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Economy and Jobs
MAKING GOVERNMENT RESPONSIBLE means . . . promoting economic recovery and stability through policies and practices that assist the business of the private sector . . . retain the American control of the products of American research and development . . . assist communities in responding to their own unique needs.
POSITION SUMMARY:
Congress has no business trying to "micro" manage the economy. It's members do not know enough about economics--and the economy is too important to be held captive to "politics." Congress should limit itself to setting policy and exercising oversight over the Administration through its control of the budget.
To revive the American economy, we need to:
Stop exporting technology – especially the products of government-sponsored research – and use our technology to produce the things that the rest of the world wants and needs.
Stimulate a rebuilding of the American manufacturing base with a government “Buy American” policy. Promote American energy independence with investment in alternative energy sources – and the infrastructure needed to make them commercially viable.
Stimulate American small business – especially those that manufacture and maintain products that will aid in the effort to establish energy independence.
Support community initiatives to build local economies and respond to local needs for products and services.
[Related issues are discussed in separate sections on Managing Federal Spending, Community Development, Education and Jobs Training, and Small Businesses.]
DISCUSSION:
We have, however, allowed ourselves to become dependent on the economies of other countries. That dependence now threatens both our economy and our national security. We have already lost our capacity to manufacture many of the basic components used in the few remaining products that we manufacture. We have also become dependent of other countries for components used in our most advanced military systems.
We are now in the middle of an economic crisis. The Government has already taken action to address the immediate need to put Americans back to work and to stimulate the economy. I support the principle of Government investments to stimulate the economy. I also agree with the need to impose strict regulations on the financial services industry and reinstate the distinction between commercial and investment banks.
Now we need to look to the future.
The crisis in the world economy is not the result of a failure of capitalism. It is the result of a failure of reason and conscience.
Throughout the world, businesses chose profits over corporate responsibility.
Investment bankers and investment managers created financial instruments that had little economic reality -- and misled investors into believing that they were real.
Insurance companies, seeing opportunities for "easy profits," ignored all principles of due diligence and insured the phantom investments.
Meanwhile, manufacturing companies and commercial service providers used their political influence to obtain trade concessions that enabled them to exploit the workers of developing countries and engage in practices that continue to damage the environment.
Government has also contributed to the problem with over-regulation in areas that increase business costs--with little evidence that the costs are justified by the benefits derived--and under-regulation in areas needed to curtail corrupt and fraudulent practices.
Even organized labor has contributed to the problem by demanding wages and benefits that have driven businesses to seek cheaper labor in countries where labor laws are lax, or even non-existent.
Overcoming the consequences of these failures will not be easy. It will require changes in many policies and practices. We will need to change the way we regulate and tax businesses.
We will need to correct serious flaws in trade policies and trade agreements. We will need to re-evaluate the balance between national economic policies, environmental policies, energy policies and global trade. I do not pretend to have answers to all the questions. I do not even pretend to know what all the related issues are. I do, however, believe that there are several distinct actions that can be taken to address the problem. I believe that we need to take action on three fronts.
FIRST: We must protect America’s place in the world economy by retaining control of the one thing we alone have —our superiority in basic research and advanced technology.
SECOND: We must begin rebuilding America’s manufacturing capacity. This is essential if we are to avoid complete dependency on foreign countries.
THIRD: We must aggressively promote the start-up and expansion of small business—both as an instrument of job creation and as a means of reinvigorating local economies.
But policies alone are not enough. We also need an action agenda of coordinated programs to make those policies a reality through economic development within regions and localities. These needs are discussed in the following topics.
