But this time, I agree with him. It's the economy, stupid.
http://www.nytimes.com/2010/03/03/op...ml?ref=opinion
I was traveling via Los Angeles International Airport — LAX — last week. Walking through its faded, cramped domestic terminal, I got the feeling of a place that once thought of itself as modern but has had one too many face-lifts and simply can’t hide the wrinkles anymore. In some ways, LAX is us. We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch.
And this contrast is playing out in the worst way — just slowly enough so the crisis never seems acute enough to take urgent action. But, eventually, infrastructure, education and innovation policies matter. Businesses prefer to invest with the Jetsons more than the Flintstones, which brings me to the subject of this column.
I had a chance last week to listen to Paul Otellini, the chief executive of Intel, the microchip maker and one of America’s crown jewel companies. Otellini was in Washington to talk about compe iveness at Brookings and the Aspen Ins ute. At a time when so much of our public policy discussion is dominated by health care and bailouts, my public service for the week is to share Mr. Otellini’s views on start-ups.
While America still has the quality work force, political stability and natural resources a company like Intel needs, said Otellini, the U.S. is badly lagging in developing the next generation of scientific talent and incentives to induce big multinationals to create lots more jobs here.
“The things that are not conducive to investments here are [corporate] taxes and capital equipment credits,” he said. “A new semiconductor factory at world scale built from scratch is about $4.5 billion — in the United States. If I build that factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion,” because of all the tax breaks these governments throw in. Not surprisingly, the last factory Intel built from scratch was in China. “That comes online in October,” he said. “And it wasn’t because the labor costs are lower. Yeah, the construction costs were a little bit lower, but the cost of operating when you look at it after tax was substantially lower and you have local market access.”
These local incentives matter because smart, skilled labor is everywhere now. Intel can thrive today — not just survive, but thrive — and never hire another American. Asked if his company was being held back by weak science and math education in America’s K-12 schools, Otellini explained:
“As a citizen, I hate it. As a global employer, I have the luxury of hiring the best engineers anywhere on earth. If I can’t get them out of M.I.T., I’ll get them out of Tsing Hua” — Beijing’s M.I.T.
It gets worse. Otellini noted that a 2009 study done by the Information Technology and Innovation Foundation and cited recently in Democracy Journal “ranked the U.S. sixth among the top 40 industrialized nations in innovative compe iveness — not great, but not bad. Yet that same study also measured what they call ‘the rate of change in innovation capacity’ over the last decade — in effect, how much countries were doing to make themselves more innovative for the future. The study relied on 16 different metrics of human capital — I.T. infrastructure, economic performance and so on. On this scale, the U.S. ranked dead last out of the same 40 nations. ... When you take a hard look at the things that make any country compe ive. ... we are slipping.”
If the government just boosted the research and development tax credit by 5 percent and lowered corporate taxes, argued Otellini, and we “started one or two more projects in companies around the country that made them more productive and more compe ive, the government’s tax revenues are going to grow.” With the generous research and development tax credits and lower corporate taxes they receive, Intel’s chief compe ors in South Korea basically have “zero cost of money,” said Otellini. Intel can compete against that with superior technology, but many other U.S. firms can’t.
Does the Obama team get it? Otellini compared the Obama administration to a “diode” — an electronic device that conducts electric current in only one direction. They are very good at listening to Silicon Valley, he said, but not so good at responding.
“I’d like to see compe iveness and education take a higher role than they are today,” he said. “Right now, they’re going to try to push this health care thing over the line, and, after that, deal with the next thing. God, I’d just like this [our compe iveness] to be the next thing. Something has to pay for” everything government is doing today.
We had to do the bailouts, the buy-ups and the jobs bills to stop the bleeding. But now we need to focus on the policies that spawn new firms and keep our best at the top. “Having run a company through a major transition, it’s a lot easier to change when you can than when you have to,” said Otellini. “The cost is less. You have more time. I am a little worried that by the time we wake up to the crisis we will be in the abyss.”
we used to build and stuff in the 50's
what is left to build? infrastructure is already built, etc... i guess it needs repairs though, some of those highways and bridges are passed their life expectancy
america should shut down most foreign interests for about 10-20 years and focus on internal affairs again, beginning with paying off the debt slowly and surely
Power Generation and transmission infrastructure. I don't want to get into an arguement about what type of power generation, but I am sure that we all agree that we need it.
I live in Pa. State govt, as many are, is broke and going more broke.
First thing they are cutting?
Higher Education - dramatically.
There was an article in the paper the other day about how Texas still has money for higher education and that we are siphoning off top talent from California who has historically had more money available to throw at researchers and profs. It also stated that we wouldn't have much longer to do this because next year we will also have a shortfall.
The number one priority of the country probably SHOULDN'T be another HUGE en lement program.
Anyone seen the movie "Idiocracy"?
A LOT of people are evacuating from CA and moving to TX. I think there are numerous reasons for this and not just how much money is devoted to education.
No, the article was dealing specifically with how we are siphoning off people to work in the UT and A&M systems from the UC system because we don't have the budget cutbacks that they do. I do realize that there are other, but I was just talking about education.
101a: yes, I love that movie. "Im'onna ALL OF YOU WOOOOOOOH!"
When it comes to infrastructure, there's plenty left to build and plenty more to repair/replace. In Texas alone the population growth equates to adding a new San Antonio sized city to the state's population every 3 years. The infrastructure needed to keep up with that growth is severely lacking. In the mean time, our roads, bridges, dams and utilities get older and older and the dollars to keep those facilities up to standard keep getting stretched thinner and thinner.
