issue: Politics

How a Startup Tax Credit Can Spur Re-Employment

Posted on by The Progressive Policy Institute

As federal and state governments outline plans for reopening the economy, lawmakers will have to grapple with the challenge of getting tens of millions of Americans back to work as quickly as possible.

More than 47 million Americans have filed for unemployment since the pandemic began, with the unemployment rate at 13.3 percent in May.

The economic damage has been inflicted on both the employer and worker sides of the labor market. A mass of businesses have filed for bankruptcy as a result of the lockdown, with the American Bankruptcy Institute finding a 48 percent increase in commercial Chapter 11 filings in May compared to last year.

And many laid off workers will not be able to return to their former jobs. As many as 25 percent of jobs may never come back, Joseph Brusuelas, chief economist at consulting firm RSM, recently told Politico.

Part of the problem is that even businesses that survive the downturn are going to be wary about expanding to fill the market gaps left by their defunct peers. Small businesses, which are naturally less risk-tolerant than their large counterparts and have access to fewer resources, will be especially cautious about growth.

That’s why simply “reopening the economy” won’t put everyone back to work. We also need a strategy for incentivizing existing small businesses to swiftly scale up and make room for rehiring the unemployed.

U.S. policymakers need new tools for revitalizing entrepreneurship and leveraging its potent job-creating abilities. To that end, the Progressive Policy Institute (PPI) has proposed a new Startup Tax Credit that incentivizes entrepreneurs to quickly increase employment at their small companies, giving even existing companies a startup-like boost.

Modeled on the Earned Income Tax Credit, the Startup Tax Credit would be a refundable tax credit tied to the number of employees and payroll at a small business.

Read more here.

Gary Pearce: Protests and Politics Echo 1968

Posted on by The Progressive Policy Institute

Gary Pearce on Politics and Public Policy in North Carolina

2020 feels like 1968.

Peaceful protests erupt into looting and burning. Police battle demonstrators in the streets. Black Americans vent their rage and frustration.

In 1968, Dr. Martin Luther King’s assassination in Memphis lit the fires. This year, it was the death of George Floyd at the hands of policemen in Minneapolis.

In 1968, the nation was already divided by the Vietnam war – and protests against the war. This year, our nerves were already rubbed raw by the Covid pandemic, the economic meltdown, stay-home orders – and protests against the orders.

Then, as now, there was the sickening sense that the floor under American society was collapsing.

1968, like 2020, was a big election year. 1968 ended 36 years of Democratic dominance in Washington, since FDR’s election in 1932. It ushered in an era – more than half a century now – dominated by a Republican Party dependent on white Southerners and dedicated to the proposition that government is the problem, not the solution.

In 1968, an anguished President was trapped inside the White House by protesters chanting, “Hey, hey, LBJ, how many kids did you kill today?” Four years after winning a historic landslide, he withdrew as a candidate for reelection. His dream of a Great Society slipped away.

Today inside a White House again surrounded by protesters, an angry President lashes out at critics, the media and political opponents. Four years after winning a historic upset, he fears his dream of a smashing reelection victory fueled by a rising economy is slipping away.

In 1968, Democrats’ election hopes were shattered when their national convention in Chicago exploded in violence. This year, the Republican convention will be in Charlotte, assuming the city and state can come to terms with the Republican Party and President Trump over Covid precautions.

They also must consider the risk that Charlotte could attract a volatile mix of protesters against racism, “tyranny”-protesting Reopeners and camo-clad white nationalists waving Confederate flags and wielding assault weapons.

We don’t want Charlotte to be to 2020 what Chicago was to 1968.

Then, the violence in Chicago and the riots nationwide set off a white backlash that helped elect Richard Nixon President. George Wallace, running as a third-party candidate, fanned the flames.

Nixon benefitted from Democratic disarray, Roger Ailes’ TV genius and Strom Thurmond’s Southern Strategy. Republicans began their rise in North Carolina and the South. In 1972, North Carolina elected a Republican governor and a Republican Senator named Jesse Helms.

It almost didn’t happen. Vice President Hubert Humphrey, the seemingly hapless Democratic candidate, nearly caught Nixon in the final days.

Former North Carolina Governor Terry Sanford and his chief political adviser, Bert Bennett, helped lead Humphrey’s national campaign. Bennett said years later that Humphrey would have won with another week.

But he didn’t. Nixon won and promised to “bring us together.” But he didn’t. The Vietnam War dragged on, and our racial divide persists today.

Politics, like life, rarely moves in a straight line. We don’t control events; they control us.

