President Obama signed into law an extension of the Export-Import Bank (NYT), passed by Congress with bipartisan support on May 15.  The measure extends Ex-Im’s charter to September 2014 and raises the bank’s lending limit from $100 billion to $140 billion over three years.  Critics have argued that Ex-Im distorts markets and effectively subsidizes exports while exposing taxpayers to default risk (WSJ).  Proponents point to Ex-Im’s profitability, and see it as a counterbalance to foreign subsidies; as Obama put it: “As long as our global competitors are providing financing for their exports, we’ve got to do the same.”

CFR Senior Fellow and Renewing America Director Edward Alden discusses the issues lawmakers faced as they considered Ex-Im reauthorization, including the increasingly aggressive actions of developing countries to finance their exports and Ex-Im’s efforts to match them.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Innovative Jobs Programs Slow to Launch

According to Stateline, states are facing delays in using federal unemployment insurance funds for pilot programs to subsidize wages and employer-provided training. Earlier this year, ten states were allowed to experiment with these new approaches, but state officials and some lawmakers are arguing that the Labor Department has made the approval process overly bureaucratic. The federal agency argues it is being appropriately cautious and thorough. Several programs are modeled after the Georgia Works program which will subsidize training of up to twenty-four hours a week for up to eight weeks for qualified individuals.

ManpowerGroup Analyzes Talent Shortages

ManpowerGroup, one of the world’s largest temporary worker agencies, released its report on global talent shortages.  In Asia and the Americas, employers are facing increased difficulty in finding qualified applicants to fill positions.  In the United States, the most difficult roles to fill were skilled trade workers and engineers, highlighting the workforce effects of deemphasized vocational training and mediocre STEM K-12 education.

CFR’s Ted Alden discusses the shortage of skilled workers in the U.S. manufacturing pipeline and the need for firms, governments, and unions to work together to encourage young people to pursue manufacturing careers, and schools to increase relevant education.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Innovation Misconceptions

A blog post from the Harvard Business Review argues that misconceptions often surround innovation. Many mistakenly equate innovation with creativity; successful innovation requires not only good ideas, but a strategic plan and successful implementation. Just as innovation is not limited to idea generation, it should also not be limited to a select few in an organization, but should involve everyone. Finally, innovation is not only doing the big things, but often starts small.

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.

The Washington Post reports that Secretary of Education Arne Duncan announced eight more states received waivers from No Child Left Behind (NCLB) requirements. This brings the total number of states to receive waivers to nineteen; seventeen other states plus Washington, DC have applications under review. Duncan argued that Congress’ stalled efforts to rewrite NCLB over the past five years necessitated the waiver process: “We prefer a bipartisan rewrite of No Child Left Behind. Obviously, that’s not where Congress is right now. . . . Children can’t wait. Teachers can’t wait. We’re moving forward right now.”

Calculating the Common Core Cost

The Thomas B. Fordham Institute issued a report that estimated the cost of implementing the Common Core State Standards (CCSS) for math and reading. The authors used three scenarios varying the adoption rate of electronic textbooks; gross costs ranged from 1.5 to 3 percent of annual K-12 education spending. After considering current outlays for instructional materials, the authors calculated that CCSS implementation in forty-five states and DC could cost as much as $8.2 billion, or save over $0.9 billion if electronic instruction materials are widely adopted.

The recent report of the CFR Independent Task Force on U.S. Education Reform and National Security highlights the importance of the CCSS 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.

Flat Manufacturing Wages Aid Revival

Since bottoming out in 2010, U.S. manufacturing employment is up 4.3 percent, but expanding domestic production is aided by flat wages (WSJ). While average wages in manufacturing are at year 2000 levels after adjusting for inflation, there is a steady trend of manufactures adding new workers at lower rates than existing workers. Skilled workers are often in short supply and tend to fare much better. An economist with the Chicago Federal Reserve Bank anticipates upward wage pressure: “Already, you hear about the dearth of certain kinds of workers. There’s a recognition that as we train workers to be more productive and more skilled, you’d better compensate them so that they stay with you.”

