Keeping America Competitive

Senator Clinton and President Bush may not always see eye to eye, but keeping America globally competitive is a shared goal. Since the election, much of the talk has been about the gridlock that will result from political "cohabitation," as the French call it. But there's much the two parties can agree on to improve — or reduce — our competitiveness, at no cost to the federal budget.

Next Monday, well-timed to come out after the election, the Council on Competitiveness will release the 20th edition of "Competitiveness Index 2006," a publication tracking matters influencing American prosperity and economic growth. Ripe with bipartisan ideas, the report will present the major factors enabling America to compete in the global economy.

And, earlier this fall, New York's Commission on Independent Colleges and Universities published a report titled "How States Can Enhance Innovation Through the Support of Higher Education and Research," focusing on how to increase science education in New York's primary and secondary schools and colleges.

The American economy's recent performance is almost enough to make us forget about global competitiveness. Since the beginning of 2003, the annualized real GDP growth rate has averaged 3.5%. Aside from the tech bubble of the late 1990s, that's one of the best rates in over 30 years. Analysts forecast that our weak third-quarter growth rate will be followed by a pickup in the fourth quarter.

In addition to a strong GDP, our unemployment rate is at 4.4%, and we've created almost 2 million jobs over the past year, 1.7 million in the private sector.

But that does not mean that we can become complacent, or that our new Congress should lose sight of one of its main goals — building a bigger, stronger America. We do not face much economic competition from Europe, with its low GDP growth, aging population, high unemployment, and excessive taxes, but we face strong competition from Asian countries such as China, India, and Singapore.

The CICU report demonstrates that far too few New York high school students take the foundation courses in math, biology, physics, and chemistry that would prepare them for serious study in college in the sciences. It proposes more teachers and mentors for middle and high school students. And New York high school students probably do better in science than students in many other states.

Minority leader Nancy Pelosi has spoken of the wisdom of cutting earmarks from the federal budget in order to reduce federal spending. There is no better place to start than with the dollars that we allocate for scientific research. We rely on scientific progress for the health and wealth of future generations. Even so, a significant proportion of our science research budget is earmarked for unrelated projects in influential members' districts, rather than going to high-level research.

The 2006 Department of Energy's Office of Science budget alone had over 150 earmarks totaling $135 million, many unrelated to basic science. New York State examples ranged from $750,000 for Joint Environmental Stewardship at SUNY New Paltz and Ulster Community College to $1.5 million for the South Nassau Hospital Green Building. The 2006 Department of Defense basic science and research budget contained about $1 billion in earmarks.

Congress and President Bush could raise the quality of our research without spending one extra dollar just by spending our science funding on competitively awarded projects. Scientists would submit proposals for research within specifically requested categories, the proposals would be reviewed by their peers, and the very best would be selected for funding. The resulting increase in quality would vastly improve our research base.

Another way to increase scientific competitiveness without spending federal dollars is to increase immigration of high-skill workers. Currently, we train the world's top foreign scientists at taxpayers' expense at our universities and then send them back to their countries to compete against us. Congressional Democrats now have an opportunity to work with the president on immigration reform, which stalled under House Republican leadership.

High-skill workers can enter America through employer-requested H-1B visas. There's an annual allocation of 65,000 of these visas, and they're so popular that they are all exhausted the first days they are available. Doubling the number of H-1B visas would be costless and would result in an infusion of extraordinary talent.

It's unfortunate that some Democratic campaign proposals would have the unintended consequence of reducing our competitiveness. The Council on Competitiveness report lauds the flexibility of our workforce and our low tax rates, both of which have been targeted by the new congressional winners.

Increasing the minimum wage to $7.25 would reduce workforce flexibility by pricing low-skilled workers out of the job market and onto the unemployment rolls. This would primarily affect younger workers, particularly teenagers, in the leisure and hospitality industry, vital to New York. We have to hope that gridlock prevails on this proposal.

Similarly, Democrats' promises to raise taxes on the rich could be accomplished by not extending the tax provisions that expire in 2010. These include making permanent certain forms of business expensing, personal income tax rates, capital gains tax rates, and the estate tax.

Raising income taxes might be populist, especially among the 50% of earners who pay almost none, but would be detrimental to competitiveness and economic growth. With nations all over the world competing to lower taxes, America must stay at the cutting edge in order for entrepreneurs and foreign investors to flourish. As New York knows only too well, labor and capital are mobile and need little excuse to go elsewhere.

It would be costless for Congress to halt the leakage of capital offshore from America, particularly from New York, by passing new legislation and revising regulations that affect corporations and financial institutions. Some companies are moving to London because the British government is shielding the London Stock Exchange from inefficient American financial regulations. Senators Clinton and Schumer may want to take a fact-finding trip to London to get more details.

Our two political parties now have the opportunity to work together to increase American competitiveness. It's time to move on from partisan politics and take the global view. Both Democrats and Republicans could be the winners in this global race.

Ms. Furchtgott-Roth is a senior fellow at the Hudson Institute and director of Hudson's Center for Employment Policy. From 2003 to 2005 she was chief economist at the U.S. Department of Labor.