Facebook successfully completed its initial public offering (IPO) raising $16 billion with a total initial market capitalization of $104 billion, the largest for a U.S. IPO (Bloomberg). That valuation is expected to rise today; IPOs are usually priced low so share prices “pop” on the first day (BusinessWeek). Potential Facebook investors are encouraged by its stickiness (LA Times) but wary of GM’s move to end paid advertising (Reuters).
New Facebook millionaires may be a tax windfall for California (BBC). Co-founder Eduardo Saverin’s decision to renounce his U.S. citizenship led a pair of senators to propose new taxes on those who leave (LA Times).
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
International Trade and Investment
Solar Cell Trade War
The U.S. Department of Commerce proposed additional tariffs on solar cells imported from China (FT). The anti-dumping ruling would set tariffs at 250 percent generally, but only 31 percent for 61 specific Chinese suppliers. These tariffs are dramatically higher than the countervailing duties of 2.9 to 4.73 percent proposed by Commerce in late March in response to allegations of unfair Chinese subsidies. Yesterday’s separate proposal may spark a trade war and may slow the installation of solar panels in the United States.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
Education and Human Capital
Divorce and Tax Rates Correlate with Labor Supply
On average, Europeans log 30 percent fewer hours of work per year than Americans. A new study at VoxEU.org found that fewer divorces and higher taxes correlate with fewer hours worked. Men work shorter hours in countries with higher effective tax rates, while divorce rates correlate with hours worked by women. The authors concluded: “marriage provides an implicit social insurance since the spouses are able to share their income. However, if divorce rates are higher in a society, women have a higher incentive to obtain work experience.”
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Lack of Natural Gas Infrastructure Prevents Trade
The Financial Times reports on Japan’s skyrocketing imports of liquefied natural gas (LNG) as its electrical grid struggles with an idle nuclear fleet (BBC). Asian LNG prices recently hit a four year high of $18 per mBTUs, while a mild winter and surging shale gas production drove U.S. prices to below $2 per mBTU. U.S. producers cannot export much LNG because there is only one American LNG export terminal, located in Alaska. Federal approval was recently granted for a larger export terminal in Louisiana, but it will not begin operating until 2015 or 2016.
CFR’s Michael A. Levi—the David M. Rubenstein Senior Fellow for Energy and the Environment—discussed the consequences if shale gas production declines. He argued that more LNG export terminals would not lead to a destabilizing shortage if domestic production falls.
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
Extension of ‘Bush Tax Rates’ Debated
Treasury Secretary Timothy Geithner argued against extending the “Bush tax rates” for the highest income bracket (WSJ). “The cost of extending the Bush tax cuts for the top 2 percent of earners for the next decade is about $1 trillion. Tax cuts don’t pay for themselves. You have to pay for them. We can’t afford to borrow the money,” he said. CNBC anchor Larry Kudlow believes an extension would sustain economic recovery: “The uncertainty over the Bush tax cuts already has caused a number of business leaders to threaten a hiring freeze and a dampening of investment.”
Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.
Corporate Regulation and Taxation
Senate Approves Two Governors for Federal Reserve
The Senate approved the Obama administration’s two nominees—a Democrat and a Republican—to the central bank’s seven-member Board of Governors, giving it a full roster for the first time in six years (MarketWatch). Separately, Reuters reports that the president of the St. Louis Fed, James Ballard, supports breaking up large banks: “We do not need these companies to be as big as they are. The regulatory system would be much simpler if large firms were broken up, rather than trying to write complicated rules to capture all of the potential risks at complex firms.”
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.