After decades of outsourcing home appliance assembly work, General Electric has invested $800 million to bring production lines to Louisville, KY (Pittsburgh Tribune Review). Lean manufacturing techniques have allowed GE to efficiently produce in the United States and take advantage of the falling gap between U.S. production costs and those overseas. GE is also taking advantage of significant tax breaks offered by state and local authorities, a common approach to attract business investment that one analyst described as a “zero-sum game.”
Success stories of rebounding local economies often provide practical, realistic lessons. CFR’s Ted Alden discussed how North Carolina is responding to the collapse of its manufacturing base.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Education and Human Capital
New Guidelines for Math Textbooks
The lead writers of the Common Core State Standards (CCSS) released a set of math textbook guidelines for publishers and purchasers (Education Week). This document seeks to align textbooks to the CCSS math standards by specifying how to focus on each topic to be covered in that year, as students progress coherently through the curriculum. While a revised version incorporating feedback is expected early next year, the current version has already gained the support of prominent educational organizations.
The report of the CFR Independent Task Force on U.S. Education Reform and National Security highlights the importance of CCSS and asserts that fixing the nation’s underperforming K-12 schools is critical to economic competitiveness and national security.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Nation’s Mayors Stress Infrastructure Needs
A recent report by the U.S. Conference of Mayors tracks the economic progress cities have made, but stresses the need for “aggressive investment” in infrastructure. The full report (PDF) cites a study by the Congressional Budget Office that public spending on transportation and water infrastructure was only 2.4 percent of GDP in recent years, not including the stimulus package. This U.S. investment rate trails Europe’s 5 percent and China’s 9 percent of GDP. Beyond weakening America’s competitiveness, underdeveloped transportation systems cost a calculated $101 billion in time lost in 2010.
The first Renewing America Progress Report and Infographic Scorecard, provides a critical assessment of federal transportation policy, including a description of major policy initiatives and important steps policy makers must take to revitalize critical infrastructure.
Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.
Corporate Regulation and Taxation
Bloomberg’s Editors Favor a Territorial Tax
The editors of Bloomberg think projected GOP presidential nominee Mitt Romney is right to propose a territorial corporate tax system. Their editorial argues that current tax law puts U.S. firms at a competitive disadvantage by taxing them equally on profits earned beyond the nation’s borders, imposing high compliance costs, and encouraging firms to take on large debt.
With the highest statutory corporate tax rate in the world—35 percent for federal taxes only—the United States is at a competitive disadvantage. This CFR Backgrounder by Jonathan Masters discusses the effect of current policy, and proposals for U.S. Corporate Tax Reform.
Some Firms Ignore Targeted Tax Breaks
While Washington has often used targeted tax breaks to encourage specific activities, high compliance costs are leading some small and medium businesses (SMB) to forgo those benefits (WSJ). While large corporations can afford specialized tax consultants and accountants to benefit from federal programs, SMBs have far fewer employees to spread these fixed costs over. One small business owner commented: “I usually avoid these targeted tax incentives, because it costs so much just to be compliant that it's not worth messing with. I can't run a business based on what area the federal government is trying to juice.”
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.