- As election day arrives, COVID-19 still wreaks havoc on the nation.
- Our greatest strength, innovation, must be utilized in our recovery, no matter who wins the presidency.
- Rick Lazio is currently a Senior Vice President at alliantgroup, and is a former US Representative from New York's 2nd district.
- Joe Crowley serves on alliantgroup's Strategic Advisory Board, in addition to being a Senior Policy Advisor at Squire Patton Boggs. He is also a former U.S. Representative from New York's 14th district.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider's homepage for more stories.
Americans are just days away from choosing the country's next leader in what is arguably the most impactful Presidential election in decades.
As November 3 approaches, the US continues to witness what has become a focal point this election: the novel coronavirus is wreaking havoc on our country and the world. Apart from the lack of a readily available vaccine, COVID-19's impact on the world economy has also reached catastrophic levels. And, as relief talks continue to go nowhere, Americans are looking to our candidates for a path forward.
Although this election cycle has unfortunately left little room for substantive policy discussions, candidates Donald Trump and Joe Biden still have time to clearly speak to voters about how they will leverage one of America's greatest strengths —innovation — in order to spur growth for our bruised economy.
It's crucial that our next leader recognize that countries who leverage innovation are the winners of the global economy. Those countries that harness the strength of innovation open new markets, develop emerging goods and services, and ultimately create a higher standard of living for their citizens.
We've talked to hundreds of American business owners in the last year, and it's clear to us that those companies that have chosen to lean into innovation efforts are in a stronger economic position than their counterparts. However, it's equally clear that even those who are managing to survive the pandemic still need help moving forward.
There are dramatic differences in both candidates' plans to leverage innovation as a means to spur economic growth. However, both candidates do seem to recognize the positive role that government policies can play in fostering innovation. It will be up to voters to decide who is up to the task in this time of need.
Business taxes
When it comes to innovation among companies, taxes are a primary focus for both business leaders and policymakers. So it's worth examining each candidate's tax plan.
Looking at business taxes, Trump has taken the traditional Republican stance that tax cuts will enable businesses to invest further in innovation efforts.
Trump's 2017 Tax Cuts and Jobs Act lowered the headline corporate tax rate from 35% to 21%, and allowed pass-through business — that is companies where the owner counts profit as their personal income — to deduct 20% of qualified business income.
Although the president has not come out with a tax agenda for his second term, his administration has continued to push for tax breaks, a move that they argue will help American businesses thrive and innovate. Trump's team has pitched the idea of an unspecified "Made in America" tax credit, capital gains tax relief for businesses investing in defined opportunity zones, as well as permanent cuts to the payroll tax.
The president's stance has obviously been to focus on the reduction of government barriers, including taxes, that he feels limit innovation efforts.
Biden and his team have seemingly been more targeted with their tax relief proposals, hesitating to provide tax cuts that don't amount to concrete public outcomes that will outweigh the government's investment.
Biden has pitched raising the corporate income tax rate to 28% while instituting a minimum tax on corporations who hold book profits of $100 million or more. However, Biden has also pitched certain tax breaks to spur innovation efforts, including the expansion of several renewable energy related tax credits, a small business retirement tax credit, and a "Manufacturing Communities Tax Credit" that would reduce the tax liability for businesses experiencing layoffs.
While the two candidates are mostly using the standard playbook from their party, both candidates should consider investing in education for America's small businesses on the tax options available to them.
Fortune 500 companies leverage whole tax departments to claim every available incentive to spur growth, a luxury that the average American small business doesn't have. If our next leader wants to leverage tax policy to spur innovation efforts, informing all American businesses of available opportunities will be a key first step.
Incentivizing onshoring
Another critical issue that will face the next president will be creating an economically viable environment for businesses to innovate and produce here in the US.
One of the main challenges, of course, will be dissuading companies from offshoring to countries like China and India, which tout cheap labor, utilities, and infrastructure development.
The pandemic was also a wakeup call. The US scrambled to get the needed equipment to deal with the coronavirus and was forced to rely on adversarial countries like China to obtain the lifesaving goods.
Despite the need to rebuild America's manufacturing infrastructure, reasonable minds, including our own, have disagreed with President Trump's trade war. The president's tariffs on aluminum, steel, and lumber were meant to drive business to American providers, but the punitive approach has seemed to have made it more difficult to conduct business overseas.
By contrast, Biden has proposed a 10% surtax for corporations that specifically offshore manufacturing jobs to foreign countries, which would effectively raise the corporate tax rate to 30.8%.