CFR’s Edward Alden discusses the shortage of skilled workers in the U.S. manufacturing pipeline and the need for firms, governments, and unions to work together to encourage young people to pursue manufacturing careers, and schools to increase relevant education.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

CornellNYC Tech

New York City plans a high tech center to compete with Silicon Valley (AP). The $2 billion campus will house CornellNYC Tech, a partnership between Cornell University and the Technion-Israel Institute of Technology. The research center will focus on industries that are already strong in NYC: medical technology, digital media, and cleantech. While the Roosevelt Island site will not open until 2017, CornellNYC Tech is already taking shape. Greg Pass, Twitter’s former chief technology officer, has joined as the founding entrepreneurial officer, and Google will donate Manhattan office space from July until the campus opens (VentureBeat).

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Coal Under Siege

Tightening environmental regulations and the lure of low-priced natural gas are leading electrical utilities to dump coal (NYT). Natural gas is currently cheaper, pollutes less, and releases less carbon dioxide than coal, so it is gaining favor for both economic and environmental reasons. Some coal producers are ramping up lobbying efforts to forestall further regulations, while others are planning to increase exports to coal-hungry developing nations.

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.

The gaps in the U.S. social safety net are about to become very large holes. For the past several years, lawmakers have repeatedly voted to extend unemployment insurance benefits, most recently in February. But in many states those benefits are running out, leaving the long-term unemployed with choices that range from bad to awful.

This moment was inevitable, and should compel Washington to re-think how it supports jobless workers. As my colleague Matthew Slaughter, a former member of the White House Council of Economic Advisers, has explained, the current unemployment insurance system was designed in the 1930s and has remained largely unchanged. It is premised on the idea that unemployment is the consequence of cyclical downturns, and that government’s role is to provide short-term support during recessions for workers who will likely be rehired in the same industries (and usually by the same employer) when the economy recovers.

That system has been inadequate for some time in the face of more intense global competition and faster technological change that has left more workers without the skills they need to find new jobs. The Pew Fiscal Analysis Initiative recently charted historical long-term unemployment (those out of work a year or more). The chart below shows that the problem had already become somewhat bigger over the past thirty years, with the numbers of long-term unemployed remaining higher for longer after each recession. But it really spiked following the recession in 2008-2009, sending the numbers up to record levels of more than 30 percent of all unemployed.

Even that huge figure is understated. The number of workers collecting Social Security disability payments has jumped 22 percent, or some 1.6 million workers, since the start of the recession, taking them out of the workforce or off the unemployment rolls. Nearly all of those will never return to work.

The biggest problem for the unemployed remains sluggish growth and lack of demand. For every available job, there are still more than four unemployed workers, and that gap will not shrink unless the economy grows faster. But the current system does very little to help the long-term unemployed prepare for those positions that are open. There are currently some 3.7 million jobs openings in the United States, a number that has increased steadily since the official end of the recession in 2009.

Both critics and supporters of unemployment insurance are in agreement that the program should do more to retrain workers for those jobs. Slaughter and Harvard University economist Robert Lawrence have argued for replacing the current unemployment insurance scheme with an “American Adjustment Program” that would bring together the current unemployment insurance program with elements of the Trade Adjustment Assistance program and current job training programs.

Their scheme, which was laid out in greater detail in work done with former Bush trade official Grant Aldonas, has four main components:

• A “training stipend” that would be available to every unemployed worker to help cover the cost of retraining.
• Tax deductibility both for companies and individuals that invest in retraining.
• Continued health insurance for all unemployed workers.
• A “wage loss insurance” program that would encourage older workers to find new jobs at lower wages by replacing up to 50 percent of their lost wage income for two years.

