The Ripon Forum

Volume 49, No. 2

May 2015

How Congress can shape the 2016 campaign…

By on May 20, 2015

Help Enterprises Become More Productive, Innovative and Competitive

by ROBERT D. ATKINSON

Robert D. Atkinson (3)Notwithstanding America’s tepid economic recovery, the U.S. economy faces a myriad of structural challenges. Productivity is growing at 40 percent the rate of a decade ago. New business formation is at its lowest levels in 30 years. Despite the improvement in our energy trade balance, the U.S. trade deficit remains high at over $400 billion. Business is investing less in basic and applied research. And U.S. firms face tough challenges as they compete against mercantilist state capitalist systems.

These problems call out for a new, bold approach to economic policy focused first and foremost on helping enterprises and high-growth start-ups become more productive, innovative and competitive. To paraphrase Bill Clinton’s campaign slogan, “It’s the enterprise, stupid.” And not just any enterprises: technology-based, global, and fast growing enterprises are the key. This focus should be the north star of Republican economic policy. Congressional Republicans can play a key role in this by promoting legislation over the next year that a GOP presidential candidate can run on in 2016.

This will require action in a number of key areas, including improving the tax and regulatory climate for productivity, innovation and competitiveness and ensuring that we step up actions against foreign “innovation mercantilism.” But it will also require Republicans to support the right kind of public investment to help spur innovation.

To paraphrase Bill Clinton’s campaign slogan, “It’s the enterprise, stupid.” And not just any enterprises: technology-based, global, and fast growing enterprises
are the key.

Let’s start with regulation. One key barrier to innovation is incumbent opposition to change. Taxi companies fight Uber. Universities resist MOOCS (massively open online courses). Realtors resist online competition. Republicans need to stand not with incumbents but with innovators. Congress could require the Federal Trade Commission to produce an annual report on state laws and regulations that unfairly protect incumbents against digital innovators. Another key area is to open up higher education to disruptive innovation. Florida Senator Marco Rubio has proposed several ideas to open up higher education including better reporting of student outcomes by institution, making it easier to earn college credits with free online courses, and reforming the college accreditation process. Hopefully, the Senator will also campaign on these ideas now that he is a candidate for the White House.

Of course, there are many other regulatory steps. Given that Federal Communications Commission wants to regulate broadband like 20th Century telephone service, it’s not too early for Congress to begin the rewrite of the 1996 Telecommunications Act, including provisions to not regulate broadband like phone service.

Congressional Republicans can also modernize our overall regulatory system. One place to start is the Start Up Act (H.R. 962 and S. 181). Introduced by Congressman Robert Dold (IL-10) and Senator Jerry Moran (KS), the bill would require the Office of Management and Budget to incorporate a screen for new business formation in its review of federal legislation. But legislation should go beyond that and require OMB to include a review of impacts on competiveness and innovation as ITIF has proposed.

Republicans should also continue to push for STEM worker immigration reform. It makes no sense to not welcome the world’s best scientists and engineers to our shores. Not only do we need the talent, but by welcoming them here we deprive our competitors of this key resource. Here, too, the Start Up Act would be of value. The measure would allow up to 50,000 foreigners who earned a master’s or doctorate degree in a science, technology, engineering, or mathematics field to remain in the U.S. indefinitely if the person is engaged in a STEM field.

Republicans can also help drive productivity, innovation and competiveness with reform of the tax code. Although some advocate that the tax code be completely neutral with regard to business behavior, Republicans should want the tax code to favor innovation and new investment. Toward that end they can support overall corporate tax reform that not only lowers corporate rates but expands two key investment incentives, the R&D tax credit and the modified accelerated credit recovery system (MACRS). For example, S.537 , offered by Senator Pat Toomey (PA), would increase the R&D tax credit from 14 percent to 25 percent. Doing this would move America from having the 27th least generous R&D credit in the world to 12th.

There is no shortage of ideas for ensuring that American enterprises can be more productive and competitive. The question is whether a Republican will run on these ideas as part of their platform next year.

Finally, creating policies to help the private sector drive productivity, innovation, and competitiveness will require a new look at public investment, particularly scientific research. In their focus on cutting the national debt, Republicans shouldn’t be increasing the future “investment debt.” To that end, Congress should follow the lead of Senators Lamar Alexander (TN), Ron Johnson (WI) and Moran, who have supported increasing funding for basic research. As Newt Gingrich writes with respect to increasing NIH funding, increased investment in research can “transform our fiscal health.”

But we need to go beyond just basic research to helping spur commercialization. One idea is to pass legislation co-sponsored by Senator Lindsey Graham (SC) to create a system of national “manufacturing universities” that would commit to doing more research and teaching related to manufacturing issues. Likewise, Congressman Hultgren (IL) and Senator Rubio have proposed legislation (called the America Innovates Act) to modernize the Department of Energy labs to make them more effective engines of technology commercialization.

In summary, there is no shortage of ideas for ensuring that American enterprises can be more productive and competitive. The question is whether a Republican – be it Senator Rubio, Scott Walker, or another candidate for President — will run on these ideas as part of their platform next year.

If they do, they will not only be running on a platform of innovation and reform. They will also be running on a platform that will help them win.

Robert D. Atkinson, Ph.D., is President of the Information Technology & Innovation Foundation.

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