Brookings: Topics - Federalism

Marijuana Legalization: Early Lessons from Colorado and Washington

Beth Stone and Jonathan Rauch — Wed, 22 May 2013 15:16:00 -0400

Last November, in defiance of federal law, the states of Colorado and Washington legalized marijuana. What are the two states learning from implementation efforts so far?

On May 21, Governance Studies at Brookings and the Washington Office on Latin America (WOLA) held a Congressional briefing and released the paper Q&A: Legal Marijuana in Colorado and Washington. The related event and paper are products of a partnership between Brookings and WOLA focused on the marijuana legalization policy debate.

The panelists were Jack Finlaw (chief legal counsel for Colorado Gov. John Hickenlooper), Alison Holcomb (drug policy director, ACLU of Washington State), and Mark A. R. Kleiman (professor of public policy, UCLA). Congressmen Jared Polis (D-Colorado) and Steve Cohen (D-Tennessee) provided additional remarks. John Walsh of WOLA moderated the discussion.

Panelists said the states confront challenges in implementing legal marijuana, especially with respect to the issues of taxation, quality control and underage use:

Holcomb mentioned that Washington, in particular, faces challenges because, unlike Colorado, it did not start with a well developed regulatory structure for medical marijuana, so it can’t “copy and paste” specific policies.
Finlaw emphasized the difficulties faced by marijuana retailers who, due to marijuana’s illegal status under federal laws, often cannot conduct their businesses through banks. They also cannot deduct businesses expenses from their federal taxes. Both problems make it harder for Colorado to regulate and tax the industry.
Holcomb agreed on the tax issue and said that there is more work to be done on amending the federal law, particularly as attorneys are actually advising some marijuana dealers not to pay taxes in order to avoid self-incrimination under federal law.
Kleiman discussed the testing of marijuana products for quality and composition. He said this process is very difficult because no one audits the testing firms, especially troubling because they insist, “We’re honest, but everyone else cheats.”
Kleiman also pointed out that the more careful a state tries to be in laying down and enforcing clear rules for marijuana production and distribution, the more vulnerable it is to federal intervention. He also warned that policy makers in this space should be wary of making promises they can’t keep, particularly when it comes to underage marijuana use.

Join Governance Studies at Brookings for an event next week, Wednesday, May 29, where Jonathan Rauch, E.J. Dionne, William Galston and others will speak on the politics of marijuana legalization and release a new study on marijuana, generational change and the future.

Watch the video of the event below »

Authors

Beth Stone
Jonathan Rauch

Image Source: © Nick Adams / Reuters

Marijuana Legalization: Are There Alternatives to State-Federal Conflict?

Mon, 15 Apr 2013 14:00:00 -0400

Event Information

April 15, 2013
2:00 PM - 3:30 PM EDT

Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Register for the Event
Webcast Archive:
Watch live streaming video from livefrombrookings at livestream.com

Last November, two states, Colorado and Washington, voted to legalize and regulate marijuana--a direct challenge to federal policy under the Controlled Substances Act of 1970. Other states may follow suit. Now the Obama administration, the states and Congress face a series of legal and political choices that will determine whether some degree of orderly cooperation is possible. Can confrontation be avoided, or at least minimized? If not, what are the implications?

On April 15, Governance Studies at Brookings and the Washington Office on Latin America hosted a public forum with two leading scholars and two key politicians to examine the options and weigh the stakes.
Video

Stuart S. Taylor, Jr.: There Needs to Be Cooperation Between State and Federal Government
Mark A.R. Kleiman: We Really Don’t Know How “Legalized” Marijuana Would Fit Into Our Society
Bob Ferguson: The State of Washington Wants to Go Forward with Its Policies Regarding Marijuana Use
Rep. Earl Blumenauer: Our Current Marijuana Policy Has Failed

Transcript

Uncorrected Transcript (.pdf)

Event Materials

20130415_marijuana_federalism_transcript

Marijuana Policy and Presidential Leadership: How to Avoid a Federal-State Train Wreck

Stuart S. Taylor, Jr. — Thu, 11 Apr 2013 11:40:00 -0400

Stuart Taylor, Jr. examines how the federal government and the eighteen states (plus the District of Columbia) that have partially legalized medical or recreational marijuana or both since 1996 can be true to their respective laws, and can agree on how to enforce them wisely while avoiding federal-state clashes that would increase confusion and harm communities and consumers.

This paper seeks to persuade even people who think legalization is a bad idea that the best way to serve the federal interest in protecting public health and safety is not for the federal government to seek an end to state legalization. To the contrary, Taylor asserts, a federal crackdown would backfire by producing an atomized, anarchic, state-legalized but unregulated marijuana market that federal drug enforcers could neither contain nor force the states to contain.

In this broad-ranging primer on the legal challenges surrounding marijuana legalization, Taylor makes the following points:

The best way to serve the federal interest in protecting public health and safety is for the federal government to stand aside when it comes to legalization at the state-level.

The federal government should nonetheless use its considerable leverage to ensure that state regulators protect the federal government’s interests in minimizing exports across state lines, sales outside the state-regulated system, sales of unduly large quantities, sales of adulterated products, sales to minors, organized crime involvement, and other abuses.

Legalizing states, for their part, must provide adequate funding for their regulators as well as clear rules to show that they will be energetic in protecting federal as well as state interests. If that sort of balance is struck, a win-win can be achieved.

The Obama Administration and legalizing states should take advantage of a provision of the federal Controlled Substances Act (CSA) to hammer out clear, contractual cooperation agreements so that state-regulated marijuana businesses will know what they can and cannot safely do.

The time for presidential leadership on marijuana policy is now. The CSA also gives the administration ample leverage to insist that the legalizing states take care to protect the federal interests noted above.

Stuart also surveys (1) what legalizing states can and cannot do without violating federal law; (2) the Obama’s administration’s approach to medical marijuana and; (3) current marijuana law at the federal level and in Colorado and Washington State.

Download and read the full paper »

Download Appendix 1: The Obama Administration’s Approach to Medical Marijuana: A Study in Chaos »

Download Appendix 2: Conflict of Laws: A Quick Orientation to Marijuana Law at the Federal Level and in Colorado and Washington State »
Downloads

Download the full paper
Download Appendix 1
Download Appendix 2

Authors

Stuart S. Taylor, Jr.

