Wilson Center Policy Brief Series: Manufacturing Matters, Strengthening America: Inventing the Future

The Wilson Center recently released two essays by Kent Hughes, Director of the Program on America and the Global Economy, in its series of policy briefs on critical issues which will run from now until Inauguration Day.

 

Manufacturing Matters

Manufacturing plays a key role in the U.S. economy and will continue to do so. The private sector provides roughly 70 percent of total U.S. spending on research and development, and the bulk of that amount comes from manufacturing enterprises. Manufacturing generates 90 percent of U.S. patents. It also is central to the system that translates laboratory research into commercial products, thus generating jobs and creating wealth. Manufacturing also constitutes the single most important export sector of the economy and is thus critical to America’s ability to pay its way in the international economy. Finally, manufacturing generates millions of jobs, which provide pay and benefits that exceed the national average. Looking ahead, the United States needs a manufacturing strategy that can support the emergence of advanced manufacturing processes that, in conjunction with low-cost energy, can revitalize the U.S. manufacturing sector.

>> Read the Policy Brief in its Entirety

Strengthening America: Inventing the Future

The U.S. innovation system has enormous strengths, including public and private support for research and development, the world’s best university system, and an entrepreneurial risk-taking culture. But those elements of the system now face several domestic and international challenges. In the United States, cuts in federal spending could reduce support for university research. The kindergarten through 12th grade (K–12) education system struggles to keep pace with the rising demands of the 21st-century workplace. Internationally, the United States now faces competition to attract or keep advanced manufacturing firms, research facilities, and top scientific talent. The United States will need to maintain support for research and development (R&D), improve its education system, and learn from best practices around the world.

>> Read the Policy Brief in its Entirety

The Tangible Effects of Austerity

One of our recent blog posts discussed the debate about austerity in Europe and here in the United States.  But what specific components of the economy will be affected by austerity measures and what effect would those measures have on the U.S. economy as a whole?

Both Europe and state economies within the U.S. have tried their hand at significant budget cuts so it’s worth examining the fallout in both cases.  Budget cuts have been heavily focused on areas like public education (both higher and lower), infrastructure, and research and development.  This is not by coincidence.  These areas, especially education, along with social welfare programs usually make up the majority of discretionary spending in state governments (particularly in large states like FL and PA) and state legislators and many governors have made public promises to not raise taxes under any circumstances.  Without the prospect of raising revenue through taxes, austerity (i.e. reducing deficits) can really only come in the form of budget cuts, and those cuts are most likely to come from those sections of the budget listed above.

Unfortunately, spending in education, infrastructure and manufacturing, and innovation is necessary for American competitiveness in a global economy and many have argued, most notably President Obama and his economic team, it is a surefire way to stimulate the economy.

The macroeconomic effects of the austerity experiment in Europe and at the state-level are muddled enough in terms of growth and job creation that it has been declared both a success and failure.  As such, the debate is still in full swing at the federal level as the U.S. approaches its so called “fiscal-cliff” at the end of this calendar year.

The cliff, and the debate itself, will have several components.  The first is whether or not to extend the Bush tax cuts and if so, to whom?  Similarly, programs for payroll tax deduction ($120 billion) and extended jobless benefits ($40 billion) will expire at yearend unless they are renewed.  And lastly, the types of budget cuts that have occurred in state and European governments discussed above are set to go into effect with mandatory 10% cuts on all discretionary spending beginning January 2013– reducing federal expenditures by $85 billion.  The mandatory cuts are part of the Budget Control Act that was passed last year after the debt-ceiling fiasco; the compromise that ended the standoff mandated that the cuts begin in January 2013 if Congress had not agreed to a debt reduction plan by that time (which of course, they have not).

With that date approaching, the austerity debate will become as prominent in Washington as it is in Brussels and in state capitols across the country.  If the mandatory cuts and tax increases occur, the nation’s GDP will likely lose several percentage points.  But even if there is a resolution, budget debates will continue and education, infrastructure, and R&D will all be on the chopping block.  The budget proposed by Rep. Paul Ryan (R-WI), the Chair of the House Budget Committee, has become the de-facto fiscal platform of the Republican Party and proposes significant cuts to all the areas discussed above.  Meanwhile, President Obama continues to insist that spending in such areas is a national priority.

The role of things like education, innovation, and infrastructure are central to America’s economy in a globalized market.  Policy makers would do well to carefully consider and debate any cuts to those areas and not simply sacrifice them for politically harder issues like defense spending and tax reform.

Posted by: Sean Norris

Sources: The New York Times, Forbes, CNN, The Guardian, The Telegraph

Photo Credit: Paul Ryan courtesy of flickr user Gage Skidmore

Innovation by Execution

In a recently published book, The Other Side of Innovation: Solving the Execution Challenge, authors Vijay Govindarajan and Chris Trimble of the Tuck School of Business at Dartmouth College explore an oft overlooked aspect of innovation; the execution of ideas.  When people think of innovation they often think of light-bulb moments in which new and creative ideas spring forth from the ether.  However, after working with over a quarter of Fortune 500 companies, the authors repeatedly found that a barrier to successful innovation was not a lack of creative ideas, but a lack of ability to execute those initiatives.

In order to best facilitate this execution Govindarajan and Trimble argue that companies should convene ‘dedicated innovation machines.’  Putting the proper execution of these ideas into context, the authors argue that “The only way to stay profitable- or in some cases, even to survive- is to innovate.”

Posted by: Michael Darden

Sources: The Economist, The Tuck School of Business

Photo Credit: Luminous Idea courtesy of flickr user Tiageo Daniel

Ingredients for Successful Innovation

Like most goals, there is no agreed upon path to follow to become successfully innovative.  Many would argue that the ability to think creatively, anticipate the needs of others,  and adapt to rapidly changing circumstances are all important components.  One case study suggests that taking advantage of limited resources, connectedness, and diversity of ideas are all essential to fostering an innovative climate.  President Obama has argued that the three building blocks for innovation are education, infrastructure, and research.

In our increasingly interconnected economy it can be agreed upon, however, that innovation has taken on increased importance.  This is partly evidenced by the fact that a significant number of professionals are now focused on innovation.  No matter the ingredients, as we continue to emerge from the global recession, harnessing our collective innovative power will continue to be an important factor for economic success.

Posted by: Clark Taylor

Sources: Business Week, The Harvard Business Review, The Innovation Journal, The New York Times, The White House

Photo Credit: Longbridge Technology Park – Innovation Centre courtesy of flickr user ell brown

America Keeps on Competing

The U.S. Senate Committee on Commerce, Science, & Transportation has reauthorized the America COMPETES Act of 2010, which, “is a critical link in maintaining U.S. dominance in innovation and R&D funding,” Brian Darmody, Association of University Research Parks (AURP) President told Newswise.  While the bill did not reach final passage in the Senate before the August recess, it does have “meaningful private sector support, with the Chamber of Commerce and Business Roundtable each throwing their weight behind the measure,” according to The Hill.

“Research parks and regional innovation clusters, which are so important to job creation and growth, are also included in the legislation,” according to Newswise.  The Act will also bolster STEM (science, technology, engineering, and mathematics) education by providing for increased research funding for the National Science Foundation and the National Institute of Standards and Technology and funding of grants at the high school, undergraduate, and graduate levels.

Posted by: Monica Schager

Sources: Newswise, The Hill, The Committee on Commerce, Science, & Transportation

Photo Credit: U.S. Capitol No. 6141, courtesy of flickr user Eric E. Johnson