Category: Uncategorized

Tariffs and their Failings: A Higher U.S. Tariff Would Would Raise Prices, Erode U.S. Competitiveness, and Endanger Exporters

Posted on by Alex Terr

Testimony from Edward Gresser

Joint Economic Committee

December 18, 2024

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to testify on potential increases in U.S. tariff rates. My testimony this afternoon will address four main points: the nature of tariffs and the way they are paid; the people and economic “sectors” who bear their cost; the risks tariff increases pose for American exporting industries; and the unsettling implications of an unlimited presidential power to impose tariffs without Congressional approval. By way of introduction, I am Vice President of the Progressive Policy Institute (PPI) here in Washington, D.C., a 501(c)(3) non-profit research institution established in 1989 and publishing on a wide range of public policy topics. Before joining PPI in 2021, I served at the Office of the U.S. Trade Representative from 2015 to 2021, as Assistant USTR for Policy and Economics, responsible for overseeing agency economic research and use of trade data, chairing the interagency Trade Policy Staff Committee, and administering the Generalized System of Preferences.

Fundamentally, a higher across-the-board tariff rate will leave Americans worse off. It will diminish family living standards by raising store prices. It will make U.S. taxation more regressive for families and less equitable for businesses. It will damage U.S. industries through higher production costs, lost overseas customers, and potential retaliation. And finally, if implemented by presidential decree rather than legislation, it will erode a core Constitutional separation-of-powers principle.

Read the full testimony here. 

 

Watch the full JEC hearing here.

U.S. tariffs are taxes paid by Americans.

Posted on by Max Sherrill

FACT: U.S. tariffs are taxes paid by Americans.

THE NUMBERS: Spending on goods by American household type* –

 

Household type Post-tax income Share of income spent on goods**
Top “decile” $271,600 18.9%
Average for all households   $87,900 28.6%
Single parent   $52,500 38.9%

 

WHAT THEY MEAN:

Live at 2:30 p.m.: PPI’s Ed Gresser testifies this afternoon at Congress’ Joint Economic Committee on potential of higher U.S. tariffs as proposed by the Trump/Vance campaign last fall.  The hearing kicks off in half an hour.  In the interim, here are the four main points: a higher tariff rate means higher prices, damaged industrial competitiveness, multiple harms for U.S. exporters, and — depending on the method — can mean some systemic risk of corruption and damage to American governance.

A brief explanation of tariffs first, since recently — as the testimony observes — over the past year we’ve had “some puzzling assertions that foreigners might somehow pay tariffs. No: U.S. tariffs are taxes paid by Americans.” The basics:

A tariff is a tax on goods bought from overseas, paid to Customs and Border Protection by the U.S.-based individual or business receiving those goods at the border.  For retailers, the tariff becomes part of the store price; for manufacturers, construction firms, or farmers, part of the production cost. Consider, for example, a retailer ordering a container of 10,000 men’s cotton shirts, hypothetically valued at $10 each. These have an “MFN” tariff of 19.7%, set out in line 61051000 of the U.S. Harmonized Tariff Schedule. So the retailer writes three checks:

$100,000 to the source for the shirts
$19,700 to CBP for the tariff
$5,000 to a shipping company for carrying the container.

These together make up her “landed cost” of $124,700 — i.e., the base expenditure from which she marks up to cover her domestic transport, wage and salary, and other costs, and earn enough per shirt to profit. So the shirts have cost her $12.47 each, including $1.97 in tariff payment. A week later at the cash register, the price includes this embedded tariff, amplified by markup and sales tax. The retailer has written the check; the shopper has borne the cost. Again, U.S. tariffs are taxes paid by Americans.

Now the main points. What we raise the U.S. tariff rate — 2.4% last year — to 10% or 20%?  Three economic results, and perhaps (depending on the method) something more.

