A 21st Century Economic Strategy for America

President Obama delivered remarks on the economy this morning. Below are a few points from what he is planning to do to spur job creation. The whole speech can be found here on the White House website.

Today, I want to outline some of the broader steps that I believe should be at the heart of our efforts to accelerate job growth – those areas that will generate the greatest number of jobs while generating the greatest value for our economy. 

First, we’re proposing a series of steps to help small businesses grow and hire new staff. Over the past fifteen years, small businesses have created roughly 65 percent of all new jobs in America. These are companies formed around kitchen tables in family meetings, formed when an entrepreneur takes a chance on a dream, formed when a worker decides its time she became her own boss. These are also companies that drive innovation, producing thirteen times more patents per employee than large companies. And, it’s worth remembering, every once in a while a small business becomes a big business – and changes the world. 

That’s why it is so important that we help small business struggling to open, or stay open, during these difficult times. Building on the tax cuts in the Recovery Act, we’re proposing a complete elimination of capital gains taxes on small business investment along with an extension of write-offs to encourage small businesses to expand in the coming year. And I believe it’s worthwhile to create a tax incentive to encourage small businesses to add and keep employees and I’m going to work with Congress to pass one. 

These steps will help, but we also have to address the continuing struggle of small businesses to get the loans they need to start up and grow. To that end, we’re proposing to waive fees and increase the guarantees for SBA-backed loans. And I am asking my Treasury Secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses.

Second, we’re proposing a boost in investment in the nation’s infrastructure beyond what was included in the Recovery Act, to continue modernizing our transportation and communications networks. These are needed public works that engage private sector companies, spurring hiring across the country. Already, more than 10,000 of these projects have been funded through the Recovery Act. And by design, Recovery Act work on roads, bridges, water systems, Superfund sites, broadband networks, and clean energy projects will all be ramping up in the months ahead. It was planned this way for two reasons: so the impact would be felt over a two year period; and, more importantly, because we wanted to do this right. The potential for abuse in a program of this magnitude, while operating at such a fast pace, was enormous. So I asked Vice President Biden and others to make sure – to the extent humanly possible – that the investments were sound, the projects worthy, and the execution efficient. What this means is that we’re going to see even more work – and workers – on Recovery projects in the next six months than we saw in the last six months.

Even so, there are many more worthy projects than there were dollars to fund them. I recognize that by their nature these projects often take time, and will therefore create jobs over time. But the need for jobs will also last beyond next year and the benefits of these investments will last years beyond that. So adding to this initiative to rebuild America’s infrastructure is the right thing to do.  

Third, I’m calling on Congress to consider a new program to provide incentives for consumers who retrofit their homes to become more energy efficient, which we know creates jobs, saves money for families, and reduces the pollution that threatens our environment. And I’m proposing that we expand select Recovery Act initiatives to promote energy efficiency and clean energy jobs which have proven particularly popular and effective. It’s a positive sign that many of these programs drew so many applicants for funding that a lot of strong proposals – proposals that will leverage private capital and create jobs quickly – did not make the cut. With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs.

Finally, as we are moving forward in these areas, we should also extend the relief in the Recovery Act, including emergency assistance to seniors, unemployment insurance benefits, COBRA, and relief to states and localities to prevent layoffs. This will help folks weathering these storms while boosting consumer spending and promoting jobs.

Of course, there is only so much government can do. Job creation will ultimately depend on the real job creators: businesses across America. But government can help lay the groundwork on which the private sector can better generate jobs, growth, and innovation. After all, small business tax relief is not a substitute for the ingenuity and industriousness of our entrepreneurs; but it can help those with good ideas to grow and expand. Incentives to promote energy efficiency and clean energy manufacturing do not automatically create jobs or lower carbon emissions; but these steps provide a framework in which companies can compete and innovate to create those jobs and reduce energy consumption.  And while modernizing the physical and virtual networks that connect us will create private-sector jobs, they’ll do so while making it possible for companies to more easily and effectively move their products across this country and around the world. 

