Amazon HQ

TL;DR: What Makes Cities Attractive Places For Business In The 21st Century?

What Makes Cities Attractive Places For Business In The 21st Century?

Amazon HQ

Here’s what you need to know…

Last week, Amazon announced 20 finalists from 238 cities that submitted bids for its “HQ2,” leaving cities left off the list to do some serious soul-searching in the wake of its decision. The public competition, which has been ripe for parody, has mostly been noted for civic leaders scrambling to make their cities sufficiently attractive, often by attempting to outbid each other on tax incentives, to lure the e-commerce giant, and the 50,000 high-paying jobs and five billion dollars’ worth of investment, that it brings.

But is a big tax incentive package really all it takes to get HQ2, or to attract other innovative companies for that matter? Amazon’s original request for proposal (RFP)highlights the main factors driving its process, and although tax incentives are one part of this, other factors point to broader public policies that make for a better economic environment for all businesses, not to mention help cities improve the quality of life for all of their citizens. As cities consider what makes them attractive investment targets in the 21st century, here’s a sampling of those policies:

  • A Stable And Business-Friendly Tax Structure: While the bidding war to provide greater tax and other incentives to Amazon has been the focus of scrutiny and criticized across the ideological spectrum, recent actions suggest that the desire for a stable, business-friendly environment and tax structure is shared by many businesses. After tax reform was signed into law, Apple announced an investment of $350 billion in the U.S. economy over the next five years, creating more than 20,000 jobs, and paid $38 billion in taxes on money it was previously holding overseas. Additionally, a business-friendly tax structure benefits employees, with over 125 U.S. employers announcing cash bonuses and pay increases after the corporate tax rate went to 21% from 35%. Rather than punish business, like the lawmakers in the California State Assembly who have already introduced a bill to force large companies to give half of their expected savings due to the tax law over to the state, facts suggest that a stable and business-friendly tax structure can enable economic growth, jobs, and wealth – without wasting money, time, and effort on incentives.
  • Affordable Housing: The price of housing, and the cost-of-living more broadly, impacts a company’s ability to recruit talent and the salary it pays them. HQ2 is predicted to drive up rents in whatever city is ultimately chosen, so major metro areas with large housing markets may be impacted less than smaller ones. Housing policy is also intertwined with congestion and gentrification, which resulted from Amazon’s growth in Seattle and helped contribute to its decision to find another location for further expansion. Therefore, cities looking to create or maintain more affordable housing may look to Houston for some inspiration, whose relaxed zoning policy has helped it remain an affordable place to live in spite of its growth.
  • A Culture Of Entrepreneurship: In a recent Forbes article, the Mercatus Center’s Adam Millsap examined Dayton, Ohio’s past as an innovative and successful city during the first half of the 20th century. To help spur that vibrancy in this century, Millsap proposes implementing policies that enable local entrepreneurs to “plant a thousand seeds,” rather than have the city hinge “its economic hopes on large, footloose companies.” One way to do this is to remove regulation and red tape – in the form of local ordinances that make it difficult for small businesses to open or expand – as a means of generating employment growth.
  • “Permissionless Innovation”: Mercatus’ Millsap also proposes an attitude change on the part of the city’s leadership towards a policy of “permissionless innovation.” Instead of a regulatory environment that operates on a “precautionary principle,” which insists that new innovations fit within the existing regulatory framework, “permissionless innovation” would allow for experimentation that could lead to new technologies and business models by default due to this light-touch approach.

Only one city will be the home of HQ2, but that does not mean others need to miss out on jobs, improved quality of life, and vibrant economic growth. With the right policy approach, a city can not only attract the next Amazon, but more importantly, enable its creation.

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ALASKA ROLLS DEEP

While some may think of big, blue states with high populations like California or New York as having the most state legislative staff per capita, the state with the most is actually Alaska – and it’s not even close. Alaska has almost seven staffers for every 10,000 residents, and Hawaii, the number two state, has only four staffers for every 10,000 residents.

