The OECD Economic Survey of the United States for 2012

The Program on America and the Global Economy hosted the Deputy-Secretary General of the Organization for Economic Cooperation and Development along with the US Ambassador to the organization yesterday to discuss the newly released OECD Economic Survey of the United States, 2012.  The organization compiles a comprehensive economic report for each member country as well as major non-member countries (i.e. the BRIC’s) every two years.  The focus of the surveys is on the macroeconomic and structural policies and key challenges that could boost economic performance on a sustainable basis in each country.

The 2012 report on the U.S. finds that the economic recovery is gaining momentum, but other key conclusions warn that legislative decisions are needed to avoid the “fiscal cliff” at the end of 2012; unemployment duration is still painfully high, income inequality and relative poverty are among the highest in the OECD, and that innovation performance has weakened.

The gains the U.S. economy has made are noted and moderate growth is expected for the next two years but a further deterioration of the European crisis or the potential for U.S. policymakers to allow for immediate sharp cuts in government spending could jeopardize the outlook, the report said. Specifically, the organization warned that U.S. lawmakers must avoid the so-called fiscal cliff of expiring tax cuts and automatic spending cuts.  A fiscal plan must be put in place to address deficits, but it should be adopted gradually as opposed to the immediate spending cuts sought by some Washington policy makers, according to the report.

To promote job creation and increase wages, the report recommended implementation of various training and re-employment programs outlined in the Administration’s FY 2013 budget and stressed the improvement of education and training overall to reduce labor-force mismatches and reduced wages.  Specifically it suggested “reducing financial and other barriers to tertiary education and providing vocational training opportunities in secondary school”.

The report was perhaps most critical of the high rate of income inequality in the U.S. economy which remains well above the OECD average, and that the level of relative poverty is one of the highest in the organization. The report said the U.S. had the fourth-worst measure of income inequality ahead of only Turkey, Mexico and Chile at the end of the last decade. Among the recommendations offered by the report, tax breaks that mainly benefit the wealthiest should be phased out over time.

“Although the middle class have seen their taxes remain roughly constant, or slightly increase, average income taxes have significantly declined for the most wealthy, especially the 1% top earners,” the report said.

Additionally, the report said the U.S. should do more to fix the educational system, including moving away from the local property-tax based funding process that is prevalent throughout the country. The OECD found that the U.S. is one of only three countries in the organization that spends less on students from disadvantaged backgrounds than on other students, and that the best teachers rarely work with students in the schools that most need their abilities. “The U.S. education system is less effective than those of other countries in helping children realize their potential,” the report concluded.

Also, the report highlighted the importance of research and development for innovation and economic growth and recommended that cuts to R&D funding be as limited as possible.  Patent reform and the increase in students graduating with degrees in STEM fields are growing needs as well.

Look for the video of the event hosted at the Wilson Center later in the week.


Posted by: Sean Norris

Sources: Bloomberg, The Wall Street Journal, The Organization for Economic Cooperation and Development

Photo Credit: OECD Conference Centre Entrance courtesy of flickr user OECD


Is Austerity Coming to America?

Last week, Greek voters went to the polls for the second time in two months, acting out the climactic scene in the long-running fiscal drama playing out on the European continent.  The choice faced by voters was between the establishment center-right party which promised to cooperate with other European nations and Eurozone lenders with regards to onerous austerity measures that have been imposed and the country’s leftist party which has declared the austerity measures far too harmful and has vowed to leave the Eurozone rather than implement them.  The conservatives won a plurality of the vote and those begging Greece to tackle its debt exhaled. 

The victory in and of itself has done little to settle the question of austerity policies on a continent whose largest economies are burdened with debt and slow growth (save for Germany).  Voters in France and, prior to this election, in Greece have taken opportunities to elect socialist platforms that reject austerity measures in an environment of slow growth while others, such as Great Britain, have continued to insist that austerity in necessary to ease the burden of debt and to allow for growth in the private sector necessary for recovery in economies still crippled by the financial crisis.   In the United States, whose debt burden is not as severe as European countries but is still close to unsustainable, Republicans swept in to office in 2010 on a popular mandate to cut government spending drastically.  Governor Romney has promised to send a bill to Congress cutting non-defense discretionary spending by 5% (about $20 billion) on his first day in office.  President Obama in turn, has warned that austerity measures are “risky” when growth is slow and can lead to “a downward spiral” where instead of reducing the debt, austerity can grow it and hurt growth.  The so-called austerity experiment has not yielded a definitive answer although both sides of the issue insist that recent events have proven their theories correct.

Decisions about austerity will have to be made soon here in the US.  Economists are rightly starting to warn that the United States faces a worrisome “fiscal cliff” at year’s end. The blunt spending cuts mandated by the 2011 compromise on the debt ceiling — and the failure of the “super-committee” that followed — along with across-the-board tax increases (i.e. the expiration of the “Bush tax-cuts”) would essentially shave off at least 4% of GDP if Congress does nothing between now and December 31st.  Some of the biggest areas hit are sure to be education (at all levels), research and development, and spending on infrastructure.  All of these areas are considered key to job growth and start-up growth, and US economic competitiveness overall.  If the debate about austerity has yet to be settled, its importance has only increased and will continue to do so; austerity’s potential consequences and the consequences of allowing debt to grow both affect key areas of economic competitiveness in ways to serious to ignore.