First: Prices rise for families as we add 10%, or 20% (or whatever the number might be), to the current tariff system’s taxation of shirts, winter vegetables, energy, OTC medicines, and so on. A series of studies earlier this year — including from Erica York of the Tax Foundation and Brendan Duke of the Center for American Progress, both also appearing at this afternoon’s hearing — suggest that a 10% tariff plus a higher rate on Chinese-made goods would cost families $2,200 to $6,000 a year. That’s a jump of at least 10% from the $25,150 the Bureau of Labor Statistics found average families spending on goods last year.* The costs of this type of tax increase fall most heavily on low-income families and least heavily on wealthy families — naturally, since lower-income households spend more of their income than average buying goods, and top-end households less. The numbers from BLS: in 2023, single-parent families spent 38.6% of their modest $52,500 post-tax income buying food, clothes, cars, furniture, toasters, etc..  This is twice the 18.9% top-decile households (with $271,600 in post-tax income) spent on goods; the national average, 28.6%, is exactly in the middle.

Second: Goods-using parts of the U.S. economy — retail, manufacturing, agriculture, construction, restaurants — decline relative to non-goods users. This is because, all else equal, if you tax one part of the economy but not another, the taxed part gets smaller. (In relative terms, not necessarily in total.) As tariffs on energy, metals, paint, fertilizer, and other inputs raise factory and farm production costs, U.S. manufacturers and agriculture will lose ground to foreign rivals. Construction firms and retailers, meanwhile, lose sales as home prices rise and sticker shocks hit groceries, drug stores, and clothing aisles.  So (again, all else equal), these goods-using parts of the economy gets smaller relative to businesses who spend less on goods — say, real estate and financial services firms — who put much more of their money into investment and services. This may already be happening even with the less ambitious 2018/2019 tariffs on steel, aluminum, and many Chinese goods: since 2018, U.S. manufacturing has dropped from 10.9% to 10.0% of American GDP, and manufacturing trade deficits have nearly doubled.

Third: Exporters suffer multiple harms.  The $3 trillion American export sector — top in the world for agriculture, energy, and services, second for manufacturing — faces a particularly grim outlook even apart from the direct effect of higher production costs. Most obviously, countries hit with tariffs — especially in violation of trade agreements – often retaliate.  Exporters are then the “cannon fodder” of trade wars — the first pushed into the front line, and the first to fall. To note a particular “sector.” farmers are typically early retaliation targets, and 20% of farm income comes from exports. Or to take a particular community, the 1,139 African American-owned exporters Census and BEA counted last year on average employed 21 workers at a payroll of $75,000 per worker, compared to 11 workers at $54,500 for all privately held U.S. businesses.

Less obviously, many export losses come without retaliation at all. As we noted earlier this month, the $141 billion in Texas, New Mexico, and Arizona exports flowing south to Mexico last year included tens of billions of dollars in auto parts, semiconductors, and other specialized products sold to Mexican assembly plants. Tariffing or blocking the cars and appliances they produce means they will shrink; then, in turn, they place fewer orders with their Phoenix, Rio Rancho, El Paso, and Houston suppliers, and they shrink too.

Finally: Beyond the world of economics, Gresser expresses particular concern about speculation that lacking the votes to pass a big tariff increase, the incoming administration might try to impose one by decree under one of a few laws designed for other purposes — declaring a “state of emergency” under the International Emergency Economic Powers Act, or again using Sections 232 or 301 of trade law, etc..

Generally, as a poli-sci rule of thumb, it’s not a positive sign for any country when a president or prime minister declares an emergency and tries to rule by decree.  In the U.S. — especially vis-à-vis tariffs and taxes — it shouldn’t happen, as the Constitution gives Congress unambiguous power over “Taxes, Duties, Imposts, and Excises.” And for good reason: if a president (or any single individual) has the power to create his or her own tax system, not only do poor and impulsive decisions become more likely, but all future presidents face a standing temptation to use tariffs in corrupt ways to reward cronies, family, and political supporters, or to punish business rivals and political critics.  Thus the testimony’s close: “this risks systemic harm to governance, and I hope no administration would proceed in this way”.

* BLS’ Consumer Expenditure Survey 2023; the percentages combine all spending on goods, excluding restaurant meals.

FURTHER READING

Watch live: The Joint Economic Committee’s hearing page; the testimony starts at 2:30 EST.

Gresser’s testimony.

More from PPI on tariffs and taxation:

Fiscal Policy Analyst Laura Duffy explains why, as “It’s Not 1789 Anymore” — in contrast to the founding generation, 21st-century America has the civil service and information needed for an efficient and equitable tax system — tariffs are a poor form of taxation.