Put in another context, Alaska has roughly the same amount of state legislative staffers as Ohio does, but the latter has more than 12 times the population of the former. Fiscal constraints may require Alaskan lawmakers to revisit the staffing levels, but historical data from the National Conference of State Legislatures makes one thing abundantly clear: Alaska rolls deep.

PEOPLE OVER(EXAGGERATE) PROFITS

Public scrutiny of companies is high, and business leaders are seeking to respond to this scrutiny by not only delivering financial performance, but a positive contribution to society. However, this public scrutiny may be based on a faulty assumption.

The general public thinks that the average company makes a 36% profit margin, which is actually five times higher than the median industry profit margin of six percent. This common misconception is used by politicians on the left as justification for promoting policies to force companies to pay more taxes, raise wages, and increase benefits, but if the public had a better understanding of the facts, they may be less inclined to support politicians whose policies treat job-creators like limitless ATMs.

37 FLAVORS OF REGULATORY RELIEF

The Trump Administration’s first year is viewed in some quarters as having had limited success, or having been an outright “failure.” Missing from these evaluations is the significant work the Administration has done to roll back the regulatory burden of the administrative state.

The Wall Street Journal compiled 37 major changes already made, proposed, or underway that will impact the way the federal bureaucracy regulates American businesses for years into the future. These policies may not garner much attention, but should the Administration continue to build off of this list into 2018 and beyond, the resulting economy, viewed favorably by Americans, could make Republicans more formidable in upcoming elections than currently perceived.

INSIGHTS TAKE EFFORT

After starting on the education beat for the Arizona Daily Star, reporter Hank Stephenson heard almost immediately about the longtime rumor of a blacklist used to retaliate against employees of the Tucson Unified School District. At first, he thought the list couldn’t exist, as another reporter would have “flushed it out long ago,” but an innocuous-looking agenda item at the end of a long and tedious school board agenda drove him to attend the meeting.

Three hours into the meeting, after other journalists left, he came across a clue that ultimately led to his making a public records request that showed more than 1,400 names of employees blacklisted over two decades, and resulted in his writing a featured article. Although he attributes getting his piece due to his “ability to sit through tiresome public meetings,” it demonstrates some of the values the team at Delve takes seriously: dig deeper, because details matter.

Hashtags

TL;DR: Policymaking In The Year Of The Hashtags

Policymaking In The Year Of The Hashtags

Hashtags

Here’s what you need to know…

In CQ’s 2018 Legislative Preview released this week, Delve CEO Jeff Berkowitz was quoted as calling the first twelve months of the Trump era “the year of the hashtags.” From #WomensMarch to #NoBanNoWall to #FakeNews, political organizing that once took several days is now realized in a matter of hours. With the activism that has been impacting corporate interests now impacting politics in the Trump era, the major policy issues facing Congress will be subject to all of the noise playing out in the public arena.

Here are Delve’s three key “hashtag activist” dynamics driving the forces that will impact policymaking in 2018:

  1. #Resistance: Grassroots activists on the Left are flush with cash and have metastasized to resist the Trump Administration and any policies associated with it. Democratic politicians have every incentive to appease their base for political reasons and for personal ambition, should they desire to run for higher office – or avoid a primary from the left. The President has already shown his willingness to make a deal with “Chuck and Nancy,” but with issues that draw bipartisan support like infrastructure and resolving the status of Dreamers approaching, the lack of bipartisan legislative accomplishment may ultimately be due to Democratic lawmakers who find it politically-untenable to make a deal, regardless of the policy. This would explain Republican leaders’ focus on bipartisanship coming out of their weekend retreat with the President at Camp David.
  2. #MeToo: Sexual harassment allegations have claimed a number of elected officials so far, with more to come. This will impact the party breakdown in Congress and may change the outcome of key policy battles. As Berkowitz told CQ, “how do you do a whip count if you don’t even know who’s going to still be in Congress?” Adding to this uncertainty is the likelihood of more allegations focusing on Members or their staff, as well as the potential for some unsubstantiated attacks targeting elected officials to be weaponized as this phenomenon continues.
  3. #FakeNews: People are choosing their own news with their own set of facts, and instead of seeking the truth, it is instead in vogue to “speak your truth.” It is difficult to work together, find common ground, and get things done if you don’t even agree on what is reality. From the partisan-tinged Russia investigation, where media misstepshave lent credence to the President’s claim that the investigation is #FakeNews, to Republican voters in the Alabama special election who doubted the allegations made against Roy Moore in a deeply-sourced Washington Post article, the lack of trust in and credibility of the media means everyone now has their partisan jersey on to the detriment of the truth.

