ITIF Maps State and Federal Path to U.S. Competitive Resurgence

U.S. economic policy will require a renewed focus on production and globally traded sectors in order to restore U.S. competitiveness, according to a new report from the Information Technology and Innovation Foundation (ITIF). Furthering the argument laid out in the recently published book Innovation Economics: The Race for Global Advantage and in last year's report "The Case for a National Manufacturing Strategy", ITIF's Stephen J. Ezell and Robert D. Atkinson present 50 recommendations for federal reform to restore the U.S.' competitive edge. In addition, the report provides another 13 strategies that could make a difference at the state level.

While the recommendations provided in the report are ambitious, they chart a practical course to building the kind of industrial policy Ezell and Atkinson have suggested may be the only way to secure lasting U.S. economic relevance. In Innovation Economics, the authors examined the U.S. descent in global competiveness rankings as emerging powers in Asia and Europe increasingly employ (see the September 5 issue) nationwide, long-term strategies for technological and economic advancement. In addition, many U.S.' competitors take advantage of international trade agreements to outmaneuver the U.S. in traded sectors. The current report builds on that work to create a plausible path to a national innovation and manufacturing policy that could overcome the significant challenges now facing the U.S. economy.

Ten recommendations are singled out as vitally important for the nation's competitiveness. These include:

• Creating a new network of 25 Engineering and Manufacturing Institutes;
• Designating at least 20 U.S. manufacturing universities;
• Increasing funding for the Manufacturing Extension Partnership;
• Increasing the R&D tax credit and making it permanent;
• Instituting an investment tax credit for capital equipment and software;
• Developing a national trade strategy and increasing funding for relevant agencies;
• Funding a manufacturing skills standards initiative;
• Expanding high-skill immigration;
• Transforming Fannie Mae into an industrial bank; and,
• Screening federal regulations for their potential impact on U.S. competitiveness.

Many of the 13 state-level recommendations are similar to the federal recommendations. In order to boost both state and national competitiveness, states should provide full funding to Manufacturing Extension Partnerships and expand manufacturing technology programs at community colleges, according to the authors. Ezell and Atkinson also recommend introducing common university-firm technology licensing, supporting a statewide commercialization and entrepreneurship organization, creating peer learning networks and providing innovation vouchers.

States can promote investment in competitive sectors by increasing their own R&D tax credits and reducing tax on capital investments. To grow the local talent pool, states should expand coordination between schools and businesses and create more STEM-oriented high schools. States should also regularly assess their own competitiveness in traded sectors to devise more effective policies.