And while we’re on the topic, PPI’s “radically pragmatic” budget vision puts tariffs, taxes, spending, and more all in context. From Vice President Ben Ritz and Ms. Duffy, a 10-year budget horizon featuring fairer taxes, lower debt burden, more space for discretionary spending, and restored “fiscal democracy.”

Can a president really create a new tariff system all by himself?

A PPI look at the Constitutional question on tariff powers (with text, James Madison’s notes on 1787 in Philadelphia, etc.) from last October.

Well-informed 21st-century arguments from trade lawyers/former senior trade officials on either side: Alan Wolff of the Peterson Institute says probably not, based on the Constitution and nature of trade laws; Bill Reinsch/Warren Maruyama/Lyric Galvin of CSIS believe it’s very likely, based on case law and precedent.

Happy Holidays! The Trade Fact will return in January. 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week.

A Note on Korean Tech Policy

Posted on by Alyssa Brown

Korea has a vibrant tech sector, and a potent App Economy, led by companies such as Samsung, Naver, and Kakao. Korea is also a staunch ally of the U.S.

That’s why it’s particularly disturbing that the Korea Fair Trade Commission (KFTC) is working with Korean lawmakers on legislation that would impact particular U.S. tech companies. This action would make it more difficult for these companies to compete on fair terms with their Korean and Chinese rivals.

PPI believes in free trade, a principle that will come under pressure in the coming months. But we must remember that free trade implies fairness as well.

Manno for Forbes: Career Navigations Maps Pathways to Economic Opportunity

Posted on by Alex Terr

“You don’t need a degree to succeed, but you do need a map,” says Matt Sigelman, President of Burning Glass Institute, a labor market analytics firm that studies the future of work and workers. Most Americans agree, saying they want to find pathways to good jobs and a career, according to the Career Optimism Index 2024.

This nationally representative survey of U.S. workers and employers, sponsored by the University of Phoenix Career Institute, reports that most current workers say they need support setting career goals (51%) and identifying job options that match their skills and interests (53%). It also found perception gaps of roughly 25 percentage points between workers and employers when asked whether five career development supports were available to help them set goals and develop skills. For example, 67% of employers say regular conversations with managers about career paths are available, but only 42% of workers agree.

The best way to meet this current workforce need is with career navigation systems, which help learners and workers create a road map to good jobs. These systems in turn must be built on accurate information on jobs that are genuine pathways to opportunity. Let’s examine the main elements of what makes a robust career navigation system and the ways organizations develop job and career information for an effective system.

Read more in Forbes.

PPI’s 2024 Year in Review

Posted on by Max Sherrill

Dear friends, 

As 2024 draws to a close, I want to thank the many friends and partners who helped PPI grow and extend its reach here and around the world throughout the year. Although last month’s presidential election was dismaying, it at least has clarified the task before us. Because of its history and unswerving dedication to radical pragmatism, PPI is uniquely poised to catalyze the center-left revival our country urgently needs. It’s a big job, and we’ll need your help and support more than ever. If you’re interested in continuing to contribute to PPI’s mission, please donate or visit our website.

PPI’s 2024 Election Review: The Way Ahead for Democrats

The 2024 Presidential election sent shockwaves through American politics, and throughout the world, marking a stunning comeback for Donald Trump and delivering a sobering verdict on the Democratic Party’s current trajectory.

While many governments are grappling with what a change of U.S. administration could mean for their countries and their relationship with the United States, Democrats are coming to terms with why they lost the election, and the way ahead for their party.

New PPI research has been undertaken which reveals the crucial underlying problem: Democrats have lost their connection with working-class Americans.

This third and final installment in a series of PPI/YouGov polling of working-class voters in battleground states, along with focus groups conducted for PPI by Deborah Mattinson, former Director of Strategy for UK Prime Minister Keir Starmer, reveal a sobering reality: Blue-collar voters now view the Democratic Party as weak, unpatriotic, incompetent, and out of touch, while seeing Republicans as stronger, more patriotic, and increasingly aligned with their concerns.

