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The Little Anchors on the Economy
Historically, America has had the most competitive economy in the world, but the financial crisis has tested the country's strength. So what can the country do to regain its competitiveness on the global stage?
There are three things that could make way for tremendous growth in the American economy, should they be addressed soon, according to Fred Hochberg, chairman and president of the Export-Import Bank: "Education, infrastructure and the debt crisis," he said. "They are like the little anchors that keep us down."
Hochberg joined General Electric's chief economist Marco Annunziata, and Chris Hyzy, chief investment officer of U.S. Trust, at the Aspen Ideas Festival on Thursday to engage in a dialogue about America's future place in the global economy. Maria Bartiromo of CNBC hosted the panel, calling competitiveness a critical question that has generated much buzz and concern for the last few years.
According to Hyzy, the public sector is the biggest drag on American competitiveness, but the private sector still shows incredible potential. "The private sector is driven by manufacturing," he said. And the story of U.S. exports of manufactured goods at the moment is extremely positive. Fourteen percent of the American economy was generated by exports, the largest percentage in decades.
Even more helpful to American competitiveness, said Hyzy, would be if businesses and investors understood the rules of the game and the future of regulation. "They don't know the rules, they don't know what's coming in 2013 and beyond," said Hyzy. He believes those uncertainties under a second Obama administration could be knocking off "a good two percent of GDP."
Hochberg believes that America's dominance in added value makes the U.S. poised for growth in the next several years. "What we make -- power plants, airplanes, locomotives, satellites -- that's what's being bought and one reason why we export so much," he said. "The export part of the economy, the trade-able part of the economy is doing very well." Caterpillar, he reminded the audience, has never had a bad year.
Hyzy added that he believes corporate tax reform -- closing loop holes and lowering rates -- would stimulate the economy. He also pointed out that a smart energy policy is needed as well. "Start with natural gas. It's abundant, we know it, technology is able to get it," he said. "We all know that things are not going to get less volatile in the Middle East." There is a potential export market in natural gas as well, said Hyzy.
Annunziata said that the question of American competitiveness itself is somewhat disturbing in that it implies globalization is a zero-sum game. "There is a dangerous protectionist bent -- as though competing means defeating everyone else," Annunziata told the audience. "The fact is: Globalization is not a zero-sum game. It helps everybody."