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Making More in America
Paid for by Stacey Lawson for Congress
AMERICA NEEDS TO MAKE THINGS AGAIN
Priority One 10
SMALL BUSINESS Creating conditions for small businesses to thrive
Priority Two 15
GOING LOCAL Promoting insourcing and local, niche manufacturing
is an educator, small business owner and candidate for Congress in California’s new 2nd District. Stacey is standing up for the shrinking middle class and fighting to re-open the doors of American opportunity for everyone, because she lived it — growing up in a blue-collar town, earning an education and then launching a series of innovative small businesses. Stacey’s very first company
Priority Three 21
ENERGY Making our own energy again
Priority Four 27
EDUCATION Retooling our workforce for the 21st century
Priority Five 32
INNOVATION Growing our lead in science and technology
developed technology to help American manufacturers design better products and stay competitive globally, helping to create and keep new middle-class jobs in America. She also co-founded and teaches at the Center for Entrepreneurship & Technology at UC Berkeley, one of the nation’s leading centers of economic innovation, small business advocacy and incubation.
Priority Six 36
MODERNIZING OUR INFRASTRUCTURE Equipping the country’s workforce with working infrastructure
Priority Seven 42
MIDDLE-CLASS BUYING POWER Accelerating demand for “Made in America”
Making the case for making more in America
The average wage for manufacturing work in America is 20 percent higher than the national average wage1 — a premium that reflects the tremendous value added to our economy by the manufacturing sector. Each manufacturing job produces up to four downstream jobs and, according to a recent report, each $1 spent in manufacturing creates $1.43 in other sectors.2 That’s a “multiplier effect” nearly twice that of other parts of our economy.3 A healthy manufacturing sector isn’t just important to individuals looking for highwage employment—it is vital to the long-term health and security of our national economy. Manufacturing and technological innovation are so closely linked that manufacturing is still the principal source of innovation in the United States. If we don’t keep innovating, our economy will fall behind and millions more Americans will drop out of the middle class. Since innovation is driven by the manufacturing sector, a healthy economic future starts with restoring the health of American manufacturing. Manufacturing is one of the few sources of steady and secure jobs for those who do not graduate from four-year colleges. A fair and just economy means creating opportunity for everyone, not just those who earn college 3
merica needs to make things again. Why? Because the kinds of jobs that can send kids to college and provide a secure retirement are not minimum-wage jobs. Creating high-wage jobs, middle-class jobs and steady year-round jobs will take revitalizing the American manufacturing economy.
degrees or, increasingly, advanced degrees. Spurring manufacturing is one of the ways we can help reverse the rapidly growing equality gap in our country that has seen the rich get dramatically richer and virtually everyone else fall behind. Manufacturing is key to restoring our balance of trade. If we don’t make things, we can’t sell things to other nations. Why does that matter? Because in the long term, it means other countries gain more and more power and more influence over our economic well-being. If we want to control
manufacturing job produces
spent on manufacturing creates
in other sectors of our economy
our economic future, we must restore our balance of trade. And perhaps most importantly, manufacturing know-how is a “use it or lose it” proposition. If we stop making things, we lose the knowledge base and the workforce that knows how to make things. We need the kind of skilled workforce that has the technical knowledge manufacturing requires, the engineers and innovators who help drive product development and the practical applications that come from a robust manufacturing economy.
Spending $100 at an independent business puts
The Power of Buying Local
Manufacturing isn’t just big factories anymore. The “buy local” and “maker” movements have shown the tremendous economic and creative energies released, and the environmental benefits gained, when we stay local. When we buy a piece of furniture that was made by a local carpenter in Del Norte County, we keep those dollars at home, we keep those skills local, we keep a neighbor in steady middle-class employment and we keep carbon emissions out of our atmosphere. And if we buy that musical instrument from a small shop in Humboldt, it doesn’t just
back into the local community, versus only
when the same $100 is spent at a national chain.
keep our local dollars local; it keeps trucks off the road and giant cargo planes out of the sky. And it keeps, or creates, new skills here at home. When we buy local wine from a Mendocino vineyard, we can see for ourselves how those grapes were grown— and understand if they were harvested in a sustainable fashion. When a skilled machinist makes tools and other high value-add products in Sonoma County, the supply chain created sets off a virtuous cycle that has actually been shown to help raise other wages, even of those not in the manufacturing sector. We know that spending $100 at an independent business puts $68 back into the local community, versus only $43 when the same $100 is spent at a national chain.4 The same thing happens when we do more than shop locally — when we make things locally. We create jobs and opportunity right here at home.
A Path to the Middle Class
I grew up in a logging town on the coast of Washington. When I was young, we lived in a trailer, like a lot of families in our community, struggling as the natural
D E C L I N E I N M A N U FA C T U R I N G J O B S S I N C E T H E T H E 1 9 6 0 s
The loss of manufacturing jobs in the U.S. is directly related to the shrinking middle class.
Employment in millions, seasonally adjusted
20 18 16 14 12 10
1964 1968 1960 1962 1966 1970 1972 1974 1976 1978 1980 1994 1998 2000 2002 2004 2006 2008 1982 1984 1986 1988 1990 1992 1996 2010
Source: Bureau of Labor Statistics
resource economy began to shrink. Our family wanted the same kind of opportunities most of us dream about. My mom and dad wanted a house they could own themselves. They wanted to be able to send us to college. They hoped, one day, to be able to retire in security and dignity. They didn’t dream about riches — they just wanted the American dream of a middle-class life. And they got it. My dad started a small trucking company. He took a risk. And it paid off for him, my family and me. With the help of scholarships, government
when American manufacturing started to shrink. I wanted to help keep the American manufacturing economy alive. I’m proud we helped so many companies stay competitive, so they could stay here in America and keep high-wage jobs here at home. I went on to co-found the Center for Entrepreneurship and Technology at UC Berkeley. My mission as an educator is to keep and promote the skills it takes to maintain America’s lead in innovation and technology. You know what we have found? Long-term economic success isn’t just about
The “buy local” and “maker” movements have shown the tremendous economic and creative energies released, and the environmental benefits gained, when we stay local.
education loans and access to great public schools and universities, I was able to go to college, earn a degree in chemical engineering and then an advanced degree. I was able to succeed because my parents were able to build a secure economic foundation. What came next for me was a path made possible by American opportunity. After finishing graduate school, I started a company that created technology to help U.S. manufacturers compete in the global marketplace. This was around the time 5
having the engineering skills to design new products, or the financial capital to bring them to market — you also need the skills to make these products yourself. We can’t “outsource” our way to prosperity. We need to do more than design and consume products. We need to make things again.
The Shrinking Middle Class
My story is one that millions of Americans could tell — or used to be able to tell. The challenge today is that the middle class is
C U M U L AT I V E G ROW T H I N AV E R A G E A F T E R - TA X I N C O M E , B Y I N C O M E G RO U P
Percentage change in income since 1979, adjusted for in ation
300 250 200 150 100 50 0 -50
Top 1 Percent 81st – 99th Percentiles 21st – 80th Percentiles Lowest Quintile
The distribution of after-tax income became substantially more unequal from 1979 to 2007 as a result of a rapid rise in income for the highestincome households, sluggish income growth for the middle 60 percent of the population, and an even smaller increase in after-tax income for the 20 percent of the population with the lowest income.
Source: Congressional Budget Office
Source: Congressional Budget O ce
If 20% of jobs were in the manufacturing sector (like they were in 1970), we would create 12 million new manufacturing jobs and 30 million new support jobs.
shrinking dramatically — and that adds to our income gap, it hinders economic growth, and it takes away the kind of opportunities that we used to take for granted. Since 2000, America has lost nearly one third of its manufacturing jobs, a loss directly related to the shrinking of the middle class. This recent decline is only an acceleration of a long-term trend — with manufacturing jobs falling from 27 percent of our workforce in 1970 to just over 10 percent today.5 We are proud of our ability to design products like the iPad — but history shows that innovation is linked to manufacturing skills, and if you lose the manufacturing skills you will eventually lose your technological edge. And, perhaps most dangerous of all, this new “winners and losers” economy has started to undermine the very idea of the American dream — the ideal that everyone has the opportunity for a better life if they are willing to study well and work hard. With just a very few gaining more and more economic power, and the rest of
America falling behind, we just can’t be sure that ideal is still true. That’s why we need to start restoring the kind of high-wage jobs that are the foundation of a sustainable economic recovery, not just for Wall Street, but also for the Main Streets up and down our district and throughout our country.
Reasons for Hope
As tough as the American economy is right now, there is reason for hope when it comes to Making More in America. Even without a coherent national policy, our manufacturing sector is coming back to life. Over the past two years, the economy has added 334,000 manufacturing jobs — the strongest two‐year period of manufacturing job growth since the late 1990s.6 Manufacturing production grew 5.7 percent on an annualized basis since its June 2009 low, the fastest pace of growth of production in a decade.7 But we are far from recovering the more than two million manufacturing jobs lost in the recession.
Part of this growth is driven by the incredible productivity of the American worker. Relative costs in the U.S. have improved with productivity growth: U.S. manufacturing productivity—which has always been strong— continues to improve, rising nearly 13 percent since the first quarter of 2009.8 Combined with an increased cost of labor elsewhere in the world, it is now more cost-competitive to invest in American manufacturing workers. A series of identifiable smart actions and choices by business leaders, educators, and policymakers could lead to a robust, manufacturing-driven economic future. Alternatively, if the U.S. manufacturing sector remains neglected, our manufacturing capabilities could then erode past the point of no return. Of course we are not going to bring every manufacturing job back. That is a reality. And we might not want to invest our resources in reviving extremely low-paying manufacturing jobs. But we can target high-wage and highvalue jobs that keep hardworking families in the middle class and expand markets for locally-made goods. The upside to bringing these jobs home can be calculated — and it is significant. For example, if we could return to the level of the late 1970s when about 20 percent of jobs were in the manufacturing sector — we would create 12 million new jobs directly and spur another 30 million new jobs in downstream support services.9 Why is that number so important? Because that’s just about the number of jobs we need to restore and create over the next ten years to get back to full employment in the U.S.
Plans versus Politics
Of course, we’ve heard our politicians talk about jobs almost endlessly. But the problem is that most of them don’t have much experience in the fundamentals of how to create high-wage jobs and how to 7
restore economic balance. So many of their campaigns are funded by Wall Street, the big banks and giant corporations, that perhaps they feel beholden. Others have spent their careers in government office — which is a noble calling — but one that emphasizes quick fixes and sound bites over the kind of economic fundamentals we need to restore the middle class and create economic fairness in the long term. That’s why I am running for Congress. And that’s why I am offering my plans for restoring the American manufacturing economy. I’m running because I know — from my own life, my own experiences helping American manufacturers succeed and my own career in education working to promote innovation and technology — we need more than promises. We need a robust plan to restore the middle class, starting with the jobs that sustain the middle class — manufacturing employment. My plan can be broken down into seven major priorities — and I would like to discuss these briefly in the pages ahead. Because I
Restoring our manufacturing strength is key to rebuilding America’s middle class and re-opening the doors of opportunity for all Americans.
have actually worked to create jobs and spark innovation, I know that this won’t be easy. But I have incredible faith in the American economy, and the American worker, because I know we are still the best trained, most creative, most motivated and most innovative people on Earth. Here are seven simple priorities to help us stay that way. One of the foundational priciples of my campaign is the belief that politicians don’t have all the aswers — but there are answers out there if we bother to ask and listen. Let’s get the conversation going. Here
are some of my ideas to get our friends and neighbors back to work. What do you think? What are your ideas? What’s right, or wrong, about the ideas proposed here? Let me know — you can email me at Stacey@StaceyLawson.com — and I’ll share your ideas with our growing community. I’ll be releasing more proposals in the months ahead — but creating new middle-class jobs by restoring America’s manufacturing economy is my first priority, which is why I have presented these proposals first.