“Working class voters rendered a harsh verdict on Democrats on November 6,” said Will Marshall, PPI President. “They see the party as weak, unpatriotic, and out of touch with their everyday economic struggles and values. Democrats need a major course correction, because they can’t build a center-left majority without reconnecting with the working families that once were the backbone of their party.”

PPI’s analysis has been informed by its work around the world to promote durable center-left governments, which is proving challenging under the continued pressure from right-leaning populism. To that end, PPI’s Project on Center-Left Renewal, led by Claire Ainsley and Will Marshall, conducted a post-election trip to Europe, making stops in Brussels, Berlin, and London. The PPI delegation discussed what went wrong for Democrats and how we can work together to rebuild and solidify the center-left coalition.

PPI will continue to engage with party leaders, strategists, and policymakers to advance a vision that reconnects Democrats with the working-class voters who have been the backbone of the party for generations. Only by reconnecting and providing them with a credible alternative for change, can we hope to win the next Presidential election. That work has to start now, and here at PPI we’re ready to roll up our sleeves and get to work on this mission.

Read PPI’s full 2024 year in review.

PPI Unveils Framework to Replace “Death Tax” with a Fairer, Deficit-Reducing Alternative

Posted on by Alex Terr

WASHINGTON — With key provisions of the Tax Cuts and Jobs Act set to expire at the end of 2025, Congress faces a critical opportunity to reshape the nation’s tax code. Amid debates over how to balance revenue needs with economic fairness, the Progressive Policy Institute (PPI) offers a bold new framework to transform how intergenerational wealth transfers are taxed.

A new report titled “A Better Way to Tax Unearned Income,” authored by PPI Vice President for Policy Development Ben Ritz and Policy Analyst Alex Kilander, offers federal policymakers a detailed technical framework for a new inheritance tax that would progressively raise revenue and counter the political vulnerabilities that have hobbled the current estate tax. If enacted, PPI’s proposal could generate several hundred billion dollars in revenue over the next decade without slowing economic growth, providing tax writers with a promising option to extend some income tax cuts for workers without increasing the national debt.

“Nobody should pay more in taxes on income they earn through their own hard work or risk-taking investments than they do on the income they inherit simply for being born into a wealthy family,” said Ritz. “Every dollar raised by taxing unearned inheritance is one that does not need to be raised by taxing the earned incomes of working Americans.”

Although polls consistently show high levels of public support for taxing wealthy Americans who are exclusively affected by the current estate tax, the tax itself has become deeply unpopular with the general public after years of anti-tax advocates arguing that, because taxes are already levied on the income a person earns during their lifetime, taxing the assets a person leaves behind is an unfair “death tax” that amounts to double taxation. The estate tax is further undermined by large exemptions and loopholes that make it easy to avoid for even the wealthiest families.

PPI’s proposal tackles these challenges by:

  • Replacing the estate tax with a system that instead taxes inheritance when it is received by heirs as income
  • Reforming the taxation of capital gains, gifts, and trusts to ensure the system cannot be exploited by wealthy Americans
  • Expanding protections to prevent heirs from needing to sell family-owned farms, homes, or small businesses to pay their tax obligations

The new report expands upon one of six dozen ideas PPI’s Center for Funding America’s Future proposed this summer as part of a comprehensive blueprint for putting the federal budget on a path to balance within 20 years. That blueprint can be found here.

Read and download the new report here.

Launched in 2018, the Progressive Policy Institute’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. To that end, the Center develops fiscally responsible policy proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, transform our tax code to reward work over wealth, and put the national debt on a downward trajectory.

The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.

Follow the Progressive Policy Institute.

###

Media Contact: Ian O’Keefe – iokeefe@ppionline.org

A Better Way to Tax Unearned Income

Posted on by Alex Terr

The belief that success should come from your personal initiative and hard work, rather than the good fortune of your birth, is central to our nation’s identity as the “land of opportunity.”

Rags to riches stories are deeply rooted in American history and folklore, with several of our founding fathers, such as Alexander Hamilton and Benjamin Franklin, rising from impoverished backgrounds to build a nation. Conversely, the American ethos has steadfastly rejected the “artificial aristocracy founded on wealth and birth,” as Thomas Jefferson writes, in favor of one built upon “virtue and talents.” Success in America is supposed to be built upon merit and hard work rather than who your parents are.

