from Renewing America

Morning Brief: Spending Cuts May Slow Economic Growth

U.S. Defense Secretary Leon Panetta briefs the media on budget cuts announced by the Pentagon in January 2012 (Kevin Lamarque/Courtesy Reuters).

July 30, 2012

U.S. Defense Secretary Leon Panetta briefs the media on budget cuts announced by the Pentagon in January 2012 (Kevin Lamarque/Courtesy Reuters).
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As policymakers debate the "fiscal cliff" of spending cuts and tax increases scheduled to take effect at the end of the year, slowing federal spending is already hampering economic growth (WSJ). Reduced federal spending and tax increases can be beneficial in the long run by closing the yawning federal deficit, but the 3.3 percent decrease in spending and elimination of over 52,000 federal government jobs in the past year may imperil growth in the short run. "It's unbelievable how much the economy is getting hurt already by the sharp drop in federal spending," said the chief U.S. economist for Deutsche Bank.

As the United States continues to run budgets with high deficits, politicians debate different plans to reduce government costs and to raise revenue. This CFR Backgrounder by Jonathan Masters outlines the competing policy paths on federal fiscal reform, and the global consequences for failing to bring down U.S. debt.

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

Education and Human Capital

Few Options for Some States with School Choice Programs

In states with school choice programs, many private schools decline to participate (Stateline). In Cincinnati, just under half of all private schools declined to participate in the state’s EdChoice scholarship program, leaving some of the city’s best schools out of reach for many students. Private schools that hold out often cite the burden of dealing with accountability requirements, including student testing, and also the difficulty in bringing students from failing schools up to speed.

Choice-based school reforms have attracted considerable debate among experts. The state of Louisiana has become a kind of national laboratory for proponents of choice-based reform. Renewing America contributor Steven J. Markovich discussed recent Louisianan educational reforms in a Policy Initiative Spotlight.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

International Trade and Investment

Corporate Profits Slow Their Rise

Slowing global growth threatens to break U.S. firms’ string of ten consecutive quarters of profit growth (WSJ), which has been decelerating for the last three quarters. Darkening earnings outlooks are an echo of slowing growth globally. Falling commodities prices point to weaker global demand. The CEO of package shipper UPS said that growth in exports was lagging global economic growth, something that’s "occurred once in the past ten years, and that was during the last recession."

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


Incorporation as a Graduation Requirement

The for-profit Founder Institute will not allow students to graduate from its training program until they incorporate (NYT). The institute was started by serial entrepreneur Adeo Ressi, who sought to support potential entrepreneurs even before they develop an idea, and believes that entrepreneurship can be taught. His brainchild has helped launch more than 500 companies, and has branches in twenty-seven cities across the globe.

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.

Social Technology’s Role in the Office

A report by McKinsey Global Institute argues that social technologies could unleash more than a trillion dollars in potential global value. While social technologies are often applied to improve consumer insight, the report argues that these tools "have the potential to raise the productivity of the high-skill knowledge workers that are critical to performance and growth in the 21st century by 20 to 25 percent."

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.

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