issue: Economy

Tech Investment Still Rising, Despite WSJ Story

Posted on by The Progressive Policy Institute

This morning the WSJ ran a story entitled “Investment Falls Off a Cliff: U.S. Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty.” The story argued that:

Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009.

It’s worth noting, however, that tech investment rose in the third quarter to its highest level on record. The chart below shows real investment in computers, software, and communications gear, in millions of 2005 dollars

 

The chart is based on BEA data. Please note that there was a pause in tech investment, but it came in the second quarter, not the third.

 

The way to interpret this chart is that we are in the middle of a data-driven boom. Companies view investment in data and data-related equipment as absolutely essential, and continue to spend, fiscal cliff or no.

This piece was cross-posted from Innovation and Growth.

As Boom Lures App Creators, Tough Part Is Making a Living

Posted on by The Progressive Policy Institute

PPI Chief Economic Strategist Michael Mandel was quoted  in the New York Times on job creation in the App Economy:

A study commissioned by the tech advocacy group TechNet found that the “app economy” — including Apple, Facebook, Google’s Android and other app platforms — was responsible, directly and indirectly, for 466,000 jobs. The study used a methodology that searched online help-wanted ads.

Michael Mandel, the economist who conducted the TechNet study, said it was problematic to slice the jobs data as Apple had done. “The guy who writes an Apple app one day will write an Android app the next day,” he said. “You can’t add up all the numbers from every study to get the total number of jobs.”

Read the entire article here.

The 4 Issues Dragging Down the Economic Recovery

Posted on by The Progressive Policy Institute

PPI Chief Economic Strategist Michael Mandel was featured in the National Journal on regulatory reform:

Mitchell suggests creating a commission, modeled on the process that Congress has used to determine which military bases to realign or close, to weed out and eliminate federal spending that benefits certain businesses at the expense of others. Economist Michael Mandel of the Progressive Policy Institute suggests a similar body to reduce the government’s impact on business growth by identifying federal regulations to repeal or modify.

Read the entire National Journal article here.

How the Latino Vote Will Shape Future Housing Policy

Posted on by The Progressive Policy Institute

Writing for U.S. News & World Report, Jason Gold explains how the Latinos will influence the future of housing policy:

A “Modern Family” coalition of single women, African-Americans, and progressive young voters who are passionate about hot-button social issues helped propel President Barack Obama to a second term this election. But it was the commanding Hispanic vote—Obama won 71 percent of Latino voters—that truly powered the president’s successful run for re-election.

So what helped drive the Latino turnout in key swing states such as Nevada, Arizona, Colorado, and Florida? While a lot can be credited to anti-immigration stances taken by some GOP candidates in the primaries, the struggling housing market in key states also had an impact: The same swing states (Nevada, Arizona, and Florida) that turned out high Latino votes were also the hardest hit in the housing crisis. Moreover, 28 percent of Latino homeowners surveyed earlier this year were underwater, compared to only 14 percent of the general population.

That might have made a big difference when it came to looking at the differing approaches of the Obama and Romney campaigns. While the Obama administration and congressional Democrats crafted legislation and campaigned on broad refinance bills aimed at helping those same underwater borrowers, Mitt Romney took a more hands-off, market clearing approach, infamously telling the Las Vegas Review-Journal to “Let it [housing market] run its course and hit bottom.”

Read the entire piece.

Conference Report – The Rise of the Data-Driven Economy: Implications for Growth and Policy

Posted on by The Progressive Policy Institute

On October 10-12, 2012, the Progressive Policy Institute joined forces with John Cabot University in Rome to highlight the transformative potential of rise of data-driven economic innovation and growth. Hosted by John Cabot in collaboration with the Guarini Institute, the European Privacy Association and the Center for European Policy Studies, the transatlantic dialogue brought together representatives of leading U.S. technology companies and European Union officials, as well as analysts and experts from think tanks, non-profit organizations and academia.

Entitled The Rise of the Data-Driven Economy: Implications for Growth and Policy, the discussion centered on the increasing contribution of data-driven activity to economic growth in the United States and Europe; the European Union’s controversial data protection regulation; the responsibility of companies to build trust by being “ethical stewards” of their customers’ data; and, political threats to an open and free Internet.

