What Kind of America Do You Want?

Mort Zuckerman’s latest opinion piece at US News does a pretty good job of stating the problems with the economy, a perfunctory job of pinning the blame for those problems on the president, and outlines a, frankly, puzzling set of recommendations for what he thinks needs to be done to solve the problems.

Ignore the piece’s caption: it’s only minimally about how “President Obama’s Economic Programs Have Failed”. You might want to read his diagnosis which I think is pretty good. I’ll jump straight to his prescriptions which, as I said, I find puzzling:

  1. Push students to a higher level of education, if necessary by mandating at least a year of higher education or vocational training at the public’s expense.
  2. Increase the number of H-1B visas for foreign graduate students in the hard sciences. Crazily, we reduced them from 195,000 in 2003 to 65,000 today. This intellectual firepower is critical to growing industries that focus on the world of high tech.
  3. Revise the tax system to encourage growth, not hamper job creation.
  4. Create financial incentives for businesses to invest in America, rather than provoking American companies to reap greater rewards by laying off U.S. workers and outsourcing production to foreign countries that have lower environmental standards.
  5. Focus on the problems of infrastructure and industrial policy.

Let me respond to Mr. Zuckerman’s plan point by point.

  1. The employment statistics do not support Mr. Zuckerman’s assumption, that more education will ipso facto lead to more employment. Don’t just take my word for it. Go to this page on the BLS web site. From there you can select the particular industries whose employment trends you want to see. You can look at any or all years over the last ten years and, optionally, produce graphs.

    Honing in on the period since 2009, most industries have shown little or no growth. There have been some bright spots. for example, mining and oil and gas extraction have seen some jobs added. The number is in the tens of thousands which is good. I honestly don’t believe that America’s future is in mining and oil and gas extraction but more jobs in those sectors is better than fewer.

    By far the greatest number of jobs, in the millions rather than in the thousands, have been added in healthcare and related areas. Here’s the employment situation for healthcare:

    That’s just one of the sub-sectors of healthcare. Others include physicians’ offices, hospitals, outpatient facilities, home healthcare, and so on. All of those sectors are growing rapidly.

    I guess that your mileage may vary on this but I don’t view this as good news for several reasons. First, 70% of healthcare spending is government spending, either from taxes, borrowed, or simply spent into existence. Second, the jobs in that sector that are compensated highly are bottlenecked: they require specific certifications, e.g. MDs, RNs, etc., and the number of applicants for those certifications exceeds the number of billets for training. The rest of the jobs are mostly futureless jobs with low compensation.

    Finally, I believe that the growth and subsidized status of healthcare saps investment from the rest of the economy. Look at it this way. Imagine that you were a private investor with $100 million you wanted to put somewhere. Are you going to put it into computers and electronics or auto manufacturing or any of the other areas that are static or even contracting? Or will you put it into an area that’s growing fast and underwritten by Uncle Sugar?

  2. I’m surprised that Mr. Zuckerman doesn’t see the conflict between his first proposal and his second. Foreign students in science, technology, engineering, and math are the cream of the crop from their respective countries (and frequently underwritten by them). Yes, importing those students to the U. S. brings them here where some will stay, along with their gifts, ambitions, and energy. But they will also out-compete the STEM students who were born here and the record is that they will work for less (there are well-known companies that are notorious for paying their H-1B employees less than the prevailing wage whatever the law requires) which will in aggregate reduce the wages for those fields. Why should American students put in the effort for a dwindling return?
  3. Like how? This is one of those things like eliminating waste, fraud, and abuse. Everybody’s in favor of it but there’s no agreement on just how to accomplish it.
  4. Great idea. The devil is in the details.
  5. Because industrial policy has been so successful in Japan for the last 20 years. IMO our infrastructure problems (in the sense of roads and bridges) are that we have more than we need and can’t agree on how to prioritize maintaining what we’ve got. Do we really need to build a new road between Nashville and Spokane? Congressmen from Tennessee and Washington say “Yes!” Should we rebuild that bridge in Podunk County that might be used by six people a week?

Before we start identifying means we might want to start thinking about ends. An America where the designers and engineers are here and the makers are somewhere else simply isn’t going to happen—we should dismiss it from our minds. We’ve already decided we don’t want the air, water, soil, and noise pollution that heavy industry brings so anything that requires more heavy industry won’t be done here. We just won’t have those building jobs or the engineering and design jobs that go with them.

