NDN Blog

Study: Paul-Boxer "Invest in Transportation Act"

Today, NDN is proud to release a timely new study of the economic implications of the “Invest in Transportation Act” sponsored by Senator Rand Paul and Barbara Boxer. The study, “The Revenue And Economic Effects of the Paul Boxer Plan To Encourage the Repatriation of Foreign-Source Earnings by U.S. Multinational Corporations,” is co-authored by Dr. Robert Shapiro of NDN and the Georgetown Center for Business and Public Policy, and Dr. Aparna Mathur of the American Enterprise Institute. Their rigorous study predicts that the passage and implementation of the Paul-Boxer bill would provide substantial revenues for future highway and infrastructure investment, boost GDP growth and potentially create large numbers of new U.S. jobs.

A PDF version of the study can be found at the bottom of this post. 

The study analyzes extensive data from the 2004 Homeland Investment Act, the repatriation-related part of the American Job Creation Act of 2004, as a benchmark to project what would happen with the implementation of Paul-Boxer. Among the study’s main findings:

  • $1.45 trillion would be repatriated from foreign sources to the United States over the 5-year term of Paul-Boxer.
  • These huge repatriations would generate revenue gains totaling $68.9 billion over five years for the Highway Trust Fund. This addition $68.9 billion in infrastructure investment would generate between $138b and $172b in additional GDP.
  • The Paul-Boxer provision directing that 25% of repatriated funds must be used for specified purposes, including job creation and capital investment, would direct $350b over five years for those purposes, producing an additional $520b in GDP.
  • The $1.1 trillion in repatriated funds not subject to those requirements would generate at least $1.1 trillion in additional GDP.
  • All told, the GDP gains related to the bill would be sufficient to increase GDP by 1.7 percent per-year over the five years.
  • Based on past experience and the terms of Paul-Boxer, the additional funds used for job-related purposes --- hiring, wage increases, and training costs – could support the creation of millions of new jobs over five years.
  • The use of the funds repatriated under Paul-Boxer would generate additional revenues of some $63.4 billion over five years.

These findings are drawn directly from IRS data on what actually happened under the 2004 Homeland Investment , and directly challenge the way in the Joint Committee on Taxation has approached the repatriation of foreign source earnings. From the study’s conclusion:

“This study has analyzed the assumptions used by the JCT to produce those forecasts and tested them against the experience with the one instance in which Congress enacted a one-year tax incentive encouraging such repatriations, the Homeland Investment Act of 2004. The IRS data from that experiment are inconsistent with the JCT revenue estimates. The HIA induced U.S. multinationals to repatriate much greater foreign earnings than forecast by the JCT, including earnings eligible for the HIA's temporary deduction and earnings that did not qualify for the special tax incentives. As a result, the revenues gains during the term of the HIA were substantially greater than JCT had assumed. In addition, the IRS data showed that in the five years following the HIA, U.S. firms did not reduce their repatriations relative to the pre-HIA baseline, as JCT had assumed they would, but actually accelerated relative to the baseline. As a result, the revenue losses that JCT had assumed would occur once the HIA expired did not occur…..This analysis, based on all of the available data and other evidence, demonstrate that the JCT forecast of the revenue effects of Paul-Boxer is fundamentally flawed. The proposal would result in the injection of at least $1.45 trillion in additional resources for the U.S. economy, producing substantial revenue gains and economic benefits.”

It is our hope that this more accurate forecast of the economic and revenue effects of repatriated foreign source earnings of US multinationals will make the passage of a bipartisan, long term Highway Trust Fund bill more likely this year.

A Path Forward on Puerto Rico

Last summer, Rob Shapiro and I became alarmed at the economic news coming out of Puerto Rico and decided to do something about it. Over that summer and the following fall, we produced a series of papers and essays about the worsening fiscal and economic crisis there. We also briefed folks around town, including key advisors in the Obama Administration.

Due to the growing interest in these issues, we send along one of our essays from last year, an English language op-ed which ran on the Fusion website (it below and here). You can find a Spanish language companion here which ran on Univision’s site, and the full paper from Rob which we reference here. Rob is a recognized international expert in sovereign debt crises and has advised the IMF on Western Hemisphere economies. As people think about what to do next, we tried to look beyond the short-term, limited fiscal measures at hand, and towards a longer term strategy for the Island that can help reverse its current, economic “death spiral.”