E V E N PRIORITIES FOR RESTORING OUR MANUFACTURING ECONOMY
1 Creating conditions for small businesses to thrive 2 Promoting insourcing and local, niche manufacturing 3 Making our own energy again 4 Retooling our workforce for the 21st century 5 Growing our lead in science and technology 6 Equipping the country’s workforce with working infrastructure 7 Accelerating demand for “Made in America”
1 Michael Ettlinger and Kate Gordon, “The Importance and Promise of American Manufacturing, Why It Matters if We Make It in America and Where We Stand Today,” (Center for American Progress, April 2011), available at http://www.americanprogress.org/issues/2011/04/pdf/manufacturing.pdf. 2 Manufacturing Matters To The U.S., Manufacturing Jobs Matter to US: A Union Member’s Handbook for Improving the Future of Manufacturing Jobs and the Manufacturing Industry in the U.S.,” (Working for America Institute), available at http://www.workingforamerica.org/documents/PDF/sloan_report_revised.pdf. 3 Ibid. 4 “The Andersonville Study of Retail Economics,” (Civic Economics, October 2004, Modified February 2005), available at http://www.civiceconomics.com/Andersonville/AndersonvilleStudy.pdf. 5 “Report to the President on Ensuring American Leadership in Advanced Manufacturing,” (Executive Office to the President and President’s Council of Advisors on Science and Technology, June 2011), available at http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast-advanced-manufacturing-june2011.pdf. 6 “Investing in America: Building an Economy That Lasts,” (White House report, January 2012), available at http://www.whitehouse.gov/sites/default/files/investing_in_america_report_final.pdf. 7 Ibid. 8 “A Vision for Economic Renewal: An American Jobs Agenda,” (The Task Force on Job Creation and New America Foundation, July 2011), available at http://newamerica.net/sites/newamerica.net/files/events/Economic-Taskforce-booklet_FINAL.pdf. 9 Ibid.
Creating conditions for small businesses to thrive
DURING THE 2001 ECONOMIC CRISIS,
small businesses of fewer than twenty employees lost fewer jobs and recovered faster than large firms.1 That’s just one example of why economists and policy makers agree — investing in our small businesses is investing in the bedrock of the American economy. From 1993 to 2009, as reported by the Small Business Association Office of Advocacy in the 2011 Economic Report of the President, “small firms accounted for 9.8 million of the 15 million net new private sector jobs,” or “nearly two out of every three of the period’s net new jobs.”2 Demonstrably, during periods of normal economic growth,
small businesses create enough new jobs to compensate for job losses created when new companies fail.3 By investing in our small businesses, we invest in one of the most promising sectors for job growth. And it shouldn’t be lost on us that these new and expanding small businesses create one of the most direct paths to the kind of middle class security we need to promote. That’s the path my family took — as my father scraped together a few dollars to buy a hauling truck and eventually leveraged that into the kind of small business that helped him buy a home and send his kids to college. In an economy still reeling from the effects of Wall Street speculation, promoting small businesses is a way to also promote the rock-solid mainstreet companies that are accountable to their communities — because they are part of our commuities.
the amount of additional investment into the American economy that would result from the federal
P RO B L E M S FA C I N G S M A L L BU S I N E S S E S
POOR SALES TAXES OTHER GOVERNMENT REQUIREMENTS INSURANCE COST/AVAILABILITY COMPETITION FROM LARGE BUSINESSES FINANCIAL AND INTEREST RATES COST OF LABOR
increasing its percentage of spending with small businesses
21 14 12 8 6 4 4
10% 15% 20% 25% 30% 35%
Notes: “Other” includes issues such as in ation and quality of labor. Data are an average of monthly National Federation of Independent Business surveys from 2009. Sources: Dunkelberg and Wade (2010); CEA calculations
Economists and policy makers agree that investing in America’s small businesses is investing in the bedrock of the American economy.
Everywhere, but particularly in the manufacturing sector, these small businesses are wellsprings of innovation. And ultimately it is innovation that will help bring back more high-wage manufacturing jobs. credit cards to support their companies financially.5 With the collapse of the housing bubble, home equity extraction is no longer available to small business owners in the same way.6 In addition, nearly eighty percent of small business owners have reported that their credit card terms have changed for the worse.7 Since the economic recession, 68 percent of small business owners reported an increase in their interest rate and 41 percent reported a reduction in their credit limit.8 Expanding the availability of resources to small businesses would provide some much-needed financial relief. The passage and implementation of the 2009 Recovery Act had a remarkable impact on lending to small business by utilizing basic tools available. While more lenders now are making loans to small businesses since the implementation of the Recovery Act, we can do more —starting with increasing the cap for small business loans to allow small business owners to move
Improve access to capital
Restoring our manufacturing sector — and restoring our overall economic vitality — requires expanding the credit available to small businesses to ensure that they have the resources necessary to weather economically challenging times and to invest in growth. Small businesses receive approximately ninety percent of their financing from banks, where larger firms are only reliant on banks for about thirty percent of their financing.4 But with the recession, banks have become hesitant to lend to small businesses, especially at the rate they were previously. Small business owners have also historically drawn upon home equity and 11
forward with their businesses in these economically rough times.9 By increasing their companies’ access to capital we will be able to support this great part of our economy. The government should continue to incentivize lending to small businesses and responsibly expand the lending limits to small businesses to give small businesses a chance to breathe in these tough economic times.
Value of loans in billions of dollars
Number of loans in millions
Leverage government purchasing power
The federal government should leverage the trillions of dollars already being spent to create hundreds of thousands more jobs by increasing federal purchases from small businesses, particularly those with sustainable environmental and social practices. At this point, only 23 percent of federal government contracts are required to be awarded to small businesses.10 With the credit crunch and a contraction in consumer demand, small businesses are seeing a double squeeze. According to a project co-sponsored by the Brookings Institution and the Small Business Administration, if the federal government increased its percentage of spending with American small businesses from 23 percent to 30 percent, the result would be an additional $100 billion investment into the American economy annually— helping to spur an increase in job growth and solidify the economic sustainability for American businesses.11
proven to increase the quality and quantity of the developments produced.12 The Brookings Institution has documented this phenomenon: “It is now broadly affirmed that strong clusters foster innovation through dense knowledge flows and spillovers, strengthen entrepreneurship by boosting new enterprise formation and start-up survival, enhance productivity, income-levels, and employment growth in industries, and positively influence regional economic performance.”13 Regions like the North Coast have domain expertise in areas such as sustainable agriculture, food production, and natural resource utilization (e.g. forest restoration, rainwater catchment, stream rehabilitation, biomass and biofuels, to name a few). Those strengths should be used to position the region advantageously so that the resources and skills there are harnessed.
Foster small business workshops
B A N K L OA N S TO S M A L L BU S I N E S S E S
Small businesses receive approximately ninety percent of their financing from banks, but with the recession, banks have become hesitant to lend to small businesses, especially at the rate they were previously.
Cultivate regional economic clusters
Across the country, we have seen the evolution of regional economic clusters like Silicon Valley. Geographic centering of research and development has been 12
One of the greatest problems for many small business owners today is the lack of guidance and support on how to weather the current period of contraction and loss. Small business proponents have recommended the government foster programs to bring small businesses together either in a collaborative way or through workshops to provide them with information on how to navigate the rougher times.14 Providing information to and educating small business owners
on the resources available to them can go a long way to helping to alleviate the burden of the current economic downturn. Breaking down the bureaucratic barriers in our system and bringing the information to the people can help to prevent unnecessary losses in our small business sector.
From expanding the lending limits to small businesses, to supporting local markets and educating our small business owners, sponsoring efforts that help bolster this fundamental part of our economy can put America back on track.
MY PRIORITIES FOR CREATING CONDITIONS FOR SMALL BUSINESSES TO THRIVE
1 Improve access to capital 2 Leverage government purchasing power 3 Cultivate regional economic clusters 4 Foster small business workshops
1 “Report to the President, Small Business Financing Forum,” (U.S. Department of the Treasury and the U.S. Small Business Administration, November 2009), available at http://archive.sba.gov/idc/groups/public/documents/sba_homepage/small_buss_finan_ forum_report.pdf. 2 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/ eop/cea/economic-report-of-the-President. 3 Ibid. 4 “Report to the President, Small Business Financing Forum,” (U.S. Department of the Treasury and the U.S. Small Business Administration, November 2009), available at http://archive.sba.gov/idc/groups/public/documents/sba_homepage/small_buss_finan_ forum_report.pdf. 5 “Report to the President, Small Business Financing Forum,” (U.S. Department of the Treasury and the U.S. Small Business Administration, November 2009), available at http://archive.sba.gov/idc/groups/public/documents/sba_homepage/small_buss_finan_ forum_report.pdf. 6 Ibid. 7 Ibid. 8 Ibid. 9 Ibid. 10 Martin Neil Baily, Karen Dynan, and Douglas J. Elliott, “The Future of Small Business Entrepreneurship: Jobs Generator for the U.S. Economy,” (The Brookings Institution, June 2010), available at http://www.brookings.edu/papers/2010/0604_innovation_small_business. aspx. 11 Ibid. 12 Darrell West, “Technology and the Innovation Economy,” (The Brookings Institution, October 2011), available at http://www. brookings.edu/papers/2011/1019_technology_innovation_west.aspx#_edn1. 13 Mark Muro and Bruce Katz, “The New “Cluster Moment”: How Regional Innovation Clusters Can Foster the Next Economy,” (The Brookings Institution, September 2010), available at http://www.brookings.edu/papers/2010/0921_clusters_muro_katz.aspx. 14 “Report to the President, Small Business Financing Forum,” (U.S. Department of the Treasury and the U.S. Small Business Administration, November 2009), available at http://archive.sba.gov/idc/groups/public/documents/sba_homepage/small_buss_finan_ forum_report.pdf.
Promoting insourcing and local, niche manufacturing
WE NEED TO INVEST IN WHAT WE DO BEST HERE, AT HOME.
We are a country whose
middle class was built by the manufacturing sector. And growth in the manufacturing sector has a ripple effect, resulting in up to four new job opportunities in other sectors for each new job in manufacturing. Yet, manufacturing now accounts for only about 11.2 percent of our gross domestic product; in 1950, it comprised 27 percent of our GDP.1
Support locally relevant niche manufacturing
In the past three decades, while large-scale manufacturing has moved offshore, niche manufacturing, or manufacturing products
on a specialized level, has by many accounts weathered the economic storm. Whether in Brooklyn, New York, Florida or on the North Coast of California, the story is the same — the niche-manufacturing sector is surviving, and with the right kind of support, could help lead our regions back to economic security.2 Even in the lead-up to the recession, niche manufacturing was bucking the overall long-term trends in manufacturing. For example, the loss in jobs and wages from niche manufacturers going out of business was largely made up for by the growth in employment and wages in the industry as a whole.3 Niche manufacturing is also something the North Coast does well. From Lost Coast Brewery, to Cowgirl Creamery, to Wing Inﬂatables of Arcata, these companies and many more have helped to put niche manufacturing at the fore of the North Coast economy.
The average wage increase in the North Coast nichemanufacturing sector:
Experts say that with the right kind of support, the nichemanufacturing sector can help lead regions like California’s North Coast back to economic security.