Even people with power – Governor, President, police chief, protest organizer – are no more in control than a ship in a storm is in control of the winds and waves.

A few months ago, we thought this election would be about impeachment and a roaring, soaring economy.

Then a virus kills 101,000 Americans and puts millions out of work.

A white policeman keeps his knee on a black man’s neck for almost nine minutes even after the victim pleads “I can’t breathe.”

An angry protester throws a firebomb.

History pays no attention to human intention.

Gary Pearce writes on policy and politics in North Carolina, and is a guest writer for the Progressive Policy Institute. You can learn more about Gary by visiting www.NewDayforNC.com.

Congress must fill the leadership void

Posted on by The Progressive Policy Institute

President Trump is promising a swift and seamless economic recovery if only the states will hurry up and lift their stay-at-home orders. “Those jobs will be back and they’ll be back very soon,” he said, reacting to last month’s horrendous spike in unemployment.

This is fantasy. Besides ignoring the health hazards of prematurely reopening the economy, Trump is raising false hopes among millions of U.S. workers whose jobs have vanished in the COVID-19 crisis.

In fact, getting everyone back to work once the pandemic is contained will be a huge challenge. It will happen in stages, not all at once, and it will require a well-focused national push to help less-educated and low-wage workers find new jobs, skills and careers.

Unfortunately, the Trump administration seems as woefully unprepared to grapple with this urgent task as it was to check the pandemic’s spread. That means Congress will have to deliver what we need: A full-scale, full-employment initiative in which the federal, state and local governments work in tandem with the private sector to upskill displaced workers, match them to openings in fast-growing sectors and lower obstacles to starting a business.

Read the full piece here.

Blog: Finally, It’s the Right Time for Infrastructure Week

Posted on by The Progressive Policy Institute

As Congress passes its historic multi-trillion spending package, people across the country, as well as investors in our beleaguered financial markets, will breathe a sigh of relief. But the truth is, this “Phase 3” response to the pandemic-induced economic shutdown may just be the beginning of what we need to avert a savage recession or even depression.

Some experts, including St. Louis Federal Reserve President James Bullard warned that the nation’s GDP could fall by upwards of 50 percent in the second quarter alone. The first numbers showcasing the fallout dropped this week, with historic unemployment claims more than doubling economist’s worst fears at 3.3 million for the week.

Although it’s called a “stimulus” bill, the package is actually aimed at several urgent goals: Expanding the nation’s medical capacity to fight the contagion and treat its victims, putting money in Americans’ pockets and keeping businesses small and large from going under.

That’s essential, but we also need more of the traditional kind of stimulus intended to juice the economy. What comes next is for Congress and the Trump administration to address real stimulus- actions that use policy to activate increased economic activity.

For that -there is no better, more popular and bipartisan use of taxpayer funds than upgrading the nation’s transportation, communications and other infrastructure. And now, with unemployment spiking, it’s the right time to act at last on all those calls we hear every year during “Infrastructure Week” for a massive surge in public investment in our economy’s backbone.

Infrastructure Week has become a bad joke in Washington. It comes with great fanfare, wins praise from a bipartisan chorus of lawmakers and labor as well as business leaders — and then passes without anything changing. Perhaps now, with interest rates at nearly zero and lawmakers committed to spending whatever it takes to keep our economy afloat, infrastructure’s moment has finally come. And we should think big- upwards of one trillion dollars big.

Why? Because infrastructure investment yields the biggest bang for your buck when you have a higher jobless rate. The reason is what economists call the “multiplier effect,” which is basically a measure of how big a boost in economic output we get from each dollar spent. Creating new jobs and putting unemployed people back to work produces the strongest multiplier effect.

For example, take these estimates of multiplier effects from an economic scenario from S&P Global in 2016 on infrastructure investment (full disclosure- I was a co-author of the paper with Chief U.S. Economist Dr. Beth Ann Bovino):

“…an additional $150 billion in spending (spread evenly over eight quarters) would be fully returned to the economy within the first two years… and at least $189.5 billion to GDP in just the first few years. Additionally, this injection of funds would create roughly 307,000 infrastructure-related jobs in the first two years. Aside from the near-term boost, the country’s productive capacity and output would also likely increase once the infrastructure is built and absorbed into the economy-which means the investment would likely add jobs long after the initial effects have subsided…”

So what can numbers like this tell us about what would happen if we invest today, under the extraordinary circumstances of escalating unemployment? Well, in general, we can reasonably expect the unemployment rate to soon be higher than the 4.9% rate when the paper was written (October 2016), and general economic conditions to be softer. So those GDP returns and job estimates (proportional to the amount invested) could be on the lower end from what we might expect looking forward.

