America Ascendant

by Stanley B Greenberg

  If one is looking for a measure of where the future lies, consider that our universities have given more than 200,000 PhDs to foreign students over the past two decades, and 70 percent of those students remained in the United States after graduation, including 92 percent of the Chinese graduates and 81 percent of the Indian graduates. Even in the absence of immigration reform, all players seem to be conspiring to ensure America has a large and growing infusion of the world’s most educated, which has implications for America’s future growth. By the way, one-quarter of American recipients of the Nobel Prize were immigrants.33

  As a consequence of immigration and even more so the higher birthrate of the new immigrant populations, America has a large young population and is getting older at a much slower pace than Europe, Japan, and China. Younger populations participate more fully in the economy and pay taxes, while aging ones work less and demand more from government social, health care, and pension programs. The great reluctance to entertain foreign immigration has contributed to the stagnation, lack of innovation, and slower growth in Japan.34

  Western Europe is coping with very modest economic growth, declining birthrates, and constrained immigration that is putting their welfare states at risk. Germany has allowed increased migration in recent years, but the birth deficit is growing rapidly. In 2008 seniors made up 20 percent of the German population, though it will rise to 34 percent by 2060. In France, seniors will make up 30.6 percent of the population in 2035.35

  The Chinese government is hardly generous with its pensioners, but the growing “specter of elderly pensioners” could threaten the Communist regime’s bargain with the public. In 2011 it had three workers for every pensioner—and that ratio will shift to two to one in 2015 and in thirty years every worker will be supporting two pensioners. By 2025, China will be home to nearly one-fourth of the world’s seniors.36

  At the same time, the United States’ over-sixty-five population is also growing, but at a much slower pace. Seniors made up 13.4 percent of the U.S. population in 2012 and will count for 19.3 percent in 2030 with the full retirement of the baby boomers, and reach only 20.2 percent by 2050. Between 2030 and 2050 that proportion will remain practically unchanged because of the generations of younger immigrants in this country. China and Europe face great challenges as the number of seniors dependent on government approaches the number of those working, but because of immigration, America’s social contract is much more sustainable.37

  Growing American immigration builds on an immigrant tradition and is strengthening the U.S. economy and global position. The most highly skilled and educated students, professionals, and entrepreneurs are flocking to the country from all over the world along with those driven individuals trying to make a better life. They come here legally and illegally and contribute to our economy as consumers, employees, and employers.

  The United States will some year soon enact a transformative law that formalizes and builds on the vast changes immigration is bringing. All of civil society has joined in to support the change, including the National Council of La Raza, the U.S. Chamber of Commerce, the AFL-CIO and SEIU, the American Farm Bureau, numerous faith groups, and Mark Zuckerberg and his high-tech coalition. It will not happen while the Republican Party, dominated by the anti-immigrant and anti-immigration Evangelical and Tea Party base, controls Congress. It is a near certainty though that the next president will mobilize after taking office to pass comprehensive reform, and the new president will have the strong support of an exasperated business community and perhaps the Republican establishment, too.

  The U.S. Senate first passed in 2013 the Border Security, Economic Opportunity, and Immigration Modernization Act by a 68 to 32 vote, a bipartisan majority. If enacted, the legislation would transform America’s immigration system. CBO estimates it would expand the population by 10 million people in ten years and 16 million by 2033. It would allow the roughly 11.7 million undocumented residents to gain legal status and place them onto a path to citizenship after ten years. The “DREAMers” would obtain citizenship on an accelerated basis. It would remove country-specific visa caps, a legacy of a more racist past, which limited applications from countries such as China and India. It would remove limits on family-based visas for spouses and minor children, immediately clearing up the backlog of family visas and impacting future immigration. The Senate bill would create new guest-worker visas for low-skilled workers in industries such as construction and hospitality. Additionally, agricultural workers that meet certain requirements could be eligible for registered provisional immigrant status within five years.38

  Green card limits would be lifted for the highly skilled and exceptionally talented, including researchers, professors, artists, executives, athletes, and those graduates with advanced degrees in science, technology, engineering, and mathematics (STEM) from U.S. universities. The bill would introduce a point-based merit visa system that takes into account skills, employment history, and educational credentials to grant visas to between 150,000 and 250,000 immigrants a year, depending on the numbers of applicants and the U.S. unemployment rate. The H-1B visa program would be reformed, the cap for high-skilled workers substantially raised, and the exemptions for advanced STEM degrees increased. Finally, a start-up visa would become available to entrepreneurs abroad that wish to start a company in the United States.39

  What would these changes mean for the U.S. economy? A lot, according to the authoritative estimate of the nonpartisan Congressional Budget Office. By expanding the U.S. population by 4 percent, granting legal status to the undocumented, and increasing the number of skilled and unskilled workers, this overhaul would also increase America’s real GDP by 3.3 percent by 2023 and 5.4 percent by 2033.40

