Category: Uncategorized

Baseline Gimmickry Doesn’t Erase Costs

Posted on by Max Sherrill

From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.

Senate Republicans and “moderate” House Republicans who are uncomfortable with the $4.5 trillion cost of extending the expiring tax cuts enacted during Trump’s first term are pushing a new strategy: pretend it is free. Normally, the cost of legislation is measured as the amount passing the legislation would increase the deficit relative to a scenario where the legislation did not pass, which is known as a “current law” baseline. But Republicans instead want to score their upcoming tax bill against a “current policy” baseline that assumes every policy in effect today continues in perpetuity.

Although advocates of this approach suggest it would “zero out” the cost of extending expiring tax cuts, the reality is that it would do nothing to change the actual cost. If Republicans pass a bill with policies that are “fully offset” relative to current policy, the national debt as a percent of gross domestic product would increase by nearly twice as much compared to if they did nothing.

Aside from helping Republicans justify their budget-busting plans to themselves and the public, adopting a current policy baseline could potentially clear some legislative procedural hurdles. Budget reconciliation bills, which can be passed by a simple majority in the Senate without being subject to a filibuster, are not allowed to increase deficits over 10 years by more than the amount permitted in a previously-passed budget resolution. These constraints are the reason Republicans scheduled many tax cuts to expire at the end of this year when they passed the Tax Cuts and Jobs Act in 2017.

By using a current policy baseline – instead of the current law baseline used in 2017 and for every other piece of legislation – Republicans are hoping to hide the true cost of extension so they can bypass reconciliation constraints and clear the path for their legislative agenda. Most experts believe budget rules do not allow lawmakers to subjectively select their preferred baseline like this. But if Republicans are somehow able to do so, either by exploiting legal loopholes or overruling the Senate parliamentarian, the results could annihilate any fiscal guardrails in future legislative debates.

Consider this scenario: After enacting the American Rescue Plan in 2021, which cost $1.9 trillion compared to a current law baseline, Democrats could have said that not extending the law’s one-time spending provisions would “save” up to nearly $20 trillion over the following decade compared to a current policy baseline. They could then have used these phony savings as an “offset” for a bill four times as expensive as Joe Biden’s original “Build Back Better” plan. Effectively, Republicans would be setting a precedent that enables far-left Democrats to enact prohibitively expensive proposals like the Green New Deal or Medicare-for-All and claim they cost virtually nothing, even as the national debt would balloon.

Some Republicans have argued that making tax cuts permanent is so important for economic growth that the benefits of extending them should outweigh any potential consequences. But according to the nonpartisan Congressional Budget Office, extending the tax cuts without offsets would be unlikely to generate any long-term economic growth at all – and could even reduce it, as higher borrowing costs outweigh any positive economic impact. Moreover, when the federal budget is on such an obviously unsustainable trajectory, no fiscal policy can be considered permanent. At some point in the not-too-distant future, some combination of tax and spending policies that currently have no expiration date will have to change to prevent, or react to, an economic crisis caused by exploding debt. If Republicans really wanted their tax cuts to be permanent, they would figure out how to pay for them.

Deeper Dive

Fiscal Fact

Under a current policy baseline, the national debt will increase by more than $26 trillion over the next 10 years.

Further Reading

Other Fiscal News

More from PPI & The Center for Funding America’s Future

Read the full email and sign up to receive the Budget Breakdown.

Isolationism and appeasement are dangerous

Posted on by Alex Terr

FACT: Isolationism and appeasement are dangerous.

THE NUMBERS: Ukraine economic indicators, 2022 and 2025* –

2022 2025
GDP $161 billion $189 billion
Growth rate -29.7%   2.5%
Inflation 20.2%   9.2%
Unemployment 24.5% 12.7%

* International Monetary Fund, World Economic Outlook database October 2024

WHAT THEY MEAN:

As President Zelenskyy returns to Kyiv, some thoughts on Russia’s war, the Ukrainian cause, the White House’s revival of isolationism and appeasement, and the dangers it poses for America and America’s friends:

Three years ago this week, we noted that Russia’s invasion of Ukraine was one of very few attempts since World War II — arguably only the second, together with Saddam Hussein’s invasion of Kuwait in 1990 — by one UN member to attack another and attempt to wipe it off the map. From this point of departure, we made three points about the event and the appropriate American and Allied response to it. Here they are, shortened a bit for space:

(1) The post-World War II ban on wars of conquest is the foundation of international order, whether one’s point of reference is international law and the UN Charter, or the logic of peace and security.  Respect for it is essential to international achievement in any field, from peaceful settlement of disputes among countries, to scientific and medical progress, environmental protection, economic policy, and international security.

(2) Russia’s violation of this ban in the attack on Ukraine was then, and remains now, especially dangerous as the action not of the rogue dictator of an isolated minor power, but of a permanent member of the UN Security Council. Should it succeed, we can expect more such events and a much more dangerous world. Should it fail, conversely, the taboo on wars of conquest will be stronger and future imitators more effectively deterred.

(3) The Biden administration and allies from Australia, Korea, and Japan to Canada, the EU, and the UK were right to respond with economic and military aid for Ukraine, and extensive sanctions on Russia. Hindsight from 2025 can dispute some of their specific choices, especially on weapons provision. But whether from the moral or the national-interest perspective, their decision to stand with Ukraine was correct.