In a low unemployment scenario, which was the reality until the coronavirus hit, there’s too little slack in labor markets to generate high multiplier effects. In this scenario, you have lower overall output because you are essentially moving workers to infrastructure jobs from other jobs, as opposed to creating brand new ones and moving workers from unemployed to being employed.

Some immediate logistical problems come with quick action; for instance, can we even invest now at a time when most folks are forbidden from going to work? The answer is obviously no, but with a caveat. Infrastructure projects tend to have very long, multi-year lifecycles, with planning from engineers, environmental impact studies and permit bottlenecks, before the first shovel can even hit the ground. Additionally, it will take a long time- perhaps years- to work off the significant economic damage that is coming our way.

With even some of the longer estimates for how long it will take for life to return to “normal” running over 3 months, passing a trillion-dollar investment package soon still makes sense.

When looking for economic silver linings in a time of dour forecasts, and multiple trillion-dollar spending barely raises an eyebrow, it seems as good a time as any for a legitimate “Infrastructure Week”.

Statement: New Business Preservation Act Provides Much Needed Capital to Startups

Posted on by The Progressive Policy Institute

Today, Senators Amy Klobuchar (D-MN), Chris Coons (D-DE), Tim Kaine (D-VA), and Angus King (I-ME) introduced the New Business Preservation Act. The legislation would  create an Innovation and Startups Equity Investment Program in partnership with states and private investors, providing vital capital during the coronavirus pandemic to new startups.

Startups play a critical role in the American economy, powering productivity gains and creating nearly 3 million jobs annually. Unfortunately, due to their nature, many new businesses do not have adequate assets on hand to survive an emergency such as coronavirus, with an average time to turn a profit of nearly three years.

The New Business Preservation Act would provide much needed financial resources to startups during the pandemic. Specifically, the New Business Preservation Act would allocate an initial $2 billion to the program for participating states to invest alongside private venture capital companies in new businesses outside of the Silicon Valley, New York, and Boston venture capital hubs. Importantly, special consideration is given to businesses created by women and persons of color, who face additional barriers in accessing investment capital.

As the U.S. economy continues to suffer due to the coronavirus pandemic, the New Business Preservation Act provides relief to America’s startups. The Progressive Policy Institute urges Congress to swiftly pass this legislation.

Marshall for The Daily Beast: “Who’s Cheering for Bernie Sanders to Win Monday? Young Lefties-and Donald Trump”

Posted on by The Progressive Policy Institute

Senate Republicans turned President Trump’s impeachment trial into a farcical exercise in partisan whitewashing. That leaves the job of canceling Trump’s reality show presidency to U.S. voters.

A heavy responsibility thus lies on Democratic caucus and primary voters as they start selecting their party’s nominee next week. If they make the wrong choice, it means four more years of Trump’s corrosive assaults on reason, democracy, and basic human decency. For many, the right choice will require setting aside their ideological druthers and picking the candidate most likely to beat Trump in the Electoral College.

It’s hard to know at this point which candidate is most electable. It’s easier to say who isn’t—and Sen. Bernie Sanders tops the list. Despite the devotion he inspires among young left-wing activists, the self-avowed socialist is too far outside the U.S. political mainstream to be considered anything but the longest of long shots against Trump.

Read the full op-ed here.

Mandel for RealClearPolicy: “Do Subprime Auto Loans Threaten the U.S. Economy?”

Posted on by The Progressive Policy Institute

With partisan divisions as deep as ever, both sides can agree on one thing: Everybody wants to avoid another financial crisis. And forecasters have recently identified subprime auto loans as an existential threat to the economy.

The headlines are eye-catching and scary: “A $45,000 Loan for a $27,000 Ride: More Borrowers Are Going Underwater on Car Loans,” “Underwater: Consumers Are Treating Cars A Lot Like Houses During The Subprime Mortgage Crisis,” and more of the same. But is it true? Are subprime auto loans the new financial cancer threatening households and the economy, much like the subprime mortgage crisis did in 2007?

No.

Worries about subprime auto loans — which offer higher interest loans to riskier borrowers — are ill-founded and based on misleading data and faulty analogies, our new research finds.

Read the full op-ed here.