Retaining Control of American Technology:
Much of our trade policy is based on the belief that the low-paying, low-skilled jobs we lose to other countries will be replaced for by higher paying jobs for which Americans have the necessary higher levels of skill and education. Rebuilding America’s Manufacturing Base Before considering a proposed national response to our declining manufacturing sector, it is important to understand the relationship between production of finished goods and the development of the businesses and industries that support them. Example: Company “A” builds cars. Company “A” does not make its own alternators, so it buys them from Company “B.” Company “B” needs wire for its alternators, so it buys wire from Company “C.” Company “C” needs copper to make its wire, so it buys it from Company “D.” Company “D” needs raw materials to make its wire, so it buys its raw materials from Company “E.” In simple terms, expansion of activities at the top of the manufacturing chain has a trickle down effect that increases business all along the supply chain. Longer supplier chains mean more workers employed in the interim industries. As manufactures of consumer goods increasingly seek to lower their costs by buying their components from foreign manufacturers, the domestic supply chain is shortened. Jobs at the low end of the supply chain tend to be those that can be filled with less skilled workers. Therefore, shortened manufacturing supply chains hit hardest those Americans in the lower economic strata because it reduces the availability of jobs for those entering the work force with minimum skills and has adverse consequences for efforts to break the welfare cycle. But there is something the government can do right away—BUY AMERICAN. The government should immediately institute a requirement that everything the government buys must consist 100% of parts manufactured in America and must be provided by a company domiciled in the United States and owned at least 51% by American shareholders. Every vehicle, every tank, every aircraft carrier must be made entirely of parts manufactured and assembled in America—right down to the chips in the computers. Every typewriter, every desk and every lamp the government buys must be made entirely of parts manufactured and assembled in America. Every button on every uniform purchased by the government must be made in America and sewed on with thread made in America. Every contractor for every government construction project must use equipment made entirely of parts manufactured and assembled in America. Every supplier of government services, (such as computer programming or the government equivalent of telemarketing) must provide its services using American labor. No government contract work should be outsourced--and state and local governments should be encouraged to follow suit and establish the same requirements for their procurements. " . . . [T]he patriotic determination of every good citizen to use no foreign article which can be made within ourselves without regard to difference of price, secures us against a relapse into foreign dependency." --Thomas Jefferson letter to Jean Baptiste Say, 1815. Is it possible to build everything the government buys with every part manufactured or assembled in America? No, not right now. And as long as there is no American producer of a required component, American business should be free to continue making or purchasing components abroad. However, it is inevitable that, as soon as government suppliers are required to “Buy American,” there will be an explosion of American suppliers—new business and new jobs. Promoting Small Business
Small businesses dominate all private sector industries. Small firms employ half of the nation’s workforce and comprise 99.7% of American enterprise. Over 80% of the country’s nearly 290,000 manufacturing firms have fewer than 20 employees, and over 98% have fewer than 500 employees. Small businesses have the ability to create jobs in those sectors of the economy that drive our economy—manufacturing, construction, and retail and, most importantly, they play significant role in rural and regional economies and communities such as those that occupy much of New Mexico. Community and Regional Development:
At the national level, addressing the needs of the American economy is a matter of policy. However, policy only becomes meaningful when it is translated into action at the local level where actual businesses are started and jobs are created.
Economic Development vs. Enterprise Development: Federal Funding for Economic and Enterprise Development:
Current federal economic and enterprise development assistance programs operate largely independent of one another. Therefore, state and local economic development agencies must seek assistance from many different programs and agencies. Unfortunately, federal programs -- which have many different features and different eligibility requirements -- do not all lend themselves to coordination with each other or with State initiated programs. Reducing program redundancy and inefficiency requires a complete re-examination of the federal policy relating to state and local economic development activities and how State and local agencies use federal funds. To comment on this issue in the Issues Forum, click here
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The first aspect of this policy has been realized. American manufacturers have fled the country and built new factories in countries where wages are low. Even the manufacturers that remain rely on components manufactured by others in countries where wages are low.
However, the second aspect of this policy—which assumes that good paying high-skilled jobs will make up for other job losses—has yet to be realized.
Corporate America says the problem is that the American educational system has not produced the pool of skilled workers needed to make this theory work. But that isn't where the problem is. Every country knows the importance of high-tech jobs.
Every developing country is committing its resources to preparing its students with the same high-tech skills that companies are demanding from the American educational system. We do need to improve our educational system.
As long as other countries can buy our technology, they will be able to out-compete us on the world stage. Having an educated workforce capable of filling the high-tech jobs of the future will be meaningless if those jobs continue to be sent overseas.
America is never going to compete in the global marketplace based on wages. Our only hope for success in the international marketplace requires that we have the ability to do something that other countries cannot do.
We have to start making things that other countries cannot make—but need. To do this: We most stop exporting technology—especially the product of government sponsored research and development activities.
There is nothing new about this proposal. In 1933, Congress enacted the Buy American Act [BAA] that requires the United States government to prefer U.S.-made products in its purchases. The BAA is still in effect, but few federal agencies comply with it because we have entered into trade agreements that make full compliance impossible. We need to change that.
Will this proposal result in increased costs to the government? Yes. Goods manufactured entirely in America will cost more because American labor costs are higher than elsewhere. But as Thomas Jefferson wrote:
In most discussions of economic expansion, the term “small business” is used to refer to “small” manufacturing businesses. This is especially true in the context of federal assistance programs. However, the concept of small business development extends much further than this.
In many rural communities, the greatest need is not found in the need for expanded job opportunities per se. Rather, their need is for businesses that serve the community—grocery stores, bakeries, gas stations and automobile repair facilities, laundromats and other businesses that serve the most basic needs of the community.
Because I believe that promoting small business start-up and expansion is vital to America’s future, I have addressed these needs in detail with specific proposals in a separate Issues discussion on “Small Businesses."
An important distinction exists between “economic development” and “enterprise development.” “Economic development” typically focuses on business and job development—and on creating the physical infrastructure needed to promote business. However, “enterprise development” typically emphasizes training and technical assistance. Effective, broad based programs of economic development will necessarily have an enterprise development component. However, the activities needed to support effective enterprise development are distinctly different from those programs emphasizing economic development. We need to support both kinds of activities with federal assistance programs.
[Specific issues to be considered in the federal funding of community and regional development programs are discussed in the "Community Development" topic in "Fixing Government.
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