It remains so now. Ukraine has used its support well. Its army defeated Russia’s initial attack on Kyiv in 2022 and holds the line in the east. Its very modest navy — mainly a collection of small boats armed with ingenious home-built naval drones — defeated Russia’s Black Sea Fleet in 2023, sinking a third of its capital ships and forcing the rest to shelter in port ever since.  And on the home front, as the IMF data above show, Ukraine’s economy has grown by about 20% since the low of 2022, with unemployment and inflation both cut by half; its start-up tech community has created ex nihilo an internationally competitive high-tech defense industry; and its Black Sea victory has reconnected Ukraine’s agricultural heartland to customers in Europe and the United States. More basically, Ukraine’s public is not about to buckle, its government is stable, and its defense is a just cause.  Americans have no reason to reassess our commitment.

The Trump administration, to our great dismay, has taken a different approach, vividly displayed in Friday’s White House meeting.  In the past month it has refused to condemn Russia’s invasion, opened direct talks with Russia without the presence of Ukrainians or European allies, and now has made an open attempt — including stopping military aid — to coerce Ukraine itself. This is full of risk — above all for Ukrainians, next for U.S. allies such as the Baltic states and Poland, and finally for Americans too.

The administration’s recycling of the term “America First” for its approach is evocative and instructive.  The first group to use this name, the “America First Committee,” was an organization created in September 1940 – that is, during the Battle of Britain — with a specific goal: to prevent Franklin Roosevelt from aiding the U.K. with ships, planes, industrial supplies, and food through the “Lend-Lease” program. Its roughly 800,000 members varied — some were sincere pacifists, others convinced isolationists and worried college students, and some admired dictators as “strong” and “decisive” personalities and considered fascism the energetic “wave of the future.” All of them were wrong, and some of them were bad. Their failure in 1940 was good for the world and America alike.

Eight decades later, Friday’s White House meeting – as well as the administration’s extraordinary decision to oppose the UN’s February resolution condemning Russia’s invasion of its neighbor – recall the ugliest part of this earlier America First movement.  The February meeting by the Secretary of State and National Security Advisor with Russian officials in Saudi Arabia — likely about Ukrainian land among other things and, we repeat, without Ukrainians present — echoes the naivete of the Committee’s pacifist/isolationist members: won’t a few concessions appease an aggressive power?  Could it hurt to try?  The obvious point of reference is the 1938 Munich Agreement, where the leaders of the two big European democracies — the U.K.’s Chamberlain and France’s Daladier — conceded Czech land to an aggressor in the hope of avoiding conflict. Here’s the classic in-the-moment verdict from an opposition MP:

“[Our people] should know that we have sustained a defeat without a war, the consequences of which will travel far with us along our road; they should know that we have passed an awful milestone in our history, when the whole equilibrium of Europe has been deranged, and that the terrible words have for the time being been pronounced against the Western democracies: ‘Thou art weighed in the balance and found wanting.’

“And do not suppose that this is the end. This is only the beginning of the reckoning. This is only the first sip, the first foretaste of a bitter cup which will be proffered to us year by year unless by a supreme recovery of moral health and martial vigour, we arise again and take our stand for freedom as in the olden time.”

Churchill was speaking of a fait accompli. By contrast, Mr. Trump’s venture has so far not succeeded.  Americans of both parties who have a greater sense of realism, who appreciate the danger of appeasement and isolationism, and who are more willing to be guided by right and wrong, may be able to prevent a second such outcome. They need to try.

FURTHER READING

PPI on Ukraine:

Tamar Jacoby leads PPI’s Kyiv-based New Ukraine Project.

… and recent pieces on Friday’s White House meeting and the February UN vote as an warning of the possible end of U.S. global leadership.

PPI President Will Marshall (July 2024) on Ukraine and NATO.

Ben Ritz on the modest budget impact of aid to Ukraine, and the very high cost failure might bring.

And Ed Gresser on economic trends and the impact of Ukraine’s Black Sea naval victory, with a point of departure in Ukraine’s large society of beekeepers and their 11-tons-of-honey-a-day American market.

Primary sources:

The UN Charter. Core sentence: “All members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.”

President Zelenskyy’s Victory Plan, October 2024.

Ukrainian Ambassador Sergiy Kyslytsya at the UN Security Council, February 2022.

The Ukrainian Embassy has updates on home events and U.S.-Ukraine relations.

The State Department’s release on Rubio goals for Russia talks.

… Rubio/Waltz do their best to explain in Riyadh.

And a look back:

The Franklin D. Roosevelt Library remembers Lend-Lease.

Historian Susan Dunn on Roosevelt, Willkie, Lindbergh, the America First Committee, and the 1940 presidential election.

Churchill on the Munich Agreement, 1938.

And from an earlier generation, British historian A. L. Rowse recalls the 1930s in Appeasement: A Study in Political Decline. Two apposite quotes:

“The fundamental reason for the Second World War was the withdrawal of the United States out of the world-system: that, more than anything else, allowed the aggressors to get away with things.  Not all the mistakes this country [i.e. the UK] was responsible for in the 1920s and 1930s equaled the one enormous and irreparable error the United States made in contracting out of responsibility.”

