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STORY: FRENCH PRESIDENT VISITS SILICON VALLEY

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STORY --- CT--- My own experiences-- family?

In 2015, I started reading through each presidential candidate's policy proposals (Republican, Libertarian, Green, Independent, and Democrat), and I decided to vote for Hillary Clinton for three reasons.

First, her economic policy is better than her opponents' policies; second, She is more pro-family than Donald Trump, Gary Johnson, and Evan McMullin; third, her vision for the country more closely aligns with long standing American ideals. 

A Pro-Growth Economic Policy

There are several factors contributing to low growth in our economy. First, under-investment from both public and private organizations is limiting our national capacity to produce and diffuse innovations. The relationship between public investment and the introduction of innovations into the marketplace is dangerously absent from national discourse on economy. The reason I use the phrase 'dangerously absent' is because overlooking the historical role of the public sector in producing the innovations, that we buy via firms in private sector, runs the risk of dismantling the social ecosystem that has continuously "wowed" the world with new tools that improve human potential. 

For example, many of you are probably reading this blog-post on an iPhone or a smartphone. Do you know that the technological innovations built into your phone were developed and funded by public institutions (See FIGURE 1 below)?  SIRI, for example, has roots in federally funded research. In 2000, the Stanford Research Institute (SRI) was asked by DARPA to lead a team, consisting of scientists from 20 different universities, in developing a virtual office assistant for military personnel. When the iPhone launched in 2007, SRI recognized the opportunity to commercialize their technology and created a venture backed company called SIRI which was bought by Apple in 2010 (Mazzucato, 2016). 

FIGURE 1: Origin of Technological Innovations in Apple Products (Mazzucato, 2016 pg.109)

In addition to benefiting from technological innovations developed using federal funding and public research organizations, in the 1980s Apple also received $500,000 (~1.5 million in today's dollars) in early stage equity investment from an organization backed by the Small Business Administration (a federal agency created in 1953; see Audretsch, 1995). Public organizations not only led in funding and developing the innovative technologies inside the iPhone, but they also led the way in funding the start-up firm responsible for bringing it to market. Apple products are not a unique case (Tesla, Google, and Genetech are other examples). In fact, 88% of the most important innovations between 1971 and 2006 were fully dependent on federal research (as rated by R&D Magazine's annual awards; see also Block and Keller, 2011).  

Perhaps the most poignant example is innovation in the pharmaceutical industry, an industry where we may have the closest thing to a natural experiment comparing innovation between public and private organizations. Public labs (such as Universities) receive large government grants to conduct research into new cures for disease, and pharmaceutical companies receive large subsidies from the federal government for their R&D activities. Studies show that 75% of new molecular entities (NMEs, i.e. actual new drugs and not just variations of existing drugs) are traced to public research labs; most drugs originating in the labs of pharmaceutical companies are variations of existing drugs (Angell, 2004). 

I think Paul Berg, a Nobel-prize winning engineer at Stanford University, summed it up best in a conversation between French President Mitterand, Thomas Perkins (a partner at a venture capital fund), and himself where Perkins was crediting brave venture capitalists for Silicon Valley's success. Dr. Berg said to Perkins, "Where were you guys in the '50's and '60's when all the funding had to be done in the basic science? Most the discoveries that have fueled [the industry] were created back then." (Henderson and Schrage in the Washington Post, 1984).  

The truth is, private investors tend not to contribute to funding innovations until they are 3-5 years away from commercialization, and public organizations tend to be the actors that fund, develop, and even provide the carrot for private investors to throw some skin in the game of economic disruption (Mazucatto, 2016).

Despite the critical role of public investment in both the early stage development of technological innovations, and the emergence of the industries that bring them to market, federal R&D investment as a percentage of GDP has slowed to a crawl. Federal investment in R&D grew at just 0.3 percent per year from 1987-2008; much lower than its average annual growth of 4.9 percent per year from 1953 to 1987, and it is ten times lower than the rate of GDP growth (National Science Foundation, 2010). What's worse, the slow down in public R&D investment is occurring at a time when other countries are rapidly increasing their public investments in science and technology research (Atkinson and Ezell, 2012).  

Hillary Clinton's economic plan is the only one proposed by a presidential candidate that explicitly proposes more public investments in science and technology in addition to much needed infrastructure spending in order to update our nation's economic platform. 

Hillary Clinton's economic plan also takes important steps toward promoting more private investment in economically productive activities by firms (activities such as investments in R&D, capital equipment, and worker training).

American firms have spent $7 TRILLION buying back their own stock since 2004 despite historical data showing that increases in the number of buybacks leads to slower economic growth over time (Foroohar, 2016 pg. 124).

 Apple, for example, essentially returned about $112 billion dollars back to its investors from August 2012 to March 2015. While some of those gains enriched  pension funds, it is important to note that the top 0.1% of Americans own 91% of all equities. Also important to note is that most of those investors did not put an actual penny towards investing in Apple's original technology, and had nothing to do with the engineering, designing, or assembling of the final Apple products. What's more, despite having a record amount of cash on hand, Apple borrowed most of the money to provide investors with record breaking payouts.

