issue: Transportation & Infrastructure

Ritz for Forbes, “Victorious Democrats Should Thank Young Voters By Funding America’s Future”

Posted on by The Progressive Policy Institute

On Tuesday, Democrats won control of the U.S. House of Representatives and state legislatures across the country thanks to record-breaking turnout among young voters. Now it is time for newly elected Democrats to stand up for the interests of their constituents by supporting an economic agenda that funds America’s future.

The reckless policies of the current administration, and many of its predecessors, have slashed critical public investments that most benefit young Americans while simultaneously burying them and future generations under a mountain of debt. In a recent report, the Progressive Policy Institute documents these trends and explores how these reckless policies could drain America’s economic strength and seriously harm young Americans for decades if no action is taken to change course.

Continue reading at Forbes.

Mandel for Forbes, “Digital Manufacturing And The Internet Of Goods”

Posted on by The Progressive Policy Institute

Manufacturing is going digital—but it isn’t easy.

Domestic manufacturers employ 150,000 software developers and programmers, according to the Bureau of Labor Statistics. Seems like a hefty number, right? But 120,000 of those tech experts, or 80%, are concentrated in only two industries: computer and electronics manufacturing; and transportation equipment.  These are also the industries that have been buying the great majority of robots. Indeed, roughly two-thirds of the industrial robots sold in North America go to the automotive industry.

Across the rest of manufacturing, most executives are cautiously inching rather than sprinting towards digitization. The slow progress shows up in the productivity statistics. For example, labor productivity actually declined in 15 out of 21 3-digit manufacturing industries in 2017.

Continue reading at Forbes. 

Ben Ritz Discusses New PPI Report on Two Radio Interviews

Posted on by The Progressive Policy Institute

Director of PPI’s Center for Funding America’s Future, Ben Ritz, participated in two radio interviews this week to discuss his new report, Defunding America’s Future: The Squeeze on Public Investment in the United States. The report explains how short-sighted fiscal policy is undermining critical investments in education, infrastructure and scientific research that are integral to the long-term health of our economy. Read the full report here.

The first interview was on Facing the Future with host Chase Hagaman, which airs on New Hampshire’s WKXL radio station. Listen to the WKXL interview here.

The second interview was on Reality Check with host Charles Ellison, which airs on Philadelphia’s WURD radio station. Listen to the WURD interview here.

Misguided Crew Size Legislation Risks Slowing Needed Freight Rail Growth

Posted on by The Progressive Policy Institute

The Progressive Policy Institute (PPI) has previously opposed arbitrary, redundant, and costly regulations, and proposed the Regulatory Improvement Commission to eliminate them. Regulation plays a vital role in refereeing market competition, protecting public health and safety, and keeping powerful economic actors honest. But regulations must be more nimble and adaptable to catalyze growth in a fast-changing world.

For people skeptical that regulation inhibits innovation and productivity growth, here’s an example of a wrong-headed proposed rule that would put Washington in the business of micromanaging employment in the freight rail sector.

When the Rail Safety Improvement Act was passed following the 2008 Chatsworth train collision, it mandated freight railroads implement Positive Train Control (PTC). PTC is a nationwide system of newly developed technologies that constantly processes thousands of variables to avert human error, including train collisions and derailments. Its implementation came at a hefty price to the railroads, estimated to cost more than $10 billion by completion.

One of the benefits of PTC was that it would enable railroads to move from two-person to one-person crews at some point down the road, boosting productivity with no loss of safety.

However, lawmakers now appear eager to flip course as fears of automation and job loss loom large in public policy conversations. Earlier this year, the Safe Freight Act was introduced in the Senate, a companion bill to a bipartisan House proposal unveiled in 2017. The legislation would mandate the crew size of freight trains to include both a locomotive engineer and a train conductor. While the legislation will not pass before midterms, it is likely to be reintroduced next Congress.