Rob has also written on the economic situation in Greece, which you can find here.

"To Restore Prosperity, Puerto Rico Should Look to Ireland"

Submitted by Simon Rosenberg and Robert Shapiro on 9/17/14

How much longer will the people of Puerto Rico have to live with failed economic policies? It must be clear by now that the Commonwealth reliance on U.S. corporate tax preferences for U.S. companies locating operations there ran its course many years ago. Low tax rates matter to foreign investors, but it’s time for Puerto Rico to expand its horizons well beyond the United States. Rather, the Island should consider the example of Ireland, which a generation ago was the poorest member of the European Union (EU) – and became one of its most prosperous members by 2006.

In the late 1980s, Irish policy planners recognized that the fastest way to modernize their economy and turbo-charge productivity and growth was large-scale foreign direct investment (FDI). They also knew that with scores of middle-income countries vying for FDI, Ireland needed a comparative advantage. So they offered up Ireland as a low-wage, low-cost platform for multinationals from everywhere but Europe to enter the huge EU market. But they also had to make Ireland the most attractive place in the region for foreign investment. So in addition to the tax breaks that countries offered, the Irish government ramped up its public investments in modern infrastructure, they created 10 "enterprise zones" for foreign investors and equipped each zone with a new institution for advanced training and education, and they rolled out an array of special services and subsidies for foreign multinationals. The program even included helping foreign companies find the best locations and workers to meet their needs and providing relief from selected regulations and taxes for individual companies.

From 1987 to 2006, more than 1,000 multinational companies established new facilities in Ireland, including Microsoft, Dell, and Citicorp. The country’s real GDP grew at an average annual rate of 6.9 percent over that period, unemployment fell from 17 percent to 4 percent, the brain-drain of highly-educated young Irish was reversed, and the government’s debt as a share of GDP declined from 112 percent to 33 percent.

Like Ireland and the E.U., Puerto Rico and the mainland United States share a common currency, and virtually everything made in the Commonwealth enters U.S. markets without cumbersome customs and other import regulation. In short, Puerto Rico has a real opportunity to attract large-scale FDI from around the world by offering itself as a low-wage, low-cost platform for multinationals from Latin American, Asia and Europe to sell into the huge American market.

To succeed as Ireland did, Puerto Rico will have to undertake a comparable commitment to undertake difficult spending and tax reform, including targeted increases in public investments in education and infrastructure while still bringing down budget deficits. The Commonwealth government also must repair its tattered image with large foreign investors. To restore their confidence, Puerto Rico must step back from a possible debt default and from proposed changes in its bankruptcy laws to word off technical defaults by its public utilities. In this context, Puerto Rico also can ill-afford widely-publicized controversies that cast doubt on the Government’s commitment to keeps its word, such as current efforts by the Commonwealth Treasurer to negate its legal agreement to provide tax credits for tax over-payments to one of the Island’s major financial institutions, the Doral Financial Corporation.

The alternative is that the future for Puerto Ricans will look much like their present and recent past. After nearly a decade of stagnation and recession, the economy is 13 percent smaller than it was in 2004 – compared to Puerto Rico’s 13 Caribbean neighbors, which have averaged 2 percent annual GDP growth over the same period. That’s unsurprising. Business investment has grown in Puerto Rico at half the rate as elsewhere in the Caribbean. Capital flight has accelerated: foreign financial flows have been negative since 2006; and more recently, FDI flows turned negative as well. Unemployment is double the rate of the U.S. and nearly percent among the young, and the labor participation rate is the lowest in the Western Hemisphere. Moreover, public debt has soared from 66 percent of GNP to 96 percent, and both Moody’s and Standard & Poors rate the Commonwealth’s bonds as junk.

Here’s what ought to be the bottom line: While the per capita income of the Irish people increased from 60 percent of the EU average in 1987 to 136 percent of the average in 2003, per capita income in Puerto Rico today is seven percent less than it was in 2006. The choice – a hard road to long-term prosperity or the easy road to further decline – is Puerto Rico’s.
 

