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“Formestic” Policy Front and Center

The Obama administration’s domestic economic stimulus package is good foreign policy, writes Nina Hachigian.

Domestic investments in education included in the recovery and reinvestment package will help boost America's global competetiveness when it comes to innovation. (AP/Alexander F. Yuan)
Domestic investments in education included in the recovery and reinvestment package will help boost America's global competetiveness when it comes to innovation. (AP/Alexander F. Yuan)

The Obama administration’s $825 billion economic stimulus package is obviously designed to jolt our domestic economy out of its deep gloom, but U.S. policymakers need to bear in mind that many of its prescriptions are equally important to U.S. foreign policy. The package has passed the House of Representatives and will be considered in the Senate next week.

In his inaugural address, President Obama described the "nagging sense" many Americans share "that America’s decline is inevitable and that the next generation must lower its sights." Indeed, along with regular citizens, many political scientists believe that America’s decline is inevitable. Until the current global economic crisis, China, India, Russia, Brazil, and other rapidly developing countries were clearly improving the lot of their citizens, stepping up their diplomacy, in many cases modernizing their militaries, and, in general, exercising greater influence in the world. Indeed, in terms of relative power, the United States is, by definition, inexorably sliding as these powers rise, sparking a spate of books and magazine articles proclaiming the onset of the "Post-American World."

But the second half of Obama’s sentence—asking whether “the next generation must lower its sights”—offers us a more meaningful benchmark: How can we continue to ensure U.S. success and preserve the American dream that our kids will be better off? In fact, along with challenges, the rise of these emerging economies actually holds opportunities for the United States, in terms of security, morality, and the economy. Our trading partners in the developing world are regular partners against non-proliferation, disease, and terrorism. Their growing middle classes lift people out of deep poverty and provide markets for our goods. Fostering this virtuous circle of global trade is critical to the recovery and growth of our own economy as the global economic downturn threatens economic recovery abroad as well as at home.

But the United States can realize the benefits of globalization and still provide good lives for our citizens if, and only if, we renew ourselves at home. From that point of view, it is the president’s stimulus package, more than foreign policy, that will ensure America continues to thrive in a vastly more interconnected world. In an era of globalization, the effects of domestic policy don’t stop at the water’s edge. How we approach innovation, health care, infrastructure development, worker empowerment, energy, and particularly education are critical to America’s global standing.

Innovation has been a prime driver of U.S. economic growth for generations. Innovation is not zero sum—more and more innovation is happening in the pristine, new information technology campuses and biotechnology labs of China—developments that could be beneficial to Americans (maybe they’ll find a cure for diabetes). Still, we have to shore up our flagging innovation system at home to ensure our long-term economic growth. To do that, we need to increase our investment in basic research and development again, but also in our children’s brains.

We can’t count on importing science talent from China and India anymore now that they are becoming attractive places for students to stay or return to. The $10 billion a year in the stimulus package for states to encourage preschool education is a smart first step. Research has shown that pre-K education is an effective and efficient way of improving children’s learning and chances for lifelong success. The stimulus’s college tuition tax credits will help improve human capital at the other end. Extending broadband access ($6 billion) will create jobs, but it will also increase capacity for innovation.

U.S. businesses often cite surging health care costs as a reason they offshore jobs. Businesses don’t pay for these benefits in China and Vietnam (to the detriment of workers there). Obama’s stimulus package proposes spending $50 billion on making medical records electronic because many studies have shown that that will greatly reduce administrative costs of health care delivery. Just as ultimately lowering health care costs will keep jobs in America, so will another facet of the stimulus—improving roads, repairing bridges, and modernizing the electric grid—to help attract new capital investment with many more countries vying for it.

The stimulus offers some support for American workers too. Beyond creating new jobs, the stimulus will allow states to update their formulas for unemployment insurance so more can qualify. That combined with health care for the unemployed provides a more secure foundation from which to face a more competitive and unsure labor landscape.

Finally, the stimulus package would improve energy efficiency in buildings and create green jobs in energy development. Moving to a low-carbon economy has two direct implications for foreign policy. First, it will allow America to engage again on climate change, which is a very serious national security threat. Doing so will ease the resentment many Europeans have felt over Washington ignoring the issue for eight years. Second, less reliance on fossil fuels will slow the torrent of billions of dollars we send each year to countries with whom we have problematic relationships—Russia, Venezuela, and Iran, for example.

The fact is that America, the big powers, and most other countries are going through very tough economic times. The stimulus plan will kick-start the U.S. economy in the short term, but its domestic prescriptions will also help put our nation on the path of global success—even in a world with more powerful players.

Nina Hachigian is a Senior Fellow at the Center for American Progress and co-author of The Next American Century: How the U.S. Can Thrive as Other Powers Rise (Simon & Schuster, 2008).

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Nina Hachigian

Senior Fellow