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June 1, 2006
Issues for the new Treasury Secretary
Most of the press (and the blogs) have been focusing on the macro-economic challenges that the new Treasury Secretary will face. The chatter has been on the trade deficit, the current account deficit, the budget deficit - and the impact of those deficits on the value of the dollar, the stock markets and the bond markets.
But yesterday's Wall Street Journal pointed out another economic issue that will confront the Secretary in his role as the Administration's lead economic policymaker - "Bush's Competitiveness Agenda Is Tested":
Henry Paulson accepted his nomination as Treasury secretary by highlighting the need for the nation to stay competitive. But one of his first challenges will be guiding President Bush's ballyhooed competitiveness agenda out of choppy waters on Capitol Hill.
The initiative, launched at the beginning of the year, started out with wide support among senior Democrats and Republicans in Congress. As the election year progresses, key planks face an uncertain future.
A proposal to renew the now-expired research-and-development tax credit, the keystone of the plan, was blocked from the tax-cut package that Republican leaders sent to the White House a few weeks ago. Instead, they promised the provision would be folded into a "trailer" bill later in the year. A plan to allow more highly skilled foreign workers into the country is in limbo, part of the deadlock over immigration. And with fiscal conservatives demanding curbs on spending, the outlook for proposals to increase spending on basic science research as well as math and science education is unclear.
"Two months ago, it looked like this was a slam dunk. Now it's bogged down," says John Hassell, Hewlett-Packard Co.'s director of federal-government relations, who is working to build momentum for the plan. "We're in an election year, and it's very easy for the headlines of the moment to push this off the front page."
. . .
Under Mr. Bush's proposal, about two-thirds of the $136 billion would go toward making permanent the R&D tax credit, a now-expired program that encourages firms to invest in cutting-edge research. "If you're not sure the tax thing is going to be around, you may not want to invest," Mr. Bush said recently, explaining the reasoning behind making the credit permanent. Amid budget pressures, Congress appears likely to revive the credit for a year, or perhaps two, when lawmakers get around to the second tax bill.
The balance of the Bush competitiveness program is designed to increase government spending on targeted priorities. The biggest beneficiaries: basic scientific research and mathematics-and-science education for high-school and younger students. Among other things, the Bush plan proposes to increase next year's spending by 9.3% for the National Science Foundation, the Department of Energy's Office of Science and the Commerce Department's National Institute of Standards and Technologies, a step toward doubling their budgets during the next decade.
Last week, the House approved a spending bill that would bump up funding for research supported by the Energy Department's Office of Science, carrying forward one plank of the Bush plan. The other science proposals have yet to be fully aired in the House, and fights may break out over the remaining requests. Mr. Bush's education proposals -- designed to increase teacher training and widen student interest in math and science -- appear to be in the greatest peril.
With the election looming, conservative House Republicans are showing little fealty to the White House on fiscal issues. Texas Republican Jeb Hensarling, a leader among House conservatives, says the government has more than 200 programs designed to promote math-and-science education. "Is the 208th program going to be the one that gets the job done? I have my doubts," he says, predicting a fight on the House floor. "Most House conservatives are going to be very reluctant to put their imprimatur on a new program."
I've been following this legislation closely, and it is clearly not a slam-dunk. It will take continued push from the White House and the House and Senate leadership. As the article notes, there is a strong conservative element that will fight against any new programs or funding - in both chambers. Already on the Senate side, the Senate Commerce Committee striped out a number of innovative new programs from their portion of the package. Among the provisions dropped was a small pilot program to help Manufacturing Extension Partnership (MEP) Centers develop new programs to help small manufacturers become more innovative -- to go beyond the current focus of the program to help small manufacturers with new process technologies.
At a time when continued American prosperity relies on the creativity and innovation, I really don't understand the objection to moving our premier business assistance program - MEP - into the 21st Century. MEP was a successful part of our meeting the competitive challenge of the 1980s - with its focus on new manufacturing techniques and processes. It can be an important factor in meeting today's competitiveness challenges - of creativity, innovation and design. But Congress needs to support this new direction - not hinder it with the cry of "no new programs."
We support innovation in the economy. Why can't we support innovation in economic policy as well?
Posted by Ken Jarboe at June 1, 2006 8:16 AM
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