Originally published by the Palo Alto Daily News
Against the backdrop of America’s election season, one question should rise to the top of the public debate: What does America need to do to succeed in the global economy? The answers offered by political candidates in the months ahead will have repercussions for decades.
The near-term economic signals are mixed. According to the U.S. Commerce Department, slower sales and higher energy and labor costs are forcing many companies to reduce spending and hiring. Tighter credit policies are making it harder for businesses and consumers to borrow. The long-term outlook is also uncertain, given the inevitable rise in global economic competition.
In such an environment, it is absolutely critical for Democrats and Republicans to offer smart solutions that re-energize the American economy. One set of issues revolves around how to modernize the major pillars of the economy, such as the tax code, regulation, healthcare, retirement security and infrastructure. Most experts agree that our existing policies are better suited to the realities of the 20th century than the 21st. The challenge is finding realistic, bipartisan approaches that ensure economic fairness and security for all Americans while simplifying bureaucracy and reducing costs. Increased use of information technology can help make all economic sectors more efficient and productive.
Another set of critical issues is how to improve U.S. economic competitiveness by addressing such issues as education and innovation. Specifically, the US must reverse the troubling shortage of math, science, and engineering talent by taking steps to increase the number of math, science, and engineering graduates, as well as improve the number and quality of K-12 math and science teachers. Congress and the President would also be wise to encourage research, development and commercialization of new technologies, including a permanent extension of the R&D tax credit and stronger protection of patents and copyrights.
One thing the United States must not do is back away from its historic commitment to global trade. The reasons why are very clear. More than 95% of the world’s consumers live outside the United States. One-sixth of U.S. manufactured goods are sold abroad. One in every three acres of U.S. farmland is planted for export. The combined effects of the major trade agreements of the 1990s have increased the purchasing power of the typical American family by $1,300 to $2,000 per year.
Any way you look at it, global trade delivers real value to American workers, farmers, and businesses. Congress and the President must work to revive global trade talks, approve two-way trade agreements with key nations, and encourage greater exchange by helping to harmonize technology standards with our trading partners.
Likewise, the United States must not close the spigot of foreign investment in our economy. Despite the occasional controversy about particular mergers and acquisitions, overall, foreign direct investment helps the U.S. economy in many ways. For example, U.S. affiliates of non-U.S.-based companies employ more than 5 million U.S. workers, and an additional 4.6 million U.S. jobs indirectly depend on foreign investment. On average, U.S. subsidiaries of foreign firms pay 36 percent higher wages and salaries than their U.S. counterparts, and such firms invested more than $150 billion in 2005 in U.S.-based research, development, plants and equipment. A recently enacted law should help ensure that foreign investment continues to flow into the United States and should be implemented with care.
Finally, policy makers must continue to maintain a healthy environment for economic growth and job creation, including lowering the overall tax burden, simplifying the tax system, avoiding needless regulation, and relying on market incentives to achieve social goals.
Long after today’s “hot button” issues have passed into history, the choices made by elected leaders about how to keep the United States globally competitive will affect the lives of all Americans and billions of people around the globe. For the sake of our own prosperity and that of future generations, we must demand that political candidates present rational, workable solutions to build a stronger America.
Mary Arnold is Vice President for Government Relations at SAP America and a member of IWF’s board of directors.