Image Source: © Rick Wilking / Reuters

Applauding Connecticut’s Gun Control Legislation

John Hudak — Thu, 04 Apr 2013 16:28:00 -0400

The Connecticut General Assembly and Governor Dannel Malloy have proposed and passed a legislative package addressing gun control, school safety, and mental health care. Are they controversial? Yes. Are they motivated by a horrific act of school violence? Yes. Do they provide a prime opportunity to improve public policy? Absolutely. The latter is what is missing from the national conversation.

Since the massacre in Newtown 111 days ago, gun control advocates have begged for policy solutions. Gun rights advocates have argued that legislative proposals will not work and thus should not be implemented. Connecticut offers something for everyone. First, this legislation is the most comprehensive, aggressive policy response in the United States since the tragedy. This move will please those clamoring for tighter restrictions on guns, for safer schools, and improved mental health care.

Second, gun rights advocates should see this as an opportunity. If gun owners, conservatives, libertarians, NRA officials and others truly believe such legislation will fail, these laws give them a chance to demonstrate it. If their convictions are firm and true and these laws will only lead to more violence, there will be proof. If their fears that such laws will make honest, law-abiding citizens the defenseless victims of criminals and an expansive government, the Nutmeg State will show us. For those in favor of unfettered access to firearms, you should let Connecticut prove your point.

Yet, there is an alternative scenario. One that is more plausible. One that is more likely. The Connecticut legislation may be a success. It may limit—not stop, but limit—crime, keep some weapons out of the hands of dangerous offenders, keep schools and other public spaces safer, provide better preventive mental health care, assist law enforcement in their investigations, and still allow citizens the ability to exercise their 2^nd Amendment rights. This scenario terrifies the most extreme elements of the gun lobby. It threatens not the Constitution, but their own existence.

The Connecticut legislation will offer a test. With scientific research, statistical analysis, and policy experience, we will see whether rhetoric reflects reality. We will see whether policy succeeds or fails. It gives us a chance to ask and answer questions that plague this debate. Yes, researchers have asked these questions already. Some of the best work on the topic comes from Johns Hopkins’ Dr. Daniel Webster and his colleagues at the Center for Gun Policy and Research. Moving forward, this legislation provides an experimental setting, Connecticut provides the most public of profiles, and time will provide the data.

Surely, some will bemoan the move as an infringement on the 2^nd Amendment. And these laws allow courts to rule on the constitutionality of such restrictions—another opportunity for gun rights advocates fearful of constitutional violation. But, in reality, Connecticut’s move today exemplifies one of the most beautiful attributes of the American Constitution: federalism. Federalism lets states within bounds to implement laws separate from the national government. It allows for an evaluation of policies and their effectiveness. States do this with law enforcement, budgeting, taxation, health care, tort reform, marriage, drug policy, and in a whole host of areas. My colleague, Jonathan Rauch, recently explained that these different laws in different places tell us much about what is good policy and what is bad. We can improve our laws, ignore the bad, embrace the good, and let evidence, not talking points, inform future policymaking.

In many ways, Connecticut has done the impossible. It brought together leaders from both parties to come to a compromise based on evidence, testimony, empirics, and, yes, emotions. Democrats and Republicans together passed legislation in an effort to keep safe my friends who are teachers, my family members who are students, my brother-in-law in law enforcement and my fellow Nutmeg State brethren.

Gridlock did not win the day in Connecticut. Solutions did. Now, time will tell us exactly what gets solved.

Authors

John Hudak

Image Source: © Michelle McLoughlin / Reuters

A Program to Boost U.S. Exports and Trade Capacity

Amy Liu — Tue, 12 Feb 2013 00:00:00 -0500

Despite the size and growth of consumer demand outside of the United States, too many firms and too many parts of the U.S. remain focused on domestic markets and are missing out on opportunities to innovate, expand and reach a wider consumer base around the world, says Amy Liu, senior fellow and co-director of the Metropolitan Policy Program. Liu—in a new report, “Strengthen Federalism: Establish a Regional Export Accelerator Challenge (REACH) Grant Program to Boost U.S. Exports and Trade Capacity,” co-authored with Brad McDearman and Marek Gootman—writes that some markets like Syracuse, New York are successfully innovating to meet global market demands. With a little help from the federal government, she argues, metros and regions all across the country can produce similar results.
Video

A Program to Boost U.S. Exports and Trade Capacity

Authors

Amy Liu

Cut to Invest: Create a Nationwide Network of Advanced Industries Innovation Hubs

Devashree Saha and Mark Muro — Mon, 14 Jan 2013 00:00:00 -0500

Congress should authorize the build-out of a national network of advanced industries (AI) innovation hubs, expanding on the modest beginnings now being made through the Department of Energy’s Energy Innovation Hubs program and the Department of Commerce’s National Network for Manufacturing Innovation (NNMI) initiative. Functioning as regional centers of excellence, the new hubs would focus on cross-cutting innovation and technology deployment challenges of critical interest to advanced industries by drawing universities, community colleges, state and local governments, and other actors into strong industry-led partnerships. The creation and appropriate funding of at least 25 such hubs would greatly accelerate the pace of innovation and new-product development in the nation’s advanced industries and so strengthen their long-term competitiveness.

Background
In the aftermath of the Great Recession, the United States needs to transition from an economic model focused on finance and consumption toward a “next economy” model oriented toward innovation, engineering, and production. Such a model promises to increase the nation’s productivity, drive export growth, and provide good-paying jobs.

Advanced industries—characterized by dynamic R&D and engineering-intensive industrial concerns—must be a focal point of this new direction. Delivering products and services in industries ranging from aerospace and space to auto assembly, advanced energy systems, IT, and medical devices, AIs comprise over 10 percent of the overall economy, generate 45 percent of U.S. goods exports, and support over 4 million high-skilled, and several million more ancillary, jobs.

All too often with advanced industries, companies fail to make adequate investments in innovation because the benefits are undetermined, the risks are too high, and the project timelines too extended. A national network of innovation hubs would address these challenges by greatly accelerating the pace of innovation and new-product development.

