The Affordable Care Act and the Economy

While our focus here at the PAGE program is on areas such as innovation, education, manufacturing, immigration, and other areas that help America compete in an increasingly globalized economy, health care spending accounts for 18% of this country’s economic output and we would be remiss if we did not briefly examine the Affordable Care Act’s effect on the economy, now that the Supreme Court has ruled on the law and declared that it can be implemented essentially in its entirety.
It terms of the overall economic effect, the ACA will expand coverage to tens of millions of people (the White House estimates 32 million) which will naturally increase demand for health-services and boost health expenditures like hospital visits and medications. This increased spending should fuel growth, at least in the near-term. The legislation is financed partly by additional taxes, especially on higher-earners and their investment income. The tax hit could stifle consumer spending, offsetting the jump in health expenditures. Then again, Americans with higher incomes tend to save more cash, so it’s also reasonable to think taxing them could divert money from savings accounts to spending — boosting the economy. The overall macroeconomic effect will most likely not be discerned as positive, negative or neutral for some time.
Regarding the economic topic of the day, job creation, the effect of the legislation again, is hard to read. As noted above, spending in the health sector is likely to increase if for no other reason than tens of millions more consumers in the market so it is not unreasonable to assume jobs will be created in the health sector. On the other hand, there is much anecdotal evidence (though little empirical, since the Act’s main provisions are not yet in effect) of businesses downsizing or putting off hiring because of the new employer-provided insurance regulations. The incentive and regulation structure for businesses is complex though, with varying rules and subsidies depending on the size and nature of the business so it is hard to forecast how hiring in the private sector at-large will change if at all.
The mostly hotly debated economic factor is how the ACA will affect the deficit. As President Obama reminds anyone who will listen, the Congressional Budget Office scored the legislation as a net deficit reducer (to the tune of $140 billion) over the next ten years although conservatives have quibbled with how the bill was scored. The Court ruled on June 28th that the Federal government cannot force the states to expand Medicaid as the bill had originally intended (specifically, the Federal government could revoke a state’s entire allocation of Medicaid funding if it did not expand Medicaid coverage) so it is possible that conservative governors will not move ahead with expanding Medicaid since they are no longer compelled to. This, no doubt, would be a huge factor in both Federal and state budgets.
Of course, Mitt Romney, Paul Ryan, and the Republicans in Congress have vowed to repeal the Act as soon as they have the chance and should President Obama stay in office, the law will not be fully in effect until 2014 at least. As a result, at this point, the only thing the American people can be sure of is that they and their economy will be affected in some way, simply due to the sweeping nature of the law and the outsized role health spending plays in our economy.
Posted by: Sean Norris

Sources: The New York Times, The Wall Street Journal, The Congressional Budget Office, http://www.healthcare.gov

Photo Credit: Protect the Law courtesy of flickr user Brett Davis

Chinese Investment in Africa and the Woes of Western Aid

Over a year ago, Secretary of State Hillary Clinton issued a severe warning to Africa’s emerging economies, “beware of China’s new colonialism.” Clinton stressed how important it is for Africa’s emerging economies to resist the old colonial practices of foreign investors looking “to come in, take out natural resources, pay off leaders and leave.” She also urged African nations to apply the same investment standards to the Chinese as they would to Americans and Europeans, reminding the people of Sub-Saharan Africa that the Obama Administration is genuinely interested in helping their economies grow and prosper.

However, economist Dambisa Moyo argues that Chinese foreign investment in Sub-Saharan Africa is favorable to the continent and pure in its intentions. She prefaces her argument by pointing out that China has now surpassed the United States as the continent’s single largest trading partner, increasing foreign direct investment to the region from $100 million to $12 billion in eight years. Moyo recognizes how this staggering increase in Chinese foreign investment has made many western powers wary, but refutes the notion that Africans are being exploited by the Chinese with data from 2007 Pew Research Poll which shows that 91% of Kenyans feel that China’s involvement in their economy is beneficial, against just 74% who feel America’s has any influence. She further disputes the claim that China is using its own workforce in Africa by highlighting that the ratio of African to Chinese workers in Zambia is now 13 to 1.  Moyo does however mention that human rights abuses should receive appropriate investigation but that China should not be generalized as hostile with regard to its approach toward Africa.