In the North Coast niche-manufacturing sector, we have recently seen an average wage increase of around seven percent and an employment drop of less than one percent, while the sector as a whole is contributing a full fourteen percent to the base economy payroll.4 Local entrepreneurship is an important part of the North Coast’s identity and economy, and niche manufacturing is
U. S . M A N U FA C T U R I N G : A S M A L L E R SHARE OF ECONOMY
Manufacturing value added as a share of total U.S. GDP, 1960–2009
30% 25% 20% 15% 10% 5% 0%
1964 1968 1962
very much a part of that story. Niche manufacturing hinges on consumers appreciating the quality of the product being produced. Because it is a sector that emphasizes extreme specialization and occurs on a small scale, consumers tend to perceive it as more expensive. It is not necessarily the case that U.S.-based production yields a more expensive product, though. So let’s invest in what we do well: niche manufacturing. Let’s grow jobs at home. Let’s make Americanmade products again. Let’s reinvigorate the American middle class, a class that grew in the middle of the last century largely because of the manufacturing sector, with a twenty-first century manufacturing sector.
2002 2004 2006 1960 1966 1970 1972 1974 1976 1978 1980 1994 2000 2008 1984 1986 1982 1988 1990 1992 1996 1998
U. S . M A N U FA C T U R I N G : A S M A L L E R S H A R E O F WO R L DW I D E M A N U FA C T U R I N G
U.S. gross manufacturing value added as share of world
30% 25% 20% 15% 10% 5%
1980 2000 2004 1970 1972 1974 1976 1978 1994 2002 2006 2008 1982 1984 1986 1988 1990 1992 1996 1998
A conversation about the future of our manufacturing sector is meaningless without a sincere glance at the relationship between the U.S. economy and global markets. According to the President’s 2011 Trade Policy Agenda, “Ninety-five percent of consumers reside beyond our borders, and the International Monetary Fund forecasts that nearly 83 percent of world growth over the next five years will take place outside of the United States. To reach our full potential for employment and economic growth, America must engage globally to sell more goods and services abroad.”5
Above Source: Bureau of Economic Analysis; Below Source: United Nations
The United States is a global leader, but our competitive edge in international markets is slipping. We have seen some positive signs of economic improvement in the past two years. Insourcing is a recent phenomenon exemplified by companies that have shifted or considered shifting production abroad, but are now producing in the United States. We need to harness the factors fostering this growth to ensure that the trends continue to favor growth here at home. These factors include an improved ability by the United States to compete with other countries in the cost of production — due in part to the increased cost of labor elsewhere helping to level the playing field for U.S. labor. In addition to the relative decrease in the cost of labor in the U.S., the increase in the production of modestly priced natural gas — locally sourced energy — has made investing in production stateside even less expensive. Furthermore, the business services located in the United States are also becoming increasingly marketable abroad as economies in emerging markets continue to grow. The expanded tradability of these services has led to an aggressive growth of firms in business services.6 These factors result in new financial incentives for firms to locate in the United States. The White House offers the following examples: “In 2010, KEEN, the footwear designer, opened a 15,000-square-foot facility to manufacture boots in Portland, Oregon— moving production from China to a location just five miles from its corporate headquarters. The company also makes bags in California and socks in North Carolina.7 “After watching costs rise in its Chinese factories, Master Lock began bringing production back to Milwaukee — the same place where the company was founded in 1921.”8 These success stories are the beginning 17
Companies like Lost Coast Brewery, Cowgirl Creamery, Wing Inﬂatables of Arcata – and many more – have helped to put niche manufacturing at the fore of the North Coast economy.
of a positive development for our manufacturing sector. Yet, we can do even more by expanding existing tax credits for companies that base their production in the United States and by continuing to provide companies with a top-notch workforce. We can also be more strategic in these credits — targeting the kind of high-wage jobs we seek in the industries that show the most long-term promise.
Extend credit to manufacturers
Much like with small businesses, it is important to ensure that we extend resources and support to manufacturers in weathering the economic crisis and continue to invest in research, development and engineering (RD&E) to remain competitive. As credit from lenders has become more difficult to acquire, the federal government needs to step in to protect
our manufacturing sector from a drying well of credit. There is no shortage of good proposals: Senator Sherrod Brown of Ohio recommended a federal program to provide a $30 billion dollar revolving loan fund for manufacturers.9 This fund would provide manufacturers with the immediate resources to improve their energy efficiency, update their factories, and fund the necessary training of workers on the new energy efficient technology.10 The Manufacturing Extension Partnership program is also a key proposal.11 Housed within the Department of Commerce’s National Institute of Standards and Technology, the Manufacturing Extension Partnership program helps manufacturers improve their competitive edge, both in local and international markets.12 This program is projected to cost about $1.5 billion.13 And the Investments in Manufacturing Progress and Clean Technology Act could yield 680,000 manufacturing jobs and subsequently an additional nearly two million new jobs in other sectors.14 I support a Locally-Sourced Manufacturing Tax Credit to support local businesses that can help drive growth in ways that will allow communities to rebuild themselves from within. The economic crisis clarified the points of vulnerability in the American economy. By bolstering self-reliance within communities, those communities develop more resilient economies, no longer dependent entirely or largely on foreign markets for goods to produce their finished products. Furthermore such a tax credit would be another way of funding the growth of small businesses. And I propose a new $20 billion loan guarantee program to stimulate small businesses and get liquidity out of the banks to small businesses at minimal 18
Today, manufacturing accounts for only 11.2 percent of our Gross Domestic Product; in 1950, it comprised 27 percent of our GDP .
risk to taxpayers. The program would be administered by an existing agency like the Small Business Administration and loan decisions would be required to be made by those best qualified to assess risk.
Get tougher on trade agreement enforcement
There are a tremendous number of trade laws on the books that exist to regulate the flow of goods between our country and the rest of the world. These trade laws are only important and meaningful, though, if they are enforced. Bill Clinton’s Back to Work cites the growth of unenforced trade policies.15 The lack of enforcement means that U.S. goods and services are subject to the effects of currency manipulation, unfair dumping practices, unregulated labor and environmental standards, intellectual property infringement and other disadvantages. In many cases, our leverage to enforce trade policy is compromised given our current, problematic financial positioning with countries like China. Currently, according to a report by the United States
Department of Treasury, as of November 2011, China held $1.13 trillion in U.S. government debt, far and beyond the largest holder of our national debt.17 The close-knit nature of this relationship makes moving forward challenging. We need to work both to balance our budget so we are less financially beholden
to trade partners, and we need to continue to enforce trade agreements that are on the books. Failing to uphold our trade agreements, the very documents intended to protect the American economy, will continue to put us at a disadvantage. Our economy can only grow if we ensure that it competes on a level playing field with our trading partners.
MY PRIORITIES FOR PROMOTING INSOURCING AND LOCAL, NICHE MANUFACTURING
1 Support locally relevant niche manufacturing 2 Incentivize insourcing 3 Extend credit to manufacturers 4 Get tougher on trade agreement enforcement
1 “Report to the President on Ensuring American Leadership in Advanced Manufacturing,” (Executive Office to the President and President’s Council of Advisors on Science and Technology, June 2011), available at http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast-advanced-manufacturing-june2011.pdf. 2 Christine Haughney, “In New York, No Crisis for Niche Manufacturers,” (The New York Times, January 10, 2009) available at http://www.nytimes.com/2009/01/11/nyregion/11manufacture.html?pagewanted=all. 3 Ibid. 4 “State of the Industry Report 2007; Manufacturing,” (North Coast Prosperity, 2007), available at http://www.northcoastprosperity.com/files/webfm/contents/MfgSIR.pdf. 5 “2011 Trade Policy Agenda and 2010 Annual Report of the President of the United States on the Trade Agreements Program,” (Office of the United States Trade Representative, 2011), available at http://www.ustr.gov/2011_trade_policy_agenda. 6 “Investing in America: Building an Economy That Lasts,” (White House report, January 2012), available at http://www.whitehouse.gov/sites/default/files/investing_in_america_report_final.pdf. 7 “Investing in America: Building an Economy That Lasts,” (White House report, January 2012), available at http://www.whitehouse.gov/sites/default/files/investing_in_america_report_final.pdf. 8 Ibid. 9 “Brown, Policy Matters Ohio Discuss Steps for Job Creation and Future of Ohio Manufacturing,” (Sherrod Brown United States Senator for Ohio, February 2010), available at http://brown.senate.gov/newsroom/press_releases/release/?id=abd4a0de-5160-4164-9b5b-121ab0571393. 10 “Building the Clean Energy Assembly Line: How Renewable Energy Can Revitalize U.S. Manufacturing and the American Middle Class,” (Blue Green Alliance, November 2009), available at http://www.bluegreenalliance.org/admin/publications/files/BGA-Phase-II-Report-PRINT.pdf. 11 “The National Institute of Standards and Technology’s Manufacturing Extension Partnership Program, Report 1,” (National Academy of Public Administration, September 2003), available at http://www.nist.gov/mep/upload/napa_1-2.pdf. 12 Ibid. 13 Ibid. 14 “Brown, Policy Matters Ohio Discuss Steps for Job Creation and Future of Ohio Manufacturing; Senator Outlines New Bill Providing Tax Incentives to Employers that Hire Unemployed Workers, Next Steps for Jobs Legislation,” (Sherrod Brown United States Senator for Ohio Press Release, February 2010), available at http://brown.senate.gov/newsroom/press_releases/release/?id=abd4a0de-5160-4164-9b5b-121ab0571393. 15 Bill Clinton, Back to Work: Why We Need Smart Government for a Strong Economy, (Alfred A. Knopf, 2011). 16 “Major Foreign Holders of Treasury Securities (in billions of dollars) Holdings 1/ At The End Of Period,” (U.S. Department of the Treasury, January 2012), available at http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt.
Making our own energy again
AS WE PURSUE A POLICY TO RESTORE
Reduce energy consumption and spur green-collar jobs through building retrofits
A key part of restoring high-wage manufacturing to the U.S. is restoring the buying power of the American consumer — and that means getting more Americans back to work as fast as possible. As greenjobs advocate Van Jones has pointed out, one of the most compelling reasons to support a green economy is that most of these jobs can’t be outsourced — they must, literally, be performed right here at home.1
the strategically imperative high-wage manufacturing sector to the American economy, there is one vital raw material that we can start making more of in America — and that is renewable energy. There are many reasons to make our own energy. Transitioning from our dependence on fossil fuels to more sustainable, lowimpact energy sources is simultaneously an environmental imperative, a national security issue and an urgent economic necessity: By making more renewable energy we lower the greenhouse gas levels contributing to global warming and environmental degradation. By making more of our own energy, we lower the “oil subsidy” we now pay to many nations that would do us harm. Ultimately that means a safer America and billions of dollars each year in savings from money we now spend to keep oil shipment routes secure. By making our own energy, we stimulate our long-term economic recovery — and stop the flow of high-wage jobs that inevitably follows the billions of dollars we currently send overseas to buy energy we could make right here at home. We will be talking in this campaign about these important benefits — but for the purpose of this proposal, let’s focus on the immediate, mid-term and long-term economic benefits of investing in American renewable energy production and energy conservation. 21
Green energy retrofit jobs cannot be outsourced; they must, literally, be performed right here at home.
U. S . W I N D , S O L A R & G E OT H E R M A L E N E R G Y G E N E R AT I N G CA PA C I T Y
2008 2009 2010 2011 2012
28.7 GW (2.8%) 36.2 GW (3.5%) 43.2 GW (4.1%) 49.1 GW (4.6%)
Geothermal Solar Wind
60.8 GW (5.6%)
Notes: Net summer generating capacity of wind, solar, and geothermal energy. Percentages are shares of total net summer electricity capacity. Sources: Energy Information Administration, Annual Energy Outlook 2011; CEA calculations.
