Since the 1960s, teacher unions have been the primary lobbyists on education policy, but new advocacy groups are emerging (Education Week). These single-issue groups are gaining traction on Capitol Hill and in state governments. While they have found common cause with teacher unions on some issues, they are often in opposition. Michelle Rhee, the former chancellor of DC public schools, created StudentsFirst and explained: “I think unions and textbook manufacturers are all doing what they’re supposed to [in advocating for their interests].” She added “We wanted to start an organized national interest group constantly pushing for the interest of kids.”
The new report of the CFR Independent Task Force on U.S. Education Reform and National Security highlights the importance of the Common Core State Standards and asserts that fixing the nation’s underperforming K-12 schools is critical to economic competitiveness and national security.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
International Trade and Investment
Low Chinese Investment in America
A recent report by the Vale Columbia Center on Sustainable International Investment discussed the relative paucity of Chinese foreign direct investment (FDI) in the United States and offered five policy recommendations. Chinese FDI is growing rapidly but from a small base, only 0.25% of total FDI in the United States. U.S. policymakers must weigh the potential employment gains from Chinese FDI against strategic concerns as many Chinese firms are state-owned enterprises, while also remembering that China can also invest in U.S. competitors, or enemies.
This CFR Independent Task Force report encourages the Obama administration and Congress to adopt “pro-America” trade and investment policies that bring more Americans the benefits of global engagement.
Measuring the True Cost of Tariffs
Bloomberg’s editors argue that imposing large tariffs against subsidized Chinese photovoltaic solar cells will undercut U.S. energy goals. Chinese subsidies helped drive down prices more than 40 percent in the past 12 months and contributed to U.S. manufacturer bankruptcies, but they also helped more U.S. consumers purchase solar panels. While tariffs may protect domestic manufacturers, they cause prices to rise; solar installers will bear higher material costs and U.S. customers will either not buy solar panels, or shift money away from other spending, hurting sales and employees in those industries.
CFR’s Ted Alden, the Bernand L. Schwartz Senior Fellow, discussed the Commerce Department’s preliminary decision—final decision due in June—to levy duties on Chinese solar cells of just 2.9 to 4.7 percent.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Corporate Regulation and Taxation
HP Loses Tax Battle with IRS
The U.S. Internal Revenue Service won a court case against Hewlett-Packard, invalidating over $190 million in claimed tax credits (Reuters). The court agreed with the IRS that HP had entered into complex financial arrangements not for economic reasons, but to synthetically create financial benefits by avoiding U.S. taxes. The scheme relied upon differences in tax treatment between the United States and European nations and structuring what the court determined was a loan to a Dutch entity, as an investment.
With the highest statutory corporate tax rate in the world—35 percent for federal taxes only—the United States is at a competitive disadvantage. 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.
GM Halts Paid Facebook Advertising
General Motors—the third biggest advertiser in the United States—has decided to halt paid advertising on Facebook (WSJ). The move will save GM $10 million and GM will continue to use its free company Facebook pages. GM will pay nothing to Facebook, but will pay $30 million to outside agencies. This move raised questions about Facebook’s future revenue growth, just as higher than expected demand for its initial public offering allowed it to increasethe number of shares for sale by 25 percent (Bloomberg).
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.