Given the challenge of accelerating the pace of hiring in the private sector, these targeted initiatives are right and they are needed. But with a fiscal crisis to match our economic crisis, we also must be prudent about how we fund it. So to help support these efforts, we’re going to wind down the Troubled Asset Relief Program, or TARP – the fund created to stabilize the financial system so banks would lend again. 

There has rarely been a less loved or more necessary emergency program than TARP, which – as galling as the assistance to banks may have been – indisputably helped prevent a collapse of the entire financial system.  Launched hastily under the last administration, the TARP program was flawed, and we have worked hard to correct those flaws and manage it properly. And today, TARP has served its original purpose and at a much lower cost than we expected. 

In fact, because of our stewardship of this program, and the transparency and accountability we put in place, TARP is expected to cost the taxpayer at least $200 billion less than what was anticipated just this summer. And the assistance to banks, once thought to cost the taxpayers untold billions, is on track to actually reap billions in profit for the taxpaying public. This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.

Small business, infrastructure, clean energy: these are areas in which we can put Americans to work while putting our nation on a sturdier economic footing. That foundation for sustained economic growth must be our continuing focus and our ultimate goal. For even before this period crisis, much of our growth had been fueled by unsustainable consumer debt and reckless financial speculation, while we ignored the fundamental challenges that hold the key to our economic prosperity. We cannot simply go back to the way things used to be. We cannot go back to an economy that yielded cycle after cycle of speculative booms and painful busts. We cannot continue to accept an education system in which our students trail their peers in other countries, and a health care system in which exploding costs put our businesses at a competitive disadvantage. And we cannot continue to ignore the clean energy challenge or cede global leadership in the emerging industries of the 21st century. That’s why, as we strive to meet the crisis of the moment, we are laying a new foundation for the future.

Because an educated workforce is essential in a 21st century global economy, we’ve launched a competitive Race to the Top fund through the Recovery Act to reform our schools and raise achievement, especially in math and science. And we’ve made college more affordable, proposed an historic set of reforms and investments in community college, and set a goal of once again leading the world in producing college graduates by 2020. 

Because even the best trained workers in the world can’t compete if our businesses are saddled with rapidly increasing health care costs, we’re fighting to do what we have discussed in this country for generations: finally reforming our nation’s broken health insurance system and relieving this unsustainable burden. 

Because our economic future depends on a financial system that encourages sound investments, honest dealings, and long-term growth, we’ve proposed the most ambitious financial reforms since the Great Depression. We’ll set and enforce clear rules of the road, close loopholes in oversight, charge a new agency with protecting consumers, and address the dangerous, systemic risks that brought us to the brink of disaster. These reforms are moving through Congress, we’re working to keep those reforms strong, and I look forward to signing them into law. 

And because our economic future depends on our leadership in the industries of the future, we are investing in basic and applied research, and working to create the incentives to build a new clean energy economy. For we know the nation that leads in clean energy will be the nation that leads the world. I want America to be that nation. I want America’s prosperity to be powered by what we invent and pioneer – not just what we borrow and consume. And I know that we can and will be that nation, if we are willing to do what it takes to get there. 

There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice. Ensuring that economic growth and job creation are strong and sustained is critical to ensuring that we are increasing revenues and decreasing spending on things like unemployment so that our deficits will start coming down. At the same time, instilling confidence in our commitment to being fiscally prudent gives the private sector the confidence to make long-term investments in our people and on our shores.

UPDATE: For more on NDN's Lost Decade narrative, read the new NDN White Paper entitled, "A Lost Decade for Everyday Americans."

With the White House Forum on Jobs and Economic Growth getting underway, now is a good time to note that the problem isn’t just jobs. As we’ve long argued and the Wall Street Journal pointed out recently, the last decade has been a lost one for everyday Americans. First, we generally note that, even as GDP and productivity surged, household income didn’t keep up. In fact, the average household income took more than a $2000 loss during the Bush presidency. 

A second point, illustrated by the Wall Street Journal, is that private sector employment has basically not grown in a decade.