Posted by: Sean Norris

Sources: The New York Times, National Public Radio, Forbes

Photo Credit:austerity” courtesy of flickr user 401K 2012


Gallup Poll Indicates Distrust of Public Education at an All-time Low

Gallup released a poll yesterday that indicates that confidence among Americans in the public education system had dropped to an all-time low.  Twenty-nine percent of respondents expressed “a great deal” of confidence in schools but a similar portion, thirty percent, expressed “little or none”.  Forty percent stated they had “some” confidence in the system.  For reference, when Gallup first asked the question in 1958, fifty-eight percent expressed a great deal of confidence meaning there has been a drop twenty-nine percent in respondents who had a great deal of confidence in schools.

The question was posed in a large poll that questioned Americans on their level of faith in various public institutions like the government, the military, religious institutions, newspapers, etc.  It should be noted that every institution except for the military has, in general, had a downward trend over the last 30 years.  This year was a record low for schools but also churches, banks and television news.

While the fact that essentially every institution has lost trust among major segments of the population indicates that the causes for distrust of the school system are not necessarily inherent in the school system itself, there are certainly some education-specific factors at work.  This faltering confidence follows a year of budget cuts across the country that have forced the elimination of jobs in the education sector, student transportation and after-school programs. Parents nationwide have also been vocal in expressing their frustration with excessive standardized testing and “teaching to the test”.  Further, the American public has been inundated with the hard-to-reconcile fact that the American education system is simply no longer the best in the world, a title it had been able to lay claim to for decades.

Commentators have long speculated about what such a decisive lack of confidence in our nation’s most powerful and ubiquitous institutions means.  Many point out that, while the causes of infinite and infinitely complex, the consequences of such rampant distrust will only undermine institutions further.   “This remarkable level of distrust in America’s leading public institutions charged with safeguarding the American Dream is deeply troublesome. The enduring power of the Dream depends heavily on public confidence and trust in our vital institutions,” says David Ford of Xavier University.  David Brooks, a prominent columnist and social critic for the New York Times recently called it not a leadership problem but a “follower problem” stating “Vast majorities of Americans don’t trust their institutions. That’s not mostly because our institutions perform much worse than they did in 1925 and 1955, when they were widely trusted. It’s mostly because more people are cynical and like to pretend that they are better than everything else around them”.

This is a problem of the first order according to Brooks because “Democratic followership is also built on a series of paradoxes: that we choose our leaders but also have to defer to them and trust their discretion; that we’re proud individuals but only really thrive as a group, organized and led by just authority”.

The public education system is not immune to this; in fact it is much more vulnerable to suffer due to mistrust than an institution like banks or the courts.  The school systems rely on people choosing to send their children to the public schools rather than private, on people willing to pay property taxes to fund them, on parents who are willing to be engaged in the decision-making process, and more.  Continued distrust will undermine schools on all of these fronts and it will be at a time where public education needs a renewal more than ever.

Posted by: Sean Norris

Sources: Gallup, The Huffington Post, The New York Times

Photo Credit: Confidence in Public Schools courtesy of GallupPolitics

You Are Invited: The Start-Up Act 2.0 and American Innovation

The Program on America and the Global Economy Presents:

 The Start-Up Act 2.0 and American Innovation

 Thursday, June 28, 2012

9:00 – 11:30 a.m.

Joseph and Claire Flom Auditorium, 6th Floor, Woodrow Wilson Center



 Senator Chris Coons, Delaware


 Michael Waring, Executive Director, Federal Relations, The University of Michigan

 Joseph Kennedy, Former Chief Economist, U.S. Department of Commerce

 Peter Mueller, Director, Government Relations, Intel Corporation


 Kent Hughes, Director, Program on America and the Global Economy


 Senator Chris Coons is part of a bipartisan group of Senators that recently introduced the Startup Act 2.0 in the Senate.  He will provide a keynote address on the Act followed by a panel discussion that will focus on key aspects of the Start-Up Act 2.0.  There will be a special focus on the provisions designed to accelerate the commercialization of university research, the broadening of opportunities for temporary immigrants with post-graduate degrees in science, technology, engineering, and mathematics (STEM) for visas for permanent residency, and the proposal to assess the impact of regulations.



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You Are Invited: OECD Economic Survey of the United States, 2012



The Program on America and the Global Economy (PAGE) and Organization for Economic Cooperation and Development (OECD) present:

OECD Economic Survey of the United States, 2012

 Tuesday, June 26, 2012

3:00 – 4:30pm

5th Floor Conference


 Ambassador Richard Boucher, Deputy Secretary-General, OECD

Ambassador Karen Kornbluh, US Mission to the OECD


 Kent Hughes, Director, Program on America and the Global Economy


Patrick Lenain, Division Head, Economics Department, OECD

Wendy Dunn, Economist, Economics Department, OECD


The OECD’s 2012 Economic Survey of the United States is an in-depth analysis of the U.S. economy and offers policy recommendations to promote sustainable economic growth and employment. The Survey also explores policy options to reduce income inequality and poverty. A special chapter in this year’s report is focused on fostering innovation.

