Executive Summary

Whether you call it globalization, the information age, the post-industrial economy, or a "flat world," the new regime is radically changing the terms of economic competition. Powerful new competitors are quickly rising -- and the costs of weaknesses and flaws in U.S. policy are being magnified.

The United States needs a new comprehensive policy designed to ensure that it remains the most innovative, most productive, most able to create high value-added jobs and best suited to lead the world. The Progressive Policy Institute's (PPI), National Competition Strategy recommends a model based on lasting principles that can effectively respond to the modern challenge with reforms that:

• Put innovation first;
• Strengthen the world trade system;
• Establish a new compact for worker security;
• Restore fiscal sanity in Washington.

Here are some of the specifics of this competitiveness strategy:

Put Innovation First

Innovation has propelled the United States to its role as a leader in the global economy. However, the U.S. is losing ground to foreign competitors in technological innovation and scientific research. This plan returns to the basics of creating a research-intensive economy and training a new generation of scientists and engineers.

Spur a Research-Intensive Economy

This strategy proposes the creation a "super" research and experimentation tax credit. Specifically, Congress should make the Research and Experimentation Tax Credit (RETC) permanent and double it from 20 percent to 40 percent of all R&D expenditures.

In addition, the U.S. should create a regionally focused network of university-based venture capital funds based on a model in place in Michigan. These funds finance loans for start up companies trying to commercialize new scientific and technological advancements.

Foster a New Generation of Scientists and Engineers

PPI proposes the funding of a national network of 250 science and technology public charter academies that focus on math, science, engineering, and computing, to further expand the pipeline for homegrown scientific talent. In order to meet the demand for science and engineering now, the United States should streamline visa checks for universities to help recruit the best international talent.

Strengthen the World Trading System

America needs to take full advantage of the global economy as a consumer of low-costs imports and as an exporter of goods and services. In order to gain footing in the international economy, the U.S. must restore stability to national and international finances and open world markets and enforce trade agreements.

Restore Stable U.S. and World Finances

Aside from addressing the home-grown problem of the growing deficit, the U.S. should forge an agreement with China and Japan to reduce trade and financial imbalances.

Open World Markets and Enforce Trade Agreements

With respect to enforcement, the next administration must rededicate itself to defending American rights in the global trading system. Simultaneously, a new approach must include a strong effort to open markets, with less reliance on small bilateral trade agreements and more on strategic initiatives dealing with major markets and the world as a whole.

Establish a New Compact for Worker Security

Entrepreneurship, innovation, and global trade are vital to this plan, but they also disrupt U.S. companies and workers. Therefore, this plan offers solutions to protect America's workers as the global economy changes.

Create a New Economy Scholarship Program

Under this plan, dislocated workers collecting unemployment insurance could also receive up to $4,000 worth of scholarships to assist in retraining and reemployment.

Modernize the Trade Adjustment and Unemployment Insurance Systems

The UI system should be reformed so that it gives workers the right incentives to get back to work, but also provides them with adequate benefits, recognizes that all employees who lose their job through no fault of their own should be eligible for UI, even if they have been working a short time or are making low wages, and ensures that workers not only collect insurance, but also skills to upgrade their career.

Provide Transitional Health Insurance for all Unemployed Workers

Losing health insurance coverage causes much fear among those at risk of losing their jobs. The current tax credit offered to cover health insurance has a low take-up rate and does not cover all UI-eligible workers. Therefore, the program should be expanded to cover all workers collecting unemployment insurance and streamlined so that the recipients receive timely tax credits.

Create a Universal Pension System for all Americans

It is time to overhaul the current system to let workers decide how much they can save, give workers greater control over their investment choices, and consolidate the alphabet soup of retirement account provisions in the tax code to a single, portable Universal Pension.

Restore Fiscal Sanity in Washington

Fiscal discipline is integral to competitiveness, and thus no competitiveness enhancing plan will be complete without a set of policies that restore fiscal responsibility.

Cut the Bush budget deficit by $2 trillion over the next 10 years

America needs a balanced budget approach that includes spending reductions, budget reforms, sensible revenue increases and entitlement reform.

Institute budget process reforms

In addition to specific cuts in spending and tax reforms, Congress needs to restore tough budget process controls such as "pay-as-you-go" rules and "present value accounting" to ensure fiscal discipline.

Shifts in policy can guarantee that in this new world economy, government policy supports, rather than hinders workers and businesses as they adjust and improve. As policy changes, the ingenuity and work ethic of the American people will once again ensure that the U.S. maintains the world's highest standard of living and serves as a paramount source of new industries, products and ideas.