U.S. government officials along with five of the country’s largest banks have reached an agreement to help American homeowners (NYT) stricken by falling home values. The deal earmarks some $26 billion to assist roughly a million borrowers reduce their debt or refinance their home loan at lower rates. Another 750,000 whose homes were foreclosed will receive checks for about $2,000. The states of California and New York had withheld their participation from the program, but have now agreed to sign on.
Corporate Regulation and Taxation
Caterpillar Halts Factory Relocation to Illinois
Moving equipment manufacturer Caterpillar announced the company would not relocate a Japan-based production facility, including some 1400 jobs, to Peoria, IL, citing concerns over local logistics, the business climate as well as the state’s overall fiscal position. Caterpillar, which is headquartered in Peoria, had recently complained to state officials after Illinois raised income taxes (MNet).
Preventing Tax Evasion via Foreign Accounts
The U.S. Treasury reached an accord with France, Germany, Italy, Spain, and the UK that will prevent American taxpayers from eluding taxes through foreign accounts (WSJ). The Treasury along with the IRS also proposed new regulations that would mandate foreign financial firms report information on their U.S. account holders and potentially withhold taxes. Under the proposal, noncompliant firms could face tax penalties.
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
Debt and Deficits
Timing the Payroll Tax Cut Extension
Former White House OMB Director and CFR adjunct senior fellow Peter Orszag promotes the effectiveness of automatic economic stabilizers (Bloomberg), such as unemployment insurance, to dampen the impact of the recession and usher in the recovery. He says Congress should take a lesson from these measures and link an extension of the payroll tax cut with unemployment rate–so as employment returns, the extension peters out.
Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.
Education and Human Capital
Economic Benefits of Skilled Immigration
Nick Schulz of the National Chamber Foundation investigates the economic effects associated with the immigration of new highly-skilled workers, and the role of “human capital” in modern economies. Skilled immigrants, he writes, not only raise productivity, which is key to long-run economic growth, but also launch new businesses at higher rates than the native-born.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Strategy Needed for U.S. Manufacturing
In this first offering of a four-part essay for American Interest, Walter Russell Mead compares the historical forces that led to the decline of the “blue social model” in 20th century America—based around U.S. manufacturing—to those that beset 19th century American life organized around the family farm. “This is exactly what is happening today,” he writes, “Revolutions in manufacturing and, above all, in communications and information technology create the potential for unprecedented abundance and a further liberation of humanity from meaningless and repetitive work.” Once we figure out how to navigate this new transformation, he says, “America is most likely headed for another era of rapidly rising standards of living.” (Part II; Part III; Part IV)
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.