The focus in Washington is centered squarely on tackling our federal debt and deficits. Continuing our current path is not sustainable and risks burdening our children and grandchildren with bills our government runs up today. But our progeny will look on us with disappointed eyes if America's long-term economic strength is sacrificed at the altar of short-sighted public policies.
To approach the fiscal challenge, Congress and the president must cut spending. Certainly savings can be found in virtually every federal program; however, deficit reduction should be driven by the nation's strategic priorities, not blind budget slashing, and not come at the expense of smart investments in research and development, education and scientific initiatives that are the foundation for economic growth.
Research drives innovation, productivity and job creation. From the Internet to GPS to the human-genome map, America's ability to create next-generation technologies has produced vast economic opportunities. These successes relied on federal investments in long-term research. They spurred significant private investment in technology development. And they generated extraordinary opportunities for a dynamic workforce grounded in science and engineering education. Yet, some lawmakers have targeted these programs for drastic cuts.
Nations like China and India are dedicating enormous resources toward research and education programs in science, technology, engineering and mathematics. Cutting U.S. investments in these areas means relinquishing innovation leadership to our global competitors. Going down this path would result in tomorrow's game-changing innovation — and the jobs that go with it — more likely coming from Bangalore, India and not Boston, Austin or San Jose.
Similarly myopic is how lawmakers are searching for new revenues to cut the deficit — Washington-speak for higher taxes. Paying fair taxes is part of the responsibilities of U.S. citizenship. But for American businesses that face stiff global competition, the business tax structure we have today is far from fair. The U.S. has the world's highest corporate tax rate. If that weren't enough of an obstacle to U.S. job growth, our system also imposes a double-tax on American companies when they bring foreign earnings home. First, the company pays taxes in the country where its products are sold, and then another tax to the IRS when the business attempts to reinvest those earnings domestically in new facilities or new jobs. The result: the U.S. tax system forces jobs and investments to other countries. That's wrong. It's time to bring those dollars home.
The tax code's last major overhaul was in 1986. Then, the tax system was state-of-the-art, with a corporate rate among the world's lowest, attracting major new investments to the United States. In the years since, every developed country has lowered corporate tax rates, and almost all have modernized their systems to keep pace in the global economy. America has stood still while our global competition has moved ahead.
Responsibly lowering the business tax rate and eliminating the double-tax on foreign earnings would be a major boost for the U.S. economy. A rate cut from the current 35 percent to 25 percent would create an estimated 581,000 U.S. jobs in each of the next 10 years. Shifting to a competitive, market-based system where companies' overseas earnings are taxed once — where they're earned — would be another major step forward. American companies with operations at home and abroad are responsible for 63 million U.S. jobs. Eliminating the U.S. double-tax would build on their record of success and spark critical new investments and hiring.8 comments on this story
In all of these decisions, something President Barack Obama said last year can be a guide: "It's a lot easier to deal with deficits and debt if you're growing." Grow, and more businesses expand and more Americans work. People earn and spend more. Put together, more revenues are generated for the federal government. That kind of growth was central when President Bill Clinton and a Republican Congress, nearly 20 years ago, balanced the budget in the face of a crisis of debt and deficits. The U.S. economy accelerated at fantastic levels, fueled by an explosion of technology innovation. It's a model for today.
Without question, our lawmakers face tough choices to address the deficit. The solutions aren't found in sacrifice, but in smart investments in innovation and technology; not through across-the-board tax hikes on American businesses, but through across-the-country economic growth and job creation.
Dean Garfield is president and CEO of the Information Technology Industry Council, a global advocacy group representing technology and innovation companies.