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A Game Plan For Restoring America’s Competitiveness

I’d like to believe it’s “Halftime in America” and the U.S. is starting to make a comeback in the game of global competition. Unfortunately, the reality feels more like sudden-death overtime–but there are concrete steps we can take to get back on track.

A Game Plan For Restoring America’s Competitiveness


I’d like to believe it’s “Halftime in America” and the U.S. is starting to make a comeback in the game of global competition. Unfortunately, I think the reality is it’s more like sudden-death overtime. Unless we develop a game plan to score soon the contest will end and not in our favor.

      To move forward there are nine plays America can call, some of which would pay off immediately and others which would make a big impact over the long term:

        1) Streamline the tax structure. When Japan lowers their corporate tax rate in April 2012, the U.S. will have the highest corporate tax rate in the world. Yet, with loopholes, companies can make billions and pay no taxes. This is because the government tries to direct industry investment by offering loopholes as incentives. Unfortunately, this actually leads to money being invested inefficiently and retarding economic growth. Lowering tax rates and eliminating loopholes could be done in a way that would allow dollars to flow to the best investments while being revenue neutral. It would also incent companies to bring back the billions they have overseas (since the repatriation of money would be taxed at a lower rate), helping create innovation and jobs in the U.S. The same must be done with personal income taxes; reducing rates while eliminating loopholes, with the goal of being revenue neutral. This may have to be done over a longer period, as eliminating deductions such as that for mortgage interest would hit the housing industry at a time it is very weak. However, streamlining personal taxes would also make our economy more efficient and have the added benefit of making our personal lives simpler.

        2) Rethink regulations to encourage proper behavior. The Federal Register, which contains all the U.S. government regulations, has roughly 36,000 pages and weighs over 100 pounds. While it’s obvious businesses need regulation, over-regulation is not the answer. Instead, regulations need to be rethought, moving away from directing businesses specifically what to do to incenting them to do the right thing. For example, rather than giving bankers thousands of regulations, instead make them personally responsible for their bank’s losses due to highly-speculative investments. Incenting proper behavior would be less bureaucratic and more effective than government micromanagement.

         3) Rebuild our infrastructure with targeted investments. The cost of inadequate ground infrastructure (not including ports and airports) is estimated to cost the U.S. up to $3 trillion between now and 2040. The 2008 stimulus was supposed to spend billions on “shovel-ready projects,” yet the rush to spend money found too few that fit the bill. Rather than funneling money to any available project, we need to create a targeted, long-term spending plan for roads, rail networks, ports, bridges and airports to reduce transportation costs. Focusing on major traffic bottlenecks and laying out investments year-by-year is the key here.

       4) Unleash U.S. energy resources. The U.S. has been blessed recently as new energy reserves have been found in states such as North Dakota and Pennsylvania. For example, new sources of natural gas have reduced natural gas prices 85% in the U.S. since 2005. While it’s important to develop the new oil and gas finds safely, the potential to reduce dependence on foreign energy sources, increase well-paying jobs in the U.S., and lower energy costs for companies and consumers is huge. While pursuing renewable energy is important, according to the Department of Energy, renewables will comprise only 16% of our energy by 2035. Wind and solar will likely be less than half that renewables number. And unfortunately, neither are as efficient or dependable as fossil fuels nor big job creators in the near term. While the drive for renewable energy must continue, allowing the development of the newfound and reliable oil and gas assets is key to economic growth.

        5) Rebuild our human capital. In 1955, Time magazine ran an article titled “Why Johnny Can’t Read,” which focused on the low performance of U.S. students in public schools. Over half-a-century later, U.S. students still perform uncompetitively compared to other developed countries. This despite spending as much or more per student. Reading is not the only problem area; science and math skills that are crucial to innovation are issues as well. Per the Harvard Business Review, of the high school seniors who took the National Assessment of Education Progress test in 2009, 74% scored below proficient in math, 62% in reading and 79% in science. Introducing technology in the classroom is one answer; there is no reason best-in-class education could not be piped into every school via the Internet. Allowing charter schools and providing student vouchers is another, as is opening up the teaching profession to qualified adults. Beyond improving K-12 education, we need to revamp our immigration policy to allow highly-educated foreign students who have studied in the U.S. to stay here and add their intellectual capital in our companies. We need every smart person we can get; changing our immigration policy can help us win the global war for talent.

        6) Invest in government research and development. While the
government is not good at picking industry and company winners (and creates
the potential for crony capitalism when it tries), it is good at
creating new innovations and technology platforms through R&D. These can in turn be exploited by private industry, as exemplified by Google, Apple, and Facebook. Increased company
competitiveness and worker productivity is only possible through
innovation and both federal and state government support for R&D can play a role here.

        7) Put social programs on a sustainable path. Social
Security, Medicare, and Medicaid together comprise almost 60% of federal
, yet are on a path of insolvency in the near future. In Social
Security’s case, this is simple demographics. Back in 1940 there were
159 workers for every retiree, life expectancy was 63 and Social Security kicked in at 65. Today there are 3 workers for every retiree, life expectancy is
77 and a person can start receiving (reduced) benefits at 62. The math is unavoidable. It’s crucial to put these programs on a path
to sustainability by increasing the retirement age, reducing benefits
for those who have more and allowing choice and premium support for
health care.

        8) Rationalize executive pay. While I believe market forces are a better path forward for economic efficiency and growth than government intervention, it’s clear that executive pay and perks in some firms have risen beyond what makes sense and may not be well tied to performance. The reason the compensation ratio has grown over time is simple; executives sit on boards that set the pay for the CEO, who in turn is plays a role in selecting them to serve on said board. Furthermore, consultants who perform other services with the CEO’s firm also provide consulting on executive pay. Both situations are conflicts of interest. The solution is not government-mandated pay limits but investor empowerment. Compensation rates should be subject to stockholder approval, not just the company board.

        9) Fix the political system. Gerrymandering by politicians has created “safe” districts that are highly partisan and can be relied upon to re-elect incumbent Democrats or Republicans. This polarizes our politics as these representatives tend to reflect the strongly-held beliefs of their constituents. This problem is exacerbated by the lack of term limits in the House and Senate, allowing Senators and Representatives to serve more than twice as long as they have in the past.  Given that control of both gerrymandering and term limits are in the hands of career politicians, I don’t have much confidence either of these will be addressed soon but they are crucial to enabling bipartisan solutions that reflect a popular consensus.

      These nine steps are my game plan for America to win the competition for global economic success. What plays would you call?

[Image: Flickr user Potyike]

About the author

Mark is the author of three books (including the popular Sun Tzu and the Art of Business: Six Principles for Managers) and a Lecturer at UNC’s Kenan-Flagler Business School. Prior to that Mark was a marketing executive with experience at IBM and Lenovo.



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