Five recommendations as Obama plans out his second term
Over the next four years, U.S. President Barack Obama has an opportunity to help the U.S. remain competitive in a rapidly globalizing, recalibrating world. While emerging markets have been grabbing larger slices of the world's economic pie, America has slid to seventh in the Global Competitiveness Report (pdf). So while looming problems like runaway health costs and a broken tax system certainly demand attention, we also need a few targeted policy changes to help us maintain our global edge. Importantly, the US has run out of time for partisan squabbling. Dozens of countries are on the move, gaining economic strength at the expense of all the United States of America, both red and blue. Five ideas to improve our competitiveness:
1. Avoiding the fiscal cliff: Priority No. 1: Break the political gridlock with a debt reduction plan a la Simpson-Bowles. This would go miles toward restoring foreign and investor confidence. Without it, the U.S. dollar's stature as a reserve currency may come into question, causing disastrous fallout on the world markets. If automatic spending cuts are triggered in January -- after last summer's embarrassing near default -- Congress should seriously consider resigning. Declining faith in government was a major reason for the U.S. fall in the competitiveness report.
2. Strengthen government statistics: In a complex, globalizing world, the US suffers from often flawed and dated data. Without reliable data, it's impossible to craft sound policies. The most influential statistics, including GDP and unemployment, are largely compiled by the Census Bureau, Bureau of Economic Analysis, and Bureau of Labor Statistics -- funded by a paltry $1.6 billion of Washington's $3.7 trillion budget to study our nearly $15 trillion economy. In a report for the Center for American Progress, Andrew Reamer recommends a modest bump of $300 million to help bring us into the true Information Age.
3. New infrastructure and energy production: We can't compete using crumbling bridges, roads, and ports. American infrastructure is ranked 25th globally, according to the Global Competitiveness Report. Equally important is expanding our domestic energy production capabilities -- from fracking to renewables -- which would reduce imports, lower electricity costs, reshore lost manufacturing, and boost employment. Combined, these could be game-changers and reverse America's 30-year decline in trade. Michael Lind and Sherle Schwenninger of the New America Foundation have called for a federal Works Progress Administration-style infrastructure bank to help finance more than $2 trillion over five years. With interest rates low, and returns on infrastructure high, there may never be a better time.
4. Graduate student visas: With unemployment near 8 percent, many would be surprised that America runs labor shortages in several critical areas including in science, technology, engineering and math, or STEM. We haven't expanded our immigration system in more than a decade while the world has changed dramatically. This matters because highly educated immigrants boost American innovation: they represent 24 percent of all U.S. scientists and a remarkable 47 percent of U.S. engineers with advanced degrees. Between 1998 and 2006, U.S. patent applications from foreign-born nationals grew from 7.3 percent to 24.2 percent. With some 700,000 foreign students currently earning degrees at U.S. universities, why not offer green cards to an extra 50,000 graduates in STEM sectors? Exporting this kind talent after graduation only hurts our global competitiveness.
5. "Smart" power and defense cuts: The U.S. spends more on defense than the next 10 countries combined, now more than $750 billion per annum including debt on previous Defense Department binges. That is a competitive disadvantage, economically speaking. The State Department, alternatively, uses only $50 billion. More "smart power" -- increased diplomacy, multilateral efforts, and cheaper hardware like drones -- can help keep the country safe while using resources far more wisely.