Washington

The Reconciliation Package Is a White Flag in the Competitiveness War With China

President Joe Biden has famously said that his father used to have an expression: “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.”

By that standard, the president seems to value social spending more than he values maintaining an economic and technological lead over China. We know this because the White House has voiced strong support for the $3.5 trillion spending package that Democrats are pushing through Congress in a budget-reconciliation maneuver, though Biden has said it will probably come in at a lower total.

Make no mistake: This spending package is a historically large program of government redistribution — “a cradle-to-grave reweaving of [the] social safety net” in the estimation of The New York Times — but not, in any real sense, an investment in America’s future technological competitiveness.

The president recognizes the urgency of increased public-sector investment in technology and competitiveness. In June, he stated, “Decades of neglect and disinvestment have left us as a competitive disadvantage” as countries “like China have poured money and focus into new technologies and industries.” China is pouring the equivalent of trillions of dollars into winning the global competition for leadership in advanced industries of the present and the future. Meanwhile, the United States invests less in research and development as a share of its gross domestic product than it did 60 years ago, and it lacks a robust advanced-technology policy.

The president went on to say: “We need historic — once in a generation — investments in our competitiveness that support R&D, innovation, our semiconductor industry, and advanced manufacturing.” But given fiscal constraints, we can only have one “once in a generation” package.

Sadly, despite the rhetorical support for investing in the essential foundations of the country’s competitiveness, Biden and congressional Democrats firmly believe the most important task for this generation is to spend trillions of dollars to give lower- and middle-income Americans expansive new public benefits.

A better way to help struggling Americans over the longer term would be to shore up America’s at-risk industrial competitiveness. But much of the package apparently deals with spending programs, including measures to expand Medicare and provide free child care, universal pre-K, housing subsidies, paid leave, free community colleges and income supplements.

Supporters of the package realize they should at least pay lip service to competitiveness as they attempt to frame the rationale for the social spending programs. “We are making the American economy more dynamic and more globally competitive,” said Rep. Robert C. Scott (D-Va.), chairman of the House Education and Labor Committee.

But claiming that measures like free child care will help the United States compete with massive Chinese government investments in quantum computing and artificial intelligence is a stretch at best. Important as many of these provisions might be, it is unlikely that they would directly boost competitiveness, especially compared with investments that are specifically focused on that goal, such as significantly scaling up funding for industry-focused R&D, export promotion, a national industrial development bank and programs to help manufacturers modernize and compete.

The stakes in this choice could not be higher. Just as the tax cuts that President George W. Bush pushed in 2001 and 2003 paved the way for the massive national debt that has crowded out virtually all increases in public investment over the last two decades, this even larger spending package could have even worse long-term consequences, crowding out any possibility of significant future increases in real investments to keep pace with China.

Even if the reconciliation package is paid for via offsets, that could mean that virtually all future “pay-fors” will have been used, leaving none going forward. And if it is not fully paid for, then future pressures on the federal budget will be severe, leaving less room for maneuver.

Some may argue that Congress already handled the competitiveness issue with its recently passed U.S. Innovation and Competition Act, and note that the reconciliation package also includes some of these investments. But the reality is that USICA funding on competitiveness was trimmed to satisfy budget concerns, and the real technological investment provisions in the reconciliation package so far are modest at best.

American politics has devolved into a system in which the average citizen now agrees with this distortion of JFK’s famous call to action: “Ask not what you can do for your country; ask what your country can do for you.” For Republicans, it’s to cut your taxes, especially if you are wealthy. For Democrats, it’s to write you big checks and provide more services. Where are the voters — and more importantly, the leaders — who say that the most important thing for government to do is to invest in the future, particularly in America’s continued technological and manufacturing strength? Maybe the voters are there, but the leaders appear to be gone.

 

Robert D. Atkinson is president of the Information Technology and Innovation Foundation, the leading think tank for science and technology policy.

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