The stimulus bill did not put nearly enough money into infrastructure. That's where the government had the opportunity to both inject money into the economy by directly creating demand for products and services and to improve the quality of life for the citizens by giving them an improved infrastructure to enjoy. Instead of doing that, the govt went with a stimulus bill filled with a bunch of giveaway programs where we're left hoping that the people being given the money will create demand by feeling motivated to go buy something, and still left with an aging infrastructure in need of serious repair and upgrade.
Awesome flick.
Not only is this completely uncontroversial, it's been widely acknowledged for years. Yet somehow it never translates into political will.
Coyotes_geek: I agree with you. I find it ridiculous that there wasn't more emphasis put on infrastructure in the stimulus. I mean it hasn't all been spent. Put that to work (on infrastructure, or research, or some sort of investment, not give away), or pay the leftover back to the Chinese.
Winehole: Doesn't make sense does it. Everyone wants it (not just republicans, not just democrats, everyone), yet it ain't happening. Its like, politicians aren't used to hitting such a slow pitch down the middle, so they just keep whiffing.
plus
it will create many jobs for all this construction work, im with ya
The infrastructure panacea is overblown, IMO. Or at least people don't think critically enough about it. If you build new roads, you've created a future fiscal obligation to maintain those roads. You should only build them if you can afford to keep them.
In other words, you really do have to be careful when spending on infrastructure. If the infrastructure itself is warranted, then stimulus spending shouldn't be necessary to meet the need. It should be something you're spending money on regardless of the current macroeconomic conditions. If it isn't warranted, and the money is spent to create temporary jobs for low-skilled workers at "prevailing wages," then any stimulative effect would have to be mitigated by the future debt incurred by maintaining that infrastructure.
Updating or repairing roads and bridges, when based on needs and done in a fiscally-sustainable way, makes sense. Have we neglected our existing infrastructure and been slow to accommodate population growth? Yes, in many areas of the country we have. Our infrastructure spending has been laughably bad, and the blame is shared by the federal government and the states.
This is a roundabout way of saying that I think infrastructure spending should be governed by need and the fiscal consequences, not by its alleged stimulative effect.
I don't follow. You start out by saying that the infrastructure problem is overblown and finish by admitting that our infrastructure spending is laughably bad.
Also, when you say that you don't think we should spend on infrastructure for stimulative effect, what do you think the government should be spending money on to stimulate the economy? Or are you of the opinion that the government shouldn't be trying to stimulate the economy in the first place?
I'm certainly not advocating that we start building bridges to deserted islands in Alaska for the sole purpose that we can, but there is more than an abundant supply of legitmately needed infrastructure projects to invest in.
Last edited by coyotes_geek; 03-04-2010 at 04:50 PM.
Ok, I agree, and I am not saying that we should be building roads just to be building roads, but as you say the ones we have need to be updated. I think a better place to spend our money would be to upgrade our energy transmission system (most specifically power lines). Increasing the efficiency of our power usage is indeed an investment which creates more discretionary cash for the country as a whole. This creates a stimulative effect on the economy without having to cut taxes (could possibly increase taxes a little and still leave the country with increased purchasing power) and ends up increasing the tax base. This money can be used to eventually balance the budget, and pay down the debt. I think that this and smart meters should be the primary things that should be encouraged by the federal government, because you get the benefit regardless of what power generation plan this country settles on, including getting more out of what we currently have.
There are certainly a lot of wind farm projects that are currently being held up because there's no transmission lines to get the power from places like west Texas to the population centers where the power is actually needed.
Maybe I wasn't clear enough.
I think infrastructure spending should be governed by need alone. We have failed in that respect--hence, my point about how our infrastructure spending has been laughably bad (both wasteful in some respects with unnecessary roads and weak bidding requirements, and underresourced in others with neglected roads and bridges).
But boosting infrastructure spending is probably not the best way to stimulate the economy, IMO, since new roads create new fiscal obligations in the future. Employing those workers may have a temporary effect on unemployment--just as throwing government money at the businesses that would be involved in the work might boost demand--but I think there are simpler, more efficient ways to stimulate the economy.
Basically: infrastructure spending is broken and messed up as a general matter, but it should mostly be unaffected by any government plans to stimulate the economy. Yes, I agree that there are many areas in which infrastructure spending should be increased to address actual infrastructure needs; but conceptually, at least, I think that shouldn't be part of any fiscal stimulus.
Really? What investment would you rather be spending the money on that has a higher ROI than, say, what I was suggesting? I am not saying that my plan is the best or anything, I am just curious.
I gotcha. Thanks for the clarification.
"infrastructure is already built,"
get yr head out of your ass. It costs more now in real $$ to paint the Golden Gate Bridge than it cost to build it.
China's building their country/infrastructure like crazy, as the US did from 45 - 75.
Now the US infrastructure is in need of maintenance (just like Old Europe, where some stuff is 100s of year old, like roads, bridges, buildings, sewers, water distribution, electrical grid) which extremely expensive. But the Movement Conservative/Repug echo chamber of "cut taxes ad infinitum and hate all govt" means there isn't enough tax money to maintain and operate the infrastructure, eg, California. So the US is rotting away.
Also, US capitalists and even corporate CFOs have figured out they get better returns playing in the financial sector casino (only need computers) than they do making stuff or selling services (both need those expensive, bothersome employees).
So US and world capital is chasing financial products and investments for their greater returns, not bricks and mortar investment.
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