The obvious objection to such a program is the cost, but by any reasonable measure it is surprisingly affordable. They estimate the annual additional cost at $22 billion; spending on the current unemployment insurance program is expected to be $99 billion in FY2012, and hit $159 billion in FY2010. The additional proposed spending is small, and looks smaller still if we take into account the big losses to the economy from long-term unemployment, losses felt through reduced incomes, lower productivity, and shrunken output.

Further, they propose a simple, logical way to fund the scheme – replace the current regressive payroll tax in which lower paid workers proportionately bear a much greater burden with a flat assessment of roughly 1.3 percent on all wages. That would be a fairer payroll tax that would actually reduce taxes for lower-wage workers.

With the possible exception of wage loss insurance, which remains controversial, none of this should be all that difficult politically. Liberals would welcome the additional support for unemployed workers, and the scheme would address conservative worries that unemployment insurance discourages people from returning to work. With the political appetite for another short-term fix waning, it is time for a longer term solution.

New research indicates that the bulk of the pay premium enjoyed by workers in developed nations is from a difference in location, not skills (BusinessWeek). Workers in the United States enjoy a “place premium”—even after adjusting for purchasing power—due to public goods such as infrastructure, a developed financial system, and reliable regulations and laws. This location effect accounted for three-quarters of the difference in average pay between U.S. software workers and Indian counterparts. It also explains why an Indian McDonald’s employee can only afford one-third of a Big Mac after an hour of work, while an American worker can buy two.

Mobility Tied to Education

U.S. workers are substantially more mobile than Europeans, but mobility correlates with education (WSJ). As the economic vitality of U.S. cities becomes more uneven, the greater ability of highly-educated workers to pay the upfront costs of relocation leads to increasing inequality. The author recommends a federal relocation assistance voucher program to help workers pursue new opportunities in growing cities.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Extended Unemployment Benefits Ebb

Unemployment checks are stopping for many long-term unemployed as the federal benefit extensions begin to phase out (NYT). In February, Congress extended the use of federal monies to supplement state unemployment funds to cover out-of-work workers for up to ninety-nine weeks. But that legislation also phased in a reduction of benefit weeks, and set higher standards for states to receive the maximum amount of aid. The end of federal assistance is part of the “fiscal cliff” that the CBO warned could lead to recession next year.

Earlier this year, CFR’s Edward Alden discussed the CBO report on the budget impact of current legislation if Congress does not act. While he states that no action would be bad policy, he suggests that Congress take the current law as a budget baseline.

Public Pension Funds Take on More Risk

The Financial Times reports that U.S. public pension funds have increased investment in risky assets as more of their participants retire, despite economic theory that suggests they should invest more conservatively. U.S. public plans calculate liabilities with an assumed rate of return; investing in risky assets allows plans to lower stated liabilities by assuming a higher rate of return. If those higher returns do not materialize, shortfalls may result. One expert remarked: “All the current fund boards, politicians, and even taxpayers have an incentive to kick the can down the road.”

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

CBS News Sunday Morning examined the importance of highways to U.S. economic strength, and the consequences of underinvestment. Federal Highway Administrator Victor Mendez offered: “When we’re competing with China, India, emerging economic powers like Brazil, we better have our infrastructure ready to go, to be able to compete on a global basis.” A principal challenge is funding; last year the federal gas tax ($32 billion) was insufficient to pay for federal transportation outlays ($37 billion). The Department of Transportation needs $100 billion a year for the next twenty years just to maintain the current system.

Scott Thomasson, the president of NewBuild Strategies and an expert on infrastructure funding, recently authored “Encouraging U.S. Infrastructure Investment,” a Policy Innovation Memorandum released by the CFR’s Renewing America initiative. Thomasson proposes new initiatives to address crumbling U.S. infrastructure.

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.