Conference Speakers: Rita Balogh, Senior Associate, APCO; Michael Mandel, Chief Economic Strategist, Progressive Policy Institute; Jacques Bughin, Director, McKinsey Global Institute; Anthony House, Manager of Public Policy, Google; Roberto Masiero, President, THINK! The Innovation Knowledge Foundation; Pietro Paganini, Managing Director, European Privacy Association; Pat Walshe, Director of Privacy, GSM Association; Luca Bolognini, President, Italian Institute for Privacy; Ed Black, President & CEO, CCIA; Daniele Pica, Professor, John Cabot University; Megan Richards, Director, DG Connect; Chris Kelly, Kelly Investments; Michael Kende, Co-Head of the Regulation Sector, Analysys Mason; Dimitrios Droutsas, Member of European Parliament; Carolyn Nguyen, Director of Technology Policy, Microsoft; Dr. Thierry Vissol, Special Adviser, DG COMM Media & Communication; Paul W. Taylor, Governing Magazine; Laura Fennell, General Counsel, Intuit; Giuseppe Conte, Professor of Law, University of Florence; Maurice Fitzgerald, VP Strategy–Autonomy, Hewlett-Packard

Download the conference report.

Young People Turned Out to Re-Elect President Obama. Now What?

Posted on by The Progressive Policy Institute

They defied the pundits: young people turned out to vote in numbers that rivaled their 2008 record. An estimated 23 million young people age 18-29 voted, even more than the highly coveted 65 and over cohort. And not surprisingly, for reasons I’ve previously pointed out, young people overwhelmingly supported President Obama by a margin of 60-40.

But President Obama’s work has really just begun. Now that TV advertising has returned to normal, young people are eager to know what’s next, what President Obama is going to do to help them get more jobs and more money.

Young people are struggling: they’ve had a worse recession and recovery than any other age group. The 18-34 year old cohort is still over 2 million jobs short since the recession began and real earnings continue to fall. But helping young people means understanding why they have been hit so hard in the first place relative to other age groups, why they weren’t the first to be re-hired as common theory dictates, and why the youngest and least educated are being squeezed out of the labor force. Continue reading “Young People Turned Out to Re-Elect President Obama. Now What?” →

AT&T’s Investment Challenge to Corporate America

Posted on by The Progressive Policy Institute

The economy is improving, but the U.S. is still struggling with an investment drought. Capital spending by business is 26% below the long-term trend, and has not yet recovered to pre-recession levels. By comparison, personal consumption has topped its pre-recession levels, and is much closer to the long-term trend.

Against that backdrop, it is notable that  AT&T announced yesterday that it  expected  a capital spending budget of $22 billion per year for the next three years. To put this in perspective, the *entire* motor vehicle industry invested less than $20 billion  in the United States in 2011.

In some ways, AT&T’s willingness to make a public announcement of a capital spending target three years out is a challenge to Corporate America (though the company certainly does not frame it this way). By making this public statement,  AT&T is effectively saying that it believes in the communications revolution, data-driven growth,  and the strength of the U.S. economy.

Why can’t other companies make the same sort of public announcement of  long-term capital spending goals and offer additional certainty to the still recovering U.S. economy? Truthfully, growth is suffering more from investment uncertainty than from regulatory uncertainty. If large companies pledged to maintain or increase domestic capital spending over the next three years, it would go a long way to boosting economic and job growth.

With the election now over, the Obama Administration should hold up AT&T–and other companies willing to invest in America–as examples of what to do right. If Obama wants a high-growth economy with prosperity for all, he needs to encourage more companies to make the same kind of bet on America’s future.

This piece was cross-posted from Innovation and Growth.

The Real Meaning of Obamacare

Posted on by The Progressive Policy Institute

Back in 1996, I wrote a book called The High-Risk Society. The book was based on the vision that Americans had to embrace risk and innovation in order to achieve faster growth and long-term prosperity.

An essential part of that vision, however, is the creation of a much stronger safety net.  If we are going to ask Americans to take risks for growth, to accept disruption in return for innovation, they have to be protected from the worst consequences of failure.

In particular, it becomes much harder to take a chance on growth if it means you might lose your healthcare. That’s why Obamacare, despite being ungainly and awkward, is an essential step towards a high-growth economy. People who want to start a new company or join an innovative new enterprise shouldn’t have to worry about whether they will be able to get healthcare. People who want to work halftime and go back to school shouldn’t have to worry about whether a sudden medical problem will throw them in the poorhouse.