These buybacks almost always boosts the company's share price because "buybacks artificially decrease the number of shares on the market [but the issues is that buybacks don't]... actually chang[e] the real value of the company via true strategic investments like research and development, worker training, or anything else that might bolster the underlying long-term prospects of the firm" (Foroohar, 2016 pg. 124).

This is backwards organizational behavior. Prior to 1982 buybacks were considered unlawful market manipulation. The stock market was intended to be an avenue through which companies can raise capital to make strategic investments, yet, companies like Apple (who don't need to raise money in order to make strategic investments) are incurring debt to give money back to the stock market at the expense of productive behaviors such as paying taxes into the public side of the social ecosystem that produced their core technologies, building a new factory, opening a new research lab, training workers, increasing their R&D budget, or giving their workers raises (thereby bolstering our consumer oriented economy!).

Overall, buybacks are increasingly found to be an unproductive use of corporate funds that contribute significantly to our persistently slow-growth economy (Smithers, 2013).  What's more, in addition to being unproductive for the wider economy, this type of organizational behavior damages the individual firm's long-term viability (Collins and Porras, 1994; Collins, 2001).

We need a system that discourages organizational behaviors such as buybacks and short-termism (see Clayton Christiensen, 2014), and we need to build one that encourages productive organizational behavior (investments in R&D, capital equipment, worker training, or profit sharing with employees). Hillary's plan will expand rewards for research and innovation, offer incentives for  companies that make capital investments, create good paying jobs in the US, and that share profits with employees. Additionally, her plan will simplify taxes for millions of small businesses, make it easier for young people to start businesses, as well as discourage corporate inversions and quarterly capitalism. 

Reducing the effective corporate tax rate via incentives for productive organizational behavior, and discouraging unproductive organizational behavior, is preferable to a blanket reduction of the statutory rate because the latter does nothing to prevent unproductive organization behavior or encourage productive organizational behavior that leads to higher growth in the real economy (Atkinson and Ezell, 2012; Cohen and DeLong, 2016; Mazzucato, 2016; Foroohar, 2016).

Some presidential candidates do not even address these issues in their economic plans, and among those that do, they do not address them as completely nor as extensively as Hillary Clinton does.

All together, her plan to increase both public and private investment in innovation and infrastructure should increase our national capacity to compete in high value industries, and increase our national capacity to create the high value industries of the future.

Another factor contributing to our low growth economy is limited access to education. In addition to creating the high value industries of the future, we need a well-educated citizenry that can acquire the high value jobs created within those new high value industries. Otherwise, our citizens will be forced to settle with lower paying jobs, or worse, have their job erased.

For example, a study by the Bureau of Labor Statistics found that the average wage increase for all US workers from 2000 to 2007 was 11 cents per hour, but that the average wage that companies paid their workers increased by 22 cents per hour during the same time frame; that is to say, average American workers only realized half of potential gains because a larger share of the workforce in 2007 was in lower-paying jobs (Keller, 2009). Atkinson and Ezell (2012) summed it up best saying "To risk being flippant, the American workforce has increasingly moved from manufacturing high-technology products to manufacturing hamburgers."

Part of the issue is that our citizenry increasingly lacks the human capital to compete for those jobs in global labor markets. Among industrialized nations, the US ranks 20th in high school completion rates and 16th in college completion rates (OECD, 2009).  Literacy among college graduates is even low (Department of Education, 2006). This doesn't bode well of our nations innovation capacity, and it is one reason why, in a 2010 report on Silicon Valley's business climate from the Joint Venture Silicon Valley Network, its chief executive stated, "I'm not telling you the sky is falling, but I have a duty to report that some of the indicators are not good." (Abate, 2010).

Here again, Clinton has more concrete, comprehensive, and practical proposals aimed at improving access to good higher education than her opponents. She is providing incentives for companies to engage in worker training, she has a plan to make community college free, she has policies aimed at easing student loan debt, and she is making it easier for parents with kids to go back and acquire more education so that they can find better employment. Go to her website, then compare the detail, feasibility, and completeness of her proposals to other candidates' proposals on their websites (if they even have plans to address these structural issue in our economy)-- There is a clear difference.

Most candidates' economic plans (a la Trump, Johnson, and McMullin) rely almost exclusively on simply engaging in a race to the bottom on statutory corporate tax rates. If that is THE great magic wand for boosting economic growth, then why is Bosnia's GDP growth rate slower than the US growth rate even though Bosnia's statutory corporate tax rate is among the lowest in the world, and the US statutory corporate tax rate is among the highest in the world? The answer is that the recipe for economic growth via innovation and entrepreneurship is more than simply a low statutory corporate tax rate.

A third factor holding back our country's economic potential is changing demographics. Recent work by economists shows that most of the decline in economic growth since 1980 has been due to factors such as the aging and retirement of baby-boomers, longer life expectancy for Americans, and lower fertility rates (Swanson, 2016). In fact, the aforementioned demographic changes account for a 1¹⁄₄ % decline in annualized economic growth since 1980; according to some estimates, that is "essentially all of the decline we've seen in that metric" (Swanson, 2016; see also Gagnon et al., 2016).

