then used reported changes in U.S. and non-U.S. property and equipment, net and operating leases to allocate global capital expenditures, taking into account depreciation and removing the effect of operating leases.
  • Verizon does not report long-lived assets by geographic region. As a result, we used the most recent available data for Verizon’s domestic employment as a share of global employment to allocate Verizon’s capital spending between the United States and internationally (https://www.verizon.com/ about/sites/default/files/esg-report/2019/ social/human-capital/v-team.html)
  • As noted in the report, our estimates for Microsoft and FedEx remain the same as our 2019 estimates because their fiscal years end June 30th and May 31st, respectively, and thus updated 10-Ks were not available at the time of this writing. For Microsoft, we used the capital expenditures data found online at https://www.microsoft.com/ en-us/Investor/earnings/trended/capital- expenditure.aspx
  • In the case of Comcast, we allocated all of its cable operation and corporate capital expenditures, including cash paid for intangible assets such as software, to the U.S. For NBC Universal’s capital expenditures, including cash paid for intangible assets such as software, we assumed the same domestic vs. foreign revenue share from our 2019 estimate for 2020 to allocate capital spending as Comcast did not report updated revenue information for FY 2020.
  • As part of our calculations for Facebook, UPS, and Kroger, we included principal repayments on finance leases reported onthe company’s 10K or estimated principal repayments on finance leases based on 10K data.
  • For consistency, we omitted capital spending by the finance arm of companies such as General Motors and Ford, which reflects the financing of leased equipment rather than actual direct investment.

NON-ENERGY U.S. INVESTMENT HEROES

As a supplement to our complete U.S. Investment Heroes rankings, we also present a non-energy list for 2020 (Table 3). This list ranks the top U.S. companies investing domestically, according to our estimates, that are both non- financial and non-energy. The energy sector is one of the most capital intensive sectors of the economy and thus can heavily influence the top 25 results. The non-energy ranking includes the non-energy companies from our complete ranking but has also made room for other companies. For example, PepsiCo spent $2.8 billion on domestic capital expenditures by our estimates in 2020, a 26 percent increase compared to 2019.

Merck invested an estimated $2.7 billion on U.S. capital expenditures in 2020, a 42 percent increase compared to 2019. The pharmaceutical company spent on new capital projects focused primarily on increasing manufacturing capacity for its products.

Target invested $2.6 billion on domestic capital expenditures in 2020 by our estimates. The retailer increased its investments in information technology and new stores, while decreasing its spending on existing stores.

CVS Health spent an estimated $2.4 billion on U.S. capital expenditures in 2020, a relatively flat amount compared to our 2019 estimates for the company. Technology made up the majority of the health retailer’s capital expenditures, while store and fulfillment expansion and improvements and new store construction made up a minority share.

Home Depot invested $2.3 billion on domestic capital expenditures in 2020 by our estimates, a slight decrease of 5 percent relative to our 2019 estimates for the company.

Rounding out our top 25 non-energy list is Johnson & Johnson, spending an estimated $2.3 billion on U.S. capital expenditures in 2020. Johnson & Johnson continues to invest in its consumer health, pharmaceutical, and medical device segments, and of course vaccine production.

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Benefits and Flexibility for Workers in the Gig Economy

Posted on by The Progressive Policy Institute

The gig economy has provided opportunities for workers who aren’t able to find or aren’t interested in full-time regular employment. Traditional jobs require workers to show up at a particular location and work a predetermined schedule set by the company. Ride-hailing and delivery gigs allow workers to set their own schedules and work as much or as little as they like. This flexibility is a key component of why independent workers choose to participate in the gig economy. But that doesn’t mean the current arrangement is perfect.

Gig workers often aren’t able to access the benefits that regular employees tend to receive in addition to their wages. Health insurance, retirement plans, vacation days, and other benefits are highly valuable pieces of total compensation for full-time employees. If gig companies were to provide independent workers with benefits, they would be forced to reclassify them as employees, which brings a host of onerous rules and regulations that are incompatible with the dynamic and flexible nature of the gig economy.

Fortunately, it seems there is another way forward to improve the lives of gig workers by securing them benefits while maintaining the flexibility they desire. As Michael Mandel and I detailed in a paper last year for the Progressive Policy Institute (PPI), Congress should allow gig companies to opt into an alternative model. Under our proposal, workers would be able to accrue benefits in proportion to the hours they work across a wide array of platforms and then select which benefits they want from a cafeteria style plan (the ability to choose is critical because sometimes workers already receive benefits such as health insurance from a spouse or other family member).

Voters seem to like this approach of offering more benefits to gig workers while letting them keep their flexibility. Last year, California voters approved Prop 22, which overturned AB-5, a controversial state bill that reclassified a broad array of independent contractors as employees. The results of this ballot proposition were not particularly close: 59% voted in favor, 41% voted against. According to the Los Angeles Times, Prop 22 found its highest support in low-income and minority communities:

A Times examination of precinct-level data in Los Angeles County shows the companies’ argument held sway in its dense core, finding support in lower income areas including plurality-Black neighborhoods such as Inglewood and Compton, and majority-Latino East Los Angeles. It also won suburbs in the San Fernando Valley, affluent communities such as La Cañada Flintridge, and rare Los Angeles precincts where President Trump was victorious in Beverly Hills and Santa Clarita.

