Media and Technology Stats and Studies – May 6, 2013

In an advertising sales pitch to advertisers at the Digital Content NewFronts this week, a top YouTube executive reported that YouTube viewers spend 2 billion more hours per month watching videos on the service than they did last year. Last year, 1 billion unique viewers watched 4 billion hours of YouTube content per month, compared to 6 billion hours per month this year. According to RBC Capital Markets, YouTube generated $4 billion in revenue in 2012, compared to $2.5 billion in 2011. One year ago, the Washington Post reported that a “disproportionate share of YouTube’s top personalities are minorities,” with the top channel attracting more than “5 million subscribers — enough to attract the attention of major advertisers.” Many other NewFronts presenters – including Univision, which participated in the NewFronts for the first time; CBS Interactive; Hulu Latino; and CNET – touted their goals to tailor their programming to attract Spanish-speaking viewers. Pew has reported that 79% of minorities visit video sharing sites, compared to 69% of whites. As the Joint Center has previously reported, a Horowitz Associates report found that, while Black, Hispanic, and Asian Americans are as likely as their White counterparts to have access to over-the-top (OTT) platforms - such as Netflix, Roku, and Hulu - they are more likely to use them regularly to watch video content.

Georgetown University’s McDonough School of Business released a report evaluating what in its view would be the likely economic impact of the incentive auctions. The report concludes that limiting the bidding rights of the largest carriers would cause inefficiencies, including 40% less revenue from auction proceeds. One of the report’s authors also determined that hampering large carriers’ ability to participate in the auctions would actually lead to a 22-46 MHz spectrum deficit and a loss of 118,000 jobs by 2017.

Social media use is driven by a fear of missing out on keeping up with friends, according to a forthcoming report in Computers and Human Behavior. This fear was most prevalent among social media users under age 30 and correlated with a higher likelihood of texting while driving.

The Digital Entertainment Group reported a 5% year-over-year increase in sales of movies and TV shows during the 1st quarter, to $4.69 billion in 2013.

Parents with minor children are more likely to be deeply engaged with their public libraries, with lower-income households showing more demand for e-readers and classes on how to use e-readers, according to Pew Research: “Parents living in households earning less than $50,000 are more likely than parents in higher income households to say they would be ‘very likely’ to take advantage of: classes on how to download library e-books (44% vs. 29%); e-readers already loaded with library content (40% vs. 22%); digital media lab (40% vs. 28%); classes on how to use e-readers (34% vs. 16%).”

The University of Southern California has received a $3.25 million Bill and Melinda Gates Foundation grant to build capacity for measuring the impact of media.

Considering Benefit Corporations as an Integral Part of Tax Reform and our Economic Future

by Ernie C. Jolly

At a shareholders’ meeting for the fictional corporation Teldar Paper, Wall Street (20^th Century Fox, Dec. 11, 1987) antagonist Gordon Gekko argued that “greed, for a lack of a better word, is good” and that “greed, in all its forms, greed for life, for money, for love, [for] knowledge, has marked the upward surge of mankind.” Although a fictional tale, the blockbuster hit may have foreshadowed what became the dominant culture among private corporations prior to the 2008 financial meltdown.  Since the crisis, financial analysts have identified greed as the impetus that encouraged Wall Street executives to amass unsustainable amounts of financial risks. Notwithstanding its negative impact, the crisis sparked a movement that has the potential of changing corporate culture for better. Through “benefit corporation” statutes, lawmakers in several states have modified their laws to encourage more altruistic behavior among entities. This movement may have been futile if the crisis had not challenged the notion that greed is essentially good. In that vein, the time may be ripe for federal policymakers to consider ways to encourage other states to enact similar legislation.

Corporations are creatures of state statutes that define the standards for incorporation. Despite differences among the states’ corporate codes, these laws are rather consistent in compelling corporate directors and managers to pursue the single goal of increasing profits for the benefit of shareholders. Accordingly, among many corporations, profit maximization usually trumps any desire to serve a public purpose.