Nor is that all. A prime site of R&D activity in the U.S. economy, AIs punch well above their weight in building and expanding national and regional economic competitiveness. Innovations in AIs—such as photonics technology with applications in optical communications, medical diagnostics, semiconductors, optical imaging, and the now ubiquitous GPS technology—tend to ripple across the economy and drive broader productivity. As a result, AIs contribute inordinately to the competitiveness of the nation’s critical traded sectors, which will be crucial in helping the United States to balance its foreign trade.

Simply put, the U.S. economy will not regain its full vitality and preeminence without a strong push to extend the leadership of AIs.

Proposal
Given these challenges, the Metropolitan Policy Program at Brookings proposes that Congress authorize the build-out of a national network of advanced industries innovation hubs by funding at least five more Energy Innovation Hubs and supporting the creation—with stable funding—of at least 20 institutes for advanced manufacturing innovation as proposed in the NNMI initiative. Such a build-out could at once scale-up two existing programs while packaging them appropriately as a single transformational initiative for renewing the U.S. economy.

Concentrating innovation resources into a network of purpose-designed, collaboration-based regional applied research centers focused on industry-relevant product and process issues holds out great promise for accelerating technology advances and subsequent market-share growth in crucial U.S. industries.

Image

National Employment in Recession and Recovery: Manufacturing and Other Sectors

Such centers will tackle the toughest problems with the biggest commercial pay-offs in technology and process development, technology deployment, and platform establishment. Because they will be regional and intensely collaborative, with strong private-sector participation, the hubs will produce substantial economic spillovers into the regional advanced industry clusters amid which they will be sited.

Form will follow function, moreover. To ensure the hubs foment intense collaborative activity, federal cost-shared funding will be allocated by means of competitive solicitations that stipulate extensive industry, state, and academic participation. To ensure the collaborations remain commercially relevant, federal support will be contingent on co-investment by businesses and other non-federal entities. Progress toward sustainable operations will be stipulated from the start and hubs must become financially sustainable within seven years.

Finally, in order to ensure a robust attack on important problems and real results, each hub will require annual funding of $25 million for a period of at least five years. Possible themes for the new hubs could include carbon capture and storage, solar photovoltaics, and smart grid on the energy side and advanced materials, nanomanufacturing, and industrial robotics on the advanced manufacturing and engineering side. Funding would be contingent after five years on demonstrated progress and results and each hub would move toward self-sufficiency. No criteria for success would matter more than industry willingness to partner and invest.

Along these lines, the creation of 25 advanced industries innovation hubs combined with stable funding for all would:

Send a strong signal that the United States remains fiercely committed to investing in game changing breakthroughs and cultivating a vibrant innovation ecosystem

Accelerate the pace of applied research in advanced industries

Drive down the cost of advanced industries technologies and accelerate their deployment

Contribute to workforce development not just at the Ph.D. level but at all levels

Spawn new, good-paying jobs and industries and aid the nation’s recovery through its huge employment multiplier effects

Boost exports and enable the United States to compete effectively in global markets, which in turn will ensure a vibrant national economy

Download the paper »
Downloads

Download the paper

Authors

Devashree Saha
Mark Muro

Image Source: © Michelle McLoughlin / Reuters

Cut to Invest: Support the Designation of 20 "U.S. Manufacturing Universities"

Robert D. Atkinson and Stephen Ezell — Mon, 14 Jan 2013 00:00:00 -0500

Congress should establish an initiative to designate 20 institutions of higher education as “U.S. Manufacturing Universities” as part of a needed push to strengthen the position of the United States in the increasingly innovation-driven global economy. In 1862, Congress passed the Morrill Act, which established land-grant colleges to promote learning in “agriculture and the mechanic arts.” These colleges played a key role in enabling the United States to later take the lead in the mechanization of agriculture and the industrialization of the economy. Today, the challenge is even greater as America competes against a wide array of nations seeking to win the race for global innovation advantage, especially in advanced manufacturing. A new cadre of federally-designated “Manufacturing Universities” that revamp their engineering programs with particular emphasis on work that is relevant to manufacturing firms while providing engineering students with real-world work experience should be part of the solution.

Background
In the aftermath of the Great Recession, states and metropolitan areas throughout the United States have come to recognize the importance of cultivating regional economies that are strong in production, innovation, and global trade. In contrast to the debt-driven, consumption-oriented economy of years past, this new economic growth model places great emphasis on innovation activity and advanced manufacturing capacity, which together improve the nation’s competitiveness in the global marketplace.

As the largest internationally traded sector, manufacturing is critical to the health of the U.S. economy. It is simply impossible to have a vibrant national economy without a globally competitive traded sector. And for U.S. metro areas, where over 80 percent of manufacturing jobs and 95 percent of high-tech manufacturing jobs are located, such an advanced manufacturing revival is particularly critical.

Image

National Employment in Recession and Recovery: Manufacturing and Other Sectors

As a relatively high-cost nation, the only way the United States can regain manufacturing competitiveness is through innovation and productivity, both of which are driven by engineering capabilities that are cultivated, in part, by the nation’s institutions of higher education. University-based engineering programs can play a critical role in supporting advanced research, particularly in areas of relevance for manufacturers, and can help train the highly skilled workforce that advanced manufacturers need.

Proposal
Given these challenges, the Information Technology and Innovation Foundation and the Metropolitan Policy Program at Brookings propose that the federal government support the designation of a core of approximately 20 leading “Manufacturing Universities.” As part of this designation, academic institutions would receive an annual award from the National Science Foundation, ideally at least $25 million per year, plus prioritization of their other applications in the awarding of National Science Foundation (NSF) grants.

Designated universities would have several responsibilities. First, they would be required to revamp their engineering programs much more around manufacturing engineering, with particular emphasis on work that is relevant to industry. This would include more joint industry-university research projects; more training of students that incorporates manufacturing experiences through cooperative education or other programs; and a Ph.D. program focused on turning out more engineering Ph.D.s who would work in industry. These universities would view doctoral training as akin to high-level apprenticeships (as is often the case in Germany) and would not allow the conferral of a Ph.D. unless one has done some work in industry. Likewise, criteria for faculty tenure would consider professors’ work with and/or in industry equally as much as their number of scholarly journal publications. In addition, their business schools would focus on manufacturing issues, including management of production, and integrate closely with the engineering program. One can imagine a number of leading engineering universities—Caltech, Carnegie Mellon, Georgia Tech, Lehigh, the Massachusetts Institute of Technology (MIT), Michigan, Purdue, Stanford, and others—readily transforming themselves to embrace this designation.

