According to the McKinsey Global Institute, the world will face a shortage of up to 40 million college-educated workers in 2020, and a glut of 90 to 95 million more low-skill workers than required. The report argues that advanced economies such as the United States must produce more college graduates, particularly in STEM fields. The report also recommends that businesses increase their efforts to shape public education and training systems.
The report of the CFR Independent Task Force on U.S. Education Reform and National Security highlights the importance of the Common Core State Standards 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.
International Trade and Investment
BRIC Currencies on the Decline
Currencies of the major developing economies of Brazil, Russia, India and China are going through their largest declines since 1998 (Bloomberg). As the U.S. dollar strengthens relative to these currencies, U.S. exporters will face greater difficulty as their products become more expensive abroad. Additionally, the profits of foreign subsidiaries decline when calculated in U.S. dollars. While all four nations are slowing down along with the broader global economy, there are specific reasons for currency falls, such as declining Russian oil exports and a widening Indian budget deficit.
CFR Senior Fellow and Renewing America Director Ted Alden discusses the general lack of trade protectionism in the wake of the Great Recession, and the likelihood that the WTO has restrained this political impulse.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Debt and Deficits
Stockton Likely to Declare Bankruptcy
Stockton, a city of roughly 300,000 in Northern California, is expected to declare bankruptcy this week (WSJ). As its state-mandated mediation with creditors ends, Stockton would be one of the largest cities to declare bankruptcy. Property tax revenues are down while costs from city workers, retirees and downtown construction costs are high. After slashing its budget by $90 million, Stockton still has a $26 million deficit in its provisional $150 million budget. Stockton’s debt is $700 million.
North Carolina’s Local Government Commission (LGC) was the subject of a recent Policy Initiative Spotlight by Steven J. Markovich. While Stockton, CA, and Harrisburg, PA, default on bonds, the LGC has kept North Carolina’s municipalities free of defaults since 1942.
Cities Mull Wider Selling of Naming Rights
As municipalities deal with budget pressures, some are selling unconventional advertising space and naming rights (NYT), such as ad space on fire trucks and other city vehicles. Advertisers see a way to grab the attention of ad weary consumers, and city leaders see a way to balance budgets. A Syracuse policeman explained the tensions: “Some people think it’s a great idea to help support public budgets, and some people are a little put off by the idea that we’re getting sponsorship for what used to be a government duty, if you will.”
Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.
Corporate Regulation and Taxation
Central Banks Face Consequences if Current Policies Persist
The head of the Bank for International Settlements—which houses the Basel Committee on Banking Supervision—warned that central banks risk harm by continuing extraordinary measures taken to fight the financial crisis (WSJ). Bank general manager Jaime Caruana observed that monetary stimulus has been provided "on a massive scale" and cautioned about the pressure on central bankers to prop up ailing economies: "Relying only on central bankers but failing to act on other fronts would ultimately damage confidence and increase the risks to macroeconomic and financial stability."
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
Innovate by Asking 'Why'
Innovation is sometimes sparked by simply asking "why" (HBR). While scientists and engineers often conjure up the new technologies that enable the big next thing, revolutionary products often emerge from the musings of someone like Steve Jobs who thinks about how a technology can be applied in a novel way. From the upside-down ketchup bottle, to automated bike rental kiosks, innovation is often about thinking through a new way to do something.
In the face of persistently high unemployment, policymakers and workers look to innovation and entrepreneurship, the primary engine of U.S. job growth over the past thirty years. This CFR Backgrounder by Steven J. Markovich discusses how entrepreneurs create and finance startups and the ramifications of policies such as the JOBS Act.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.