Easter is a celebration of springtime rebirth—a good time to enumerate reasons for optimism and the tasks necessary to accomplish America’s potential.
The U.S. economy is in renaissance. The wrenching recession and halting recovery have masked a major restructuring ignited by technology and good-old- fashioned market forces.
Typewriters and toys have become a powerful competitive advantage.
The modern office and consumer technology industries—which began with programmable typewriters, clumsy dedicated word processes and TV-set ping pong—have blossomed into enormously-powerful and highly-portable computers, smartphones and more specialized devices for industrial automation and supply chain management. These promote transparency in pricing, accelerate the movement of goods and services, and make nearly anyone who would like to be a global purveyor of ideas and services.
Teenagers can become millionaires, because the traditional barriers to developing and commercializing new ideas—access to up-to-date knowhow and capital—have been greatly reduced or removed. And the commercial applications of new technologies are quicker and dramatically more scalable, at much lower cost, beyond the imagination of entrepreneurs 50 years ago.
The fracking revolution has unleashed a new bounty of natural gas. It won’t fully free us from dependence on foreign oil, but it has some potential to substantially reduce that dependence, and instigate dramatic new growth in heavy industry—metals, petrochemicals, fertilizer, durable goods, and fuels.
America still imports, net of exports, about 6.8 million barrels of oil a day—much of it from the volatile Middle East and other unstable places around the world.
Emerging compressed and liquefied gas technologies—many already in trial use—have the potential to replace about 2 to 3 million barrels a day in big-city taxi and fleet transportation, rail transportation, inter-costal marine and Great Lakes shipping, and inter-city trucking on the East and West Coasts and within the industrial Middle West. Extending those technologies to even limited personal automotive use could slice oil imports by nearly half.
Beneath the rubble of the recession, U.S. manufacturers, which already enjoyed the highest productivity in world, have widened that gap. They have created smart factories that have converted the abovementioned technologies into automated material handling and supply chain management to dramatically decrease labor use.
Along with those enhancements, the re-pricing of American labor—as disparities in wages and work rules between unionized and other workers have been reduced—have robbed from Asia much of its cheap labor advantage. Insourcing is now the big word in manufacturing.
Barriers to exports remain. Important are the undervalued yuan and yen, high tariffs and regulations that keep competitive products out of big Asian markets, and government subsidies that make foreign products artificially cheap on U.S. store shelves, but some of U.S. disadvantages are self-inflicted—among these are regulatory barriers that make putting up factories more difficult and time consuming than in Asia and higher taxes on business.
Simply, America needs smarter policies to translate the bounties of technology and inexpensive energy into broader, more rapid economic growth and rising real incomes for middle class families.
Regulatory reviews in manufacturing must be streamlined and accelerated. Government needs to subject environmental protection to the same efficacy standards that the market applies to commercial technologies—we need environmental protection but it must be delivered cost effectively and quickly to add genuine value.
America has some of the highest taxes on corporations and small businesses in the world—especially considering that businesses are still expected to foot much of the nation’s health care bill—and too many investment decisions are made to minimize taxes as opposed to creating economic value.
Tax reform that shifts gifted human resources from gaming the tax system to making stuff is sorely needed.
Finally, it would be folly to use the bounty of natural gas for quick profits through unbridled exports of liquefied natural gas to Asian economies that subsidize energy use in manufacturing and other commercial activities. Americans would see that gas returned, incorporated into artificially cheap products on U.S. store shelves, displacing U.S. jobs and slowing recovery.
Strategically reserving natural gas for truly competitive domestic uses in transportation and industry could easily create another three million jobs, and would knock one or two percentage points off unemployment.
Breaking down other barriers posed by inefficient regulatory and tax systems could keep the economy growing robustly and at full employment for the next generation.
Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist.