What do we want? I for one don’t want an America divided between plebs (most of us) and patricians (the 1%). But that’s where our institutions are taking us and I do mean all of our institutions—government, schools, companies, the media, you name it.

I think the die has already been cast and the next technological revolution will be in medical and biological sciences. That won’t take us to the moon. We don’t know where it will take us. Today’s buggy whip manufacturer analogs are much better organized than their 19th century predecessors were. We should start thinking about what sort of institutions we’ll need for that technological revolution to come./blockquote

7 comments… add one
  • michael reynolds

    So basically he has no real idea how to manage things any better, but is pretty sure Mr. Obama has done poorly. This seems to be the norm. Everyone is unhappy with the status quo, no one has any clear idea how to realistically improve the status quo.

    So far Mr. Romney seems to be offering to do all over again the same things that didn’t work before. (Not that he’s committed to that. Or to anything.) So the political choice is a) Do what didn’t work before, or b) Do what isn’t working now.

    And of course by “Do” we mean propose to 535 hyper-partisans in thrall to competing special interests.

  • So basically he has no real idea how to manage things any better, but is pretty sure Mr. Obama has done poorly. This seems to be the norm. Everyone is unhappy with the status quo, no one has any clear idea how to realistically improve the status quo.

    Yeah, that about sums it up. Zuckerman is a smart guy but his op-eds are amazingly vapid.

    I think the underlying problem is that successful guys like Zuckerman understand that the problems are basic. We need to change the institutions that are underpinning the status quo. That means that the status quo that has been so good to them will change. I think we’ve reached a point at which fixing it means real change.

  • steve

    “We’ve already decided we don’t want the air, water, soil, and noise pollution that heavy industry brings so anything that requires more heavy industry won’t be done here.”

    I dont think this is true. If you mean we are not willing to let heavy industry do whatever it wants, then it is true. Otherwise,

    1) I think Zuckerman is sort of correct. Workers will have their jobs change more frequently. They will need the skills to learn new jobs. An extra year or two of training emphasizing how to learn may be needed (extra math, computer and reading skills). Health care spending has increased at a steady rate since the 1930s, before we had significant government involvement. Private spending goes up as fast or faster, and it private insurance pays more for care. Everywhere else in the world has more govt involvement AND lower costs.

    2) Mostly agree. I think that you under rate our students a bit.

    3) Yes. Hard to tell how much difference tax rates really matter.

    4)Agree.

    5) We need better electrical infrastructure. Our roads need repairs. A lot of stuff was built in the 50s. Our computer access infrastructure is hit and miss.

    Steve

  • We need better electrical infrastructure. Our roads need repairs. A lot of stuff was built in the 50s. Our computer access infrastructure is hit and miss.

    Agreed on electrical infrastructure. Unfortunately, that’s not what people mean when they say “infrastructure”. They mean roads, bridges, stuff like that. As I suggested in the post, I don’t believe that every road and bridge that’s in disrepair should be repaired or that there’s an actual return on some repairs. I think that some should be abandoned. That’s how I read the civil engineers’ report.

  • Drew

    “We need better electrical infrastructure. Our roads need repairs. A lot of stuff was built in the 50s. Our computer access infrastructure is hit and miss.”

    Our politicians are too busy taking money money from one group and buying the votes of another. Such quaint notions of a legitimate function of government long since dissolved in a bygone era.

  • We need to change the institutions that are underpinning the status quo.

    Behind every institution is a group of people who are deeply committed to the preservation of that institution, purely for selfish reasons.

    I don’t believe it is an exaggeration to claim that all of politics is about advancing the vested interests of one group over the general interests of the public. If this is really the dominant factor in play, then politics as usual can’t be used to bring about a solution for no one would support the reform proposals because those reforms would very likely hurt the interests of numerous vested interests who benefit from the system just the way it is.

  • We could start by limiting the capital gains rate (or lower it further) to actual brick & mortar, start up enterprises that hire people and not financial paper shuffling which could be taxed at 20%.

    Next would be a lowering of the corporate tax rate to 25% but elimination of most loopholes unrelated to R&D, capital investment or net job creation in new facilities. The famous double Irish and Dutch tax dodges would be gone, maybe with a “holiday” window to repatriate capital under favorable terms. Google and GE would actually pay taxes and invest here.

    The number of people allowed to be VC investors under SEC regs would be vastly increased

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