A band of wealthy or increasingly affluent liberal-leaning neighborhoods stretching from Santa Monica and Venice, across to Los Feliz, Highland Park and South Pasadena mounted the strongest opposition, decisively voting down the measure.

So, what did drivers get in exchange for maintaining their classification as independent contractors? According to Quartz, Prop 22 “guarantees gig workers new, limited healthcare subsidies and accident insurance, some reimbursement to account for gas and other vehicle costs, and a ‘minimum earnings guarantee’ equal to 120% of the minimum wage applied to the drivers’ ‘engaged’ time.” Not only do voters approve of this model, but drivers do too. According to one survey of Uber and Lyft drivers, around 70 to 80% of respondents prefer being independent contractors to employees.

A broader survey from the Bureau of Labor Statistics found that “Independent contractors overwhelmingly favored their alternative employment arrangement (79 percent) to a traditional one (9 percent) in May 2017.” In total, these data points show that worker benefits and flexibility are a winning combination for the gig economy.

E&E News: ‘Free-For-All’ Used Car Export Threatens Climate Goals

Posted on by The Progressive Policy Institute

E&E News -- The essential news for energy & environment professionals

By Arianna Skibell, E&E News reporter

Replacing gasoline cars with electric vehicles is a pillar of President Biden’s strategy for tackling climate change. But even if the administration sets a deadline to sunset sales of gas-powered passenger vehicles, the export of used cars abroad could stall the global reductions needed to stave off catastrophic warming.

Every year, the United States ships hundreds of thousands of its oldest and dirtiest cars overseas to predominantly poor countries in a trade that is largely unregulated. In other words, cars that would fail safety, fuel economy and emissions standards in the United States or Europe are dominating the roads in countries that rely on imported vehicles.

In Kenya and Nigeria, for example, more than 90% of vehicles are foreign imports.

“The pollution and gas guzzling continue on even after the vehicle is removed from America’s roads,” said Dan Becker, head of the safe climate transport campaign at the Center for Biological Diversity. “It’s essentially a Cheshire cat issue.”

Worldwide, there are about 1.4 billion cars on the road. That figure is expected to more than double by 2050, with 90% of growth coming from the sale of used vehicles in lower-income countries. That means emissions from the global transportation fleet — which currently account for a quarter of total carbon dioxide emissions worldwide — also could double.

If left unchecked, the global trade in secondhand cars could have bleak consequences for climate change, air quality and, by extension, public health, according to a pioneering U.N. report released last year.

The study found that between 2015 and 2018, the United States, Japan and the European Union exported 14 million used passenger cars, with 70% winding up in developing countries in Africa, Eastern Europe, Asia, the Middle East and Latin America. Two-thirds of countries surveyed in the study lacked adequate policies to regulate the quality of imported cars. Consequently, the majority of used vehicles imported were inefficient, unsafe and old.

In Uganda, for example, the average age of a used diesel import in 2017 was more than 20 years.

“The majority of the vehicles being exported do not have a valid road worthiness certificate,” said Rob de Jong, head of the U.N. Environment Programme’s Sustainable Mobility Unit and an author of the report. “The trade in used vehicles is not a bad thing per se, but in the total absence of standards, it’s a free-for-all.”

A few countries have started cracking down on dirty, unsafe imports. Some countries, such as Egypt, India and Brazil, have outright banned the import of used vehicles. Others, like Iran and Iraq, have implemented age limits, while still others, such as Singapore and Morocco, have issued vehicle emissions standards.

Mauritius, a small island nation in the Indian Ocean, banned used vehicles over 3 years old and issued a vehicle carbon tax. As a result, the country has seen a major increase in the import of used electric and hybrid cars.

Still, there is no regional or global standard to regulate the flow of used vehicles as a climate mitigation or air pollution control mechanism. De Jong of the U.N. said there needs to be a streamlined approach to curbing the sale of unsafe and inefficient vehicles.

“The risk of not doing this,” he said, “is not meeting the Paris climate agreement,” which aims to keep warming below 2 degrees Celsius.

Roger Gorham, a transport economist and urban development specialist with the World Bank, said there is an emerging consensus that regulating the secondhand vehicle trade should be a joint responsibility between exporting and importing countries.

“Exporters need to be able to distinguish between legitimate exports of vehicles that can actually be used safely, reliably and in line with environmental and climate objectives in their destination countries, as opposed to cars and trucks that do not meet even the most basic safety and environmental standards,” he said in an email. “But importer countries also have an obligation to be clear about the acceptable performance thresholds of cars (and fuels) they will allow to be imported into their country.”

In the United States, the export of used cars and trucks accounts for a small fraction of the domestic used vehicle market. In 2019, more than 40 million used vehicles — and 17 million new ones — were sold, according to Edmunds. Of those 40 million, less than 1 million were exported overseas, according to Commerce Department data.