These proposals would deny freight rail the productivity gains of the digital age despite the widespread embrace of automation for passenger vehicles and commercial trucks on highways. Labor productivity for rail transportation has risen only a modest 16 percent over the last decade, about the same as the lagging pace of productivity growth across the entire U.S. economy. Meanwhile, as shown in Figure 1, the price of railroad transportation has risen 77 percent since 2000, far outpacing inflation. Allowing the freight rail industry to digitize would jumpstart productivity growth and cut distribution costs for the energy, manufacturing, and construction sectors they serve.

What’s more, there is no evidence to suggest that one-person crews are less safe than two-person crews. Single-person crews are commonly used in other countries and the FRA acknowledges the “evidence…indicates that safety record of these foreign operations are acceptable.” In the U.S., crew sizes have steadily been reduced from the five-person crews of the 1970s to the current two-person crews, with accident rates falling more than 80 percent during that time. And passenger trains have safely used single-person crews for decades.

Railroad investment and technological advances have played a critical role in realizing safety gains over the last decade. Since 2008, freight railroads have spent $245.3 billion on capital expenditures like infrastructure and equipment. Ultrasound, ground-penetrating radar, smart sensors, analytics software, and data sharing have enabled railroads to proactively identify and fix track and equipment issues. As a result, railroad accidents are at a historic low, according to data from the FRA. As shown in the figure below, the total train accident rate dropped 42 percent from 2007 to 2017. Track-caused accidents have dropped 51 percent. And accidents caused by human error are down 41 percent.

The implementation of PTC promises to further drop accident rates. According to forecasts from the Federal Highway Administration, total U.S. freight shipments will rise from 17.7 billion tons in 2016 to 24.2 billion tons in 2040, a 37 percent increase. Imposing crew size mandates on the freight rail industry would inefficiently divert resources from investing in safety, cutting costs for consumers, and improving and expanding America’s rail infrastructure. Rather, it would unnecessarily increase labor costs in the safest era ever of rail travel.

New Report Highlights How Technology-Not Tariffs-Key to Revival of U.S. Manufacturing Jobs

Posted on by The Progressive Policy Institute

WASHINGTON—Manufacturing productivity, on the decline for two decades, could be on the upswing and the sector could be on the verge of a significant transformation, according to a new report authored by PPI Chief Economic Strategist Dr. Michael Mandel. This shift hinges on an alternative digital future for manufacturers – one built around innovations in other sectors such as distribution and communications. Mandel terms such a digital transformation in manufacturing “The Internet of Goods.”

“The future of manufacturing, having come more slowly than expected, may now be on the verge of happening all at once,” Mandel writes. “The ability to digitize the actual manufacturing and distribution process is rapidly approaching the point where new business models and new markets will emerge. Digitization of production and digitization of distribution will lead to a renewed emphasis on local manufacturers, which will provide rapid response customization and distribution that foreign competitors cannot. Moreover, we are entering a new era of manufacturing platforms, both open and proprietary, which may boost global productivity and innovation in manufacturing.”

“The result: anticipate a thickening network of small-batch and custom factories taking hold around the country. The new business models will give a sustained competitive advantage against foreign competitors, because who wants to buy a custom item from a supplier 10,000 miles away that will take two months to arrive? This will enable the U.S. to rebuild its industrial networks in areas like the Midwest and upstate New York.”

“As this fascinating preview of the coming ‘Internet of Goods’ shows, America is on the cusp of an exciting new era of manufacturing start-ups and jobs enabled by digital innovation,” said PPI President Will Marshall. “Technology – not Donald Trump’s retrograde tariffs – is the right tool for growing manufacturing jobs across the country.”

In the report, “The Rise of Internet Goods: A New Perspective on the Digital Future for Manufacturers,” Mandel discusses the convergence of three new trends that will boost manufacturing productivity and create new markets:

—The rise of ecommerce fulfillment centers and the digitization of distribution;
—The dramatic expansion of robots and 3D printing for quick and cheap delivery that will allow for more localized production of goods; and
—Cloud-based manufacturing platforms that enable design, production, sales, and distribution to run as separate services on a packet-switched network.

As the Internet of Goods takes hold, state and local policy will play a powerful role in determining which areas are the big winners, according to Mandel. The gains will depend on whether the local workforce is prepared for tech-enabled physical industries; the availability of capital for local entrepreneurs to start new businesses or expand existing ones; and the regulatory environment.