One possible model (albeit on a small scale) is the Olin College of Engineering in Massachusetts, which reimagined its engineering education and curriculum to prepare students “to become exemplary engineering innovators who recognize needs, design solutions, and engage in creative enterprises for the good of the world.” Olin’s results have been impressive. Its new method of teaching engineering has been widely praised among engineering firms, and, on a per-student-graduated basis, Olin graduates start more new businesses than MIT graduates. Olin is a one good model for how the United States can transform its universities into entrepreneurial factories while encouraging the development of completely new schools based on the needs of the current workforce.

These Manufacturing Universities would complement, not duplicate, any national manufacturing institutes established under proposed legislation to create a National Network of Manufacturing Innovation (NNMI). The NNMI institutes would be private-sector led and, while affiliated with universities, would not attempt to change how university engineering programs function. In contrast, the Manufacturing Universities proposal would work to ensure that universities themselves function in ways that are more supportive of the U.S. manufacturing economy.

Download the paper »
Downloads

Download the paper

Authors

Robert D. Atkinson
Stephen Ezell

Image Source: © Larry Downing / Reuters

Cut to Invest: Create a "Race to the Shop" Competition for Advanced Manufacturing

Bruce Katz and Peter Hamp — Mon, 14 Jan 2013 00:00:00 -0500

A “Race to the Shop” competition for advanced manufacturing should be initiated in order to expedite the transition toward a more innovative, productive, inclusive, and globally competitive American economy. The competition would challenge U.S. states and metropolitan areas to align their policies and investments to meet the distinct labor demands of their primary advanced manufacturing sectors and clusters. Winning applicants would not only receive resources for planning and implementation, but also increased flexibility in the use of existing federal workforce development and skills training funds.

Race to the Shop responds to one of the major barriers threatening the resurgence of U.S. manufacturing: the lack of educated workers with the skills necessary for today's advanced industry.

Background
In the years preceding the Great Recession, the United States pursued a post-industrial economic growth model, prioritizing consumption and real estate speculation over investments in innovation and production—the true engines of economic competitiveness and wealth generation in America. Among the few positive developments drawn from the Great Recession is that the U.S. economy is now undergoing a slow, painful transition toward a “next economy,” one where the U.S. exports more and wastes less, innovates in what matters, produces more of what it invents, and ensures that the economy actually works for working families.

Image

National Employment in Recession and Recovery: Manufacturing and Other Sectors

Reviving America’s advanced manufacturing sector is obviously a critical component of building a more productive, sustainable, and inclusive economy. U.S. manufacturing is an important source of quality well-paying jobs that offer a significant wage premium—nearly 20 percent higher average weekly earnings than non-manufacturing jobs—and are more likely to provide health care and retirement benefits. The sector also accounts for the lion’s share of the country’s R&D and innovation activity. While manufacturing provides only 9 percent of all U.S. jobs and 11 percent of total GDP, it employs 35 percent of all engineers, represents 68 percent of the spending on R&D that is performed by U.S. companies, and produces 90 percent of all patents developed in the United States. Further, manufactured goods comprise about 65 percent of all U.S. trade (both imports and exports), making it a crucial component of any strategy to reduce America’s growing trade deficit. In short, a strong manufacturing sector is necessary for America to compete in the global economy.

Proposal
The Metropolitan Policy Program at Brookings proposes an annual $150 million Race to the Shop competition to reform and modernize federal investments in workforce education and skills training for advanced manufacturing in the United States.

The Obama administration’s Race to the Top competition in the educational arena offers a model for Race to the Shop. Race to the Top is a clear example of how the carrot of a relatively small amount of federal spending can reinvent how states (and metros) carry out a critical role of government, as states undertake systemic reforms and develop new, innovative approaches to education in hopes of qualifying for federal education grants.

A Race to the Shop competition would challenge states and metropolitan areas to develop long-term plans, investment strategies, and regulatory and administrative reforms in support of their top advanced manufacturing sectors, particularly in the area of skills training and workforce development. The competition would require a cross-section of leaders from the public, university, non-profit, and private manufacturing sector in states and metro areas to organize a task force (perhaps led at the state level by the governor’s office and at the metro level by a consortium of elected officials or a leading non-profit or manufacturing intermediary) that would be charged with designing and submitting a proposal to address the manufacturing workforce and skills challenges within their state or region. The proposals would:

Articulate a bold economic vision for the state or metro that builds on their special assets and strengths in advanced manufacturing

Identify and prioritize key weaknesses or barriers (e.g., lack of strong vocational education or skills training system, absence of customized training for existing industrial firms and sectors, etc.) to successfully implementing the state or metro plan

Design strategies that carry out the plan through tangible projects and investments, with deep and sustainable involvement of manufacturing companies

Leverage other federal funds in support of these strategies

Reform state and/or local policies and governance in support of these strategies

Hold themselves accountable on a regular basis through a set of transparent performance measures

Download the paper (PDF) »
Downloads

Download the paper

Authors

Bruce Katz
Peter Hamp

Image Source: © Jeff Tuttle / Reuters

Creating the Manufacturing University

Robert D. Atkinson — Mon, 14 Jan 2013 00:00:00 -0500

Editor's Note: Robert Atkinson further discusses key points in his newly released paper, Cut to Invest: Support the Designation of 20 "U.S. Manufacturing Universities," proposing federal support of these institutions to advance manufacturing competitiveness through advanced research, innovation, and productivity.

American manufacturing is in crisis. Over the last decade the United States lost one-third of its manufacturing jobs, more than any other industrialized nation, and our total industrial production was actually less in 2010 than at the start of the 2000s. And for those who think the movement of manufacturing to lower cost countries is simply the natural order of things, you only need to look at the impact of manufacturing loss on innovation to see the true danger in this decline.

As industrial production has moved overseas, the engineering, product development and technology innovation that are key components of manufacturing has gone with it. And it is getting worse. Countries like China and India are pumping millions into their R&D and university infrastructure, while adopting mercantilist trade policies that are only enhancing our loss of intellectual property and technical know-how. Given this environment, the United States is in serious jeopardy of permanently losing the race for innovation advantage, further hampering our overall economy and the standard of living of our citizens.

