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PRESS RELEASE: PPI Report: Tax Prep Chains Target Low-Income Workers

FOR IMMEDIATE RELEASE
April 14, 2016

Contact: Cody Tucker, ctucker@ppionline.org, 202-775-0106,
or Steven Chlapecka, schlapecka@ppionline.org, 202-525-3926

PPI Report: Tax Prep Chains Target Low-Income Workers

Taxpayers eligible for the EITC spend as much as 22 percent of their refund to file

WASHINGTON—National tax preparation chains continue to exploit the working poor, many of whom spend a significant portion of a key federal anti-poverty tax credit—the Earned Income Tax Credit (EITC)—just to pay for filing their taxes, according to a report released today by the Progressive Policy Institute.

The report, coauthored by Paul Weinstein Jr., PPI Senior Fellow and Director of the Public Management Graduate Program at the Johns Hopkins University, and Bethany Patten, a policy and research manager at Excellent Schools Detroit, found that workers eligible for the EITC continue to spend large sums—averaging around $400—at national tax preparation chains.

In a recent survey of storefront operations in Baltimore and Washington, D.C., they found that those eligible for the EITC, who are typically low-income workers with children, would spend between 13 and 22 percent of their refund this year at local tax preparation outlets. In Baltimore, where the average EITC refund is $2,335, the cost to file ranged from $309 at H&R Block to $509 at Liberty Tax Service. In Washington, D.C., where the average EITC refund is $2,351, the cost to file ranged from $315 at H&R Block to $485 at Liberty Tax Service.

Additionally, Weinstein and Patten found that national tax preparation chains continue to target EITC filers by locating in areas where the largest numbers of EITC claims are made. ZIP codes with the highest level of EITC filers have approximately 75 percent more tax preparers per filer than moderate-EITC ZIP codes. The study found “a clear relationship” between the share of EITC filers in a ZIP code and the area’s saturation of tax preparation chains.

Lastly, government studies, as well as those by nonprofit organizations, consistently show a high error rate for returns filed on behalf of EITC beneficiaries by paid tax preparers. Two studies by the Government Accountability Office (GAO) found an error rate of 89 and 94 percent respectively. And last year the head of the GAO stated that in an analysis of IRS data, an estimated “60 percent of returns prepared by preparers contained errors.”

“These realities demand a public response. But proposals to further complicate the tax code in the name of reducing fraud would only make the problem worse,” write Weinstein and Patten. “Instead, U.S. policymakers should establish a national goal of reducing the dependence of low-wage workers on paid tax preparers. Specifically, this would mean taking steps to simplify EITC rules and requirements, by requiring all paid preparers to take competency exams, increasing access to free filing programs, and/or streamlining the federal income tax code in its entirety. A combination of these reforms would allow low-income workers to keep more of their tax credit while also raising standards within the paid tax preparation sector.”

The report follows up on a 2002 study by researchers at PPI and Brookings Institution, which found that tax preparations services, clustered in low-income neighborhoods, cost workers eligible for EITC refunds about $1.75 billion.

The Earned Income Tax Credit was established in 1974 as an anti-poverty measure. It has become the federal government’s largest safety net program, last year providing $66.7 billion to 27.5 million Americans. It is especially valuable to low- and middle-income workers, since it provides a direct credit against taxes owed rather than a deduction from reported income. It is also a refundable credit, meaning an eligible worker can receive a refund even if the credit exceeds what would have been his or her federal income tax liability.

Download, The Price of Paying Taxes II: How paid tax preparer fees are diminishing the Earned Income Tax Credit (EITC)

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PPI Tackles Tax Disputes in Europe

Last week, PPI led a bipartisan delegation of 10 high-ranking Congressional staffers to London and Brussels, which is still grieving in the aftermath of the March 22 terrorist attacks. Our visit there so soon after the atrocity was greeted warmly as an act of transatlantic solidarity.

The Digital Economy Study Group was the third such delegation PPI has taken to Europe in as many years. Our mission is to engage influential government and private leaders in exploring common ways to tackle our mutual dilemma of slow growth and stalled social mobility. We believe more innovation and growth are the best antidotes to the virulent strains of populism that are warping democratic politics on both sides of the Atlantic.