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Even After Budget Deal, Discretionary Spending Remains Low

Posted on by The Progressive Policy Institute

Although February’s bipartisan budget deal significantly increased discretionary spending, the portion of the federal budget appropriated annually by Congress remains near record-low levels. Both defense and non-defense (domestic) discretionary spending are falling relative to the size of the economy – a trend that has serious long-term implications for our nation’s ability to make critical public investments that strengthen the foundation of our economy.

Domestic discretionary spending is the category of federal spending that encompasses virtually all non-defense, non-entitlement programs. These programs include critical public investments such as infrastructure and scientific research that provide long-term benefits to our society. It is also the part of the budget that Congress has the flexibility to use for addressing unexpected crises such as natural disasters and economic downturns. Reducing the resources available for domestic discretionary spending thus risks jeopardizing many core government functions and the future health of our economy.

Unfortunately, that’s exactly what policymakers have been doing in recent years. The Budget Control Act of 2011 capped both categories of discretionary spending as part of a broader effort to reduce future deficits. When Congress failed to reach a bipartisan agreement on taxes and other categories of federal spending, the BCA automatically triggered an even deeper, across-the-board cut to discretionary spending known as sequestration. While the sequester has been lifted several times since it first took effect, discretionary spending consistently remained far below the original BCA caps.

That trend ended with the Bipartisan Budget Act of 2018. This budget deal not only lifted discretionary spending above sequester levels – it also went above and beyond the original BCA caps for two years. Nevertheless, projected domestic discretionary spending for Fiscal Year 2019 is significantly below the historical average as a percentage of gross domestic product. Moreover, even if policymakers extended these policy changes beyond the two years covered by the BBA, we project that domestic discretionary spending could fall to just 3 percent of GDP within the next decade – the lowest level in modern history.

The story is similar for defense spending. Thanks to the pressure put on by the sequester, defense discretionary spending fell to just under 3.1 percent of GDP in FY2017. Under the BBA, defense spending would increase to 3.4 percent of GDP in FY2019 before falling again. Unlike domestic discretionary spending, however, defense would remain above the all-time low it reached before the 2001 terrorist attacks throughout the next decade.

None of this is to say that policymakers should abandon any semblance of fiscal discipline when it comes to discretionary spending. The budget deal set domestic discretionary spending levels above those requested in President Obama’s final budget while also setting defense spending above the levels requested by President Trump. This fact suggests that the immediate spending increase was more than either party really needed to fund its priorities. Sharp spending increases without a clear purpose are more likely to lead to waste as government officials lose the incentive to make tradeoffs and efficiently target taxpayer resources.

Moreover, the budget challenges that led to the original imposition of the Budget Control Act remain serious. PPI criticized the BBA because we believe that any spending increase above the original BCA caps – which were meant to be a down payment on much-needed fiscal discipline – should be offset so as not to further exacerbate the nation’s already ballooning budget deficit. Thanks to both it and other recently enacted legislation, the federal government is now running an annual budget deficit that may never fall below $1 trillion again.

But when policymakers are ultimately forced to confront the nation’s long-term fiscal challenges, they should focus their efforts on the tax code and non-discretionary programs that are growing on auto-pilot faster than the economy. Discretionary spending isn’t the main driver our budget deficits, and most of the savings achieved by cutting internal waste should be redirected towards more beneficial public investments. A great nation invests in its future and cutting those investments too deeply will only hurt us in the long run.

Senate Democrats’ Deficit-Neutral Infrastructure Plan Clarifies the Cost of Tax Cuts

Posted on by The Progressive Policy Institute

Senate Democrats yesterday unveiled an ambitious $1 trillion infrastructure proposal that would invest in everything from roads and railways to hospitals and high-speed broadband. And in sharp contrast to recent proposals by the Trump administration, this new Democratic proposal includes a plan to fully pay for itself.

The proposal calls for repealing three elements of the recently-enacted Republican tax bill that almost exclusively benefit the wealthiest taxpayers, as well as closing the “carried interest loophole” that allows certain earnings on Wall Street to be taxed at a lower rate than other compensation. It would also raise the top corporate tax rate from 21 percent to 25 percent – the average rate among OECD countries and the level originally proposed by House Ways and Means Chairman David Camp (R-MI) back in 2014.