California is leading the nation in promoting renewable energy with a Renewable Portfolio Standard (RPS) that will require utilities to deliver one third of our power from renewable sources by 2020.
In 2008, buildings in the United States accounted for a full eight percent of global energy consumption.2 In the United States, our buildings used 40 percent of our energy consumption, which is 43 percent higher than consumption accounted for by the transportation sector and nearly 25 percent more than the industrial sector.3 That’s why, if we could do just one thing to help create jobs, restore our economy and create high-wage manufacturing, we should start with a renewed commitment to energy retrofits of all of America’s homes, offices, and public buildings. For some reason, weather stripping, calk, double-pane windows and new insulation don’t generate as many headlines as solar arrays and electric cars. But they should. These simple and relatively low-tech ways to upgrade our built environment are the fastest and most cost-effective way to lower energy use. And they create jobs — potentially
millions of jobs. The National Association of Homebuilders estimated that for every $1 million spent in energy retrofits, we create ten new jobs.4 These are exactly the kind of jobs that get young people into the workforce, help reduce poverty and open a pathway to the middle class. And these are jobs our unemployed friends and neighbors can do right away right here in our district. I support the tax credit for energy retrofits — but we can do better. We need to find innovative ways to fund solar installations, like the promise of the Property Assessed Clean Energy (PACE) program, that will accelerate installations of energyefficient solar panels, insulation, water conservation systems and more. The White House has estimated that home energy retrofits could save consumers $21 billion annually — and that’s a conservative figure.5 Others have estimated the savings are much higher. Even if we take the lower
new jobs could be created by investing in the Smart Grid
figure, a dramatic increase in the home and business retrofit market creates high-wage jobs right now and creates billions in additional spending power every year — spending power that will create new markets for the new goods we want to make here at home, putting the hard-hit building industry back to work. So if you look at a return on investment both from the environmental and the economic perspective — this is where you start.
ESTABLISH UNIFORM SOLAR STANDARDS
JUST AS with any new construction
Create the next-generation smart electric grid
The next logical step in making more energy here at home — and one I will advocate for — is federal investment and incentives in upgrading the national electric grid. We need to remember, even the high value-add type of manufacturing we want to bring back to this country takes energy — we want that energy to be affordable, predictably priced and sustainable. The counterattack on renewable energy is that it is too expensive. Some forms of renewable energy appear much more expensive when you look only at the cost per kilowatt-hour. Of course, that’s not the real price. You also need to look at the environmental cost of global warming, the cost of policing our shipping lanes to bring in foreign oil, the healthcare costs that arise from air pollution and other toxins, the devastating cost of oil spills like we saw in the Gulf on industries like tourism and fishing, the foreign policy impacts of being beholden to potentially hostile governments because of our our dependence on foriegn oil, and all of the other many costs. There is one energy resource in some areas that already competes on a kWh basis with natural gas, oil and coal — and that is wind energy. And with fossil fuel prices certain to rise, wind energy will soon be less expensive than energy coming from GHGgenerating sources. The problem is, we don’t 23
project, installing residential and small commercial solar must be done well and be done safely. Permitting is an important component to help ensure businesses and residences take all the necessary precautions, but the permitting process falls under the control of city hall and differs from municipality to municipality. One report pegged the average cost of the permitting and inspection process at $2,516 per residential installation.14 By contrast, Germany—a country with about 10 times the installed solar capacity of the United States and where it costs about 40 percent less than it does in the United States to complete residential installations—has a single, simple solar permitting process with rapid approval. 15 16 I propose the establishment of a uniform, simple permitting process for all of the United States. This will go a long way to achieving grid parity for solar.
have the kind of sophisticated energy grid it takes to deliver the low-cost renewable power where and when it is needed from where it is most economically produced. That’s why we need a “smart grid” and we need to make it a national priority. There have certainly been some missteps here — like the poorly communicated plans to switch consumers to wireless meters. But despite these missteps, we can grow our economy in leaps and bounds by investing in an upgraded national grid to deliver low-cost and stable renewable energy supplies when and where they are needed.
the amount of money the federal government (not including the military) spends each year on energy
Setting energy consumption and renewable energy standards is another vital step in securing a clean energy future — and there is one real success story here in California that the whole nation needs to follow. Did you know that California is one of the lowest energy users per household in the nation? In fact, as the national percapita energy consumption has gone up by approximately 45 percent in the past three decades, California’s per-capita use has not followed the same upward trajectory because of proactive energy efficiency legislation passed in the 1970s AMERICAN ENERGY INDEPENDENCE BONDS: and 1980s.7 And now, California is leading the nation in promoting renewable energy I P RO P O S E that we create an American Energy Independence Bond to with a “Renewable Portfolio support American renewable energy projects. The bonds would pay Americans Standard” (RPS) that will 2.5 percent—an attractive rate given that most Americans are currently earning require utilities to deliver fully less than one percent on their savings. one third of our power from The Center for American Progress reports that investing $100 billion in renewable sources by 2020.8 renewable energy and clean technology over a two-year period would yield We need to model these “nearly four times more jobs than spending the same amount of money within standards on a national basis — the oil industry, and would reduce the unemployment rate to 4.4 percent over and go beyond them. With the two years.”11 existing technology trend, it is This plan would help us achieve the President’s goal of doubling America’s possible to meet the President’s national renewable energy generation and Governor Brown’s goal of generating standard of an 83 percent 1.3 million megawatts of renewable energy as well as bringing nearly 500,000 reduction in emissions by 2050.9 jobs to California.12 13 We would decrease our dependence on foreign oil and We should set this as a floor help usher our economy into the twenty-first century. right now — but we should also
The smart grid has been called the “Internet of Energy” and I think it is fitting that we apply the Internet model, which was originally developed by the federal government (ARPANet), and then advanced through private innovation and investment. In partnership with private industry and colleges and universities, the federal government should invest in the backbone and then turn additional development and innovation over to the private sector. One national report estimated that the smart grid will create 280,000 new jobs and that 140,000 of those jobs would permanently support the ongoing operation and maintenance of this new upgraded grid.6 In addition to the jobs created by the grid, the incredible energy savings available will put billions of dollars back into our economy. Just as the original Internet sparked a wave of innovation, job creation and a decade of economic growth (and helped contribute to balanced federal budgets), this new Internet of Energy can do exactly the same thing. From making widespread implementation
of electric vehicles possible to helping small manufacturers make things affordably and sustainably because they have access to reliable and affordable energy — the Smart Grid is vital. We need a stable and reliable grid to deliver energy where we need it. This will not only help us restore our manufacturing economy; it will protect millions of other jobs by ensuring we have secure, stable and clean energy supplies into the future.
Set national renewable energy and consumption standards
One way to pay for clean energy investments
revisit our standards every five years to see if the technology has advanced sufficiently to raise them even further. The benefit of setting national standards is that we gain economies of scale. We can lower prices faster and make renewables competitive by making sure this is a national project, not a series of one-off, local state incentives. Those programs got the ball rolling — but this is now a national challenge and we need national economies of scale. In our research at the Center for Entrepreneurship and Technology which I co-founded at UC Berkeley, we’ve found that while government can do a good job of setting standards and goals, the government is rarely qualified to make decisions about which technologies to use and which not to use. It’s just not the expertise of most people in Sacramento or Washington. Government should set a standard — a high but achievable standard — and then let universities, innovators and the R&D departments in private industry figure out how to meet those standards in the most cost-effective way. That’s the best of both worlds. And we’ve seen the incredible innovation that can occur when we focus the government, our network of research universities and colleges, and private companies on big national goals — we get big and lasting technology breakthroughs that help sustain economic growth.
Make our military and the federal government energy-independent
If we are looking at energy security, we should start by expanding one of the more successful renewable energy programs — and that’s the work being done in the Department of Defense to make our military more energysecure. The reality is that much of renewable energy takes land and sun — and the DOD has bases throughout California and the nation with spare land and plenty of sun (and wind) in places that are not ecologically vulnerable. Our federal goal should be to make our military energyindependent within the next fifteen years. The federal government itself should also meet this standard. Just like any smart homeowner, the government can save money in the long run by investing up front in renewable energy and efficiency. I support a goal of making our federal government a net-zero generator of green house gases in fifteen years. Right now, the federal government (not including the military) spends $25 billion each year on energy.10 We could promote jobs and lower spending in the long run by having the government do itself what it encourages others to do — retrofit, reduce consumption and create local solar and wind generation onsite where appropriate.
MY PRIORITIES FOR MAKING OUR OWN ENERGY AGAIN
1 Reduce energy consumption and spur green-collar jobs through building retrofits 2 Create the next-generation smart electric grid 3 Set national renewable energy and consumption standards 4 Make our military and the federal government energy-independent
1 Van Jones, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems, (Harper Collins, 2008). 2 Buildings Energy Data Book, Chapter 1: Buildings Sector, (U.S. Department of Energy, 2008), available at http://buildingsdatabook. eren.doe.gov/ChapterIntro1.aspx. 3 Ibid. 4 “Submission of Steven Nadel, Executive Director, American Council for an Energy-Efficient Economy to the Energy and Environment Subcommittee, House Energy and Commerce Committee, Hearing on: Home Star,” (American Council for an Energy-Efficient Economy, March 2010), available at http://www.aceee.org/files/pdf/testimony/Nadel_HomeStar.03.18.10.pdf. 5 “Recovery Through Retrofit,” (Middle Class Task Force and Council on Environmental Quality, October 2009), available at http://www. whitehouse.gov/assets/documents/Recovery_Through_Retrofit_Final_Report.pdf. 6 “Understanding the Benefits of the Smart Grid,” (National Energy Technology Laboratory, June 2010), available at http://www.netl.doe. gov/smartgrid/referenceshelf/whitepapers/06.18.2010_Understanding%20Smart%20Grid%20Benefits.pdf. 7 “Integrated Energy Policy Report,” (California Energy Commission, November 2005), available at http://www.energy. ca.gov/2005publications/CEC-100-2005-007/CEC-100-2005-007-CMF.PDF. 8 David Baker, “California renewable energy goals come at a price,” (San Francisco Chronicle, November 2011), available at http://www. sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/23/MNLV1M1CET.DTL&ao=all. 9 “President to Attend Copenhagen Climate Talks,” (The White House, Office of the Press Secretary, November 2009), available at http:// www.whitehouse.gov/the-press-office/president-attend-copenhagen-climate-talks. 10 “Energy Sector Launched,” (The Pew Charitable Trusts, September 2010), available at http://www.pewtrusts.org/our_work_report_ detail.aspx?id=85899359699. 11 Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Helen Scharber, “Green Recovery, A Program to Create Good Jobs and Start Building a Low-Carbon Economy,” (Center for American Progress, September 2008), available at http://www.americanprogress.org/ issues/2008/09/pdf/green_recovery.pdf 12 “Promoting Clean, Renewable Energy: Investments in Wind and Solar,” (The White House, The Recovery Act), available at http://www. whitehouse.gov/recovery/innovations/clean-renewable-energy. 13 “Brown Announces Clean Energy Jobs Plan,” (Brown for Governor Campaign, June 2010), available at http://www.jerrybrown.org/ Clean_Energy. 14 “The Impact of Local Permitting on the Cost of Solar Power, How a federal effort to simplify processes can make solar affordable for 50% of American homes,” (SunRun, January 2011), available at http://www.sunrunhome.com/download_file/view/414/189/. 15 Ibid. 16 Erik Kirschbaum, “Falling solar prices good for climate, bad for firms,” (Reuters, February 2012), available at http://www.reuters.com/ article/2012/02/01/climate-solar-prices-idUSL5E8CV3LT20120201.
