Economy & Budget

As globalization and offshoring have ramped up, the left and right have both responded with failed strategies.

The right’s response has been Panglossian, denying the problem. The left’s response has been vituperative, and worse in its consequences. When liberals see U.S. companies sourcing globally, they don’t see trade, they see betrayal. They don’t see the inexorable creation of an integrated global market — they see, in the words of Lou Dobbs, a “War on the Middle Class.”

These observers miss the fact that the United States is in a race for global innovation advantage that requires policies that promote a competitive business climate to attract investment instead of repel it. Notwithstanding the recent surge in energy production, American companies still face sharp competition as other countries become more attractive places to do business.

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The patent system is intended “to promote progress of science and the useful arts.” However, in the fast-moving mobile app industry, we are witnessing the opposite: patents are slowing innovation and serving the interests of exploitative patent trolls.

Sometimes referred to as patent assertion entities (PAEs), patent trolls do not develop or sell new technologies. Instead, they build patent portfolios in order to turn around and license them to operating companies. The burden that this places on innovators drags down our economic recovery, slows job creation and effectively taxes our most innovative products and services. Despite important efforts like the America Invents Act (AIA), passed by Congress in 2011, the patent troll problem is getting worse.

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With the economy slowing improving, there are several issues that are hurting small businesses in a negative way and still causing small-business owners many sleepless nights.

Recent sequestration has sent government contractors, a significant sector of our economy, into retraction. Large businesses have garnered uncertainty, thus initiating some spending pullback. This affects small businesses in a myriad of ways; large businesses often keep small businesses afloat by purchasing from them, or partnering with them. When large businesses sneeze, small businesses catch colds. Not to mention that the government does business with thousands of small businesses directly. These business are now either in a "holding pattern" or outright experiencing some downsizing directly due to the sequester. There is no upside for small businesses as a result of the sequester. 

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 There are three distinct phases of leadership when attempting to implement change: vision, structure and implementation. This same process can be applied to congressional leadership regarding U.S. financial reform.

Last week’s Department of Labor announcement of the drop in unemployment showed signs of life in the economy, driven in part by a booming U.S. housing market that has been on a roll for several quarters. 

New homes mean new materials from foundation to roofing, and this is creating a lot of jobs for the manufacturers and distributors of those materials throughout the supply chain. The robust kitchen and bath cabinetry industry alone is an estimated $7 billion industry, according to data from the Kitchen Cabinet Manufacturers Association.

Good news, right? 

Unfortunately, this market growth could be stalled and reversed by a direct attack on U.S. manufacturing created by just six companies in a dubious government play to change the dynamics of an important commodity to this industry. 

The JOBS Act has the potential to help entrepreneurs finance their small and emerging growth businesses through “crowdfunding,” but only if we get the costs right. In the year since the measure was signed into law, online technology platforms have continued to successfully disrupt the costs of fundraising, necessitating a reevaluation by the Securities and Exchange Commission of some components of the law before completing the regulations.  

Main Street merchants, still reeling from the economic devastation of the Great Recession, are one step closer to fair and equal treatment in the collection of sales taxes, thanks to the Senate’s recent passage of the Marketplace Fairness Act. The law, which passed with bipartisan ease, is long overdue and aims to rectify a distorted marketplace that gives online retailers an unfair edge over their brick-and-mortar competitors.

However, it faces a steep uphill battle in the U.S. House of Representatives, and has already been tarnished by grossly inaccurate characterizations by the lobbyists for the online retailers whose ability to avoid paying any sales tax has put an untold number of small businesses, with no Internet presence, out of business. The legislation is neither a new tax nor a tax increase. Rather, at its core, the bill is about making competition between all merchants — whether online or over the counter — fair and equitable.

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Over the last few days, politically driven critics have called on the president to abandon his support for changing the way the government indexes provisions in the budget to inflation by switching to “chained CPI.” Looking beyond politics, we’re here to say that these critics’ arguments are wrong on their merits.

As economists from opposite ends of the political spectrum, we would strongly urge the president and leaders in Congress to continue to support moving to chained CPI, which represents the most accurate available measure of inflation and cost-of-living increases. Switching to this more accurate measure of inflation represents the right technical, fiscal and retirement policy — and policymakers should not delay any further in making this improvement.

After trying private negotiations, bipartisan commissions, informal “gangs” and a supercommittee, the search for a long-term federal fiscal plan has come full circle back to where it started — regular order under the budget process in Congress.

Amid all the controversies gripping Congress, certainly we should all be able to agree that the full faith and credit of the United States — the very trust the public has when it loans money to the government — should not hang in the balance every time there’s a fiscal debate in Washington.