SSTI Digest

In addition to decreasing enrollment numbers at both two- and four-year institutions of higher education, detailed in an earlier SSTI Digest story, higher ed is facing other threats from looming state budget cuts. While enrollment numbers are still in flux, many universities are already making drastic budget reductions, and that pain will ultimately land on students, which could impact educational attainment and student debt for years.

Personal income levels throughout the country received a boost in the second quarter of 2020 through assistance programs from the federal government designed to combat the economic difficulties brought on by the COVID-19 pandemic. In their recently published report, Pew Charitable Trusts explains that “the surge in federal assistance more than offset record losses in earnings, which counts wages from work and extra compensation such as employer-sponsored health benefits, as well as business profits.” Earnings reflected the largest losses on record, falling by about $860 billion from the prior quarter and $670 billion from a year ago.

After two years of research on technology and jobs, MIT’s Task Force on the Work of the Future has issued its final report, and the news is hopeful: with better policies in place, more people could enjoy good careers even as new technology transforms workplaces.

The report, “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines,” argues that as technology takes jobs away, new opportunities open. The real issue is improving the quality of jobs and ensuring a greater shared prosperity, especially among middle- and lower-wage workers.

Contradictory to the prevailing theory that fintech companies — utilizing cutting-edge algorithms and incorporating data beyond the standard credit reports — have better insights into borrower risk profiles than traditional lenders, new research indicates that fintech borrowers are more likely to default on their loans than their counterparts who utilize traditional banks. In their forthcoming article in The Review of Financial Studies, Marco Di Maggio and Vincent Yao find that fintech companies are actually more reliant on “hard information” than traditional banks and typically acquire market share by first lending to higher-risk borrowers and then to safer borrowers. Although their analysis is based entirely on the personal loans market, the research raises another flag, adding to a growing list of fintech issues ripe for regulation.

Criticism of the federal Opportunity Zone program has been directed at individual examples of questionable tracts for inclusion, the process for selecting tracts in each state, and the merits of some of the development projects underway. For example, some question inclusion of lowlands subject to flooding as sea levels rise with climate change and subsidence, while others raise eyebrows at inclusion of greenfield freeway interchanges or tracts already undergoing gentrification in fast growing cities. Complaints have been raised about projects where the end use (e.g. a hotel) will offer low-wage, part-time jobs without benefits for worker or a chance of raising them out of poverty.  Still others question if a decade of forgone public revenues from real estate projects that would have happened anyway is good policy. A new report from the U.S. Government Accountability Office recommends Congress pass legislation granting the Treasury Department the authority to actually evaluate the program to determine if all of the concern is justified. 

The Angel Capital Association has recently released its Angel Funders Report 2020, examining the angel investor landscape through a survey of 76 angel groups and investments made during 2019. While the survey results represent only a portion of the larger angel investment community, the ACA report does provide useful insights into the current trends within the angel funder sphere. The report also provides an in depth look at the current trends and methodology of the participating angel investors while also exploring the changes in investment strategy throughout recent years.

Amid dwindling hope for a second stimulus package from Congress, the Federal Reserve has widened the terms of its Main Street lending program to better target support for small businesses. According to the new guidelines, the minimum loan size for three Main Street vehicles available to for-profit and non-profit borrowers has been reduced from $250,000 to $100,000. Corresponding fees have also been adjusted to encourage loan dispersal. A new FAQ has also been added clarifying that Paycheck Protection Program (PPP) loans of up to $2 million may be excluded for purposes of determining the maximum loan size under the Main Street lending program.

The Securities and Exchange Commission (SEC) recently published a final rule clarifying acceptable communications during “demo days” and expanding the accessibility of crowdfunding, among other changes. The new rule establishes guidelines to make “demo day” activities exempt from general solicitation requirements. Exempt events must be sponsored by institutions of higher education, nonprofits, incubators, accelerators, local governments or, added in response to SSTI’s letter on the proposed rule, state governments or state/local instrumentalities. The rules provide guidance on the types of communication allowed during the events and limits on compensation for hosting the event, but, unfortunately, the SEC opted not to include any of the clarifications requested by SSTI and other commenters.

The United States is currently ranked tenth in research and development intensity (a measure of R&D investment as a percent of a nation’s Gross Domestic Product) but has continued to lead the pack in total research and development spending, according to the American Association for the Advancement of Science (AAAS) recently published A Snapshot of U.S. R&D Competitiveness: 2020 Update. The report analyzes the role R&D investment plays within the U.S. while also examining research and development trends globally. It notes that while U.S. spending remains high, China’s R&D spending has “seen staggering increases over the past two decades, and remains an undeniable leadership rival to the U.S.” When measuring R&D intensity, AAAS found that the U.S. ranked tenth when combining public and private R&D investment, but is ranked 14th when only factoring in public spending towards R&D.

The Senate released its draft appropriations bills for FY 2021 this week. Priorities for SSTI’s Innovation Advocacy Council did well, with increases for Build to Scale ($38.5 million, + $5.5 million from FY 2020) and FAST ($5 million, + $2 million) and level funding for Regional Innovation Clusters ($5 million).

Science and innovation highlights within the FY 2021 budget proposal include the following:

I suspect the whole country woke up Wednesday morning and looked at the half that voted for the other candidate and said, “What were you thinking?!?” Rather than attempting to address the question of what people were thinking, let me attempt to address where we are and what we need to do.

The 2016 election of Donald Trump, the rise of Trumpism, the pandemic and George Floyd’s killing have laid bare fundamental crises that face America. The challenge that President-elect Joe Biden has is how to address the stark divisions we have in the country. The election results are just representative of the divisions we’re facing.

The challenges we face have been decades in the making. A shift to a knowledge- and technology-based economy has benefited those that have been prepared for it, but regions and peoples have been left behind. Additionally, the long-term decimation of manufacturing that has only recently stabilized has left communities and the economic livelihoods of people devastated.

While official results are still being certified, unofficial counts reveal a mixed bag on a slew of state ballot initiatives that could have an impact on innovation, education, state budgets and elections. Some gained favor with voters, like a battle over gig workers and how they are classified, which landed on the side of Uber and Lyft. The California Proposition 22 initiative won voter approval (58 percent) following a $200 million effort to defeat earlier legislation that provided employee-like protections for the app-based drivers. The approval allows the drivers to be classified as independent contractors and not employees, overriding Assembly Bill 5, and possibly chilling other states’ efforts to consider legislation that would have forced companies to treat freelancers as employees.