Still, the United States is the third-largest exporter of used vehicles, behind the European Union and Japan. Additionally, dramatic action is required in the next decade if humanity is to stave off catastrophic warming, according to an International Energy Agency report released this week (Climatewire, May 18).

Electric vehicles currently make up 5% of global automobile sales. That number will need to increase to 60% by 2030, IEA said, and the sale of traditional gasoline- and diesel-powered cars will need to end by 2035.

Ray LaHood, who served as Transportation secretary under former President Obama, said the Biden administration should try to regulate the export of dirty vehicles.

“Part of our responsibility is to clean up the environment in whatever ways we can, not only for our own country but for the world,” he said in an interview. “That has to be a priority.”

Biden administration officials “are going to have to think about whether they take these cars in as trade-ins,” added LaHood, who now serves as co-chair of the Building America’s Future Educational Fund, a bipartisan infrastructure coalition.

Under the Obama administration, LaHood oversaw a federal program called the Consumer Assistance to Recycle and Save (CARS) program — also known as Cash for Clunkers — which provided financial incentives for car owners to trade in their vehicles for new, more fuel-efficient cars and trucks. The program, which was intended to stimulate the post-recession economy and promote the sale of cleaner cars, was enormously popular.

Consumers who traded in their older automobiles and purchased new ones received cash rebates on the spot. Within six weeks of authorizing a $1 billion disbursement, Congress appropriated an additional $2 billion for rebates.

According to a Congressional Research Service report, more than 677,000 rebates were processed, increasing the U.S. gross domestic product by billions of dollars, creating or saving thousands of jobs, reducing fuel consumption by millions of gallons, and significantly slashing carbon emissions.

Traded-in vehicles were supposed to be smashed or otherwise destroyed, but a 2010 Transportation Department Office of Inspector General report found disposal hard to verify. Of the disposal facilities surveyed, the report found that 32% were not in compliance with DOT standards, which required facilities to report the disposal to the National Motor Vehicle Title Information System (NMVTIS).

But at the time of the OIG report’s release in 2010, only 15 states fully participated in the NMVTIS database, which was created to deter vehicle theft and fraud. After Hurricane Katrina, for example, cars that had been declared total losses to be scrapped were resold in other states with forged titles, a process known as title washing. Today, 48 states participate in the program, according to its website. Hawaii, Kansas and the District of Columbia are listed as “in development.”

“[O]ne facility, which received 357 CARS vehicles at the time of our audit, was not aware of NMVTIS and therefore, had not reported any information on the status of those vehicles,” the investigation found. “In addition, one facility we visited did not sign or date the disposal certification forms for the 27 trade-in vehicles it handled.”

Paul Bledsoe, who served as a Department of Energy consultant under Obama and worked on climate change in the Clinton administration, said he worries that many Cash for Clunkers vehicles may have ended up being exported.

“They were shipped overseas to Africa or South America,” Bledsoe, now a strategic adviser for the Progressive Policy Institute, said in an interview last month. “So the Biden team has to make sure [retired vehicles] are permanently retired.”

Read the full article here

New Report from PPI’s Innovation Frontier Project Outlines the Challenges of the Digital Economy and the Need for Policies That Advance the Diffusion of Frontier Technologies

Posted on by The Progressive Policy Institute

Today, the Innovation Frontier Project (IFP), a project of the Progressive Policy Institute, released a new report from James Bessen, an economist and Executive Director of the Technology & Policy Research Initiative at Boston University School of Law.

In the report, Bessen argues that new information technology has delivered more and unprecedented convenience for consumers, and good-paying jobs that contribute to overall economic growth. However, limited access to the technology is also contributing to the major economic and social issues of the day: the growing dominance of large firms and the struggle to increase the flow of knowledge, slow productivity growth, rising economic inequality, and the failure of regulation. The challenge for policymakers is to mitigate these negative effects while preserving as many of the benefits as possible to consumers, to workers, and to the economy.

“James Bessen provides a policy framework for thinking about the diffusion of these important digital technologies. The productivity gains that have resulted from proprietary IT investments are vitally important, but now we need to make sure the whole economy can benefit from these advancements.” said Caleb Watney and Alec Stapp, co-leads of the Innovation Frontier Project.

The report draws from his forthcoming book, “Superstar Capitalism”, to be published by Yale University Press.

Read the report here.

Based in Washington, D.C. and housed in the Progressive Policy Institute, the Innovation Frontier Project explores the role of public policy in science, technology and innovation. The project is co-led by Caleb Watney and Alec Stapp.

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

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Congresswoman Chrissy Houlahan Joins PPI’s Radically Pragmatic Podcast for a Joint Episode with PPI’s Mosaic Economic Project

Posted on by The Progressive Policy Institute

On this week’s Radically Pragmatic Podcast, Crystal Swann, Senior Policy Fellow at the Progressive Policy Institute and Mosaic Economic Project lead and Hilary Abell, Mosaic Economic Project Cohort member and co-founder of Project Equity, sit down with Rep. Chrissy Houlahan (PA-06), a trained engineer, entrepreneur and veteran.

