President Obama used his State of the Union address to shift the legislative and national focus from austerity (the debt and deficit) to audacity (growth and economic development).
Some pundits assert that in doing so he was taking his eye off the ball. We would argue quite the contrary. Putting jobs and wages in the direct line of sight is exactly what needs to be done to move the economy forward in a manner that benefits the middle class and average Americans.
We made that argument last week in our blog, "The Key to Prosperity: Manufacturing American Jobs" and in our 2011 blog, "The Need for Austerity and Audacity." We presented it first in our 2010 book, Renewing the American Dream.
We are not alone in our assessment. Larry Summers, former chief economic adviser to President Obama, made the case most recently in his Reuters column, "The Growth Challenge," on the day before the president's speech. Others such as Jared Bernstein, Robert Reich, Ezra Klein and Paul Krugman have written frequently (blogs, articles and books) over the past few years about the need to emphasize growth instead of the deficit to pull the country out of its post-recession sluggishness.
Some commentators such as Chris Cillizza opined that the president's economic agenda was short on "details" and did little to move the "debate" forward. We believe that they are wrong in both instances.
First, we would observe that the State of the Union address (and the inaugural address as well) is not the place to present a policy paper but to set out priorities. The president did that in a clear and unequivocal manner. And, in addition, he provided a few details.
On jobs: He called for restoring manufacturing jobs, lowering the corporate tax rate; making the research and development tax credit permanent; preferential treatment for those who invest in the United States; a "Fix It First" program for the infrastructure; and, a program revamping vacant homes. On wages: He called again for the "Paycheck Fairness Act" and to increase the minimum wage from $7.25 to $9 per hour indexed for inflation.
The president also referred to his $447 billion "Jobs" bill which was introduced in 2011 to but not considered by the 112th Congress. There are plenty of details in that bill. Among other things, it includes tax cuts for small businesses; spending money to modernize public schools and community colleges; and funding for infrastructure projects and to protect jobs of teachers, firefights and police officers.
Second, the debt and deficit debate has dominated the national dialogue for more than two years and unfortunately continues to do so. There are no new ideas being generated and the good ones have been ignored. More importantly, this singular focus diverts attention from dealing with the economic abyss confronting many of our citizens and the well being of the individual citizen.
We see the president's inaugural address and his State of the Union address as the beginning of the essential debate that must be had on the future of America and the American dream. Central to that debate is what role government should play in stimulating the creation of good-paying jobs that will help to unfreeze the American economy.
As we noted in our last blog, the American public is staring at an economic abyss characterized by a "slow to no growth economy, a job vacuum, stagnating wages, and substantial and increasing income inequality." In our opinion, given these conditions, government needs to do much more rather than less.
That is why we have called for development of a national Manufacturing American Jobs Agenda built upon traditional American strengths such as manufacturing, innovation, quality, productivity and entrepreneurship.
For more than two decades the United States has excelled at creating low-value jobs that contribute little to building a sustainable economy and competitive advantage for the nation and its citizens. The country has been majoring in the minors.
The only way that the United States can reverse this trend is to place a renewed emphasis on manufacturing and make it central to the American economic agenda. The State of the Union address begins this process and provides a broad framework for creating an American Jobs Agenda with manufacturing as a central pillar.
There are a multitude of proposals and excellent ideas that have been advanced that can be considered for shaping that agenda. We repeat three major ones here that we have made before:
- Establish a National Industry, Innovation and Infrastructure Bank. Both the Senate and the House have filed legislation to create a national infrastructure bank but no action has been taken. We support the establishment of such a bank but recommend that its scope and mission be expanded to include: support of all forms of infrastructure upgrading; a financing capability for "scaling" of manufacturing and technology concerns of all types; and, "seed" and start-up funding for new ventures and innovative businesses in the early stages of their life cycles
- Ensure a "job creation" linkage in all initiatives to strengthen and grow manufacturing. Lowering corporate taxes, making the R&D tax credit permanent, and providing preferential treatment for investments are good starting points. Others to consider include: repatriation of corporate profits made overseas; elimination of the payroll tax on new hires or tax credits for new "high value" jobs (high skill/high wage); and, creating a blended set of incentives working with state and local governments to bring advanced manufacturing from around the world here. The critical point, however, is that each of these initiatives must incorporate a "job creation" test or requirement.
- Enhance the financial and technical assistance available to small manufacturing businesses and entrepreneurs. Our recommendations in this area include: Enhance the assistance available to enable small manufacturing businesses to participate more fully in exporting. Implement programs to attract and retain talented educated immigrants and foreign entrepreneurs.
The debt and deficit were not central to the president's address -- neither in time nor substance. William Galston of Brookings notes, "On the public's other major priority -- reducing the federal budget deficit -- Obama broke little new ground." We agree with that perspective and realize that the austerity debate must be continued and brought to a productive resolution. But, reiterate that it is not the only debate that we should be having within the Beltway or halls of Congress at this time.
As we said in an earlier post, "Our leaders must become bi-focal, if not bi-partisan. They need to work at constructing an audacity agenda that will put Americans back to work sooner rather than later. By doing so, they will acknowledge the gravity of our situation and begin to restore confidence in our flailing economy and governance process."
We need an audacity agenda with good-paying jobs as its centerpiece to match an austerity agenda. It's time to walk and chew gum at the same time.
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