“Whatever concessions were justifiable to Weimar Germany, no concessions should ever be made to Hitler.  That this was the right line to adhere to all the evidence now proves: hold the ring around Hitler’s Germany, and the break will come inside.”

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.

Kahlenberg for The Liberal Patriot: Time to Ditch DEI in Favor of Something Better

Posted on by Max Sherrill

For almost a half century, Republican presidents consistently attacked racial preference programs rhetorically but did little to roll them back. That was true of Ronald Reagan, George H.W. Bush, George W. Bush, and even Donald Trump in his first term. Trump’s second term is different. The new administration has unleashed a flurry of executive orders and a “Dear Colleague Letter” upending racial preferences and associated trainings and bureaucracies that constitute modern diversity, equity, and inclusion (DEI) programs.

How should Democrats respond? Championing existing DEI programs, some of which are completely indefensible, is a political trap that must be avoided. At the same time, Donald Trump has overreached by attacking not only racial preferences (which are unpopular) but also race-neutral efforts, such as class-based affirmative action programs to promote racial diversity (which are broadly supported).

To thread the needle, Democrats would be smart to jettison unpopular and divisive DEI programs in favor of something better—a policy of “integration, equal opportunity, and belonging” that restores the original values of the civil rights movement including judging people based on merit, not race, emphasizing what we have common across racial divides, and championing free speech and dialogue rather than indoctrination.

Such a policy would embrace racial integration without racial preferences—which is precisely what the public wants.

Keep reading in The Liberal Patriot.

PPI Statement on President Trump’s Continued Reckless Tariffs Campaign

Posted on by Alex Terr

WASHINGTON — Today, Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute (PPI), issued the following statement in response to President Trump imposing a 25% tariff on goods from Mexico and Canada, and an additional 10% tariff on Chinese goods:

“Mr. Trump has compiled a remarkable record over the past month: bad-faith economic assaults on America’s neighbors, deference to international aggressors, and escalating harm to the U.S., North American, and world economies. Signs of the effects are already evident in the U.S. economy, with warning lights flashing red in GDP, consumer confidence, and financial markets. Should today’s attempt to impose tariffs by decree stand, Americans can expect worse: where a few months ago Mr. Trump promised to bring costs down, families will in reality get higher costs for everything from home and auto repair to groceries, OTC medicines, and spring clothes. Meanwhile, American manufacturers, home-builders, and farmers will see production costs spike, and exporters will lose markets with Canada and China already retaliating. The national security costs are yet to be seen, but will be large.

“As harmful as these effects are, the lasting harm to American governance is likely to be even worse. One-man creation of a new tariff system is an open invitation to future corruption, as — aware they can create new tariff systems by themselves — all future presidents will face the temptation to use tariffs to punish critics and rivals and to reward supporters and cronies. And it is a grave harm to the separation of powers, as a usurpation of Congress’ Constitutional power over ‘Taxes, Duties, Imposts, and Excises,’ and substituting illegitimate rule by personal decree for actual legislation. 

“House Speaker Mike Johnson, Ways and Means Committee Chairman Jason Smith, and their Senate counterparts, Majority Leader John Thune and Finance Committee Chairman Mike Crapo, must oppose this power grab and, per the Congressional oath of office, support and defend the Constitution by overturning Mr. Trump’s decision today.”

PPI recently outlined four key principles for responding to tariff-driven economic isolationism. Additionally, PPI has warned of the economic risks posed by Trump’s tariff policies in a recent report and detailed these concerns in testimony before Congress and in PPI’s own coverage. For further context on the Constitution over tariffs and taxation and how the legislative, not executive branch, has the authority, see the full text of the U.S. Constitution.

###

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

Energy Costs Come First: Data by State

Posted on by Alyssa Brown

In the scatter plots for each state, every panel reflects the relationship between Black population and energy burdens in one Congressional District in that state. Within each district’s panel, one dot represents each census tract in that district. The slope of each panel’s light blue line reflects the correlation between higher black population and higher energy burdens for that district, with its confidence interval shown in gray (so a wider gray shading represents a looser fit for that panel’s blue line). Then, each Congressional District in the states included in PPI’s report “Energy Costs Come First: a New Approach to Environmental Justice” is mapped such that the fill color of each census tract scales according to the energy burden as a percent of area median income or the proportion of Black households as share of the tract’s population.

This appendix uses data from the Department of Energy’s Low-income Energy Affordability Data (LEAD) tool collected through the Census Bureau. Importantly, these estimations are not causal and only reflect the statistical level of similarity between the two characteristics across the range of census tracts in each district. Additionally, the underlying data report values for energy burden calculated from area median income and average annual energy costs and so do not capture varying levels of energy burden within each tract or microdata like individual household burden. Even though this correlation does not allow for direct causal claims, the simplicity of this comparison provides significant insight when paired with the entire PPI report.

Each state listed below links to a PDF with this data:

Read the full report.

Jacoby for Washington Monthly: Trump’s Moral Blindness Should Disqualify Him as a Peacemaker

Posted on by Alex Terr

It reminded me of a certain kind of unpleasant talk show. The guest shows up, a little nervous but earnest, looking forward to a serious discussion of the issues. But the host lies in wait, spoiling for a fight and ready with ammunition—in this case, complaints about the guest’s supposed lack of gratitude and a poorly planned visit last fall to an arms plant in Pennsylvania, a state thought at the time to be leaning Democratic.