Issue/Agenda Path for GOP Hard to See – Some Thoughts on the Early 2016 Landscape

It is always a bit dangerous to extrapolate too much from a single poll, but findings in the new CNN/ORC poll if true and lasting are important for understanding the emerging 2016 landscape. The poll published earlier this week finds the approval of the President’s handling of the economy is now 52%, higher than his overall approval rating which stands at 50%. As CNN reports, this is the President’s highest rating on the economy in six years and may be the first time his approval rating on economic matters has been higher than his own personal approval rating. New consumer confidence data out yesterday shows a similar potentially structural jump in the public’s understanding of where the US economy is today (and it should be noted that these gains have come at the same time TPA was debated and passed once again challenging the conventional wisdom that advancing these trade agreements is bad politics).

Why is this so important? It speaks to where the GOP can go in 2016. Many commentators this past weekend dwelled on the anachronistic social agenda of the modern GOP and how it is likely to be a major drag for their party in 2016. This leaves the GOP candidate nominee more opportunity perhaps on the economy and security matters some suggested. But if Obama and Democrats are beginning to get credit now for turning the economy around, why would one elect a Republican in 2016? Particularly since this will have been the second consecutive Democratic Administration who had to turn things around from a GOP President whose policies brought us recessions and higher deficits? And the truth is the economy is far better now due to President Obama – tens of millions more are employed, tens of millions have gained health insurance, the annual deficit is a third of what it was in Bush’s last budget, the stock market is at historical highs, and there is a growing body of evidence showing that wages have begun to go up for the first time in fifteen years. Under this President and his policies the country is far better off, and the public is beginning to notice. And the projections for the next eighteen months suggest things are far more likely to get better than worse for the US economy.

Given all this it is just hard to see a way for the GOP to win the economic debate in 2016, particularly given that on fiscal matters – their supposed strong suit – the last two GOP Presidents have brought higher deficits while the last two Democratic Presidents have brought lower ones. Winning the economic argument in 2016 may be just as challenging for the GOP as winning on social issues. Democrats will be able to make a clear and convincing case that over the past generation it is just simply true that under Democratic Presidents the lives of everyday people have gotten better and under Republican Presidents they have gotten worse.

Thus, it is likely that the GOP is going to have count on winning the argument about who is best about keeping us safe as the cornerstone of their 2016 approach, an approach that worked well for them in 2014. Certainly there could be an opening for the GOP here. But my own view is that like the economy there is a lag in understanding of how much the President has achieved in foreign policy and security matters. He has pursued broad, strategic engagement in Europe and Asia, highlighted by his ambitious trade agreements in both regions. With his bold Cuba initiative, and other policies, relations with Latin America are strong and solid, and improving as was evidenced by the very warm event with President Rousseff of Brazil yesterday. The President has taken unprecedented steps to tackle global climate change, and his “all of the above” energy strategy has helped make the US far more energy and geopolitically independent. The US-Mexico border is far more secure than it was in the Bush era, and net undocumented migration into the US has gone from hundreds of thousands a year to zero. This President is helping rediscover the very best in the American foreign policy tradition, using all the tools in his tool box – economic sanctions, trade negotiations, traditional diplomacy and military might – to advance American interests abroad and make the world safer and more secure. Recent polling suggests the public likes this approach, and appreciates this President’s efforts to shape the course of history through more than just risky military conflict.

But what about the Middle East and terror? While President Obama may join the long line of American Presidents who struggled to improve things in the most challenging region of the world, the judgment of his strategic approach here still needs more time to settle on the ground and with the public. Much could change for the better, or the worse, in the next eighteen months. We don’t know how the Iran deal will turn out but at his point in his Presidency it would be ridiculous to dismiss these efforts as naive or ill thought through. But however the public will judge him next year it is hard to see how the simplistic belligerence of the modern GOP will either make the current global situation better, or their party popular with the American public skeptical of yet another American war in the Middle East. The last GOP President brought a series of foreign policy disasters for the US perhaps unparalleled in our history. And that legacy is likely to be as a big a drag in 2016 as any other the GOP faces no matter the record of President Obama next year.  So even this issue set is going to be hard for the GOP to prevail on next year. 

