Posts tagged editorials
Rethinking American Investment in an Intangible Age

At The Wall Street Journal’s 2017 CEO Council meeting, Gary Cohn—then the director of the White House National Economic Council—spoke to the Trump administration’s tax reform efforts. “We want companies to invest back in the economy,” he said, “not give money back, or sit on money because they don’t think there’s anything to do with it.”

Moments later, the Journal’s John Bussey turned to the audience and asked for a show of hands: “If the tax reform bill goes through, do you plan to increase investment, your companies’ investment, capital investment?” In the crowd of over 100 top corporate executives, only two or three hands could be seen rising on the C-Span recording.

“Why aren’t the other hands up?” Cohn asked through nervous laughter, before the moderator deftly changed the topic.

Opening with the transcript of this exchange, a new report from Senator Marco Rubio, “American Investment in the 21st Century,” suggests it knows the answer to that question. But in a compelling shift from the usual Republican focus on taxes and regulation, it points the finger squarely at over-financialization and the notion that corporations exist to maximize returns to their shareholders.

Shareholder primacy, the report argues, “tilts business decision-making towards returning money quickly and predictably to investors rather than building long-term corporate capabilities, reduces investment in research and innovation, and undervalues American workers’ contribution to production.”

Read the rest at the American Conservative.

Has Trump Handed Democrats an Opening in Red America?

President Trump’s feckless trade war is bludgeoning the bottom line of the Republican Party’s reliable rural base. But the party’s disregard for the economic interests of its own constituents goes well beyond barriers to Chinese markets.

Small towns and rural areas, along with some Rust Belt metros, are falling ever further behind booming urban dynamos — leaving many heavily Republican regions in a deepening morass of economic deterioration, joblessness, substance abuse and declining life expectancy. The lower-density places most Republicans call home produce barely half as much wealth as our biggest cities — and it’s showing.

Yet the travails of America’s struggling red regions, and practical ideas about might be done to alleviate them, are barely mentioned in right-leaning policy circles. For example, “The Once and Future Worker,” a widely discussed book by Oren Cass, a former economic policy adviser to Mitt Romney now at the Manhattan Institute, focuses on initiatives to expand employment and wages for American workers but largely neglects the changing geography of economic output and opportunity behind the woes of heartland workers.

Worse, the Republican Party under Mr. Trump has blundered into a positively anti-rural economic agenda, leaving the soybean fields littered with $20 bills for enterprising Democratic presidential hopefuls to pick up. The president’s nativist immigration agenda deprives farms and small factories of workers local economies can’t otherwise supply, while the administration’s latest budget proposalcontinues the Republican assault on the health care and social insurance programs rural populations increasingly rely on to survive.

To address the problem, we need to understand it. For decades, poorer areas had been converging economically with wealthier ones, but that stalled in the early 1980s as employment began to shift away from widely distributed agriculture and manufacturing jobs toward the service sector and high-skill “knowledge work” in the city-centered information economy.

Read the rest at NYTimes.com

How to Escape the Two-Income Trap

The reprisal of Elizabeth Warren’s 2004 book The Two-Income Trap has sparked a valuable debate within the conservative policy community. Co-authored with her daughter Amelia Warren Tyagi, the book argues that the rise of two-income households has created a bidding war over goods like housing and child care, offsetting apparent household income gains and leaving families in a more precarious financial state.

Tucker Carlson thinks the book is onto something and that the GOP should become the party of traditional families. Helen Andrews thinks so too, but laments the contemporary dearth of female voices leading the charge. Other conservative thinkers aren’t so sure, particularly those like Scott Winship who have long defended the encouragement of maternal work as a pillar of conservative anti-poverty policy.

Warren’s original argument consists of many moving pieces, including tie-ins with her somewhat dubious academic work on household bankruptcy. Nonetheless, The Two-Income Trap’s appeal to a certain type of traditionalist should be obvious enough.

Yet accepting Warren’s version of the story at face value falls into a trap of its own, derailing the normative debate traditionalists would like to have into an empirical debate about Warren’s specific claims. Matt Bruenig’s critique, which showed how the data in The Two-Income Trap was improperly adjusted for inflation, was particularly devastating. Michael Strain of the American Enterprise Institute picked apart Warren’s “bidding war” theory in a recent column, writing: “If you’re looking for a reason why their costs have risen so much, start with policies that subsidize their demand and restrict their supply, not with women working.”

