- The Washington Times - Wednesday, October 4, 2000

If you listen carefully to the platforms of both Vice President Al Gore and Gov. George W. Bush, you will find that, whatever their substantive differences, they are identical in one important respect. They both focus on ways to distribute the fruits of our hard-won prosperity. Their respective proposals for improving health care, education, social security, defense readiness, and tax relief are all funded out of projected surpluses in the federal budget.

The candidates are missing an historic opportunity to educate the American people about the other half of the equation: What is the source of the wealth that is creating those surpluses? What kinds of public policies would the next administration put in place to help ensure that the economy continues to generate the expected surpluses? In short, what can the government do to sustain and enhance our current prosperity?

While the candidates are silent on wealth creation, at least Fed Chairman Greenspan is very articulate on this issue. Over the past year, he has accurately observed that the source of the New Economy and its magical ability to grow with low rates of inflation and unemployment, is technology-driven productivity growth. Increased productivity enables companies to raise wages, not prices. Increased productivity is thus the pathway to prosperity: greater real income and a higher standard of living. It also is the key to expanding the budget surplus. Upward revisions in GDP, which increase the federal budget surplus, are accounted for by sustained increases in productivity growth.

The forces that truly drive productivity growth are technology, human skills, capital assets, supply chains, and effective management of all four. Combined, these forces influence the performance of individual businesses, workers and plants and then whole industries, regions and finally the nation.

While federal fiscal and monetary discipline contribute to productivity, there are other public policy affecting productivity growth that the candidates are largely ignoring in the present campaign.

Take technology, for example. The bedrock of technology is basic scientific research and discovery. The federal government spends some $75 billion on R&D;, but there is a steady decline within that budget for research on engineering and physical sciences. Despite its traditional role as funder of basic research, the feds spend less than 5 percent of that budget on manufacturing process technologies even though these have the most direct impact on productivity growth.

In the field of work force skills, the candidates are concentrating on education reform. They pay scant attention to work force skills development and training of the incumbent workforce, even though both have the most immediate impact on the effective use of technology.

Supply chain issues are at the heart of a productive economy. Large corporations are out-sourcing more of their production to their small- and medium-sized suppliers who provide the largest number of jobs but these businesses typically lack the research and training base to ensure their competitive position in the global economy.

In an effort to direct some of the campaign debate toward wealth generation issues, the National Coalition for Advanced Manufacturing conducted industry-led, high-level meetings around the country to ask the question: What initiatives should the next administration adopt to increase productivity growth? The results are contained in a just-published report titled, "Smart Prosperity." Here are its principal recommendations.

In the field of technology, the federal government should increase support for engineering and the physical sciences by $10.3 billion over three years, beginning in fiscal 2002. At least one-third of the proposed increase should be reserved for a research initiative focused on basic manufacturing science and technology.

In the field of work-force skills development, the federal government, together with state government and industry, should support a voluntary nationwide system of industry-led skill standards, assessment and certification. The government should also introduce technical training tax credits for both entry-level and incumbent workers.

To enhance the performance of supply chains of small and medium-sized manufacturers, federal and state government should strengthen the emerging manufacturing extension service infrastructure by giving it greater flexibility and aiding the development of nationwide programs and services. Additionally, an industry-led voluntary electronic framework to enable software interoperability would yield immediate benefits to large and small manufacturers.

Measures of this kind will make a significant contribution to securing long-term productivity growth. In addition to its beneficial impact on the economy, that growth will continue to transform the political climate in this country. It is time for policy-makers to support public policies that will nourish productivity growth over the long term.

Leo Reddy is the president of the National Coalition for Advanced Manufacturing.

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