Moyo concludes her criticism of Secretary Clinton’s assertion by claiming that maybe it’s not such a bad thing that Western aid to the region has decreased, citing that aid has been a primary hindrance of  democracy and has harbored the corruption which has kept the region’s economy stagnant for so long. She suggests that America’s efforts will only prove beneficial once they put the onus of government accountability and responsibility on local governments instead, summarizing that “foreign investment and job creation are the only forces that can reduce poverty and stave off the sort of political upheaval that has swept the Arab world. And China’s rush for resources has…created a large market for African exports-a huge benefit for a continent seeking rapid economic growth.”

Posted By: Jonathan Sherman

Sources: Huffington Post, New York Times

Photo Credit: Dambisa Moyo @ Canada 2020 courtesy of Flickr user Canada.2020

Is School Too Easy?

A report released last week suggests that schools are failing on a wide scale to provide a productive and effective learning environment for their students.  The report was based on an analysis of the background surveys of the National Assessment of Educational Progress. Known as the Nation’s Report Card, these assessments are administered every two years by the National Center for Education Statistics.

Many schools are simply not challenging students and large percentages of students report that their school work is “too easy.” For instance, twenty-nine percent of eighth-grade math students nationwide report that their math work is often or always too easy. In some states like Virginia, nearly a third of middle-school students reported their work was often or always too easy.

This finding was consistent across grades and subject matter. 57 percent of eighth-grade history students report that their work is often or always too easy. Elementary school students also revealed that they aren’t being challenged by their math work—37 percent of fourth-grade students reported that their math work is often or always too easy. Among high school students, 21 percent of 12th-graders said their math work was often or always too easy, while 56 percent and 55 percent respectively found their civics and history work often or always too easy.

The problem is not just that the work is too easy.  Students simply aren’t being asked to engage in rigorous learning activities.  Almost a third of eighth-grade students report reading fewer than five pages a day either in school or for homework. That’s below what many experts recommend for students in middle school. Eighth-grade students across the country also report that they rarely write lengthy answers to reading questions on tests: approximately one-third of students write long answers on reading tests twice per year or less.

The issues are similar at the high school-level. Thirty-nine percent of 12th-grade students, for example, say that they hardly ever or only once or twice a month write about what they read in class. Nearly one-third said they write long answers on reading tests two times a year or less.

There are some other troubling conclusions, including that these issues are exacerbated for low-income and minority students and that students are not being prepped for STEM coursework later on (e.g. 72% of eighth graders report not being taught anything about technology or engineering).

Students cannot be expected to thrive in an increasingly competitive, knowledge-based economy with this as their intellectual foundation.  This void of learning obviously puts students at an enormous disadvantage should they choose to attend college and pursue a major such as science or engineering (or one requiring writing and analytical skills for that matter).  Even those who choose not to pursue higher education are still potentially graduating below the requisite intellectual capacity expected of them.  Reforms aimed at the school system cannot just focus on improvements in teachers or facilities but must make clear that the goal is to improve the learning experience itself.

Posted by: Sean Norris

Sources: Center for American Progress, The Organization for Economic Cooperation and Development

Photo Credit: “Math Meeting Board and Lesson” courtesy of flickr user judybaxter

Our New Trade Frontier: The Asian-Pacific Rim

In May the 12^th round of talks on the Trans-Pacific Partnership (TPP) took place in Dallas, Texas where officials from the nine countries– United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam– met to discuss what could become the single largest jolt to the American economy since the Recovery and Reinvestment Act in 2008. If agreed upon, the free trade agreement would strengthen economic relations with a region that currently serves as the fourth largest trading market for the United States.  Also, the TPP could significantly widen what is already an emerging market for NAFTA partners. In 2010, trade with the Asia-Pacific region totaled $775 billion, and accounted for 72% of all U.S. agricultural exports to the world marketplace.