Finally, Hillary Clinton also seems prepared to open a new front which could end up being very advantageous to the Democrats in 2016 – political and governmental reform. As I have written elsewhere, this is an area of incredible opportunity for the center-left. What has become true in recent years is that there is one party which wants everyone to vote and to ease participation in our democracy, and one party which doesn’t. If fully developed this issue could become a powerful and meaningful new bludgeon for the Democrats in 2016, one making an already promising political landscape even more so.

So yes, it is early. And yes this is one poll. And yes much will change. But as we look ahead to 2016 a winning issue/agenda/argument path for the GOP is hard to see.  

In a long form magazine piece from a few years ago, I offered my own explanation for why the GOP is struggling so much with modernity, and been so unsuccessful in looking forward rather than back.

Update: Gallup reports a significant swing in Party ID towards the Democrats this quarter, providing further evidence of structural changes emerging in the 2016 landscape.  

Release: TPA Advances, Final Passage Now Assured

 "NDN is pleased that the U.S. Senate voted to advance trade promotion authority today. We expect that TPA will pass the full Senate later this week and head to the President's desk for signing soon after.

We hope that this new momentum will allow USTR Froman to bring the TPP round to a rapid close in the coming weeks.

Once again, we applaud the more than 40 Democrats in the House and Senate who voted to pass TPA in the last few weeks."

- Simon Rosenberg, President of NDN

For more on NDN's work on the President's trade agenda, visit this backgrounder.

Thank These Democrats for Supporting TPA

Today, the President signed both TPA and TAA. 

Thanks to all of you who put the hard work in to get us to this point.  If you can, and if you haven't already,  please take a few minutes today to thank all of these courageous Senators and Members of the House who took a tough vote (or two!) and voted for TPA:

The Senate - these 13 couragegous Senators voted for final passage: Michael Bennet, Tom Carper, Chris Coons, Maria Cantwell, Dianne Feinstein, Heidi Heitkamp, Tim Kaine, Claire McCaskill, Patty Murray, Bill Nelson, Jeanne Shaheen, Mark Warner, and Ron Wyden.

The House - These 28 courageos Members of the House voted for final passage of TPA: Brad Ashford (NE-2), Ami Bera (CA-7), Don Beyer (VA-8), Earl Blumenauer (OR-3), Suzanne Bonamici (OR-1), Gerry Connolly (VA-11), Jim Costa (CA-16), Jim Cooper (TN-5), Henry Cuellar (TX-28), Susan Davis (CA-53), John Delaney (MD-6), Suzan DelBene (WA-1), Sam Farr (CA-20), Ruben Hinojosa (TX-15),  Jim Himes (CT-4), Eddie Bernice Johnson (TX-30), Derek Kilmer (WA-6), Rick Larsen (WA-2), Ron Kind (WI-3), Gregory Meeks (NY-5), Beto O'Rourke (TX-16), Scott Peters (CA-52), Jared Polis (CO-2), Mike Quigley (IL-5), Kathleen Rice (NY-1),  Kurt Schrader (OR-5), Debbie-Wasserman Schultz (FL-23), Terri Sewell (AL-7).

There are many ways to thank these members, but the easiest is just to call the congressional switchboard at 202 224-3121, ask to speak to their office and then let their receptionist know that you are grateful for their courage and support of TPA . 

With TPA now the law of the land, we are already looking ahead to the campaign to pass TPP when it is finalized in the weeks ahead.    We will back in touch with you as this effort gears up this fall. 

For more on NDN’s work in support of the President’s trade agenda, including my op-ed, “An Enduring Legacy: The Democratic Party and Free and Open Trade” visit NDN's TPA "Backgrounder"  here.

Release: NDN Applauds the Passing of TPA In the House

 "NDN applauds the House for mustering a majority for trade promotion authority for the second time in the past week. Both chambers have now voted affirmitively in support of advancing TPA, and we are optimistic that Congress can work through the issues that remain so the President can sign it soon.

And we applaud the 28 House Democrats who have now voted twice to pass TPA, and the 14 Senate Democrats who will be called on again to support TPA in the coming days."

- Simon Rosenberg, President of NDN

For more on NDN's work on the President's trade agenda, visit this backgrounder. You can also read our previous statement following last Friday's TPA vote in the House, "On TPA Passing, But Not Passing."