In April of 2010, Maryland became the first state to enact a benefit corporation statute. Currently, Maryland has been followed by 11 other states. These statutes legally allow entities to pursue interests beyond simply increasing profits for investors. According to B Lab, a nonprofit whose mission is to use the power of business to solve social problems, benefit corporations:  “(1) have a corporate purpose to create a material positive impact on society and the environment; (2) are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and (3) are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard.” After electing to become a benefit corporation, corporate directors and officers are legally protected if they consider the non-financial interests of their workforce, local communities, and the environment while making decisions, even if the decisions do not yield the most profit.

Despite the flexibility afforded to them on the state level, benefit corporations are treated by the Internal Revenue Service as any other for-profit entity, and donations to them are not deductible as they would be if given to a charity. Therefore, a benefit corporation’s income is fully taxable, and their investors and donors are not provided the same tax incentives as traditional charitable donors. As the House Committee on Ways and Means considers comprehensive tax reform, the Committee should also consider organizing hearings on benefit corporations. If this current tax treatment is eventually changed, there may be both more incentive for entities to adopt the new corporate form, and more pressure on state legislatures to jump on the bandwagon.

Ernie C. Jolly is a spring 2013 intern at the Joint Center for Political and Economic Studies and a second-year law student at American University’s Washington College of Law.

Beyond Home Mortgages

by Wilhelmina A. Leigh, Ph.D.
remarks given at the Howard University Fourth Annual African American Economic Summit

Legislation in the 1930s established the nation’s housing goal as decent, safe, sanitary housing that is affordable for all.  Over the decades since the declaration of this goal, however, the nation’s housing policy problem has remained how to narrow the gap between household incomes and housing costs.  This gap, in fact, increased between 1960 and 2008 (before the subprime mortgage market collapsed) for both renters and owners.  Other methods than those heavily relied on to date should be considered and funded to help address this enduring housing problem and achieve our national goal.

The tool kit of options to narrow the gap between household income and housing costs contains three types of approaches. If we choose the first approach, we accept both household incomes and housing costs as fixed and use various financing mechanisms to bridge the gap between them.  These mechanisms include mortgage loans made by financial institutions and mortgage market products developed and sold in the secondary market by Fannie Mae, and Freddie Mac. The subprime mortgage market collapse and The Great Recession have shown us the worst case outcome associated with these activities.  The second approach involves accepting the cost of housing as fixed and increasing household incomes as a way to narrow the gap.  This approach is most often applied via the tax system with deductions and credits that increase income in ways that benefit the wealthy more than the poor.  The third approach requires us to accept that household incomes are fixed and involves modifying the cost of housing production as a way to decrease its cost.  Examples of programs that use this third approach include Habitat for Humanity and the Nehemiah housing program (currently operating in New York City).  If we target this core housing problem by bringing to scale tools that reduce the cost of housing by reducing its production costs, we will be able to assist more households to become homeowners in a sustainable and affordable manner.

In this “zero-sum” era, how can we afford to take this approach to scale?  We can do so if we reduce the amount of tax revenue that the federal government chooses not to collect via the mortgage interest deduction on the federal personal income tax form.  Collecting as federal revenue some of the $100.9 billion in tax expenditures (estimated for FY 2013) from this deduction and using it to expand programs that close the gap between household income and housing costs in a sustainable manner should be high on our nation’s “to do” list.

Wilhelmina A. Leigh is Senior Research Associate of the Economic Security Initiative of the Civic Engagement and Governance Institute at the Joint Center for Political and Economic Studies. More information on Dr. Leigh and her work can be found at the Joint Center website.

Tax Policy, Small Businesses, and the Myths that Consume the Discussion

by Ernie C. Jolly

In its September 2012 optimism survey, the National Federation of Independent Business reported that small business owners considered unfair taxes to be their single greatest impediment to success.  Consequently, it is understandable why the government’s role in spurring small business development has become a hot-button issue on the 2012 presidential campaign trail.  But how could we rid the tax code of the unfairness that vexes so many small business owners?  One way would be to increase taxes on the wealthiest individuals and close corporate tax loopholes to ensure tax fairness, and to generate revenue that could be used to fund programs that support small business development.