Ritz for Forbes: “New CBO Report Projects $13 Trillion Deficit Over 10 Years”

Posted on by The Progressive Policy Institute

Projections published today by the non-partisan Congressional Budget Office confirm that the federal government is on course to spend $1 trillion more than it raises in revenue in Fiscal Year 2020. Trillion-dollar deficits continue as far as the eye can see, with CBO estimating a 10-year deficit of over $13 trillion.

Legislative changes since August have increased projected deficits by more than $500 billion, according to CBO. More than 90 percent of the increase comes from a package of irresponsible tax cuts added to a year-end spending agreement passed in December. But most of the change was offset by a decline in the projected interest rates and other technical changes, leaving 10-year deficit forecasts “only” $160 billion more than they were in August 2019.

What’s driving these deficits? Primarily the growth in federal health-care and retirement programs caused by our ageing population. Federal spending on Social Security, Medicare, and other health programs is projected to grow from 11 percent of gross domestic product today to 14 percent in 2030. All other non-interest spending, meanwhile, is projected to shrink as a percentage of GDP. Revenue won’t keep up with these costs, in large part because the Trump administration keeps charging tax cuts upon tax cuts to the national credit card. If anything, CBO’s projections are overly optimistic because the agency is required to assume most of these tax cuts expire in 2025 as they are scheduled to under current law.

Read the full piece here.

Ritz for Forbes: “What Bernie Sanders Isn’t Telling You About Social Security”

Posted on by The Progressive Policy Institute

In recent days, Sen. Bernie Sanders and his campaign surrogates have accused former Vice President Joe Biden of being dishonest about his views on Social Security. Although much has been written about Biden’s position, far less scrutiny has been applied to what Sanders proposes to do with the nation’s largest federal spending program. That’s a problem, because Sanders’ agenda isn’t honest about Social Security’s financial condition and would gravely harm the young voters powering his presidential campaign if enacted.

Here are the facts: both Biden and Sanders, as well as nearly every other Democrat running for president in 2020, have proposed to expand Social Security benefits during the campaign. Nobody is championing benefit cuts in this election. The only real difference among the candidates’ proposals is for whom benefits would be expanded. Biden has targeted his benefit expansions to low-wage workers and window(ers), two groups of older Americans that are statistically more likely to be left in poverty by our retirement system. These are the folks who need Social Security the most. Sanders, meanwhile, has proposed across-the-board benefit increases that would increase benefits for even the wealthiest retirees regardless of need.

Unfortunately, no one is talking about the elephant in the room: Social Security doesn’t even have the capacity to pay out the benefits already scheduled. Every year since 2010, the program has spent more money on benefits than it has raised in payroll taxes.  The U.S. Treasury is currently covering that shortfall, because it borrowed from previous surpluses and is now paying that debt back. But once those funds are exhausted in 2035, Social Security would be legally required to cut benefits across the board by roughly 20 percent. Even Sanders has acknowledged the program has “been adjusted before, and adjustments will have to be made again.”

Read the full piece here.

Ritz for Forbes: “Democrats Finally Debated The Deficit. What Did They Say?”

Posted on by The Progressive Policy Institute

Two days ago, I noted there had been little mention in the Democratic debates of the trillion-dollar deficits being run up by the Trump administration. That discussion finally started last night after moderator Abby Phillip asked Sen. Bernie Sanders how he would finance his proposals to double existing federal spending. Several candidates weighed in, offering insight into how their management of the federal budget would differ from one another, as well as with President Trump.

Sanders rejected the premise of the question and insisted that his Medicare-for-All plan would actually reduce total health-care spending in the United States. The reality, however, is that – despite embracing almost every tax hike imaginable – Sanders hasn’t come up with a credible plan to finance even half of the more than $50 trillion in additional spending he’s proposed over the next 10 years. Sen. Elizabeth Warren, who has made enacting a federal wealth tax one of the central pillars of her campaign, said that some of the revenue from this tax could be used to pay down the growing national debt.

The problem here is that Warren – like Sanders – has already pre-committed every dollar of her wealth tax (and other revenue proposals) to new spending. Major federal programs, including Social Security and Medicare, are facing growing shortfalls due to our ageing population and the Trump administration’s reckless tax-cut and spending policies. As a result, the next president will likely inherit a 10-year deficit of almost $17 trillion. How could Warren or Sanders hope to pay for the promises our government is already making after they’ve tapped every revenue source they conceivably can to pay for new spending?

Read the full piece here.

Ritz for Forbes: “2019 Was Officially Trump’s First Trillion-Dollar Deficit. Will Democrats Debate It?”

