I recently posted “my thoughts on the upcoming presidential election”:http://theludwigs.com/2012/10/why-i-will-vote-for-obama-in-the-presidential-election/, and a couple people mentioned how concerned they were about economic issues. Hey, me too! They aren’t the most important issues for me this election, but I worry about deficits, taxes, government expenditures, economic growth.
The only viable path out of our economic problems is growth:
* We are running large budget deficits. These deficits lead to even more interest payments in the future, compounding the deficit problem. Someday this will all come home to roost, we would be well advised to get our own house in order now.
* We run large deficits in part because of excessive government expenditures. Our governments (federal, state, local) spend an unimaginable amount of money, much of it on entitlements and interest payments that have proven to be pretty much politically untouchable. We can try to cut discretionary expenses, but there just isn’t enough we can cut to make a dent. And we are already underfunding education among other things.
* The other reason for our large deficits is that we just don’t bring in enough tax revenue. We could raise tax revenues via dramatic tax increases but the levels necessary to wipe out the deficits would be staggering and this is also politically impossible.
* We could print money freely to address our shortfalls, we are pretty much already doing that, and massive inflation is not appealing. This is not a sustainable approach.
* So we are left with increasing tax receipts not via tax increases but via economic growth — more sales, more exports, more employers, more jobs. Economic growth is the best way (and only politically viable way) to address the budget shortfalls and to generate the job growth we need.
Improving our growth rate is not a one-time issue. A single dose of government intervention dollars doesn’t lead to sustained growth over 30-40 years. Creating a bunch of public sector government-financed jobs doesn’t result in real economic growth. We need policies that will result in enduring growth in the private sector. Instead, our politicians largely focus on short term moves — job growth next year, short term tax policies, relatively short term accelerants — bailouts, rate cuts, cash infusions, goosing the housing market, etc. This all seems mostly like noise, a lot of the benefits are temporary or get sucked up by cronies and insiders. How much did the bank bailouts help the man on the street? I’ve yet to meet an individual who has said to me “thank goodness for those bank bailouts, they really made a difference in my life.” Maybe if I lived in New York.
I don’t understand all the levers for growth. I am not an economist or public policy expert, I am just a guy who has lived for a while, has been employed in various roles in the tech industry, and has tried to be observant and thoughtful. I have spent my career in the tech industry, which has grown dramatically, and provided a lot of great jobs. My sense is we need to focus on education, and the commons.
Education is kind of the obvious point. We need better K-6 education so that everyone has a solid basis in reading and basic arithmetic. Great public high schools and colleges so that everyone can build out the skills they need to start their careers. Mid-life re-education of adults as industries change. STEM education of course, but also design and arts education. Our country made a dramatic investment in education early on with public schools, this bore great fruit. We’ve made further dramatic investments over the centuries — land-grant colleges, ongoing federal support of research. We need new dramatic programs, something that creates the world-class education system for the next century. I don’t know what the “Apollo” program for education should be, but we need one. If we expect to have sustainable job growth greater than the developed country average, and particularly growth in high-paying “good” jobs, then we probably need to have the best-equipped populace in the world.
The other area of policy focus should be the “commons”:http://en.wikipedia.org/wiki/Commons. Our investment in common, public domain systems and knowledge has resulted in massive economic growth. The design of the “transistor was thrown in public domain by att”:http://money.howstuffworks.com/att4.htm which allowed thousands of firms to innovate around the transistor and integrated circuits, causing the explosion of the electronics industry. Unix was put into the public domain, resulting in the explosion of much of the software and services industry. The internet was put into the public domain by early federal government funding, and the (public domain) world wide web was layered on top of the internet, resulting in the explosion of internet companies. PC design was basically thrown in public domain by the cloners with support of Microsoft and Intel, resulting in the massive expansion of the PC industry. Imagine if any one of these events had not happened — we would have seen a dramatic reduction in the number of tech companies and innovation. So, where is the next commons, what is the next huge piece of public domain technology or infrastructure, what is the government doing to encourage the creation of this?
I have some thoughts for the next great piece of commons, I am sure there are other equally good or better ideas:
* spectrum access. Today the government grants fixed licenses to corporations who pay large prices for the spectrum, and who then do their best to mine the value of that spectrum for their own corporate wellbeing. As a result, a few large corporations have a choke hold on how most of the spectrum is used. In a few cases (WiFi), spectrum use is a little more wide open, and these have been areas of great ferment and innovation. We should look at mechanisms and technologies that would get fixed spectrum allocation out of the hands of large corporate entities, and instead allow more dynamic and innovative use. There are plenty of smart people who have already thought hard about software radios, dynamic spectrum access, ultra wideband spectrum use, and many other topics involved, we should throw our government weight behind some of this thinking.
* healthcare and life sciences. I am not very smart about things biological, but I wonder what the transistor analog is in life sciences. I wonder what the IP/internet equivalent is in healthcare. Information sharing in healthcare seems absolutely primitive — in 2012, I am still faxing in requests for test results to one of the largest hospitals on the west coast, and getting results back by fax or physical mail.
* 3D printing. This is a nascent technology for geeks only now. But very soon it seems like nearly anyone will be able to make, cost-effectively, almost any small part out of a huge variety of materials. This has dramatic implications for so many industries. However, people are already trying to lock up patents around this technology, we are not clearly on a path to an open environment where people can easily share designs, improve designs, iterate quickly on designs, all in an open web-like environment.
* Energy. What if battery technology was 10x and 10x more open for everyone’s use? If someone invents the next great battery, is it really good for our economy if this invention is locked up in one product?
Cutting across all these areas is the operation of the patent system. It has become ungainly and largely misapplied. Originally designed for the advancement of science and arts by putting designs into the public domain after some time, the focus now seems to be on locking up inventions and preventing the movement of knowledge into the public domain. Count me among those campaigning for a dramatic rethink.
I think these issues cut right to the heart of trade deficits too. If we can have the most educated populace, with the richest commons infrastructure on which to build new industries, then I am pretty sure we can create things that the rest of the world wants.
So: Education, Commons Investment, Patent Reform, all leading to long-term sustained economic growth, which will allow us to grow out of current deficit and budget issues. Important issues, but as far as this election goes, I don’t feel like either candidate is doing anything distinctive. I’ve read some nice things about Obama’s “Race to the top” program, but that is a drop on the bucket of the things we need to do in the education area. I don’t see any leadership on patent or commons issues from either of them. I hear a bunch of frothing about marginal tax rates which I think is largely irrelevant (and I hear nothing about the massive money printing operation at the Fed, apparently the candidates feel that is too complicated for us to understand). So pretty much a yawner of an election on economics issues in my view.