"Investing in the USA"
Op-Ed in Politico by Lloyd Blankfein, Chairman and Chief Executive Officer, Goldman Sachs
The question I’m most often asked these days is, “Where should I invest?” In recent years, we all know, there has been an unusually high degree of uncertainty. It falls into two broad categories: cyclical concerns that focus on the outlook for near-term economic growth; and structural concerns that center on the viability of existing political or economic systems, for example the European Union.
The cyclical and structural challenges are considerable, and in some cases, even daunting. But when I meet with chief executive officers and institutional investors and they ask me where to invest, my response is that the United States remains as attractive as ever. And it would be even more attractive if it can make some short-term progress in a few key areas.
The U.S. has a number of major competitive advantages that we sometimes overlook -- especially given the focus of the 24-hour news cycle on sensational, and mostly deflating, events. First, the U.S. has favorable demographics -- thanks to its relatively high birth rates and immigration. While the BRIC countries -- Brazil, Russia, India and China -- have generated extraordinary economic growth, the U.S. remains a magnet for many of the smartest, most ambitious people in the world.
Second, the ability to better tap into domestic sources of energy – natural resource-based and, to a lesser but promising extent, the growing array of clean technologies – will spur more job-creating investments, improving our balance of payments.
Third, U.S. policymakers were aggressive in responding to the financial crisis, and the financial sector has been quick to increase capital and reduce leverage.
Fourth, U.S. companies have restructured more quickly and more extensively than others since 2008 -- boosting US productivity growth.
These and other strengths make America more than just a safe port in the storm; they make it a compelling place to invest for the long term. But we need to build on our strengths by addressing some pressing short-term challenges.
Make Progress on the Long-Run Fiscal Situation: Economic and investment sentiment suffered last year as a result of the congressional stand-off over the federal debt limit. In the end, however, that debate produced $900 billion of debt reduction and an additional $1.2 trillion of spending cuts over 10 years, which will be mandated by sequestration if no other action is taken.
Realistically, while few expect a fiscal reform agreement before the November election, we should not discount the value of a declaration by congressional leaders of both parties, as well as both President Barack Obama and former Massachusetts Gov. Romney, that Simpson-Bowles will be the basis of future reform. Simpson-Bowles presented a serious, responsible and bipartisan effort to improve the long-term fiscal outlook. Embracing its broad conclusions will send the right message to investors and corporate managers that we will make progress on our long-run budget challenges -- and that now is the right time to commit capital and invest in the U.S.
Make It Easier for People to Legally Immigrate: Immigration is one of the main reasons why the U.S. has grown faster than many other developed economies. The growth in the foreign-born population contributed roughly 30 percent to 40 percent of total U.S. population growth from 1980 to the mid 2000s. New immigrant workers provide a boost to economic growth. Just think about the effect new workers have on demand for housing, let alone creating new businesses.
Unfortunately, we allow thousands of smart young people to come here for undergraduate and graduate degrees but then send them home -- forgoing the benefits of their know-how, knowledge, ideas and enthusiasm. Immigration reform is a complex issue -- but there is no reason why we can’t make progress on a few specific, powerful ideas:
As New York Mayor Michael Bloomberg has argued, foreign students who graduate from U.S. universities should be eligible to work in the U.S. permanently. We should also remove the cap on visas for skilled workers. And let’s make it much easier for promising entrepreneurs to work and create jobs in the U.S.
Invest in Infrastructure: Whenever I see clients in China and other growth markets, I’m always struck by the intense focus on building world-class infrastructure. The U.S. needs that same level of focus. There are few other types of public spending that can create jobs more quickly and still ensure longer-term economic and social benefits. It is an accepted fact that many of our roads, highways, rail systems and other infrastructure are failing. But we aren’t doing enough to respond.
One source of infrastructure investment could turn on the repatriation of excess cash held overseas by U.S. companies. We should consider allowing companies to repatriate these profits without incurring a significant tax bill -- and to demand in return a commitment that they would use a certain percentage of these funds for infrastructure or, maybe more broadly, any activity that creates jobs.
Compromise for the Sake of Progress and Stability: In recent years, it’s often felt like elections have become zero-sum contests. When the majority party acts like it is winner take all, the minority party spends the next two-year cycle planning for a complete reversal. This results in perennial delay and paralyzing uncertainty. Our history demonstrates that some compromise, more often than not, produces stability.
If some of the opposition’s concerns are addressed, then less time is spent in the future trying to undo previous actions -- and more time is focused on improving or building upon earlier progress. No one should have to forsake their principles. But there are issues that both sides of the political spectrum can, and need, to tackle together, right now, to help lift confidence and spur economic growth.
It’s very easy today to think that all of our problems are intractable. But sentiment can shift quickly. If we push forward in some of these areas, especially in the short term, we will see for ourselves how investing in America still produces the best return.
Lloyd Blankfein is the chief executive officer and chairman of Goldman Sachs.