Congresswoman Houlahan serves on the House Armed Services Committee, the House Foreign Affairs Committee, and the House Small Business Committee. Additionally, she is the Chair and Founder of the Servicewomen and Women Veterans Congressional Caucus, is Co-Chair of the Women in STEM Caucus, and is a Whip in the New Democrat Coalition.

They discuss the role of women in the new post-COVID economy, removing barriers to childcare, supporting access to capital for women of color seeking to become entrepreneurs, expanding access to affordable health care and more.

“There’s a lot of different very good ideas on how to make healthcare more accessible, more affordable, and more portable for people. Those three things are issues one, two, and three in my community and many other communities. People – whether they are individuals who have health care, individuals who don’t have health care, entrepreneurs who are starting businesses or larger businesses who employ people – whatever one of those things you fit into, you all have issues with health care. So we need to be thinking about how to make our collective systems more efficient and more fair,” said Rep. Chrissy Houlahan on the podcast.

This podcast was in partnership with PPI’s Mosaic Economic Project.  The Mosaic Economic Project is a network of diverse and highly credentialed women in fields of economics and technology. Mosaic programming focuses on upskilling, connecting, and advocating for cohort participants’ meaningful engagement in  public policy debates, with a particular focus on engaging Congress and the media.

Listen here, and subscribe:

 

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 Economic Project.

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Media Contact: Aaron White – awhite@ppionline.org

WEBINAR: Helping Women Return to the Workforce, with Senator Kirsten Gillibrand (D-NY)

Posted on by The Progressive Policy Institute

On Tuesday, April 27th, PPI hosted a webinar with special guest Senator Kirsten Gillibrand on policies to help women return to the workforce following the devastating effect of the pandemic on women’s labor force participation. Our panel included policy experts on labor, child care, and gender equity.

Keynote Speaker:

Sen. Kirsten Gillibrand (D-NY)

Moderator:

Veronica Goodman, Social Policy Director, Progressive Policy Institute

Panel:

Chandra Childers, Study Director at the Institute for Women’s Policy Research
Elliot Haspel, Author of Crawling Behind: America’s Child Care Crisis and How to Fix It
Rhonda V. Sharpe, founder & president, Women’s Institute for Science, Equity, and Race

Watch the event here. 

PPI Hosts Event with Sen. Kirsten Gillibrand on Helping Women Return to the Workforce Post-Pandemic

Posted on by The Progressive Policy Institute

Today, the Progressive Policy Institute and PPI’s Mosaic Economic Project hosted a webinar with special guest Senator Kirsten Gillibrand (D-NY) on policies to help women return to the workforce following the devastating effect of the pandemic on women’s labor force participation.

The panel included esteemed policy experts on labor, child care, and gender and racial equity, including Chandra Childers, Study Director at the Institute for Women’s Policy Research, Elliot Haspel, Author of Crawling Behind: America’s Child Care Crisis and How to Fix It, and Rhonda V. Sharpe, founder & president, Women’s Institute for Science, Equity, and Race.

“The pandemic recession threatens to erase decades of progress in women’s labor force participation, which hasn’t been this low since the 1980s. But we know that even before the pandemic, women and working mothers were not adequately supported and struggling to thrive. That’s especially true of Black and Hispanic female workers. As the White House and President Biden unveil the American Family Plan this week, we hope that policies to support women and working families are top of mind. We also thank Senator Gillibrand for being a tireless advocate for women and families throughout her time in Congress,” said Veronica Goodman, Director of Social Policy at PPI and moderator of the event.

The event covered a wide variety of roadblocks women face when returning to the workforce, including access to paid family leave, affordable child care, workforce development, and expanding apprenticeships and other educational and job training opportunities.

According to the Department of Labor, Black and Hispanic women workers were disproportionately impacted by the pandemic, as they are overrepresented in low-paying service sector jobs, which were slower to hire workers back as communities reopen and recover from the pandemic. As of March 2021, almost 1.5 million fewer moms of school-aged children were actively working than in February 2020, according to the U.S. Census Bureau.

Watch the event livestream 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.

The Mosaic Economic Project brings together a network of diverse women who are experts in economics and technology – fields where women’s perspectives are grossly underrepresented. Mosaic trains, connects, hosts and advocates for the network’s participation in meaningful policy influencing conversations, with a particular focus on Congress and the media.

Follow the Progressive Policy Institute.

Follow the Mosaic Economic Project.

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Media Contact: Aaron White, Director of Communications: awhite@ppionline.org

Unleashing UI’s Potential to Counter Recessions

Posted on by The Progressive Policy Institute

Prospects for economic recovery are brightening as nearly 3 million Americans per day get their Covid shots. But 18 million Americans still rely on unemployment insurance (UI) benefits, and many will continue to do so until the job market fully recovers and they can return to work. Fortunately, President Biden’s American Rescue Plan (ARP) Act, signed March 11, extended the benefits of 11.4 million jobless Americans until September 6.