Our trip began last Tuesday in London at 10 Downing Street, where Daniel Korski, deputy head of policy for Prime Minister David Cameron, briefed our delegation on the government’s efforts—including a low-tax patent or innovation box—to encourage greater digital investment in the UK. Then it was on to Westminster, where Tory MP Ian Liddell-Grainger led the group on an entertaining tour of Parliament, which also included a brisk dissection of Britain’s controversial Pay As You Earn (PAYE) tax.

Also at Parliament, Labour MP Meg Hillier, Chair of the Public Accounts Committee, defended the government’s diverted profits tax as a response to public anger over the tax avoidance strategies of international companies. At breakfast the next day, veteran Labour MP John Spellar offered a trenchant analysis of how economic change and slow growth have scrambled British politics and led directly to June’s “Brexit” referendum. At UK Treasury, Financial Secretary David Gauke explained how recent reforms to corporate tax rules have resulted in greater foreign investment and business creation.

On Thursday, we took the Eurostar to Brussels, where the U.S. Mission to the European Union briefed us on difficult aspects of the US-EU economic relationship, including the new “Privacy Shield” agreement, international tax policy, and the TTIP trade pact. At the European Commission’s powerful Competition directorate, the group had a robust exchange of views with officials overseeing “state aid” investigations that have called into question tax agreements negotiated by EU member states and U.S. companies. We expect these issues resurfaced this week when Commissioner Margarethe Vestager visited Washington for talks with Congress and the administration.

Later, officials at DG CONNECT briefed the group on Europe’s efforts to establish a digital single market and plans for “platform regulation” to create space for European tech companies to grow. On Friday, the DG GROW team discussed their wide-ranging efforts to spur entrepreneurship and digital skills building across Europe. The growing gulf between U.S. and European views on tax policy also was the subject of a lunch with Bart Van Humbeeck, economic advisor to Kris Peeters, Vice-Prime Minister of Belgium, hosted by Paul Hofheinz of the Lisbon Council. Our last official meeting was with PPI friend Ann Mettler, Head of the European Strategy Centre, an in-house think tank for EU President Jean-Claude Junker.

These frank and in-depth discussions enabled us and Congressional staff to get a better understanding of the sometimes byzantine workings of the EU, as well as its often different perspectives on issues vital to both sides—privacy and cross-border data flows, digital innovation, trade, tax, copyright and more. The visits also have impressed on our European friends that U.S. policymakers are paying closer attention to such issues. PPI’s hope is to nudge these sometimes contentious conversations to common ground, and strengthen the fraying bonds of transatlantic economic cooperation.


Bernie vs. Hillary: Who Is More Trustworthy?

The Washington Post just reviewed a recent dispute between the Sanders and Clinton campaigns and concluded that Sanders earned “three Pinnochios” for dishonesty. This raises broader questions as Bernie’s campaign goes negative.

Bernie has built a mythology that he is a uniquely honest politician, and he has traded on that brand myth to raise money. Now that he is using those funds to attack Hillary Clinton, progressives should consider the factual answers to three questions:

(1) Is Bernie a high-integrity politician, or does he have a history of making compromises when politically convenient?

(2) Do his budgets speak hard truths or promise falsehoods?

(3) Do well-informed, independent observers more frequently trust Bernie or Hillary?

Question #1: Does Bernie Show Courage When The Chips Are Down?

We all know that Bernie attacks Wall Street and the rich, and his attacks often have merit. But those attacks do not require political courage, as neither constituency matters to his campaigns in Vermont or nationally. So, how has Bernie’s integrity held up when his own political career was at stake? The facts are not kind, as Mother Jones recently explained. To take three examples:

Exhibit A: The National Rifle Association. In the largely rural state of Vermont, the left’s bête noire is the National Rifle Association. Did Bernie benefit from the NRA’s money, endorsements, and support? Yes. He had previously lost statewide office six times before the NRA decided to invest tens of thousands to elect him. Upon his election, Bernie reversed the gun-sense positions of his predecessor and voted against the Brady Bill five times.

Exhibit B: Going negative on HillaryBernie initially promised a campaign of ideas. He said would advance issues, forcing the party to respond to a substantive agenda of economic justice. He promised he would not attack Hillary personally in ways that might increase the likelihood of a GOP victory in the fall, because (in his words) Hillary would be a vastly better President than Trump or Cruz.