Unfortunately, the political discourse on the impact of tax policy on small business development remains muddled at best.  While campaigning in Ohio, presidential hopeful Mitt Romney implored America’s youth to start businesses through what he termed as “risk-taking,” even if it means using their parents’ savings. Romney’s comments became a talking point for San Antonio Mayor Julian Castro, a keynote speaker at the 2012 Democratic National Convention, who mocked Romney’s remarks while contending that federal investments in public education, infrastructure, and job-training would do far more for the American entrepreneurial spirit than impractical risk-taking.  These differences in the approaches of Romney and Castro represent a larger philosophical debate among policymakers regarding the government’s role in supporting small businesses.

Some policymakers argue that extending the Bush-era tax cuts for the wealthiest individuals (those in the top two tax brackets) will allow small businesses to grow and provide new jobs.  However, this argument does not square with the facts. The Congressional Research Service (CRS) reported that in 2007 and 2009, fewer than 2% of filers in the top two brackets were small business owners.   In other words, if the Bush-era tax cuts for the wealthiest individuals expire, needed revenue will be obtained without increasing the tax burden on 98% of small business owners.

While the myths of the Bush cuts continue to shape the political discourse on tax policy, actual hindrances to small businesses remain unexamined.  Small businesses must compete with multinational corporations that are able to avoid taxes by shifting profits earned in America to foreign subsidiaries.  By exploiting corporate tax loopholes, multinational corporations avoid paying as much as $60 billion annually, according to CRS.  The Senate Permanent Subcommittee on Investigations released a scathing report in September of 2012, detailing various ways multinational corporations have been able to legally avoid paying federal taxes. Schemes employed by multinational corporations include, but are not limited to, the following: (1) transferring property rights and assets to jurisdictions outside of the United States to avoid taxes on such property and (2) accumulating debt in the United States, but not increasing the corporation’s overall debt exposure, so as to receive federal tax deductions on debt interest.  By employing such schemes, multinational corporations are able to avoid taxes on income earned in America.  Consequently, small businesses, many of which are solely domestic, assume a greater tax burden on income earned in the United States than their multinational competitors  and are disadvantaged.

The budget cuts that loom as a result of sequestration are predicted to result in the loss of more than 2 million jobs, nearly half of which are provided by small businesses.  The subsequent inability of the federal government to fund programs that support small businesses – such as their procurement programs – will put others out of jobs.  Additionally, cuts in education, transportation, and job training will adversely impact small businesses.

Congressional action on the budget is necessary for economic stability and small business growth.  If small business development is a priority for policymakers, eliminating the Bush-era tax cuts for the wealthiest individuals, while plugging unfair corporate tax loopholes, may be a practical solution. Such policies would ensure small businesses thrive as our economy continues to recover.

Ernie C. Jolly is a fall 2012 intern at the Joint Center for Political and Economic Studies and a second-year law student at American University’s Washington College of Law.

Federally Assisted Asset Building: For Whom and How?

By Melissa Wells

Assets and savings help families weather economic downturns and unexpected financial crises. The President’s budget continues a longstanding federal approach to asset building. According to the recent Assets Report released by New America Foundation, the President’s FY 2013 budget provides nearly $548 billion to support asset-building activities and policies. However, middle and upper-income families, rather than low-income families, reap the lion’s share in benefits from federal policies that support asset-building and savings, especially through tax subsidies.

