So long, 2012, a year in which the economy took two steps forward for every one step back, and welcome to 2013, a nestling born on the edge of a cliff. Here are some trends worth following.
How businesses and people cope with the hidden costs of health care reform: It’s already a lock that taxes will rise Jan. 1 on wealthy individuals and the health care industry to pay for President Barack Obama’s Affordable Care Act. There may be another shoe waiting to drop, however.
Congress could decide to tax employer-sponsored health insurance, which is a federal tax break bigger than any other – including deductions for mortgage interest and charitable giving. About half of all Americans benefit from that break, paying no taxes on what their employers contribute to their health insurance. If that break disappears with a “fiscal cliff” rescue, those same people will share in $150 million in new taxes.
How the energy industry adjusts to the oil-and-gas boom: The United States is well on its way to becoming virtually energy independent in less than two decades, in no small part because hydraulic fracturing and other technologies are unlocking new supplies of oil and natural gas within our borders.
That’s good news for the economy, but unnerving for those who worry about prolonged reliance on fossil fuels. The debate needn’t be framed as boom-or-bust, however. With careful planning, a balance can be struck between the short-term benefits of the nation’s oil-and-gas bonanza and the longer-term need to conserve and diversify. Consider changes already underway in the coal industry: Two years ago, there were 522 coal-burning electricity plants in the United States. Today, fewer than 400 remain open or unscheduled for retirement. They’re being replaced by cleaner-burning natural gas and newer technologies.
How the financial markets deal with democracy: The owner of the New York Stock Exchange, NYSE Euronext, agreed in December to be acquired by the Intercontinental Exchange, an Atlanta-based upstart that has prospered by trading derivatives over the Internet. It symbolized decades of change in the financial markets, where technology, regulatory reform and competition have slowly replaced market monopolies run by member brokers.
The next test may be the much-advertised spread of “crowdfunding” to the startup economy. Largely an online phenomenon, crowdfunding could help entrepreneurs seeking to raise $1 million or less from small investors – assuming rules to protect those investors are put in place by federal regulators. In a high-risk investment class, warning labels for mom-and-pop investors will be vital to the movement’s long-term success.
How the airline industry flies through market turbulence: In cities such as Milwaukee, business executives are feeling the pinch of direct-flight cutbacks by major carriers. For companies that have dozens or more than 100 branch operations, that’s a productivity hurdle. It also makes it harder to sell Wisconsin as a business relocation destination.
Meanwhile, business traveler groups are lining up to complain about the lack of transparency in ticket prices and the proliferation of add-on service fees. Look for increased friction between the airlines, regulators and travelers before this issue comes in for a landing.
How the nation comes to grips with cybersecurity: The Internet is the defining technology of our era, but it’s nearly 40 years old and getting a bit long of tooth, especially when it comes to protecting digital data. “The major glaring weakness (of the Internet) is the lack of security, because the protocols and the technology were not designed to support security,” warned Wisconsin computer science pioneer Larry Landweber, a member of the Internet Society’s Hall of Fame.
Wisconsin is a state with large health care and financial service sectors, both of which come with growing cybersecurity needs. Look for researchers working with the UW-Madison, the Milwaukee Institute and the Wisconsin Security Research Consortium to help probe for answers.
How policymakers treat startup companies: Obama raised a few eyebrows among entrepreneurs during his campaign when he said, “If you’ve got a business, you didn’t build that. Somebody else made that happen.” While his comment was later portrayed as an “it-takes-a-village” moment, there’s lingering doubt about how well Obama understands the innovation economy.
The same holds for some Wisconsin policymakers, who approved sweeping tax changes for major companies nearly two years ago but have yet to pass a much smaller investment capital program that could grow tomorrow’s companies today. Let’s hope 2013 is truly the Year of the Entrepreneur and not another startup cliff.
Tom Still is president of the Wisconsin Technology Council.