But then Bernie broke his promise. After Iowa and New Hampshire tantalized Bernie with the prospect he might actually win, and then large states such as Florida and Ohio dimmed his prospects, he and his campaign decided to go negative. Sanders is now using his campaign war chest to attack Hillary Clinton personally.

Exhibit C: Free collegeWhen Bernie launched his presidential bid, he had a choice about what to emphasize. He decided to announce a $70 billion investment in education. The funny thing is that $70 billion is almost exactly the figure that would be necessary to fund universal, high-quality early childhood education for young children. Such a program would deliver enormous benefits for economic growth and social justice for all children.

Except … preschool children do not vote, and most families in need of preschool are too poor to give money to political campaigns. So instead,Bernie’s first major campaign pledge was free college. This is a $70 billion handout that would overwhelmingly go to the wealthier half of society (lower income families mostly do not send their kids to college, for reasons that often have little to do with tuition).

Why did Bernie prioritize college for some over preschool for all? Even if Bernie genuinely worried about college affordability, why didn’t he endorse policies that targeted low-income families (such as the policies promoted by President Barack Obama or Hillary Clinton)? The most plausible answer is not very flattering: to appeal to the wallets of middle-class campaign donors,Bernie Sanders disregarded the needs of the poor for political advantage.

Question #2: Do Bernie’s Budgets Convey Hard Truths or False Promises?

To convey a sense of honesty, Bernie trades in blunt ideas. “College will be free.” “Healthcare will be free.” “Other people — undeserving people—will pay for it.” The sum of these ideas appear in Bernie’s proposed budgets.

Sadly, you can find more climate scientists who reject climate change than credentialed economists who believe that Bernie’s budgets add up.

For example, the Sanders campaign has elevated the analytic work of Professor Gerald Friedman, who concluded that Sanders’ budgets work mathematically. To reach this conclusion, Friedman made aggressive assumptions about the U.S. growth rate under a Sanders presidency.

The credible economic reviews of Friedman’s analysis have been withering:

  • Jared Bernstein, who is friendly to Sanders and leads the liberal Center on Budget and Policy Priorities, cited several assumptions as “wishful thinking” in a conversation with the New York Times.
  • Obama’s former chair of his Council of Economic Advisors , Christina Romer, did a deep-dive analysis of Friedman’s work that revealed serious errors.
  • Austan Goolsbee, another former chair of Obama’s Council of Economic Advisers, wrote that “The numbers don’t remotely add up,” and that “they’ve evolved into magic flying puppies with winning Lotto tickets tied to their collars.”

Why does this matter? As liberal papers such as Slate Magazine and Mother Jones have explained, Bernie’s bad math is a form of dishonesty. His campaign is telling the entire country that we can have something for nothing. This demagoguery weakens America’s capacity for self-government and encourages apathy and anger, because the promises will not ever come true. Since Hillary Clinton chooses budgets that have a relationship with reality, she cannot offer as much. In other words, when Bernie claims that Hillary lacks ambition, the truth is that what she really lacks is reckless mendacity. As Nobel Laureate Paul Krugman wrote:

this controversy is an indication of a campaign, and perhaps a candidate, not ready for prime time. These claims for the Sanders program aren’t just implausible, they’re embarrassing to anyone remotely familiar with economic history (which says that raising long-run growth is very hard) and changing demography. They should have set alarm bells ringing, but obviously didn’t.

Question #3: Do Well Informed, Independent Observers Trust Bernie or Hillary More?

Bernie’s brand for honesty also comes from his claim that, by comparison, Clinton is not trustworthy. In this, he relies upon decades of Republican-led attacks on Hillary, ranging from Vincent Foster’s suicide to the terrorist attacks in Benghazi. But like those other artificial scandals, Bernie’s made-for-politics campaign of character assassination is false. Those who have carefully observed both candidates have concluded that Hillary is the more trustworthy.

A compelling recent example is the former executive editor of the New York Times, Jill Abramson, who has had a long career covering Hillary Clinton from an adversarial perspective. Abramson summarized her research in a column:

As an editor I’ve launched investigations into [Clinton’s] business dealings, her fundraising, her foundation and her marriage. As a reporter my stories stretch back to Whitewater. I’m not a favorite in Hillaryland. That makes what I want to say next surprising.