All indications are that 2018 will be tougher, legislatively and otherwise, than last year. The above dynamics provide a lens through which the team at Delve will be conducting our analysis this election year, because being prepared for this challenging landscape will allow companies to weather the uncertainty and make the most of the opportunities that appear.

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GETTING THE STORY STRAIGHT

Seattle’s new tax on sugary drinks has shocked some shoppers, but the spin – or lack thereof – coming from public health advocates supporting the tax may well add some whiplash. Jim Krieger, who is the executive director of Health Food America and serves on the Seattle Healthy Kids Coalition committee, said he was “very excited” to see the impact the tax would have on shoppers’ behavior, which he expects to result in a decrease in consumption of sugary drinks that have the 1.75 cents tax per ounce.

However, when Krieger was confronted by a local reporter asking if the tax would hurt Seattle businesses by driving shoppers to purchase their sugary drinks in neighboring cities, he contradicted his theory that taxes influence buying decisions, telling the reporter that “people realize it’s not worth [their] while” to shop elsewhere. The tax is either big enough to elicit change, which Krieger earlier suggested and which may then hurt local businesses by causing shoppers to go elsewhere, or it is not – meaning that sugary drink tax advocates need to get their story straight.

“ERISA-ING” TIDE LIFTS ALL BOATS

A proposed rulemaking change by Labor Secretary Alex Acosta would change the way small businesses and sole proprietors can get health insurance coverage, allowing them to join or create association health insurance plans based on factors such as geographical area, industry, trade, or profession. While large employers and union-sponsored plans may be exempt from ObamaCare coverage mandates, millions of small business workers and owners are uninsured or struggling to afford their insurance because the ObamaCare exchanges pass on these compliance costs to the consumer.

The Department of Labor’s action to more broadly define the “commonality-of-interest requirements” for association health plans under the Employee Retirement Income Security Act (ERISA) would allow these individuals to band together to create flexible coverage options appealing to their needs, suggesting that a health insurance solution for the 21st century’s expanding “gig economy” can stem from less government interference rather than more government promises.

NEVERTHELESS, CALIFORNIA PERSISTED

With the state and local sales tax deduction now capped at $10,000, high-tax, high-cost states like California and New York are exploring workarounds to evade it. California’s Democratic legislative leaders unveiled a bill to allow residents to make a charitable donation to the state’s California Excellence Fund in exchange for a state tax credit. Charitable donations are not capped under the federal tax legislation signed into law at the end of last year, and already the proposal has been labeled as a political gimmick unlikely to escape scrutiny by the federal government.

The evasion strategy could backfire, though, because federal tax law requires charitable donors to reduce the deductible amount of their donation by the value they receive, so with donors still receiving the same government services of significant value, the Internal Revenue Service could argue it is not a charitable deduction at all. Should state governments want to resist the burden of high-taxes on their residents, Tax Foundation analyst Jared Walczak instead suggests “states should consider revisiting their tax rates rather than devising increasingly convoluted and legally suspect workarounds.”

EXPOSING THE CAMPAIGN FINANCE DEBATE

 Democratic efforts to campaign against “dark money” in politics just aren’t taking off, and a recent policy analysis by Wiley Rein’s Eric Wang of the Supreme Court’s jurisprudence regarding campaign finance disclosure laws may shed some light on why that is. Democratic candidates have taken full advantage of the campaign finance laws as they currently exist, all while asking voters to support their efforts to reform them.

