Lift Government Barriers to Encourage Competition and Innovation

Washington, D.C., July 21, 2010—Tomorrow the Senate Commerce Committee will mark up the “America COMPETES Act,” possibly adding an amendment that would create a 15-member commission to study how the federal government can encourage competitiveness and innovation. The Competitive Enterprise Institute announced today, however, that it was prepared to spare taxpayers the cost of such a project, instead issuing the most effective single guideline for guiding government action in the economy: get out of the way.

“The most important thing to remember about the America COMPETES effort is the limited ability of the political process to centrally plan processes like growth and innovation,” said Competitive Enterprise Institute Vice President for Policy Wayne Crews, “Repealing previous government intrusions into the economy should come before any attempt to pump up economic growth with new programs.”

At a time of record-breaking budget deficits and a mostly stagnant private sector, Congress has, for the most part, continued to ignore the strategies of privatization, liberalization, and devolution that could spur new growth and innovation.

“Doing something about manufacturing doldrums is about more than spending money. Legislation like the bipartisan America COMPETES Act might scrounge a few scarce billion dollars. But so what? Such subsidies are distortionary, and the real gains can come if we ‘liberate to stimulate,’ if we separate state and economics.” Here’s how:

• Rather than trying to improve speeds by picking the particular R&D horses to run on the racetrack, improve the business and regulatory track so everyone can go faster, and let jockeys keep more of their earnings.

• Allow freer trade in skilled labor: Bright foreign workers want to stay and create U.S. jobs after graduating here. That’s a better way to address global competition.

• Avoid safety regulation that makes us less safe: Many frontier technologies like nanotech can make our environment cleaner. Exaggerating risks overlooks the hazards of stagnation.

• Liberalize capital markets: Capitalism ranks among the world’s great democratizing forces, but post-Enron Sarbanes-Oxley regulation has severely distressed smaller companies. Exempting firms with small market capitalizations is just for starters.

• Privatize: During the 1990s, it was proposed that commercial aspects of federal labs be offered to the industries they benefit, or to allow research employee buyouts. Do that.

• Award “prizes” rather than grants as one element of a transition to private funding.

• Relax predatory and anti-consumer antitrust activism: Markets emphasize competition, but sometimes “collusion” is merely a “partial merger” instead of a full one. Constraining productive firms in ways the market never intended hobbles entire industry sectors, and undermines the wealth creation process itself.

• Reduce overregulation generally: More than 60 agencies issue 4,000 regulations a year within some 70,000 Federal Register pages. Congress should get busy implementing a bipartisan “regulatory reduction commission”; sunsetting old rules and putting an expiration date on new ones; requiring fast-track congressional approval for controversial agency rules; adding flexibility for smaller business; requiring supermajority points of order for unfunded mandates; and creating a basic regulatory report card to accompany the federal budget.

“The assumption behind the COMPETE Act seems to be that the creation of innovative technologies can no longer be trusted to mere private companies and their investors. Members of Congress and their staff members have decided that they are the new venture capitalists – except that the billions of dollars they decide to ‘invest’ will come out of the pockets of taxpayers,” said Crews.

Read testimony of Wayne Crews before the House Committee on Science and Technology on America COMPETES and “The Future of Manufacturing,” delivered March 17, 2010.

CEI is a non-profit, non-partisan public interest group that studies the intersection of regulation, risk, and markets.