For the last 16 straight months, unemployment has been over 9%. Yet, our current long-term strategic plan for job growth can be summarized in one word: hope. We hope that tax breaks will perform miracles.
Let me be clear: I think that's a pretty lousy strategy for long-term economic growth.
There are lots of ideas that might be part of a long-term strategic plan to get our economy going again. Jerry Seib talks about three different approaches in a recent Wall Street Journal article "It Isn't Just Lost Jobs--It's the Lost Jobs Machine." Intel co-founder Andy Grove described his ideas to restart job growth in his excellent Bloomberg op-ed "How to Make an American Job Before It's Too Late."
The Obama administration just needs to create a well thought through plan, have it independently validated, and then lobby Congress to adopt it. It's that simple.
If Congress rejects the plan, then Obama should either re-work the plan as needed or re-double his efforts to sell it to Congress. That is how government is supposed to work. The President's job is to educate the public to put pressure on their elected representatives to pass legislation that is in the public's best interest.
Today, there is no long-term strategic plan for how to restart the job growth machine. There is no plan to put back in place the financial regulations that we need to prevent yet another financial melt down (watch the movie "Inside Job" which explains how government deregulation caused the economic crisis and why we aren't putting the regulations back in place to prevent a reoccurence). More importantly, there isn't even a well-defined process for how tough national problems should be solved.
Instead, what we typically see from the Obama administration are seemingly uncoordinated short term tactics like extending the R&D tax credit and investing in infrastructure. That's a good start, but it is not nearly sufficient. I don't know anyone who believes that piecemeal policies will get us out of the deep hole we are in. The real solution we need is much broader and more complex than a few tax policy changes.
Does Obama have a specific measurable goal for long-term job growth? No. Did Obama tell us where his written long term jobs plan can be found so we can read it and understand the thinking that went into creating the plan? Nope. Did he tell us who created it? Nope. How it was created? Nope. Did he explain to us why he made the choices he did and what evidence supported those choices? Nope. Did he tell us who validated his plan and what top economists and key business people support it as a great long-term strategic plan that will get the job done and specifically why they believe it will work? Nope. And Obama expects us to get excited about his new plan??!?! Come on. I was a big Obama supporter and even I can't get excited about an unclear economic goal, piecemeal policies, no long-term plan, and no validation of anything. So how can he reasonably expect others to support his agenda? He shouldn't. It's a lousy strategy and it isn't working either.
Clearly, consulting with individual experts (economists and business people) and following their advice hasn't led us down the right path. Governments need to really understand their competition and take steps to compete just like businesses study their competition and compete. I don't think we do this very well. But how would we know? All the public ever sees is just the final policy, e.g., "we're going to reduce business taxes." Why aren't we allowed to see the critical thinking, research, and analysis that was done to create the policy? I'd like to see a document that summarizes what the world's most successful countries have done, how we know what the key success elements were, and the explanation of why our strategy is clearly superior to our competition (or at least as good). I'd like to know what our sustainable competitive advantage is. I'd like to know that somebody thought this through.
If I were President, the very first thing I would do is start with a clear statement of the problem. I would either determine a set of clear, measurable goals I want to achieve or have a very clear problem statement that describes exactly what problem I am trying to solve. In this case, the goals might be "Create at least 5M new jobs in America between 2010 and 2015, grow GDP at least 2% per year for at least the next 10 years, and put in place long-term policies that will keep unemployment under 6% every year going forward."
Next, I would appoint a small, but diverse, committee of our smartest thinkers on this subject and ask them to put together such a plan that will meet the goals.
Collectively, the group should include business people with operational experience in both small and large enterprises and competing globally (from high tech to agriculture) and economists who have an excellent understanding of why other countries are doing better than we are. The group should also include people that we don't normally associate with growing the economy but that experts point out are key to solving the economic growth problem, e.g., experts who understand the impact that education has on economic growth.
The committee should be kept small for the best results. The more people you have on the committee, the harder it will be to create a bold plan that will really make a difference.