So began last week’s meeting in the Oval Office, Volodymyr Zelensky vs. Donald Trump and J.D. Vance. “Much was learned,” Trump posted on Truth Social shortly after the fracas, “that could never be understood without conversation under such fire and pressure. It’s amazing what comes out through emotion.” Sadly, he’s right, but the truth revealed wasn’t about Zelensky. It was about Trump and his unprincipled approach to American foreign policy.

It was 10 excruciating minutes of classic Trump: bullying, lies, and utter indifference to American values.

Read more in Washington Monthly. 

Kahlenberg on the Liberal Patriot Podcast: Rethinking Racial Preferences

Posted on by Alyssa Brown

Rick Kahlenberg joins Ruy Teixera on the Liberal Patriot Podcast

Today, I sit down with my friend Rick Kahlenberg, an expert on all things affirmative action and the author of the forthcoming book, Class Matters: The Fight to Get Beyond Race Preferences, Reduce Inequality, and Build Real Diversity at America’s Colleges. We kick off with a discussion of DEI trainings, the educational bureaucracy, and Trump’s latest executive orders. We then chat about how both sides of the political spectrum have problems with their approaches to racial diversity. Rick walks us through his 40-year journey to move Democrats towards class-based preferences in college admissions—a position that both Bill Clinton and Barack Obama once supported. Finally, we close with a preview of our upcoming co-authored report titled, “Bobby Kennedy: Liberal Patriot.”

Read on Substack

IRS Layoffs Threaten to Inject Chaos Into Tax Filing Season and Cost Taxpayers Billions

Posted on by Alyssa Brown

From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.

The Trump administration is laying off thousands of employees at the Internal Revenue Service (IRS), just as tax season gets underway. These cuts will worsen customer service for millions of hardworking taxpayers as they try to comply with the law. And while the cuts make it harder for Americans to follow the law, it will empower those who break it, allowing tax cheats to continue avoiding paying their fair share.

Many of the 6,700 IRS staffers laid off were recent hires tasked with improving the agency’s poor responsiveness by answering phone calls, processing tax refunds, and assisting with filing. Cutting this staff at the beginning of tax season will reverse recent improvements at a time when households need the most tax help. And with even larger layoffs planned after tax season, the administration will set the stage for even more chaos in future tax seasons.             

The administration claims to be making these cuts in the name of improving government efficiency and reducing waste. However, it is actually more likely to increase budget deficits by undermining efforts to close the “tax gap” — the difference between what taxpayers owe and what the IRS actually collects.

There are two main causes of the tax gap: well-intentioned taxpayers misunderstanding their obligations, and malicious tax cheats actively working to evade their obligations. The Inflation Reduction Act included additional funding for customer service to assist the former and enforcement to crack down on the latter, which the nonpartisan Congressional Budget Office originally estimated would generate $180 billion in additional revenue over the next decade. These expected savings have already declined somewhat due to funding recissions, and laying off newly-hired auditors and customer support staff will go even further, potentially preventing the agency from realizing any savings at all. 

Like any large agency, there is clearly room for the IRS to improve, including by modernizing its outdated technology or simplifying a complex tax filing process. But rather than work to truly make the IRS more efficient to save taxpayers money, Trump’s layoffs instead cost the Treasury billions in foregone revenue and taxpayers millions of hours in compliance headaches. While this is great news for tax cheats seeking to evade their responsibilities, it will hurt the law-abiding American businesses and households who will be left to pick up the tab.  

Deeper Dive

Fiscal Fact

The current U.S. Tariff schedule, which specifies the goods subject to tariffs and the rates they face, already has roughly 11,000 lines. Trump’s proposal to move to a reciprocal tariff system, where every imported good faces a tariff equal to the rate that the same American good would face if exported to its country of origin, would require an exponential expansion to at least 3.1 million lines. 

Further Reading

Other Fiscal News
More from PPI & The Center for Funding America’s Future

Jacoby for Forbes: Ukrainian Defense Forum Underscores The Need For Western Investment

Posted on by Max Sherrill

There were few, if any, people in the room who weren’t aware of the meeting under way that afternoon in Saudi Arabia—Russian and American diplomats talking about the future of Ukraine with no Ukrainian input. But none of the 3,000 attendees at the defense forum in Kyiv—a combination conference and expo designed to bring startups, investors, soldiers, and government officials together to discuss Ukraine’s burgeoning defense industry—mentioned the proceedings in Riyadh.

Even if a peace deal is signed in coming months, the world-class weapons industry that has emerged in Ukraine since Moscow’s invasion in 2022 is likely to play a pivotal role in the country’s future—both as a deterrent against future Russian aggression and an export-driven pillar of the Ukrainian economy.

The sprawling expo showcased just how much the fighting in Ukraine has transformed war as we know it. The four or five dozen companies present ranged from fledgling startups to established manufacturers producing at scale for the Ukrainian armed forces. Exhibition booths featured every conceivable type of drone, large and small, for use in the air, at sea, and on the ground. Also on display was a range of electronic-warfare jamming and spoofing devices.