Having averted an immediate crisis, the White House and Congressional leaders should now work to transform UI benefits so that they automatically deliver vital aid throughout this downturn and those in the future.

Unfortunately, it appears they cannot count on bipartisan support. As they did in 2020, Senate Republicans fought to cut the pandemic extension’s generosity, claiming it discourages people from taking jobs. To keep GOP obstructionism from causing yet another harmful lapse in September, Senator Ron Wyden is pushing to automatically extend the expansion until the unemployment rate falls below a predetermined threshold.

This makes sense from both a humanitarian and an economic perspective. Lawmakers should not only tie the generosity of benefits to the unemployment rate during this recession, they should do so permanently to insulate all future UI expansions from partisan wrangling in tough economic times.

In addition to preventing premature interruptions in benefits, this change would make future economic slumps less severe. Federal programs like UI that spend more in weak economies and less in strong ones are “automatic stabilizers” because they moderate swings in the business cycle without requiring Congressional action.

Replacing unemployed workers’ lost income through UI enables them to keep paying their bills, which helps to sustain demand across the
entire economy.

U.S. policymakers also should work to modernize other elements of the UI system. As we saw last spring when unemployment surged, outdated computer systems hampered states’ ability to get benefits to idled workers quickly. Congress wisely included $2 billion in ARP for updating UI systems. States should seize this opportunity to modernize their computer systems, and federal lawmakers should offer more resources if necessary.

In addition, Congress should develop a more equitable financing system for UI that fully pays for these expansions over the business cycle. The federal government and the states currently only apply their respective UI payroll taxes to workers’ earnings below a maximum level, which is typically very low. As a result, many low earners pay exactly as much in UI taxes as welloff workers do despite receiving smaller benefits when they become unemployed. The federal government should fully pay for these expanded benefits across the business cycle by raising more revenue from incomes that UI does not tax today.

More specifically, this policy paper proposes that the Biden administration and Congress embrace the following changes in unemployment insurance: 

  • Permanently tie the share of lost wages replaced by UI benefits to the unemployment rate.

  • Offer Extended Benefits for more weeks during severe recessions.

  • Fund state IT modernization efforts and avoid duplication of efforts by developing UI administration technology for states at the federal level.

  • Cover more jobseekers who are not currently eligible for UI by helping self-employed people save for gaps in work and expanding work-sharing programs.

  • Pay for these reforms across the business cycle by taxing higher incomes than the program currently does.

Adopting these complementary sets of reforms – pegging UI benefits to the unemployment rate and modernizing the way benefits are delivered and financed – would create a stronger safety net for laid-off workers and help temper economic contractions.

Read the full report here.

 

Letter to Congressional Leadership

Posted on by The Progressive Policy Institute

The Honorable Nancy Pelosi
Speaker
United States House of Representatives
Washington, DC 20515

The Honorable Charles E. Schumer
Majority Leader
United States Senate
Washington, DC 20510

Dear Speaker Pelosi and Majority Leader Schumer,

The Progressive Policy Institute (PPI) commends President Biden’s push to fund long-neglected public investments like transportation, research and development, clean energy infrastructure, and a highly skilled workforce in the next phase of his “Build Back Better” agenda. We also applaud the president and his team for acknowledging the need for raising revenue to offset most of the costs of his American Jobs  Plan and offering concrete proposals to do so.

The federal budget deficit will top $3 trillion for the second consecutive year in 2021, leaving the federal government owing more money than the economy produces annually for the first time since World War II. Although borrowing whatever sums were necessary to combat the covid recession was justified,  structural deficits will persist and continue growing larger after the economy has recovered. Moreover,  our recovery has thus far been “K-shaped”: those who entered this crisis flush with wealth in stocks and real estate are emerging wealthier than ever before, while lower-income workers and the unemployed are  falling farther behind. Americans deserve a recovery package that is substantially funded by progressive adjustments to our tax code.

We understand that the administration’s ambitious blueprint has controversial features and will trigger robust debate in Congress. Our view is that Congress should consider a wider array of tax changes to offset the costs of whatever it eventually passes. Building off of discussions with moderate lawmakers  who have expressed similar desires, PPI has developed a menu of radically pragmatic options for strengthening the government’s fiscal infrastructure and sustainably financing strategic investments in  America’s future growth.

We respectfully encourage you to consider the following tax reforms, which would largely tax wealth  instead of work and make federal taxes more progressive:

  • Raise the tax on inherited fortunes. Less than 0.1 percent of inheritances are subject to the federal estate tax, which allows heirs to inherit up to $23.4 million tax-free from the estate of a couple. There is simply no good reason that a wealthy heir should pay less in taxes than a middle-class  schoolteacher or an entrepreneur who earns their wealth through hard work. Replacing the estate tax with a progressive inheritance tax (one that taxes inherited income at the recipient’s ordinary tax rate plus a 15 or 20 percent surtax) would raise an enormous amount of revenue while deconcentrating wealth in America. Every dollar raised from taxing the unearned income of the super-wealthy is a  dollar the government does not need to raise by taxing work or productive investment.
  • Reduce Tax Preferences for Capital Gains. Capital gains are currently taxed up to 23.8 percent and while ordinary income is taxed up to 37 percent. Capital accounts for roughly 40 percent of income for households in the top 1 percent of the income distribution, compared to less than 2 percent of income for households in the bottom half, so reducing the disparity in tax treatment is an essential component of a progressive tax system. To ensure this change raises significant revenue, lawmakers should also repeal the “step-up basis” provision that allows recipients of inherited assets to permanently avoid paying taxes on untaxed capital gains that accrued during the original owner’s  lifetime – otherwise, many wealthy Americans will simply choose to hold assets until death to avoid higher capital gains tax rates.
  • Institute a Value-Added Tax (VAT). Many developed countries, including Canada and all of those  in the European Union, fund their generous social safety nets through a consumption tax collected incrementally at each step in a product’s supply chain. Economists prefer these consumption taxes over income taxes because they are harder to evade and reward people for saving and investing in  growing the economy. Pairing a value-added tax with subsidies to hold harmless lower-income  Americans could raise significant revenue in a progressive way without harming economic growth.
  • Put a price on carbon pollution. Congress should use our tax code to harness the power of market mechanisms to limit the damage of climate change. Placing a fee equal to the social cost of carbon on producers puts those social costs on the emitter and ensures that carbon is only emitted when the benefits outweigh the true costs. Carbon-intensive businesses would pay higher taxes for producing more carbon and businesses that invest in reducing their emissions would gain a competitive advantage. A carbon price would especially help frontline communities most vulnerable to the impacts of climate change by reducing emissions, and these benefits could be further enhanced by earmarking some of the revenue raised to be invested in targeted climate mitigation efforts.
  • Transition to mileage-based fees. Revenue raised by federal taxes on motor fuels have failed to keep up with transportation funding needs, both because Congress never indexed the rates to inflation and because improvements in vehicle fuel efficiency are reducing the amount of gasoline that the average driver needs to buy. That shortfall will only grow worse as our country makes the transition to electric  cars and trucks. A mileage-based fee would be neutral as to fuel type while ensuring that what you pay to use the roads is related directly to how much you use them. Although a national vehicle-miles traveled (VMT) fee for all vehicles may not be not practical now, adopting a VMT for commercial trucks and launching pilot programs for passenger vehicles would put our transportation infrastructure on the road to sustainable funding for the future.
  • Raise the corporate income tax rate. Real corporate tax reform would have lowered the corporate income rate and paid for it by broadening the tax base. But while the GOP tax law’s corporate tax changes did curtail some deductions, it did not do nearly enough and gave away hundreds of billions of dollars more in revenue than it raised. The net revenue loss was an unaffordable tax giveaway to the wealthy that should be recouped by raising the tax rate.
  • Cap itemized deductions. Itemized deductions are worth more to taxpayers in higher tax brackets because they would have owed more on each dollar deducted if it had been taxed. Capping itemized deductions at 24 or 32 percent ensure that people in higher tax brackets receive no greater benefit per dollar deducted than people in the tax bracket at which the cap is linked.
  • Increase resources for IRS enforcement. The IRS estimated 10 years ago that taxpayers failed to pay over $400 billion in tax obligations annually. But instead of trying to reclaim that money by spending more on tax law enforcement, Congress has cut the IRS’ budget in inflation-adjusted dollars by nearly 20 percent since then. As a result, the IRS is now 80 percent less likely to audit people earning over $1 million than it was in 2011. Spending more money on tax enforcement will help the  IRS crackdown on tax evasion by the wealthy and reduce federal budget deficits.

Now is the time to pass a big, bold recovery package that funds America’s future. With your leadership,  we can set our country on the path to sustainable and equitable growth.

Sincerely,

Will Marshall

President, Progressive Policy Institute

Ben Ritz,

Director, PPI Center for Funding America’s Future

Five Ways the Americans Jobs Plan Gets Workforce Development Right

Posted on by The Progressive Policy Institute

The Biden administration released its American Jobs Plan yesterday – a bold package with critical investments in infrastructure and America’s workers. Among its more ambitious aims is $100 billion set aside for workforce development. This includes a long overdue investment to diversify career pathways, through approaches such as apprenticeship programs, a focus on sector partnerships, and a new and robust program for dislocated workers. There is a lot to cheer for in the AJP—here are five ways it gets it right in pairing job creation with next-generation training programs.