Hillary Clinton is fundamentally honest and trustworthy.

The yardsticks I use for measuring a politician’s honesty are pretty simple. Ever since I was an investigative reporter covering the nexus of money and politics, I’ve looked for connections between money (including campaign donations, loans, Super Pac funds, speaking fees, foundation ties) and official actions. I’m on the lookout for lies, scrutinizing statements candidates make in the heat of an election.

… There are no instances I know of where Clinton was doing the bidding of a donor or benefactor.

As for her statements on issues, Politifact, a Pulitzer prize-winning fact-checking organization, gives Clinton the best truth-telling record of any of the 2016 presidential candidates. She beats Sanders and Kasich and crushes Cruz and Trump …

Surprised by Abramson’s conclusion? You shouldn’t be. All the remaining candidates have long histories of working with other human beings. Progressives in Burlington, black activists in Vermont, and Bernie’s former colleagues in the House and Senate describe Bernie as a self-promoter with narcissistic tendencies. Hillary, by contrast, has received large numbers of endorsements from political leaders in cities, states, and national governments all over the world. Why? Because, when the chips are down, those people trust Hillary, notwithstanding the decades-long attacks on her character.

Abramson’s column is consistent with the experiences of those who have worked with Hillary. Her caution, and her suspicion of the press, make her appear suspicious to the public, but no one who knows and works with Clinton closely walks away feeling that she is untrustworthy. If you talk with people who know her, you find that they praise her directness and integrity.

If Sanders had kept running a positive, issues-oriented campaign, he might have eventually won over African American, Hispanic, and female voters. If he’d done that, he might have won the nomination. But he stopped. He is no longer running a campaign to shape the Democratic Party. Those who fund his campaign are now doing Donald Trump’s dirty work with false attacks on Hillary’s character. It is time for Bernie’s donors to turn off the money.


Do American’s Utility Bills Reflect Abundant Cheap Power?

Although the price of electricity in the Eastern United States fell by half over the last decade, residential customers saw their monthly bills increase by 26 percent, according to government data. What accounts for this anti-market discrepancy?

Consumer advocates claim that power companies are using tumbling electricity costs as camouflage to increase other charges. Utilities push back, saying price hikes are necessary to pay for billions of dollars of government-mandated improvements to long-neglected infrastructure. Last year PPI held a “future grid” summit which posed this key question to the assembled experts: Who will pay for the modern grid we need? Now we may have an answer: consumers.

Electricity charges make up about a third of the average utility bill, down from around half just a few years ago. This decrease is due to a flood of cheap natural gas extracted by hydraulic fracturing, otherwise known as “fracking.” The rest of your utility bill consist of retail charges associated with delivering supplies—for example getting the electricity to the end user and adding enough capacity to handle demand surges.

Bernie Sanders may want to ban fracking, but the resulting glut of cheap gas is driving down the wholesale cost of electricity across his native Northeast. According to the U.S. Energy Information Administration, these low prices are attributable to warmer than normal temperatures, additional pipeline infrastructure, and “the generally well-supplied and low-priced natural gas environment.” Northeast regional prices for electricity are just a fraction of what they were two years ago. For example, in January peak prices for the month in New England reached only $66/MWh down from $438/MWh January two years ago. New York has similar numbers peaking at $71/MWh this year as opposed to $518/MWh two years ago.

Thanks to these low, low prices, utilities have room to pass along the costs of modernizing our outdated electricity grid to residential consumers without their bills exhibiting dramatic spikes. The rapid deployment of intermittent renewable energy resources on the U.S. power grid is partly responsible for rising delivery costs. This evolution away from large, centralized power plants toward smaller, more widely distributed generation sources means utilities must install digital sensors, meters, and more power lines, the costs of which are passed along to consumers.

According to the Edison Electric Institute, the trade association for investor-owned utilities, their member companies spend $20 billion annually on upgrades to the distribution grid alone. Without cheap natural gas electricity consumers would certainly bear a heavier share of these costs. In other words, without fracking, U.S. consumers won’t be reaping the benefits of more renewable energy and a smarter and more reliable grid. And when their electricity bills start to soar, they will really be feeling the burn.