Spending in the new proposal is broken down into 19 different categories, each with its own budget and parameters for implementation. The package as a whole includes additional guidelines, such as encouraging the adoption of innovative technologies and long-term financing mechanisms, to accompany proposed spending. If fully implemented, the proposal’s authors believe it would create 15 million good-paying jobs.

Compare that to the proposal offered last month by the Trump administration, which claims to increase infrastructure investment by $1.5 trillion even though the administration’s budget provided no additional funding for it. The Trump proposal would also privatize a wide variety of physical assets, such as waterways and interstate highways, that the Democratic proposal would retain for public use.

Another advantage of the Democratic proposal is that it makes clear to voters the true cost of the Republican tax cut enacted last year – something PPI has been urging Democrats to do since before passage of the bill. For less than half the cost of this terrible tax cut, voters could have gotten a robust 21st century infrastructure that would benefit our economy for generations to come. That message could be a powerful one heading into the midterm elections, especially if paired with a credible and comprehensive Democratic framework for “repealing and replacing” the GOP tax bill.

Senate Democrats should be commended for including suggested funding mechanisms in their proposal. Whereas Republicans added over $2 trillion of tax cuts to the national debt, the Democrats’ infrastructure proposal would be fully funded and deficit-neutral. If implemented in a timely and cost-effective way, their proposal might even reduce budget deficits because of the high economic returns on well-targeted infrastructure investment. The stark contrast between these two approaches to fiscal policy is just further evidence that only one of the two political parties in Washington is making any attempt to pay for its proposed policies.

But when they find themselves in a position to implement these policies, Democrats should keep in mind that simply paying for their new proposals isn’t sufficient.

The federal government is now spending $1 trillion more than it raises in revenue every year – a gap that is projected to more than double over the next decade. It will be impossible to sustain social programs as they’re currently structured, let alone fund new ones, without major reforms to both existing spending and the tax code. The government cannot afford to commit every dollar of additional revenue to new promises until it finds a way to pay for the ones we’ve already made.

For these reasons, Democrats would be wise to use yesterday’s proposal as merely the starting point for crafting a complete fiscal policy: one that sustainably finances both public investments and a strong social safety net without placing an undue burden on young Americans. A fiscally responsible public agenda along these lines is what the Democratic Party needs, and it’s what our country deserves.

#TBT: How Public-Private Partnerships Can Get America Moving Again

Posted on by The Progressive Policy Institute

This week, President Trump unveiled proposed specifics for the infrastructure plan he discussed in his State of the Union address last month. As part of Trump’s proposal, the federal government would dedicate just $200 billion (by cutting existing infrastructure funding without adding new sources) to infrastructure initiatives, relying instead on local and private investments to reach the administration’s goal of $1.5 trillion in total spending. Whether or not this plan gets passed, it is clear that private investment will play a key role in any infrastructure initiative from the Trump administration.

In this 2014 piece from Diana Carew, former director of the Young American Prosperity Project, PPI explores the potential role of public-private partnerships (P3s) in American transportation systems. In “How Public-Private Partnerships Can Get America Moving Again,” PPI argues that P3s “have several key advantages over traditional public funding.” Specifically, P3s require fewer taxpayer dollars, encourage innovation, and help depoliticize public works projects. All of these factors allow P3s to achieve higher financial returns. However, institutional support from government is necessary for these partnerships to succeed. The paper argues that, in order to facilitate meaningful partnerships, Congress should allow more tax-exempt private activity bonds, encourage the participation of foreign investors, and set up a fund for projects with national significance.

Although specific legislative circumstances have since changed, the PPI article offers an important starting point for considering the role of private investment in public infrastructure projects. The memo explains that public-private partnerships “are a complement to, not a replacement for, the traditional model of financing infrastructure through public appropriations,” and that thoughtful public policies can help make P3s a more effective financing strategy. Before relying heavily on private financing for infrastructure, lawmakers must consider the ways in which government limits or facilitates the efficiency of this process. Without legal support for P3s, President Trump’s confidence in them is premature. Revisiting this 2014 piece offers a timely examination of “how to get the biggest bang for the federal buck.”