Retooling our workforce for the 21st century
AS AN EDUCATOR AND SMALL
Studies show that community college students who do well in math and English have higher graduation rates than students who don’t.
I know first-hand that we need to invest in training to restore our manufacturing competitiveness. Unlike the smokestack-industry, manual-labor or unskilled jobs of yesterday, most of today’s manufacturing jobs require a high degree of training. Instead of bailing out big banks, we need to lay a strong foundation for our real economy—like starting our kids out in better public schools and preparing them for the 21st century workforce. This isn’t an “entitlement.” Educating our workforce is one of the smartest investments we can make to create an economy that works better for everyone. Studies have shown the social return on investment of an effective training program is as high as $9.10 per dollar
THE COLLEGE GAP
California is not producing enough college graduates to meet the demand of our projected workforce.
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
LESS THAN HIGH SCHOOL GRADUATE HIGH SCHOOL GRADUATE SOME COLLEGE COLLEGE GRADUATE
Projected adult education Projected economic demand
Source: Public Policy Institute of California
invested.1 There is simply no better place to start than retooling our education system so our kids can get the training they need from an early age.
Improve early childhood and K-12 education
We need to support access to quality education from the earliest age— because even those manufacturing jobs that do not require advanced degrees demand high-school degrees or community college training. Creating a highly trained workforce, therefore, starts with keeping kids in school— and the least expensive way to start doing a better job at that is to invest in early childhood education.
the increase in lifetime earning potential resulting from strong early childhood education
Recent studies have shown up to an $11 return for every dollar invested in early education.2 And children who get a strong start achieve higher graduation rates, better grades, more college enrollment and dramatically higher earning potential — up to $100,000 over a lifetime.3
Invest in community college, trade and vocational programs; foster collaboration with local employers
Our goal should be to provide every child the
opportunity to go to college. But the reality is that many will not obtain a four-year degree. Some estimates in California have put that number as high as 70 percent.4 That’s just one of the reasons why community colleges, trade and vocational programs and four-year institutions should serve local needs, both equipping a workforce with skills that are in demand locally and providing local employers with a workforce which meets employers’ needs. These higher education institutions, insofar as they are responsible for re-tooling our workforce, can also be an incentive for employers to locate in a community. Our local institutions should collaborate with employers to ensure that the skills being taught in career technical education or specialized science, technology, engineering, and mathematics (STEM) programs meet the needs of local employers. Fostering the development of local advisory boards composed of leaders from various local sectors and the leadership of the local community colleges can help ensure that courses being provided at a given community college equip students with a set of skills needed by local employers. I propose a grant program for local businesses — with an emphasis on small manufacturers — that would subsidize the salaries and training of part-time two- and four-year college students. By learning on the job, students can make their academic skills relevant and acquire additional necessary skills. Students would graduate from the program ready to take their place in American manufacturing. Under this program, small grants would be made to local businesses to give work experience to high school students pursuing a vocational career — with afternoon programs during the academic year and fulltime summer school programs.
Support standardization of a portion of the coursework at community colleges
Standardizing basic coursework and program requirements at community colleges can allow employers to have a general sense of the skills a student has when that student graduates from a local community college or four-year institution. Because coursework can differ greatly from institution to institution, without standardization, employers are left trying to decipher a student’s transcript and degree without a clear sense, for many programs, of whether or not those courses have educated students with the skills necessary to complete the tasks a job might require. Standardization of basic coursework for training programs will give employers some sense of the basic competencies of a student. For students, standardizing their basic coursework can improve the marketability of their degrees as employers will not need to guess at the student’s skill level.
of students, upon entering a four-year institution, find themselves in a position of not being equipped with the knowledge to move forward with their education and need to take remedial classes.9 By improving our standards for high schools, we will improve the preparedness of our students to take on the challenge of higher education. I am interested in the current discussion around reforming our funding system for colleges to incentivize retention and graduation. For example, studies show that community college students who do well in math and English have higher graduation rates than students who don’t.10 Consequently, we should look at funding models that incentivize colleges to prioritize early competency in English and math.
Make higher education more accessible
Our goal should be to provide every child the opportunity to go to college. But the reality is that many will not obtain a four-year degree. Some estimates in California have put that number as high as 70 percent.
Improve four-year institution completion
We also need to understand that many factory and manufacturing jobs now even require a college degree. That’s why college achievement trends are so troubling. The U.S. now ranks 12th in the world in college attainment for the 2534 year old population.5 And according to the Public Policy Institute of California, California is not producing enough college graduates to meet the demand of the current and projected workforce.6 This is not just isolated to California. A recent study by the Georgetown University Center on Education found that the United States is not producing enough collegeeducated workers to meet economic needs.7 The Administration’s four-year completion plan calls for the improvement of our high school exit standards. 8 In the United States, around forty percent 29
It is time we remove the artificial barriers to higher education. The infamous barrier of cost needs to become a debate of yesterday. Our higher education institutions help to make our workforce one of the most competitive and well-trained workforces in the world. We should be taking down barriers to education, not putting them up, in order to ensure the strength of our economy. To do this we need to increase funding of programs like Pell Grants, which are key in making it possible for low-income students to attend college. Additionally, we need legislation like the College Cost Reduction and Access Act, to provide aid to students through their financial aid offices. As institutions around the country feel their own belts tighten, their ability to lend or provide grants to students decreases. The College Cost Reduction and Access Act will help fill the gap. I do not support granting higher loan limits to students. Our students are saddled with more debt than ever today
and extending the limits up to which they can borrow is less effective than funding granting programs and scholarships. We need to make education more affordable, not just immediately, but entirely. Students should not be saddled with tens or hundreds of thousands of dollars worth of debt just to become qualified to participate in our specialized workforce. We need to reduce the barrier to entry.
Increase our number of STEM graduates
We need to increase the number of students interested and willing to work in science, technology, engineering, and mathematics, or STEM fields. These fields have been suffering over the years, and it’s time to shift the decreasing trend.
In order to do this we need to start in grade school with a strategy of improving our science and mathematics programs across the board.11 Starting in high school is simply not soon enough. Students need to be exposed to better science and math programs from an early age to produce the muchneeded increase in the number of STEM college graduates. In order to improve our STEM programs in elementary and middle schools, we need to improve the quality of our teachers in these schools. Right now, reports are that “fewer than one in five 12th graders have both high interest in STEM and high proficiency in mathematics.”12 We can do better. And to do better, we need to strive to ensure that each school is staffed with qualified STEM teachers.
MY PRIORITIES FOR RETOOLING OUR WORKFORCE FOR THE 21ST CENTURY
1 Improve early childhood and K-12 education 2 Invest in community college, trade and vocational programs; foster collaboration with local employers 3 Support standardization of a portion of the coursework at community colleges 4 Improve four-year institution completion 5 Make higher education more accessible 6 Increase our number of STEM graduates
1 Social Issue Report; Economic Empowerment; Workforce Development,” (Social Impact Research, Root Cause, March 2011), available at http://www.rootcause.org/sites/rootcause.org/files/uploads/WFD-Issue.pdf. 2 “High-quality preschool program produces long-term economic payoff,” (National Institutes of Health, February 2011), available at http://www.nih.gov/news/health/feb2011/nichd-04.htm. 3 “The Case for Investing in Early Childhood Education,” (Maryland Family Network, July 2011), available at http:// marylandfamilynetwork.org/pdfs/Research_Case_Early_Childhood.pdf. 4 Hans Johnson and Ria Sengupta, “Closing the Gap, Meeting California’s Need for College Graduates,” (Public Policy Institute of California, 2009), available at http://www.ppic.org/content/pubs/report/R_409HJR.pdf. 5 Tamar Lewin, “Once a Leader, U.S. Lags in College Degrees,” (New York Times, July 2010) available at http://www.nytimes. com/2010/07/23/education/23college.html. 6 Deborah Reed, “California’s Future Workforce, Will There Be Enough College Graduates?,” (Public Policy Institute of California, 2008), available at http://www.ppic.org/content/pubs/report/R_1208DRR.pdf. 7 “Social Issue Report; Education and Youth Development; College Access and Success,” (Social Impact Research, Root Cause, September 2010), available at http://www.rootcause.org/sites/rootcause.org/files/uploads/CAAS-Issue.pdf. 8 Brian Levine, “A Call to Action on College Completion,” (The Middle Class Task Force, The White House, March 2011), available at http://www.whitehouse.gov/blog/2011/03/23/call-action-college-completion. 9 Ibid. 10 Nanette Asimov, “Community college dropout rate alarms researchers,” (San Francisco Chronicle, October 2010), available at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/10/19/MNN41FUHQH.DTL. 11 “Increasing the Number of STEM Graduates: Insights from the U.S. STEM Education & Modeling Project,” (Business-Higher Education Forum, 2010), available at http://www.bhef.com/solutions/documents/BHEF_STEM_Report.pdf. 12 Ibid.
Growing our lead in science and technology
T H E M A N U FA C T U R I N G S E C TO R P L AY S
a vital role in fostering an environment for research and technological developments. In 2003, approximately 60% of the $123 billion spent on research and development in the United States was spent in the manufacturing sector, which totaled $123 billion.1 The public and private support for research and development is frequently an incentive for companies to locate in the United States and in specific regions. In many cases, as companies are trying to decide whether to invest at home or abroad, they are looking to the American workforce for its capacity for innovation and the public sector support of that innovation. Siemens was recently cited as spending $50 million annually in training its U.S. employees.2 Such investments of companies across the board totaled $228 billion in 2010, a significant jump from the just $153 billion in 2009.3 Technological advancements, while they can translate to the direct commercialization of a product and mean economic growth for a company and the economy, also contribute to the well being of the American workforce. In addition to the 25-fold increase in U.S. per capita income since 1820, the benefits
Science and technology are the high ground of our manufacturing economy. If we keep and grow our lead here, we’ll be able to regain our lead in manufacturing.
of technological advancements have greatly improved the lives of American workers.4 Despite the demonstrable positive impacts of innovations, the National Science Board has reported a significant decrease in the amount spent by the federal government in research and development, a decrease from a full 63 percent in the 1960s to 27 percent currently. The private sector has made the converse jump, increasing from 30 percent to 68 percent today.5 Overall, the United States currently spends only 2.8 percent of its GDP
the backlog of U.S. patent applications
US EXPORTS AND WORLD GDP
Insourcing is helping to drive an increase in U.S. exports.
on research and development research and development tax efforts, less than many other credit for private institutions countries: Sweden spends on a year-by-year basis. This 4.3 percent; Japan spends 3.1 sort of episodic renewal does percent; South Korea spends not give companies a chance 6 3.0 percent. We should to plan of the future. be funding research and I support creating development at least on par legislation that includes a the average delay with other countries. tax credit over a multi-year between a patent While the private sector window that would allow application and a is helping to compensate for private companies to invest the drop in federal funding for in research and development patent grant research and development, ventures with time horizons the federal government needs longer than a single year. to step up to the plate. There are many good Artificially constraining these ventures with ideas in the marketplace, but these are a such short time horizons can be artificially great start: constraining the successes of those innovators and contributors.