Press Release: PPI Unveils New Blueprint for Shared Prosperity

FOR IMMEDIATE RELEASE
March 15, 2016

Contact: Cody Tucker, 202-775-0106
or ctucker@ppionline.org

A Progressive Alternative to Populism

PPI Unveils New Blueprint for Shared Prosperity

WASHINGTON—The Progressive Policy Institute (PPI) today released Unleashing Innovation and Growth: A Progressive Alternative to Populism, a new blueprint for renewing America’s economic dynamism.

The plan offers an array of creative proposals for accelerating the “digitization” of the physical economy; lowering regulatory obstacles to innovation and entrepreneurship; launching a new public works push; adopting pro-growth tax reform; grooming the world’s most talented workers; and enabling working families to escape poverty and build middle class wealth.

The blueprint also takes aim at the populist anger that has figured prominently in campaign 2016:

…[P]opulists do Americans no favors by claiming the economic game is hopelessly rigged against them, that the leaders they elect are incompetents, or that our democracy is rancid with corruption. None of these claims is true, and such demagoguery undermines public confidence in America’s boundless capacity for self-renewal. Populist anger fosters an ‘us versus them’ mentality that, by reinforcing political tribalism and social mistrust, can only make it harder to build consensus around economic initiatives that benefit all Americans.

“We believe progressives owe U.S. voters a hope-inspiring alternative to populist outrage and the false remedies of nativism, protectionism and democratic socialism,” writes Will Marshall, PPI President.

“I encourage anyone looking for optimistic ideas to create more jobs, wealth, and prosperity for hard working Americans to read PPI’s new report using innovation to spur growth,” said Congressman Ron Kind (D-Wis.), Chairman of the New Democrat Coalition. “This report is full of forward thinking policy initiatives that help grow the American economy.”

“In the midst of today’s populist uprising, it’s up to our leaders to recognize the real reasons why our economy isn’t working for everyone and to fight for effective solutions,” said Governor Jack Markell (D-Del.). “PPI’s blueprint gives policymakers a roadmap to create opportunity for all Americans by harnessing the unstoppable forces of globalization and technological innovation, while opposing the impractical, and sometimes dangerous, proposals offered by the political extremes.”

The anger on which populists feed is rooted in a real economic problem: America has been stuck in a slow growth trap since 2000. This long spell of economic stagnation has held down wages and living standards and shrunk the middle class. What the nation needs is a forward-looking plan for moving the U.S. economy into high gear. Instead, as the PPI blueprint notes, today’s populists peddle nostalgia for our country’s past industrial glory but offer few practical ideas for building new American prosperity in today’s global knowledge economy.

Unleashing Innovation and Growth seeks to fill this vacuum in the presidential campaign, offering bold ideas for unleashing the collective ingenuity of the American people—harnessing disruptive change, raising skills, lowering tax and regulatory barriers to individual initiative and creativity, and experimenting with innovative ways to rebuild middle class wealth and enable more Americans to exit poverty.

Summary of Key Proposals

Unleash Innovation
• Spread innovation across the economy: Adopt a new “Innovation Platform” aimed at stimulating public and private investment in new ideas and enterprises, and at diffusing innovation across the entire economy.
• Improve the regulatory climate for innovation: Tackle the mounting costs of regulatory accumulation, the constant layering of new rules atop old ones; Make systemic changes to regulatory agencies to make promoting investment, innovation and new enterprises part of their core mission; Rein in occupational licensing requirements that screen out many low-income entrepreneurs; Lift outdated restrictions on lending to small business; give businesses incentives to offer more flexible work, including paid leave.
• Innovate our way to clean growth: Implement a more innovative energy strategy that simultaneously advances two vital interests: powering economic growth and assuring a healthy environment; Recognize that, for the foreseeable future, the U.S. and the world will have to tap all fuels—renewable, nuclear, and fossil—to meet growing energy demand and sustain global economic growth; Institute a nationwide carbon tax to curb greenhouse emissions while driving investment to clean and efficient energy.
• Democratize trade: Sell more of America’s highly competitive exports to a growing global middle class; promote the free flow of data across global borders; support innovative trade agreements, like the Trans-Pacific Partnership (TPP), that lift labor, environment and human rights standards in developing countries and enable more Americans to benefit from trade; Seize new opportunities for U.S. small businesses and entrepreneurs to use low-cost digital platforms to tap into global growth.