It is difficult to understand how bad this recession has been without fully understanding the pre-recession weakness of the American consumer caused by dropping incomes and higher costs. NDN’s Dr. Rob Shapiro – who is at the White House Forum right now – has agued that structural dynamics in the American economy have broken down its job creation and wage growth capability. For NDN’s latest thinking on these important issues, please consult:

I enjoyed this latter section of the President's speech last night. It is perhaps the clearest holistic indication to date of his view of America's role in the world:

As President, I refuse to set goals that go beyond our responsibility, our means, or our interests.  And I must weigh all of the challenges that our nation faces.  I don't have the luxury of committing to just one.  Indeed, I'm mindful of the words of President Eisenhower, who -- in discussing our national security -- said, "Each proposal must be weighed in the light of a broader consideration:  the need to maintain balance in and among national programs."

Over the past several years, we have lost that balance.  We've failed to appreciate the connection between our national security and our economy.  In the wake of an economic crisis, too many of our neighbors and friends are out of work and struggle to pay the bills.  Too many Americans are worried about the future facing our children.  Meanwhile, competition within the global economy has grown more fierce.  So we can't simply afford to ignore the price of these wars.
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But as we end the war in Iraq and transition to Afghan responsibility, we must rebuild our strength here at home.  Our prosperity provides a foundation for our power.  It pays for our military.  It underwrites our diplomacy.  It taps the potential of our people, and allows investment in new industry.  And it will allow us to compete in this century as successfully as we did in the last.  That's why our troop commitment in Afghanistan cannot be open-ended -- because the nation that I'm most interested in building is our own.

Now, let me be clear:  None of this will be easy.  The struggle against violent extremism will not be finished quickly, and it extends well beyond Afghanistan and Pakistan.  It will be an enduring test of our free society, and our leadership in the world.  And unlike the great power conflicts and clear lines of division that defined the 20th century, our effort will involve disorderly regions, failed states, diffuse enemies.

So as a result, America will have to show our strength in the way that we end wars and prevent conflict -- not just how we wage wars.  We'll have to be nimble and precise in our use of military power.  Where al Qaeda and its allies attempt to establish a foothold -- whether in Somalia or Yemen or elsewhere -- they must be confronted by growing pressure and strong partnerships.

And we can't count on military might alone.  We have to invest in our homeland security, because we can't capture or kill every violent extremist abroad.  We have to improve and better coordinate our intelligence, so that we stay one step ahead of shadowy networks. 

We will have to take away the tools of mass destruction.  And that's why I've made it a central pillar of my foreign policy to secure loose nuclear materials from terrorists, to stop the spread of nuclear weapons, and to pursue the goal of a world without them -- because every nation must understand that true security will never come from an endless race for ever more destructive weapons; true security will come for those who reject them. 

We'll have to use diplomacy, because no one nation can meet the challenges of an interconnected world acting alone.  I've spent this year renewing our alliances and forging new partnerships.  And we have forged a new beginning between America and the Muslim world -- one that recognizes our mutual interest in breaking a cycle of conflict, and that promises a future in which those who kill innocents are isolated by those who stand up for peace and prosperity and human dignity. 

And finally, we must draw on the strength of our values -- for the challenges that we face may have changed, but the things that we believe in must not.  That's why we must promote our values by living them at home -- which is why I have prohibited torture and will close the prison at Guantanamo Bay.  And we must make it clear to every man, woman and child around the world who lives under the dark cloud of tyranny that America will speak out on behalf of their human rights, and tend to the light of freedom and justice and opportunity and respect for the dignity of all peoples.  That is who we are.  That is the source, the moral source, of America’s authority.

Since the days of Franklin Roosevelt, and the service and sacrifice of our grandparents and great-grandparents, our country has borne a special burden in global affairs.  We have spilled American blood in many countries on multiple continents.  We have spent our revenue to help others rebuild from rubble and develop their own economies.  We have joined with others to develop an architecture of institutions -- from the United Nations to NATO to the World Bank -- that provide for the common security and prosperity of human beings.

We have not always been thanked for these efforts, and we have at times made mistakes.  But more than any other nation, the United States of America has underwritten global security for over six decades -- a time that, for all its problems, has seen walls come down, and markets open, and billions lifted from poverty, unparalleled scientific progress and advancing frontiers of human liberty. 