Keep reading in Forbes.

The number of African American-owned exporters grew by 60% in 2022

Posted on by Alex Terr

FACT: The number of African American-owned exporters grew by 60% in 2022. (Most recent year available.)

THE NUMBERS: African American businesses exporting to Africa –

Year   Number of firms   Export total
2022   491   $192 million
2021   163   $105 million
2020   138     $45 million
2019   278     $45 million
2018   200     $27 million
2017   300     $62 million

*   Census and BEA data collaboration

WHAT THEY MEAN:

A Black History Month look at U.S.-African trade and its role in the recent African American export boom:

As a point of departure, here’s then-President Bill Clinton peering into the future, as he signs the African Growth and Opportunity Act in the millennial spring of 2000:

“Sub-Saharan Africa is home to more than 700 million people [ed. note: now 1.25 billion], one of our biggest potential trade partners. I say potential because American exports now account for only 6 percent of the African market. This bill will surely change that as it expands Africa’s access to our markets and improves the ability of African nations to ease poverty, increase growth, and heal the problems of their people. It promotes the kinds of economic reform that will make sub-Saharan nations, on the long run, better allies, better trade partners, and stronger nations.”

Scrolling ahead a quarter-century: A unique Census Bureau/Bureau of Economic Analysis data collaboration, “U.S. Exporting Firms by Demographics,” provides the most detailed statistical portrait of a trading community anywhere in the world, with insights on exporting companies by size, export market, ownership by race and ethnicity, gender, veteran status, and more. Its count two years ago revealed an exceptionally severe blow to African American exporters during the COVID-19 pandemic. As economies worldwide closed the overall count of American exporting businesses fell by 17,000, or 5%. Loss counts varied by ownership but, in most cases, not by a lot: the Census/BEA counts of white-owned and women-owned exporters, for example, fell by 1.5% and 2%, that of Hispanic businesses dropped by 7%, and the number of Asian-American and Native American exporters remained stable. The African American exporting community, by contrast, lost a third of its members, contracting from 1,514 in 2019 to 1,001 in 2020.

The next edition, as we noted last February, found a modest but hopeful rebound in 2021, to 1,139. And the most recent, out three weeks ago, reports a surge to 1,802.  Its count of businesses and their $1.2 billion in exports — substantially driven by a boom in exports to African customers — are both the highest numbers in the six-year-old series. A table:

Year   Number of Firms   Total Exports
2022  1,802   $1.195 billion
2021   1,139   $1.122 billion
2020   1,001   $1.097 billion
2019   1,514   $806 million
2018   1,400   $830 million
2017   1,200   $616 million

Policy likely helped support this strong recovery: Gina Raimondo’s Commerce Department made a concerted effort to raise the exporter count through more engagement with this and other “underserved” — women, rural, veterans, ethnic — communities through the Global Diversity Export Initiative. So did the economic environment across the Atlantic – Africa’s GDP growth is a point above the world rate, and the continental market is becoming simpler, more efficient, and easier for small businesses to manage as the African Continental Free Trade Area “AfCFTA” enters into force. African American firms seem to be tapping this opportunity especially quickly — almost 500 of the 1,802 exporters have African customers, and the African share of the total sales has jumped from 6% before the pandemic to 16%. A 2022 table by market:

  Number of Exporters   Export Value
World   1,802   $1.195 billion
Mexico      154   $225 million
Africa      491   $195 million
(Nigeria)      204   $76 million
(Ghana)      104   $14 million
(South Africa)        41   $10 million
Canada      460   $162 million
European Union      319   $100 million
United Arab Emirates      110   $85 million
United Kingdom      201   $63 million
Caribbean Islands   n/a   $55 million
All Other   n/a   $310 million

In sum, very much the situation President Clinton imagined in which African growth supports American businesses and production, with particular (though by no means exclusive) benefits for the diaspora.

The cautionary notes in this relate more to policy than data or economics. Like all U.S. exporters, African American exporters are at risk of retaliation and loss of markets as the Trump administration threatens tariffs against America’s major trading partners. Mexico, Canada, and the EU, all recent targets, provide 40% of African American export earnings – a bit below the 50% for all U.S. businesses and far below Native American exporters’ 78%, but still a lot.  On a lesser but still important scale, it isn’t clear that the newly confirmed Commerce Secretary, Mr. Lutnick, will have the same interest in export promotion generally, or this community specifically, that his predecessor did. And the African Growth and Opportunity Act itself, now approaching its 25th anniversary and still the “foundation” of U.S.-Africa economic relations today, ends this September — which would mean some fraying of business ties — unless Congress renews it.

So a lot to do and some risk to manage. But still, a happy piece of transatlantic community-building, African/African American business success, and modern black history to record this February.

FURTHER READING

Data: 

From Census and BEA, “Demographics of Exporting Companies” data for 2022, with links to reports for 2017 through 2021.

Community links:

The Pew Center reports on America’s black-owned businesses.

The Brookings Institution finds a post-COVID boom in African American business startups.

The Hilltop, Howard University’s student paper, looks at the challenges and achievements of D.C.-area African American small businesses.

And also from the Pew Center, background and data on African and Caribbean immigrant families in the United States.