Tax subsidies account for 92 percent of federal spending on asset-building in the President’s FY 2013 budget. Of the nearly $508 billion provided in tax spending, $478.5 billion is provided for policies that  primarily benefit upper-income households, such as the mortgage interest deduction,  deductions for  contributions to retirement accounts, and exclusions for capital gains.  For example, at least 89 percent of mortgage interest deductions and 77 percent of IRA tax subsidies accrue to households that earn more than $75,000 per year, while these households constitute only 31 percent of all households in the country. Low-income and poor households typically benefit from tax policies that receive considerably less funding, such as post-secondary education tax credits and deductions, which are allocated only $28.93 billion in funds in the budget.

Although low-income and poor households benefit less from tax subsidies than do middle- and upper- income households, they do benefit more from direct spending to support savings and investment, homeownership and post-secondary education. The largest portion of direct spending to build assets is for Pell Grants ($36 billion), a post-secondary education program that provides financial resources for low-income college students.  In addition, $1.19 billion is allocated to programs that prevent foreclosure and subsidize mortgage down payments for low-income households. An additional $602 million is provided to support entrepreneurship through microloan and small business lending, both of which contribute significantly to small business development and in turn can support job creation.  A meager $52 million supports savings and investment through the Assets for Independence program, the Bank On USA initiative and the Volunteer Income Tax Assistance (VITA) program. These programs provide direct services that link low-income and poor households to financial literacy and tax preparation resources. But, again, the sum total of these programs is only a small fraction of the sum total of direct and tax expenditures aimed at asset-building.

The disparity in access to federal asset-building resources limits economic opportunity for low-income populations.  Ensuring low-income households have access to asset-building programs is important because these programs can make it possible to purchase a home, retire with financial security, or send a child to college. As such, the Administration should consider not only how to make existing asset-building programs serve more low-income households but also how to develop new programs that can more effectively help them save and develop assets.

Melissa Wells is Policy Assistant, Asset-Building at the Civic Engagement and Governance Initiative of the Joint Center for Political and Economic Studies.

In Social Security…We Trust

by Wilhelmina A. Leigh, Ph.D.

On April 23, 2012, the Social Security Board of Trustees released its 2012 annual report on the financial health of the Social Security Trust Funds (formally the Old-Age and Survivors Insurance and the Disability Insurance (or OASDI) Trust Funds).  Like previous annual reports, this one contains estimates of revenues and expenditures of the Trust Funds for the current year and projections of the same for 75 years into the future.  Also like previous reports, its findings lead many to conclude that Social Security won’t be there for them when they need it.  This doesn’t have to be the case.

Many who conclude that Social Security will not be there for them support their view by citing the Report’s projection that the Trust Funds will be exhausted in 2033. They ignore the additional information that even if the current surplus in the Trust Funds no longer exists, the revenue collected by the program each year thereafter in FICA (Federal Insurance Contributions Act) taxes is projected to cover 75 percent of scheduled benefits and administrative costs.  They also ignore the fact that between now and 2033, the United States Congress has 21 years in which to act to ensure the solvency of Social Security system.

It would serve us all well if members of Congress were to act sooner rather than later to retrofit the Social Security system to close the 75-year shortfall, currently projected to be 2.67 percent of taxable payroll (that is, all earnings subject to Social Security contributions).  It is indeed possible to not only eliminate the shortfall but also simultaneously add features that would bolster program support for the many people for whom Social Security benefits—averaging annually only $12,870 in 2010—are the major, or only, source of income. The report of the Commission to Modernize Social Security features many suggestions for achieving these dual objectives.

Rather than an invocation to doom and gloom about the fortunes of the Social Security system, the 2012 Trustees report should be a call to those who care about it to insist that we act while its green light is on, rather than waiting for the yellow light or red light before acting.  Crossing the street on the green light—in other words, in 2012, when the Trust Funds have a projected annual surplus of $57.3 billion—is the prudent thing to do.  Crossing on yellow or red—when Trust Fund reserves are nearly or totally depleted—will involve avoidable and harmful fiscal risks.

Wilhelmina A. Leigh is Senior Research Associate of the Economic Security Initiative of the Civic Engagement and Governance Institute at the Joint Center for Political and Economic Studies. More information on Dr. Leigh and her work can be found at the Joint Center website.