PPI Statements Prior to the State of the Union Address: “Trump’s Infrastructure Promises Are Lies”

Posted on by The Progressive Policy Institute

WASHINGTON— The Progressive Policy Institute (PPI) today released the following statements prior to President Trump’s State of the Union address, which is expected to focus on a $1.5 trillion infrastructure plan:

“The GOP’s insistence on passing tax cuts first will make it harder to tackle the infrastructure challenge,” said PPI President Will Marshall. “For example, House Republicans have proposed to kill the exemption for ‘private activity bonds’ that help leverage private investment in repairing and upgrading infrastructure. And if Republicans use revenues from repatriating overseas profits to offset the cost of their rate cuts, that money won’t be available to finance the big infrastructure push we need.

“GOP leaders have broken their promise to make tax reform ‘revenue neutral’ and now propose to add $1.5 trillion in new borrowing to the national debt. Where are the fiscal hawks of the House Freedom Caucus, who were so fierce in their attacks on Obama’s alleged fiscal profligacy? Back in their nests, cooing contentedly as their party sticks future generations with the bill for lower tax rates today.”

“The Republican tax bill gave away trillions to the richest one percent, squandering all the money needed for investments that would actually grow the economy to the benefit of all Americans; namely, rebuilding our antiquated infrastructure to be competitive in the digital economy,” said Paul Bledsoe, PPI Strategic Adviser. “Trump’s infrastructure promises are lies—because he’s given away all the money needed to pay for them. Democrats should propose rescinding the Republican tax giveaway to the rich and put forward middle class tax cuts and a robust US infrastructure plan to benefit everyone.”

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Happy Holidays from PPI

Posted on by The Progressive Policy Institute
It’s been a surreal political year, but PPI has much to celebrate this holiday season. Throughout 2017, we expanded our productive capacity and the scope of our political and media outreach significantly. For example, PPI organized 150 meetings with prominent elected officials; visited 10 state capitals and 10 foreign capitals, published an influential book and more than 40 original research papers, and hosted nearly 30 private salon dinners on a variety of topical issues.
Best of all, we saw PPI’s research, analysis, and innovative ideas breaking through the political static and changing the way people think about some critical issues, including how to revive U.S. economic dynamism, spread innovation and jobs to people and places left behind by economic growth, and modernize the ways we prepare young people for work and citizenship.
Let me give you some highlights:
  • This fall, David Osborne’s new book, Reinventing America’s Schools, was published on the 25th anniversary of the nation’s first charter school in Minnesota. David, who heads PPI’s Reinventing America’s Schools project, documents the emergence of a new “21st Century” model for organizing and modernizing our public school system around the principles of school autonomy, accountability, choice, and diversity. David is just winding up a remarkable 20-city book tour that drew wide attention from education, political, and civic leaders, as well as the media. Because David is a great storyteller, as well as analyst, it’s a highly readable book that offers a cogent picture of a K-12 school system geared to the demands of the knowledge economy. It makes a great holiday gift!
  • Dr. Michael Mandel’s pioneering research on e-commerce and job creation also upended conventional wisdom and caught the attention of top economic commentators. Dr. Mandel, PPI’s chief economic strategist, found that online commerce has actually created more jobs in retail than it destroys, and that these new jobs (many in fulfillment centers in outlying areas) pay considerably better than traditional ones. His research buttresses the main premise of PPI’s progressive pro-growth agenda: that spreading digital innovation to the physical economy will create new jobs and businesses, raise labor productivity, and reduce inequality.
  • PPI challenged the dubious panacea of “free college” and proposed a progressive alternative – a robust system of post-secondary learning and credentials for the roughly 70 percent of young Americans who don’t get college degrees. PPI Senior Fellow Harry Holzer developed a creative menu of ways to create more “hybrid learning” opportunities combining work-based and classroom instruction. And PPI Senior Fellow Anne Kim highlighted the inequity of current government policies that subsidize college-bound youth (e.g., Pell Grants), but provide no help for people earning credentials certifying skills that employers value.
  • Building on last year’s opening of a PPI office in Brussels, we expanded our overseas work considerably in 2017. In January, I endeavored to explain the outcome of the U.S. election to shell-shocked audiences in London, Brussels, and Berlin. In April, we led our annual Congressional senior staff delegation to Paris, Brussels, and Berlin to engage European policymakers on the French presidential election and other U.S-E.U. issues, including international taxation, competition policy, and trade. PPI also took its message of data-driven innovation and growth to Australia, Brazil, Japan and a number of other countries.
Other 2017 highlights included a strategy retreat in February with two dozen top elected leaders to explore ideas for a new, radically pragmatic agenda for progressives; a Washington conference with our longtime friend Janet Napolitano (now President of the University of California system) on how to update and preserve NAFTA; public forums in Washington on pricing carbon, infrastructure, tax reform, and other pressing issues; creative policy reports on varied subjects; and a robust output of articles, op-eds, blogs, and social media activity.
I’m also happy to report many terrific additions to PPI in 2017. Rob Keast joined to manage our external relations and new policy development; Paul Bledsoe assumed a new role as Strategic Adviser as well as guiding our work on energy and climate policy; and Emily Langhorne joined as Education Policy Analyst. We will also be adding a fiscal project next year.
All this leaves us poised for a high-impact year in 2018. In this midterm-election year, our top priority will be crafting and building support for a new progressive platform — a radically pragmatic alternative to the political tribalism throttling America’s progress. That starts with new and better ideas for solving peoples’ problems that look forward, not backward, and that speak to their hopes and aspirations, not their anger and mistrust.
It’s a tall order, and we cannot succeed without your help and support. Thanks for all you have done over past years, and we look forward to working with you in 2018.
Happy holidays and New Year!