For unlike the great powers of old, we have not sought world domination.  Our union was founded in resistance to oppression. We do not seek to occupy other nations.  We will not claim another nation’s resources or target other peoples because their faith or ethnicity is different from ours.  What we have fought for -- what we continue to fight for -- is a better future for our children and grandchildren.  And we believe that their lives will be better if other peoples’ children and grandchildren can live in freedom and access opportunity.  (Applause.)   

As a country, we're not as young -- and perhaps not as innocent -- as we were when Roosevelt was President.  Yet we are still heirs to a noble struggle for freedom.  And now we must summon all of our might and moral suasion to meet the challenges of a new age. 

In the end, our security and leadership does not come solely from the strength of our arms.  It derives from our people -- from the workers and businesses who will rebuild our economy; from the entrepreneurs and researchers who will pioneer new industries; from the teachers that will educate our children, and the service of those who work in our communities at home; from the diplomats and Peace Corps volunteers who spread hope abroad; and from the men and women in uniform who are part of an unbroken line of sacrifice that has made government of the people, by the people, and for the people a reality on this Earth.

After meeting with his Cabinet yesterday, President Obama spoke mostly about the economy. Here are his remarks:

THE PRESIDENT:  Hello, everybody.  I assembled my Cabinet today for updates on progress we've made across several areas.  Secretary Gates and Secretary Clinton spoke about issues of national security.  Peter Orszag had some discussion of our upcoming budget.  And I updated the Cabinet on the progress that we're making on the health insurance reform legislation that's moving its way now through the Senate, and reiterated the urgent need for us to get to the finish line and provide relief, both in terms of costs and the quality of coverage that Americans are getting in their health care.

The primary focus of our discussion today, though, had to do with the same thing that Americans sitting across kitchen tables all across the country are focused on, and that is jobs and the economy. 

If you look back at where we've been, in the first several months of my administration, because of the steps taken by people like Secretary Geithner and the rest of our economic team, we were able to stabilize the financial system and ensure that the economy didn't slip back into a depression.  And we take this for granted now, but it is something that I think all the members of the Cabinet who participated are extremely proud of.

Since that time, we've passed a Recovery Act that's put a middle-class tax cut into people's pockets, that has invested in infrastructure all across this country and put people back to work, and something that isn't noted often enough, has helped stabilize state budgets at a time in which we could have seen hundreds of thousands of layoffs in teachers and police officers and firefighters.

Our economy is growing for the first time in more than a year, and we know that economic growth is a prerequisite for job growth.  But, having said that, what I emphasize today is we cannot sit back and be satisfied, given the extraordinarily high unemployment levels that we've seen.  We have only taken the first step in curing our economy and making sure that it is moving on the right track.  And I will not rest until businesses are investing again and businesses are hiring again and people have work again.

Now, this is going to be a challenging task.  It's challenging because of the extraordinary blow that the financial crisis delivered to the economy as a whole.  It is particularly difficult because both the financial sector and the housing sector were the biggest drivers of economic growth prior to the financial crisis, and so the severity of their pullback means that things are moving slower than we would like them to move.

One of the ironies that we have right now is is that businesses across sectors are making profits again but their primary way of making profit has been to cut costs, as opposed to seeing increased demand.  And unfortunately, the huge rise in productivity, which is normally a good thing, in this circumstance means that they have learned to produce the same amount of goods with fewer people.  All these present some significant challenges in terms of us creating more jobs in this economy.

But, having said that, something that our economic team emphasized is that there are core strengths to the American economy that will put us in good stead over the long term.  Having gone through this very wrenching adjustment, we continue to have the best universities in the world, the best innovation and technologies in the world.  We continue to have some of the best workers in the world, the most productive workers in the world.  And we have the kind of dynamism and entrepreneurship in our economy that's going to serve us well in the long term.  The key is to bridge where we are now to that more prosperous future.  And so a lot of the discussion, in a whole range of different sectors, was how do we move that job agendas forward.

For example, in the export area, I just came back from a trip to Asia in which one of my highest priorities was discussing how we can increase exports into that region.  If we could just increase our exports by 5 percent into that region, that would mean hundreds of thousands of well-paying jobs.  And there's no reason that we can't do it.  In fact, it turns out that they want our products and they want our technology, but partly because of regulatory restrictions, partly because of currency issues, partly because we just haven't been as aggressive as we need to be, we haven't gotten there. 