Posted on by The Progressive Policy Institute

It’s official: the Trump administration spent $1 trillion more in 2019 than it raised in revenue. That deficit is 50% larger than the deficit in 2017, which was President Trump’s first year in office, and represents the first calendar-year deficit to top $1 trillion since 2012. Annual deficits will only grow worse in the coming decade, in large part thanks to the $2 trillion tax cut Trump signed into law in 2017 and a similarly-sized tax and spending deal he signed at the end of last year (over a quarter of which was added to the national debt).

With trillion-dollar annual deficits stretching into the future indefinitely, will Democrats address this generational challenge in their Presidential debate? There sure is an appetite for it: when I had the privilege of speaking with students at the New England College Convention in New Hampshire last week, they expressed deep concern about the rising national debt they’re poised to inherit and how the Democratic candidates would pay for their proposals.

Unfortunately, these issues haven’t been raised in any of the more than 500 questions asked throughout the last six presidential debates. The seventh debate on Tuesday night presents one last opportunity to change this dynamic before the Iowa Caucus.

Read the full piece here.

Stangler for Medium: “The first Democratic debate of 2020 is next week: Guess what won’t be talked about?”

Posted on by The Progressive Policy Institute

The Democratic presidential field continues to be in flux, with Julian Castro dropping out and Michael Bloomberg ramping up his campaign. Participation in the January 14th debate is, as of yesterday, limited to just five candidates. Those five — Joe Biden, Amy Klobuchar, Elizabeth Warren, Pete Buttigieg, and Bernie Sanders — have hit the polling and donation thresholds to qualify.

The narrowing is unsurprising, but unfortunate in many respects. The biggest is that it means the debate likely won’t include much mention of one of the most important economic issues facing the country. What’s that?

Declining business creation and overall economic dynamism.

Read the full piece here.

Ritz for Forbes: “The Trillion-Dollar Question Missing From The Presidential Debate”

Posted on by The Progressive Policy Institute
Congress voted this week for a $1.9 trillion tax and spending deal, over a quarter of which was added to our $23 trillion national debt. Thanks to this and other fiscally irresponsible legislation signed into law by President Donald Trump, the federal government will run an annual budget deficit of over $1 trillion this year and every year that comes after it. Yet of over 500 questions asked throughout six presidential debates, not a single one has raised the issue.

 

Read the full piece on Forbes.

Ritz for Forbes: “Naughty Or Nice? Breaking Down Congress’s $1.9 Trillion Budget Deal”

Posted on by The Progressive Policy Institute
The House of Representatives earlier this afternoon passed two bills to provide $1.4 trillion in funding for defense and non-defense spending programs that must be appropriated on an annual basis. As is often the case with must-pass legislation at the end of the year, these bills have become “Christmas trees” decorated with various policy riders and pet projects for members of both parties in Congress. What are the major provisions attached to this legislation that help add $500 billion to its price tag, and should they put Congress on the naughty or the nice list?

Read the full piece on Forbes.

Ritz for Forbes: “Three Tax Cuts a Santa Claus Congress Could Deliver in 2019”

Posted on by The Progressive Policy Institute

Congress must pass a comprehensive funding bill by the end of next week to avoid a repeat of last year’s government shutdown. Such a must-pass bill at the end of the year often becomes a “Christmas tree” decorated with various policy riders and pet projects for members of both parties in Congress. But under this year’s tree, a fiscally irresponsible Santa Claus Congress might leave wealthy Americans three gifts that together could cost up to $1 trillion over the next ten years – all put on the nation’s credit card for young Americans to pay off for generations to come.

Read the full piece here.

Marshall for The Hill: “Is Corbyn handing Brexit to Boris Johnson?”

Posted on by The Progressive Policy Institute

When British voters go to the polls Thursday, it probably will be their last chance to stop Brexit. If they don’t, Jeremy Corbyn will bear much of the blame.

Wait – isn’t the Labour Party leader running to oust the man actually driving the UK toward Brexit, Prime Minister Boris Johnson? Yes, but polls show Johnson’s Conservatives holding on to a double-digit lead over Labour. That’s remarkable, considering the sorry mess Tory leaders have made of Brexit over the last three years.

If Johnson has the electoral wind at his back, it’s not because he’s so mesmerizing. It’s mainly because of Corbyn’s epic unpopularity with UK voters. A mere 22 percent approve of Labour’s chief, while 58 percent say he’s doing badly. Thirty-six percent approve of Johnson, and 43 percent rate him negatively.

Read Will Marshall’s full op-ed here.