Soaring Construction Costs Threaten Infrastructure Push

Posted on by The Progressive Policy Institute

Throughout the 2016 presidential campaign, Donald Trump promised a massive infrastructure program financed primarily by the private sector. Trump’s 2018 budget proposed leveraging $200 billion in direct federal spending into $1 trillion in infrastructure investment through private sector incentives.

However, President Trump recently retreated from this campaign pledge that private sector funding would be a cornerstone of his infrastructure plan, raising questions as to whether the plan would be financed through increased federal spending or if state and local governments would be forced to foot most of the bill. Unfortunately, this approach is likely to limit the scope of the initiative to a fraction of what Trump has described, as federal, state, and local governments continue to deal with the reality of limited budget resources. In any case, there’s a large obstacle to any ambitious infrastructure plan – soaring construction costs.

Bringing down the astronomical cost of construction in the United States, which turns even the simplest infrastructure projects into enormous fiscal burdens, would help make the infrastructure upgrade that America so badly needs more affordable.

Fulfillment Centers: The Nodes of a Packet-Switched Physical Distribution Network?

Posted on by The Progressive Policy Institute

Warning! Wonky post ahead.

At PPI, we are focused on understanding where the new jobs of the future are coming from, and how policymakers can help foster their growth. That sometimes requires identifying underlying trends that may not be obvious.

The growth of multiple networks of ecommerce fulfillment centers–built by retailers such as Amazon, Walmart, Nordstrom and many others–is effectively a transition from “circuit-switched” physical distribution networks to “packet-switched” physical distribution networks. Analogous to the shift from circuit-switched telephone networks to the packet-switched networks that make up the Internet, the new ecommerce distribution networks are capable of much greater flexibility and lower costs than the dumb warehouses which preceded them.

And just like the Internet helped create a wave of new industries in tech hubs, this new “Internet of Goods” is going to enable a new wave of business and job creation in domestic manufacturing and food production. With the right policy, this growth in domestic manufacturing and food production jobs will benefit states across the country.

Background

The old telephone networks were “circuit-switched”–that means the telephone company would set up a separate circuit for each call, and the callers would “own” the circuit until the call was over. The connections were solid, but they were not flexible, and they wasted network resources (since so much of a voice conversation is dead air). By contrast, the multiple networks that make up the Internet break down data (including voice) into packets, which are then routed to their destinations and reassembled.  Packet switching requires a lot more intelligence in the system, but it’s much more flexible and lower cost than circuit switching.