In an effort to address this potential catastrophe and restore American leadership in manufacturing, the Information Technology and Innovation Foundation (ITIF) and the Brookings Institution Metropolitan Policy Program are proposing that the federal government support the designation of a core of approximately 20 leading “manufacturing universities.” This would include significant federal investment of $25 million per university and the creation of a network of industry-university partnerships that could provide the technical training and applied research necessary to transform American industries and assist us in better competing globally.

Designated universities would revamp their engineering programs with a focus on manufacturing engineering and curricula designed specifically for targeted industries. This would include: joint industry-university research projects; training of students that incorporates manufacturing experiences through co-ops or internships; and a focus on turning out more Ph.D. engineering grads who would work in industry. Ph.D.s would be transformed into high-level apprenticeships (as they often are in Germany), where industrial experience is a requirement for graduation. Likewise, criteria for faculty tenure would be reformed to include professors’ work with industry and the connection of research with industrial applications, as much as their number of publications. In addition, designated universities would also introduce new programs in their business schools that focus on manufacturing issues, including management of production, and integrate more closely with their engineering schools.

One, though not the only model, is the Olin College of Engineering in Massachusetts, which re-imagined engineering education and curriculum to prepare students “to become exemplary engineering innovators who recognize needs, design solutions, and engage in creative enterprises for the good of the world.”
In 1862, Congress passed the Morrill Act that established land-grant colleges whose mission was to promote learning in agriculture and mechanic arts. These institutions later became leaders in mechanization of agriculture, the American Industrial Revolution and the tremendous expansion of our economy in the 20^th century. Today, the challenges America faces are even more pervasive, as a wide array of nations are already ahead in the race for global innovation advantage, particularly in manufacturing. A new cadre of “manufacturing universities” can be a key part of the solution.

Authors

Robert D. Atkinson

Image Source: © Ruben Sprich / Reuters

Needed: Efforts to Manufacture a Recovery

Mark Muro and Jessica Lee — Mon, 14 Jan 2013 00:00:00 -0500

Though Washington can’t seem to get enough of it, the debt and deficits fixation continues to feel pretty theatrical. Far scarier, by contrast, is the state of the economy. Notwithstanding some positive signs in the housing and construction sectors, the drifting economy remains troubled.

Real domestic product has been growing at tepid rates below 2 percent per year. Pay remains stagnant for most workers. And for that matter the number of poor and near-poor people in America has skyrocketed from 81 million in 2007 to 107 million in 2011—nearly one-third of the nation’s population.

In short, it’s time for Washington to return its attention to the economic emergency and commit itself to working on a bipartisan basis to jumpstart growth.

Where should it start? One obvious place for a new push to renew the economy is the manufacturing sector—that most critical site of high-tech innovation, exports, and well-paying jobs with strong multiplier effects.

Which is why today’s latest three installments of our ongoing Remaking Federalism | Rebuilding the Economy Series call for bold actions to bolster the competitiveness of the U.S. manufacturing and advanced industries sector.

What do we propose? The three ideas from Devashree Saha and one of the co-authors of this blog (Mark Muro), Bruce Katz and Peter Hamp, and Rob Atkinson and Stephen Ezell add up to cohesive trio of proposals for improving innovation, workforce, and higher-education connections in the sector.

On the innovation front, we argue that Congress should authorize the build-out of a national network of advanced industries (AI) innovation hubs, expanding on the modest beginnings now being made through the Department of Energy’s Energy Innovation Hubs program and the Department of Commerce’s National Network for Manufacturing Innovation (NNMI) initiative. Functioning as regional centers of excellence, the new hubs would focus on cross-cutting innovation, process, and technology deployment challenges of critical interest to advanced industries by drawing universities, community colleges, state and local governments, and other actors into strong, industry-led partnerships. The creation and appropriate funding of at least 25 such hubs—funded at $25 million a year each, with a significant local, state, and private sector matching support required—would, we believe, greatly accelerate the pace of innovation and new-product development in the nation’s advanced industries and so strengthen their long-term competitiveness.

Turning to labor force development, Katz and Hamp urge the federal government to initiate a “Race to the Shop” competition (loosely modeled on the successful Race to the Top education challenge) to push states and metropolitan areas to develop long-term strategies for better addressing the workforce and training needs of their leading sectors. Under this new program, the five states and five metropolitan areas that present the strongest plans would receive a federal implementation grant as well as increased flexibility to realign or better invest existing federal resources, say from the Workforce Investment Act or Perkins Career and Technical Education funding. Ultimately winning states and regions might receive significant resources and flexibility to create a network of manufacturing high schools, for instance, or to align community college curricula to fit the varying skill demands of major local industries.

Finally, to bolster both the innovative capacity and human capital of the manufacturing commons, Atkinson and Ezell call on Congress to establish an initiative to designate 20 institutions of higher education in America as “U.S. Manufacturing Universities,” with a special charge to strengthen the position of U.S. manufacturing in the competitive global economy. Along these lines, Atkinson and Ezell would have government provide the new cadre of federally-designated institutions $25 million a year each to revamp their engineering programs to better serve the needs of U.S. manufacturers. Through such changes U.S. regions and industries would gain more joint industry-university exchanges; more undergraduate and graduate training that incorporates work-based experience in manufacturing; and more universities focused on turning out engineering PhDs who go on to work in industry.

So there we are: Three new ideas for bolstering American manufacturing that would strengthen economic growth in U.S. regions and contribute to American renewal all at once.

In sum, it isn’t hard at all to think of useful policy moves that would help renew the American economy. What does seem hard, though, is getting Washington to focus on what matters, rather than what captivates. And unfortunately, that seems nearly impossible.

Authors

Mark Muro
Jessica Lee

Publication: The Avenue, The New Republic
Image Source: © Brian Snyder / Reuters

Washington vs. Washington (and Colorado): Who Should Decide About Marijuana?

Tue, 08 Jan 2013 14:00:00 -0500

Event Information

January 8, 2013
2:00 PM - 3:30 PM EST
Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Register for the Event
This program was broadcast live on C-SPAN2 and streamed at c-span.org.

