President Barack Obama is initiating an "Insourcing American Jobs" dialogue with top business leaders. The latter are always looking for tax breaks and special benefits, and this could quickly degenerate into pleas for special treatment — whereas creating the best overall environment for all private investment would best foster growth and jobs.
Huge losses in Washington's equity stake in GM illustrate that government-financed jobs are too expensive. Fiascos like Solyndra and other ill-fated energy projects prove yet again that businesses, not bureaucrats, have the fine-grain information and financial acumen to make the right bets: investments that create new products, advance established industries and multiply jobs, not merely pay politicians' debts to campaign supporters.
Globalization makes abundant U.S. technology, energy and capital (if correctly deployed) much more valuable. China and Germany — so often are cited for their effective manufacturing and technology strategies — ensure their businesses compete in an advantaged environment. The policymaking challenge to Washington is defined by the need to level the playing field for U.S. businesses.
Washington must ensure U.S.-based innovation and production have the same market access in Asia and the Eurozone that foreign businesses now enjoy in U.S. markets, and that American firms are not disadvantaged by an undervalued yuan or euro. Currently, the math for locating manufacturing — be it textiles or turbines, auto parts or automation equipment — tilts heavily in favor of China and Germany.
Both the Bush and Obama administrations have relied too much on endless and unproductive diplomacy and commissions, and they have failed to take the concrete actions advocated by the likely GOP nominee, Mitt Romney (as well as this author and other economists). The president's Insourcing American Jobs forum and his new Trade Enforcement Task Force are just more talk and study without the muscle of U.S. government action to rebalance a tilted playing field.
Federal support for research and development is generous and essential, but too often, government-assisted research results in patents that create jobs abroad; consider how little Apple and Microsoft technology results in U.S.-based manufacturing. Federal policy should require that patents accomplished with federal support be worked in the United States to be honored by the courts. Otherwise, competing firms should be permitted to pay a fair licensing fee to manufacture those products in the United States.
Innovations in solar power and other alternative energy will drastically reduce petroleum use in 20 or 30 years; however, for now, the global economy will run on oil, and the United States continues to import 10 million barrels a day, greatly taxing job creation and growth.
At $100 a barrel, prudent development of U.S. reserves could cut imports in half, and coupled with better use of abundant natural gas and wiser application of now available internal combustion technologies, the United States could become an energy exporter.
Discouraging domestic oil and gas development does not hasten the arrival of alternative energy; it only shifts the environmental risks associated with petroleum extraction to developing nations.
Genuinely opening the Gulf and other offshore petroleum reserves, and freeing up onshore natural gas deployment, would create 2.5 million jobs in exploration and development, as well as in construction, steel, cement and other industries. Such work is usually associated with government stimulus spending, but in this case it would be done with private sector money.
For decades, Wall Street financial houses accelerated growth by directing vast American capital to new and innovative products and improving the efficiency of established enterprises. In recent years, those creative energies morphed into the buccaneer pursuit of big bonuses and nearly dealt a lethal blow to American capitalism.
The cure, however, has been worse than the disease. The Dodd-Frank law and big-bank bailouts have encouraged large Wall Street banks to acquire smaller regional institutions, which are flummoxed by the quagmire of new federal regulations. This concentrates control of most U.S. bank deposits among a handful of the largest financial institutions on Wall Street and limits lending to small and medium-sized enterprises that create the most new jobs.
Commercial banking should again be separated from the Wall Street casinos and offered streamlined regulation befitting taking deposits and making loans. The largest banks should be broken up to ensure none controls more than 5 percent of U.S. deposits.
The agenda to accelerate growth and create jobs is clear. It's not Washington picking winners and engaging in endless talk. Rather, it's the tough work of creating, through assertive international trade and exchange rate policies, a level global playing field for American businesses and workers; ensuring technologies developed in America build America; developing domestic conventional energy instead of sending environmental risks abroad; and cutting banks down to size to again serve their communities.