Obamacare is a step towards unleashing the creative juices of Americans.  There are lots of problems, of course. We need to ensure that the new Obamacare bureaucracies don’t strangle innovative company. But now that the basic mechanisms are in place, we can move onto the more important task of empowering innovative and hardworking Americans.

This piece was cross-posted from Innovation and Growth.

The Next Choice: A High-growth Economy Versus Long-term Stagnation

Posted on by The Progressive Policy Institute

As soon as the results of the election are known, President Obama or President Romney will be beset with a list of difficult decisions: What to do about the fiscal cliff, whether to cut the federal deficit, how to implement healthcare reform or how to get rid of it,  whether or how to create jobs.

But the biggest decision facing the next president—and Americans in general—goes far beyond the ‘fiscal cliff’, or any of the machinations which fascinate Washingtonians. Should the United States follow its current path of long-term stagnation, or should we choose a road that likely leads to rapid—but disruptive—growth?

This choice will have huge and resonating consequences. In a slow-growth economy, government leaders must focus on apportioning pain and austerity. The rich and the poor within each country or region struggle over scarce resources, with predictable consequences. We are seeing the face of the stagnant future in Europe now, where country after country are being forced to absorb massive cutbacks. Slow growth means that our children will be poorer than we are. Continue reading “The Next Choice: A High-growth Economy Versus Long-term Stagnation” →

Why Young People Overwhelmingly Support Obama (Hint: It’s in the Jobs.)

Posted on by The Progressive Policy Institute

On Sunday Mitt Romney told an Ohio crowd that he couldn’t understand why a “college kid” would vote for Obama. He said Obama was spending all their money and that the only thing they would get from it was a bill with interest. Instead Romney promises to cut the deficit and simultaneously create an astounding 12 million jobs in his first term.

Despite his promises, young people overwhelmingly support Obama. President Obama enjoys a 19-point lead over Romney among likely young voters according to the latest polls.

Why? It’s all in the jobs. The number one concern of young voters is jobs and the economy. They need more jobs and more money. And while Romney talks a big game, his lack of details leave young people uninspired.

Meanwhile, Obama’s plan offers concrete ideas to address the economic struggles of young people, the 73 million people age 18-34. Since the recession they have lost over 3 million construction, production, and office jobs. Obama’s plan includes bringing back production jobs that may have been lost to unfair competition, while encouraging “innovation clusters” to form the next crop of high-skill, high-wage jobs. His plan increases public investment in infrastructure, boosting construction jobs in the short-term and providing a foundation for a strong economy in the long-term. His plan establishes more public-private partnerships to better match students with today’s business demands. Continue reading “Why Young People Overwhelmingly Support Obama (Hint: It’s in the Jobs.)” →

The Astonishing Obama Tech Boom

Posted on by The Progressive Policy Institute

Going into the next two debates, Barack Obama would certainly like a bit more of Bill Clinton’s mojo. After all, Clinton both won a second term and presided over the Internet-driven New Economy boom of the late 1990s, which created millions of jobs and eliminated the budget deficit. These are achievements that Obama would dearly love to duplicate.

Yet, Obama has been surprisingly unwilling to take credit for the most powerful economic success story on his watch: The astounding growth of the communications/internet sector, including smartphone makers, app developers, internet companies, and wireless providers.

Here are some figures:

• Over the past four years, the internet publishing, search and social media industry has been the top industry in job growth, with a 44% gain in domestic employment.

• Tech has beaten motor vehicles as a source of job growth. Since Obama took office in January 2009, the motor vehicles and parts industry created 94,000 jobs. By comparison, the key tech industries of software, online retailing, and internet publishing, search and social media have created 98,000 additional jobs since Obama’s inauguration. Custom computer programming–much of which involves the internet or mobile–accounts for another 91,000 new jobs over the same period.

• The so-called App Economy includes more than 500,000 jobs, up from none in 2007. These figures, based on an analysis of The Conference Board’s database of help-wanted ads, include the tech jobs that involve developing and maintaining mobile apps; the non-tech jobs that support app developers; and a conservative estimate of local spillover jobs.

