All posts by Luke Stewart
After already slashing R&D funding, the Sequester is about to deliver another kick in the teeth to American competitiveness: it’s going to sharply reduce our ability to measure it. This one comes courtesy of the Bureau of Labor Statistics, which announced last month that the sequestration has forced it to eliminate its International Labor Comparisons (ILC) program, a neat little database that adjusts foreign data to a common framework, allowing you to compare the traded sector health and competiveness of the United States against that of other countries.
This may not sound like much, but in the nerdy world of competitive analysis economics, it’s huge. No one else provides this data to the same extent as ILC. The OECD does a bit,[i] but their data are rife with warnings about the perils of cross-country comparison among their indicators. Moreover, the OECD has little-to-no data on the big boys such as China and India, which renders its data useless for any “big picture” comparisons of our competitive health. Other organizations, such as the UN Industrial Development Organization, provide limited competitiveness data that is vastly incomplete.
In contrast, the ILC
Percentage of business executives willing to give up specific tax incentives (n=682) (source: KPMG)
Last Friday, Reuters reported on a recent KPMG survey of 682 business executives that finds that, (to paraphrase KPMG’s website) in exchange for a lower statutory corporate tax rate, 68 percent of respondents would be willing to give up accelerated depreciation of capital equipment, 66 percent would be willing to give up the domestic production deduction for manufacturing, and a “surprising” 52 percent would be willing to give up the research and experimentation (R&E) tax credit.
This is untrue, and here’s why. The survey question (Question 4a) that asks which tax incentives the executives would be willing to give up is limited to only those executives who answered “yes” on a previous question (Question 4) about whether or not they’d be willing to support reform that repeals tax incentives in exchange for a lower rate. This means that, while the previous question had 682 respondents, the subsequent question on the specific tax incentives they’d be willing to give up had only 322 respondents.
So, while it is indeed true that, for example, 52
One rebuttal out commonly used against those of us worried about the large and persistent U.S. trade deficit is that a trade deficit implies a “capital account surplus.” In other words, a trade deficit must be offset by inflows of funds, and those funds are sometimes (although far from always) used to finance investment in the U.S. economy. One big part of these inflows is foreign purchase of U.S. debt, such as corporate securities or Treasury bonds that finance government spending. The other big part is foreign direct investment (FDI), which is the inflow of foreign funds used to control (i.e. own) business assets within the United States.
While the economic benefit of the financing of U.S. debt by foreign entities is hotly debated, the inflow of FDI is often touted as a sign of continuing U.S. economic strength, given that, at first blush, the influx of foreign dollars appears to support investment in companies in the United States and thus million of American jobs. It is important to note, however, that there are in fact two kinds of FDI, and each has different consequences for the American economy. Read the rest . . .
The United States has a decentralized statistical system with agencies such as the Census Bureau, Bureau of Labor Statistics (BLS), and Bureau of Economic Analysis (BEA) each producing their own economic metrics. There are advantages to this system; however, there is currently one big flaw: the agencies do not work from an internally-consistent set of data. In fact, they are barred by law from sharing important microdata with one another, and this leads to statistics on the U.S. economy that are badly inaccurate. These accuracy problems affect everything from the BEA’s national and state GDP statistics, to the BLS’s and the Census Bureau’s (separate) employment, payroll and establishment statistics, to statistics on the productivity growth and trade balances in strategic sectors such as manufacturing. And because these statistics are used by the federal government to make fiscal and monetary policy decisions, this data sharing problem leads to misdiagnosis of economic problems and ineffective policies. Moreover, the lack of data sharing leads to work redundancy (many agencies procuring their own data to produce similar statistics), increasing budget costs while also increasing the reporting burden on private businesses.
The resolution to this problem is rather simple. Congress should amend the Internal Revenue Code such that statistical agencies such as the BEA and BLS gain access to the Census Bureau’s Business Register (which is derived from IRS data). … Read the rest