Extend the term of research and development tax credits
Incentivizing companies to invest in research and development is a key way of ensuring that we continue to move forward. The 2007 research and development tax credit provided $8.8 billion in credits to 12,548 corporations and 56,000 individual taxpayers.7 Such tax credits are estimated to “translate dollar-for-dollar into increases in current research spending, especially over the longer run as businesses develop their research enterprise.”8 Congress reviews the
Spur advanced manufacturing technology
We can also focus on harnessing our resources to spur growth and expansion of our research and technological advancements. Universities are the ultimate Petri dish for basic research. There is often little financial return for private companies to invest in basic research — basic research takes time and the end results are difficult to predict. Private firms invest in research that has an anticipated return, and basic research may not have that. Despite this,
140 135 130 125 120 115 110 105 100 95 90
U.S. real exports
World GDP excluding the U.S.
Sources: Bureau of Economic Alalysis, National Income and Product Accounts; country sources; CEA calculations.
basic research, like the initial work on the predecessor s a successful entrepreneur in the burgeoning technology field, I saw the to the World Wide Web, is need for students who were prepared to be competitive in a global economy. invaluably foundational. That’s why I co-founded the Center for Entrepreneurship and Technology We need to fund this (CET) at UC Berkeley—a nationally recognized program in innovation management research as it can help to and new venture creation. move our economy forward. I now have the great honor and privilege of teaching our amazing young Universities and other such people about engineering, technology, innovation and how to compete in the global public settings are key marketplace. We have incubated and helped create 18 new companies out of the CET centers for such work. environment, all with young entrepreneurs at the helm. These talented young people President Obama will be the innovators of America’s future. Administration’s 2012 budget So my belief that science and technology are the high ground of our currently includes dramatic manufacturing economy should come as no surprise. If we keep and grow our lead increases in funding for here, we’ll be able to regain our lead in manufacturing. science organizations “to That’s why our government needs to continue to be supportive of our academic catalyze breakthroughs for institutions and private enterprises—so that our innovators and entrepreneurs can advanced manufacturing continue to pursue important innovations across the board to help move our economy applications and provides into the twenty-first century. funding to initiate the Advanced Manufacturing Technology Consortia Program, a public-private partnership that licensing of innovations at rates that allow will help spur innovation in manufacturing innovators and entrepreneurs financially systems and shorten the time needed for benefit from their work. 9 innovations to reach the market.” Additional This means we need to work on programs to foster such connections facilitating the processing of patents. between the public and private sector can Currently, the U.S. patent office faces a help to drive innovations and make that “backlog of 719,000 patent applications, and innovative process meaningfully profitable. the average delay between patent application Facilitating the relationships between the and patent grant has risen to 35 months.”10 private sector and our research institutions These delays are in many cases prohibitive can help increase the pace of research and for entrepreneurs and other private sector development, which can directly, positively participants. The Obama Administration’s drive economic growth and expansion. plan to streamline the patenting process and to hire on additional reviewers can go a Patent our long way to improving the rate at which innovations patents are processed, which will, in turn, The essence of our science and technology go a long way toward incentivizing sectors is the ability to protect the intellectual submission of patent applications and the contributions of innovators. The licensing innovation process. and patenting of knowledge being produced Protect the accessibility in universities and in the private sector takes of H-1B visas place on a time horizon that is far beyond what is practical for the market. We should Immigration reform has been a focus of focus on and incentivize the patenting and politicians for years, and a key part of the
conversation on immigration reform is how to keep those immigrants who specialize in fields like science, technology, engineering and math — specializations which can help make the United States a top global manufacturer again — from leaving our nation and going to work abroad. We need a national immigration reform plan that includes protections for immigrants who are educated in our nation’s schools, who have grown up in our nation’s cities and whose
parents pay taxes to our nation’s government. But in lieu of such a comprehensive reform, the H-1B visa, which allows employers to continue employing skilled immigrant workers legally, is a temporary fix to the problem of losing our skilled workforce.11 We need to continue to support the extension of the H-1B visa to help protect the future of the American economy until a more stable solution is created.
MY PRIORITIES FOR GROWING OUR LEAD IN SCIENCE AND TECHNOLOGY
1 Extend the term of research and development tax credit 2 Spur advanced manufacturing technology 3 Patent our innovations 4 Protect the accessibility of H-1B visas
1 Robert E. Scott, “The Importance of Manufacturing, Key to recovery in the states and the nation,” (Economic Policy Institute, February 2008), available at http://www.gpn.org/bp211/bp211.pdf. 2 Matt Compton, “Everything You Need To Know About Insourcing,” (The White House, January 2012), available at http://www.whitehouse.gov/blog/2012/01/11/everything-you-need-know-about-insourcing. 3 Ibid. 4 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President. 5 Darrell West, “Technology and the Innovation Economy,” (The Brookings Institution, October 2011), available at http://www.brookings.edu/papers/2011/1019_technology_innovation_west.aspx#_edn1. 6 Ibid. 7 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President. 8 Ibid. 9 Ibid. 10 Ibid. 11 Bill Clinton, “Back to Work, Why We Need Smart Government for a Strong Economy,” (Alfred A. Knopf, 2011).
Modernizing Our Infrastructure
Equipping the country’s workforce with working infrastructure
ultimately means moving things faster — from moving digital information and e-commerce through a more robust broadband infrastructure to moving goods and services over modern roads, bridges, rail links and ports. Faster trains and the interstate highway system have all increased the pace of our economy. A network of hub and spoke airports support the movement of goods and people. Innovations like the Internet and email mean that the exchange of information happens at unprecedented rates. These capital investments are and have been the
MAKING THINGS AGAIN
foundation for the greatness of the American economy since the Industrial Revolution. But we are falling behind. Sadly, the World Economic Forum now ranks the U.S. 24th in the world in terms of infrastructure.1 We are still the nation with the proud heritage of the Erie Canal and the Transcontinental Railroad, but in the past fifty years, we have watched our infrastructure fall into disrepair. In this era, there is no reason why every American household should not have access to broadband resources or why constant freight bottlenecks should limit our ability to put Americans back to work. A faster economic recovery hinges on modern, efficient systems for moving goods, information and services. It is time to reinvest and rebuild both our digital and physical infrastructure.
IN THE WORLD
world’s best infrastructure
America’s rank in terms of the
We lose billions each year because we can’t get our products from here to there — economic recovery hinges on moving goods, information and services faster.
Today, in the United States, 68 percent of households are now equipped with broadband, up eight-fold from 2001. That is a
B ROA D B A N D A D O P T I O N A C RO S S OECD COUNTRIES
The U.S. now only ranks 14th in the world in terms of broadband infrastructure
penetration adds 1.3 percent to a high income country’s gross domestic product.”8 It is also estimated that for every one billion dollars invested in wireless infrastructure, 12,000 jobs are created.9 These kinds of increases can help solidify our footing in the post-economic crisis economy. These numbers confirm what we all know from our daily experience — if you’re not on the Internet (with high-speed access), you’re being left behind. That’s why we should focus on two primary areas:
giant leap in the right direction, but it also means that a third of our households are currently operating outside of the digital economy. It also means that the U.S. now only ranks 14th in the world in terms of broadband infrastructure, and our national average download speeds rank 24th internationally.3 The global digital economy, in 2009, contributed to a full three percent of the global GDP.4 Moving in the direction of bringing that last third of households online can, in the end, both provide jobs to a new set of sectors and reinvigorate existing sectors. Currently the Internet employs approximately 1.2 million people directly for commerce, marketing, and infrastructurebuilding and maintenance, and each of these jobs supports about 1.5 additional jobs elsewhere in the U.S. economy, according to the Harvard Business School.
NETHERLANDS DENMARK SWITZERLAND KOREA NORWAY LUXEMBOURG ICELAND FRANCE SWEDEN GERMANY
CANADA BELGIUM U.S.A. FINLAND JAPAN NEW ZEALAND AUSTRALIA AUSTRIA SPAIN ITALY IRELAND PORTUGAL GREECE HUNGARY CZECH REP. POLAND SLOVAK REP. CHILE MEXICO TURKEY
Support Broadband USA 2.0
Broadband USA is a step in the right direction, and we need to continue funding future versions of this project until the far reaches of our rural communities are online and the cost of those services are accessible. A federally funded program attempting to improve the accessibility of broadband for our nation, Broadband USA has invested
$293 million to close the digital divide.10 But there is still so much to do. Many parts of our North Coast are at a severe disadvantage with slow, nonexistent or non-redundant broadband coverage and limited cellular
In real dollars, the Harvard Business School estimates that the Internet is responsible for $175 billon of the U.S. economy, with $85 billion coming from retail transactions. McKinsey
5 10 15 20 25 30 35 40
Subscriptions per 100 inhabitants
Source: OECD Information Technology Outlook (2010)
& Company estimates that the Internet accounts for 21 percent of GDP growth in mature economies over the past five years. These numbers are too huge to ignore.
phone service. The economic impacts of broadband infrastructure include immediate job creation as well as long-term economic growth and potential with better infrastructure in place.11 Bringing broadband to the North Coast will bring commerce to the North Coast to support local businesses. Building out the physical infrastructure for Internet
As cited by Darrell West in his paper, “Technology and the Innovation Economy,” “a study of 120 nations between 1980 and 2006 undertaken by Christine Qiang estimated that each 10 percentage point increase in broadband 37
access is one step, but making that access financially accessible is another. In rural and urban areas alike, low-income residents face the digital barrier. Access to the Internet means access to education, to information, to stores, to news. It means a more level playing field. Paying for the broadband service is expensive for some, and owning a computer or laptop is a costly venture. Sponsoring programs like Broadband USA to bring all American residents into the twenty-first century by making the Internet accessible and inexpensive should be our goal. While access at home is key, broadband access at public institutions such as our public schools should be non-negotiable. While technically a full 97 percent of our nation’s schools are equipped with Internet capacity, greater than half of our educators report problematic slow service which impedes their ability to teach.12 The digital divide should not play out in our schools. Our schools should provide equitable access to the resources our students need to get ahead in life, not additional barriers to entry to our institutions of higher education and our workforce. Broadband USA is bringing access to our rural communities — let’s make sure our schools are a top priority.
far overtaxed in the near future. The federal government should fund the expansion of our current spectrum capacity. This immediate need has very real implications for the pace of innovation and commercial success as the twenty-first century is defined by a global transition to the Internet economy. A recent NDN/New Policy Institute report states that, “under the current transition, every 10 percent increase in the adoption of 3G and 4G wireless technologies could add more than 231,000 new jobs to the U.S. economy in less than a year.”13 In an economy recovering from a recession, such
The numbers confirm what we all know from our daily experience: if you’re not on the Internet (with high-speed access), you’re being left behind.
growth cannot be passed up. The report goes on to cite a Juniper Research report that “estimates that the market for mobilebased cloud services could reach $39 billion by 2016, assuming wide deployment of 4G infrastructure and devices.”14 This level of growth would go a long way to alleviating our economic woes, but we are not prepared for it. The federal government needs to fund the building out of our wireless infrastructure with an eye to these projected future demands. Without the infrastructure to keep pace with that transition, our economy will miss the proverbial boat.
Build-out our wireless infrastructure
Beyond broadband, the proliferation of smart phones, wireless meters, ebooks, and other wireless technologies has led to an increased demand for wireless infrastructure. The federal government administers this invaluable part of our infrastructure. Projections suggest spectrum demand for our wireless infrastructure is going to increase to the extent that our current capacity will be 38
For a country that used to be number one in terms of physical infrastructure, our physical infrastructure is seriously lagging.
Experts estimate that every $1 billion invested in infrastructure supports nearly 35,000 American jobs, and every dollar spent on public infrastructure yields a $1.59 boost to gross domestic product.