Align Fiscal Policy with Innovation and Growth
• Embrace pro-growth tax reform: Advocate for a dramatic shift from income to consumption taxes to stimulate investment in productive economic activities rather than those favored by the current tax code; Close loopholes that benefit special interests and dramatically simplify taxes for most Americans; Raise enough money to cut corporate income taxes down to globally competitive levels, and reduce taxes that penalize innovation and hiring.
• Modernize public works: Accurately measure the true economic impact of infrastructure spending; open infrastructure markets to private capital; define a strategic role for Washington through a national infrastructure bank; impose firm deadlines on project approvals and licensing process.

Groom the World’s Most Talented Workers
• Reinvent public school: Champion new models of school governance that enable more school autonomy and innovation, more customized learning, rigorous standards, and genuine accountability and results.
• Create new pathways into middle class jobs: Create a more promising approach to “career pathways” by combining classroom training and work experience through a sequence of jobs, within or across firms in an industry, and a sequence of credentials that signal their growing skill levels.
• Cut college costs for everyone: Rein in costs and decrease debt by encouraging colleges to offer three-year degrees rather than the traditional four-year program and focus policies on competency, rather than credit hours.

Build Middle Class Wealth
• Narrow the wealth gap with universal pensions: Champion “universal pension” accounts that would enable all workers to save for retirement, navigate the maze of tax-favored retirement plans, and take their pensions with them when changing jobs.
• Help families save for homeownership: Tackle the twin problems of declining homeownership and souring housing costs for both owners and renters by creating a new, tax-preferred mechanism for down payment savings—“Home K”—to lower obstacles to homeownership, like tight credit and down payment requirements, for first-time homebuyers and to promote savings.

Fight Poverty with Empowerment
• Empower people with smart phones: Use modern technology to cut through bureaucratic barriers to government safety net programs, consolidate benefit streams, enable people living in poverty more access to the information they need, and apply online for social supports; Encourage federal, state, and local governments to create online H.O.P.E. (Health, Opportunity, and Personal Empowerment) accounts and action plans.
• Expand housing choices for low-income Americans: Convert some federal rent subsidies into incentives for homeownership to relieve the burden on low-income families of high housing costs and reduce the waiting list for subsidized housing, without raising taxes or adding to the federal deficit.

Download Unleashing Innovation and Growth: A Progressive Alternative to Populism.


PRESS RELEASE: New PPI Report Links Future U.S. Productivity to Mobile Broadband Availability

Study finds that Next-Generation Wireless Networks Could Add Nearly $3 Trillion to U.S. GDP by 2030; Increase Economic Output by 11 Percent

WASHINGTON—A new policy report released today by the Progressive Policy Institute (PPI) examines the long-term relationship between mobile broadband and U.S. economic growth and relates it to current public policy questions.

The report, authored by PPI Chief Economic Strategist Michael Mandel, focuses on the year 2030 and considers the economic implications of next generation wireless networks for long-term productivity growth and living standards. The result could be an acceleration of productivity growth in the physical industries that adds roughly $2.7 trillion (in 2015 dollars) to U.S. GDP by 2030, according to the report. This translates into an 11 percent increase in economic output, which is equivalent to boosting the average annual growth rate by 0.7 percentage points.

“Creating vastly more wireless capacity is essential for getting the United States out of the slow-growth trap we are currently stuck in,” Mandel writes. “In order to catalyze the next round of spectrum-enabled economic expansion, policymakers need to focus on freeing up multiples of the current amount of spectrum—both for licensed and unlicensed uses—while creating an economic environment in which it is profitable to build and maintain a greatly expanded number of cell sites.

“Conversely, if policymakers fail to free up enough spectrum, or free up more spectrum for unlicensed rather than licensed operations, or impose regulations that reduce the return on investment that currently fuels spending on telecom infrastructure build-out, the likely outcome will be that the physical industries—which make up the greater part of the economy—will fail to achieve their productivity potential. In that event, all Americans will suffer.”