Despite this national ethos, America has fallen behind many of our international peers in creating opportunities for social mobility. In the World Economic Forum’s measure for social mobility, the United States performs worse than the Nordic countries, France, and even the United Kingdom, with their long history of hereditary aristocracy. Declining levels of intergenerational mobility have come in tandem with rising levels of wealth inequality. U.S. wealth is densely concentrated among relatively few households, with the top 10% of households today owning roughly 67% of the nation’s wealth, compared to the 2.5% for the bottom 50% of households. Even among households that are exclusively above age 50, which removes cases where people are high-income but low-wealth (such as a recent law school graduate), the wealthiest 10% of households own 70% of wealth in that age range, while the bottom 50% of households only have 3%.

This combination of low social mobility and high wealth inequality produces a self-perpetuating hierarchy of economic privilege, making it difficult to get ahead on hard work alone. As much as 60% of all wealth in the United States is inherited rather than earned. Moreover, this inheritance income is skewed toward those who already enjoy comfortable lives: In 2021, the top 10% of earners received 55% of total inherited wealth, while the bottom 40% received less than 10%. It’s perfectly natural that people who have enjoyed economic success would want to pass some of their wealth on to their children. But the privilege cannot be limitless. Entrenched aristocracies built upon generations of inherited wealth create a substantially uneven playing field and pose a threat to our democracy, as concentrated wealth, in turn, leads to concentrated economic opportunities and political power.

The best tool for reconciling this tension between individual liberty and America’s promise of equal opportunity for all is the U.S. tax system. But as the next section of this paper explains, the current estate tax is undermined by large exemptions and loopholes that make it easy to avoid for even the wealthiest families. It has also become deeply unpopular with the general public after years of anti-tax Republicans arguing that, because taxes are already levied on the income a person earns during their lifetime, taxing the assets a person leaves behind is an unfair “death tax” that amounts to double taxation. But these critiques misrepresent who actually pays the estate tax. Someone who is already dead suffers no inconvenience from the estate tax or any other tax policy; the tax is instead borne entirely by heirs who never paid any tax on the income they receive from an inheritance.

The following sections of this paper offer federal policymakers a technical framework for reforming the taxation of intergenerational wealth transfers to progressively raise revenue and undercut the misleading political attacks levied against the current system. To start, we propose to replace the estate tax — which taxes a decedent’s estate — with a new system that would only tax inheritance as it is received by an heir. This approach would both limit Republican “death tax” arguments by making it more clear that the tax is paid by wealthy heirs and create a fairer system for heirs by only taxing the inheritance they actually receive as income. We also propose reforms to the gift and generation skipping transfer taxes — two taxes intended to complement the estate tax — to work better alongside our proposed inheritance tax.

Next, we offer a series of reforms to close the largest loopholes in the current wealth transfer tax system. One of the biggest is the stepped up basis, which permits previously unrealized capital gains to completely escape taxation after an asset has been passed down. In addition, our proposal takes aim at the myriad of loopholes that arise from the IRS’s favorable treatment of non-liquid assets, including tax deductions and discounts commonly abused by wealthy families. However, we also pair these reforms with expanded protections to ensure that no heir has to sell the family farm, home, or small business they inherit just to pay an onerous tax bill. Lastly, we make major reforms to the taxation of trusts, streamlining complicated tax rules and closing the many loopholes that arise from this complexity while preserving the use of trusts for valid reasons unrelated to tax avoidance.

Left out of our proposal are changes to address other vehicles that are sometimes used to avoid estate tax, such as leaving estates to questionable nonprofit “family foundations” or using life insurance to pass along wealth tax-free. Since closing these loopholes would require a much broader rethink of the taxation of nonprofits and life insurance overall, and our proposal makes them no worse than under current law, we have chosen to leave them unchanged. Despite these omissions, our proposal would be a substantial improvement over the status quo, raising several hundred billion dollars over ten years from the wealthiest households while creating a better and fairer tax regime. Furthermore, every dollar raised by taxing unearned inheritance is one that does not need to be raised by increasing taxes on the earned incomes of working and middle-class Americans, making it a strong option for policymakers to consider in the context of future tax reform or deficit reduction efforts.

Read the full report.