A couple of things can ease or reverse the negative economic impact of those demographic changes. The first is immigration reform. We depend on immigration to keep our population growth rate at or above replacement rate, which is an important factor underlying economic growth (Kavoussi, 2012; Swanson, 2016). Immigrants and foreigners also account for the lion share of entrepreneurial activity (Stangler and Wiens, 2015), Nobel Laureates (Bernal, 2016), and STEM students (Sanchez, 2015). Which is why research tends to find a positive association between immigration and national economic wellness (Furtchtgott-Roth, 2014). Despite overwhelming evidence, Republicans in Congress have consistently blocked immigration reform saying that they want to secure the border before discussing changes in the immigration system. However, illegal immigration across US borders is lower than under President Bush (Dinan, 2015), and more undocumented immigrants were deported under President Obama than under any other president (Marshall, 2016; Palma, 2016). Clearly effort has been made to placate those who are unwilling to come to the table on immigration reform until the border is more secure. Despite this effort, the republican presidential platform is more anti-immigration than in anyone's recent memory. Hillary Clinton's platform, however, puts forth a plan for reforming the nation's immigration system. 

A Vision that aligns with American Ideals

Finally, I am supporting Hillary Clinton for President because her vision of America most closely aligns with American ideals. Our declaration of Independence says, "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

Our founding fathers had the vision of a government that would secure these unalienable rights for its citizens. Historically, healthcare in the US performs worse than other OECD countries in terms of cost, quality, and choice (Reid, 2009). Compared to our friends, we are perform awfully at securing a right to life for the citizenry. ACA has succeeded in helping 20 million Americans gain health insurance (around 90% of Americans have healthcare now), and Hillary Clinton's proposals can take the next steps to make health insurance more affordable. 

With regards to the unalienable rights to liberty and the pursuit of happiness, last year's Supreme Court Decision legalizing same-sex marriage was a historic year for the expansion of liberty, the pursuit of happiness, and religious freedom. The conservative right wants to retard those expansions of liberty, pursuit of happiness, and religious freedom under the guise that they are protecting religious liberty. The verdict of the Court, however, makes clear that the ruling is an expansion of religious freedom. On page 27 of the Supreme Court brief it states:

"it must be emphasized that religions, and those who adhere to religious doctrines, may continue to advocate with utmost, sincere conviction that, by divine precepts, same-sex marriage should not be condoned. The First Amendment ensures that religious organizations and persons are given proper protection as they seek to teach the principles that are so fulfilling and so central to their lives and faiths, and to their own deep aspirations to continue the family structure they have long revered. The same is true of those who oppose same-sex marriage for other reasons. In turn, those who believe allowing same-sex marriage is proper or indeed essential, whether as a matter of religious conviction or secular belief, may engage those with their view in an open and searching debate. The Constitution, however, does not permit the State to bar same-sex couples from marriage"

The court made clear that religious organizations, if they feel so inclined, can continue to advocate that same-sex marriage should not be condoned, and that religious organizations will continue to be protected as they seek to teach the principles of their faith regarding marriage and religion. Clearly it was done with the intention of ensuring that all people are allowed to worship according to the dictates of their own conscience. Contrary to claims on the religious right, the ruling is an expansion of religious freedom rather than a constraint on religion freedom because groups with seemingly opposing views regarding marriage are now allowed to practice their respective beliefs without the other imposing their beliefs.

I have long advocated for religious freedom with friends on the Right, and I was flabbergasted in 2015 when so few of them cheered for that expansion of religious freedom. When did Christians reject Jesus Christ's vision of society with open commensality? 

Again, Hillary's proposals strengthen these expansions of Liberty, Pursuit of Happiness, and Religious Freedom--- making her the candidate that is pro-religious freedom, pro-individual liberty, and pro-limited government (in this case, limiting the government's ability to regulate marriage).

Another American ideal, with which Hillary's vision aligns, is the invitation written at the base of the Statue of Liberty: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed, to me: I lift my lamp beside the golden door.”  A record number of human beings are political refugees, and 87% of those refugees are located in developing countries. This is a time when America should be leading in the reception of "huddled masses yearning to breathe free", and our arms should be opened wide to "The wretched refuse of your teeming shore". 

Instead we have presidential candidates who criticize secretary Clinton for seeking to substantially increase the number of refugees that we receive (Candidates and politicians on the Right have even suggested patrolling Muslim neighborhoods!). What's more these faux limited government politicians want to increase regulation of the federal governments screening process for refugees even though historically the system has been incredibly effective (of the 785,000 refugees admitted since 2001, less than .00001% have been arrested). 

Refusing huddled masses, fighting against the expansion of liberty, and government regulation of how individuals use their genetalia is not the American Spirit that made this nation unique. This is not the attitude that makes this country the shining light upon the hill. 

I want an America that still lifts her "lamp beside the golden door" for the tempest tossed, and I want an American that continues to ensure Life, Liberty, and the Pursuit of Happiness for its citizens. I found that candidate in Hillary Clinton.