President Johnson proved you can create great plans to solve our nation's toughest problems with committees of less than 10 people. He tackled the country's largest problems by creating long-term plans using a process similar to this one. His legislative agenda was the most successful in US history with a 96% passage rate.
Selecting the right committee members (and the right mix of committee members) is critically important. This is one of the hardest and most important parts of the whole process. You need people who are open-minded, good listeners, and who can work well together. They should have somewhat diverse viewpoints, but not so diverse that nothing gets done. They should collectively have the expertise and viewpoints to understand the problem from many different viewpoints. John Thompson and Joseph Stiglitz, for example, would be reasonable choices for members of this committee.
The final selection of the members of the committee should be done by the President, but he should seek input from both Republicans and Democrats, and pay careful attention to reasonable Republican input so that the commission is not seen as partisan and then when it is announced, prominent members of both parties need to publicly proclaim that this is a good idea, before the process begins. They should also agree up front that there will be no filibustering of the outcome; that the policies recommended by the committee will be given an up or down vote.
Ideally, the committee should have an overall public process, but it is more efficient (and critically important) to have lots of committee meetings that are not public so members can speak freely amongst themselves. The committee should seek advice and input from economists, small and large business owners, and the public at large. Public input ensures that no good argument escapes the attention of the committee.
My input for the committee would be that the very first thing we should do is put the financial regulations back in place that we had before the problems occurred (the movie "Inside Job" does a great job of explaining why this is important). That way, we won't have a re-occurrence.
We should look at adopting the strategies that have worked so well for countries with high employment and a positive balance of trade would be a good starting point for such a plan. We could certainly start by copying what has worked for our competition. Once we succeed in restarting our economy by adapting best practices, then we can try out other new, innovative approaches to improve even more. While this makes it sound easy, it is not nearly as easy as that because there are always so many elements at play that it is difficult to isolate which specific measures were key to success in other countries and whether it is possible to replicate those measures in the US. For example, India is one of the world's fastest growing economies, but it has a corrupt and dysfunctional government. Is India's success due to the government policies or in spite of government policies?
It would also be nice if our economic growth plan dovetailed nicely with our need to drastically reduce our greenhouse gas emissions, Obama's desire for America to be a leader in clean energy technologies, and a national goal to be completely energy independent within two decades (which has a direct benefit of helping our trade deficit). We send a billion dollars a day overseas for oil so it's not unreasonable that a comprehensive economic plan would include addressing the energy issue. Wouldn't it be great if we had a bold, visionary comprehensive plan could address all the issues at once? I think this is quite possible, but I realize I'm asking for a lot. But why not give it a try?
Creating such a plan would not be easy.
What would such a plan look like? I can tell you for sure what it would not look like. It would not be as simple as "let's make the Bush tax cuts permanent" or "let's increase the R&D tax credit" or "drill baby drill" or anything like that. Been there, done that.
A good plan would clearly explain the research that was done, the policies that were considered, and the rationale behind its recommendations. A good plan would have a clear set of goals. It would align a variety of policies and incentives to achieve the goals. There must also be a way to judge if the plan has been successful and a plan for repairing or replacing policies that are not measurably working out as expected.
I don't know why all public policy rationales aren't out in the open. If there is strong evidence supporting adoption of a policy, then why would you want to keep it a secret?
As I noted above, there are many good ideas out there that might be part of the plan to restart our economic growth. The trick is to stay focused on the problem of global competition and growing our economy and improving our trade deficit.
One thing is quite clear: any long-term plan for fixing our economy must include fixing our educational system. The most important point in the movie, "Waiting for Superman" is that if we replace the worst 8% of teachers with teachers who are just "average," we will zoom to the very top of the world in education. That's not conjecture; it is mathematically provable from real world data. But it is the companion book to the movie that points out the dramatic impact such a change would have on our economy. It would increase our GDP by trillions of dollars over the coming decades (see page 88 of the book). The potential impact dwarfs the 1 trillion dollar stimulus. We know all this must be true since the data comes from a Republican think-tank.
