Outside of smartphones, laptops, and chatbots, America has boasted relatively few meaningful innovations since 1971. Cancer, heart disease, and dementia remain with us. Towns and cities burn dirty coal instead of splitting emissions-free atoms. Many American children can barely read, and average life expectancy has dipped almost to where it was when President Ronald Reagan took office. A man hasn’t walked on the moon in over 50 years.
The federal government has spent more, but the American economy has been going nowhere fast. Productivity and economic growth have been meager in the U.S. since the 1970s. Total-factor productivity—a wonkish stat used to track gains from innovation—has slowed to 0.5 percent from a brisk post–World War II clip of 2.2 percent. Slower productivity growth has translated into smaller and slower increases in living standards.
It’s hard to conceive what life might have been like had the U.S. kept growing at the same rocket rate it did between 1920 and 1970. Imagine, for example, our economy being twice the size it is today, with a median household income of $125,000 instead of today’s $70,000.
Future historians, I predict, will puzzle less over the Great Depression than the sclerotic half-century that economist Tyler Cowen has dubbed the Great Stagnation. These 50-plus years have not been characterized by resource scarcity but by a dearth of innovation, invention, and scientific breakthroughs. If Americans have fewer resources today than they would like, it is because we lack the knowledge of how to make more with less. To the extent we have a scarcity crisis, it is a crisis of ingenuity.
What is to be done? First, cutting capital-gains and inheritance taxes must be part of the solution. Families and individuals—and yes, the 1 percent—are better and more adventurous capital allocators than the government; slashing their taxes will help spur innovation.
We also must allow our cities to operate as engines of creativity. Throughout history, people in tight spaces have generated new products and services at astonishing rates. In the last decade, though, many city governments have let drug-fueled homelessness and crime overtake their streets and have made it impossible to build homes for would-be innovators. Cleaning up the streets and reforming local zoning would ensure that innovators rush in to cities, not out of them.
Third, municipalities must generate electricity from our cleanest, safest source—nuclear fission. In 1973, President Richard Nixon called for the construction of 1,000 nuclear plants by 2000. Today, we’re stuck at 93. The Nuclear Regulatory Commission should streamline the review process for advanced fourth-generation reactors and small modular reactors. The current process is too slow and onerous: construction of the new Vogtle 3 plant in Georgia, for example, took seven years longer than expected and cost $30 billion. No startup can endure such wait times and costs.
The NRC is not the only regulatory body moving glacially and hampering innovation. The Food and Drug Administration could accelerate the drug- and medical-device approval process merely by requiring proof of safety and dropping its proof-of-efficacy requirement. If a drug is safe, its efficacy could be proved over time in the market.
Similarly, the military’s procurement process hampers innovation by rewarding expensive cronies over scrappy innovators. An example: it costs the U.S. $5,000 to make a 155-millimeter artillery shell; for Russia, it costs $600. The story is the same on infrastructure procurement, as California has spent billions on high-speed rail without laying a single track, and New York City stares down a $2.5 billion-per-mile price tag to build new subway tunnels.
Lest we be tempted to embrace industrial policy in response to our innovation crisis, we should remember that government officials tend to be terrible venture capitalists. More importantly, it costs too much to make things in America. The government may well spend money in hopes of re-shoring critical industries, but those industries went abroad in the first place because labor and land-use regulations made it too expensive to host them here. Reforming minimum-wage laws and paring back labor regulations and backbreaking environmental review will do more to reindustrialize America than would any industrial policy.
It may be decades before we have a luxury hotel on the moon. The first steps to reaching those far-fetched dreams, however, require making some straightforward but potentially transformative policy changes.
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