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ICYMI: What Government Should Do to Boost National Economic Competitiveness

Bipartisanship can be rare in an election year, when few people expect Congress to do much of substance. Surprisingly, 2022 could be an exception. What’s bringing Democrats and Republicans together?

Competitiveness—namely, how competitive U.S. firms and industries are relative to peers in other countries, especially China. In June 2021, the Senate passed the U.S. Innovation and Competition Act (USICA) with strong bipartisan support. In early February 2022, the House passed the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act. Unlike the Senate, the House bill passed along mostly party lines, with one Republican vote for, and one Democratic vote against.

The two bills, which have many similarities but also stark differences, now heads to some form of conference. Senate Majority Leader Chuck Schumer (D-NY), one of the cosponsors of the original legislation that became USICA, has set a rough deadline of Memorial Day for resolution and final passage. Last month, the Bipartisan Policy Center hosted an insightful discussion of what the bills include, what happens next in terms of legislative process, and, most importantly, how the legislation could strengthen U.S. economic competitiveness.

The event, “Moving Forward to Boost U.S. Competitiveness: Next Steps for Congress,” featured a conversation with Sen. Todd Young (R-IN), Schumer’s cosponsor on the original legislation. Sen. Young was followed by a panel discussion with:

  • Maryann Feldman
    • Heninger Distinguished Professor of Public Policy at the University of North Carolina
    • Adjunct professor of finance at Kenan-Flagler Business School
    • Research Director at UNC Kenan Institute of Private Enterprise
  • Chris Griswold
    • Policy Director, American Compass
  • John Neuffer
    • CEO, Semiconductor Industry Association

Overflowing with insight, our discussion inevitably could not cover every dimension of competitiveness or the pending bills. Several key takeaways emerged; those are captured here, including clips from the event.

What Does It Mean for a Country to Be “Competitive”?

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“We are competitors. … We have a people that is competitive against the rest of the world. If we fall behind in any particular areas, the American people like their leaders to attend to that and do whatever we can to harness their potential, to harness their creativity and power and work ethic, so that we can outcompete the rest of the world. Especially, especially those who challenge our value system.” - Sen Todd Young (R-IN)
“Generally speaking, competitiveness means ensuring America is home to the high level of innovation, talent, and economic growth that will enable our country, our workers to succeed and prosper into the future.” – John Neuffer, CEO, Semiconductor Industry Association
When we think about competitiveness, this is the way we grow the pie, the way we increase prosperity. It’s embedded in a system of business strategy. Over the long run what we’ve seen is, how do firms secure competitive advantage? It is either by being innovative and finding a niche that’s profitable, or by cutting costs.” – Maryann Feldman, UNC-Chapel Hill

Back to the Future: Industrial Policy

“Do we care what industries the economy invests in? And if we do, is there anything we can do to try and promote that outcome? I think the answer to both questions is yes. We do care; we should anyway. And yes, there are things we can do. … Not choosing is a choice. So let’s be honest about the fact that we have to make a choice, and then do it right in the industries that matter.” – Chris Griswold, American Compass
“We need to think about competitiveness a little bit differently to make sure everyone is working in the same direction toward a goal of economic prosperity and renewal. … Theories of international trade said we would be better off if we had specialization in different countries, and then we should compensate the people would be laid off, who would lose their jobs. But that never happened.” – Maryann Feldman, UNC-Chapel Hill
“We really don’t have a cohesive economic strategy to take us into the 21st century. This has been a source of real frustration for me and some of my colleagues in recent years irrespective of party affiliation.” – Sen. Todd Young, R-IN

Investing in Industries

“We want to reshore some essential manufacturing capabilities, semiconductors in particular. … We want to invest in areas of applied research where we’ve seen funding go down over the years. … If we’re making things here in the United States, in this case computer chips, we’re also on the front lines of innovating as it relates to manufacturing processes.” – Sen. Todd Young, R-IN
“The global chip shortage has been a very stark reminder of the ubiquity of semiconductors and their importance in virtually all areas of our society and economy as we just become amazingly digitized. This industry has a proud history in America. Semiconductors were invented here more than 60 years ago, and US-based companies command the lion’s share of global market share. We account for about half of the world’s total chip sales. But we have lost ground in key areas, especially when it comes to where chips are made. … Evenas the cost of researching, designing, manufacturing more and more advanced chips has increased, federal investments in chip research have been flat as a share of GDP for decades, while other countries have significantly ramped up research investments.” – John Neuffer, CEO, Semiconductor Industry Association

Innovation Everywhere

“Product development and product manufacturing work best in our industry when they happen in the same place. It’s two sides of the same coin. When we produce more chips here, we do more of the research and development of those chips here. In addition, research funding and the activity it generates in universities, centers of excellence, national labs, etc., is a major driver of talent and workforce development. It's a virtuous cycle we need to pump more oxygen into.” – John Neuffer, CEO, Semiconductor Industry Association

Final Thoughts

“I believe that if we have the right leadership and we harness the power and potential of our people, we can defend our values, our way of life. But it’s going to take some adaptation; this won’t happen by itself.” – Sen. Todd Young, R-IN
“The use of the term competitiveness should imply a realistic admission of the way the world really works. Once we admit that we really are in an economic and geopolitical competition with China, for example, then that lets us ask all the other questions we need to ask: what industries matter and why, why does it matter where production happens, how does innovation actually work?” – Chris Griswold, American Compass
“What we are seeing is a once in a generation investment in science and innovation, that’s unprecedented in my lifetime. There is great potential. But again, many times the dreams in Washington are dashed in the Heartland through bad implementation. Attention needs to be paid to the details to make sure, while we’re talking about competitiveness and innovation, really the objective is to increase American prosperity. That’s got to kept in mind. The best plans in Washington will not be realized unless we can get firms on board, and can get firms to adjust their thinking.” – Maryann Feldman, UNC-Chapel Hill

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