The Environmental Protection Agency (EPA) proposed limits for carbon dioxide emissions of new power plants (NYT). The rules will require future power plants to restrict emissions to less than 1,000 pounds of carbon dioxide per megawatt hour. The proposal would effectively eliminate coal as a potential fuel for new power plants, as today no carbon capture and sequestration technology is currently available to economically fulfill the new EPA requirements. Coal currently supplies less than 40 percent of U.S. electricity but has been in steady decline; new natural gas power plant construction was spurred by improved combined-cycle combustion technology and natural gas prices falling to ten-year lows.
Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.
Debt and Deficits
Federal Spending 30 Percent Larger than Reported
Proposals to reform federal income taxes often stress the importance of cutting tax deductions and loopholes to fund a reduction in rates. Deductions—such as the home mortgage interest deduction and renewable energy credit—effectively act as subsidies, but their incorporation into the tax code masks their ultimate cost. A recent report from the Urban Institute and Brookings Intuition analyzed the extent of these deductions and found that true federal spending is approximately 30 percent higher than reported in the budget.
As the United States continues to run budgets with high deficits, politicians debate different plans to reduce government costs and to raise revenue. This CFR Backgrounder outlines the competing policy paths on federal fiscal reform and the global consequences for failing to bring down U.S. debt.
Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.
Education and Human Capital
Parents Trump Schools on Exam Scores
A study of Danish teenagers over the past decade indicated parents have five times more influence than schools over students’ exam scores (The Telegraph). Results indicated that parents were responsible for half of test performance variation; schools explained only 10 percent and the pupils themselves were responsible for the remaining 40 percent. Separately, a recent study by the UK education department found a correlation between students’ exam scores and the amount of time they commit to homework; effects were greatest for students who did two to three hours of homework nightly (The Guardian).
The new report of the CFR Independent Task Force on U.S. Education Reform and National Security asserts that fixing the nation’s underperforming K-12 public schools is critical for strengthening the country’s security and increasing its economic competitiveness.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Perspective from Secondary Markets
Barry Silbert, the founder and CEO of SecondMarket, discussed the important components of a robust secondary market (Techcrunch). Secondary markets are important to start-ups because they increase liquidity; employees, ex-employees, and other investors can buy and sell shares of a firm before an initial public offering (IPO). March was a difficult month for secondary markets. The SEC began to crack down on unfair practices (Reuters), and Facebook—which makes up almost a quarter of all secondary market trading volume—will exit secondary markets on Friday (FT). Facebook is planning an IPO in May.
When to Consider Innovation Acquisition
As mergers and acquisitions (M&A) activity shows signs of rebound after a first quarter slump (Reuters), the Harvard Business Review describes five important questions corporate chieftains should ask themselves before pursuing an acquisition based on innovation. Firms should be wary of damaging an innovative culture, chasing financial numbers, and confusing buying yesterday’s innovations with buying the potential to create tomorrow’s innovation. Firms need to ensure they are not sinking large funds into acquisitions that would be better spent developing their own capabilities.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
Steven J. Markovich holds an MBA from the University of Chicago’s Booth School of Business.