That's something that we're going to be focusing on -- on infrastructure.  Although some of the payout extends beyond just a couple of years, us investing now in revamping our existing infrastructure and then starting to lay the foundation for things like high-speed rail can make all the difference in the world.

And in green technology, we are seeing some terrific ideas that could immediately put people back to work and save consumers money and help with the climate crisis that we have in place. 

So, as many of you know, we're going to be having a jobs summit on December 3rd.  Part of the task of this Cabinet was to generate good ideas in anticipation of that jobs summit.  We are going to be bringing together people from all across the country -- business, labor, academics, non-for-profits, entrepreneurs, small and large businesses -- to explore how we can jumpstart the hiring that typically lags behind economic growth, but we don't want to wait.  We want to see if we can accelerate it.  And I'm confident that we're going to be able to do it because I've got as good of a Cabinet as I think any President has ever had.

Let me just close by saying this.  This is a week to give thanks.  And I advised this hardworking Cabinet to get a little bit of rest this week, particularly the people who have been traveling around the globe for day in and day out and don't know what time zone they're in. 

But I think it's also a time to remember that this has been a very difficult year, and a lot of people out there are having a very, very tough time.  And I indicated to my Cabinet that as hard as they're working and as difficult as the political environment can be sometimes, we are extraordinarily blessed to be in a position where we can make a potential difference in the lives of millions of people.  We need to take advantage of that opportunity and redouble our efforts in the months and years to come.

Thank you very much, everybody.

Over the weekend, the Atlantic's Ron Brownstein penned an important piece on the cost containment measures in health care reform legislation released by Senator Harry Reid. The consensus amongst economists that he talked to is that Reid did a pretty good job. 

When I reached Jonathan Gruber on Thursday, he was working his way, page by laborious page, through the mammoth health care bill Senate Majority Leader Harry Reid had unveiled just a few hours earlier. Gruber is a leading health economist at the Massachusetts Institute of Technology who is consulted by politicians in both parties. He was one of almost two dozen top economists who sent President Obama a letter earlier this month insisting that reform won't succeed unless it "bends the curve" in the long-term growth of health care costs. And, on that front, Gruber likes what he sees in the Reid proposal. Actually he likes it a lot.

"I'm sort of a known skeptic on this stuff," Gruber told me. "My summary is it's really hard to figure out how to bend the cost curve, but I can't think of a thing to try that they didn't try. They really make the best effort anyone has ever made. Everything is in here....I can't think of anything I'd do that they are not doing in the bill. You couldn't have done better than they are doing."

Gruber may be especially effusive. But the Senate blueprint, which faces its first votes tonight, also is winning praise from other leading health reformers like Mark McClellan, the former director of the Center for Medicare and Medicaid Services under George W. Bush and Len Nichols, health policy director at the centrist New America Foundation. "The bottom line," Nichols says, "is the legislation is sending a signal that business as usual [in the medical system] is going to end."

Of course more could be done to cut costs, more can always be done, and I'd imagine that even after a reform bill is passed, we'll still have to come back to the cost question relatively soon. Having said that, the Senate bill seems to make a solid effort at cutting health care costs, which have been one of the main drags on wages and job creation over at least the past decade. Containing these costs has to be a crucial part of a new economic strategy for America going forward and is the core economic logic for health care reform. The whole piece is worth a read, as is Rob Shapiro's recent blog pointing out the political ramifications of not containing healthcare costs in the years to come.

Update: Ben Smith reports that President Obama has declared Brownstein's piece "mandatory reading for all senior staff."

In his weekly address, President Obama says he went to Asia in large part to help create economic prosperity:

As we emerge from the worst recession in generations, there is nothing more important than to do everything we can to get our economy moving again and put Americans back to work, and I will go anywhere to pursue that goal.

That’s one of the main reasons I took this trip.  Asia is a region where we now buy more goods and do more trade with than any other place in the world – commerce that supports millions of jobs back home.

