The New American Century
Barack Obama’s decisive victory, based on the theme of change, provides a unique chance to make some basic approaches in key areas of national security and domestic policy. There will be a narrow window during which a new team can come forward with specific plans to implement the commitments made during the campaign and work with the Congress to get them passed quickly. It will be critical to pick the right list, to propose plans bold enough to match the need, and be prepared to argue forcibly for the urgency of the goals and the utility of the proposed solution.
Coming in the midst of the worst financial crisis in a generation, there will be powerful pressures to shy away from programs requiring new funding. But failing to make the investments President-elect Obama promised for reestablishing U.S. leadership in research, innovative businesses, education, and infrastructure would put the country on a path to irrelevance. The inability of the Japanese to escape the sclerotic thinking of their establishment managers has not only lost a decade of growth, but undercut the confident tone of a nation that once seemed poised to lead the world with technology and invention. This is one of the few times when a president may be able to slay some sacred cows saying plainly that we simply can’t afford to be hemorrhaging money in federal programs that have long outlived their original purposes.
There is general agreement that a new fiscal stimulus package is needed and that it should focus on government spending most likely to generate economic activity quickly. Carefully constructed, this short term stimulus can also build an infrastructure that will pay long term dividends. The investments should focus on accelerating the revolutionary changes already underway in national security, in the economy, in the way energy is used and produced, and in education.
A National Security Revolution
While Americans are all in sticker shock at spending $700 billion to bail out Wall Street, we’ve been spending nearly this much every year on national security programs at the Department of Defense and Department of Energy. In 2008 the U.S. spent $676 billion.
And it seems that the base budget, reported at the beginning of the year, is basically a kind of retainer. You have to pay extra (in the form of an annual “supplemental”) if the military is actually asked to fight. It’s time to take a careful look at what we’re getting for the retainer.
While only a small portion of the budget, one essential part of the base budget must be a revitalized investment in defense research and development. The Defense Advanced Research Projects Agency (DARPA) and other programs have filled the pipeline of innovation and led to key advances in materials, communication systems, and computation that have underpinned U.S. security for generations. These innovations have led to spinoffs of great benefit to the civilian economy. Defense research – particularly basic research – needs to be put back on its feet with funding and creative new management.
The United States is maintaining a defense infrastructure largely unaffected by a dramatically changed security environment. Repeated fights over closing bases and laboratories, and cutting pointless hardware have resulted in some savings – but not nearly enough. Weapons systems like the ballistic missile defense are not counted as earmarks but should be. We continue to fund outlandishly expensive programs that would be near the bottom of any list of priorities for defense spending prepared by a team trying to build a defense system tailored to real 21st century threats to our security. The U.S. spends roughly twice the NSF budget to dig holes in Alaska for missiles that don’t work. Can we really afford this?
National Defense Outlays
But the worst thing an earmark does is waste money. There are cases where military pork can do real harm – as the missile defense deployments have clearly already done so. These legacy programs rob investments badly needed to address new challenges: cyber attacks, rapid and real time intelligence, robotics, and flexible operations in dense urban environments.
The U.S. nuclear weapons program is another pointless legacy. We are maintaining nearly 10,000 weapons of which about 1000 are on a hair trigger alert. We continue to operate the full Cold War contingent of weapons laboratories. No one seems able to explain what logic drives these huge numbers. On the other hand it’s easy to explain the harm they do – the risk of accidents, and the way they undermine any serious effort to rebuild international nonproliferation efforts.
US Manufacturing Employment
The good news here is that the Kissinger, Shultz, Nunn, and Perry “gang of four” have forced the nation to ask the obvious questions about its nuclear policy and both political parties have shown an interest in a dramatic rethinking of U.S. nuclear policy. What we lack is an accompanying strategy for building a global nonproliferation system that makes technical, political, and economic sense.