Read the rest at the American Conservative.

It's time to get serious about helping America's struggling regions

By Samuel Hammond and Michael Myers

Despite our internet age, where a person lives and works matters more than ever before in the modern American economy. Between 2007 and 2017, 80 percent of U.S. counties experienced declines in their working-age demographic. The New York metropolitan area now accounts for over 10 percent of the nation's output, yet only 6 percent of its population. America is still the land of opportunity, but in a way that has become increasingly concentrated in a shrinking number of locations.

The contemporary success of cities has an ominous flip side. Once-thriving regions across the United States are struggling with the collapse of industries and shrinking tax bases. Cities, on the other hand, have failed to properly absorb newcomers in search of opportunity, driving up rents and exacerbating local inequality. Policymakers often treat these two kinds of inequality — inter-regional and intra-regional — as separate. But what if they are two sides of the same coin?

It’s time to get serious about the regional nature of inequality, and push the frontier of research into the issues facing struggling communities, both rural and urban. 

There’s clearly an appetite for fresh thinking in economic development policy. Consider the battle over Amazon’s HQ2, which pitted more than 230 cities and development authorities against one another, each offering more outlandish inducements than the last. In the end, Amazon settled on an affluent part of Northern Virginia, bringing the promise of major investments to one of the richest zip codes in the country. …

Read the rest at TheHill.

How to Prevent the Next Lordstown

General Motors first broke ground in Lordstown, Ohio, 55 years ago and was once considered the most modern GM plant in the country. Thanks to a combination of business decisions by the company, tariffs implemented by the Trump administration, and a general dearth of innovative thinking the Lordstown Assembly is now set to close for good in January 2020.

From its first car, the Chevy Impala, to what now appears will be its last, the Chevy Cruze, the plant was known for its adaptability to ever-changing consumer demand. But with the announcement that GM is cutting 14,000 jobs across North America, including shuttering its Lordstown operations, adaptation has given way to extinction.

The ecological analogy is useful in more ways than one. The Trump administration’s tariffs on steel and aluminum have cost Ford and GM about $1 billion each. In any commercial ecosystem, when you raise the cost of inputs—a factory’s food source—the population declines.

Automakers, meanwhile, are looking ahead to trends in self-driving and electric vehicles. Yet rather than fostering that next stage in evolution, blunt trade restrictions and threats to revoke subsidies are the economic equivalent of wildlife conservation, treating the U.S. automotive sector as if it were an endangered species.

Public policy isn’t the only source of blame for the Lordstown closure, but it clearly hasn’t helped. Simply put, Washington, D.C., needs creative  policies to encourage genuine economic development. …

Read the rest at TheBulwark.com

Marco Rubio Wants a National Innovation Strategy

new report on China from the Senate Small Business Committee, now chaired by Senator Marco Rubio, is turning heads in the conservative policy world. The report details the “Made in China 2025” initiative, China’s national plan for technological and economic supremacy in a number of emerging industries. But what makes the report interesting, particularly from a Republican-chaired committee, is its suggestion that America shouldn’t merely punish China for unfair trade practices, but also should pursue a national innovation strategy of similar ambition.

“This report’s central conclusion is that the U.S. cannot escape or avoid decisions about industrial policy,” its authors write, after opening with an extended quotation from Alexander Hamilton’s “Report on Manufactures.” Then it explicitly rebukes the orthodox libertarian view that markets are “neutral” when government simply gets of the way:

States place great value on capturing high-productivity, high-labor content industries, or developing new ones. This is no new insight, for constraining the excessive possibilities of this behavior is arguably the orienting view of the World Trade Organization (WTO). States can attempt to redirect this fundamental interest by agreeing to “not select” industries, or at least not do so outside the bounds of reasonable policy difference. But even here, distinctions between competing decisions of economic value must be made.