Watch the whole video:

The high economic anxieties that most Americans felt six months ago may have faded, but count me among economists who are still very concerned.  Sure, the last GDP report came in at 3.5 percent, and the next one should show comparable gains.  Virtually all of those gains, however, come from the temporary stimulus and unusual inventory corrections.  Once those factors run their course – mid-2010 for the stimulus and maybe earlier for inventories – a second dip down becomes very possible, and it could be even worse than the first.  And the main reason we remain so vulnerable is the series of political stumbles which have left largely unchanged many of the forces that drove us off the cliff.

Just today we learned that new residential construction fell again last month, while home foreclosures continue to rise.  It could hardly be otherwise: Washington has still done little to address the pressures from falling home prices colliding with rising mortgage payments, even though they were the largest single factor in the financial meltdown. We did warn that the government’s housing plan wouldn’t work:  A small government benefit to encourage banks to offer better terms to strapped homeowners couldn’t overcome the basic rule that anymore facing foreclosure becomes a poor credit risk, and banks don’t refinance mortgages for poor credit risks.  So, as jobs have continued to disappear and incomes fall, foreclosures continue to rise.  We could still declare a brief moratorium on foreclosures while putting in place some measures that might actually work – for example, directing Fannie Mae, which we taxpayers now own, to provide better terms to strapped homeowners whose mortgages are held there.

Washington also gave financial institutions hundreds of billions of tax dollars without ever requiring them to get rid of their toxic assets and reboot credit to businesses – and so, they largely didn’t.  Now, as foreclosures continue to rise, they face more losses from the mortgage-backed securities and their derivatives they still hold.  Those losses will continue to limit the credit flows needed to keep the economy going once the stimulus fades.  And that doesn’t factor in the increasing pressures on financial institutions from growing problems with commercial real estate. 

And by the way, oil prices are up to $80 per-barrel again and headed higher if the dollar continues to weaken.  You may have forgotten, but it was the run-up in oil price in 2007 that actually triggered the recent recession, with the financial crisis coming a little later and making it so much worse.  If oil prices keep on rising now, on top of weak credit flows and anemic consumer spending, and the economy heads down again, its trajectory could well be even worse this time, since it will come in the context of already weak demand and high unemployment. 

This possibility brings us to Washington’s largest failure of all – okay, the second largest after its astonishing incompetence dealing with the financial bubble and bust.  Throughout the last expansion, Washington sat on its hands as jobs continued to disappear for two years after the 2001 recession ended, and then finally began to grow but at less than half the rates seen in the 1990s and 1980s.  This political failure means that we now face double-digit unemployment for a long time, even if we manage to avoid returning to recession.

At least the administration and Congress finally are noticing the jobs problem.  What we don’t know is whether they’ll do anything effective to address it.  They have real options here.  For example, for the short-term, they can provide more money to states squeezed by falling revenues and balanced-budget requirements, so the states can keep their teachers, police and other employees working.  An even better idea would be to jumpstart new job creation by exempting the first few thousand dollars of wages from payroll taxes.  And they could pay for it with a small, Tobin-type tax on financial transactions.  

What really scares me and some other economists, however, is the possibility of another large shock to the financial system.  For example, while it’s not likely, we could see a sudden collapse in the markets for securities backed by commercial mortgages.  The real nightmare on Wall Street, however, is an international crisis that suddenly drives up the dollar’s value.  That would present terrible problems, since much of the near-record profits being reported by Goldman “We’re doing God’s work” Sachs and others come from nearly a trillion dollars in complicated financial plays that depend on a weak dollar.

If this somehow should come to pass, Washington’s incapacity to deal effectively with the recent crisis will create very scary scenarios.  At a minimum, even President Obama’s legendary skills of persuasion won’t be enough to convince the public to bail out Wall Street a second time. It’s may not be too late, however, for the administration and the Fed to privately jawbone Wall Street to reduce this new risk exposure – and ours. Whether they’re willing to accept smaller bonuses, which usually come with less risk, could be a good test of whether they deserve to ever be rescued again.