Facebook’s Stumbles May Chill IPO Market

In less than two weeks since its initial public offering (IPO), Facebook’s share price tumbled more than 15 percent; that fall may be dampening investor enthusiasm for IPOs (LA Times). Other Silicon Valley firms such as Twitter and Spotify are considering delaying their IPOs until market sentiment rebounds. Facebook may weigh especially hard on small, individual investors; one who lost $1,000 on Facebook remarked: “It was a chance to be part of history. This was my first foray into an IPO, and it’ll probably be my last.” One analyst speculated that the effects will not last: “I don’t think long term there will be any less demand for anything Silicon Valley produces.”

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.

China responded to the recently imposed 31 percent U.S anti-dumping tariffs on imports of Chinese solar panels with investigations into U.S. clean energy projects (WSJ). China’s Commerce Ministry alleges six projects in five states violated international trade law, and Beijing has stated that the tariffs reflect “the U.S.’s tendency toward trade protectionism.” The heads of four major Chinese solar power manufacturers have banded together to refute the determination of the U.S. Commerce Department.

CFR Senior Fellow and Renewing America Director Edward Alden discusses the general lack of trade protectionism in the wake of the Great Recession, and the likelihood that the WTO has restrained this political impulse.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Education and Human Capital

A Common Core Can Spur Innovation

As part of Washington Monthly’s special report on education, Robert Rotham sees the adoption of the Common Core State Standards as a transformational moment that will unlock education innovation. He argues that nearly nationwide standards will help children who move from state to state and facilitate innovation by allowing the best educational products and practices to easily spread. Assessment should also improve as testing and requirements standardize, and it becomes easier to compare performance between states.

The 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.

Student Loan Bill Stalls

Politico reports that the Senate was unable to pass either party’s bill to renew a temporary rate cut on subsidized Stafford loans. Democrats favor eliminating a loophole that allows some self-employed professionals to avoid payroll taxes, while Republicans are targeting spending cuts in an element of the healthcare reform law. On July 1, subsidized Stafford loans are scheduled to return to an interest rate of 6.8 percent from the current 3.4 percent.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Corporate Regulation and Taxation

Wind Power Tax Credit Expiration Looms

The wind production tax credit will expire at year’s end; its renewal is attracting supporters from both parties (TheHill). President Obama spoke at an Iowa manufacturer of wind turbine parts in favor of renewal. Republican Senator Chuck Grassley of Iowa has introduced legislation to extend the credit and called renewing the tax credit a “no-brainer for many of us.” But Grassley also indicated that renewal may have to wait for other, less popular, expiring tax provisions to be debated on Capitol Hill.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

Innovation

Google Wins Patent Fight

Google and the Android platform won an important court victory yesterday, trouncing Oracle’s claims of patent infringement (Bloomberg). The patents in question relate to the Java programming language developed by Sun Microsystems, which Oracle acquired in 2010. Oracle had sought a billion dollars in damages, and wanted a licensing fee for every Android smartphone sold. Separately, a German court ruled that Google’s new Motorola Mobility subsidiary infringed a Microsoft patent related to text messaging (Reuters).

Should the United States adopt a “patent box” tax incentive as several European countries have done in recent years in order to spur innovation? This Policy Initiative Spotlight by Jonathan Masters examines the issue alongside a more conventional policy, the research, and development tax credit.

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.

Mitt Romney, the presumptive GOP presidential nominee, gave a major policy speech yesterday outlining his educational priorities (NYT). The candidate argued that disparate educational opportunities—with minorities disproportionately relegated to failing schools—is the “civil-rights issue of our era.” He embraced school choice and proposed a federal voucher-like system for low-income students, and also called for increasing school performance transparency so parents can avoid failing schools. Education has not been a major issue for presidential campaigns since 2000, but analysts noted this speech was given at the Latino Coalition’s Annual Economic Summit, and see an opportunity for Romney to attract Hispanic voters.

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.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Data-Driven Regulations?