  Immigration has been a flash point because of the presumption that new immigrants compete with citizens for employment and public services and impact wages. The CBO studied these questions and concluded that the downside risks were minimal. Compared to projections under current law, the bill would cause the unemployment rate to go up just 0.1 percent between now and 2020, and there would be no effect after that. Overall, the effect on wages is truly minimal. On average, wages would be lower by 0.1 percent until 2023 and then higher by 0.5 percent per person by 2033. The big winner would be the formerly undocumented workers, whose pay would increase by 12 percent.41

  Moreover, rather than reducing the resources of the government, the newly legal immigrants would participate in the labor force at a higher rate and pay more taxes. According to the CBO, the new tax revenue would offset the extra costs for border protection required by the law in the first decade and in the next, reducing the deficit by $300 billion.42

  The immigration revolution today, like the one that shaped America from the outset, will renew, grow, and strengthen the U.S. economy and society in more ways than we can imagine.

  THE INNOVATION REVOLUTION

  Countries that commit to promoting learning and education, science, and basic research will be home to tomorrow’s leading industries. That will include the countries that commit an ever larger portion of their military budget to supporting technology and advanced engineering, the countries that encourage people to think creatively and seek innovative solutions, and those that are open enough to welcome new professions and new industries.

  Those commitments are the reason why America came to lead in high-tech, aerospace, and the creative industries. And that is why America continues to lead the world in investments in human capital and R & D and why it is home to great research universities that promote the most advanced research. In a globally competitive age where human capital and the knowledge economy are ascendant, who do you think is leading the advancement of big data?

  Consider where America starts: it has increased its R & D spending by 5 percent a year in real terms for sixty years. That has slowed for the past few years because of the economic crash and Republican efforts to cut federal research spending and support for state universities; nonetheless, it reached $465 bi
llion in 2014. And while the European Union countries and China have upped their research game significantly, only by combining all of their efforts do you get ahead of the United States.43

  U.S. spending on public education as a percent of our total economy has risen steadily to 7 percent—that is more than double the share of GDP spent in China or India. On a per capita basis, the United States is just behind Luxembourg, Switzerland, and Norway among the OECD countries.44

  To be sure, America must raise its investment in public education and teachers and rally around bold reforms that demonstrably raise skill levels, allocate education resources more equitably, and narrow the gap between the privileged and the poorest. I take seriously the comparisons of U.S. students on key tests with students in South Korea, Finland, and Shanghai. There is no way to address some of America’s biggest contradictions unless it addresses education in a very different way, which I discuss in chapter 12.

  But we should also remember the “Johnny can’t read” campaigns of the 1950s, which hardly portended a period of American decline. America never performed well on international tests in the 1960s, 1970s, and 1980s, Fareed Zakaria wrote in In Defense of a Liberal Education, yet somehow America ended up producing college graduates who furthered America’s competitiveness.

  America is home to virtually all of the top research universities at the center of the knowledge economy that promote the research advances and innovations at the heart of our growing metropolitan centers and that fuel the global migration of talent to the United States. In one respected rating of global universities, only Cambridge and Oxford make it in the top ten, followed by the Swiss Federal Institute of Technology in Zurich and the University College of London, in the nineteenth and twentieth positions, respectively. All the rest of the top twenty are in America.45

  America’s strength lies in its top universities serving as advanced research institutions, not as institutions educating a large number of graduates who excel in their learning. If you look at all Americans with only bachelor’s degrees, they score below average on international tests. America’s top universities are very clear in their central purpose, and on that they are unchallenged.46

  American academics dominate as authors of the top-cited articles in science and engineering, as holders of patents registered in the United States, the European Union, and Japan, and as holders of patents in biotechnology. Collectively the West owns 85 percent of triadic patents, while China barely owns 1 percent.47

  America’s research universities are part of “a triangular relationship among government, industry, and academia,” characterized by Walter Isaacson as “one of the significant innovations that helped produce the technological revolution of the late twentieth century.” The U.S. military has played a larger-than-life role in promoting basic science and technology, just as war drove the Greeks to invent the catapult and Cesare Borgia to exploit the inventions of Leonardo da Vinci, his military engineer. America’s military, for its part, led the advance of computers, atomic power, radar, and the Internet.48

  “Academic Ranking of World Universities,” Institute of Higher Education, Shanghai Jiao Tong University, 2013.

  With the Second World War looming in Europe, the U.S. Army promoted electrical engineering at universities and supported the development of machines that could advance computational power to make artillery more accurate, break enemy codes, and calculate the force of nuclear fission. The best scientists were recruited for the Manhattan Project, which developed the atomic bomb, and for AT&T’s research facility, Bell Labs, which took on a huge number of projects for the military.

