By Peter Bearse
There’s a growing feeling that we need another economic “stimulus.” But “feeling” doesn’t equate to understanding, nor stimulus to strategy. “Stimulus” can feed addiction, a dangerous, ongoing, over-dependence upon government largesse. Without a guiding strategy, a lot of money will be wasted. What kind of stimulus, generating what effects? We need a strategy that creates a dynamic, on-going, self-reinforcing process to generate new enterprise, build new industries and create new jobs.
The last stimulus was a consumption-side quickie. The next one needs to be an investment-side durable good, marking a shift from a financial paper-trading and consumption-spending economy to a “Made in America” and savings-investment society. It needs to generate durable jobs providing more than part-time employment in retail stores or McDonalds. It’s time for Congress to look to the long-term future of our children and future generations [who do not vote], not quick fixes that earn media attention for re-election.
So, we need a long-term strategy. What does this mean? – a set of programs that reinforce each other in positive, cumulative ways over the years – not just a hodge-podge of one-year or less programs that don’t add up. Three other strategic guidelines are also needed: (1) the program should be decentralized by passing federal money through state and local governments; (2) the focus should be on small rather than big business; and (3) government money should be used to leverage private investment via public/private partnerships or other such arrangements.
For many past years, we’ve neglected to face growing neglect of our country’s so-called “infrastructure” – the deteriorating bridges, roads, public buildings, power plants, refineries, dams, and other public facilities. The last big wave of public infrastructure investment was initiated by President Eisenhower – the National Defense Highway Act project that built our U.S. highways. Many public authorities have projects ready to go. Many public agencies also need to renew their equipment, so some outlays can have impacts in the near-term even though “infrastructure” is long-term.
For many future years, we need to invest in alternative energies and the “greening” of America to reduce global warming. We cannot repeat the failure of our short-term response to the last energy crisis of the late ‘70’s. We abandoned the electric car and energy conservation as soon as oil prices went down.
We also need to focus attention on our health care system so as to reduce the costs of medical goods and services, a major factor in peoples’ rising cost of living.
Entire new science-based industries have recently arisen or are on the horizon. Thus, support for entrepreneurship, science and technology should be another essential part of a strategy for “stimulus.” This element will reinforce all the others by improving access to equity financing for the development and growth of promising new or early-stage enterprises. Many such enterprises will be found in all the industry sectors already cited, such as biofuels (“green” energy), bio- and nano-tech (medical products), and new designs, methods and materials (infrastructure, manufactured housing and other construction).
Exports have been the only significant positive contributor to economic growth over the past year. A strategic focus on the industries just cited will help to build our export base, reduce our dependence upon foreign oil, reemploy people, raise incomes and improve our standard of living.
Another international aspect of this otherwise “America First” strategy is that federal officials will need to work in concert with their foreign counterparts in major industrial countries to prevent national recessions now rolling out in-sync from turning into a worldwide depression as in the 1930’s. Smart, new, flexible regulations will also need to be developed in cooperation with our major trading partners to forestall the kinds of flawed financial innovations – risk aggravating, not risk managing -- that are amplifying national economic downturns.
The details of the strategy outlined here will need to be set forth with the same care as its overall features. With such a program in hand, Stimulus II or whatever it may be called, can bring dynamism, vitality and productivity back to American industry and help to restore the American Dream. Another program of government handouts will fail and hand off a huge, national “sub-prime mortgage” to our kids and grandkids.
PETER BEARSE, Ph.D., International Consulting Economist