In Bloomberg, noted finance researcher Tobias J. Moskowitz argues for regulations based upon data rather than political ideology and public outrage. As one example, Moskowitz and his colleagues conducted a randomized experiment that found restricting short selling may not prop up share prices after all. He points out that similar data were available to Securities and Exchange Commission (SEC) regulators three years before the financial crisis, but says policymakers let politics—rather than data—guide their regulatory response to the crisis.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

China Buys U.S. Treasuries Directly

Since June 2011, China has had the option of buying U.S. Treasuries directly and bypassing Wall Street banks (Reuters). China is the only nation to have a direct relationship with the U.S. Treasury; all other sovereigns buy U.S. debt through “primary dealers.” This accommodation benefits the Chinese by reducing transaction costs and hiding their bids from other buyers. It also highlights China’s purchasing power. China holds $1.17 trillion in U.S. debt—the most of any nation.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Airplane Sales Takeoff

Boeing and Airbus have enjoyed soaring demand, but analysts caution airplanes sales may be in a bubble (Reuters). Rising orders are being driven by travel growth in emerging economies, fuel cost conscious airlines seeking a more efficient fleet, and the growth of aircraft leasing companies. Airbus and Boeing predict a $4 trillion airplane market over the next twenty years. That market may be increasingly shared with new entrants from China, Brazil, Canada, and Russia, though most growth plans have hit turbulence (Economist). China’s first passenger jetliner will face further delay (Reuters).

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Federal Funds for Portland Light Rail

The Federal Transit Administration (FTA) agreed to pay for half of a $1.49 billion project to extend light rail from Portland to its suburbs, with operation slated for 2015. The funds came from the FTA’s discretionary New Starts program, which uses federal funds to support locally planned, implemented and operated transit projects. New Starts funds are supporting projects to build light rail, bus rapid transit, commuter rail, and even New York’s second avenue subway line.

Scott Thomasson, the president of NewBuild Strategies and an expert on infrastructure funding, recently authored “Encouraging U.S. Infrastructure Investment,” a Policy Innovation Memorandum released by CFR’s Renewing America initiative. Thomasson proposes new initiatives to address crumbling U.S. infrastructure.

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.

Over the years, advanced and developing countries have experimented, sometimes deliberately and frequently inadvertently, with a variety of approaches to growth. Unfortunately, many of these strategies have turned out to have built-in limitations or decelerators – what one might call elements of unsustainability. And avoiding serious damage and difficult recoveries requires us to get a lot better at recognizing these self-limiting growth patterns early on.

Here are some of the items in a growing library of decelerating growth models.

In developing countries, import substitution as a way to jump-start economic diversification can work for a while; but, over time, as productivity growth lags and comparative advantage is over-ridden, growth grinds to a halt.

Small, open economies are naturally somewhat specialized, which leaves them vulnerable to shocks and volatility. But, in terms of growth and living standards, the cost of economic diversification, when implemented by protecting domestic industries from foreign competition, eventually outweighs the benefits. It is better to allow specialization, and build effective social safety nets and support systems to protect people and families during economic transitions. Such “structural flexibility” is better adapted to enabling the broad changes that rapidly evolving technological and global economic forces require.

Mismanagement of natural-resource wealth underpins an especially potent self-limiting pattern of growth and development. If invested in infrastructure, education, and external financial assets, natural-resource revenues can accelerate growth. But, too often, such revenues distort economic incentives, which come to favor rent-seeking and interfere with the diversification that is essential for growth.

More recently, many advanced countries have discovered a “new” set of growth models with built-in structural limitations: excessive private or public consumption, or both, usually accompanied and enabled by rising debt and inflated asset prices, and a corresponding decline in investment. This approach appears to work until domestic aggregate demand can no longer sustain growth and employment, at which point it ends in either gradual stagnation or a violent financial and economic crisis. (In fact, many developing countries have learned this the hard way, but the lessons seem not to have crossed over to advanced countries.)

But the opposite of the excessive-consumption model – excessive reliance on investment to generate aggregate demand – is also a self-limiting growth pattern. When the private and social returns of investment diminish too much, growth cannot be sustained indefinitely, even though rising investment rates can sustain aggregate demand for a while. Altering this growth pattern is a significant part of the challenge that China now faces.