  The Defense Department, the National Science Foundation, and the National Aeronautics and Space Administration (NASA) funded the surge in basic research through the 1980s that centered on Harvard, MIT, Princeton, and Stanford. With defense contractors setting up to meet the Soviet challenge in space and Stanford University’s dean of engineering setting up a new industrial park, Silicon Valley became ground zero for the new companies of the computer and Internet age.49

  The commitment to R & D, education, and university research is already shaping the emerging successful and globally competitive sectors in the U.S. economy.

  America’s high-tech sector is vibrant and continuously evolving, and will undoubtedly produce disruptive new technologies and new ways of organizing our lives. The Silicon Valley model remains hard to replicate as it grows in importance. The proximate universities and incubator labs continue to attract great scientific talent and research funds. There is even more start-up money and would-be entrepreneurs reinvesting there, combined with patience and disdain for short-term thinking. The ethos is open, transparent, experimental, mobile, and accessible, without many class barriers; indeed, it is irreverent and bohemian. While some of the biggest global companies are based in the vicinity, there is a conviction that one can produce groundbreaking, enriching change. That spirit is refreshed by the international character of today’s Silicon Valley.50

  Some of the biggest gains in productivity and business competitiveness in the future will come from big data and advanced analytics. We are just beginning to see the scope of what is being created in economic transactions, product design, medical records, legal research, government services, and social media. Who do we think is in the best position to take advantage of those changes? According to McKinsey Global Institute, “the United States owns a disproportionate share of the world’s data assets … and its companies, entrepreneurs, and universities are leading the development of this technology.” The United States has one-third of the world’s data, and new analytics could drive up productivity in retail, health care, and government—industries which have not shared the productivity gains experienced by other sectors.51

  Big data is the future, though who would have thought that an old manufacturing sector, the U.S. auto industry, would emerge profitable, competitive globally, and innovative? Headlines in business journals tell the story: “New Chapter for Detroit Auto Makers”; “Detroit’s Plan: Export Cars, Import Chinese Investment.” A revived U.S. industry is now back to prerecession levels of production, and amazingly, plants are pushing to 100 percent of capacity to meet projected sales of seventeen million vehicles a year by 2016.52

  The American auto industry is part of America’s innovative future because the government rescued, restructured, and renewed the industry. It forced successive and sometimes dramatic increases in fuel efficiency, including recently requiring the shift to zero-emission vehicles. The higher standards moved the industry to innovate and to produce much more efficient cars that are able to compete in the United States and globally. With lower energy costs and “competitive wages,” the auto industry has joined other U.S. manufacturers that are on the move.

  With manufacturing employment barely increasing, manufacturing is increasing its contribution to the economy and American exports are up. America is becoming one of the cheapest and most productive places for manufacturing in the developed world, with costs 8 to 18 percent less than in Japan, Germany, France, Italy, and Great Britain by 2015. The starting point, cited by the heads of car and petrochemical companies alike, is the very real decline in energy costs. Industrial electricity prices in Europe, according to a European Commission report, are twice those in the United States.53

  These shifts have come with a high price tag for the workers in the auto industry and manufacturing, a price that will have to be addressed if America’s economic gains are to be sustained. The scale of manufacturing employment will never get back to earlier levels, and the shift of manufacturing to the southern states, where the political and business classes are hostile to labor unions, has accelerated the downward trend in wages. Production wages rose less than 4 percent between 2005 and 2010.54

  Labor costs are now inviting more onshoring and expansion in the United States. Thanks to heavy capital investment, computerization, and robotics, the United States has seen continued productivity gains, which means that labor makes up
a smaller and smaller share of production costs. Plus, America’s relatively open immigration policies and research universities often allow access to what may be the right mix of skills needed to drive innovation and fill both skilled and production positions.55

  “The markets generally seem to be doing quite well in the United States, raw materials are plentiful, energy is cheap, skills are great,” one prominent British industrialist notes. A few years ago, “people were shutting things down” in America “because it wasn’t competitive. Now it’s become immensely competitive.” Large manufacturing companies such as General Electric, Caterpillar, John Deere, Siemens, United Technologies, and Mitsubishi must agree, because they have all announced plans to expand manufacturing operations in the United States.56

  Sustained military spending on R & D and advanced aerospace engineering along with low energy and manufacturing costs will assure that the American aerospace industry will be ascendant and the dominant exporter, even if it shares the global market with Airbus and Chinese and Brazilian companies. While defense spending is trending downward, the United States will significantly outspend the rest of the world. The United States spent $582.4 billion on the military in 2014—roughly the amount of the next twelve largest foreign military budgets combined, or 44 percent of what the whole world is spending—and will spend $585 billion in 2015. American defense companies are ramping up to respond to increased military spending in the Middle East and Asia.57

  That will drive American innovation through R & D and adoption of technology. Chicago-based Boeing has restructured and taken advantage of all these trends to expand its domestic production of the 787 Dreamliner in North Charleston, South Carolina, and Everett, Washington; the Next Generation 737 in Renton, Washington; and its operations across the board in Southern California.58