On TPA Passing But Not Passing

"In what was a confusing outcome today, the House showed they had enough votes to pass trade promotion authority, but it did not actually pass.

We remain optimistic that now that we know there is a majority for trade promotion authority in the House, the President and the Speaker will be able to come up with a new mechanism to bring the vote back and pass TPA soon. We commend the 28 House Democrats who took a very tough vote even though they knew it would not actually lead to the passage of TPA today. Like many in Washington, we are disappointed that the House Democrats walked away from their President and abandoned Trade Adjustment Assistance (TAA), a valuable program which has helped many workers over many decades, and which has put the President's trade agenda in limbo.

And while there is a great deal of finger pointing today, let us point our own finger directly at the House Republican leadership. It wasn’t easy to create a process which would prevent TPA from passing even though the votes were there. But Speaker Boehner did just that today. As the one managing the floor of the House, it is clear now that if he wanted TPA to pass today Speaker Boehner badly miscalculated; and with 100 or so GOPers voting yes on TPA but no on TAA it raises questions of how committed the GOP really was to getting TPA through. Passing TPA required three votes - the rule, TAA and TPA. Speaker Boehner failed to deliver his conference for the first two and yet brought it all up for a vote anyway. "

- Simon Rosenberg, President of NDN

For more on NDN's work on the President's trade agenda, visit this backgrounder.

On TPA, Did Boehner Miscalculate?

It wouldn’t be the first time Speaker Boehner brought up an issue to find he didn’t have the votes or a strategy to get them.  This may be happening again on TAA/TPA.

Last night we saw the first warning sign - the Speaker needed Democrats to bail him out on the rule, an uncommon event in the House.  Rules usually pass easily with straight party line votes.  This morning, in the second test, TAA, news accounts suggest that the Speaker is bringing no more than 100 votes to the table.   Are there really 100 GOPers who are “pro-trade,” supporting TPA but not the modest, historically bi-partisan TAA designed to help every day people cope with the dislocations trade brings?  Why aren’t all the GOPers who are supporting TPA willing to do what is required to pass TPA by supporting TAA?   

As we head into the votes this morning, a few questions for the Speaker:

  • Why couldn’t you deliver more GOPers for a modest TAA if the TPA vote was so important to your conference?
  •  Will you release your public whip list for TPA showing that you have the 195-200 votes needed for final passage?

While I hope we can find the votes to pass TAA and TPA this morning, there are legit and serious questions about how prepared the House Republican leadership was for this vote today.  

NDN Endorses Clinton's Plan to Make Voting Easier

NDN endorses in the strong possible terms the speech and plan offered by Hillary Clinton yesterday to help renew our democracy and bring initial reforms to our political system.

Complaints about our “dysfunctional” democracy have become as common as laments about traffic or the weather in the US. Yesterday Hillary Clinton made it clear that she wasn’t going to accept the status quo and was making political reform and making it easier for every day Americans to participate in our democracy central to her campaign. Bravo! we say to that.

The issue of political reform – particularly ways to make our electoral system more democratic – has been a major issue for me and for NDN for many years. We were significant early funders of the Oregon vote by mail experiment which has now created a system with the highest participation rates in the country. We were among the earliest champions and advocates of the democratizing potential of the Internet, a new political tool that has allowed millions of Americans a far more meaningful way to participate in their democracy. When I ran for chairman of the Democratic Party in 2005, I made “making it easier for everyone to vote” one of the core tenets of my campaign, and I helped advise the DNC on their new efforts in this area last year. I also was the central architect of the plan which added a southern and southwestern state to the early primary window for the national Democratic party, a move, which implemented in 2008, allowed people of color to play a far more meaningful role in picking the Democratic nominee (and look what happened!).

In recent years we’ve aggressively advocated for the center-left to make these matters far more central to our work. We held a major forum on these issues at the Tisch School of Citizenship and Public Service at Tufts University a few years ago, and have published numerous studies and opinion pieces, a selection of which you can find below. Throughout all of this we have been guided by a simple belief that the center-left could not be a true champion of everyday people unless we helped imagine and build a 21st century political system that made it far easier for everyday people to participate in our democracy.

