Gerard Scimeca – Chairman, CASE
August 31, 2018 – https://bit.ly/2xYsfXy
Seinfeld’s George Costanza never studied to be an architect, but that didn’t stop him from pretending to be one. In one conversation, he falsely took credit for designing the addition to the Guggenheim Museum, then added for good measure, “Yeah, it didn’t take very long either.”
Costanza’s phony bravado aside, it’s true that great achievements don’t always coincide with a major investment of time, our current economy a case in point. In a little over a year and a half, America’s economic engine has gone from puttering down the shoulder of the road with its hazards blinking to high orbit. And it didn’t take very long either; all it took was a president to fix the regulatory and tax burdens holding our economy down.
Aided by President Donald Trump’s tax reform and blitzkrieg against federal regulations, unemployment is at record lows, low-skill wages are rising, GDP growth estimates have busted through the 4 percent wall, and consumer and investor confidence are peaking at levels we haven’t seen in years, if not decades. Even with markets nervous about a possible trade war, the trade deficit is down on record exports and positive news springs from a pending trade agreement with the EU that even NPR reports will “lower tension.”
As expected, Trump did a victory lap on news of the 4.1 percent estimated second quarter GDP growth, calling it a “historic turnaround,” but naysayers were almost as vocal. Balkers included some Democrats, who are politically invested in spinning good news as bad, and even a few skeptical voices on the right, who argue the Trump bump is not much more than a continuation of an inherited incline. Regardless of the verbal jockeying, Americans are eager to keep the economic momentum going, having had enough of the “ new normal” of 2 percent growth and slow job creation.
But just as quickly as Costanza fixed the Guggenheim, it wouldn’t take very long for our economy to likewise fizzle. Keeping the engines roaring is no great mystery, as most economists who make a living at the profession will agree it comes down to one key factor: investment. Surely other factors, such as trade, currency, etc. are vital, but investment by far gets top billing.
Lack of private investment was a key factor in the uber-slow recovery under former President Barack Obama and was only half that of the robust recovery of the 80s. Economic investment drives productivity, job growth, and wages and is the lifeblood of innovation and new technologies that ignite all of the above.
Investment has been central to resurgent American industries, for example energy and manufacturing. America is now projected to be a net energy exporter by 2022, something that was unthinkable merely a few years ago.
Likewise, America’s manufacturing rebound is turning the spigots of investment even further, with a recent National Association of Manufacturer’s (NAM) survey showing 85 percent of members plan to increase investment, 77 percent plan to increase hiring, and 72 percent plan to increase worker wages and benefits. Meanwhile, manufacturing optimism has hit a historic high of 95.1 percent, and the manufacturing jobs that Obama said “aren’t coming back” have swelled by over a million new workers.
As important as these figures are, however, they shouldn’t obscure the fact there are larger races being run across the global economy that hold far greater consequence to our economic fortunes beyond today’s good numbers. For example, America is currently lagging behind the world in 5G investment, the new wireless technology that will transform our society and economy with data speeds over 100 times faster than we have today. Quite simply, 5G technology is the foundation upon which the future economy will be built.
China, South Korea, and even parts of Europe are outpacing us in this race, pouring billions into research, infrastructure and proprietary technologies at a level that could leave the U.S. as a world-follower in technology for the first time ever. A recent study by Deloitte even warns of losing this race for good. As Dr. Roslyn Layton pointed out in testimony before a Senate committee in June, China is far ahead of the U.S. in 5G investment, and overtook the U.S. as the world’s largest market in mobile apps in both revenue and downloads.
Our lagging position has been exacerbated by government meddling. When Obama put the internet under regulatory control in 2015 as if it were a public utility, investment in broadband technology and infrastructure fell. Thankfully, Trump’s FCC reversed this decision, but with anything that involves government, the risk of more meddling is always around the corner.
A key example now is the proposed merger between wireless carriers Sprint and T-Mobile, that would produce a legitimate third national wireless company to challenge the dominance of AT&T and Verizon. The merger would produce $40 billion in direct 5G investment and speed the deployment of this critical technology across the nation. As Senator Mike Lee (R-Utah) recently noted, this is not only a huge win for consumers, but our national interest and the long-term economic outlook of every American.
The key to America catching up in this critical race is for government to get out of the way, and let free-market investment propel us to the forefront as it has done elsewhere, or risk losing the race both at home and abroad.
In allowing the internet to be free of depression-era utility regulations or supporting partnerships in technology, the pretend architects in government need to embrace the tax and regulatory reforms fueling our strong economy, and keep their hands and their T-squares to themselves.
