Economy & Budget

Cultivating our trade relations with Russia

Three years since Secretary of State Hillary Clinton famously pushed for a reset of relations between the United States and Russia, the two nations have made progress. International relations being not unlike a dance where both partners like to take the lead, strides and swings forward do not some without a misstep or two. With Russia’s accession to the World Trade Organization (WTO), we have an opportunity to create a more harmonious trade partnership where both nations play to their strengths and grow our markets.

The economic benefits for the United States are real. Russia’s accession creates a ripe opportunity to broaden market access for American agricultural products including beef, pork, and poultry - a commodity that has been mired in an uncertain off-and-on trade status in recent years. U.S. food and agricultural exports to Russia totaled nearly $1.3 billion in 2010 with $336 million of that in red meats and $311 million in poultry. These sales were during a time in which Russia had a nearly seven-month ban on U.S. poultry products due to differences in sanitary protocols, which resulted in an arbitrary trade barrier.

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Best of budget - combining Tea Party and Occupy

Given Washington’s spectacular political dysfunction, many pundits seemed surprised that Congress extended payroll tax cuts by wide bipartisan margins. But both parties are now somewhat chastened after recent political pratfalls on the economy and taxes.

Many Democrats are beginning to realize that leading with a tax increase message, even taxes on the wealthy, as they did in the Senate last fall, represents a flawed political strategy. As bipartisan budget groups have noted, some tax increases will be needed to deal with long-term U.S. debt, but Democrats should present these as regrettable, while necessary. 

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Look who pays less in taxes than Buffett and Romney

Corporations pay a lower effective tax rate than Warren Buffett and Mitt Romney, but you wouldn’t know it from all the complaints that our corporate tax rate puts our country at a competitive disadvantage. Last year, U.S. corporations paid just 12.1 percent of their earnings in federal corporate income taxes. Buffett’s tax rate is 17.4 percent; Romney’s reported 2010 tax rate was 13.9 percent.

The corporate tax system is riddled with loopholes and subsidies that do create competitive problems, but not the ones CEOs are talking about. Our broken tax system blesses U.S. multinational corporations with lots of loopholes that enable them to pay less in taxes than Main Street businesses. It allows large companies, even those in the same industry, to pay vastly different tax rates. It has starved our government of revenue, adding to the pressure for deep budget cutbacks rather than the investments needed to rebuild our crumbling infrastructure, educate our children and support the innovation needed for economic success.

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Greece should serve as a wake-up call

Just last week, a financial shock wave swept across Europe as Greece narrowly averted economic collapse by securing its second major bailout in as many years.

While markets everywhere breathed a sigh of relief that the $172 billion rescue package temporarily saved Greece from insolvency, the forecast for continued stability remains in doubt.

Could what’s happening in Greece actually happen here in America? To some extent, it already has. Greece and the United States are two of the seven countries in the world with a national debt that exceeds total economic output.

Among advanced economies, the United States and Greece join Iceland, Ireland, Italy, Japan and Portugal on the list of nations whose debt is greater than their gross domestic product (GDP). The last time America’s debt topped the size of its overall economy was in 1947, due to the costs incurred in World War II. Today there is no excuse for spending more than we’re taking in. Frankly, it’s a recipe for disaster.

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Presidential candidates must address our debt

After a year in which the country was on the verge of declaring bankruptcy and the federal deficit surpassed the $1 trillion mark for the third straight year, you would think that the number-one priority for the president and Congress would be to put America’s fiscal house in order. But instead, both sides seem content to sit on their hands -- at least until the election is over -- while the Treasury issues more and more IOUs.

That’s unfortunate, because the most important issue facing our nation is our worsening debt situation, and we are rapidly running out of time in which we can restore fiscal sanity on our terms, rather than allowing an economic fiscal crisis to occur.

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Hauling hedge funds into the 21st century

Over the last few years, hedge funds have moved into the mainstream of the U.S. economy. Once restricted to a small number of super-wealthy “sophisticated investors,” they now receive hundreds of billions of dollars from public and private pension plans acting as fiduciaries for schoolteachers, truck drivers, construction workers, first responders and others whom we have lately come to call “the 99 Percent,” those who share little in common with fund managers stocking the Forbes 400 list. Surfing upon this incoming tide of money, some individual funds now manage enough assets to exert significant influence in the markets.