Markets are always and everywhere structured by rules and institutions, the parameters of which shape final outcomes for society at large. That these rules should align with national priorities like strong families and decent wages for average people might seem obvious, but alas, too often it’s not…

Read the rest at NationalReview.com

What Tucker Carlson Gets Right

The Fox News host Tucker Carlson delivered a monologue on the market and the family last week. It quickly found a large audience, becoming a viral sensation online. It also attracted a host of critics from across the political spectrum. Some of the fiercest criticism came from conservatives, including writers such as Ben Shapiro and David French, who attacked the very argument that we believe Carlson largely got right: Contemporary capitalism, small government conservatism, and elite negligence have all played a role in the fall of the working-class family.

Let’s review the three key points Carlson made regarding the erosion of marriage and family life in America. First, he argued that “increasingly, marriage is a luxury only the affluent in America can afford.” French, a senior writer for National Review, objected to the idea that only the rich can marry, arguing that “affluence is not a prerequisite for marriage.”

But Carlson is onto something. A half century ago, there were not big differences in marriage and family life by class; the vast majority of Americans got and stayed married. Starting in the late ’60s, however, marriage eroded among the poor, and since the ’80s, it has lost considerable ground among the working class. Today, only minorities of poor adults (26 percent) and working-class adults (39 percent) ages 18 to 55 are married; by contrast, a majority (56 percent) of middle- and upper-class Americans age 18 to 55 are married. …

Read the rest at TheAtlantic.com

The Amazon HQ2 Fiasco Was No Outlier

In September 2017 Amazon issued an open invitation for North American cities to put in bids for hosting the company’s $5-billion “HQ2” (that is, second headquarters) and the 50,000 jobs it’s expected to bring. Well over 200 locations applied. Their submissions included a range of gimmicks, from an offer to create a separate city called Amazon to free sandwiches for company employees—but also, crucially, billions of dollars in economic development incentives.

When Amazon announced last month that it would split HQ2 between New York City and Arlington, Va., losing applicants cried foul: They accused Amazon of an extraordinary bait-and-switch, enticing dozens of bidders to increase the competition and the incentive offers, only to end up with two of the most obvious candidates all along.

The reality is that this sort of competition for big projects, while unusually large in the Amazon case, is the rule not the exception in economic development and has been for a long time. It has been happening in the U.S. since Alexander Hamilton received local tax exemptions in 1791 to build up the city of Paterson, N.J. as an industrial center. What’s different in our own era is that most companies aren’t actually changing their decisions based on incentives but are pocketing substantial benefits anyway.

Studies show that the cost and frequency of incentive packages—which cities and states typically offer companies to either relocate or stay put—have been rising. Secrecy surrounding many of the deals makes a full accounting difficult, but a new database assembled last year by the Upjohn Institute for Employment Research covers programs for 47 cities in 33 states. It found that the cost of such incentives more than tripled from 1990 to 2015, to $45 billion. …

Read the rest at the Wall Street Journal.

The Real Source of Teachers’ Struggles

Striking teachers in West Virginia recently made headlines in their efforts to increase their pay and benefits, which are among the lowest in the country. Teachers in Oklahoma, Arizona, and Kentucky have followed suit with similar protests. The dominant narrative, pushed by Democrats and their allies in the labor movement, presents these protests as part of a larger struggle between underpaid educators and miserly state Republicans more concerned with cutting taxes than with investing in children. While politically convenient, this story is largely a red herring distracting us from the real reason teachers in West Virginia and elsewhere are currently underpaid and unlikely to see substantial pay increases any time soon.

The problem is fiscal capacity. This is the ability of governments to raise enough revenues for the provision of basic public goods. Some states have greater total taxable resources (income, wealth, natural resources, etc.) than others. Typically, social scientists discuss fiscal capacity in regard to the inequality that results from the ability of rich suburbs to spend more on education than poor urban areas. While reformers have made great strides in reducing the disparities between urban and suburban school spending, they have paid almost no attention to disparities among states. It is impossible to address the teachers’ grievances without addressing limited fiscal capacity among poor states.

Comparing West Virginia and New Jersey helps us understand the underlying problem. Each state dedicates the same proportion of its resources to spending on education salaries and benefits — about 3.5 percent of its GDP. In other words, they are putting in the same effort. …

Read the rest at NationalReview.com