 

 

A Transatlantic Dialogue on the Industrial Heartlands

Posted on by Max Sherrill

For a generation, people living in the traditional industrial heartlands all over the world have been buffeted by a technological and services revolution, the decline of manufacturing, and the rise of a borderless global digital economy. The result is deepening inequality, ongoing political support for right-wing populists and a hollowing out of the middle class.

With this three-year project together with our partners from the U.S. and Germany we aim to create new opportunities in old industrial heartlands in both countries by forging a transatlantic dialogue, exchanging best practices and developing political strategies and policy solutions for a better, greener and more democratic future. The main goal is to deliver increased living standards and opportunities, while also working towards rebuilding trust in democracy in the U.S. and Germany.

Neel Brown talks with two of the program fellows, Colleen Dougherty⁠ and ⁠Friedrich Opitz⁠, about their reflections on the fellowship’s October trip to Pennsylvania, Ohio, and Michigan.

Learn more about the program: https://www.industrial-heartlands.com/

Stone for RealClearEducation: It’s Time to Expand Pell Grants to Include Short Term Workforce Programs

Posted on by Alex Terr

Over the past few decades, most kids have grown up being told by their parents that getting a four-year college degree is the best way to get ahead in life. Today, however, as the cost of college has skyrocketed and employers have faced a shortage of skilled workers, people have started to look beyond traditional two and four-year colleges for their pathway to career success.

With so many employers in need of workers with qualifications in anything from IT services to healthcare to the culinary arts, short-term educational programs have been one of the fastest emerging career training opportunities for people looking to enter the workforce or change careers. These programs are typically highly accredited, providing workers with a quality education and the specific skills they need to thrive.

However, Washington lawmakers have created an unbalanced system that makes it harder for students to access these programs. Short-term training programs are popular, enjoy higher competition rates than two-year degrees, and tend to be dramatically cheaper than traditional colleges — but the cost can still be prohibitive, and very little financial aid in the form of grants or scholarships is available for them at the state, local, and federal levels. While some short-term programs are eligible for federal student loans, under current law, programs must span at least 600 hours over 15 weeks to qualify for Pell Grants.

Read more in RealClearEducation. 

Jacoby Interview for The Big Picture With Edwin Eisendrath

Posted on by Max Sherrill

Edwin talks to Tamar Jacoby, director of the New Ukraine Project at the Progressive Policy Institute.

Jacoby, who is based in Kyiv, talked about the mood there, after almost three years of war in the country. “People are tired,” she said, “and that word doesn’t quite even capture it. Kyiv is far from the front, and life goes on in Kyiv. People go to restaurants and bars, and do live their lives, but just about everybody knows or is related to somebody who’s fighting, and indeed, most have casualties in their circle of a family or acquaintances. And the war is coming increasingly to Kyiv and to the west of the country because of the intensified missile and drone strikes.”

Check out the full episode.

Ryan for Newsweek: DNC should move D.C. Headquarters to Youngstown, Ohio

Posted on by Alex Terr

Democrats are out of touch and disconnected from working class voters of all races, genders, and backgrounds. That isn’t exactly breaking news. It is obvious. For many of us in the industrial Midwest, this has been like watching a decades-long train wreck in slow motion. Many of us have been screaming this from the rooftops, and no one, and I mean no one, in Washington wanted to listen. Now here we are with a brand new Trump presidency and an even further damaged Democratic brand. My suggestion as a first step on the road to recovery: Move the Democratic National Committee headquarters out of Washington, D.C. to Youngstown, Ohio.

Democrats need to get the hell out of the D.C. bubble. It’s killed our party. Force the overpaid consultants and contractors who give really bad advice to get immersed into the culture of an old mill town trying to make its way in the new economy. Make them and the staffers who work for the DNC drink coffee, eat lunch and dinner, drink beer, bowl, play bocce, go to concerts and watch sports with normal everyday working people. And they should spend their time mostly listening—not talking or tweeting.

The Democrats have, whether we like it or not, become an arrogant, preachy, coastal, inside-the-beltway, Twitter Party. We’ve become an organization of loosely tied, self interested groups who make a lot of money pitching outrage so they can raise more money for their own self preservation. Then, if any fellow Democrat has an honest, fact based disagreement, they scream and yell and call you corrupt.