The Obama Administration has made the TPP a central item to its trade agenda for the upcoming election, and has marketed its potential impact as being an “economic stimulus package that doesn’t require the federal government to spend more money (or go deeper into debt). The agreement would formalize trade in traditional sectors such as industrial goods, agriculture, and textiles between the United States and its Asian-Pacific partners, as well as develop universal guidelines to defend intellectual property rights, regulate trade barriers, and enforce labor laws and environmental standards. Additionally, the TPP will address trade and compliance issues to better monitor foreign investment in products and services, streamline the exchange of digital technologies, and allow for the competition of state-owned enterprises with the private sector to protect against American economic disenfranchisement.

Since its conception, there have been strong, varying opinions of the TPP. Some contend that the TPP is just an extension of corporate greed and western expansion, like the Citizens Trade Campaign who argued that passage of the TPP will “do everything from hurt public health to accelerate global warming.” While many in Washington on both sides of the isle see the TPP as a catalyst for building and maintaining the types of jobs Americans need most to remain competitive in the technology and manufacturing industries.

Posted By: Jonathan Sherman

Sources: The Washington Times, Forbes Magazine, Office of the U.S. Trade Representative

Photo credit: Jefe de Estado participó hoy en la Reunión de Negociaciones del Acuerdo de Asociación Transpacífico (TPP) courtesy of flickr user Presidencia Perú

Trending among governors: education reform

Governor Bobby Jindal signed his public education reform plan into law earlier this month and the media is abuzz about it. Some opinionated columnists have noted that there is still too much bureaucracy in education and that governors and presidents are not suited to running schools because they lack expertise in the field. Others have been inspired by Louisiana’s drastic and sweeping changes. In Michigan, for example, Governor Rick Snyder has just proposed transformational education reforms aimed at progressing the education system from days of farmers to one that prepares students for the digital age. The Governor believes that education is the long-term key to revitalizing the economy in Michigan.

Gov. Snyder’s plan includes a model called “Any Time, Any Place, Any Way, Any Pace,” which allows for a wide variety of learning experiences for students including school choice, blended learning and online education. School districts will have more control over the length of the school day, week, and year and more flexibility in instruction and classroom configuration. The plan includes removing the cap on the number of charter schools in a district with at least one failing school, offering college credit opportunities to high school students, rating schools and reevaluating teachers.

Through studies, interviews, testing, and documentaries, it has become very clear that effective teaching is not always what happens in the average public school classroom. In fact, almost half of America’s K-12 teachers graduated in the bottom third of their college classes. While in model education system countries like Finland, requires teachers to have master’s degrees and only 10 percent of applicants are accepted to teacher training. Another point made by critics of the U.S. system is that teachers don’t have enough autonomy. P.L. Thomas, associate professor at Furman University, wrote in The Atlantic that “teachers and principals must feel free to act on their best instincts.” This sentiment is felt elsewhere as well. Marc Tucker, the president of the National Center on Education and the Economy says that the reason Finland strategies are working is because, “they have created a set of policies that are producing teacher they can trust, while we here in the U.S., we are basically pursuing a set of policies that are designed for teachers we don’t trust.”

Posted by: Devon Thorsell

Sources: Philadelphia Inquirer, The Atlantic, Michigan.gov

Photo credit: Governor Rick Snyder courtesy of flickr user Frankenmuth Fun

Can America Restore Its Competitive Edge?

The Wilson Center hosted a panel discussion this morning focusing on what government, business, and educators can do to restore U.S. competitiveness through long-term improvements in the K-12 education system and public policy. The event brought together five experts for a dialogue led by moderator David Wessel, Chief Economic Correspondent for The Wall Street Journal.

