The recent stimulus package may help the economy a bit in the short run, but election-year tactics are no substitute for thoughtful, long-term investments in our country.
"The best hopes of any community rest upon that class of its gifted young people who are not encumbered with large possessions. ... It is not large possessions, it is large expectations, or rather large hopes, that stimulate the ambition of the young."
Rutherford B. Hayes, author of that statement and the 19th president of the United States, is not discussed much today. But he did sign a bill allowing female attorneys to argue cases before the U.S. Supreme Court, vetoed many pending laws that he thought were unfair to black people, and insisted on the appointment of only qualified and honest people to high positions -- an approach that drew anguish from members of Congress.
He was also wounded four times during the Civil War and refused to campaign for any of the political offices he ultimately held. Then, when elected president, he held fast to one term.
One wonders how he would feel about today's frenetically constructed economic stimulus package.
The package no doubt will create some spending and will probably help the economy in time for November's elections. It is sure to pass. But the election-year popularity of knee-jerk reactions to deeply rooted structural deficiencies does not provide sustainable value.
I recently received an interesting draft paper from one of Minnesota's most respected economists, Regents Professor Vern Ruttan of the University of Minnesota. He describes how the periodic development of "general purpose technologies" spurs economic growth.
The arrival of such technologies as the steam engine, railroads, electrical generation, the automobile, turbine-powered aircraft and computers have always been followed by robust periods of economic activity where the good effects of these breakthrough technologies spill over into many industries.
But, in order to qualify, not any technology will do. To spur these monumental economic effects, the technology must be pervasive (widespread), capable of improving productivity and lead to further innovations.
The problem in Minnesota and the United States is that we have not had many of these general-purpose technologies emerging lately. The electrical grid is ancient, automobiles are produced all over the world and computers are now commodities.
The results of our technology deprivation is showing up in our statistics. From 1980 to 2005, the percentage of college graduates receiving degrees in engineering, physical and biological sciences and mathematics declined from 18.6 percent to 14.9 percent. From 1988 to 2003, the U.S. share of worldwide academic articles in science and engineering declined from 38 percent to 30 percent. From 1963 to 2006, the share of U.S. patents awarded to foreign entities rose from 18.6 percent to 48.3 percent. Does it look as though we are on our way to developing new breakthrough technologies?
It's not easy to sustain prosperity in today's highly competitive world -- especially when the fundamental preparatory skills are weak. We might ask, where will the prosperity come from? Will it come from our troubled K-12 education system? Will it come from the superior attributes of our well-run financial institutions? Will it come from our highly subsidized sports and entertainment industries? Will it come from world-leading U.S. manufacturers? From 1979 to 2005, this country has lost 5.4 million manufacturing jobs -- 4 million of them production jobs.
We might wonder what will be the result of the soon-to-be-enacted stimulus package. Will more television sets from China help our economy in the long term?
There are many things government could do to more fundamentally strengthen the U.S. economy.
Retirement ages could be increased. Is it helpful for so many people to be able to retire in their mid-50s, while others have to work into their 70s to support themselves?
Taxes could be collected. Estimates indicate that uncollected taxes exceed $300 billion each year. This money could help fund research and development into new and better materials, better water purification, advanced batteries and other technologies that we'll need for the future.
We could develop tax systems that will distinguish between investment (which is good) and speculation (which merely shifts wealth to a few).
Instead of dissipating additional borrowed funds to stimulate consumer spending, much of which will go for imported goods, we could use these funds to shore up our rapidly deteriorating infrastructure. If we have to go even further into debt than we are now, perhaps we could at least fix something.
Hayes was on to something that contemporary politicians in both major parties have missed. If we really want to stimulate the economy, we should work on science, scholarship and art.
If we fail to energize the creative engines of technological advancement to solve our pressing energy, infrastructure, education and environmental challenges, our economy is likely to stagnate and spur social unrest that we won't have the resources to address.