The first quarter of 2012 was the twelfth straight quarter of positive foreign direct investment (FDI) flows into the United States, with the second quarter looking even better (WSJ). FDI includes long term investment into the U.S. economy through long-term bets such as corporate acquisitions and real estate. As the top destination for FDI, the United States economy benefits through greater investment: “It’s almost like a reindustrialization of the U.S., with the help of foreign money,” said one analyst.
This CFR Independent Task Force report encourages the Obama administration and Congress to adopt a “pro-America” trade policy that brings to more Americans the benefits of global engagement and investment.
International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.
ASCE Predicts a D Grade for U.S. Infrastructure
Greg DiLoreto, the president-elect of the American Society of Civil Engineers (ASCE), expects U.S. infrastructure to keep its near failing “D” grade in 2013 (Bloomberg). In 2009, ASCE said that the United States needed an extra $2.2 trillion to be spent on capital projects, significantly higher than the $1.6 trillion it thought was needed in 2005. DiLoreto said: “We haven’t really invested additional money, so I would be hard-pressed to believe that the grade would improve. Not everything is falling apart — you can find examples of agencies spending money. But the D represents an overall condition of America’s infrastructure.”
The Renewing America Initiative’s first Progress Report and Scorecard, “Road to Nowhere” highlights the failure of the nation to continue to invest in the infrastructure that has enabled economic strength in past decades.
Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.
Education and Human Capital
H1-B Visa Cap Reached
Bloomberg Businessweek discusses what options firms have since the 85,000 cap on H1-B visas for highly skilled immigrant workers was reached earlier this week. It took two and half months for the cap to be reached, a possible indication of improving job prospects; last year it took seven months to reach the cap, while in April of 2008, it only took one day. Without an H1-B visa, a U.S. firm could place a foreign worker in an overseas office, and then bring him/her to the United States the following year under a L-1B visa for key personnel, a cumbersome process.
Current U.S. immigration policy makes it difficult for many firms to hire the best workers, and leads to a system that does not always humanely deal with migrants. CFR Senior Fellow and Renewing America Director Edward Alden recently commented on the untenable positions both parties have taken.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Innovation Lessons from Skunkworks and Startups
Established firms that struggle to innovate beyond their current core offerings should learn lessons from startups and skunkworks (HBR). Skunkworks of the 1970s and 1980s allowed a team of employees to focus on new technologies and offerings outside the core product line, but they lost favor in the 1990s as business leaders pursued focus. Amazon’s Lab126 and Google X are high profile, modern examples. Startups focus on product innovation first, and as they grow, their attention shifts to process innovation to scale up the business and rein in costs.
In the face of persistently high unemployment, policymakers and workers look to innovation and entrepreneurship, the primary engine of U.S. job growth over the past thirty years. This CFR Backgrounder by Steven J. Markovich discusses how entrepreneurs create and finance startups and the ramifications of policies such as the JOBS Act.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
Debt and Deficits
Public Pensions May be Unfulfilled Promises
The Economist explains how lax accounting standards and poor investment returns have led to underfunded public pensions in the United States. Average annual real net investment return was negative for pensions from 2001 to 2010. Many governments did not dramatically raise their pension contributions to compensate, because they continued to assume an 8 percent annual investment return. Private firms face tougher accounting rules, which require more realistic assumed rates of return, often cited as one reason many have shifted investment risk to workers through defined contribution plans.
Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.