With the mid-term elections now behind us, the United States has a fresh opportunity to assess priorities going forward. If we were to be so bold as to take an honest look in the mirror, we would have to admit that we are a nation with vast potential that is being undermined by policy failures. Increasingly hyper-partisan politics masquerading as policy solutions are setting us on course for a new normal consisting of glacial economic growth, high unemployment, and a broader disillusionment with the American dream. We must do better.
The idea of the U.S. losing its economic bearings for an extended time may seem as far-fetched as a bad Halloween B-movie, but it is not beyond the realm of reality. Consider the example of Japan: throughout the 1980s, Japan's economy was the envy of the world. It grew at an average annual rate (as measured by GDP) of 3.9 percent -- far outpacing any other industrialized nation, including the United States. The bursting of their real-estate bubble, followed by policy inaction, led to a complete lack of confidence in the economy which then led to two "lost decades" with marginal economic growth.
The U.S. should not be so arrogant as to assume that through its exceptionalism it will avoid a similar fate. It is true that this is the most innovative economy on earth, but there are already troubling signs of long-term challenges. For example, over the last decade, there has been no net job creation here at home. Coming out of the recession in 2002, the nation created 7.5 million new jobs and then lost all of those jobs during the great recession of the last two years.
In many ways, our current predicament is symptomatic of a much larger problem -- the failure to recognize that we live in a globally competitive world and must advance policies aimed at attracting jobs here. According to a report by Information Technology and Innovation Foundation (ITIF), not only has the U.S. lost its leadership role in innovation and competitiveness, but we have also made the least progress of the 40 nations/regions in improvement in international competitiveness and innovation capacity.
To avoid Japan-like fate, the U.S. must focus on pro-growth policies that are supported by both Democrats and Republicans, create jobs and, above all, restore the level of confidence necessary to ensure a sustained period of economic growth.
Nowhere is there a better opportunity than corporate tax policy, especially the Research and Development (R&D) tax credit and repatriation of foreign earnings. The U.S. currently has the 3rd highest corporate tax rate in the world, well ahead of European and Asian competitors. Many of the world's largest companies, especially those in high-tech sector, can tie innovation and jobs directly to the R&D credit. When Congress first created it in 1981, the U.S. economy sat in the midst of a serious recession. Not only did the R&D credit help inspire critical research, but it also helped spur industries that transitioned the global economy into the digital age.
Similarly, it is past time to create a tax code that is in line with the rest of the world and that creates positive incentives for repatriating dollars earned internationally. The Federal Reserve's planned infusion of $600 billion into the economy is an acknowledgment that such a large cash infusion is likely to provide tangible benefit to the economy. Why not create incentives for the private sector to bring back billions of dollars to the U.S. as way of driving job creation now?
Second, while not a kitchen-table issue, we should expand wireless spectrum for broadband use. Stated simply, the economic benefits will be sizable and immediate, both from capital expenditures for deploying 4G networks, and from the new business opportunities the next generation of wireless will provide with speed and functionality. The idea of establishing incentive auctions to transfer existing spectrum to mobile broadband has bipartisan support and would raise billions of dollars that could be directed at the deficit or used to help fund a more robust R&D credit.
Third, we must confront our major structural problems -- namely the deficit and public education system. In a recent report, "One Trillion Reasons," a group of tech CEOs identified proven ways of reducing government spending by $1 trillion with the smarter use of technology, including consolidating data centers, streamlining procurement, adopting online self-service for federal agencies, and deploying analytics software to detect fraud and waste in federal grant programs, food stamps and Medicare.
Equally important is education, particularly our lack of standing in science, technology, engineering and mathematics (STEM). The latest scorecard released by the National Center for Education Statistics shows that the average score of U.S. eighth-graders in math and science is 520, compared with 530 in Russia, 553 in England and 561 in Japan. We are simply kidding ourselves if we think this problem can go away on its own.
For the first time in the country's history, nearly 50 percent of Americans no longer believe in the attainability of the American dream. This is unacceptable. With 2012 on the horizon, November 2, 2010, should mark the end of a contentious campaign cycle and the beginning of a new economic normal in Washington.