Two states' recent legalization of marijuana, in defiance of federal drug laws, is creating a new flashpoint in federal-state relations. When the will of a state's voters comes into direct conflict with the will of Congress, is it wiser for the federal government to seek accommodation or to come down hard in defense of its prerogatives? Who gets to decide, and why?

On January 8, Governance Studies at Brookings and the Washington Office on Latin America hosted a forum on what is at stake in this potential confrontation over legalized marijuana and how best to resolve it. A panel of experts discussed the importance of how the marijuana dispute is handled and how this may influence the federal-state balance on a host of other issues.

Related Event: Legal Marijuana? New Domestic and International Initiatives Challenge the Status Quo
Video

Jonathan Rauch: The Federal Government Needs Time to Figure Out the Marijuana Legalization Issue
Michael Greve: No State Has to Criminalize Marijuana
Angela Hawken: It's Not a Question of If States Will Legalize Marijuana, But When
Troy Eid: There Will Be Winners and Losers in the Marijuana Legalization Debate
Full Event - Washington vs. Washington (and Colorado): Who Should Decide About Marijuana?

Audio

Washington vs. Washington (and Colorado): Who Should Decide About Marijuana?

Transcript

Transcript (.pdf)

Event Materials

20130108_marijuana_policy

Out of the Hole and Over the Cliff? State and Local Budgets in 2012 and Beyond

Tracy Gordon — Fri, 21 Dec 2012 11:00:00 -0500

2012 was the year states and localities finally emerged from massive revenue hole created by the Great Recession… Or was it?

The latest data suggest that state tax collections are back at pre-recession levels. However, this is only in nominal terms. Adjusted for inflation, taxes are still below their 2008 peak and growth has been sporadic and uneven across states. It’s also unclear how much recent gains reflect investors cashing out early to avoid higher capital gains taxes next year if the country goes over the so-called fiscal cliff.

Consistent with stronger revenues, state general fund spending is expected to grow 2.2 percent this year. Although below historic averages, this represents a marked improvement over the Great Recession, when spending declined in real terms for two years in a row. Today, state lawmakers use words like “stable” and “improving” to describe their budgets – versus “grim,” “bleak,” and “dire,” which prevailed at the low point of 2009.

Still, all is not rosy. At the local level, cities, counties, and school districts are contending with lower property taxes and cuts to state aid. Job cuts have largely abated in state and local government, but to the extent they continue it is in local education. And, although only a handful of municipalities (including the two relatively large cities of Stockton and San Bernardino, CA) declared bankruptcy in 2012, muni bond analysts worry about shifting local norms and state limits on local taxation leading to more defaults and bankruptcies going forward.

The Great Recession also exposed long standing weaknesses in state and local public finances, including underfunded employee pensions and the proliferation of non-traditional debt. A State Budget Task Force convened by former Federal Reserve Chairman Paul Volcker and ex-New York Lieutenant Governor Richard Ravitch issued several high quality reports in 2012 on these risks. However, much more work remains to be done to make state and local finances truly accessible and transparent.

Looking ahead, perhaps the biggest vulnerability for states and localities is their exposure to federal fiscal retrenchment. States depend on federal grants for more than a third of their general revenues. Localities derive a comparable share from states, including pass throughs of federal funds.

Although Medicaid and other big ticket items are exempt from automatic federal spending cuts scheduled for 2013, states stand to lose 6.6 percent of their revenues next year if Congress does nothing. These cuts may be small overall, but they will be painful to some jurisdictions. This is especially true because affected programs (like Community Development Block Grants, and Title I education grants) provide relatively discretionary dollars with few federal strings attached.

Of even greater concern to state and local leaders is what going over the cliff would mean for their underlying economies. Making matters worse, as in the 2011 debt limit debate, a deal to avert the cliff could be worse than no deal – because Medicaid and tax provisions benefitting states and localities could be part of any federal deficit reduction “grand bargain.”

But unlike in 2011 and other federal budget negotiations, governors and mayors have had seats at the table in fiscal cliff discussions. This may just be what Washington loves to call “optics.” Still, in 2013 and beyond, governors and mayors would do well to seize the moment to redefine the federal-state-local relationship on their own terms.

A new, more robust federalism would include measuring and publicizing successes managing challenges such as aging populations and rising health care costs. Federal, state, and local governments all share the same fiscal problems. They must all be involved in crafting solutions.

Authors

Tracy Gordon

Image Source: © Larry Downing / Reuters

Amid Cuts, Invest in Innovation

Mark Muro and Jessica Lee — Fri, 21 Dec 2012 00:00:00 -0500

Contrary to the claims of some politicians and pundits, we can’t cut our way to a strong economy. We need to get our fiscal house in order, to be sure. But we also need to invest in those key areas that can help boost the nation’s growth, which is still the best way to erase the debt.

Which is why, in the midst of its fiscal struggles, Congress should move forward on the permanent authorization of a simpler and more generous research and experimentation (R&E) tax credit.

Since 1981, the R&E tax credit has helped guard against one of the foremost enemies of innovation: underinvestment. The first of its kind, this credit encouraged firms to commit funds to research and development activities and sent a clear signal to the world that the U.S. placed a high priority on the continued strength of its innovation-driven economy.

Left to their own devices, private firms tend to underinvest in R&D because they are unable to capture all of the benefits of their investments. The spillover effects of research and development—those positive externalities such as knowledge transfer and information sharing that encourage further innovation and help strengthen regional industry clusters—mean that an individual firm’s R&D investments will likely benefit not just the company itself but the industry as a whole.

The R&E tax credit helps counteract this tendency to underinvest. By effectively reducing the cost of private-sector R&D, the credit encourages companies to spend more on research activities than they otherwise would.

Over the past three decades, countries throughout the world have adopted their own policies to stimulate private R&D investment, many of which now outpace the R&E tax credit. Indeed, the Information Technology and Innovation Foundation (ITIF) found that the U.S. now ranks 27th in terms of R&D tax incentive generosity. Even more troubling, the U.S. now ranks fourth out of 40 countries in innovation-based competitiveness and second to last with regard to progress over the last decade.

Expanding the credit from 14 percent to 20 percent would improve the credit’s competitiveness in the global marketplace while also producing an estimated $66 billion increase in annual GDP and at least 162,000 new jobs—both of which would go a long way towards setting the U.S. economy back on track.