Newsweek just released a poll of American and Chinese attitudes toward innovation and their respective economies. The write-up leads with this telling anecdote:

Only a slight breeze blew across the plains of Inner Mongolia on a recent afternoon, but the giant turbines at the Huitengxile Wind Power Field were spinning steadily. This facility, 200 miles northwest of Beijing, has 550 turbines churning out enough juice to power a small city, and inside a monitoring station, plant manager Zhang Jianjun points to a wall chart showing the 11 different suppliers of the high-tech windmills. Four are Chinese companies, but when Zhang is asked to pick his favorite, his nationalism is trumped by a desire for quality. "General Electric," he says, citing its reliability. "I'm excited when all of the turbines are working."

The poll says some pretty basic things: Americans think the recession has hurt innovation and both Chinese and Americans think innovation will be more important than ever to the U.S. economy. The poll however goes onto cite some interesting and curious dynamics.

Here are results asking Chinese and American parents what skills their children need to drive innovation:

This slide says a few things to me. First, the grass is always greener. Our education system is prized for its ability to teach creative approaches to problem solving, while that of China is maligned for a lack of doing so and generally prizes technical and math skills. While I certainly acknowledge that Americans could use more math and computer skills (see www.ndn.org/skills), it's clearly our creativity and ability to thrive in competition that has made us successful.

Here are results from asking Americans and Chinese how they would invest a week's pay:

Again, curious, that Chinese say they would invest, while Americans say they would save, when the behavior tends to be the opposite. I'm not sure what this means - other than perhaps people are constantly being told that behavior that they are not partaking in is desirable. I know it's hard to watch cable news without hearing that Americans have too much debt. 

What the poll ultimately says to me is that the national conversation on innovation is long overdue. This poll, conducted by BSG and commissioned by NDN in 2007, shows Americans understanding the nature of innovation and the globalized economy better than some give them credit for. That said, policymakers and pundits could probably do a better job filling in the blanks. 

David Barboza of the New York Times has one of those pieces today which just catches your eye, and makes you think.  He writes:

China has begun transforming itself from a global font of low-priced goods fueled by cheap labor into a much more diverse and complex economic power.

But it is the incredible chart the Times has produced tracking China's growth that I strong urge you to review.  You can find it here.

Two stats really stuck out for me:

- In 2000, the US had 180 of the Fortune 500 largest companies by revenue.  China had 8.  This year the US had 140 of the 500 largest global companies.  China had 37, an almost five fold increase. 

- In 2000 the US had 29 of the top 50 companies of the world by market capitalization.  China had 1.  This year the US had 21 of these top 50 market cap companies.  China had 9. 

These charts, and this trip by the President to Asia this week, reminds us how fundamentally the global economy is changing.  We really are entering a completely different economic era, one characterized by the "rise of the rest" as Fareed Zakaria calls it.   A significant part of the rise of the rest is not just the growing geo-political and economic power of these rising powers, but the emergence of globally competitive corporations from these countries which are challenging the hegemony of American and European global brands, making it much harder for our corporations to make money.  The global corporate playing field is getting much more crowded, global competition is getting much more virulent, reducing the pricing leverage of our companies, which Rob Shapiro and I have been arguing is at the core of why it is has been so hard to get wages and incomes up here in the US this last decade.

This new dynamic of this new era of globalization is one we simply have to talk about much more - global competition has grown permanently more competitive.  As these rising power economies mature we will see global competition get ever more intense, as they produce not just low-wage low-quality companies, but the unimagined and yet unbuilt Microsofts, Intels and Nokias of the new century, and new much more global economy.

"Recovery," or returning to the old American economy, is not just impossible, but it is a dangerous illusion, preventing us from recognizing and addressing the underlying structural changes happening in the American economy today.  There is no going back now, there is only the fashioning of a new economic strategy for America, one which takes into account these historic and game-changing developments and begins to strategically transition America and its people successfully into this new era.  

Of the many things President Obama is taking from his trip this week I hope a deeper understanding of this dynamic - and a commitment to address it forthrightly when he returns - is at the core of his takeaways.  For preparing America, our workers and our students for this new much more competitive global economy may just be the most important domestic responsibility of our leaders today.