It’s pretty pathetic. Our party has no clear unifying vision for America. The Party has taken extreme positions that are not connected to reality generally and do not resonate with the sensibilities of working class voters. We’ve lost touch with the hopes and dreams of everyday Americans. And we won’t reconnect with those hopes and dreams by having all of our operatives living and working just blocks from the stupid echo chamber that has become Washington, D.C.

Read more in Newsweek.

Pankovits for The Milwaukee Journal Sentinel: Wisconsin parents deserve truth about their children’s academic progress

Posted on by Alex Terr

Many states’ standardized test scores mislead the public about whether students have mastered the lessons taught at their grade level. In other words, scores some states label as ‘proficient’ doesn’t match the knowledge the nation’s top experts in student assessment say children should attain by their age.

Wisconsin now joins their ranks.

In June, with nary a public hearing, Jill Underly’s Department of Public Instruction (DPI) unilaterally watered down Wisconsin’s achievement standards. Without input from the governor, legislators, parents, or assessment experts, DPI lowered the “cut” scores for the state’s annual Forward exam.

Not surprisingly, Underly’s new performance standards manifested as a mirage on the Forward exam scores released earlier this fall:

  • In 2023, 39% of Wisconsin students tested proficient in reading; in 2024, 51% did.
  • In 2023, 41% were proficient in math; in 2024, DPI claims 53% are.

That’s a 12% jump in both subjects in one year – extremely unusual, even when students get intensive academic remediation.

Read more in The Milwaukee Journal Sentinel. 

Untapped Expertise: HBCUs as Charter Authorizers, Part 1

Posted on by Max Sherrill
On this episode of RAS Reports, Curtis Valentine, the Co-Director of PPI’s Reinventing America’s Schools Project, and Naomi Shelton, CEO of the National Charter Collaborative, sit down with Ronald Falls Jr., a member of the Board of Trustees at Stillman College.

The group discusses Stillman’s charter school partnership, as well as the crucial role HBCUs can play in K-12 education as charter authorizers.

Many Americans Are Unprepared to Weather a Trump Economic Storm

Posted on by Max Sherrill

After a pandemic-induced recession and several years of high inflation, many Americans are pessimistic about both their own personal finances and the overall economy. Unfortunately, the incoming Trump administration will likely bring more economic turbulence, with sweeping policy promises that could cause economic growth and employment to drop, while reigniting high inflation. Americans without robust savings are especially vulnerable in such turbulent times.

One of the most unnecessary contributors to inflation over the past four years was an excess of deficit-financed stimulus spending. But Trump and Congressional Republicans appear likely to repeat the mistake of their predecessors by extending and possibly expanding upon the tax cuts they enacted in Trump’s first term — which would cost more than $4 trillion over 10 years — without offsetting most of the cost. Furthermore, while the tax cuts’ largest benefits will disproportionately flow to wealthy Americans, the inflation they could cause would be borne primarily by working-class Americans who consume more of their household income than their upper-income peers. 

As both a candidate and as president-elect, Trump has promised several other policy shifts that would wreak havoc on American households’ financial stability. For example, Trump promised throughout his campaign to impose a 10-20% tariff on every imported good, with at least a 60% tariff on Chinese goods. More recently, Trump also threatened a 25% tariff on Canada and Mexico, two of our largest trade partners. If implemented, these proposals would lower most Americans’ incomes by thousands of dollars, as importers pass the cost onto consumers through higher prices for everyday items.

If enacted, these policies and the many others Trump has advocated for, such as mass deportations, would send shockwaves through the economy. One prediction from the Peterson Institute for International Economics suggests severe consequences for Americans: Prices could skyrocket as much as 28% above the baseline prediction, gross domestic product could be  $6.4 trillion lower, and employment would fall in exporting industries such as agriculture and manufacturing. While other estimates may be smaller, they all point to disastrous consequences for American households if Trump succeeds in enacting the economic agenda he campaigned on. 