In addition, a permanently authorized R&E tax credit would bring an end to the repeated expiration / reauthorization cycles that now foster uncertainty about the future tax climate and, in turn, discourage long-term R&D investments. By introducing a degree of predictability, a permanent credit would encourage companies to engage in long-term planning and undertake R&D projects with longer timelines.

And simplifying the calculation of the credit would lower administrative costs for firms seeking the credit and for the IRS in determining qualification and compliance.

From increased innovation and first-mover advantages to job growth and higher productivity, the potential benefits of the R&E tax credit underscore why it is particularly deserving of federal investment. And with support spanning the political spectrum, permanent authorization of the R&E tax credit offers a rare opportunity for bipartisan action. So as Congress and the president sort out a solution to the austerity crisis, they should also seize this moment to strengthen the economy by simplifying, expanding, and making permanent the R&E tax credit.

Authors

Mark Muro
Jessica Lee

Publication: The Avenue, The New Republic
Image Source: © Mary Calvert / Reuters

Provide a Federal Life Line for America's Destabilized Neighborhoods

Alan Mallach and Jennifer S. Vey — Tue, 11 Dec 2012 15:30:00 -0500

In the years since America’s housing market collapsed under the weight of subprime loans, foreclosures, and the housing bubble, the nation has seen a series of efforts—mostly too little, too late—to help impacted homeowners, creating a new alphabet soup of HERA, HARP, HAMP and HHF. Meanwhile, millions of words have been written, mostly focused on assigning blame to Wall Street greed, homebuyer negligence, and/or regulatory failure.

This wave of collective fingerpointing, however justified, has largely distracted policy makers, and much of the public at large, from realizing how the vitality of many of our cities and neighborhoods has been eaten away by the housing sector’s calamitous fall. After over five years of elevated mortgage foreclosures and collapsing house prices, one city after another is battling a wave of neighborhood destabilization that has turned thousands of once-valued homes and apartments into empty shells. As this has happened, neighborhood housing values have plummeted, deterring investment by developers and prospective homebuyers, discouraging the remaining homeowners from making repairs and improvements, and causing residents to despair for their community’s future. While the housing market in many parts of the country has begun to stabilize, and even improve, far too many areas are still mired in long-term instability and decline.

The scale of this problem is far too great, and the market failures too deeply rooted, for these distressed neighborhoods to recover on their own. Nor do individual cities and states have the resources needed to help rebuild their markets. As Brookings argues in a recent policy brief, these neighborhoods need a lifeline that only the federal government can provide.

More specifically, the brief calls on Congress to establish a new multifaceted Strategic Neighborhood Investment Program that includes both a Qualified Neighborhood Investment Bond program, and a multi-part Neighborhood Investment Tax Credit program. In contrast to many past programs, including the short-lived Neighborhood Stabilization Program, the new Strategic Neighborhood Investment Program is designed explicitly and directly to leverage private investment in rebuilding neighborhood markets.

The Qualified Neighborhood Investment Bond program would authorize $8 billion in qualified state and local bonding authority that could be used for demolition, property acquisition, and rehabilitation, as well as related uses such as improvements to vacant lots. Simultaneously, the Neighborhood Investment Tax Credit program would leverage targeted investment in designated destabilized but still vital neighborhoods. The tax credit program would have three components:

neighborhood investment pools funded by passive investors who would receive a tax credit for investing in the neighborhood

a tax credit for households that buy and restore vacant homes for owner-occupancy, or that buy a home from a developer who has restored it

a special FHA mortgage program for homebuyers

Such a program would be modest in cost, with the potential to leverage four to six dollars in private sector investment for every dollar in federal tax credits. While we project it will fuel the rehabilitation of over 180,000 vacant homes and remove some 400,000 blighting abandoned structures, it will do far more than that by stabilizing the neighborhoods and rebuilding the markets of communities where millions of American families live.

Authors

Alan Mallach
Jennifer S. Vey

Image Source: © Kevin Lamarque / Reuters

Cut to Invest: Create New Bond and Tax Credit Programs to Restore Market Vitality to America's Distressed Cities and Neighborhoods

Alan Mallach — Thu, 06 Dec 2012 00:00:00 -0500

To promote market recovery and revitalization of cities and neighborhoods destabilized by recession, job loss, and foreclosures, Congress should authorize the creation of a new, multifaceted Strategic Neighborhood Investment Program that includes bonding authority, tax credits, and a special mortgage program.

These programs, each of which tackles a different aspect of the problem, would together make possible the reuse or demolition of thousands of now-vacant or substandard properties, stabilize distressed neighborhoods, create new homeownership opportunities for young families, foster sustained increases in market value and private investment, and ultimately improve the fiscal and economic health of the nation’s metropolitan areas.

The proposed programs include:

Qualified Neighborhood Investment Bond program. This proposed bond program represents an adaptation of the Restore our Neighborhoods Act of 2012 (HR 4210), introduced in March 2012 by a bipartisan group of representatives. That bill would have authorized $4 billion in Qualified Urban Demolition Bonds to fund the demolition of vacant and abandoned housing in hard-hit communities. The QNIB program uses the same fiscal structure, but provides greater funding flexibility. It would authorize $8 billion dollars in state and local bonding authority, the purpose of which would be to provide a flexible resource for addressing property issues that are hindering the revitalization of distressed cities and towns.

Neighborhood Investment Tax Credit program (NITC). The Neighborhood Investment Tax Credit program (NITC) is designed to be a realistic, cost-effective, market-based vehicle for generating targeted investment in still-vital but severely destabilized neighborhoods. The program would have three elements: neighborhood investment pools; a tax credit for households that buy and restore houses for owner-occupancy; and a special FHA mortgage program for homebuyers. These three elements complement one another, with each playing a clear and critical role in the process of neighborhood revitalization.

Downloads

Download the paper

Authors

Alan Mallach

Image Source: © Rick Wilking / Reuters

Cut to Invest: Reform the Mortgage Interest Deduction to Invest in Innovation and Advanced Industries

Bruce Katz — Thu, 06 Dec 2012 00:00:00 -0500

Reforming the mortgage interest deduction (MID) offers an opportunity for the federal government to realize hundreds of billions of dollars in savings over a 10-year period to contribute toward deficit reduction as well as to invest a portion of the savings in policies and programs that are likely to spur more productive and innovative economic growth.