Rising inequality in either opportunity or outcomes (and often both) also poses threats to the sustainability of growth patterns. While people in a wide range of countries accept some degree of market-determined income variation, based on differential talents and personal preferences, there are limits. When they are breached, the typical result is a sense of unfairness, followed by resistance and, ultimately, political choices that address the inequality, though sometimes in counter-productive, growth-impeding ways.

Perhaps the largest long-run sustainability issue concerns the adequacy of the global economy’s natural-resource base: output will more than triple over the coming two or three decades, as high-growth developing economies’ four billion people converge toward advanced-country income levels and consumption patterns. Existing economic-development strategies will require significant adaption to accommodate this kind of growth.

Some adaptation will occur naturally, as rising energy and other commodity prices generate incentives to economize or seek alternatives. But the un-priced environmental externalities – global warming and water depletion, for example – will require serious attention, not myopic, reactive mindsets and approaches.

All of these self-limiting growth patterns tend to have three things in common. First, in one or several dimensions, some part of the economy’s base of tangible, intangible, and natural-resource assets is being run down. I would include social cohesion as part of the asset base: it is the one that is depreciated by excessive inequality.

Measurement issues play an important role here. It is easier to run down something that is partly invisible because it is not regularly or effectively measured. Expanded measurement of the dimensions of economic, social, and environmental performance is necessary to broaden awareness of sustainability issues.

Second, unidentified self-limiting growth patterns produce very bad results. Expectations come to exceed reality, and resetting the system to a sustainable growth pattern is difficult. After all, past investment shortfalls have to be made up and future-oriented investments undertaken simultaneously – a double burden that must be borne by the current generation. An inability to resolve the distributional and fairness problem can produce gridlock, paralysis, and prolonged stagnation.

Finally, many of these flawed growth patterns involve fiscal distress. Contrary to the prevailing wisdom nowadays, some degree of Keynesian demand management in the transition to a more sustainable growth pattern is not in conflict with restoring fiscal balance over a sensible time period. On the contrary, applied both individually and together, fiscal stimulus and consolidation are necessary parts of the adjustment process.

But they are not sufficient. The crucial missing pieces are a shift in the structure of accessible aggregate demand and restoration of those parts of the economy’s asset base that have been run down, implying the need for structural change and investment.

This article originally appeared at www.project-syndicate.org.

The nonpartisan Congressional Budget Office (CBO) predicts that the “fiscal cliff” of over $500 billion in spending cuts and tax increases scheduled under current law will cause a recession in the first half of 2013. The CBO argues that Congress should reduce these fiscal changes to prevent recession while enacting specific, long-term measures to put federal finances on a stable course—a view shared by Peter Orszag, former CBO director and current CFR Adjunct Senior Fellow. The Committee for a Responsible Federal Budget has a quick summary of the scheduled spending cuts and the tax increases.

Earlier this year, CFR’s Edward Alden discussed the budget impact of current legislation if Congress does not act. While he states that no action would be bad policy, he suggests that Congress take the current law as a budget baseline.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Foreign Retailers Fill Vacated Mall Storefronts

As many U.S. retailers pull back from shopping malls, foreign retailers are opening stores (NYT). The Japanese affordable clothing chain Uniqlo plans to open twenty to thirty new stores annually over the next eight years, despite aborting previous mall expansion plans in 2006. Foreign retailers across the price spectrum are attracted to the United States because of easier access to credit, lower regulatory hurdles, relatively cheap rents, and the chance to attract Wall Street investment.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Why Banks Shouldn’t Be Broken Up
In the wake of J.P. Morgan’s $3 billion trading loss, the editors of Bloomberg argue large banks should not be broken up through regulatory fiat, even though complex financial institutions are hard to regulate. They acknowledge that “too big to fail” creates an implicit government subsidy; systemically important banks are likely to be bailed out, lowering their risk of default and borrowing costs, and thus increasing profits. The editors suggest imposing fees and higher capital requirements as banks grow larger, to reduce this perverse incentive to expand even further.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