As we’ve seen over the past two decades, the widespread introduction of packet switching in telecom opens up all sorts of possibility for entrepreneurs and existing companies to create new digital products and services. The Internet revolution transformed digital industries, creating millions of jobs in the process. In particular, since December 2007, the tech-ecommerce sector has generated 1.7 million jobs. That’s around half of private sector job growth, outside of health and education.

The old warehouse-retail distribution system was analogous to circuit switching. Big trucks would bring boxes of identical goods from manufacturers or importers. The warehouses would break down the incoming goods into predictable patterns.  All the boxes of identical lamps, for example, would be stored together for easy retrieval when it was time to put together the shipments to individual retail stores.  The shipments were regular and straightforward, and didn’t require much “intelligence” in the networks.

Ecommerce fulfillment centers are much more like the “routing nodes” of the Internet. They take in goods from a wide variety of sources, at irregular interviews, including returns from consumers. They store the goods according to their own internal schema. For example, Amazon uses a “random stow” method that distributes incoming products across the fulfillment center in a way that maximizes the odds of products in the same order being close together. Since most consumers don’t order multiples of the same item, the Amazon random stow method might distribute  the most popular items across the whole fulfillment center, rather than clumping them all together. Then the ecommerce fulfillment center puts together consumer orders and ships them out.

The Internet of Goods

In effect, these multiple networks of fulfillment centers are creating a new packet-switched “Internet of Goods.”  The first economic consequence, as we have described, is the creation of hundreds of thousands of jobs in electronic shopping companies and fulfillment centers. This is analogous to the first wave of Internet growth in the 1990s.

The next step, we believe, will be the creation of new businesses in domestic manufacturing and food production that make use of the flexibility and low cost of the Internet of Goods. For example, we can visualize custom manufacturing operations that are located near fulfillment centers. They take production orders from customers, and then ship out the product on the same day via the fulfillment center. The cost of distribution would go way down compared to today’s situation, giving domestic custom manufacturers a sustainable competitive advantage against foreign rivals.

To get an idea of magnitudes, consider that as  of 2015, 57% of the retail price of furniture was the cost of distribution (transportation, wholesale, and retail).  For women’s clothing, 59% of the retail price was the cost of distribution, and for food, 40% of the retail price was the cost of distribution. Reducing the cost of local distribution while shortening the distribution time could open up new sustainable business models for domestic manufacturers and food producers.

 

 

 

 

 

 

 

 

 

 

 

 

 

Flashback Friday: PPI in Hindsight

Posted on by The Progressive Policy Institute

Just over a year ago, PPI unveiled a big ideas blueprint with a prescient subtitle: Unleashing Innovation and Growth: A Progressive Alternative to Populism. We knew that progressives in the United States and Europe needed better answers to the economic and cultural grievances that have fueled the rise of a retrograde populism and nationalism around the world. We did not foresee that Democrats would fail to offer a forward-looking plan for jobs and shared growth, opening the door to Donald Trump’s improbable victory.

Which makes the themes and ideas in PPI’s sweeping policy blueprint more important than ever. Populism today thrives in the political vacuum left by center-left parties that offer no clear vision for reviving economic dynamism and hope. “Winning the economic argument will be essential to victory in the 2016 elections and it starts by getting the diagnosis right,” the blueprint noted. Instead, Democrats ran a campaign that leaned heavily on identity politics, wealth redistribution and centralized, small-bore solutions.

Unleashing argued that America (and Europe) are stuck in a slow-growth trap that holds down wages and living standards. And it offered bold prescriptions for building on America’s competitive advantage in technology and entrepreneurship to spread innovation – now concentrated in a vibrant digital sector — to the nation’s physical economy, which continues to suffer from low productivity. In addition, the document proposed creative ways to modernize the nation’s economic infrastructure, improve the regulatory environment for innovation, build middle class wealth and empower poor Americans to work, save and chart their own course to social mobility and inclusion.