AGOA:

President Clinton at the AGOA signing ceremony, May 2000.

… and the U.S. Trade Representative Office’s 2024 AGOA report.

An origin point: 

If AGOA is the foundation of U.S.-African economic relations today, here’s a deep-past predecessor:  President Lincoln’s Ambassador to the U.K., Charles Francis Adams (yes, son of President John Quincy & grandson of Founder John) spent most of the autumn of 1862 facing down London Confederate sympathizers and outwitting would-be gun-runners. But he also took a week to inaugurate U.S. commercial diplomacy with sub-Saharan Africa, to join Maryland-born Liberian President Stephen Benson as signatories of the 1862 U.S.-Liberia Treaty of Amity and Commerce. Ambassador Adams’ private diary for that rainy October day (via the Massachusetts Historical Society) shows some emotion:

“I had received this week powers to negotiate a Treaty of commerce with the Republic of Liberia. I notified President Benson of the fact, and he came this day to see me about it. I gave him the form of Treaty he had first sent through me to Washington, modified as it came back to me, both of us be put into shape and executed early next week. He did so. Thus it seems that my name is to be on the first national act recognizing the restoration of the status of the Americo-African to a condition of equality with the White. I think it is an era in our history. We received the mail bags from America and found the news generally quiet cheerful. A long letter from Charles [Charles Jr., then a Union Army Lieutenant] to his mother, giving an interesting narrative of the whole campaign in Maryland, including the two great actions at South mountain and Antietam, which he witnessed. I returned thanks to God for all his mercies, and especially for his preservation thus far safe and well.”

And some then-and-now from Ghana, Ethiopia, and Madagascar: 

Dr. King reflects in 1957 on Ghanaian independence, transatlantic parallels between civil rights and decolonization, and the potential African American role in African economic development.

… and today’s Accra-based African Continental Free Trade Area Secretariat.

The Ethiopian Embassy recalls the launch of U.S.-Ethiopian trade and diplomacy in the 1903 Commercial Treaty signed by Ohio diplomat Robert Skinner and Emperor Menelik II – “King of Kings” by title, best remembered as war leader and preserver of Ethiopian independence, but also a capable commercial strategist when opportunity arose.

… and at its modern Addis Ababa HQ, the African Union on continental integration.

From 1867, the Treaty of Amity and Commerce with Queen Rasoherina’s Kingdom of Madagascar. Sample:

“Commerce between the people of America and Madagascar shall be perfectly free, with all the privileges under which the most favored nations are now or may hereafter be trading. Citizens of America shall, however, pay a duty, not exceeding ten per cent., on both exports and imports in Madagascar, to be regulated by a tariff mutually agreed upon, with the following exceptions: Munition of war, to be imported by the Queen of Madagascar into her dominions, or by her order. Prohibited from export by the laws of Madagascar are munition of war, timber, and cows. No other duties, such as tonnage, pilotage, quarantine, light-house dues, shall be imposed in ports of either country on the vessels of the other to which national vessels or vessels of the most favored nations shall not equally be liable.”

… and U.S. Amb. Claire Pierangelo (2023) applauds Madagascar’s success as an AGOA clothing exporter.

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.

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PPI Lays Out a Bold Democratic Foreign Policy Vision: Preparing Now for a Post-Trump World

Posted on by Alex Terr

WASHINGTON — President Trump has fundamentally altered America’s global stance after just one month — alienating key allies, dismantling vital treaties, and embracing America’s adversaries. As the damage unfolds, Democrats must prepare now for the consequences of four years of weakened U.S. leadership.

In response, the Progressive Policy Institute (PPI) today released “Five Pillars of Freedom: First Steps Toward a New Democratic Foreign Policy,” a report by Peter Juul, PPI’s Director of National Security Policy. The report outlines a principled, proactive, and pragmatic Democratic foreign policy that prioritizes defending freedom, strengthening alliances, and advancing strategic economic engagement in a world reshaped by a second Trump presidency.

“Any Democrat who succeeds Donald Trump in 2029 will inherit a world that is more dangerous, more unpredictable, and more hostile to American interests than at any time in recent history,” said Juul. “This roadmap provides a path for Democrats to rebuild America’s standing, defend democracy, and protect our national security in an increasingly unstable world.”

Juul argues that Democrats must abandon outdated approaches and embrace a bold, forward-looking strategy rooted in five key pillars:

  1. Defending Freedom: America must lead the global fight against authoritarianism and stand with democracies under threat.
  2. Investing in a Strong National Defense: Democrats must overcome outdated skepticism about defense spending and ensure America’s military is prepared for 21st-century threats.
  3. Rebuilding and Strengthening Alliances: From NATO to the Indo-Pacific, the U.S. must repair and reinforce strategic partnerships.
  4. Leading on Economic Statecraft: Free and fair trade agreements with allies must replace Trump’s chaotic, self-defeating trade wars.
  5. Projecting Strength and Resolve: A new Democratic foreign policy must reject excessive caution and be willing to take risks in defense of American values.

Juul warns that a second Trump presidency is already dismantling U.S. alliances, emboldening autocratic regimes, and undermining international institutions that have safeguarded global stability for decades. In his first weeks back in office, Trump has already bullied NATO allies, cozied up to Vladimir Putin, and proposed dangerous policies that weaken America’s strategic position.