The panel discussion highlighted the importance of manufacturing in U.S. competitiveness. Norm Augustine, former CEO of Lockheed Martin, pointed out that advanced manufacturing is not only essential for the U.S. economy, but also for national security. Deborah Wince-Smith, president of the Council on Competitiveness, added that stimulating the growth of manufacturing hubs and clusters will help spur innovation and progress within the industry. Two of the most significant problems that need to be addressed are outsourcing and the shortage of skilled labor.

Combating outsourcing can be done through changes in corporate tax policy, Business Roundtable President John Engler asserted, such as simplifying and reducing it. This will give businesses more incentive to stay in the US. Paul Vallas, former superintendent of schools in Chicago, Philadelphia and the Recovery School District in Louisiana, adds that not only do changes need to be made at the federal level, but also at the state and local level, especially with entitlements and tax policy.

Jan Rivkin, a professor at Harvard Business School, explained that a less restrictive immigration policy can bring in a large influx of skilled laborers that many firms need. Engler pointed to heightened partisanship in politics during the last few years for keeping a comprehensive immigration policy from being pushed through Congress.

The panelists also agreed that reforms in the education system can address the shortage of skilled labor. Vallas asserted that the K-12 education system in the U.S. has failed to evolve, and identified two major issues – the school days and year are too short, and the teachers are not good enough. As such, the education system needs to be modernized and given more flexibility to adapt to changing demands. He suggested that we bring a “free enterprise system” to education; pay STEM teachers more, pay excellent teachers more, pay mediocre teachers less, and fire incompetent teachers.

A full webcast and podcast of the event is available on the Wilson Center event page.

Posted by: Pokyee Yu

Sources: The Woodrow Wilson International Center for Scholars

Photo Credit: David Hawxhurst/WWICS

Live Webcast Tomorrow: Can America Restore Its Competitive Edge?

This event is by invitation only but a live webcast will be available here at the time of the event.

Can America Restore Its Competitive Edge?

What will it take to rebuild wealth-generation and innovation in the U.S.? What are the roles of government, business, and educators and what changes must each of them make to reverse the decline in US competitiveness?

 Featuring…

Introduction by The Honorable Jane Harman—President, Director and CEO, Woodrow Wilson International Center for Scholars

Norm Augustine—former CEO, Lockheed-Martin, Chair of the National Academies Gathering Storm Committee and author of Rising Above the Gathering Storm

John Engler—former Governor of Michigan, former President of the National Association of Manufacturers, and currently President of the Business Roundtable

Paul Vallas—former Superintendent of the Recovery School District in Louisiana; former CEO of Chicago Public Schools and the School District of Philadelphia and active in restoring schools in post-earthquake Chile and Haiti

Jan Rivkin—Bruce V. Rauner Professor of Business Administration Unit Head, Harvard  Business School

Deborah L. Wince-Smith—President, Council on Competitiveness

David Wessel (moderator)—Chief  Economic Correspondent, Wall Street Journal

 Wednesday, March 28, 2012

9:30 to 11:00 a.m.

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

 The National Conversation at the Woodrow Wilson Center series provides a safe political space for deep dialogue and informed discussion of the most significant problems and challenges facing the nation and the world.

Harvard Survey results shows low expectations for future of U.S. competitiveness

The Harvard Business School recently released the results of a survey that attempted to answer the questions “What ails the American economy?” Harvard surveyed almost 10,000 alumni in the U.S. and abroad this past fall, all of whom are important actors in the global economy. HBS asked the alumni how they thought the U.S. would compare in the next few years and what they found was a lot of pessimism.

Two-thirds of the alumni polled agree that the U.S. is falling behind the emerging economies of Brazil, India, and China and is only just keeping up with other advanced economies. Of the numerous disadvantages the complex tax code, the political system, and weak K-12 education stood out as blockades to growth and competitiveness.

Overall, 71 percent of alumni expect U.S. competitiveness to decrease over the next three years, even though 57 percent say that the current business climate in the U.S. is above the average set by other advanced economies.