But the widespread acceptance of hedge funds among institutional investors has not been matched by commensurate improvements in their level of transparency, accountability and corporate governance. In recent months, we’ve witnessed the dismal result: a parade of inside-trading scandals evoking the fraud-riddled implosions of Worldcom, Tyco, Enron and Global Crossing that rocked corporate America a decade ago. It’s time for hedge funds to be brought into the 21st century and reflect their new broader role and fiduciary responsibilities. And this means the legal regime that sets the rules for hedge funds must change.

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H.R. 7 - more than just roads and bridges

As the House debates an infrastructure bill, we shouldn’t lose sight of the fact that the legislation at hand is more than just roads and bridges. For example, H.R. 7 would help our nation’s veterans obtain their Commercial Driver’s License, and with it the prospect of a good-paying private sector job. Perhaps more importantly, it would also help to ensure that teen drivers are better prepared for the challenges of the road.

I firmly believe that our commitment to our nation’s men and women does not end when their time in uniform ends. Instead, for all they do for us, we need to ensure that their transition back to civilian life and civilian employment is as simple as possible. As part of this, we should do what we can to help veterans transition from their military specialties into civilian employment. Under the VALOR Act, federal agencies would collaborate to assist veterans with relevant skills in getting their commercial driver’s license. It’s just common sense to me that after you’ve driven a truck in the service of your country, it shouldn’t be hard for you to get the license you need to get behind the wheel of a truck and help move America forward.

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Payroll tax cut extension: just another quick fix

Policymakers of both parties may be hailing the recent bipartisan extension of the current payroll tax cut, but it’s really just one more example of the short-term tax fixes to which lawmakers have grown addicted – and that are making our tax code an increasingly undecipherable patchwork of temporary provisions.

House Republicans reached the compromise by dropping their demand for spending cuts that would offset the estimated $1 billion cost of the tax measure. Economists estimate that the average American family would have seen a tax increase of more than $1,000 per year if the temporary payroll tax cut had not been extended.

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USPS's "Plan to Profitability" - triaging the patient

Apply the Tourniquet  Now

The U.S. Postal Service is hemorrhaging red ink. The Postal Service recently placed a 911 call to Congress, pleading for permission to address a wound caused by a plummeting first-class mail rate and explosive adoption of electronic communication. The USPS’s proposed five-year business plan, “Plan to Profitability,” must be approved and immediately enacted in order to constrain the bleeding and sustain the USPS until 2016.
 
It is a critical situation – the USPS is losing money at a lethal rate. By its own projections, the Postal Service could incur annual losses of $21.3 billion and accumulate $92 billion in debt by 2016.  Instead, the USPS rescue plan calls for $22.5 billion in annual cost reductions by 2016, nearly $10 billion of which depends on Congress approving significant legislative reforms: allow the USPS to provide employee health benefits outside federal health programs, increase the First-Class Mail stamp price to $0.50 and authorize a move to a 5-day delivery schedule. When fully applied with the operational and compensation initiatives, this plan is designed to keep the Postal Service alive.

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Reducing both the debt and drug use

At a recent summit in Venezuela, Latin American and Caribbean leaders vented over their region’s soaring murder rates, much of which is fueled by the northward pull of drugs, and the southward flow of guns from the United States. Forty years after President Nixon initiated the war on drugs, the latticework of kidnapping and gang battles, endemic underdevelopment, and human subjection resembles open combat. But if we are to address this enduring challenge, we need bold new approaches that transcend traditional thinking — particularly in an era of budgetary restraint.

The illicit drug trade and violence it spawns is more than just a domestic and foreign policy challenge, it raises uncomfortable questions about our national identity. Characterizing it as an overseas threat, and responding to it with primarily military instruments, has satiated U.S. sensibilities, but it has failed to provide an enduring solution for the United States or for Latin America. Staying the course in the war on drugs wastes vital resources, and dooms the Americas to cyclical violence and underdevelopment. Rebalancing our efforts, on the other hand, could improve public safety, health, and reduce costs both here and abroad.

Our first step should be letting go of the war on drugs’ emotional reward, and recognizing that the addiction and drug-related criminality that afflicts our communities is created by our demand, not by supply from overseas. A greater proportion of resources should stay at home, both to help overcome the problem and to control the debt, rather than being transferred to foreign security services.

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