Rebuilding the American Economy Barry Bluestone Center for Urban and Regional Policy Northeastern University Boston, Massachusetts USA Massachusetts Building Trades Council May 12, 2004

U.S. Job Growth 1928-2003

How Do We Explain these Numbers?

Productivity is a “Two-Edged Sword” When economy is growing rapidly, productivity growth boosts wages and living standards But when productivity grows faster than demand layoffs result 2002 had fastest growing productivity since 1950. 2003 may have been even faster Productivity now exceeding GDP growth = Rising unemployment – from 4% to 6% in last three years

An Overvalued Dollar Rise in exchange rate of the dollar from 1999 through end of 2000, followed by high valued dollar through early 2002 Between 1996 and early 2002, dollar appreciated by 30 percent against currencies of industrialized nations That means prices of U.S. exports were as much as 30 percent higher than similar products made abroad ... and imports became cheap Dollar is still overvalued relative to the Chinese Yuan and Japanese Yen

The Import Explosion – 2004 Exports: $1.147 Trillion Imports: $1.764 Trillion TRADE DEFICIT: $617 BILLION

Exports/Imports - 2004 Goods Exports: $808 billion Service Exports: $340 billion Goods Imports: $1.473 Trillion Service Imports: $291 billion

Imports – From Where? Western Europe 21% Canada 19% Mexico 12% China 10.2% Japan 10.1% Pacific Rim (NIC) 6.9% (Korea, Indonesia, etc.)

What Made Us Grow in the Past?

Answer: Investments in New Technology Federal R&D Investment in Missile Technology and Space Exploration Federal and State Investment in Public Infrastructure – Roads, Airports, Seaports, Internet Highway Public Investments in Education after Sputnik

From the Moon to the Home Investments in integrated circuits, computers and software for missiles and rockets From DOD and NASA to the factory, office, and the home From missile guidance systems to laptop computers, GPS, and Palm Pilots

A Model of Growth for the 21st Century

Sustaining Prosperity Public Investment in Basic Research Public Investment in Education Public Investment in Infrastructure

Restoring Social Equity Higher Minimum Wage Expand the EITC Labor Law Reform to Foster Unionization Fair Trade Invest in Public Schools Universal Health Care Coverage Expand Public Goods (e.g. Transportation, Day Care, Elder Care)

Policies for Sustaining Growth? Tax Cuts for the Rich? (Bush) Retire the Federal Debt? (Clinton/Gore) OR ... Investment in Public-sponsored Research, Education, and Infrastructure?