This is Harvard’s first “Survey on U.S. Competitiveness” – part of the school’s ongoing “U.S. Competitive Project,” a multi-year project, which aims to lay out the facts and realities of international competition and the implications for the U.S. in a nonpartisan way.

Posted by: Devon Thorsell

Sources: Reuters, The Washington Post, Harvard Business School Survey on U.S. Competitiveness

America on the Rebound?

The United States has been boasting economic growth and stabilization over the past few weeks. The dollar is at a multi-week high, and retail sales in February showed the largest gain in five months. The jobs report, released by the Bureau of Labor Statistics, announced that the private sector added 233,000 jobs in February 2012 and the labor force participation rate recorded the largest increase in two years. Economists say that these trends are the real deal. “HIS Global Insight is projecting that all 50 states will see employment increases this year,” said the Weekly Standard. Additionally, American families and households are seeing positive results as well; during the last quarter of 2011, average household net worth rose by $1.2 trillion. The Obama administration also has good news for homeowners. Bank of America will be reducing mortgage balances on approximately 200,000 homes to avoid paying $850 million in penalties.

In trade news, U.S. domestic oil production is at its highest since 2003 (5.6 million barrels/day).  The United States is currently importing 45 percent of its petroleum, down from 57% in 2008. The Obama Administration says that these statistics show that the United States is on track to meet the administration’s goal of reducing oil imports by 1/3 in the next 10 years.  According to a recent Gallup poll, most Americans think Obama and Congress can do more to reduce gas prices, which have been steadily increasing over the past year. Together with the recovering economy and high prices at the pump, a record number of Americans are choosing to take public transportation: 10.4 billion trips were taken in 2011.

Combined with the news that China is posting its first trade deficit in a decade ($31.5 billion), and the euro is a at a one-month low against the dollar – things are looking up for the United States economy.

Posted by: Devon Thorsell

Sources: Weekly Standard, Boston Herald, Reuters, Wall Street Journal

2012 Global Innovation Policy Index

Earlier this month, The Information Technology & Innovation Foundation, in conjunction with the Ewing Marion Kauffman Foundation, published The Global Innovation Policy Index. The report emphasized the value of having an “innovative advantage” in an increasingly globalized world arena of fierce competition. The authors believe that in crafting a nation’s policies for maximizing innovative capacity, policymakers should embrace “thoughtful and constructive” strategies that boost competitiveness without disrupting the health of the globally-beneficial innovation environment.

To accomplish this, the index identified seven core policy areas that constitute their framework for determining fifty-five nations’ innovation capacity.

• Trade, market access and FDI
• Science and R&D
• Domestic competition
• Intellectual property rights
• Governance over information and communications technology
• Government procurement and transparency
• High-skill immigration

The United States ranks in the “Upper Tier” category, alongside other developed nations – such as Australia, Canada, France, Germany, Singapore, and Sweden – on overall innovation policy capacity. Notable countries residing within the “Upper-Mid Tier” include Israel, South Korea, and Spain. The BRICS countries ranked in the “Lower-Mid Tier” and the “Lower Tier.”

While the U.S. sits comfortably in the realm of the “Upper Tier,” it falls short behind several others in the categories of science and R&D and of high-skill immigration. Countries such as Chinese Taipei, Denmark, and Singapore all rank above the U.S. in science and R&D, while Brazil, China, Hong Kong, and Russia were given the same “Upper-Mid” ranking. The index identified three areas within this category that the U.S. could improve upon: R&D tax incentives, government R&D expenditure, and higher education R&D performance. The U.S. falls behind Canada, Chinese Taipei, Hong Kong, Israel, and Singapore in high-skill immigration policies. The index suggests that an immigration policy combining both the points-based and the employer-led selection systems may be the most conducive to bringing in high-skill immigrants that contribute to sustainable innovation capacity.

 

Posted by: Pokyee Yu

Sources: The Information Technology & Innovation Foundation

Photo Credit: Information Technology & Innovation Foundation