Crucially, the blueprint also urged progressives to reject anger and victimhood and offer voters a confident account for how America can build a new, inclusive prosperity:

What America needs is a forward-looking plan to unleash innovation, stimulate productive investment, groom the world’s most talented workers, and put our economy back on a high-growth path, It’s time to banish fear and pessimism and trust instead in the liberal and individualist values and enterprising culture that have always made America great.

That was the road not taken in 2016. Now it’s the road to political relevance and success for progressives here and elsewhere.

 

Fast Company: America’s Infrastructure is Crumbling–Here’s How We Can Fix It

Posted on by The Progressive Policy Institute

An article published today by Fast Company’s Co.Exist highlights two policy ideas of PPI’s on how to get more infrastructure projects up and running.

Borrow Money When It’s Cheap

The Progressive Policy Institute, a centrist Washington, D.C., think tank, has proposed several ways around relying on the gas tax for infrastructure funding. These include using “dynamic scoring” to assess the true value of public works. Research shows that each dollar invested produces economic value of between $1.5 and $2. So, says the PPI, it makes sense for the federal government to borrow the money directly, especially at a time when interest rates are low. The PPI says we need to get away from the “hardening Republican view” that all public spending is bad, and instead make a distinction between borrowing that funds investment and borrowing that pays for ongoing everyday programs.

Public-Private Partnerships

Will Marshall, president of the PPI, says Congress should agree to a White House proposal to exempt infrastructure companies from certain taxes. And it should seed a self-financing infrastructure bank, which would act as a founding partner as the public-private deals are being signed. Another idea is the West Coast Infrastructure Exchange, which bundles smaller projects across state lines, producing more attractive opportunities for private investors.

Read more at Fast Company’s Co.Exist.

RealClearPolicy: Nuclear Innovation Can Support Growth and a Healthy Climate

Posted on by The Progressive Policy Institute

Amid mounting public concern about climate change, many progressives are giving nuclear energy another look. It’s already America’s biggest source of zero-carbon energy, far surpassing wind and solar. And “next generation” reactor technologies hold great promise for generating nuclear power in safer, cleaner, and cheaper ways.

What’s more, America will need more nuclear energy to meet the ambitious greenhouse gas reduction targets President Obama set at last year’s Paris climate summit. According to the White House: “As America leads the global transition to a low-carbon economy, the continued development of new and advanced nuclear technologies along with support for currently operating nuclear power plants is an important component of our clean energy strategy.”

Nuclear energy today accounts for nearly 11 percent of the world’s electricity. Without it, the world produce an additional 2.5 billion metric tons of carbon dioxide per year. Here in the United States, nuclear energy generates 19 percent of our electricity — 63 percent of all zero-carbon electricity in America. The United States as well as developing countries such as China and India will need more nuclear power to meet growing energy demand without loading more carbon into the earth’s atmosphere. But we’re heading in the opposite direction — decreasing more nuclear capacity than we are adding.

U.S. nuclear companies intend to add five more reactors to the nation’s fleet by 2020. In the meantime, however, they have announced plans to shut down three existing plants — and more may be in the offing. Why so many closures? One of the main reasons is the glut of cheap natural gas stemming from America’s shale boom. Natural gas typically sets the price of electricity on the grid in much of the United States. Today, with natural gas trading on the spot market at around two dollars per BTU, nuclear-generated power is being priced out of electricity markets.

Continue reading at RealClearPolicy.

Transportation Topics: Infrastructure Permitting Project Delays Driving Up Costs, Experts Say

Posted on by The Progressive Policy Institute

PPI President Will Marshall was quoted on his thoughts about reforming America’s transportation infrastructure.

Infrastructure projects in the United States are taking up to 10 years to gain regulatory approval, a problem that is too often sending investors to other countries and driving up the costs of projects, several transportation experts said

An “accumulation of laws and regulations,” largely designed to protect the environment via environmental impact reviews, is bogging down approval of badly needed transportation projects and instead causing environmental damage, Will Marshall, president of the Progressive Policy Institute, said at a May 19 Infrastructure Week event here.”

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