American Competitiveness is an interconnected and multifaceted issue linking our core economic and national security imperatives. One such example involves the necessity of the U.S. to retain Science, Technology, Engineering, and Mathematics (STEM) graduates in order to make advancements in research and development. Furthermore, if the United States is unable to foster economic growth and high export levels, revenues (via both profits and taxes) will not be high enough to afford the ability to invest in cutting-edge next generation weapons technologies. The capacity of American firms and workers to compete successfully in the global economy directly correlates to the amount of influence the U.S. can exert around the world. Should we fail to be “competitive” in the economic sector, we will face serious security challenges created by a mismatch of both our hard (military) and soft power and the strategies we wish to pursue.
The American Security Project’s 2012 report on American Competitiveness cites Standard & Poor’s 2011 downgrade of America’s credit as “the most obvious sign of deepening trouble.” Standard & Poor’s recently upgraded the outlook on the US credit rating from “negative” to “stable,” citing economic improvements and budget deficit reductions. While U.S. long-term credit still remains at an AA+ rating rather than the paramount AAA, the upgrade to “stable” is a valuable sign for American growth. However, there are still many necessary initiatives with regards to the U.S. business climate and national debt that must be pushed forward in order to bolster American Competitiveness and thus ensure greater American National Security.
The upgraded credit status indicates an improving economy and a shrinking budget deficit. However, this attractive business climate will only exist for as long as political and business leaders continue to push for regular interaction between private enterprises and public interests. Economic improvement may be further aided by lowering the maximum corporate tax rate; legislation in this direction must also close corporate tax loopholes. Additionally, repatriating offshore income will help to keep “American money” invested in the U.S. economy. These reforms will help to stabilize and improve the business climate in the United States and attract investment in research and development areas that drive growth across economic sectors.
In addition to the unneeded costs and constraints within the business community, the United States’ enormous national debt also invites a variety of national security challenges. A lack of political cooperation on issues such as appropriate budget reductions and debt ceiling limits has damaged the credibility of American leaders on the global stage. Furthermore, a large national debt must be financed by way of international creditors. In the case of the United States, China is the largest holder of U.S. bonds and thus “owns” most of America’s debt. Such an arrangement creates an intricate set-up as China could potentially use this leverage in credit markets and possibly affect U.S. foreign policy. A complex situation arises as a result; the U.S. must appeal to creditors yet it cannot cede its influence as a result. The S&P upgrade should help to encourage creditors to continue the necessary purchasing of U.S. bonds as it also demonstrates the positive effects of deficit reduction.
Undoubtedly, deficit reductions are a necessity should the U.S. wish to improve its competitiveness in world markets. Interest payments will pose great appropriation challenges with regards to discretionary spending on the whole, especially with regards to national security operations. Although reductions are essential, such budgetary decisions and cuts should be made in a strategic manner to avoid the potential national security threats that accompany decreased defense spending.
American competitiveness will determine the strength and influence that the U.S. has in the future. The creation of a more vibrant business climate and the reduction of national debt are key imperatives toward increasing the ability of American companies and citizens to prosper in a global economy. These actions are deeply connected to national security and will define how the United States can operate in the international system for the remainder of our nation’s history.