Reuters reports that Intel is building a $5 billion advanced chip fabrication plant in Arizona, even as competitors move production overseas in pursuit of lower taxes, better supply chain integration, and access to skilled workers. Intel believes its innovation benefits from close collaboration between design and manufacturing teams, but acknowledges the cost advantages of overseas production. Some are calling for government intervention in the mold of Sematech—the 1980s government investment program for the chip industry—in addition to reforms to the corporate tax code as well as regulatory, educational, and immigration policies.
With the highest statutory corporate tax rate in the world—35 percent for federal taxes only—the United States is at a competitive disadvantage to countries such as Ireland (12.5 percent) and Israel (24 percent). This CFR Backgrounder by Jonathan Masters discusses the effect of current policy, and proposals for U.S. Corporate Tax Reform.
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
International Trade and Investment
U.S. Coal Bound for China
As reported in yesterday’s Morning Brief, U.S. utilities are slashing coal consumption; in response, U.S. coal producers are preparing to export coal to China (WashPost). While China has the world’s second largest coal reserves, experts expect its imports to rise quickly as coal use escalates. U.S. coal could keep Chinese energy prices low, encouraging the continued growth of coal consumption and the release of more carbon dioxide.
CFR’s Michael A. Levi—the David M. Rubenstein Senior Fellow for Energy and the Environment—argues the net effect of increased U.S. coal exports on global greenhouse gas emissions will hinge on whether those exports supplement or displace other coal production.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
The Decline of Sears
Crain’s Chicago Business discusses the decline of Sears, once the world’s largest retailer. The retailing icon suffered from self-inflicted wounds including chronic underinvestment in stores and management distracting itself with non-core businesses. Sears also failed to anticipate and adjust to the market shift from malls to big box stores. More innovative rivals, such as Wal-Mart and Target, were able to seize upon these trends and Sears’ weaknesses, in order to displace it at the top of the U.S. retail hierarchy.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
Education and Human Capital
Magnet Schools as a Public Choice
Magnet schools are recasting themselves as a school choice option (Education Week). Magnet schools were a popular strategy to address court-ordered desegregation mandates by luring parents with specialized curricula. Today, that impetus has faded and magnets face greater competition from charter schools. In the face of greater demand for choice in education, some magnets have increased their specialization, while others have added accelerated curricula and replaced lottery enrollment with competitive academic requirements.
Choice-based school reforms have attracted considerable debate among experts. The state of Louisiana has become a kind of national laboratory for proponents of choice-based reform. Renewing America contributor Steven J. Markovich discussed recent Louisianan educational reforms in a Policy Initiative Spotlight, a new feature that identifies and discusses important policy innovations that could help rebuild U.S. economic strength.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Southwest Blackout was Avoidable
The Federal Energy Regulatory Commission (FERC) determined that a power outage last September that affected 2.7 million homes in California, Arizona, and Mexico could have been avoided (WSJ). The FERC report said grid operators could have avoided the cascading outages after the failure of a transmission line between Arizona and California if they had “communicated more effectively, shared data and used real-time tools.”
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.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.