Posted by: dstieglitz | July 28, 2012

That Used To Be Us

In That Used To Be Us, Thomas Freidman and Michael Mandelbaum mourn the decline of the U.S. as the world’s premier economy and suggest ways to maintain that position. When I think back on our country’s greatest achievements, I recall projects like:

  • The Hoover Dam in the 1930s to tap the agricultural potential of California and change the geography of the southwest U.S.
  • Constructing national highways in the 1950s to enable commerce to flow as easily from state to state as blood flows in our veins.
  • Putting men on the moon in the 1960s which captured our imagination and rekindled scientific innovation and education.
  • Inventing the Internet in a 1970s as a defense project which now connects the globe in one huge economic enterprise.

With the U.S. mired in a 1930s-style depression – 12.7 million people are unemployed – a project like one of these would go a long way toward restoring our economy and our greatness.

Our Own Worst Enemy. Alas, the government has erected roadblocks that essentially prevent a repeat of these national projects. Environmentalists would never allow a dam to be built – for example, they stopped construction of the XL Pipeline which could have provided huge economic benefits. Our highways, bridges, railroads and airports continue to crumble; but Congress hasn’t raised the gas tax to fund more infrastructure projects since 1993. NASA’s manned space flight program and the innovative spirit it created are in mothballs. And defense R&D in fields like the Internet is a victim of deep budget cuts. We must find something to be this decade’s symbol of American greatness.

Several Possibilities. The recession left citizens pessimistic about their financial future. Fortunately, like the mid-1990s recession under President Clinton, there are reasons to believe that better times lie ahead. If the government provided incentives instead of roadblocks, U.S. innovation could create jobs in new industries, grow the economy, and balance the budget. Consider the potential for: (1) an energy boom, (2) a rebirth in manufacturing, (3) innovations in biotech, and (4) another technology gold rush.

An Energy Boom. Today, the U.S. is the world’s fastest growing gas and oil producer. Innovative techniques like horizontal drilling and fracking enable U.S. energy companies to tap into massive domestic deposits of natural gas and crude oil. Furthermore, innovative advances in green energy sources and distributed use of solar and wind energy could produce a wide range of new U.S. products for world markets. The combination of increased fossil-fuel production, alternative energy devices, and higher efficiency standards could make the U.S. energy-independent in this decade – and generate millions of jobs.

Rebirth in Manufacturing. The decline of U.S. manufacturing is poppycock. In 2010, the U.S. produced $1.7 trillion in manufactured goods – up 42% from $1.2 trillion in 1996. Unfortunately for workers, manufacturing companies are more efficient: they employed 11.7 million workers in 2010 – down 33% from 17.5 million workers in 1996. The good news is the decline is reversing: U.S. high-tech manufacturers added over 200,000 jobs in 2011. Rising labor costs in China and high transportation costs make it more attractive to manufacture in the U.S. An expanded market for electric cars, the infrastructure to support them, and home-use solar and wind power devices could fuel a rebirth in manufacturing – and generate millions of jobs in the next decade.

Innovations in Biotech. The biotechnology industry is moving swiftly from the lab into commercial applications. World markets are booming for bioengineered fish raised on farms and agricultural products that produce higher yields, consume less water, and are more resistant to disease. Stem cell breakthroughs offer exciting possibilities for treating cardiovascular conditions and neurologic disorders, and regenerating human tissue and body parts. Furthermore, personalized medicine based on DNA profiles is moving closer to reality. Taken together, these biotech innovations could generate millions of new jobs.

Another Technology Gold Rush. Twice in the last 30 hears a new information technology has jump-started the U.S. economy and fueled a worldwide gold rush in technology. In the 1980s, the boom was the PC revolution. In the late-1990s it was global use of the Internet. Another technology gold rush could grow from cyber-security protection, imbedded computing in household devices, or innovative uses for mobile communications – and generate millions of jobs. With effective government policies, any of these four possibilities could propel an economic recovery in the U.S. What it will take is: (1) favorable tax policies for startups and R&D; (2) a workforce educated in technology; and (3) immigration programs that attract the best and brightest, and retain foreign students educated in American colleges.

The American Way. Europe and Asia are experiencing economic upheavals. If the U.S. is in decline – and it’s hard to deny the evidence – it is not because of China or the inevitable fall of a super power. It is because Washington is dysfunctional – the threat of a government-induced recession is a wet-blanket that stifles recovery. Even still, the U.S. has huge advantages over other countries: active capital markets, the rule of law, flexible labor laws, favorable demographics, and nearly endless natural resources. The American Way is to prosper and lead global change even when Washington’s policies are anti-business – but how much quicker could it happen with favorable policies?

More Entrepreneurs. The U.S. needs more entrepreneurs and investments by large companies to make growth happen in the four areas – yet the President vilifies big business and support raising taxes on small business owners. Most countries see businesses as problem-solvers – and they distinguish between entrepreneurs who create products and services, and financial speculators who distort the system. Entrepreneurs create new companies and jobs through imagination and perseverance – not by making babbles for the wealthy. They prosper by delivering products and services to people inexpensively and raising the standard of living for everyone. Entrepreneurs reallocate resources, sometimes sloppily, to markets where they are used productively. Many times, big businesses are as innovative as small ones; and just as many entrepreneurs sprout from middle management in Fortune-500 companies as from graduate schools.

Less Regulation. A salary survey published in Washingtonian Magazine shows that top people in trade associations – industry lobbyists – earn million-dollar salaries to influence what Congress and federal agencies do or might do. It’s a sad state of affairs when lobbyists earn more than entrepreneurs. There are so many regulations, taxes and policies that brilliant people get rich faster by manipulating the government’s rules to benefit existing companies than by building new ones. As a former business owner myself, my voting priorities have and continue to be policies that encourage investment in new jobs, R&D and national defense – and a fair tax code. President Obama says we need to double exports, repair our infrastructure, improve education, and expand R&D. Great ideas – but why haven’t he been doing that for the last three years?  Let’s at least start doing them today.


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