Let’s restart America: Here’s how
By Guest Columnist BAHNS STANLEY, an Atlanta investor
I’ve given a lot of thought to the best way for us to restart the economy. Yes, we need to go back to work in a safe way, and we have to rely on our governor and mayors to guide us. When we go back to work, we are likely to be in a deep recession, and just going back to work in a slow, methodical way will not be enough. We need a new strategy for investing in America to recover from record unemployment and shattered business dreams. Here’s the way we can do it.
Invest in American Capabilities
The president sometimes has good instincts and ideas, but his message gets lost because people react to the way he says it. Imagine how this idea would have been perceived compared to “I’m ordering American companies to leave China and relocate their business!” as he did during the trade battle.
American and European companies have developed complex supply chains, with significant amounts of component production and finished assembly in Asia, principally China.
There are many good reasons that American companies should rethink the wisdom of locating production far from their customers. Someday, there will be another disruptive event which shuts down supply chains originating in China and other Asian countries for an extended period:
- Earthquake/tsunami in China, Japan, Malaysia, Indonesia, Philippines;
- Typhoon in Shenzhen or Shanghai;
- Terrorist incident closing down a major port;.
- Political miscalculation (using force in Hong Kong, invasion of Taiwan, North Korea adventurism).
I understand locating production in the least expensive location. A better approach would be to locate production closer to key markets. If you sell products in China, I understand the need to make products in China. The same is true of Europe. Smart companies spread their production around the world to be close to end markets. Many European, Japanese and South Korean companies already make automobiles in the U.S. for the US market and for export.
But consider the United States.
The U.S. and North America are the largest, most important and most developed markets for virtually all products. Companies should locate all of their engineering and product development activities in the U.S. to take advantage of U.S. resources – higher education, engineering talent, innovative venture capital backed companies, sophisticated consumers, rule of law and protection of intellectual property – that are unmatched anywhere in the world.
Major companies should base some of their production in North America to serve the U.S. and North American markets, to be close to the final consumer and avoid the supply chain disruptions that are sure to occur someday. If it costs a little more, it will be worth it in the short run and the long run.
Once upon a time, we thought that items related to national security were only for the military and defense. We have learned that many things impact our national security: Defense, aerospace, health care/medical equipment (disposables, durables, therapeutic drugs, vaccines), and even esoteric minerals like rare earths.
America needs to produce more of the things critical for our expanded definition of national security at home or with longstanding allies. We have a new Cold War at hand with China, based more on economics than conquest, that is likely to intensify. As a matter of national economic and security policy, we must be more self-reliant and less dependent on fair-weather friends. This is not economic nationalism. This is logic and common sense.
If the new Cold War intensifies, each side is likely to restrict exports of items considered critical to national security, e.g. the newest version of chip technology, quantum computing, artificial intelligence software, and yes, perhaps vaccines. America needs to get ahead of this competition.
If the president would make this argument in this way, many corporate leaders would nod their heads in agreement. The American people would call for this action. The investment and hiring that would result from this plan would transform the economy and make our country more productive. We have come to rely too much on others to produce the things we need and now we concentrate on services in America.
This is the time to make this transformation and return America to its roots as the most productive manufacturing and product development economy in the world. This plan will put America back to work and it will increase the need for more workers in this country.
Invest in Infrastructure
The president has called for infrastructure investment for years. Whether the number is $1 trillion or $2 trillion, that is capital to be invested over many years (it would be difficult to invest more than $100 billion per year soon in construction projects), but the commitment needs to come now to help restart the economy. Whatever comes out of Congress will look like a Christmas tree, so I won’t add to the list of roads, bridges, airports, seaports, Amtrak, rural broadband, 5G, renewable energy, etc.
Congress seems to agree on the wisdom of infrastructure, but has been unable to agree on funding. In the current climate, with low interest rates and little concern about deficits, now is the time to commit.
With low petroleum prices, ample supply and reduced demand, now is the time to include a gasoline tax – at current pump prices, no one would notice an increase of 25 cents a gallon. For each vehicle, at 15,000 miles ayear and 25 Mpg, that amounts to $150 in annual cost per consumer vehicle. With 250 million vehicles in America, that new tax would produce $37.5 billion per year, which would cover a lot of the debt service and amortization on a $1 trillion plan. If necessary, we could increase the Earned Income Tax Credit for low income families to offset the additional cost.
A large infrastructure plan now would set the stage for continued growth for the next decade, no matter who occupies the White House in 2021. Combined with a plan to invest in America and restart critical manufacturing, we can put America back to work with more earning potential.
Let’s do this now and restart the American economy.
Note to readers: Bahns Stanley started several TV networks and websites for a large media company and worked as an investment banker. He then turned to early stage venture investing, while maintaining an active profile in leadership of several non-profits.