As national attention pivots toward the economy and employment, I'd like to present some some key analysis and narrative from NDN on the breakdown in job and wage creation in America:

• Health Care's Raw Deal for Middle-Class Families by Dr. Robert J. Shapiro, 11/11/2009 - Shapiro argues that if the American middle class knew how adversely incomes were being impacted by health care costs, a political upheaval on the level of the 1970’s tax revolt might take place in America. This dynamic makes containing health care costs one of the great political and economic challenges of the day. 

• Sifting Through the Economic Messages From the Elections Last Night by Simon Rosenberg, 11/4/2009 - Exit polls show that the most important factor to voters is the economy, as the old, 20th century economy is not working for everyday Americans anymore. To have electoral and governing success, policymakers must make a the creation of a new, 21st century economy their central focus. 

• What Washington Should Understand and Do to Create Jobs by Dr. Robert J. Shapiro, 10/8/2009 - Even the term "jobless recovery" understates how dire America's economic situation is, as the economy now faces structural problems to create jobs and wage growth. With no silver bullet in sight, policymakers must set their sites on creating an agenda and conversation around long-term, broad based prosperity. 

• The Key to the Fall Debate: Staying Focused on the Economy by Simon Rosenberg, 9/3/2009 - The summer months were not good ones for Democrats, but Rosenberg argues that there is a roadmap for how they can get back on track: staying relentlessly focused on the economy and the struggle of every day people.  

• Noticing and Solving the Problem with Jobs and Wages by Dr. Robert Shapiro, 7/23/2009 - The ability of the American economy to create jobs and wage growth, even in times of productivity and GDP growth, has broken down. Policymakers must adjust to this new economic reality.

• Not Taking the Presidential Eye Off the Economic Ball by Simon Rosenberg, 7/2/2009 - The economy is the singular dominant issue in American politics today, and the administration must craft a response to that, understanding that few want a recovery that takes America back to the Bush economy.

• Time to Face the Facts: The Economy Probably Won’t Get Better For Quite a While by Dr. Robert Shapiro, 4/9/2009 – Shapiro's most recent economic analysis says that the economy could be stuck in the Great Recession for long period of time, and that a v-shaped recovery is unlikely.

• A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.

• Back to Basics: The Treasury Plan Won't Work by Dr. Robert Shapiro, 9/24/2008 - As the financial crisis unfolded and the Bush Administration offered its response, Shapiro argued that, while major action was needed, the Treasury's plan would be ineffective.

• Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 – At the beginning of the financial collapse, NDN offered this narrative-shaping essay on the economic need to stabilize the housing market.

• Making the Struggle of Every Day People the Central Focus of the National Debate by Simon Rosenberg, 8/17/2008 - As the 2008 presidential campaign entered a crucial phase, Rosenberg argued that political leaders must focus on raising the wages and incomes of Americans.

• Poll: Economic Strategies and Globalization conducted by Pete Brodnitz, Benenson Strategy Group, 11/8/2007 - This poll of attitudes toward the economy and globalization found that Americans understand the modern nature of globalization, want government to give them the opportunity to succeed through investment, and believe innovation is a key strength of the American economy. Americans also saw the economy getting much worse, and they were right, as the recession officially began just a month later.

• The New Landscape of Globalization: The Real Foundations of American Prosperity in the 21st Century by Dr. Robert Shapiro, 6/20/2007 – Shapiro offers this forward-looking paper on the state of globalization, the structural problems facing the American economy, and a road map to prosperity in this new economic era.

• Voters Deliver a Mandate for a New Economic Strategy by Simon Rosenberg, 11/10/2006 - In analysis of exit polls from the 2006 elections, which chased Republicans from power, NDN argued that the most important factor, even in an election most thought was decided on the war in Iraq, was the economy. 

• Meeting the Challenges of the 21st Century: Crafting a Better CAFTA by Simon Rosenberg, Dr. Robert Shapiro, and Joe Garcia, 6/9/2005 - NDN calls on policymakers to face squarely a vision of how globalization can and should work, and how rapid economic liberalization, generally a positive for America and the world, must be accompanied by a commensurate investment in the economic well-being of everyday Americans, who have not seen the expected wage gains despite strong productivity and GDP growth.