• The real growth rate of gross domestic product is about a half percentage point higher than the official numbers show, once we take into account the enormous increase in data use by consumers.

Read the entire article at the Atlantic.

Photo credit: spirit of america / Shutterstock.com

Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy

Posted on by The Progressive Policy Institute

INTRODUCTION
We live in a world where ‘data-driven economic activities’—the production, distribution and use of digital information of all types—are the leading edge of economic growth. Mobile broadband, increasingly available even in poor countries, is fostering a fundamental technological and social transformation.  Big data—the storage, manipulation, and analysis of huge data sets—is changing the way that businesses and governments make decisions.  And torrents of data ceaselessly flow back and forth across national borders, keeping the global economy linked.

Yet paradoxically, economic and regulatory policymakers around the world are not getting the data they need to understand the importance of data for the economy. Consider this: The Bureau of Economic Analysis, the U.S. agency which estimates economic growth, will tell you how much Americans increased their consumption of jewelry and watches in 2011, but offers no information about the growing use of mobile apps or online tax preparation programs.  Eurostat, the European statistical agency, reports how much European businesses invested in buildings and equipment in 2010, but not how much those same businesses spent on consumer or business databases. And the World Trade Organization publishes figures on the flow of clothing from Asia to the United States, but no official agency tracks the very valuable flow of data back and forth across the Pacific.

The problem is that data-driven economic activities do not fit naturally into the traditional economic categories.  Since the modern concept of economic growth was developed in the 1930s, economists have been systematically trained to think of the economy is being divided into two big categories: ‘Goods’ and ‘services’.

Goods are physical commodities, like clothes and steel beams, while services include everything else from healthcare to accounting to haircuts to restaurants. Goods are tangible and can be easily stored for future use, while services are intangible, and cannot be stockpiled for future use.   In theory, a statistician could estimate the output of a country by counting the number of cars and the bushels of corns coming out of the country’s factories and farms, and by watching workers in the service sector and counting the number of haircuts performed and the number of meals served.

But data is neither a good or service. Data is intangible, like a service, but can easily be stored and delivered far from its original production point, like a good. What’s more, the statistical techniques that have been traditionally used to track goods and services don’t work well for data-driven economic activities.  The implication is that the key statistics watched by policymakers—economic growth, consumption, investment, and trade—dramatically understate the importance of data for the economy.  In turn, these misleading statistics distort government policy.

SUMMARY
In this policy brief we will show that government economic statistics, stuck in the 20th century, are missing most of the data boom.  To remedy this problem, it is time to expand our economic statistics to add data as a primary economic category, just like goods and services.  Until we do this, policymakers and regulators won’t have the information they need to make good decisions.

This policy brief is organized around three major arguments:

  1. We explain why data is becoming important enough to get its own statistical category. Individuals can consume data, just like they can consume soda (a good) or haircuts (a service). Businesses can invest in databases, just like they invest in buildings and equipment.  And countries can export and import data, just like they export and import goods and services. As a result, instead of breaking down the economy into goods and services, statisticians need to be thinking about goods, services, and data. Adding data as a primary economic category can give policymakers a much more accurate picture of economic growth, consumption, investment, employment, and trade.
  2. We show how the official economic statistics dramatically undercount the growth of data-driven activities.  To give a real-life example, we focus on the consumption of data by Americans.  According to statistics from the Bureau of Economic Analysis, real consumption of ‘internet access’ has been falling since the second quarter of 2011.
  3. In other words, according to official U.S. government figures, consumer access to the Internet—including mobile—has been a drag on economic growth for the past year and a half.  This is simply absurd. As a result, the official statistics are missing such important trends as the increasing adoption of smartphones and tablets, the growth of mobile broadband, and the enormous surge of usage of services like Gmail, Dropbox, Facebook, and Twitter.
  4. We adjust the official U.S. statistics to account for unmeasured data consumption by individuals. Based on our estimates, we show that real GDP rose at a 2.3% rate in the first half of 2012, compared to the 1.7% official rate. In other words, the impact of the data-driven economy on overall economic growth is being substantially underestimated. Based on these figures, the growth in data consumption in the United States accounts for roughly one-quarter of adjusted GDP growth in the first half of 2012, making  data consumption by individuals is one of the largest contributors to U.S. economic growth in this period.
  5. We assess the link between economic growth and future government privacy and data regulatory policy in the 21st century data-driven economy Given that we have shown that data powers growth, correctly measured, we discuss the possibility that excessive privacy and data regulation can inadvertently harm future growth prospects.

