The Good News
In the words of Tom Friedman, “America is hard-wired to thrive” in this new world that is unfolding.
We are talking about a flat world where labor is going to flow, not just to the lowest cost markets, but to the most productive markets. This is a hyper connected world where companies have the information they need to determine which investments give them the best chance to maximize their return on investment. As an example, North America may become the cheapest place to manufacture energy intensive products (e.g. steel and aluminum) because of new domestic oil and gas discoveries. Lower costs for raw materials combined with high tech manufacturing will allow our automation-enhanced high wage workers to out compete low wage low skill alternatives.
This is a world that will reward education, innovation, and those economies that can best develop and attract talent. We are leaving the world where there are substantive differences between developed economies and developing economies. We are entering a world where the differences will be drawn between those economies who celebrate imagination and those that stifle it.
Here’s what we have to do to dominate this emerging “creativity” economy.
We have in invest in better infrastructure, post secondary education for everyone, a welcome mat for talented immigrants, regulations that encourage risk-taking while preventing recklessness, and government funded R&D to create new opportunities for the VC community. Success depends on a strong public-private partnership where government understands its role, to make the world safe and fair for our businesses, and business understands its role, to compete aggressively, play by the rules, and grow the US economy.
We also have to address the two long-term challenges that could undermine our ability to grow this new economy – debt and entitlement obligations. There is no silver bullet here. The math is undeniable. These two problems cannot be solved without raising more revenue (likely through taxes), trimming entitlements, and reducing expenditures (primarily defense). We have to do all three. Anyone who tells you that we can accomplish this by doing less is using “magical” thinking. Magic may be entertaining, but it is only an illusion.
Finally, we have to embrace the changing energy landscape. Regardless of the new discoveries of oil and gas in North America, we will not be able to “drill” our way to a new economy. The most we can expect from those discoveries is more time to make the transitions away from fossil fuel that we all know must be made. The next great global industry is going to be efficient use of our existing resources and development of new clean energy alternatives to fossil fuels. The winners in this new economy are going to also be leaders in this new global industry.
The Bad News
We have a broken political system.
When Republicans say that they won’t accept $1 of increased revenue in return for $10 of spending cuts, they have cut themselves off from reality. It simply is not possible to make the sorts of investments that we need to make and bring down the deficit and restructure entitlements with spending cuts alone.
Similarly, when the Democrats suggest that the only thing we need to do is raise taxes on the rich, they are also not telling the truth. Entitlements also have to be restructured and spending cut.
The difference, however, is that Democrats don’t seem to have nearly the same hardened ideological positions as Republicans. In all of the confrontations that have happened since the Republicans gained control of the house and veto power in the Senate, virtually every confrontation has resulted in Democratic concessions to craft a compromise.
Right now the only thing that both parties are offering the American people is more of the same. They are in effect asking the voter to make a binary choice. Either voters elect enough Democrats to overcome Republican opposition to the Democratic agenda. Or voters elect enough Republicans to overcome Democratic opposition to the Republican agenda.
Both parties are guilty of “magical thinking” – suggesting that their flawed and partisan agendas are capable of addressing the needs of the country. In fact it is compromise that extracts a rational set of legislation from ideological positions that are not practical.
The way that it should work, or at least the way that it has worked in the past is that both parties bring their agendas to the table and negotiate legislation which has some Democratic items, some Republican items, and some items that are in the middle.
The Democrats still seem willing to engage in those discussions.
The Republicans, however, have rejected compromise as an option because they claim it means compromising their ideals. They have instead adopted a scorched earth strategy where they deliberately undermine the very institutions of government they took an oath to support.
If compromise is no longer part of the toolbox of the current set of Republicans, then we need a new set of Republicans.
We need are Republicans who are willing to fight for their ideas during the election cycles, but will also accept the results of an election. If they win, they will work with the Democratic minority to govern effectively. If they lose, they will engage in strategic compromises to advance the interests of country, rather than simply grind the government to a stop until the next election.
We need a Republican party that is going to offer a conservative rather than ideological vision of this new world. We need a Republican party that is willing to engage the Democrats in an informed debate on the best fiscal, energy, immigration, and public-private partnership policies. We need the sort of public dialog that educates voters on what the real issues and choices are. Then we need a Congress willing and able to craft legislation based on election results.
Since it is unlikely that Republicans will voluntarily abandon their current ideological crusade, there really is only one other alternative.
They have to lose and lose badly. They have to lose so badly that those who have been driving this hard turn to the right, are banished. They have to be crushed so badly that they are forced to engage in a fundamental reassessment of their strategy and values. They have to be banished to the wilderness by voters and told not to come back until they have something better to offer voters. They have to be beaten back to their senses and forced to re-engage with the Democrats rather than simply demonize them. This loss has to represent a wholesale rejection of ideology and a demand by the voters for a return of the practical, thoughtful, conservative Republicans who brought us the interstate highways system, the EPA, and the Helsinki Accord. Those Republicans can help create a new political structure where creativity rather than confrontation, ideas rather than ideology, compromise with an eye on the prize, lead us to the promised land of this new global creative economy.