Today, air traffic delays cost the United States approximately $9 billion annually and freight bottlenecks cost around $200 billion annually.15 If we are to meet our own demand for infrastructure needs, we need to spend $2.2 trillion over the next five years repairing and building new infrastructure — roads and bridges, waterways, airports, electric grids and more.16 The American Society of Civil Engineers estimates that a quarter of our bridges are deficient, seven billion gallons of clean water are wasted each day because of leaking pipes and a third of our major roads are in poor or mediocre condition.17 These structures are the gateways for commerce in much the same way as the Internet is necessary for e-commerce. We need to support these structures and repair them to meet our growing economy’s needs.
potential distribution of these federal funds could support efforts like the expansion of a North Coast “marine highway” and harbor development, forest and stream restoration or an environmentally sound build-out of geothermal plants to harness the energy in the North Coast geysers. California does not lend itself to supporting such efforts financially, but a federally sponsored loan program would be the gateway to making such projects come to fruition.
Modernize our schools
Fund the six-year infrastructure plan
President Obama’s administration supports a six-year, $556 billion dollar plan to modernize the country’s infrastructure.18 This proposal includes allocations for high-speed rail, airport maintenance, and roadway repairs — and could have key positive implications for the current pace of our economy.19 The 39
We need to modernize tens of thousands of schools across the country, building new classrooms, bolstering better science programs with technology and improving the libraries in our schools. Adding $30 billion to restore school-facility funding would boost employment by 239,000 jobs.20 Improving our public school infrastructure is, in the end, a necessary investment in California’s future workforce to take on the challenges of the new economy.
Support the National Infrastructure Reinvestment Bank
The National Infrastructure Reinvestment Bank is a proposal that has taken on several forms
over the years in Congress and White House. It would provide federal funding in the form of loans to give state and local projects a needed jolt of money. It could help fund expansion projects in the North Coast as well as in the rest of California. According to the U.S. Department of Transportation, every $1 billion invested in infrastructure supports nearly 35,000 American jobs, and Moody’s Analytics estimates that every dollar spent on public infrastructure yields a $1.59 boost to gross domestic product.21 22
Create a modern WPA
In 1935, under the leadership of President Franklin Delano Roosevelt, the United States Congress enacted The Emergency Relief Appropriation Act. This allowed the president to create the Work Progress Administration or WPA. Until 1943 when the demand for jobs to prepare for war dramatically reduced unemployment, the WPA provided jobs to millions of Americans in the development, refurbishing, and extension of domestic infrastructure. Today, it is unlikely that the United States will ever have the proportion of naturally occurring low-skilled jobs that it had 50 years ago. The combination of less expensive labor internationally and the power of technology have made
many of those jobs disappear. I propose the creation of a modernized WPA, providing jobs to otherwise unemployable Americans in the development, refurbishing and extension of the domestic infrastructure we need today, such as revamping our decaying national parks, repairing our pockmarked roads and modernizing our aging schools. This new WPA would be designed as a program that would create net new jobs that would not have otherwise been available — no existing job would be replaced. Instead, both the private and public sectors would actively pursue projects that would not otherwise have been completed. Wherever possible, these jobs should be funded through small and medium businesses. We will see our nation’s infrastructure improved, the lives of all Americans enhanced and offer those who cannot get a job in this economy an opportunity to contribute productively. Growing our infrastructure is a key component to growing our economy and supporting our workforce as well as the businesses that employ our workforce. It is imperative that we support existing policies, and expand existing proposals, to best meet the needs of our shifting economy and transitioning workforce. Without that support, we could potentially fail to shift to a growing economy.
MY PRIORITIES FOR EQUIPPING THE COUNTRY’S WORKFORCE WITH WORKING INFRASTRUCTURE
PHYSICAL INFRASTRUCTURE 1 Fund the six-year infrastructure plan 2 Modernize our schools 3 Support the National Infrastructure Reinvestment Bank 4 Create a modern WPA
DIGITAL INFRASTRUCTURE 1 Support Broadband USA 2.0 2 Build-out our wireless infrastructure
1 John Bryson, “Fostering Growth Through Innovation, The Commerce Department and Innovation,” (The Brookings Institution, January 2012), available at http://www.brookings.edu/~/media/Files/events/2012/0113_growth_innovation/20120113_growth_innovation_bryson_remarks.pdf. 2 Ibid. 3 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President. 4 Robert J. Shapiro and Kevin A. Hassett, “The Employment Effects of Advances in Internet and Wireless Technology: Evaluating the Transitions from 2G to 3G and from 3G to 4G,” (NDN and New Policy Institute, January 2012), available at http://ndn.org/sites/default/files/blog_files/The%20Employment%20Effects%20of%20Advances%20In%20Internet%20and%20 Wireless%20Technology_1.pdf. 5 John Quelch, “Quantifying the Economic Impact of the Internet,” (Harvard Business School, August 2009), available at http://hbswk.hbs.edu/item/6268.html. 6 Ibid. 7 James Manyika and Charles Roxburgh, “The great transformer: The impact of the Internet on economic growth and prosperity,” (McKinsey Global Institute, October 2011), available at http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/The_great_transformer. 8 Darrell West, “Technology and the Innovation Economy,” (The Brookings Institution, October 2011), available at http://www.brookings.edu/papers/2011/1019_technology_innovation_west.aspx#_edn1. 9 “Wireless Broadband and Economic Growth,” (The Brookings Institution, October 2011), available at http://www.brookings.edu/~/media/Files/events/2011/1017_broadband_growth/20111017_broadband_growth.pdf. 10 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President. 11 “Wireless Broadband and Economic Growth,” (The Brookings Institution, October 2011), available at http://www.brookings.edu/~/media/Files/events/2011/1017_broadband_growth/20111017_broadband_growth.pdf. 12 “Economic Report to the President,” (Council of Economic Advisors, 2011), available at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President. 13 Robert J. Shapiro and Kevin A. Hassett, “The Employment Effects of Advances in Internet and Wireless Technology: Evaluating the Transitions from 2G to 3G and from 3G to 4G,” (NDN and New Policy Institute, January 2012), available at http://ndn.org/sites/default/ files/blog_files/The%20Employment%20Effects%20of%20Advances%20In%20Internet%20and%20Wireless%20Technology_1.pdf. 14 Ibid. 15 “A Vision for Economic Renewal: An American Jobs Agenda,” (New America Foundation and The Task Force On Job Creation, July 2011), available at http://www.americanmadeheroes.com/pics/amh-advocates/hindery/Economic-Taskforce-booklet_FINAL.pdf. 16 “Fact Sheet: Rebuild America Jobs Act,” (United States Senate Democrats, October 2011), available at http://democrats.senate.gov/2011/10/21/fact-sheet-rebuild-america-jobs-act/. 17 Mark Gerenscer, “Re-imagining Infrastructure,” (The American Interest, March/April 2011), available at http://www.the-american-interest.com/article.cfm?piece=926. 18 “The Budget for Fiscal Year 2012,” (U.S. Department of Transportation 2012), available at http://www.whitehouse.gov/sites/default/ files/omb/budget/fy2012/assets/transportation.pdf. 19 Ibid. 20 “American Jobs Plan, A Five-Point Plan to Stem the U.S. Jobs Crisis,” (Economic Policy Institute, December 2009), available at http://www.epi.org/page/-/american_jobs_plan/epi_american_jobs_plan.pdf. 21 Brian William Greene, “Is Obama’s National Infrastructure Bank the Answer on Jobs?,” (US News, October 2011), available at http://www.usnews.com/news/articles/2011/10/06/is-obamas-national-infrastructure-bank-the-answer-on-jobs. 22 “A Bank That Can Get Americans on the Road and on the Job: View,” (Bloomberg, August 2011), available at http://www.bloomberg.com/news/2011-08-11/a-bank-that-can-get-americans-on-the-road-and-on-the-job-view.html.
Middle-Class Buying Power
Accelerating demand for “Made In America”
Encourage Americans to Buy American, at least once
to incentivize Making More in America is to help create demand for Made in America. That’s simple economics. But it’s also a matter of fundamental fairness. When the government buys local, we’re keeping our tax dollars circulating here at home, working for us. When citizens buy local, they’re giving back to their communities. And when we restore American buying power through greater economic equality, we’re making the American Dream accessible to everyone.
ONE OF THE BEST WAYS
Require the federal government to buy more domestically produced products
The federal government has tremendous purchasing power and by many accounts, if it were to focus more on buying local, we could continue to grow the existing and strong niche manufacturing sector. Many federal grants contain Buy American provisions — it was a key feature of the American Recovery and Reinvestment Act. Constraining federal purchases to homegrown products, within limits, is one way of injecting a tremendous amount of capital into our manufacturing sector. 42
Roger Simmermaker’s book, How Americans Can Buy American, outlines more than sixteen thousand affordable U.S.-produced and based products and services.1 He also goes so far as to offer an online resource listing where these products can be purchased in your community.2 While occasionally locally produced products are slightly more expensive, as Diane Sawyer’s Made In America challenge notes, “if every American spent an extra $3.33 on U.S.-made goods, it would create almost 10,000 new jobs in this country.”3 Buying American, when possible, is a way we can all give back now, without waiting for the great gears of the American bureaucracy to turn. For readers who think this is a soft kind
would be created if every American spent an extra
on Americanmade goods.
of policy — let me give an example of how this kind of “market making” is already working — in our food supply. For the past decade local farmers, environmentalists and concerned consumers have been focusing on locally grown, organic and sustainable foods. Many of us were educated to the need for such products by environmental groups and journalists like Michael Pollan and others. So we created a market for these products, and organic local farmers stepped in to fill it. It is working — every day more of our food comes from local sources. If we start to pay attention to where our goods are manufactured as well — and ask hard questions like, “What is the carbon footprint of bringing this to market?” and, “Did the worker who produced this earn a living wage?” we will start to make markets for more American goods.
