Let’s put U.S. economic condition in context

   If you don’t watch Fareed Zakharia’s “GPS” program Sunday mornings on CNN, you should. The journalist and foreign affairs analyst gets past the surface noise to provide provocative analysis about what’s really going on at the intersection of global economics and politics.
  GPS stands for Global Public Square. It’s a forum for exchanging ideas about the critical issues of the day.
   The show offers important lessons for freight executives at the domestic and international level because transportation and logistics activity ultimately boils down to global productivity and consumer demand. 
   A couple of Zakharia’s recent commentaries caught my eye for their ability to put in perspective the economic dilemma in Europe and the United States. 
   As I’ve pointed out in this column in recent weeks, the conservative drumbeat about overzealous government regulation being a drag on the economy has some merit, but is largely overhyped. Zakharia, a well-known author, editor-at-large and columnist for TIME who also writes for the Washington Post, explains that regulations have not noticeably hampered U.S. competitiveness.
   Despite pessimistic predictions that the United States is headed for decline, Zakharia remains optimistic. The United States, unlike other countries that have their hands tied, can still exert control over its economic destiny, he says. 
   Less political bickering and more investment – especially in infrastructure – can help the United States retain its lead as the world’s most dynamic economy, he says.
   Here are some expansive excerpts I’ve pulled together from GPS commentaries in recent weeks:

On Nov. 24:
   “Every time I turn on the TV, I hear some politician talk about how Europe’s woes should be a warning and that America is next. This is a fundamental mistake. The United States is not Greece.
    “Countries like Greece and even Italy have a deep economic problem. They don’t produce enough goods and services that the world wants at attractive prices. It’s a competitiveness problem.
    “Greece also has a long history of borrowing too much and being unable to pay its debts. Over the past 179 years, it has been in default about 50 percent of the time. Its debts are huge and could not be paid under any plausible scenario. And crucially, because it is part of the euro zone, Greece does not have control over its currency, which means it cannot make its goods cheaper on world markets.
    “Italy, which is in much better fundamental shape than Greece, would face no short-term crisis if it had kept the lira. It could devalue its currency and make itself more competitive overnight.
    “The U.S. by contrast, has control over its currency, which is the reserve currency of the world.
    “Ok, but what about Japan? Isn’t America looking a lot like Japan with its lost decade (actually two decades)?
    “At a recent debate, former U.S. Treasury Secretary Larry Summers pointed out that Japan’s collapse in the 1990s was vastly greater than America’s. Housing prices there dropped not by a third but by 75 percent. The stock market fell about the same. The Dow Jones would have to be at 2,600 to hit the equivalent low. And the GDP output gap was not 5 percent or 6 percent as it is in America but almost 50 percent!
    “Japan has a complex economy with many sclerotic elements and – perhaps crucially – a demographic decline that it could not solve, unless it took in immigrants, which it did not want to do.
    “The U.S., by contrast, remains one of the world’s most competitive economies. It is home to the leading companies in the most advanced industries, houses the largest capital markets and continues to spawn new companies and, indeed, whole new industries. It exports everything from aircraft to entertainment to healthcare products around the world.
    “Its demographics are strikingly healthy: It will be the only rich country in the world to actually increase its population over the next 30 years – which means more young workers, producers, entrepreneurs and taxpayers.
   “America’s problems are not economic, demographic or technological. They are political. Simple policy measures can change our fate.
   “If we built out our infrastructure, kept monetary policy pro-growth and reformed our tax code to encourage business investment, we would have growth, a manageable deficit and a bright future.”

On Dec. 11:
   “One theory heard a lot these days is that the economy is burdened by excessive government regulation, interference and taxes. Cut them, the Republican candidates all say, and the economy will be unleashed.
   “It’s a compelling picture, but the data simply do not support it. 
   “The Organization for Economic Cooperation and Development (OECD) released a study last week measuring tax revenue as a percentage of GDP. Of the 30 countries studied, the United States came in 27th. Taxes are low in historical terms as well – the lowest since the early 1950s.
   “The Kauffman Foundation, which looks at the level of U.S. entre­pre­neur­ship, found that in 2010, 340 out of every 100,000 Americans started a business each month. That rate hasn’t changed much in the past few years; it is only slightly higher than in 2007, before the recession. Regarding regulations, Bloomberg News crunched the numbers and found that the Obama administration has not reviewed or issued significantly more rules than its predecessors.
   “Or look at competitiveness. The World Bank publishes a report that looks at ‘Doing Business’ across the globe. The U.S. ranks 4th in the world. The World Economic Forum does an annual ranking of overall economic competitiveness. The U.S. ranked fifth. In both these rankings, the countries that score higher are tiny places like Singapore and Finland, with populations often at 5 percent that of the United States.
  “And these rankings have not slipped much over the last decade. So where has there been change? Where have we slipped?
  “The answer is pretty clear. Only five years ago, American infrastructure used to be ranked in the top 10 by the World Economic Forum. Now we’re 24th. U.S. air infrastructure has gone from 12th in the world to 31st – roads from eighth to 20th.
   “The drop in human capital is even greater than the drop in physical capital. The United States used to have the world’s largest percentage of college graduates. We’re now number 14, according to the most recent OECD data, and American students routinely rank toward the bottom of the developed world in international tests.
   “The situation in science education is more drastic. Even with the increase in college attendance over the past two decades, there were fewer engineering and engineering technologies graduates in 2009 (84,636) than in 1989 (85,002). Research and development spending has risen under Obama, but the basic trend has been downward for two decades. In percentage terms, the federal share of research spending – which funds basic science – is half of what it was in the 1950s.
   “In other words, the big shift in the United States over the past two decades is not a rise in regulations and taxation but a decline in investment – in physical and human capital. And investment is the crucial locomotive of long-term growth. Michael Spence, the Nobel Prize-winning economist, points out that the United States got out of the Great Depression because of the spending associated with World War II but also because during the war, the U.S. dramatically reduced its consumption and expanded investments. People spent less; they saved more and bought war bonds. That surge in investment – by people and government – produced a generation of growth after the war.
  “If we want the next generation of growth, we need a similarly serious strategy of investment.”

   So readers, keep that in mind when you hear talk about cutting the deficit at all costs. Yes, the government needs reform to show citizens they’re getting better value for their tax dollars. But a laser focus on debt and shrinking government will also hinder government from supporting R&D, and using its purchasing power and policymaking to spur on fledgling industries and improve the core foundations of society – water treatment, broadband networks, education, roadways – upon which the private sector depends to remain productive.
   And let’s hope members of Congress remember the importance of infrastructure investment when they gather next year to debate a new surface transportation reauthorization bill, which has suffered from neglect for more than two years.