Yet, although Supreme Court rulings have cited an “informational interest” for voters in knowing from where political donations come, few voters – the Delve research bullpen notwithstanding – actually reference this information or pay attention to attacks against large political donors, indicating that the campaign finance debate in 2018 is more ineffective political pandering than actual policy issue.

TL;DR: Iran Unrest Redux, The Emoji Lobby, And Waiving The Red Flag

Iran Protest Redux, The Emoji Lobby, And Waiving The Red Flag

Here’s what you need to know…

While people around the world were celebrating Christmas and New Year’s, citizens in Iran were taking to the streets for the largest protests in that country since 2009’s Green Movement. There seems to be no end in sight to the unrest, as more people take part in the demonstrations, the regime takes new measures to suppress them, and violence increases. The outcome of these protests has the potential to dramatically alter America’s relationship with Iran, the broader geopolitical alignment in the Middle East, and the world.

Here’s what you need to know about the protests in Iran:

  1. How Did The Protests Start? Hundreds of people gathered in Iran’s second-largest city, Mashhad, last Thursday to protest the high prices of basic goods, high unemployment and inflation, and general lack of economic opportunity in the country. The Iran Nuclear Deal reached in 2015 was sold by Iranian President Hassan Rouhani as a way to end the country’s economic isolation and bring more prosperity to its people, but the promised benefits have not materialized, especially for poorer Iranians, because foreign investment has fallen short of predictions and access to financial capital remains limited. As the protests gained momentum, economic concerns have given way to grievances against the Supreme Leader Ayatollah Ali Khamenei, the regime, and its expansionist foreign policy. The economy may have been the vehicle with which the protests began, but they are now challenging the very legitimacy of the regime.
  2. What Has Been The Iranian Regime’s Response? Security forces at first showed a degree of restraint, initially dispersing the crowd in Mashhad with water cannons and making few arrests. President Rouhani even stated that Iranians “are absolutely free to criticize the government and protest,” so long as they avoid violence. But that has given way to a crackdown as the protests spread, with more than 450 people arrested in Tehran alone, 22 dead, and access to popular social media platforms like Telegram and Instagram restricted. For its part, the regime has blamed its “enemies” for the unrest, believed to be a reference to Israel, the U.S., and Saudi Arabia.
  3. How Has The U.S. Responded? The Trump Administration was quick to praise the protesters and warn the regime that the world will be watching its response, which is in contrast to some European allies and the cautious approach of the Obama Administration during the 2009 protests. Trump’s response and his emphasis on human rights also gained the support of officials previously critical of him, although some – including former U.S. Ambassador to the U.N. Samantha Power – have used the protests as a means to criticize the President as a political hypocrite due to his so-called “travel ban,” a policy that blocks people from entering the U.S. from eight countries, including Iran.
  4. What Is Different From Prior Protests? Unlike the Green Movement, which was largely a middle-class affair, today’s protests include Iranians of all economic classes, a reality that may make it more difficult to suppress. In addition, the unrest in 2009 was due to electoral uncertainty while today’s unrest reflects a loss of faith in the clerical political system entirely. When he came to power, Rouhani was billed as a reformer, despite evidence to the contrary. Regardless of whether Rouhani’s “reform” administration is replaced due to the regime’s demise or swept aside during an extreme anti-reform crackdown, the experiment to reform the Islamic Republic’s government seems to have failed if it ever really began.
  5. What Else Can The U.S. And International Community Do? By following up sympathetic sentiments with action, the U.S. and its allies and partners can raise the costs for the regime’s clamp down. For example, new economic penalties against key institutions responsible for repression – such as the Central Bank and the Basij resistance force – can help, as well as increased United Nations pressure and free and open broadcasting to counter the regime’s claims.

It remains to be seen how long this unrest will continue, and whether more momentum will lead to greater kinetic activity. Should these demonstrations lead to the fall of the regime, they will – given the regime’s nefarious influence in the Middle East, North Korea, and Venezuela, coupled with its repeated violations of the 2015 nuclear deal – have the potential to be one of the most consequential geopolitical developments of the 21st century.

