The American Prosperity Project
A Nonpartisan Framework for Long-Term Investment
America’s economic health depends on sustained, long-term investment to support our families and communities and to reinvigorate the economic engine that creates jobs and prosperity. There is no viable model under which either business or government can or should shoulder the responsibility for long-term investment alone; both are required.
The time is right for a national conversation about long-term investment in infrastructure, basic science, education and training for workers who feel the brunt of globalization and technology. We need to focus on the critical levers for economic growth along with sources of revenue to help pay for it, as well as ways to overcome the short-term thinking currently baked into government policy and business protocols.
The ideas offered here have been developed under the auspices of the Aspen Institute in consultation with a non-partisan working group of experts in public policy formation, tax and regulation, business, and corporate law and governance. While these ideas enjoy support across party lines, breaking the log jam and taking action will require a coalition of leaders across the private and public sectors who are committed to the health of the commons and America’s prosperity.
The problem in brief:
- Decades of inadequate investment in America’s infrastructure undermine our nation’s safety and productivity. Once a global leader, the US now ranks 25th in infrastructure quality per the National Association of Manufacturers.
- Underinvestment in basic science research—by business and government—threatens America’s leadership in technological innovation. The OECD reports that, relative to GDP, the US has fallen to 10th in R&D investment. At current rates, China will surpass the US in total investment in basic science research by 2019.
- CEOs and directors of our public companies report persistent pressure for short-term financial performance; a 2013 McKinsey survey1 reports that short-term pressures have increased in recent years. The overwhelming majority of corporate leaders believe a longer time horizon would positively affect corporate performance, strengthen financial returns, and drive innovation.
- Short-term pressures also influence business investment. Despite record profitability, fixed capital investment by American corporations is the lowest since 19522 and employer-paid skills training declined 28% between 2001 and 2009.3
- Perverse incentives in our corporate governance system undermine the health of capitalism itself. Short-termism is baked into our tax system and is evident in the decisions, regulations and rules that govern corporations and capital markets. Changes to the rules of the game are a necessary step to rebuild the public’s trust in our economic system.
The issues involved are complex. The work involved in identifying and adopting supportive policies is formidable but by no means insurmountable—and, in this moment, there is both challenge and opportunity.
America’s incentive system for long-term investment is broken. It must be repaired to work effectively in a globally competitive market and to address today’s most vexing “grand challenges”—from economic opportunity to new forms of energy and the need to rebuild America’s physical infrastructure. The goal is a better deal for Americans working to support their families and communities—and the restoration of public trust in capitalism itself as an economic system that works for all.
Our framework for this national conversation and for subsequent action has three goals:
- Focus government investment on recognized drivers of long-term productivity growth and global competitiveness—namely, infrastructure, basic science research, private R&D, and skills training—in order to close the decades-long investment shortfall in America’s future. Building this foundation will support good jobs and new business formation, support workers affected by globalization and technology, and better position America to address the national debt through long-term economic growth.
- Unlock business investment by modernizing our corporate tax system to achieve one that is simpler, fair to businesses across the spectrum of size and industry, and supportive of both productivity growth and job creation. Changes to the corporate tax system could reduce the federal corporate statutory tax rate (at 35%, the highest in the world), broaden the base of corporate tax payers, bring off-shore capital back to the US, and reward long-term investment, and help provide revenues to assure that America’s long-term goals can be met.
- Align public policy and corporate governance protocols to facilitate companies’ and investors’ focus on long-term investment. Complex layers of market pressures, governance regulations, and business norms encourage short-term thinking in business and finance. The goal is a better environment for long-term investing by business leaders and investors, and to provide better outcomes for society.
Although these goals defy seemingly intractable politics-as-usual, they are broadly shared across a wide spectrum of leaders in both public and private sectors. The ideas outlined here have many sources and they require more conversation, debate, and action to reach the targeted outcomes of creating good jobs, encouraging innovation, and combatting economic short-termism.
When it is resolved in a course of action, the United States of America has the ability to do great things and make the necessary and sometimes difficult choices. In this case, national conversation and action on these ideas can give us ways to secure a bright future for all Americans, rebuilding the American dream now and for generations to come.
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