Increasing American Economic Growth and Competitiveness

Remarks prepared for the Congressional Black Caucus Commission on the Budget Deficit, Economic Crisis, and Wealth Creation

by Algernon Austin, January 27, 2011

Currently, there are over 14 million Americans who would like to work but cannot find work. This is the most important immediate problem facing the country. Although African-American workers only make up 12% of the American labor force, blacks make up 20% of the unemployed. Our ability to create jobs—sooner rather than later—matters a great deal for the well-being of millions of American families. Our failure to create jobs causes people to lose their homes, produces increases in family stress, and leads children to drop out of school.

A serious longer-term problem is the economic decline of the United States relative to other nations. In the 1950s and 1960s, the United States led the world on many important measures. Today, the United States has fallen behind. If we fail to invest in our people, in our infrastructure, and in research and development we will continue to fall behind. Even worse, we will stand by as we watch our country literally fall apart.

The good news is that we can go a long way to address these two problems—the immediate problem of a high rate of joblessness and the longer-term problem of America’s declining competitiveness—with one solution—smart investments now. The federal government needs to make investments rapidly in education, infrastructure, and research and development to make us more competitive globally. These investments if done quickly and substantially will create millions of jobs to address the current jobs crisis.

Falling Behind and Falling Apart
Below are just a few examples of how the United States is currently failing to make the necessary investments in education, infrastructure, and research and development.

Education

• A 2008 UNICEF report ranked the United States 20th out of 24 countries in providing early childhood education.
• Fifteen year olds in the United States ranked 17th out of 65 countries in the 2009 Program for International Student Assessment reading test. U.S. students were 23rd in science and 31st in math.
• The College Board found that the United States ranked 12th out of 36 countries in the college completion rates of 25- to 34-year olds in 2007.

Infrastructure

• The American Society of Civil Engineers estimates that two-thirds of U.S. roads are in poor or mediocre condition.
• 27% of U.S. bridges are “structurally deficient” or “functionally obsolete.
29% of all transit assets are in poor or marginal condition.
• Each day in the United States, there are about 700 water main breaks, we lose 7 billion gallons of water from water main leaks, and we put the public at risk from contaminated water.
• An analysis by the 21st Century School Fund finds that we have neglected nearly $300 billion of required maintenance in our public schools.

Research and Development

• The United States falls behind seven other countries—Israel, Sweden, Finland, Japan, South Korea, Switzerland, and Iceland—in terms of research and development spending as a percent of GDP.
• The Economic Policy Institute found that the United States ranked 15th out of 30 nations in broadband penetration in 2007.
• McKinsey estimates that the total savings from revamping health IT across the U.S. provider landscape could be as much as $40 billion annually.

Rising to the Sputnik Moment
If the United States wishes to remain a leader in the global economy we must make significant investments in education, infrastructure and research and development. If we make these investments now, the jobs created will help reduce the high levels of unemployment the country is currently facing.

Investments in Education
Disadvantaged children tend to begin school already behind their more advantaged peers, and these achievement gaps only widen through the children’s educational career. To increase America’s educational performance, we need to break these patterns.

We need to make the necessary investments:

• in early childhood education so that all disadvantaged children attend high quality pre-kindergarten.
• to increase the quality of teachers serving disadvantaged children throughout their educational careers.
• to increase the number of teachers serving disadvantaged students so that these students attend classes with a low student-to-teacher ratio.
• so that our public colleges and universities do not have to raise their costs out of the price range of low-income students because of state deficits.

If we begin to make these investments now we will create a substantial number of jobs in the education field, push the U.S. workforce back into a top position educationally, and increase the economic growth and competitiveness of the nation.

Investments in Infrastructure
The infrastructure needed for the productivity, safety and health of the nation is falling apart. We need to make the necessary investments:

• to repair, replace, and upgrade our deficient roads, bridges, water systems, power grids, and sewers.
• to repair, replace, upgrade and expand our public transportation systems.
• to modernize our school infrastructure so that all our students have access to 21st century technology and instructional resources.

If we begin to make these investments now we will create a substantial number of jobs in construction, transportation, and technology, and we will be laying the foundation for U.S. competitiveness for the rest of the 21st century, just as similar investments helped to make the United States a dominant economic force in the 20th century.

The expansion and modernization of our public transportation systems are particularly important for our low-income population. These improvements to these systems will allow low-income workers greater access to jobs. Increased use of new and efficient public transportation has the additional benefits of reducing our dependency on fossil fuels and on foreign energy.

Investments in Research and Development
In the State of the Union address, President Obama stated, “In America, innovation doesn’t just change our lives. It is how we make our living.” Yet, the United States is falling behind in its investments in research and development. We need more investments in R&D to ensure that America continues its innovation leadership.

Can We Afford These Investments?
America cannot maintain its leadership position in the world without these investments. America will not continue to be a vibrant, healthy and safe society if our infrastructure continues to decay. Our roads will not stop deteriorating, our water mains will not stop breaking without the necessary investments. In the long-term, the economic growth that these investments will produce will make us a stronger and richer nation. We will have more and stronger businesses and a better and more prosperous workforce. Our history and the history of other nations show that strong economic growth can effectively reduce a country’s debt load. The greatest risk to the United States is economic decline. And we will decline if we fail to make smart investments.

There are many options for generating revenues to pay for these investments. A few of these options are to reduce defense spending, to tax capital gains and dividends as ordinary income, to repeal the Bush-era tax cuts for top earners, and to adopt a financial speculation tax. For additional options and details see Investing in America’s Economy by Rebecca Theiss and Andrew Fieldhouse of the Economic Policy Institute.