Most importantly, however, we seem unable to accept the recommendations from field commanders that skillful diplomacy and civilian economic development can almost always achieve security objectives at a lower cost than direct military intervention. The personal history of the new president and his skill in building coalitions, positions the U.S. to finding ways to be a full partner in solving problems that are global in nature – energy supplies, water, food, and disease prevention. Investing in collaborative projects in these areas, while not a substitute for an ability to project power, can provide security at a far lower cost.
An Economic Revolution
The twin pressures of a tightly integrated global economy and a revolution in production technology is transforming the U.S. economy like the profound movement in an earlier generation that took Americans off the farm and onto factory floors, and out of sweat shops into modern manufacturing plants. But the effects thus far have been frightening. Income inequality has grown sharply and gaps are as great as they were in the 1920s. The U.S. trade deficit continues to widen. Last year we imported $800 billion more than we exported. About 40 percent of this deficit resulted from petroleum imports. This year our petroleum imports alone may be more than $500 billion. We’re even getting clobbered in high technology products. The U.S. went from a $30 billion trade surplus in advanced technology products in 2000 to a $40 billion deficit in 2006. In Asia the trade balance in advanced technology products increased from $25 billion to $72 billion over the same period as China and other nations, led by highly competent engineers, implemented a program to move from imitation to innovation. Employment in U.S. manufacturing that has provided solid middle class incomes for generations is vanishing at breathtaking rates—they’re now less than 10 percent of all jobs. The number of manufacturing jobs today is lower than it was in the 1950s. There is no way to restore the glories of the U.S. manufacturing juggernaut of the late 20th century. The production process has moved irrevocably away from a system that could be operated by a high school graduate to one that relies on sophisticated equipment integrated into an international network. Even non-manufacturing jobs are redefined as information technology tools replace the routine tasks of many service employees. Service sector productivity has been increasing at an astonishing 3 percent per year.
While much remains uncertain, it is increasingly clear that a prosperous future U.S. economy will automate most anonymous, routine physical tasks and depend on people skilled in invention and managing change. The new economy will rely on new tools that educate, heal, persuade, communicate, and counsel with unprecedented connections to each other and a reservoir of worldwide information. Success will depend on our ability to maintain an unrelenting pace of innovation and reinvention coupled with an effective system.
The U.S. needs to make investments in the ingredients we know must be part of any successful strategy to build an economy that provides sustainable growth in output and employment. These include strong research and development programs capable of focusing funding on areas most likely to be productive in expanding our understanding of how the world works – even when there is no clear connection to contemporary problems. Applied research in areas like energy, agriculture, and health should find ways to define problems in ways that invite innovative solutions from many sources and disciplines. Recent research suggests, for example, that advances in silicon nano-wires may provide breakthroughs in solid-state refrigeration.
US Merchandise Trade
The energy and climate policies discussed below can provide a powerful set of tools for creating markets for innovative products and production systems. Among other things, this can provide strong incentives for increases in private research investment. Skillful use of stimulus funding can also provide key infrastructures – the introduction of broadband, smart electric grids and transportation networks, and new industrial facilities designed to produce highly efficient cars with highly productive processes.
Energy and Climate
President-elect Obama supports cutting U.S. CO2 production 80 percent by 2050. This simply cannot be achieved unless a key element of the economic transformation involves a fundamental shift in the connections between energy use and economic activity. The momentum of current patterns of economic growth is not encouraging and, worldwide, is leading to huge growth in energy use and emissions. The recession will slow growth but unless something dramatic changes, economic recovery will be accompanied by a rapid growth in energy demand.
Achieving the dramatic climate goals while accommodating economic growth will be an unprecedented achievement. And it must be accompanied with a strategy that allows poor nations to sharply increase per capita income without offsetting gains achieved here. The good news is the innovation- driven economic recovery just described is consistent with the changes needed to drastically increase the productivity of energy use and a shift to a new generation of energy supplies. It is also consistent with a program to build a transportation and communications infrastructure consistent with a new economy. The investments needed to achieve this massive transformation are so large, and touch so many parts of the economy, that an innovation-driven energy and climate program can be the engine to drive needed changes in the entire economy.