Read and download the report here.

Founded in 1989, 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. Find an expert at PPI and follow us on X.

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

 

Five Pillars of Freedom: First Steps Toward a New Democratic Foreign Policy

Posted on by Alex Terr

Introduction

Come January 20, 2029, any Democrat who succeeds Donald Trump as president must be prepared to confront the very different and much more dangerous world Trump will almost certainly create. The Democratic Party must begin thinking seriously about a new foreign policy approach now — one based on the party’s best internationalist traditions and the defense of freedom worldwide, not fantasies of “restraint” conjured up by progressive isolationists or the timid, managerial approaches of the Obama and Biden years.

Democratic foreign policy would have required a serious refresh even had Kamala Harris prevailed in November 2024. But Trump’s return to the presidency makes matters even more urgent: Unconstrained by more experienced and sober national security voices that understand the value of America’s alliances, Trump appears ready and willing to let his deepest and most destructive foreign policy impulses run wild — as became clear during his first weeks back in office. Long-standing American allies and friends have already found themselves treated as enemies, threatened with and subjected to economic and military pressure, while adversaries and autocrats find themselves welcomed as comrades and given leave to act as they please.

Like prudent military strategists who plan for every possible contingency, Democrats need to prepare for world more hostile to American interests and liberal values than at any point in living memory — and an America much weaker and far less able to defend them. Dictators in Moscow and Beijing will see their power and influence grow, possibly with Ukraine as a de facto Russian vassal state and Taiwan under China’s thumb. Other democracies could well follow America’s example and elect illiberal, far-right governments of their own, a task made all the easier by Trump’s gutting of USAID and the vital support it provides to those fighting for freedom and democracy abroad. NATO and other American alliances may either cease to exist altogether or stumble ahead shadows of their former selves, effectively unable to deter conflicts or defend their members. Future American promises and commitments will lack credibility, particularly when it comes to issues of trade and security.

Indeed, in his first month in office alone, Trump bullied two NATO allies — Canada and Denmark— with threats of tariffs and territorial annexation while sitting down one-on-one with Vladimir Putin’s Russia to discuss the fate of Ukraine. He similarly promised to levy tariffs on Mexico, another neighbor and trading partner, while Secretary of State Marco Rubio falsely claimed Trump’s threats wrested concessions from the Panamanian government over access to the Panama Canal. Trump also publicly backed crimes against humanity when he floated a preposterous scheme to depopulate the Gaza Strip, seize the Palestinian territory for the United States, and transform it into “the Riviera of the Middle East.”5 The loud and repeated endorsement of gangster-style extortion, territorial conquest, and rank imperialism by the president of the United States will have lasting and calamitous global consequences.

It will, therefore, not be possible for a future Democratic president to proclaim, as President Joe Biden did, that “America is back” and restore the world as it was before. Institutions and relationships demolished, degraded, and debased by a second Trump presidency, both at home and abroad, cannot simply be resurrected as if nothing had happened over the previous four years. Reconstruction and rebuilding, not restoration and refurbishment, will be the order of the day for any future Democratic foreign policy worthy of the name — and it will need to be done at a moment when America finds itself in its most precarious strategic position since before the Second World War.

So what should a future Democratic foreign policy look like?

First, it’s important to note that it’s hard to predict just how much damage Trump will do to America’s national security and foreign relations over the next four years — making specific policy proposals and positions less relevant than a broader intellectual and moral framework for thinking about foreign policy. Indeed, less than two weeks into his second term in office, Trump and his minions have already attempted to liquidate the U.S. Agency for International Development, purge the CIA and FBI of professional intelligence and law enforcement officers, and gut public scientific research institutions like the National Science Foundation, NASA, and NOAA.

What Democrats need is not a suite of detailed policy blueprints on this or that specific issue, but a general orientation and set of attitudes toward foreign policy — an animating spirit to guide them as they navigate the world moving forward.

That starts with a clear understanding of enduring global strategic realities and abiding American national interests — realities and interests that won’t change no matter who happens to occupy the Oval Office.

As Democratic Presidents Woodrow Wilson and Franklin D. Roosevelt recognized, the dramatic scientific, technological, and industrial breakthroughs of the late nineteenth and early
twentieth century transformed the world in fundamental and irreversible ways.10 From steamships, the telegraph, and internal combustion engines to aviation, the radio, and rocketry, these advances made it impossible for geography to insulate the United States from threats across the Atlantic and Pacific. The political, economic, and diplomatic fate of this vast geographic expanse would now determine and define the sort of world in which America and other nations would live.

These profound changes required Americans to think about their national security in global terms, not just continental or hemispheric ones. As Roosevelt reminded his fellow citizens in his December 1940 fireside chat, “The width of those oceans is not what it was in the days of clipper ships.” Rapid technological progress since the Second World War — jet airliners, nuclear weapons, satellite telecommunications, and the internet, among other innovations — have only made Roosevelt’s central argument more compelling. Today, America’s own safety, prosperity, and freedom remains, as it has for more than a century, intimately and inextricably bound up with that of Europe and East Asia.