  1. Investing in Workforce Development and Worker Protection. For decades, the United States has lagged other high-income countries in workforce development. The AJP calls for a $48 billion investment in workforce development and worker protection, which includes funding for registered apprenticeships and pre-apprenticeship programs. In total, this would create one to two million new registered apprenticeships. PPI has long-called for the U.S. to increase apprenticeships 10-fold and provide workers with career pathways that do not require a four-year degree. We’ve also advocated for two specific ways to modernize apprenticeships: Congress should formalize and incentivize intermediaries (public or private) by subsidizing them to create “outsourced” apprenticeships, and government at all levels should create public service apprenticeship opportunities and programs, including in industries such as information technology, accounting, and health care.
  2. Expanding Career and Technical Education. The plan recognizes the need for investments to expand career and technical education (CTE) and workforce-readiness programs for middle- and high-school students. The 10 million jobs lost by Americans at the pandemic’s onset disproportionally impacted young adults between the ages of 16 and 24, and some estimate that as many as 25 percent of our youth will neither be in school nor working when the pandemic ends. According to the U.S. Department of Education, high school students enrolled in programs with a CTE concentration are more likely to both graduate and earn higher median annual salaries than those who did not participate. These investments will set up students to be better prepared to enter the labor force upon graduation and gain their economic footing as they transition to adulthood.
  3. Addressing Inequities. Women and minorities have been disproportionately impacted by job losses during the pandemic and have historically been excluded from infrastructure jobs. Acknowledging these inequities, the plan calls for “strengthening the pipeline for more women and people of color to access apprenticeship opportunities,” such as through the Women in Apprenticeships in Non-Traditional Occupations program. Another option would be to increase training programs and increase apprenticeship slots in industries dominated by women that face worker shortages, such as early childhood education and care, and pair these jobs with competitive wages.
  4. Supporting Job Training with Smart, Evidence-Based Policies. The AJP acknowledges that we need forward-looking, evidence-based approaches to train the next generation of American workers and help those who might need to reskill or upskill, including laid off workers during the pandemic. The White House calls for a “a $40 billion investment in a new Dislocated Workers Program and sector-based training.” These funds would be allocated to help train workers get trained with skills in high-demand industries, such as clean energy, manufacturing, and caregiving. To ensure the success of such programs, the White House draws on evidence that completion rates are highest when workers are provided with wrap-around services, income supports, counseling, and case management to overcome the barriers to finishing their training.
  5. Empowering Workers and Unions. Lastly, the AJP emphasizes the important role of union jobs as the backbone of the American middle class. The proposed legislation includes important provisions for strengthening the rights of workers to organize and for making sure that employers who benefit from the plan adhere to appropriate labor standards and do not interfere with workers’ exercise of their rights. Enhancing the power of workers in our economy is critical to supporting good jobs and a strong middle class.

The Covid recession has left over 10 million Americans out of a job and millions of workers might not have a job to return to when the pandemic is over. For them, the AJP would create a diverse set of pathways to connect them with quality jobs offering livable wages. We hope that when Congress takes up this package in the coming months, they will pursue equity not just for underrepresented groups in workforce development, but also for those who lack a college degree yet make up a majority of the labor market. For them, access to pathways that do not require a four-year degree will be critical to help them regain their economic footing. Overall, the AJP meets the moment to address historic job losses and infrastructure in need of significant public investment.

Congress Should Raise Taxes On Multi-Million Dollar Inheritances

Posted on by The Progressive Policy Institute

After passing President Biden’s $1.9 trillion American Rescue Plan, Congress is beginning to move on enacting the rest of his “Build Back Better” recovery agenda. This next bill presents a unique opportunity to finally fund long-neglected public investments in infrastructure and scientific research that lay the foundation for robust economic growth. But at a time of skyrocketing budget deficits and rising inequality, lawmakers should also be pursuing changes to our tax code that equitably and efficiently raise enough revenue to fund these and other national priorities.

Unfortunately, Republicans in Congress seem to believe the opposite: on the same day they voted unanimously against giving aid to help lower- and middle-income Americans weather the pandemic, Senate Republicans introduced a bill to cut taxes exclusively for multi-millionaires who inherit their wealth. The GOP’s tone-deaf pursuit of their tax-cuts-at-any-cost agenda is galling: there is simply no good reason that a wealthy heir should pay less in taxes than a middle-class schoolteacher or an entrepreneur who earns their wealth through hard work. Lawmakers should raise taxes on inheritances, not cut them.

Read the full piece here.

Biden Clears First Big Hurdle

Posted on by The Progressive Policy Institute

Barring some 11th hour drama in the House, President Biden is expected to sign his $1.8 trillion American Rescue Plan into law this week. It’s a landmark achievement that gives us reason to hope our government may not be broken after all. 

Although he’s only been in office 46 days, Biden already has done more to lift the nation’s morale and make the economy work for everyone than his predecessor managed in four turbulent years. In case we’ve forgotten, this is what a real president looks like.

Biden’s plan focuses intently on defeating the coronavirus pandemic that has frozen normal life for a full year. It provides ample money to ramp up vaccinations, enable schools to reopen, help people who have lost their jobs and businesses, keep state and local governments running – all of which will speed economic recovery. 

In shaping and steering the package through Congress, Biden has drawn on a deep reservoir of political experience and cordial relationships. He also has been abetted by qualified and competent White House staff (another contrast with the man he replaced). He has radiated calm and showed impressive discipline in ignoring political distractions and media sideshows to deliver swiftly on his core campaign promise. 

The record will show the relief bill passed with almost zero votes from Republicans. But it will also show that Biden got the job done without vilifying his opponents or deepening the country’s paralyzing cultural rifts.    