One thing my many years in politics has taught me is that Presidential primaries are a vital time for political parties and leaders to test out new thinking and new approaches. They are incredibly important for the renewal and regeneration of political leaders and the cultures of their parties. What we saw yesterday in this bold and ambitious speech by Hillary Clinton is that she understands that the single most powerful thing she can bring to 2016 is an inspiring argument for how to make our country better in the years ahead. And with this speech she is off to a great start.

For more from NDN on political reform, read these pieces:

"The Consent of the Governed," 12/17/14. This new analysis takes a look at whether, due to how fewAmericans are able to cast a meaningful vote in a Federal elections our electoral system, is still capable of conveying the “consent of the governed” to those in power in Washington.

"A Wake Up Call For Democrats - Simon's 2014 Post-Election Memo," 11/7/14. Republicans have made substantial gains in recent years, and are a much stronger national party. Democrats have a lot of work to do to compete and win against a resurgent GOP.

Leaving the Reagan Era Behind - Why Political Reform Matters for the Center-Left,” Simon Rosenberg,” NDN, 12/15/12. Some thoughts about the post-Sandy Hook shooting political environment, and the hard, tough struggles ahead necessary to usher in a new and better age of politics.

Has Congress Developed an Undemocratic Small State Bias?” 05/12/12. Ezra Klein referenced some recent research we published on what might be a creeping "small state" bias in Congress. Half of the country now lives in 9 states, the rest in the other 41 states.

Improving Our Democracy: Reforming The Electoral College,” 10/18/12. There may be no more important way to improve our democracy than to reform or eliminate the anachronistic Electoral College.

"The 50 Year Strategy: A New Progressive Era (No, Really!)," Mother Jones, 11/2007. The seminal long-form article by Simon and Peter Leyden which made the case that big changes in demography, media and technology and in the issues in front of the American people was opening a new and promising political age for the American center-left.

On FIFA, Fair Play and Our Global System Today

A few issues I’ve spent a lot of time writing about in the last few years have come together in a rather unexpected way these last few weeks. This is a bit of an early draft tying them all together, so indulge me a bit:

At the core of the President’s push for his Pacific trade agreement is an effort to modernize and extend today’s rules-based global trade system. This is a principal reason why I am so personally enthusiastic about TPP and potentially the European agreement to follow, TTIP. It is vital that America, the architect and guarantor of the global system over the past 70 years, take responsibility for updating and renewing this system for a new day.

As I’ve written elsewhere, I believe ensuring that this liberal system prevails in a time of great change and “the rise of the rest” to be the central project of center-left political leaders in the developed world over the next generation. This effort will manifest itself in many ways but today I want to focus on one country’s serial flouting of international conventions that will help illuminate why President Obama’s actions are so important. The country is Qatar.

Qatar has derived its enormous wealth from an illegal oil cartel that has held most of the world hostage for forty years. It has coddled some of the world’s most violent extremists central to the destabilization of the Middle East today. It has broken faith with global airline conventions, unfairly subsidizing its own state airline giving it a competitive leg up against European and American carriers. And perhaps most famously, it is now at the very center of the greatest public corruption scandal of our day, Sepp Blatter’s FIFA.  The farce of their securing the 2022 World Cup will remain the most enduring symbol of the epic corruption at the core of FIFA; that we know now that hundreds of virtual “slaves” have died in the early days of construction for the World Cup brings even greater shame to all those involved.

Many advocates have argued that we need to advance the President’s trade agenda to ensure that China doesn’t write the rules of the road of the next global order.  Along with others, however, I am frankly as concerned about the efforts of countries like Qatar and Russia to forge a far more Hobbesian system based on might and wealth rather than law, convention and “fair play.” As I’ve written elsewhere, bringing the petro-dictatorships of the Middle East and elsewhere into the rules-based global system remains one of the great unfinished projects of this era. The fall of FIFA will perhaps become a catalyst for a global conversation that is much more important than one about how we will manage football in the years ahead; it will become whether we want a world guided by liberal values or ones far more medieval.

Update: Appropriate that one of the world's most corrupt leaders, Vladamir Putin, has come to Blatter's defense.

Update (6/3): BuzzFeed News put out a major article that highlights the reaction in Qatar to the news that Sepp Blatter will step down, including that they have asked members of the host committee to stay off of US soil for fears of having them arrested.

Syndicate content