To put it another way, restrictive and prescriptive regulation of the Internet and the movement and uses of data could have the effect not only of constraining Internet freedom but also Internet free trade.  Such regulation could become the trade barriers of the data-driven economy, “balkanizing” access to information and innovative data-driven products and services and constraining global economic growth. That’s a highly undesirable outcome for everyone.

Download the memo.

Photo credit: Shutterstock/photobank.kiev.ua

PPI in Rome – The Rise of the Data-Driven Economy

Posted on by The Progressive Policy Institute

The Progressive Policy Institute, John Cabot University, the Guarini Institute for Public Affairs, the European Privacy Association, and the Centre for European Policy Studies will host “The Rise of the Data-Driven Economy: Implications for Growth and Policy” on Oct. 10-12, 2012 in Rome, Italy.

Featuring prominent U.S. and European political and business leaders, as well as economists and policy experts, the conference will explore how the growing volume of cross-border trade in digital information is becoming an increasingly important driver of economic innovation and growth, as well as a key component of international trade. This reality raises a host of new and complex questions about the “rules of the road” that should govern data storage, security and privacy, and, ultimately, the Internet itself.

The conference will grapple with three key questions: 1) How is the data boom driving economic growth in the United States and Europe?; 2) What are the economic consequences of privacy regulations, and can Americans and Europeans find compatible approaches to privacy; and, 3) How can policy-makers best balance the competing imperatives of Internet freedom and responsible internet governance?

REGISTER

Continue reading “PPI in Rome – The Rise of the Data-Driven Economy” →

Democratic Devolution: How America’s Colleges and Universities Can Strengthen Their Communities

Posted on by The Progressive Policy Institute

In the face of a deepening economic and political crisis, the U.S. political and governing system is deadlocked. We need a new way forward. The old and tired government versus markets debate is just that—old and tired. It’s time for a broader mobilization of America’s civic resources, including the nonprofit sector and especially our colleges and universities.

We see government as a catalyst that stimulates new forms of interaction and partnerships between all sectors of society. Based on our experience at the University of Pennsylvania, we believe government should challenge all institutions of higher education (public and private; community colleges, colleges, and universities) to contribute systematically to improving the quality of life and learning in their local communities.

When called to service (e.g., Peace Corps, AmeriCorps) young people have answered the call. Each year, more than 75,000 citizens serve through AmeriCorps alone. But it is not enough to simply call upon college students to serve. Rather, government should challenge institutions of higher education, as well as students, to make a greater contribution to the public good.

America’s colleges and universities represent immense concentrations of human and economic capital (with nearly four million employees, 20 million enrolled students, $400 billion in endowments, and $1 trillion in annual economic activity). As “anchor institutions,” they have the potential to be sources of stability and permanence in civic partnerships with government and the private sector to revitalize local communities. For colleges and universities to fulfill their great potential and more effectively contribute to positive change in their communities, cities, and metropolitan areas, however, they will have to critically examine and change their organizational cultures and structures and embed civic engagementacross all components of the institution. Through more effectively targeting existing resources, as well as utilizing both modest financial incentives and the bully pulpit, the federal government can stimulate colleges and universities to realize their stated—but not fully realized—mission of service to society.

To realize this potential, we recommend a five-part strategy:

First, Congress should create a new federal commission—comprised of local, state, and national government officials along with leaders from the private sector and higher education—to forge civic partnerships with the nation’s institutions of higher education;

Second, the commission should develop innovative strategies for integrating federal programs and funding streams, as well as aligning federal efforts with these new local civic partnerships that involve colleges and universities;

Third, the commission should promote regional consortia of higher educational institutions to significantly and effectively improve schooling and community life;

Fourth, the federal government should create prestigious Presidential Awards for outstanding Higher Education-Civic Partnerships, and;

Fifth, government should provide support to colleges and universities based on the “Noah Principle”—funding given only for building arks (producing real change), not for predicting rain (describing the problems that exist and will develop if actions are not taken).

Download the memo.