I think it is pretty funny (and sad) that the Republican plan to restore our economy would slash spending for education. That would simply guarantee economic disaster. It is the educational disparity between us and other countries that is a major cause of our falling behind. And that's according to a prominent Republican think-tank! So how does slashing education spending make our educational system better? It doesn't! Had the Republicans instead talked about a strategy to replace the worst 8% of teachers with average teachers as a central focus of their economic plan and explained to the public how education and economy are related...well, then I'd have a lot more respect for their plan. As it stands, it's clear that they have a brain-dead agenda that would make things worse. I don't know how any of these guys can go on TV and defend such a plan (they only get away with it because the press doesn't ask probing questions that would expose the hypocrisy). That creates an opportunity for Democrats to really differentiate themselves by creating brilliant policies and explaining to the public why they are so brilliant and why the Republican plan is so dumb. They can even back up their statements with facts. I could really get excited about that, and all the loyal Democrats I know say the same thing.
A good plan would probably include making key strategic bets in a few large industries where we have or could create a sustainable competitive advantage and aligning lots of national resources behind that bet. For example, Westinghouse is the world market leader in conventional nuclear power (3rd generation) and it also it turns out that we know how to design and build reliable fast nuclear reactors (4th generation) better than anyone else in the world. We could set a goal of becoming the world leader in nuclear power and back it up with R&D funding, regulations, expedited regulatory approvals, low-cost loans, student scholarships for those students choosing to major in nuclear engineering, and other incentives in support of that goal. All the wood behind one arrow.
Although this is somewhat of a digression, suffice it to say that Bill Gates and I both think fast nuclear reactors are critical to invest in right now, and we are both extremely disappointed that the US isn't doing anything in this area today. I think any serious long-term economic growth plan for the US needs to have fast reactors as a key piece because foreign oil costs us $1B a day in money sent overseas. To get off oil, we need to switch to electricity for transportation, nuclear is the provides the most reliable and cheapest electricity cost to replace oil, but today's nuclear designs have a waste problem, but the new fast reactor technology uses our existing nuclear waste for fuel and produces no long-lived nuclear waste whatsoever. George Vendryes, a French national, who recently received the Bennett Lewis Award from the American Nuclear Society, closed his acceptance speech by quoting Enrico Fermi who said in 1945, "The country which first develops a breeder reactor will have a great competitive advantage in atomic energy." He is absolutely right. We need to get off the dime here. Nuclear power is the biggest most important clean energy technology we know of today and for the foreseeable future and we've already invested $5 billion of government money in our National Labs to create and prove the technology and no other country has been able to match our technology. An independent group of over 240 nuclear experts from all over the world validated that we have the best advanced nuclear technology on the planet. This is a huge national competitive advantage and we are seriously blowing it: we ordered our scientists to stop work on it 15 years ago and the reactor they built is now in the process of being dismantled. That's not the way to become the world leader in clean energy!
A good plan also would have a goal to bring manufacturing back to America. This can be done by offering incentives (like tax breaks) to companies investing in capital equipment used for manufacturing, adopting Andy Grove's idea for taxing offshore goods and services and putting that money into a scaling bank, more aggressive trade policy (e.g., raising tariffs on foreign goods and services), by offering incentives for consumers to buy products manufactured in America and by offering government assistance, education and training, and incentives to firms who decide to manufacture in the US. Do you remember the last time our government asked us to buy products that are "Made in the USA?" I don't. Do we really just not care anymore? I've run five companies over the last 30 years and not once has anyone in our government offered assistance in helping me to manufacture in the USA.
Funding such a plan should be easy. We seem to have no problem investing over 1 trillion dollars doing nation building in other countries like Iraq and Afghanistan. Yet, the wars in Iraq and Afghanistan have been a huge mistake (see "Move Chuck Hagel From Obama "Team B" to "Team A""). Since we can afford over a trillion dollars on building up other nations, shouldn't we be able to afford at least the same amount building up our own nation?
