Volume 12 | Issue 4 | Year 2009

A deep national recession and an energetic new Administration have spurred the federal government to aggressive economic activism on many fronts – stimulus spending, climate change, health care, taxes, and aid to stabilize the auto companies and financial industry. The pace of action in the nation’s capital today is more intense than I have ever seen before.
There is no question that the dire economic situation called for aggressive action, and the National Association of Manufacturers (NAM) supported the stimulus legislation. But it is vitally important that we not allow the economic downturn to serve as a pretext for abandoning our traditional reliance on the private sector as the primary engine of economic growth, and it is equally important that we rein in unprecedented budget deficits as quickly as we can to avoid burdening future generations with mountains of untenable debt.

In the long term, we need to think beyond the recession to what is needed to restore our nation’s economic vigor and restore confidence in the future. In their efforts to address the nation’s economic problems, the White House and Congress need to more fully consider the effect of their actions on America’s global competitiveness.

Every action the federal government takes that imposes new costs, regulations, taxes, and managerial burdens to business makes it more difficult to compete in the world. These actions add up, bill by bill, regulation by regulation, making it more difficult for the United States to remain the world’s economic leader when the recession finally ends.

Today global competition is more intense than ever before. Our competitors are working feverishly to overtake our economic lead and establish economic dominance. What’s their strategy? They are adopting long-term policies that will make their economies more competitive. They clearly understand what’s at stake and are determined to outperform us.

A strategy for maximizing U.S. global competitiveness should surely embrace most of the following components:

  • A comprehensive energy policy: The carbon debate is at its heart an energy debate. If we impose a strict cap and trade regime for carbon without a credible plan to meet the economy’s growing energy needs, the exodus of critical industries could become a flood. Federal policies should encourage their exploration and product while also allowing a true renaissance of clean nuclear power.
  • A pro-growth tax system: Our system of taxation, state and federal, should be seen as a tool to encourage economic growth and job creation, not just fill budget shortfalls. The U.S. corporate tax rate is the second highest income tax rate in the world (after Japan). If we want our private sector to flourish, our tax system must reflect the realities of global competition.
  • Fostering innovation: To compete in the global marketplace, we must rely on our greatest strength – creativity. Manufacturing is a wellspring of innovation, accounting for two-thirds of all private sector research and development. Yet every year sees a struggle in Congress to renew the modest R&D tax credit. And we must become more aggressive defending intellectual property rights in the international arena, investing the resources needed to deter piracy.
  • Trade expansion: The United States, which is still the world leader in manufacturing, exports about $60 billion in manufactured goods each month. Exports in recent years have been a major factor in economic growth. In 2008, we had a $21 billion trade surplus in manufactured goods with our free trade partners. Our marketplace is global, and Congress should recognize the opportunities that trade represents.
  • Equitable labor policies: Labor and human resource policies must strike a balance between the legitimate needs of workers and employers.
  • Restoring confidence: In the midst of the deepest recession since the Great Depression, it’s important that policymakers act in a way that restores predictability and stability to our economic system. Long-term business and investment decisions, often involving hundreds of millions of dollars, cannot be made in an environment of uncertainty and risk.

We need a spirited public debate of all these issues, but one that appreciates the global context that U.S. business must operate in. By all means, yes, let’s have an energetic, active government – but one that acts on behalf of U.S. competitiveness. That is the key to our nation’s economic future.

John Engler is president of the National Association of Manufacturers, whose mission is to enhance the competitiveness of manufacturers. Visit: www.nam.org.