The recommendation to cap the income tax rate at which taxpayers can take itemized deductions, including the mortgage interest deduction, at 28 percent has been proposed by the Obama administration in each of its past four fiscal year budgets. This reform would only affect married taxpayers filing jointly with adjusted gross income (AGI) over $250,000 and single taxpayers with an AGI over $200,000.

A second common proposal has been to convert the mortgage interest deduction from a tax deduction to either a refundable or non-refundable tax credit, and to lower the cap on the overall mortgage value eligible for the subsidy. This course of action was proposed in various forms in reports by both of the major bipartisan deficit reduction committees in 2010:

The Bipartisan Policy Center’s Debt Reduction Task Force Plan (Domenici-Rivlin) proposed shifting the MID to a 15 percent refundable tax credit to all taxpayers, lowering the mortgage limit from $1.1 million to $500,000, and eliminating the provision that allows taxpayers to deduct mortgage interest for second homes and home equity loans

The National Commission on Fiscal Responsibility and Reform’s plan (Simpson-Bowles) largely mirrored the Domenici-Rivlin plan for reforming the MID, but instead called for a 12 percent non-refundable tax credit

In recent months, a third common reform proposal has been to implement an overall cap of between $25,000 and $50,000 on itemized deductions, which would include the MID, the deduction for charitable contributions, and other subsidies in the tax code.
Adopting any of these proposals for reforming the home mortgage interest deduction would:
Raise hundreds of billions of dollars in income tax revenue over ten years for the federal government to contribute to deficit reduction and investment in productive and innovative growth

Create a fairer balance in benefits among lower, middle, and upper income homeowners
Downloads

Download the paper

Authors

Bruce Katz

Cut to Invest: Make the Research and Experimentation Tax Credit Permanent

Jessica Lee and Mark Muro — Thu, 06 Dec 2012 00:00:00 -0500

A simplified and more robust Research and Experimentation (R&E) Tax Credit should be permanently authorized in order to encourage research and development investment by both domestic and foreign-owned firms located in the United States. A permanent R&E Tax Credit will bolster innovation-related investment and activity in U.S. metropolitan areas, foster prosperity, and improve the nation’s standing in the global economy.

Along these lines, extending and expanding the credit would:

Send a strong signal to firms throughout the world that the United States remains fiercely committed to cultivating a vibrant innovation ecosystem

Encourage companies to engage in long-term planning and undertake R&D projects with longer timelines

Reduce the administrative costs incurred by firms seeking the credit and by the IRS in determining qualification and compliance

Bolster the power and impact of regional innovation systems, which drive the nation’s metropolitan economies

Contribute to the renewal of the U.S. manufacturing sector, which represents the majority of R&D spending in the United States

As these positive effects suggest, a permanent expansion of the R&E Tax Credit would work to enhance the nation’s standing in the global economy both now and in the decades ahead.
Downloads

Download the paper

Authors

Jessica Lee
Mark Muro

Image Source: © Joshua Roberts / Reuters

Cut the Mortgage Tax Break, Invest in R&D

Mark Muro and Jessica Lee — Thu, 06 Dec 2012 00:00:00 -0500

As tax hikes and spending cuts loom, we at the Metro Program will continue to harp on the need also to renew the economy. Put simply, U.S. economic strength and fiscal health requires that Congress cut and invest to catalyze economic renewal even as it moves the nation toward fiscal stability.

Along those lines, two briefs the program is releasing today as part of our Remaking Federalism / Renewing the Economy series call for budget negotiators to curtail the massive mortgage interest deduction (MID) and use some of the savings to expand and make permanent the critical research and experimentation (R&E) tax credit.

These proposals epitomize what needs to happen this winter as Congress moves to fix the debt. To begin with, the time has come to reform the mortgage interest tax break, which continues to grow exponentially, subsidizes excessive housing consumption, and diverts substantial resources from more productive pursuits. Writes our colleague Bruce Katz: “Reforming the MID offers an opportunity for the federal government to realize hundreds of billions of dollars in savings over a 10-year period to contribute towards deficit reduction as well as to invest in tax incentives that are likely to spur more productive and innovative economic growth.”

So let’s do it. Let’s limit the deduction now to generate from $350 billion to $500 billion or more for deficit reduction and investments over the next 10 years.

At the same time, there are few more overdue, catalytic, and meritorious uses of a sliver of MID-reform revenues than a decisive move to renew the force and clout of the federal R&E tax credit, the stimulative effective of which has waned over time.

The R&E tax credit is, after all, an American invention that in 1981 announced to the world that the United States placed a high priority on cultivating an innovation-driven economy and knew how to do it.

Since its inception, the credit has been widely held to have provided an important boost to economic growth both nationally and in metropolitan areas. By lowering the effective cost of research it has encouraged firms to engage in more such activity than they otherwise would have and so has helped produce increased innovation and first-mover advantages, job growth, and productivity.

However, in recent years the credit has been the object of neglect. Continual cycles of expiration and reauthorization have undermined the effectiveness of the credit by injecting uncertainty into companies’ R&D investment calculations. Indeed, Congress has left the R&E tax credit to languish since its most recent expiration on December 31, 2011.

Meanwhile, the rest of the world has caught on to the importance of stimulating R&D investment, with many nations now offering even more generous encouragement to the private sector. As a result, the United States now ranks 27th in terms of R&D tax incentive generosity.

Now, as the nation’s advanced firms and metropolitan centers of innovation labor to throw off the effects of the Great Recession, the federal government should support them. An expanded and permanently authorized R&E tax credit would do just that.

Increasing the credit from its current 14 percent to 20 percent would bolster the credit’s positive effects, resulting in a projected $66 billion increase in annual GDP and at least 162,000 new jobs. Meanwhile, permanent authorization would create a tax climate more supportive of long-term private-sector planning and R&D projects with longer timelines.

More than ever before, global economic competitiveness in the coming decades will depend on a nation’s capacity for research, development, and innovation-oriented activity. By permanently authorizing an expanded R&E tax credit, Congress can help ensure that the United States is well-positioned for future success in the global marketplace.

Authors

Mark Muro
Jessica Lee

Publication: The Avenue, The New Republic
Image Source: Andrew Qualls