Plenty of pragmatic progressives – myself included – have misgivings about parts of the bill. Its cash payments are not well-targeted, and $350 billion appears to be more than state and local governments actually need. Those dollars would be better spent on science and technology, high skills for non-college workers, clean energy infrastructure and other essential public investments. Amid $5-6 trillion deficits and cascading public debt, we could face some difficult fiscal adjustments in the years ahead.

On the other hand, the Biden package is deeply progressive. It throws lifelines to vulnerable Americans who have borne the brunt of the virus and the Covid recession:  the old, low-income workers, poor and minority communities with severe health challenges and hungry families. Through an expanded child tax credit, the bill also would create the equivalent of a child allowance that is expected to cut child poverty in half. 

Policy disagreements aside, Biden correctly gauged the magnitude of the nation’s health and economic emergency. After a long, grinding year of loss, suffering and social isolation, his instinct to go big is right. So is his desire to cultivate national “unity” and reach out to reasonable Republicans, who are beset by extremists in their party. 

This is what governing in a Constitutional democracy is supposed to look like. The public seems to approve, even if Biden’s left-wing detractors don’t. The most recent AP poll shows the president’s approval rating hitting 60 percent. 

By clearing his first big hurdle, Biden has dealt himself a strong political hand for the next one: Winning passage of his coming “Build Back Better” plan for building a more just, clean and resilient U.S. economy. 

This piece was also published on Medium.

How Senators Can Improve The Covid Relief Package

Posted on by The Progressive Policy Institute

In the coming days, the Senate will take up the $1.9 trillion covid relief bill that passed the House of Representatives last week on a party-line vote. It’s an essential measure that would fund a robust public health response to end the covid pandemic and provide vital economic assistance to struggling families. But no bill is perfect, and the Senate should seize the opportunity to better target relief funds and thereby position the U.S. economy for the strongest post-pandemic recovery possible.

Read the full piece here.

How Biden Can Get Americans Back to Work Better

Posted on by The Progressive Policy Institute

President Biden’s upcoming address to Congress is an opportunity to speak directly to the more than 10 million Americans who find themselves out of a job because of the pandemic recession. On the question of how to help these workers, Biden need look no further than the Build Back Better platform he campaigned on. A key element of the BBB platform is a $50 billion investment in workforce development, including apprenticeships.

Americans, especially young adults, need more pathways to careers that don’t require a traditional four-year college degree. While Millennials are the most educated generation in history, as of 2015, only about a third of Americans ages 25 to 34 were college graduates. That number is even lower for older Americans. Most people don’t go to college, and apprenticeships are an underappreciated way for finding jobs for the millions of job seekers who will have to find work after the pandemic, including those whose pre-Covid jobs might never come back. Compared to other high-income countries, the U.S. lags significantly when it comes to apprenticeships and other “active labor market” policies and it’s time for us to make investments to fill this gap.

Recently, the White House announced several ways that the Biden administration is strengthening registered apprenticeships across the country.

President Biden has endorsed Congressman Bobby Scott’s bipartisan National Apprenticeship Act of 2021, which will “create and expand registered apprenticeships, youth apprenticeships and pre-apprenticeship programs.” This legislation had been passed in the House in November 2020, in the last Congress, but the Republican Senate Majority failed to take up the bill for a vote. With Democrats now in the majority, there is renewed hope that the country’s underfunded and outdated apprenticeship system can finally be modernized to meet our 21st-century workforce needs. The reauthorization of the National Apprenticeship Act is estimated to create nearly one million high-quality apprenticeship opportunities and includes provisions that target opportunities for key groups, such as young adults, childcare workers, and veterans. The bill also aims to increase apprenticeships in industries that do not require a four-year degree for well-paid jobs, such as healthcare, IT, and financial services. We’ve supported this bipartisan legislation in the past and we look forward to seeing it make its way through Congress.

Additionally, the White House has reversed a harmful Trump-era policy by rescinding the industry-recognized apprenticeship programs (IRAPs), which threatened to undermine registered apprenticeship programs across the country and weakened employer-protections for trainees.

These are important steps, but the White House and Congress should go even further to modernize the current apprenticeship system. First, they should formalize and incentivize intermediaries (public or private) who create “outsourced” apprenticeships programs that get paid for each placement when they hire candidates who meet certain criteria (such as eligibility for Pell grants), provide them with an apprenticeship that pays minimum wage or better, train them, and place them in permanent positions. Second, they should create relationships with high schools to set up apprenticeships and career and technical education programs that begin in the 11th or 12th grade and pair students with local employers. These have shown promise in other high-income countries that employ a high percentage of their younger workers through apprenticeships. And, lastly, they should create public service apprenticeship opportunities and programs at all levels of government, including in industries such as information technology, accounting, and healthcare.

As President Biden crafts his address to Congress in the coming weeks, we hope that he acknowledges that millions of Americans who are out of a job lack a college degree. For them, other pathways to jobs, such as through investing in apprenticeships, will be a critical step forward in regaining their economic footing.

This piece was also published on Medium.