His team points to his "Made in America" plan as a way to combat offshoring, which also proposes a 10% tax credit for companies that invest in "revitalizing closed or nearly closed facilities, retooling or expanding facilities, and bringing production or service jobs back to the US." Biden appears to take a more balanced approach, offering proposals that serve as both targeted protection and incentives for businesses to stay here.
The truth is that an effective plan for incentivizing onshoring will lean more heavily on incentives that will allow businesses to view the US as the economically viable country for their operations and, in turn, their innovation efforts.
Federal Funding for R&D
An important question remains: how would a President Trump or President Biden leverage the federal government to financially support the development of new technologies that could strengthen the US's position as a mecca for innovation — one that ensures that the next Apple or Facebook is founded here?
During his first term President Trump's approach to funding innovation was the reverse of his phi tax policy — favoring targeted investments instead of going for a broad-based strategy to lift all companies. So while the Trump administration has increased funding for the so-called "Industries of the Future" — including quantum computing, advanced manufacturing, biotechnology, 5G and AI — the president has overall proposed cuts to the federal research budget in each of his four years in office.
Biden, who has also cited China as a threat to American economic prosperity, has proposed broader policies including partnerships between companies and the government as well as direct federal funding for R&D activities — including $300 billion over four years toward the advancement of critical "new industries and technologies" such as 5G and AI.
Overall, federal funding of R&D is an area of considerable crossover appeal. The value behind these efforts is not something either party owns, and is evidenced by broad support on both sides of the aisle.
However, the great challenge for our next president will be ensuring that America's small and medium sized businesses aren't overshadowed by the tech conglomerates of our country. An enormous amount of innovation and disruptive technology is birthed from our country's smaller businesses, and new policies mustn't bypass the businesses that need it the most.
Building a STEM Support System
Regardless of what business policies either candidate were to implement, it would all be for naught if we do not address the innovation "elephant" in the room: a dire lack of future innovators.
The US has consistently fallen behind countries like Germany, India, Russia and China in terms of total STEM graduates, leaving technical jobs that could inject necessary capital into our economy unfilled year after year. Our next leader must make changes to reinvigorate our country's approach to STEM education in order to create a more viable pipeline of technical talent.
President Trump released a five-year plan for STEM education, focusing less on direct funding and more on emphasizing apprenticeship programs. Trump has, however, proposed increasing education spending by $900 million in order to teach technical skills and trades, while prioritizing STEM in education grants by investing $540 million in 2019.
Biden has proposed investing further in vocational training and partnerships with high schools and community colleges, particularly in minority communities, in order for students to harness necessary technical skills. His campaign claims it would invest approximately $5 billion in graduate STEM programs that focus on internship and career pipelines.
Finding Common Ground Through Innovation
In sum, it seems that Trump and Biden have taken normal stances for their party lines towards encouraging business innovation. Biden has pitched public-private partnerships as the key to innovation and economic development, while President Trump has focused on tearing down government roadblocks such as taxes and regulations that he feels limits innovation efforts.
Glimmers of hope, such as bipartisan support for tax credits that incentivize research and development, prove that there is an understanding in Democratic and Republican circles for the need to retain technical talent, keep jobs here in the US and reward innovation.
The question now becomes whether we have the political will to make these aspirations a reality.
Small and medium sized businesses make up the backbone of our economy, with more than 99% of all businesses being small, and employing half of the country's workforce. As a result of the pandemic, however, millions have filed for unemployment while countless businesses have shuttered.
These companies have historically been a driving force behind our country's innovation efforts, and will ultimately be the key to our economic recovery in the days after COVID-19. That's why it's critical for our next president to embrace policies that foster innovation and offer the necessary support to American businesses so they can chart a path toward sustainable growth.
Whether we see a President Trump or Biden, one thing remains certain, our next leader must recognize the economic imperative of embracing policies that will enable our country's small to mid-sized companies to flourish. American businesses need the tools necessary to accelerate and meet their maximum potential today more than ever before.
The good news? There is a path forward, and unleashing American innovation will be the key.
Rick Lazio is currently a Senior Vice President at Alliantgroup, and is a former U.S. Representative from New York. Lazio served in Congress from 1993-2001. After Congress, Rick moved to the private sector working for JP Morgan Chase as a Managing Director and then Executive Vice President.
Joe Crowley is a Senior Policy Advisor at Squire Patton Boggs in Washington and serves on alliantgroup's Strategic Advisory Board. He was first elected to Congress in 1998 to represent New York's 7th District. After redistricting following the 2010 census, in 2012 he was elected as the representative of New York's 14th District. While in Congress, Crowley served as Chair of the House Democratic Caucus and Member of the House Committee on Ways and Means.