‘Innovation’ Saturation
The Wall Street Journal reports that the term “innovation” has exploded in popularity, but its increasing use in corporate materials may be a marketing ploy. “Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” says Clayton Christensen, author of 1997’s The Innovator’s Dilemma. Many firms use the term to refer to very good products, rather than reserving it for new, disruptive products, which helps explain why Campbell’s Soup uses the term more than Google.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Romney May Seek to Expand School Choice

Education Week obtained a document from the campaign of likely Republican presidential nominee Mitt Romney, suggesting he could increase school choice nationwide. One proposal would allow students from disadvantaged families or in special education to apply federal funds to any public district, charter school, or private school (if consistent with that state’s rules). Other proposals include encouraging states to drop caps on charter schools, expanding the DC Opportunity Scholarship, and using federal block grants to encourage states to institute effective programs of identifying and retaining good teachers.

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 recent Policy Initiative Spotlight.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

Should more Americans go to college? I would have thought the answer is an unequivocal yes. The evidence is overwhelming that college graduates have lower unemployment rates, earn far more money, and are generally healthier and happier than those with a high school education or less. And young people seem persuaded. College enrollment rates for high school grads have risen from 44 percent in 1989 to nearly 60 percent last year.

Peter Thiel, the billionaire co-founder of Paypal, disagrees. And his willingness to spend millions of his own fortune to pay bright young people to drop out and start businesses earned him a national audience Sunday night on 60 Minutes, the country’s most-watched news program. My first reaction was to agree with entrepreneur-scholar Vivek Wadhwa, who has lambasted Thiel for selling young people on the fantasy of hitting the entrepreneurial jackpot without an advanced education. “If you don’t even have a bachelor’s degree, if you don’t even have basic education, basically you are beyond hope,” Wadhwa told CBS.

After listening to Thiel’s argument, however, I think he has a point. While he’s utterly wrong on the virtues of dropping out (the fortunate few like Mark Zuckerman excepted), he’s right that the compact between what college promises and what society is delivering is increasingly frayed.

Here’s what the deal is supposed to be: parents sacrifice to help their kids through college because that is the surest road to advancement. But over the past two decades, the road has become a lot bumpier. Numbers compiled earlier this month by the Economic Policy Institute (EPI) show that the hourly wage of recent college graduates, after rising sharply at the end of the 1990s, has fallen back. Starting wages for college grads today are only slightly higher than in 1990, or just under $17 an hour in 2011 dollars. Unemployment is near 10 percent and underemployment nearly 20 percent.

And new graduates are entering the job market with much greater debt burdens. As tuition continues to rise, two-thirds of students are borrowing to earn bachelor’s degrees, up from 45 percent in the early 1990s. Wadhwa rightly points out that the average debt load on graduation — $23,300 – is not excessive, but that may only begin to count the costs. A Washington Post piece Tuesday, provocatively titled “Is College Too Easy?” noted that the time students spend studying has dropped steadily over the years. But the main reason seems to be that more and more students are holding down part-time jobs to finance their education, reducing the time available for classwork. In short, students are paying more, borrowing more, and getting less.

Thiel’s response to these trends is to give up on higher education and encourage young people to take up plumbing or roll the dice on launching a business. That’s the wrong response. If the EPI numbers for recent college grads are depressing, the picture for those with less education is positively Dickensian. Recent high school grads entering the workforce have an unemployment rate over 30 percent and an underemployment rate over 50 percent, and those lucky enough to find jobs are earning less than $10 an hour. As I know from playing the board game Life’s Twists and Turns with my kids, with some luck you can make it big as an actor or an athlete. But the odds of winning the game go way up with a college degree.