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CAN AN APPLE A DAY KEEP REGULATORY FATIGUE AWAY?

There is a reason it’s said that “an apple a day keeps the doctor away,” but apples alone cannot relieve the regulatory fatigue felt by apple and other produce growers. In a New York Times profile, a fifth-generation apple farmer shares his experience in placating government regulators and complying with the layers of regulation that impact his farm and its ability to produce apple pies, apple cider, and doughnuts.

The article suggests that the Trump Administration’s efforts to rollback regulations, despite the fearmongering coming from some, taps into discontent experienced by many small businesses across the country – regardless of their political affiliation – who are not outright opposed to regulations, but have rather found their application in practice to be “impractical” and “overkill.”

THE EMOJI LOBBY

Where do emojis come from? Why The Unicode Consortium, of course. The Consortium, a nonprofit group mostly made up of people from large tech companies, is tasked with setting the global standard for the cartoonish icons that are used on phones, tablets, and computers. Although anyone can propose an emoji, there is a strict, involved process that must be followed in order to see one’s emoji dream become a reality. This includes submitting a written proposal to Unicode including the projected usage levels for the proposed emoji, whether it can be used as an archetype or metaphor for a symbol, and ensuring it avoids disqualifying features.

In her ultimately successful campaign to create the dumpling emoji, one journalist and author spent the better part of two years researching and writing her proposal, complete with research on the dumpling’s history and popularity. This just goes to show that when it comes to achieving desired outcomes – in the political, policy, business, or emoji environments – digging deep for the details that matter is how to make a lasting impact.

ENVIRO’S OFFENSIVE AGAINST INSTITUTIONAL NORMS 

Washington Governor Jay Inslee, with the support of The Sierra Club, turned to his executive powers when the state legislature failed to pass his signature cap-and-trade policy and Washington voters refused to approve a carbon-tax the previous year. This is endemic of the new era Delve CEO Jeff Berkowitz wrote about in a December Morning Consult article, warning that environmental activists use new and increasingly aggressive tactics to implement their climate agenda irrespective of law, governing institutions, or, as in this case, the voters’ will.

A state court ultimately determined the Governor’s administration did not have the legal authority to regulate greenhouse gas emitters. The outcome provided a victory for both the rule of law and accountable, democratic government subject to the will of the people, while also exposing the true motives of environmental groups that have become more aggressive in this new Age of Activism.

SULLYING THE WHITE HELMETS

The White Helmets, also known as the Syrian Civil Defense, have rescued nearly 100,000civilians trapped under the rubble resulting from the civil war in Syria, been nominated for the Nobel Peace Prize, and featured in an eponymous Academy Award-winning Netflix documentary. Yet not all of the attention they’ve received is positive and helpful to their cause, as demonstrated by the massive, Russian-backed counter-narrative against the volunteer rescue workers.

The disinformation campaign, propagated by online activists and trolls backed by the regime-aligned Russian government, is floating conspiracy theories and half-truths to damage the political and reputational credibility of The White Helmets. Besides rescue civilians, the group uses cameras to document what is happening in the war-torn country, which in turn helps international humanitarian groups monitor events on the ground. These facts often contradict Syrian and Russian narratives, making delegitimizing the White Helmets, even with phony claims, a priority for both governments.  

WAIVING THE RED FLAG 

In order to alert its users to fake news articles, Facebook began placing red “Disputed Flags” next to stories. However, the tech giant said it was reversing course because the flags did not work as intended. In fact, the flags caused people to click and share the fake articles more than they would have otherwise, leading to the company’s decision to place Related Articles next to fake news ones instead of the flag.

The unexpected increase in click-throughs after Facebook added the fake news warnings seems to suggest people do not trust Facebook’s authority to determine fake news from real news. As long as partisans demand their own set of facts, flagging fake news will only increase interest from those who are inclined to believe it.