World Energy Use
Reconstructing existing infrastructure – buildings, even entire urban areas and transportation systems – requires special focus. Clearly we don’t want to rebuild the 1950s highway system without careful thought to mass transit, urban design, and novel transportation modes that could lead to more livable, more sustainable, and healthier urban areas. About 70 percent of all U.S. electricity goes to power residential and commercial buildings – and the turnover rate of these structures is very slow; there are 130 million homes in the United States while only 1-2 million new homes are built each year. Then so, in most cases, the cost of renovating these homes to reduce electricity use is far lower than the cost of building new electric generating facilities. A strategy that could get an ambitious retrofit for every building sold (roughly every seven years for housing) is essential. This means making full use of the regulatory authorities and incentives available through agencies not traditionally associated with energy and environmental issues, such as Housing and Urban Development, Transportation, and Agriculture.
Education and Training
People will only benefit from the kinds of changes envisioned here, as workers, as consumers, or as citizens, if they are able to enter the workforce trained to take intellectually challenging jobs, and if they able to keep learning in response to relentless innovation. This is already evident in the growing gap separating the income of people with college degrees from those with a high school education. Soon it will no longer be possible to have a middle class job with a high school education.
The challenge is that while the need is growing, the cost of providing sophisticated education and training is also rising. After years of effort, U.S. K-12 students still compare poorly with students in Europe and parts of Asia. Costs continue to soar – college tuition outpaces growth in incomes. As we’ve argued in these pages before, the only affordable way to provide a highly diverse population with the education and training required to make them part of a fast-paced, flexible economy will involve using the same information technology tools that have made other service enterprises more productive. This means making use of simulations, personalized tutors, and continuous embedded assessments. The process requires building an infrastructure that can continuously improve upon itself based on reviews from scholars and teachers from many disciplines around the world. And it will require a way to ensure the persistence of material developed – such as learning modules, virtual objects, and simulated tours. The world is littered with many small efforts that can’t interoperate with modern systems and are trapped in formats rapidly rendered obsolete.
A Path Forward
The federal government has always played a central role in the research needed to develop technologies to drive American growth, and it clearly must do so again. It must ensure that the market for innovations is strong – by encouraging private research investment and providing a strong pull for creative new approaches through clever design of energy and environmental regulations. Efforts to do this have faltered and repairing the damage must be a central focus of the new president. A report from the National Academies of Science titled “The Gathering Storm” sounded the alarm that a new level of federal research investment is needed. This led to the America Competes legislation that – while filled with a laundry list of pet projects – showed bipartisan determination to double federal research spending in key agencies.
Virtually none of the promises were backed with appropriations. This has to change. It would be disastrous to cut back on research and education investments essential to build a strong economy and meet the energy and climate changes we face. An economic crisis will force some tough choices but it may also provide a rare opportunity to take a tough look at legacy defense programs, water projects, agricultural subsidies, and a tax code with hundreds of pages of manipulations designed to protect businesses. Doubling budgets for the National Science Foundation, the Department of Energy’s Office of Science, and the National Institute of Standards and Technology would cost roughly $21 billion a year. This is the annual amount we spend on agricultural price supports. Eliminating the Strategic Defense Initiative would save enough money to increase the NSF budget 150 percent. In spite of all the rhetoric, the real buying power of U.S. energy research programs is less than half that in the late 1970s. A 5-fold increase has been suggested and would clearly be justified.
There are many ways to go wrong at this critical moment, and a lot of pressure to build walls around familiar terrain instead of looking forward. But if any nation can continue to reinvent itself around a revolution in technology it’s the United States. We have the intellectual infrastructure, superb research populations, and talent drawn from around the world. With the right leadership, we can maintain the perpetual revolution that is the real America.
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