This essential national interest in the stability, security, and freedom of Europe and East Asia remains constant and objective; it can be denied and downplayed by isolationists on both left and right, but it cannot be altered, eliminated, or wished away. Now and for the foreseeable future, this interest is threatened by a pair of global gangster powers — Vladimir Putin’s Russia and Xi Jinping’s China — that aim to dominate these two vital regions and dictate their own terms to the rest of the world. In this endeavor, moreover, Moscow and Beijing receive both material and moral support from lesser gangster states like Iran and North Korea. The frontiers of America’s own national security, in other words, now stand at Ukraine’s Dnipro River and in the Taiwan Strait.

For a future Democratic foreign policy to fully succeed, however, the pursuit of America’s national interest must proceed hand in hand with the pursuit of higher ideals and moral values that represent America at its best — namely, a stalwart defense of freedom and democratic self-government against the depredations of despots, dictators, and international gangsters.

A strong and forthright defense of freedom at home and abroad ought to sit at the heart of a future Democratic foreign policy, serving as its crucial central pillar and main organizing principle. As America learned during the first half of the twentieth century, a world dominated by unfree powers is one that’s manifestly unsafe for the United States. It ultimately remains up to America to defend freedom around the world — there is no other nation or group of nations that can assume the same mantle of moral leadership as the United States or possesses the necessary geopolitical heft. Without a power as strong and influential as America to stand for them, freedom and liberal values will find themselves with no real or effective champion on the global stage. In short, the fate of freedom around the world depends in no small part on America’s own active involvement in the world.

Democrats should also make clear that they want the United States to defend freedom where it already prevails — however incomplete and fragile it may well be in certain places — against bullying, intimidation, and outright invasion by gangster powers like Russia and China. America remains the only nation with the capacity and ability to organize an effective, durable defense of democratic self-government where it now exists against such powers. It’s not some abstract rules-based international order that Democrats want America to defend, then, but actual living-and-breathing societies like Ukraine and Taiwan who wish to live free from the very real threat of military bullying and political domination by their more powerful and predatory neighbors.

Four additional pillars support and flesh out in more practical terms this main animating principle of a future Democratic foreign policy:

  • Provide for a strong defense capable of meeting present and future challenges.
  • Alliances amplify American power and help secure American interests.
  • Free and open trade with friends and allies around the world.
  • A willingness to take risks and use American power to defend freedom overseas.

Read the full report. 

 

Child Opportunity Accounts Would Expand Opportunity and Financial Capability for American Children

Posted on by Alex Terr

Economic policy debates in recent years have increasingly focused on how to better support children and families. One of the central proposals in these discussions is expanding the Child Tax Credit (CTC), which will be a key feature in the current debate over the Tax Cuts and Jobs Act. This tax benefit helps working parents by providing them with additional resources to cover everyday costs, which can significantly improve the lives of disadvantaged children by meeting their basic needs.

However, while the CTC provides important short-term assistance to parents, it does less to ensure children can access opportunities for long-term success. Many children from low-income families face barriers to building wealth, such as limited income or job opportunities. Additionally, a lack of financial literacy often makes it even harder for these children to make informed decisions about managing money, impeding their ability to effectively plan for the future or continue building wealth over time. Together, this combination of limited opportunity and financial capability can trap many Americans into lower economic positions, regardless of their talent or potential.

In a recent report, “Building Opportunity and Financial Capability with Child Opportunity Accounts,” PPI proposed to help increase financial resources and financial capability for children from all backgrounds by establishing universal Child Opportunity Accounts (COAs). COAs would automatically be opened at birth with a $700 contribution from the government, with the government making supplemental contributions depending on household income each year on the child’s birthday up to age 16. This progressive approach ensures that children from families struggling to make ends meet get the most help, while still offering modest support to children born in more well-off households. In addition to the contributions from the government, families are also encouraged to participate by contributing to their child’s COA.

Account balances would be automatically invested in diversified portfolios, growing over time to give each child a financial cushion when they enter adulthood. By the time they reach 18, a child from a low-income family could have tens of thousands of dollars in their account to use for wealth-building activities — including education, housing, or starting a business — and guardrails in place to ensure that the money does not go to waste.

 These accounts do not just provide resources for children but also foster the skills they need to grow those resources over time. Financial education resources would be embedded into the accounts and beneficiaries would have to pass an assessment to access their account’s funds before age 25. As children grow, they would learn to manage their own finances and gain more control over their financial future.

To ensure that the burden of rising public debt doesn’t negate the benefit of COAs for young Americans, PPI has offered a comprehensive fiscal blueprint with several policy options to fully offset the program’s cost. One particularly fitting offset included in the blueprint and further detailed in another recent PPI report would be reforming the taxation of inheritances. Taxing the birthrights of the richest 1% to give every child an equal starting point would help create a more inclusive society where everyone, regardless of their background, has access to the resources and opportunities necessary for success. But PPI’s blueprint also offers several dozen potential alternatives if this offset proves politically challenging for one reason or another.

America’s economic future depends on its ability to foster talent, not just in its wealthiest citizens, but across the socioeconomic spectrum. Providing for a child’s basic needs, while important, does little to set them up for success in adulthood. Investing in Child Opportunity Accounts would ensure that every child, regardless of background, has the financial foundation and knowledge they need to pursue their full potential. This isn’t just an investment in individual families, but in our country’s future prosperity.