Households without savings to rely upon will be especially vulnerable to these economic disruptions. Emergency savings can not only provide a crucial financial cushion during unexpected events such as job loss but can also reduce reliance upon debt when a household’s costs rise faster than its income. Yet the past few years of inflation have taken a toll on American households, with 65% of adults in a Federal Reserve survey published earlier this year saying price increases have worsened their financial situation. One consequence of higher prices is that it becomes harder to adequately save for emergencies: According to the same survey, 46% of Americans surveyed did not have emergency savings to cover three months of expenses, up from 41% in 2021. Another recent survey by Blackrock found that more than one in four Americans lack any form of easily accessible savings to draw from during a crisis. 

Donald Trump’s voting base is especially at risk: Blackrock’s survey found that 36% of rural households, which backed Trump by a 28-point margin, had no form of emergency savings — one of the highest of any demographic group. But these communities will also be among the hardest hit by Trump’s economic policies: The trade wars caused by his across-the-board tariffs will not only raise the prices they pay on consumer goods, but hit export-reliant industries that are important for rural economies, such as agriculture. As other countries respond with retaliatory tariffs, the industry will suffer as American products become substantially less competitive overseas.

Ideally, policymakers should avoid pursuing policies that will cause economic uncertainty or chaos. But in any case, they should pursue policies that promote financial capability to help vulnerable households weather whatever turbulent times lie ahead. PPI will be highlighting some potential policies that could advance these objectives in the next year.

Ritz for Forbes: Democrats’ Last Act Shouldn’t Be Expediting Social Security Insolvency

Posted on by Alyssa Brown

By Ben Ritz

On Wednesday, outgoing Senate Majority Chuck Schumer announced his intention to bring the House-passed “Social Security Fairness Act” up for a vote before the end of the year. While the bill may sound good and have some admirable goals, passing it now as written would undermine the future of Social Security. It would be both political malpractice and bad governance for Democrats to rush this bill into law as their final act before handing control of the White House and U.S. Senate to the GOP in January.

Social Security is currently built around two core principles. The first is that workers should receive benefits based on what they paid into the program. Although this principle is heavily strained today, as workers have not paid enough in Social Security payroll taxes to cover the cost of benefits for many years now, benefits are calculated based on the average wages upon which workers paid payroll taxes over their careers. The second principle is that the benefit formula is progressive, meaning workers with lower lifetime incomes receive a greater benefit relative to the money they earned (and paid into the program) compared to higher earners.

At issue are two provisions, known as the windfall elimination provisions (WEP) and government pension offset (GPO), that attempt to enforce these principles fairly for people who spend part of their career working for state and local governments in jobs that offer pension benefits in lieu of Social Security. Earnings from these jobs are considered “uncovered,” which means workers don’t have to pay payroll taxes on the income, but those earnings also aren’t taken into account for Social Security’s benefit formula. WEP and GPO are intended to prevent someone who consistently earned a $100,000 annual salary over a career that was split evenly between covered and uncovered jobs — and thus would be treated by the benefit formula as if they received a $50,000 over their whole career — from getting a higher return on their payroll-tax contributions than someone who consistently earned $60,000 in covered employment.

Read more in Forbes.

Moss and Gresser on Medium: Biden’s “To Do” List for His Last Weeks: Approve the Merger of Nippon Steel and U.S. Steel

Posted on by Alyssa Brown

By Diana Moss and Ed Gresser

As President Biden “runs through the tape” in his last weeks in office, he should take a few minutes to approve U.S. Steel’s purchase by Japanese firm Nippon Steel. Doing so would have myriad benefits and virtually no costs. The merger would help America’s heavy industry, support a core U.S. international alliance, and promote fair competition and supply for steel users in the United States. Approving the merger is, basically, the right thing to do.

Nippon Steel’s bid to purchase U.S. steel succeeded in late 2023. That is, at least as far as the money, the terms, and the agreement of U.S. Steel’s management and Board of Directors. The two companies agreed on a $14 billion deal that would bring new blue-chip Japanese technology and capital to a fading U.S. industrial icon and help preserve metal production in Pennsylvania.

Nonetheless, the Nippon-U.S. Steel merger has proved controversial. Fears about foreign ownership of a major American metals producer quickly generated opposition from both the Biden administration and the incoming Trump administration. The issues have also divided the United Steelworkers union, with union leadership opposing the deal while many Pennsylvania members support it.

Read more on Medium.