Neither am I persuaded, however, that the right response is just to rally around the colleges as they are currently doing business. Sure, the elite institutions can keep raising tuition, confident that student demand far exceeds supply, the brand value of a Harvard or Stanford justifies the expense, and their large endowments will open doors for some who would otherwise be turned away. But state universities cannot play their traditional role as ladders of opportunity if funding continues to be slashed. California, which has the nation’s flagship public system, has seen state funding cut precipitously; it is now at the same level as 1997-1998, when there were 73,000 fewer students.

And both state schools and smaller private colleges need to get creative at doing more with less. This could include expanded online learning, greater specialization (not every school can and should be offering the full range of courses in all subjects) and new faculty hiring models that mix superstar professors with hands-on instructors. There are some fascinating initiatives under way, though the biggest ones such as EdX and MITx are led by the elite universities.

Peter Thiel clearly struck a chord when he said on 60 Minutes that college education is a “bubble.” Too many young people  are overpaying for a product whose returns are increasingly uncertain. But the product is one that both individuals and American society badly need. The challenge is to make it much better, and more affordable, than it is currently.

The Department of Education is expected to release new draft regulations for grant proposals for the latest round of Race to the Top funds (Education Week). The new guidelines for receiving one of the fifteen to twenty four-year grants from the $400 million program include: instruction tailored to individual students, incorporating student data into district superintendent evaluation, and the proposal’s “vision” for improving performance and narrowing achievement gaps.

The recent 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.

Chipotle’s Hiring Practices Under Investigation

Chipotle Mexican Grill, the quick service food chain that owns and operates over a thousand U.S. stores, is under investigation by the SEC for its hiring practices (WSJ). Chipotle has been the subject of prior investigations; a 2010 case led to the termination of 450 undocumented workers in Minnesota. Since that investigation, Chipotle installed the Department of Homeland Security’s E-Verify system to screen job applicants. That system failed to protect the Pei Wei Asian Diner food chain, which closed eight Arizona locations after employees used stolen identities to bypass the E-Verify protections.

CFR’s 2009 Independent Task Force on U.S. Immigration Policy, recommended policies with three goals: reform of legal immigration to improve efficiency and U.S. competitiveness; effective enforcement of immigration laws; and a fair, humane, and orderly way to deal with migrants illegally living in the United States.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

SpaceX’s Dragon Capsule Rockets to Orbit

At 3:44am EDT, SpaceX’s Falcon 9 rocket launched its Dragon capsule into orbit (Wired). Last Saturday’s launch was scrubbed after a computer diagnostic program detected a faulty valve half a second before liftoff. Dragon will conduct maneuvering exercises and on Friday will attempt to dock with the International Space Station, the first non-government entity to make that attempt. If successful, Dragon may carry astronauts within three years (AP) and validate NASA’s plans to rely on private space companies to achieve low earth orbit.

Finger-pointing over Facebook’s Falling Price

Facebook’s share price is down almost 11 percent after two days of trading, leading many to blame lead underwriter Morgan Stanley (Bloomberg). A few days before Friday’s Initial Public Offering (IPO), Morgan Stanley and Facebook decided to raise the share price and the number of shares being offered, which experts believe set the stage for decline. While investors have complained about the underwriters, TechCrunch argues that the IPO was successful for Facebook by maximizing the capital raised for the firm while minimizing costs and dilution for its pre-IPO shareholders.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Chinese Firm to Acquire U.S. Movie Theater Chain

China’s Dalian Wanda Group, announced its $2.6 billion proposal to purchase AMC Entertainment Holdings (WSJ). The deal would be a role reversal; typically U.S. media interests are trying to break into the burgeoning Chinese market. Wanda’s CEO said he would let AMC’s management make decisions on what movies to show based upon market demand, though he also added that Chinese-made movies would gradually enter the U.S. market. Talks have been under way for almost two years (NYT); the deal will require regulatory approval.

This CFR Independent Task Force report encourages the Obama administration and Congress to launch a National Investment Initiative to encourage greater foreign investment in the United States.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.