Once the jobs plan is created, it must be validated by people and organizations who were not involved in the process of creating the plan. This would be similar to the "peer review" process that academic papers have to go through in order to be published. Basically, we need independent peer review for validation of the plan so it is a plan we can believe in. There is no point in trying to sell a plan that is full of holes. We want to find out sooner, rather than later, what the holes are so we can fix them. That's the point of the validation phase: to ensure the plan is solid. Not every expert is going to agree with every item in the plan, but if there isn't a large enough base of support among independent experts, it's probably a bad plan.
If the plan is rejected by most experts, the recourse should not be to try to do damage control by trying to "convince" or "sell" them on the plan. The recourse should be to fix the plan so it is solid. Solid plans that accomplish the objective are good for two reasons: 1) they are better for the public and 2) they are easier to sell to Congress. This isn't my theory. President Johnson proved this with his Great Society agenda: 96% of his bills were passed by Congress.
Lastly, once there is a validated plan, the President must appoint another small bi-partisan team carefully selected based on their ability to work well together to develop a plan to get the public and Congress to understand how the plan was created and to draft the needed legislation and policies to implement the plan. This team should have Republican and Democratic members of Congress, as well as outside experts on getting legislation passed. Make no mistake, getting any legislation that significantly changes the status quo, no matter how good it is for the country, passed in Congress, is the hardest part. But the better the plan is, and the more validation and support it has, the easier it will be to get it through Congress.
Today, the Fed says that they will do things like keeping interest rates low until the economy gets better. That is not a long-term strategic plan for economic growth. It is a lifesaving tactic. Similarly, the Recovery Act was a lifesaving tactic, not a long-term fix. We need a proactive long-term strategic plan.
We should be asking the President questions like: "When will there be a written long-term strategic plan for economic growth? Who is creating it? Who will it be validated by?"
Leadership is all about identifying big problems, executing a process to develop viable, well thought-through plans to solve those problems, and getting others to follow. It also involves having the courage to take, when appropriate, unpopular stands because it's the right thing to.
The process outlined above can be applied to other big issues like climate change, education, health care costs, immigration, and so on.
We've known about climate change for decades. Has any administration ever assembled a small, carefully selected team to put together a comprehensive and cohesive climate change strategy? Nope. Never happened. Nobody ever tried. That's pretty sad. As with the economy, there are so many diverse viewpoints out there that choosing a compatible group of committee members is critically important. Jim Hansen would be my first choice for this committee. Climate change is a global problem. The goals must be global goals. It can be solved by US leadership, but only if we have a clear, believable plan that explains why other countries will follow our lead. The failure of Copenhagen once again proves that the only way to solve this problem worldwide is to create a way to generate base-load electric power cheaper than coal that can be built anywhere there is a coal plant today. Today, the only way I know to do that is with a national focus on lowering the cost of nuclear power through a focus on 3rd and 4th generation designs (4th generation nuclear power plants do not generate any long-term radioactive waste), and scaling up manufacturing to get down the cost curve. We could do that by building hundreds of new nuclear plants in the US by offering power companies huge incentives to replace their aging coal plants now. We would reduce our greenhouse gas emissions and create millions of domestic jobs as well. A great kick start for our economy. We would unite the country behind a great national goal. It would cost a fraction of the money we've spent on the wars in Afghanistan and Iraq. If there is better way to wean other countries off of cheap coal, then let's hear it from Obama right now and get it validated. Otherwise, we are just wasting time. This shouldn't take us years to create a plan. We do not need the perfect plan. A "good" plan is a lot better than we have now which is no plan. The cost of delay is huge.
An even better approach would be to have N different committees (where N is a small number like 4) independently solve the problem at the same time . Then the President can pick from N great solutions. This actually is much easier than trying to pick a single compatible committee to solve the problem because each team is free to select its members. The President appoints N team captains. Let the Republicans appoint a few captains too. Each team captain then assembles his own team of diverse, but like-minded experts. The number of people on the team should be up to the captain; but it should not be more than than 10 people. Each team listens objectively to public input and can deliberate in private as much as it wants. This is very efficient since no time is wasted in committee debating irreconcilable differences among committee members and gridlock is eliminated. All would assemble interesting plans. Then let independent experts who weren't involved in any of the committees rank order each plan and have the President select the winning plan.