Idea Theft and Black Unemployment

By Joseph Miller, Esq.

Black unemployment is a symptom of persistent racial discrimination and skills gaps, but competition and trade policies play a role in unemployment that policy makers too often overlook.  Information technology (IT) and intellectual property (IP) theft is a significant threat to U.S. companies’ ability to generate revenue and thereby jobs.  Earlier this week, U.S. Senators Mary L. Landrieu (D-Louisiana) and Olympia J. Snowe (R-Maine), Chair and Ranking Member of the Senate Committee on Small Business and Entrepreneurship, along with a bipartisan group of 14 other committee members, wrote a letter to the Federal Trade Commission (FTC) urging it to assist 36 state attorneys general in confronting the growing problem of IT and IP theft from U.S. companies by foreign manufacturers.

Some have noted that many African Americans are already grappling with a silent economic depression.  While the nation’s employment picture has slowly improved over recent months to an unemployment rate of 8.3 percent in February 2012, the unemployment rate for African-Americans still stands at 14.1 percent, which is up from 13.6 percent in January.  This is significantly higher than the Great Recession peak overall unemployment rate of 10.2% in October of 2009.

The fates of African Americans have been tied to the manufacturing sector since the end of World War II.  John Schmitt and Ben Zipperer of the Center for Economic and Policy Research have noted that manufacturing jobs “built the black middle class after World War II.”  However, between 1979 and 2007, the share of African Americans working in manufacturing fell from 23.9 percent to 9.8 percent.  During the Great Recession’s incipient stages between December 2007 and December 2009, the manufacturing sector experienced a 14.6 percent decline in employment–among 13 service sector industries, only construction experienced a steeper decline in jobs during that period. African-Americans were among those workers who were hardest hit during this period and are now under-represented in manufacturing.

Improving African-American unemployment trends will require a multi-agency effort.  The U.S. Department of Labor and other agencies have already granted a consortium of 10 universities in South Carolina and an HBCU $20 million to develop 37 new online courses in emerging jobs in manufacturing and other key sectors.  While this approach addresses skills gaps, the FTC can do its part by addressing IT and IP theft and ensuring the competitive landscape remains conducive to job growth.

Joseph Miller, Esq. is Deputy Director and Senior Policy Director of the Media and Technology Institute of the Joint Center for Political and Economic Studies in Washington, DC.  More information on Mr. Miller and his work can be found at the Joint Center website.

Fairness Within the Economic Recovery

by Wilhelmina A. Leigh, Ph.D.

June of this year will mark the third anniversary of the official end of The Great Recession, the month when the downturn bottomed out and the economy started to grow again.

With the recovery, as during the recession, however, disparities by race/ethnicity have persisted in economic outcomes such as employment, and will continue to do so unless determined efforts are made to reduce or eliminate them, and the impacts of these efforts are closely monitored.

The economic recovery is currently gaining steam.  During the fourth quarter of 2011, real U.S. gross domestic product, or GDP (the output of goods and services produced by labor and property located in the United States), increased at an annual rate of 3.0 percent.  This rate of growth was faster than at any point during the last year and a half and nearly equals the average annual growth rate of GDP over the last 60 years of 3.25 percent.  In addition, unemployment rates have declined even for groups such as African Americans, who were not seeing much of a decline earlier in the recovery.  In the wake of the recent recession, the unemployment rate for the nation peaked in October 2009 (at 10 percent), while the rate for African Americans did not reach its peak until August 2011 (at 16.7 percent).  In February 2012, the unemployment rate for African Americans was 14.1 percent, while the national rate was 8.3 percent.

