Doing What Works for the Short and Long Term
The stimulus package exposed what we all hoped would have changed with a new President: That is entrenched perspectives unfortunately will not go away overnight. As we move forward, the information and communication technology sector encourages leaving behind Sunday morning sophistry that perpetuates political fault lines. We, and ideally the nation, will instead focus on real world solutions that both stand the best chance of quickly and effectively putting Americans back to work, and providing fundamental capacity for expanding our information based economy for years into the future.
We have reached the moment when difficult choices must be made and translated into concrete actions. Individuals, businesses, and banks are experiencing unprecedented declines in the value of their assets leading to a hoarding of cash and consequent cuts in operations, spending, and jobs. The unremittingly negative economic news -- the latest being a 7.6 percent unemployment rate and 3.1 million jobs lost in the last year -- has profoundly impacted consumer confidence leading to even greater erosion in the asset base. The growing interdependence of main-street and Wall Street could not be clearer.
Breaking this spiral requires shoring up the assets of both individuals and corporation. In short, we need to get cash flowing into individual pockets, bank accounts, and the broader economy in order to get back to saving, spending, lending, and otherwise creating wealth. The first crucial step in that process was for Congress to pass an economic recovery package that will immediately stimulate the creation of high-paying jobs.
Congress should be commended for passing a plan that has the potential to be stimulative as well as smart. Investments in Information Technology (IT) will help lead the way to economic recovery. Critical investments in America's digital and scientific infrastructure will spur immediate and significant job creation and provide our nation with both a near-term stimulus and long-term competitive advantage. The data clearly support this: the Information Technology Industry Foundation (ITIF) has determined that an investment of $40 billion in America's IT network infrastructure in 2009 will create approximately 949,000 U.S. jobs, more than half of which will be in small businesses.
The other, perhaps equally important aspect of the story is the byproduct of these investments in the IT sector and in scientific research. Dollars spent today in creating a "smarter" energy grid; in upgrading health care technology; improving the scientific research infrastructure; and in accelerating broadband deployment will do much more than provide steady paychecks for those directly involved. They will help save lives and provide health care at affordable cost. They will enhance educational opportunity and empower individuals to take more control over their lives. They will help expand America's competitiveness in the globalized world and move us towards energy independence.
Passage of an economic recovery package that focused on creating good paying jobs is critical to getting the country back on track, but must be paired with a real effort to address America's competitiveness deficit. Countries around the world increasingly recognize that in order to compete in a globally integrated economy they must invest in human capital and innovation, and embrace a competitive tax structure. Economies like Australia, Canada, Hong Kong, Ireland, and Singapore, are establishing the human, digital, and tax infrastructure that is required to capture capital and get their economies growing. They have adopted effective and creative policies aimed at encouraging STEM education and driving innovation partnerships between the public and private sectors. The United States has yet to show a similar commitment.
The United States' corporate tax policy is particularly problematic. Policy-makers have yet to face the reality that capital is like electrons: it flows freely and moves to the most favorable environment. This environment is increasingly outside of the United States.
The United States' corporate tax structure was largely developed in the 1960s and has been unchanged in the last 15 years. In the last four years alone 15 countries, including many major European and Asian markets, have reduced their effective tax rates. As a result, the U.S. corporate tax rate is the second highest in the industrialized world and has placed the U.S. economy and American companies at a competitive disadvantage.
Ignoring this reality and failing to create incentives to make America more competitive is particularly damaging in a recession. Improving the flow of capital into the United States is dependent on entrepreneurship driving innovation resulting in compelling products and services with global appeal that in turn fuels growth and the return of foreign earned capital to the United States. It is encouraging that some policy-makers appreciate this virtuous circle of capital growth created through innovation and international expansion.
Indeed, credit should be given to Senators Boxer and Ensign, and the 40 other U.S. Senators who attempted to temporarily adjust our tax code to encourage the repatriation of profits earned internationally. Dr. Laura Tyson, the former Chair of President Clinton's Council of Economic Advisors, and a number of other noted economists estimated that this change in the tax code would have led to the repatriation of $400-500 billion resulting in millions of new jobs, billions of dollars flowing into the economy, and tens of billions in taxes to the Treasury. Moreover, the amendment would have brought hundreds of billions into the economy improving the balance sheet of our banks and thus improving the flow of cash to consumers. Incredibly, Congress said no to this amendment that had so much potential to reduce the amount of federal dollars that the President is requesting to bail out troubled banks and increase the dollars from the private sector being applied to the recovery. This was a significant missed opportunity.
We should not allow the implementation of the broader recovery package to become another missed opportunity by pulling the nation into partisan bickering or blinding us to the fact that the job is not done. We must ensure that the stimulus package is implemented in a transparent fashion with clearly defined measurements of success. Moreover, we must maintain our focus on implementing policies that improves our global competitiveness, including reforming our antiquated corporate tax structure. While it is important that we address the nation's short-term health, we must also look to our future, and encourage private industry to play a prominent role in helping to restore employment and capital spending. A targeted recovery package that embraces IT and science complemented by taking steps to improve our global competitiveness will accomplish all of these goals. The IT sector is committed to working with Congress and the President to do what works for the short and for long term.