If you want the best possible plan, the N-team approach on each problem is the way to do it. You just have to resist the temptation at the end to generate "an even better plan" by cherry picking the best ideas from each plan. Instead, it would be better to give the teams a second round to come back with a modified plan after everyone sees all the plans and then pick the winner from that final round.
You can also do a hybrid approach. Appoint one committee where all the members are selected by the President as described above, but also appoint 5 other team captains to solve the same problem. You cannot lose this way. You will always get a better final plan than if you had just gone with a single hand-picked committee. Guaranteed.
All participants should be paid for the time they spend working on the committee and you could even give each member of the winning team a $100,000 bonus. This ensures that the teams can attract the best and brightest members. As before, once the winning plan is selected, another committee of political experts should determine how best to get the policies adopted.
There are a number of other variations of the basic approach which I've described on my Facebook notes page (see How government could create great long-term strategic plans for solving tough problems like climate change, the economy, etc.).
A subset of the process above can also be applied to objectively evaluate plans proposed by Republicans for saving the economy. So when Congressman John Boehner says, "Here's the Republican plan for fixing the economy," it would be nice if there is an objective, non-political process for evaluating the credibility of that plan. Today, Boehner says that to fix the economy we should cut government spending and freeze all tax rates for two years, but John Q. Public has no objective basis for evaluating whether those claims are credible. Because there is no clear analysis by objective experts or evidence it won't work, and because the public sees the current administration as failing to deliver new jobs, it's no wonder that people will gravitate to those who offer an alternative that might work. The opponents offer hope; the incumbents have failed to deliver and do not have a credible plan to make things better. Is it any wonder that the Democrats are in trouble in November?
Jobs and the economy are clearly top issues for our country and this administration. Mr. President, if you don't like my process for creating a plan to create a "jobs machine," then please choose a better process. But please, let's not wait any longer. Let's get this economy started now.
One final thought. If the Democrats lose big in November (which appears to be likely to happen as noted in Huffington Post articles such as "Slumping Economy Jeopardizes Democrats' Election Prospects") they will have no one to blame but themselves because as far as I'm concerned, they didn't even try to put in place even the most modest of a real long-term jobs plan. As far as I know, they didn't even try to create a comprehensive plan as outlined above. Had Obama to followed my advice but was blocked in Congress by the Republicans, it would be a different story. Then the Democrats could very rightly focus the public's rage on the Republicans, get even more seats, and pass the reforms that are needed. So really, the Democrats have no one to blame but themselves if they lose big in November.
Another change the Democrats should make is to get a new set of out of the box thinkers advising them and start listening to them. One good litmus test for a new set of advisors is whether they have previously pointed out that we have no long term plan or strategy for restarting our economy and that they have a better process than mine for fixing it. Another good litmus test for new advisors is to ask them what they think about this article.
The good news is that some influential people inside the White House have read this article and agree with it and are taking action to convince others within the White House to adopt this. At least one cabinet member is going to use this process for his next big problem.
Lots of people I know who used to support Obama that have read this article agree that this is a great way to recover their support. That alone is sufficient reason for adopting this process. In fact, some of my friends are even writing articles today with similar advice! For example, Kent Pitman, a fellow computer scientist that I attended MIT with, wrote in his blog "Finding an Antidote to Hopelessness" (emphasis mine):
Obama may not be able to fix everything, but he needs to level with people--and himself--about the problems we face. And to get to that, he needs to start by getting some new advisors and some fresh viewpoints. He's become increasingly insular during his time in office, failing to fulfill his promises of transparency. Right now he can't seem to see out, and neither can we see in.
Once he can see clearly where he is, he'll be in a position to chart a believable path forward. Only when people see a plan they can understand and believe in will there be hope. He must articulate such a vision. And he must spell out clearly how completely essential it is to have a Democratic Congress in order to execute that plan.
But the best reason for adopting the ideas here is that my suggested process, properly executed, has the best chance of resulting in solid, non-partisan, defensible plans that are good for America and can get past the gridlock in Congress.