We invite you to join us at the Woodrow Wilson Center for a presentation and discussion on the findings of the report with OECD Deputy Secretary-General Ambassador Richard Boucher, US Ambassador to the OECD Karen Kornbluh, and members of the OECD Economic Survey team.

The 34-nation Organization for Economic Cooperation and Development (OECD) regularly assesses economic policies of its member countries and key emerging economies. OECD Economic Surveys are prepared as part of a peer review process and its recommendations are endorsed by all OECD member counties. They  provide timely analysis, guidance and options for policymakers to shape “better policies for better lives” and have proven to be essential reading in assessing global economic challenges and opportunities.



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Immigration Lessons From Our Northern Neighbor?

True or False: Canada has a higher foreign-born population, per capita, than the United States?  Surprisingly, it’s true and it speaks to the lessons the U.S. might learn on how to integrate immigrants into their economies.

While the United States has long had the image around the world as the refuge of the “tired, poor, and huddled masses yearning”, its increasingly arcane and complex immigration system is coming under fire as inefficient in a global economy where labor, just as much as capital, is flowing freely across borders.  More business leaders and policymakers are arguing that immigrants, especially those with in demand skills, are needed to fuel economic growth.

Canada has already caught on to this trend and is taking advantage of gaps in the American system.  Look no further than, where one of the main links is for foreigners in America on a H1-B or temporary work visa and how they can be fast tracked for Canadian immigration.  Canada, of course offers many of the same things to immigrants the U.S. does: a high standard of living, an advanced economy, rule of law, peace and safety.  In addition, Canada has made a concerted effort to use immigration to directly fill gaps in its labor force, something the US has yet to do.  To determine who is granted a permanent visa, Canada has a simple point system that awards points for things like level of education, occupational skills, language ability, and others factors relevant to productivity.  Only 22% of its immigration was for family reasons (i.e. reuniting mothers with children, brothers with sisters, etc.) while about two thirds of all permanent visas were granted for economic reasons.  In the U.S., the inverse is true: Only 13% of green cards last year were doled out for economic reasons, while two-thirds were for family reunions.

The StartUp Act 2.0, currently being deliberated in both houses of Congress, contains provisions that shift the immigration paradigm in the U.S. towards a more economic view.  The Act would create a new visa for immigrants who graduate from U.S. universities with a master’s degree or doctorate in STEM fields and also create an entrepreneur’s visa to enable immigrants with capital to start businesses and create jobs in the U,S,, rather than returning home to do it.

The U.S. faces both demographic changes (aging and shrinking labor force) and economic forces (e.g. a shortage of STEM workers) that can be solved by a smart immigration policy.  As of now, the US is educating and accepting intelligent and hard-working immigrants temporarily, who are then forced to either return home or go to a country like Canada, where they create jobs and contribute to growth.

Posted by: Sean Norris

Sources: CNN, The Christian Science Monitor, The Fort Wayne Journal-Gazette

Photo Credit: Citizenship Ceremony courtesy of flickr user mars_discovery_district

Promoting “Green Growth” in the Development Conversation

Last week, an audience at the Wilson Center heard new recommendations from the World Bank on how to get countries to grow green. Their report, titled Inclusive Green Growth: The Pathway to Sustainable Development, calls on governments to “think green when pursing growth policies which can be inclusive, efficient, affordable, and necessary to sustain economic expansion in the years ahead.” It makes the point that sustainable growth is critical to meeting the needs of developing nations, and that unsustainable growth will lead to greater socio-economic problems if environmental and social considerations are not accounted for.

The World Bank’s “Inclusive Green Growth” model recommends using more than just a nation’s Gross Domestic Product (GDP) to evaluate its economic growth. It requires using “case-by-case analysis” to minimize short-term costs and promotes enacting “well-designed” regulations to encourage private-sector development that still protects the environment. The World Bank explicitly states that “green growth is not anti-growth,” and presents a plan that implements policies which will allow for greater development that is also “greener” development.

The model that the World Bank has developed focuses on three main pillars to achieving sustainable development: economic, social and environmental sustainability. Economic sustainability requires tailoring a country’s sustainable development strategies to specific circumstances. Meanwhile, social and environmental sustainability encourages sound decision-making by stakeholders in the hopes of building better partnerships between the public and private sectors to meet “up-front capital needs with innovative financing tools.” This recent report by the World Bank highlights how environmental and sustainable growth will be the key to generating a more prosperous and sound world economy. The Inclusive Green Growth project is so important because it points out the need to change our attitude and approach international development efforts moving forward.

Click here to view the video from the event.

Posted By: Jonathan Sherman

Sources: The World Bank

Photo Credit: 24 Solar Panels courtesy of Flickr user Michael Coghlan