A few weeks ago, the Senate did the impossible.  It passed a bill.  Not only did it pass a bill- but it was bipartisanly passed.

While it was somewhat benignly titled the US Innovation and Competition Act of 2021, it really should be called the Senate Reacts to Chinese Competition.  The bill was co-sponsored by Charles Schumer (D-NY) and Todd Young (R-IN)- and passed the Senate by a 68-32 vote.

Basically, this act is modeled after the Chinese state-led economic model.  And, while it is a good bill, it only involves $ 250 billion of funding for both semiconductor manufacturing (in the United States) and scientific research.  What it does is assist US businesses against the Chinese subsidization of cutting edge industries, where they have been eating our lunch.  (In particular, electric vehicles, artificial intelligence, and computer chips.)

This bill is long overdue.  However, the concept has languished- not just because of Mitch McConnell’s overwhelming desire to stifle any progress under a Democratic administration- but because of the residual myth perpetrated by Ronald Reagan that the government cannot play a positive role in economic progress.  (Let us not forget that the Transcontinental Railroad, the Interstate Highway System, and, yes, the semiconductor industry would not have arisen without direct US government involvement.)

Note further this S1260 is about to be followed by the American Jobs Plan, which intends to pump some $ 174 billion to thrust US electric vehicles over the finish line.  (This is yet another anti-Chinese government bill.)

One of the key considerations is that these bills are diffuse- they set up large-scale missions, necessitating multi-sector innovative change.

Which brings up another program that is long overdue.  One that I discussed more than a year ago.  Simon Johnson and Jonathan Gruber (Sloan Management/MIT) published a treatise a few years ago, “Jump Starting America”.

This was also touched upon during the short-lived political campaign of Michael Bloomberg, who advocated a similar program for mid-tier inland cities and technology.

The Johnson-Gruber concept is to build R&D centers in some 120 communities across the USA.  Instead of funneling these funds to our elite institutions (which means the benefits accrue to  metropolitan Boston, metropolitan NY, metropolitan Atlanta, metropolitan LA, Silicon Valley, etc.), we should pick smaller communities (like Indianapolis, Kansas City, etc.) which have strong university and industry- to afford new centers of research that would build the US economy, amplify the capabilities of smaller cities and regions, and begin to eliminate the inequality that pervades across the USA.)

We need to do adopt this as the third leg of our “anti-China” policy.  In so doing, we will reduce inequality in the US, to improve our industrial positions and grow new jobs across the USA that pay reasonable wages.

It’s time.