Morning Brief: House and Senate Debate Transportation

Fourteen senators and 33 representatives began meeting yesterday to attempt to hammer out a compromise between two versions of the transportation spending bill (Reuters). Politico discusses the major points of contention, including: authorization of the Keystone pipeline, different scopes—the Senate bill covers two years, while the House proposal spans five—and investment in high speed rail and mass transit. The last highway spending bill expired in September 2009, and Congress has passed nine temporary extensions to keep projects moving until a new version becomes law.

Scott Thomasson, the president of NewBuild Strategies and an expert on infrastructure funding, recently authored Encouraging U.S. Infrastructure Investment, a Policy Innovation Memorandum released by the CFR’s Renewing America initiative. Thomasson proposes new initiatives to address crumbling U.S. 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.

Venture Capital Model Draws Criticism

The Ewing Marion Kauffman Foundation reports that over the past decade, public stock markets have outperformed the average venture capital (VC) fund. VC firms have an incentive to increase the size of funds to earn larger fees and profits, but as funds have grown, VC performance has eroded. Since 1997, a majority of funds—62 percent—failed to exceed the returns of public markets after fees. Funds with capital above $400 million performed even more dismally, with 86 percent failing to beat the market. BusinessWeek has some interesting commentary.

The Difficulty of Blending Innovation with Continuous Improvement

While methodologies such as Six Sigma, Kaizen, and Lean have improved quality while reducing cost, continuous improvement may impede innovation (HBR). To maintain innovative capacity, firms should: deemphasize continuous improvement in appropriate departments such as research and design, consider the need for processes rather than simply improving them, and pay attention to how company culture may become too execution-oriented and cost-focused.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Senators Argue for Export-Import Bank

In an opinion piece on Politico, two Democratic senators—Tim Johnson of South Dakota and Mark Warner of Virginia— push for reauthorization of the Export-Import Bank (“Ex-Im”). They argue that Ex-Im is necessary for U.S. firms to compete against international competitors who receive export financing from governments such as China, Germany, Brazil, and France. Additionally, Ex-Im has a lower default rate than commercial lenders and is profitable, having returned nearly $2 billion to the U.S. Treasury since 2008. The House is scheduled to vote today on reauthorization.

CFR’s Edward Alden discusses the issues facing lawmakers as they consider Ex-Im reauthorization, including the increasingly aggressive actions of developing countries to finance their exports and Ex-Im’s efforts to match them.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

New IRS Rules make Offshore Investment Harder

In an effort to prevent tax evasion, Congress passed a law in 2010 requiring foreign financial institutions to report on the income earned by U.S. citizens (Bloomberg). As firms brace for the new rules to be phased in starting at the beginning of next year, many are turning away investments from Americans to avoid the increased regulatory burden. Americans will have fewer opportunities to invest overseas, while expatriates will face greater difficulty in finding foreign institutions to handle their transactions.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.