N E T WO R T H A N D F I N A N C I A L W E A LT H D I S T R I BU T I O N I N T H E U. S . I N 2 0 0 7
Financial wealth distribution 2007
Top 1 percent
Next 4 percent Next 5 percent Next 10 percent Bottom 80 percent
Net worth distribution 2007
7% 10% 11% 43%
Restore the buying power of the middle class: economic equality and tax fairness
We know American middle-class families have lost ground in this struggling economy. But the good news is that they can power America’s economic recovery — by buying what we are making in America again. First, however, our nation must confront a central barrier to restoring the buying power of the middle class: economic inequality. From the Occupy Wall Street movement to the uproar over Mitt Romney’s tax returns, our nation is engaged in a renewed debate on economic inequality, and the statistics are sobering: Since 1979, after-tax income for the top one percent of households more than tripled, while increasing by only one third for the bottom 80 percent.4 CEO compensation has approached 300 times that of the average worker.5 43
The richest one percent of Americans in 2007 took home almost 24 percent of income, up from almost nine percent in the 1960s and 1970s.6 While the long-term causes of this widening gap in incomes are many,7 the Great Recession has focused the attention of policy makers, economists, business leaders and the pundits on one of the most devastating results: the massive shortfall in consumer demand that is holding back our economic recovery. As President Obama said in a recent speech: “When middle-class families can no longer afford to buy the goods and services that businesses are selling, when people are slipping out of the middle class, it drags down the entire economy from top to bottom.”8 American middle-class consumers —
G ROW T H I N R E A L A F T E R - TA X I N C O M E F RO M 1 9 7 9 TO 2 0 0 7
While the top one percent of earners are getting richer, the rest of us are being left behind. 300% 250% 200% 150% 100% 50% 0%
LOWEST QUINTILE SECOND QUINTILE MIDDLE QUINTILE FOURTH 81st – 99th TOP 1% QUINTILE PERCENTILES
Source: Congressional Budget O ce
already left behind as the most wealthy Americans increased their share of our nation’s total income — are now staggering from a toxic combination of high unemployment and underemployment, the evaporation of home equity and the hangover of huge debt as a result of the collapse of the housing bubble, or worse, the juggernaut of home foreclosures. In addition to the other solutions proposed in this plan, we can make meaningful progress toward remedying income inequality and ensuring our capacity to invest in a prosperous future by reforming our tax system to make sure that everyone — including those who are fortunate enough to have made millions — pays his or her fair share. President Obama has proposed making our tax system more progressive9 — and I agree. That’s why Congress should take these four immediate actions: Repeal the Bush tax cuts for those making over $250,000 per year Though still the subject of debate, there is much evidence that the Bush tax cuts did not deliver what President Bush promised— 44
not on job creation, not on economic growth, not on increases in middle-class income nor on improvement to the nation’s deficit.10 But there’s no room for debate on the cuts’ impact on economic equality — they’ve been a disaster. Data aggregated by the Economic Policy Institute11 show that in 2010, the top 1 percent of earners (i.e., tax filers making over $645,000) received 38 percent of the breaks from the 2001-08 tax changes. And the top 0.1 percent of earners (i.e., those making over $3 million) received an average tax cut of roughly $520,000, more than 450 times larger than the share received by an average middleincome family. There are many reasons for repealing the cuts for the wealthiest two percent of Americans, not to mention a savings of approximately $700 billion over ten years.12 But making our tax code fairer is among the most important. Observe the “Buffett rule”13 — those making over $1 million a year should pay the same rate as the average middle class family Billionaire Warren Buffett made headlines last year when he authored an opinion editorial calling on Congress to “stop coddling the super-rich.”14 Buffett reported that he paid only 17.4 percent of his taxable income, lower than that of any of the other 20 people in his office, whose tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. He called on Congress to raise tax rates on the wealthiest Americans and “get serious about shared sacrifice.” This is no small problem. A recent report from the nonpartisan Congressional Research Service reveals the following facts:15 One quarter of millionaires pay a lower tax rate (less than 26.5 percent) than 10 million middle-income Americans who earn less than $100,000 annually.
There are more than 4,000 “ultramillionaires” who earn more than $5 million a year and pay a lower tax rate (less than 23 percent) than 10 million middle-income Americans who earn less than $100,000 annually. More than half of taxpayers who earn between $100,000 to $200,000 pay a higher tax rate than 33,000 millionaires and 4,400 ultra-millionaires. President Obama enshrined the “Buffett Rule” in his principles for tax reform: No household making over $1 million annually should pay a smaller share of its income in taxes than middle-class families pay.16 I agree and I applaud Mr. Buffett for stepping forward as a voice for fairness in our tax system. Cap the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $250,000 This proposed limitation, a feature of the tax reforms in the President’s plan, would return the deduction rate to the level it was at the end of the Reagan Administration.17 Adjust the preferential rate on carried interest, capital gains and maybe dividends According to Tax Policy Center estimates, almost half of the benefits from preferential rates on carried interest, capital gains and dividends (15 percent maximum) go to the top one-tenth of one percent of households.18 Low- and middle-income households, by way of contrast, earn most of their income from wages and salaries that are taxed at much higher rates (a flat payroll tax rate up to a maximum and graduated income tax rates).19 They cannot benefit from these tax
breaks like millionaires, nor can they exploit other tax loopholes and deductions like highincome households. President Obama’s plan calls for taxing hedge fund profits, called “carried interest,” as ordinary income instead of the current 15 percent capital gains rate. I agree, but I believe we should also take a serious look at some adjustments to preferential rates for capital gains and perhaps even dividends. Warren Buffett has argued eloquently for this type of policy shift: “I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 197677 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. “And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.”20
The American Dream
These proposals are really about much more than buying power or big numbers — they are about restoring middle-class access to the American Dream. I grew up watching my father work hard and play by the rules. That’s not just a cliché for our family; it’s a fundamental American value that allowed us to move into the middle class. By restoring economic equality, we can help every family in America benefit from the opportunities that mine did. It’s a goal worth fighting for.
MY PRIORITIES FOR ACCELERATING DEMAND FOR “MADE IN AMERICA”
1 Require the federal government to buy more domestically produced products 2 Encourage Americans to Buy American, at least once 3 Restore the buying power of the middle class: economic equality and tax fairness
1 Roger Simmermaker, How Americans Can Buy American: The Power Of Consumer Patriotism, Third Edition, (Consumer Patriotism Corporation, 2010). 2 Roger Simmermaker, “How Americans Can Buy American,” (Consumer Patriotism Corporation), available at http://www. howtobuyamerican.com/index.php. 3 “’Made in America’ Pledge: What is American-Made in Your Home?,” (ABC World News), available at http://abcnews.go.com/WN/ MadeInAmerica/mailform?id=12912252. 4 2011: The Year that Income Inequality Captured the Public’s Attention, Isabel V. Sawhill, The Brookings Institution, 12/19/2011. 5 Ibid. 6 Emmanuel Saez, “Striking it Richer: The Evolution of Top Incomes in the United States (Update with 2007 estimates),” (University of California, Berkeley, Department of Economics, August 2009), available at http://elsa.berkeley.edu/~saez/saez-UStopincomes-2007.pdf. 7 Josh Bivens and Heidi Shierholz, for example, list 6 policy changes that led to today’s vast concentration of wage incomes: (1) Labor law changes accelerated the decline of unions in the private sector – the more-insulated public sector saw unionization rates hold steady or even increase; (2) The purchasing power of the minimum wage was allowed to be eroded by inflation for almost decades-long stretches – resulting in a minimum today that remains far below its late-1960s peak in purchasing power; (3) Global integration with much-poorer trading partners occurred under a regime of trade agreements that provided detailed and firm protections for capital-incomes but none at all for labor-incomes in any country; (4) The financial sector was deregulated and began paying exorbitant rents to its most-privileged employees, who dominate the upper reaches of the wage-distribution; (5) Tax-rates on high-incomes were radically reduced; (6) The Federal Reserve let its mandate to pursue full-employment wither. It Takes a Policy Agenda, L. Josh Bivens and Heidi Shierholz, Economic Policy Institute, June 2011. 8 Remarks by the President on the Economy in Osawatomie, Kansas, December 6, 2011. 9 Living Within Our Means and Investing in the Future – The President’s Plan for Economic Growth and Deficit Reduction, September 2011. 10 Three Good Reasons to Let the High-End Bush Tax Cuts Disappear this Year, Michael Linden and Michael Ettlinger, Center for American Progress, 7/29/2010.
11 Tenth Anniversary of the Bush-era Tax Cuts, Andrew Fieldhouse and Ethan Pollack, 6/1/2011. 12 Three Good Reasons to Let the High-End Bush Tax Cuts Disappear This Year, Michael Linden and Michael Ettlinger, Center for American Progress, 12/29/2010. 13 Stop Coddling the Super-Rich, Warren Buffet, New York Times Op-Ed, 8/14/2011. 14 Ibid. 15 The Three Things You Need to Know About Millionaire Tax Rates, Sarah Ayres, Center for American Progress 10/14/2011, drawing from Thomas L. Hungerford, “An Analysis of the ‘Buffett Rule’” (Washington: Congressional Research Service, 2011). 16 Gene Sperling, “Buffett Rule Facts and Fictions,” (The White House, September 2011), available at http://www.whitehouse.gov/blog/2011/09/21/buffett-rule-facts-and-fictions. 17 Living Within Our Means and Investing in the Future – The President’s Plan for Economic Growth and Deficit Reduction, September 2011. 18 On the President’s Recommendations to the Joint Select Committee, William G. Gale, Brookings 11/19/2011. 19 Ibid. 20 Stop Coddling the Super-Rich, Warren Buffet, New York Times Op-Ed, 8/14/2011.
everyone who works hard has the chance to succeed.
That was my experience growing up. My mom and dad dreamed of a better life for our family — they worked hard, they took risks and we all succeeded. Their sacrifice sent me to college, and then to grad school. I succeeded on their shoulders. Our strength as a nation is that we can draw on the talent and vision of everyone — not just the lucky few. That’s why we can’t let the world of American Dreams disappear. And that’s why I am starting my campaign for Congress focused on restoring middleclass jobs by revitalizing our manufacturing economy. These are the kinds of jobs that pay living wages — wages that help buy houses, pay college tuitions, fund decent retirements. These are jobs everyone who works hard and is willing to get training can do and keep. These are the kind of jobs that add such tremendous value to our economy — and add tremendous value to our lives as we experience the power of making things with our own hands again. Now, I am the first to acknowledge that many jobs that were once done in America are not coming back. As a co-founder and educator at the UC Berkeley Center for Entrepreneurship and Technology, we study these macroeconomic trends. The indicators suggest that low-wage and low-skill manufacturing jobs will not come back in any real numbers. And the reality is, bringing back these kind of jobs should not be our goal. We want jobs that open up economic opportunity and provide middle-class stability and prosperity — not low-wage jobs. But millions of high-skilled and high-wage jobs can come back. Over the last two years, we’ve already seen this start to happen. Our government can do much more to promote the resurgence of high-wage manufacturing and that’s what this plan is about.
place to start. That’s what I am proposing with my Make More in America plan — a place to start restoring middle-class jobs and a place to start rebuilding the economic balance in this nation again. The “American Dream” we share is not one of the very rich and the very poor — it is the dream of a nation where
Stacey Lawson and her family
We’re lucky to live in the most beautiful congressional district in America. But we are also lucky that the hardworking and innovative individuals who live in our district are already showing the way to an America that Makes More again. Our niche manufacturing sector is a model. It shows the power of innovation and how keeping manufacturing local helps bring cutting-edge products to market faster. Beyond what we think of as traditional manufacturing, we see the people of our district showing how to create sustainable local economies. When we consume cheese from West Marin and Humboldt, or oysters from Tomales Bay, honey from Mendocino, wine from the Anderson Valley, fresh salmon from the waters off Fort Bragg or fresh, organic and sustainable produce from a thousand small farms up and down our coast and valleys — we are participating in an economic model that should inspire the rest of our economy. Buying local works. It gives us power as consumers. It keeps producers both in touch and accountable to us, because we are all neighbors. It recovers lost skills and builds new knowledge. It helps sustain and protect our environment. And it has launched thousands of small businesses, those transformative economic portals to the middle class. We can and will Make More in America again — if we work together as consumers and as participants in our government to make local markets and make national changes in policy.
Our strength as a nation is that we can draw on the talent and vision of everyone —not just the lucky few.
I’ve spent most of my career in starting small businesses, in helping to develop new technologies and in education. One of the things I have learned throughout my career is the way to get the best answers is to ask the people who are actually doing the work. That’s one thing about politics I still don’t get. Politicians seem to feel they need to pretend to have all the answers. Maybe that’s why politicians make so many mistakes. I don’t pretend to have all the solutions. But I am committed to making this start — by presenting you this plan and asking you what you think. Please — tell me where you agree or disagree. Tell me what else we should do. Let me know what you think our next plan should cover. I trust this community, this state and this nation. Our problems are big and times are still tough. But I know we’ve got the smartest and most skilled workers in the world. And I certainly know we’re up to any challenge.
To learn more about Stacey Lawson and our campaign for middle-class jobs, please visit www.StaceyLawson.com
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