How can we channel the economic recovery to more completely benefit all Americans?  One way is to monitor existing and new federal, state and local programs and policies for the extent to which they can and do foster economic equity among racial/ethnic groups. An analysis by PolicyLink of proposals in the 2013 Obama budget highlights programs that are promising in this regard. For example, the Partnership for Sustainable Communities—an interagency collaboration among the Department of Housing and Urban Development, Department of Transportation, and Environmental Protection Agency—would redevelop communities to reduce barriers for low-income households to access jobs, schools and affordable housing.  The Pathways Back to Work Fund, another 2013 budget proposal, would provide funding for subsidized employment and work-based training for low-income youth, the long-term unemployed and low-income adults. Among the wish list of programs that presidents’ budgets too often become, initiatives such as these should, first, be supported and then, once enacted, be monitored for their effectiveness.

Racial/ethnic economic disparities will not be lessened or eliminated without conscious action.  We justify not addressing these longstanding disparities during recessions because we lack resources to do so.  We cannot justify the failure to act during periods of economic growth. Thus, we should insist that such action is evident during the coming recovery.  As Alan Krueger, chairman of the President’s Council of Economic Advisers noted recently, “Restoring a greater degree of fairness to the U.S. job market would be good for businesses, good for the economy and good for the country.”

Wilhelmina A. Leigh is Senior Research Associate of the Economic Security Initiative of the Civic Engagement and Governance Institute at the Joint Center for Political and Economic Studies. More information on Dr. Leigh and her work can be found at the Joint Center website.

In the Interest of Social Security

by Wilhelmina Leigh, Ph.D.

In its deliberations to develop a plan to reduce the federal deficit by more than a trillion dollars over the next decade, the Joint Select Committee on Deficit Reduction considered a proposal to calculate cost-of-living adjustments (COLAs) in all government programs using the “chained” CPI-U (Consumer Price Index-Urban), rather than the CPI-U.  Implementing this proposal would dramatically reduce Social Security benefits for recipients.  Although reducing federal program benefits by changing the COLA computation is indeed one way to reduce the deficit, reducing benefits is not the only way to eliminate the 75-year projected shortfall (of 2.2 percent of taxable payroll) for the Social Security system.  The shortfall can be closed by holding benefit levels harmless and, instead, increasing revenue directed to the system.  A recent report of the Commission to Modernize Social Security (Plan for A New Future: The Impact of Social Security Reform on People of Color) offers recommendations for doing just that.

According to a brief by the National Academy of Social Insurance, over the first ten years after implementation of the chained CPI-U, two-thirds of the deficit reduction achieved would come from cuts in benefits that would be borne by elderly and disabled Americans.  The remaining third would come from revenue increases associated with adjustments to tax brackets and other parameters of the tax code.  After the first decade, deficit reduction due to revenue gains is projected to decrease, while benefit cuts are expected to remain indefinitely.  Reductions in Social Security benefits would be especially problematic for African Americans, among whom benefits (averaging only $1,035 per month for retirees in 2009) are the sole source of income for 40 percent of retiree households ages 65 and older.

The Commission to Modernize Social Security focused on proposals that would both eliminate the projected shortfall and increase benefits for selected vulnerable populations, rather than on proposals that would reduce benefits. Two of the proposals in its report—eliminating the $106,800 cap on wages taxed for Social Security, and extending Social Security coverage to all state and local government employees—would jointly generate enough revenue to eliminate the projected shortfall.  These two proposals along with a gradual increase in the payroll tax rate of one percentage point and taxing contributions to salary reduction plans (such as flexible spending accounts) would generate enough revenue to not only cover the shortfall but also fund benefit increases for the oldest recipients, students, caregivers, and widowed spouses.

It is in the nation’s interest to reduce its deficit.  It is also in the nation’s interest to provide a tune-up to the Social Security system so it will remain solvent over the next 75 years.  Achieving the first goal by reducing the modest benefits that provide a lifeline to so many Social Security recipients of color, however, is not the right way to go.

Wilhelmina A. Leigh is Senior Research Associate of the Economic Security Initiative of the Civic Engagement and Governance Institute at the Joint Center for Political and Economic Studies. More information on Dr. Leigh and her work can be found at the Joint Center website.