Why Biden must rely on innovation to rejuvenate the economy
Made in America. It seems those three words will define President-elect Joe Biden’s approach to rejuvenating an American economy that continues to be pummeled by the ongoing coronavirus pandemic.
But looking closer at his platform, it seems Biden’s actual approach to economic recovery in the face of the coronavirus will be defined by three other terms: invest, provide, and support.
Biden has made clear through policy proposals that the U.S. needs to kick-start its struggling economy through a heavy focus on one of America’s true strengths: innovation.
His plan shows a strong desire to invest in research and development activities in order to increase demand for domestic goods and services while creating high-quality jobs.
He has also laid out proposals to provide incentives such as tax credits for businesses that are innovating, and he outlined a path to support an economically viable environment for U.S. businesses to keep their operations here and combat offshoring.
Markets have rallied in response to reported positive results for the Pfizer/BioNTech and Moderna vaccines, but that isn’t indicative of truly sustainable economic progress. Biden’s plan for lasting economic recovery leverages the power of innovation in the U.S. in an attempt to boost our industrial and technological capacities.
It’s clear that Biden recognizes the role that American small and midsize businesses, particularly in the manufacturing sector, will play in an economic rebound effort that he compares to our country’s resilience during World War II.
Tackling COVID-19 will be job No. 1 in the Biden administration, but these growth tactics are sure to play a role in combating the pandemic’s negative economic impact.
First, Biden’s proposals call for a $400 billion investment in federal purchases for products made by American workers. Biden hopes to both spur demand and increase job growth for small businesses through this investment, which will likely mirror the 2009 Recovery Act in many ways, and which will include the purchase of billions of dollars’ worth of clean vehicles and products, materials such as steel and cement, and other equipment.
The investment would also include a commitment to purchase advanced tech—a sign of his administration’s confidence in a digital revolution centered on artificial intelligence (A.I.), machine learning, and telecom.
Further, Biden has supported direct federal funding for research and development activities in the form of a $300 billion investment in his first term that would be directed toward the advancement of critical “new industries and technologies” such as 5G and A.I.
And, although the details of the proposal are not fully disclosed, Biden’s team has also thrown support behind the creation of a “credit facility” that will inject capital into small and midsize manufacturing firms in order for them to modernize and become more competitive.
Although addressing the Tax Cuts and Jobs Act in the form of a Biden tax reform plan likely won’t be on the table for some time, the administration very likely will work to implement tax tools for American businesses to leverage in order to bolster economic viability.
Specifically, his team has claimed it will “put a special focus on the backbone of American manufacturing—the thousands of small and medium-sized manufacturers throughout the country.”
In order to encourage business growth and innovation, a Biden administration would push for a 10% tax credit for companies that invest in “revitalizing closed or nearly closed facilities, retooling or expanding facilities, and bringing production or service jobs back to the U.S.”
Alongside the tax credit, Biden has also pitched a 10% surtax for companies that offshore manufacturing operations that would seemingly increase the corporate tax rate to 30.8%. That’s a sure sign that for him, innovation in the homeland is priority No. 1.
Biden has signaled, however, that these types of incentives wouldn’t just be available to one specific industry. This is indicative of the President-elect’s belief that innovation efforts for all American small and midsize businesses will be central to relief efforts.
Confronting an adversarial China has already been listed as a top priority for the Biden administration. This will be a necessary task if the U.S. wants to increase innovation efforts and maintain a stable role in the global supply chain.
However, this approach will need to not only concentrate on pushing back against China, which boasts cheap labor and infrastructure development for businesses tempted by offshoring, but also ensure that the U.S. can create an equally appealing environment for innovators.
Biden’s approach to tax incentives and penalties seems to be a strong first step toward creating that environment, but more will need to be done. His team has proposed invigorating public-private partnerships, and even investing $50 billion in workforce development programs, a necessity when access to technical labor has been a consistent problem in the U.S.
Creating a support system for innovation will also involve ensuring that our workforce can keep pace with what will hopefully be a hare-paced development of new technologies. President-elect Biden seems to understand that.
As stated on his published platform, “As President, Biden will ensure that employers receiving federal funds give all affected employees advance notice of technology changes and automation in the workplace, put their employees at the front of the line for new jobs, and offer paid skills training so that employees can succeed in new jobs.”
For Democrats excited by the notion of a Biden presidency, the truth is that control of the Senate is a concern. In order for any of these proposals to become a reality, Biden will likely have to keep his word and leverage his past strengths as a master in bipartisanship.
To start, Biden should look toward existing incentives that already benefit from bipartisan support. The Research and Development Tax Credit has historically been a boon for American small and medium-size businesses, and has been recognized by members of both parties as a viable tool for spurring economic recovery.
In fact, several pieces of bipartisan legislation, including Sen. Chris Coons’ (D-Del.) Forward Act, advocate for strengthening the credit. A recent column from House Minority Leader Kevin McCarthy (R-Calif.) and Rep. Kevin Brady (R-Texas) even signaled support for doubling the credit to foster greater innovation.
President Obama received criticism in the wake of the 2008 crash for not doing enough to generate a robust recovery, even though his efforts were enough to mitigate the crisis. Biden should work to avoid any chance of similar critiques by focusing heavily on creating tools for sustainable economic growth.
Regardless of the approach to reinvigorating the U.S. economy, innovation is sure to play a central role.
Joe Crowley is a senior policy adviser at Squire Patton Boggs in Washington and serves on alliantgroup’s Strategic Advisory Board. He was first elected to Congress in 1998 to represent portions of Queens and the Bronx in New York. While in Congress, Crowley served as chair of the House Democratic Caucus and a member of the House Committee on Ways and Means.