“PPI’s paper provides concrete evidence that next-generation wireless networks will be key to transforming our economy and drive economic growth by over 10 percent. This report underscores the importance of the FCC’s upcoming 600 MHz auction and spectrum frontiers effort, as well as the need to identify the next bands of spectrum for wireless use to fuel our mobile-first lives,” said Meredith Attwell Baker, President and CEO, CTIA. “We remain committed to working with all interested parties to free up more spectrum—both licensed and unlicensed—so that the world’s best mobile industry can provide our nation with almost $3 trillion in productivity gains.”

This report makes three main points.

• Slow productivity growth today across much of the economy is correlated with the failure of “physical” industries such as manufacturing, health care, and construction to make good use of digital technologies, compared to “digital” industries such as professional services, finance, and entertainment. PPI estimates that the physical industries, which make up roughly 80 percent of the private sector, account for only 35 percent of private info-tech investment, and only 40 percent of the telecom usage. A recent paper from the McKinsey Global Institute estimates that the United States has only reached 18 percent of its potential for digitization.
• PPI suggests that successfully digitizing physical industries will require a vast increase in remote sensors and remote-controlled devices such as cars, drones, and construction equipment. Cisco forecasts that M2M wireless traffic in the United States, including wearables, will rise from 3 percent to 11 percent of all mobile data by 2020. In this paper, PPI further projects that IoT related M2M communications will account for roughly 35-47 percent of mobile data communications by 2030.
• Achieving this level of connectivity and productivity improvement will require a sharp increase in the capacity of the nation’s mobile broadband networks. The nature of the capacity increase will depend on the development of technology. Using an analysis based on historical trends, we project that by 2030 it will be necessary to have more than 1900 MHz of spectrum in the sub-millimeter wave (mmW) bands (3 times the current availability) and at least 1.2 million cell sites (4 times the current level) in order to fully enable the IoT-driven productivity gains we document in this new paper.

Download “Long-term U.S. Productivity Growth and Mobile Broadband: The Road Ahead”

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PPI WEEKLY WRAP-UP: PPI in Europe, State AGs Abusing Power, & U.S. App Economy Capitol Hill Briefing

PPI IN EUROPE: PPI Chief Economic Strategist Dr. Michael Mandel was in Brussels this week, where he was invited to speak at an event on small and medium-sized enterprises (SMEs) and the Digital Single Market. The event was sponsored by the Swedish, Finnish, Irish and Estonian Permanent Missions to the European Union. While there, he and PPI Executive Director Lindsay Lewis held several meetings with the European Commission.

STATE AGs ABUSING POWER: In an op-ed for RealClearPolicy, Phil Goldberg, Director of the Civil Justice Center at PPI, details the evolution of the role of state attorney general over the last 20 years from mere law enforcer to general policymaker:

“Today, both Democratic and Republican AGs use litigation and the powers of the office to regulate. But with this new responsibility comes new opportunities to breach the public trust.

“A particularly alarming development is AGs’ increasing use of private law firms to sue companies under no-bid contracts where the firms get percentages of the settlements or awards. These arrangements were born out of tobacco litigation in the 1990s and have spread to all sorts of actions, leading to several scandals over the connections between AGs and the firms they hire.

“An aggressive way to address the politicization of the state AG is to have the AG selected by the governor, rather than through a popular election where he or she must raise campaign funds. The states that select their chief law enforcement officers this way have seen fewer scandals. For now, though, states should adopt legislation such as [the Transparency in Private Attorney Contract Act] to ensure that law-enforcement actions brought on behalf of the state put the public good above private profits.”

U.S. APP ECONOMY CAPITOL HILL BRIEFING: Please join PPI and TechNet next Thursdayfor a Capitol Hill breakfast briefing on “App Economy Jobs in the United States.” The event will feature remarks by Congressman Mike Bishop (R-MI), followed by a panel discussion featuring:

  • Dr. Michael Mandel, Chief Economic Strategist, PPI
  • Terry Howerton, CEO, TechNexus Venture Collaborative
  • Ron Klain, Executive Vice President & General Counsel, Revolution, LLC
  • Linda Moore, President & CEO, TechNet
  • Brendan Peter, Vice President, Global Government Relations, CA Technologies
  • Karl Rectanus, CEO, Lea(R)n
Thursday, March 3, 2016
10AM to 11:30AM
2226 Rayburn House Office Building