The Joint Economic Committee, led by Chairman Erik Paulsen, R-Minn., held a hearing this week on “How the Innovation Economy Leads to Growth," examining how to sustain the newfound growth in the American economy by encouraging innovation.
In his opening statement, Chairman Paulsen said:
“[The growing economy] stems from the decision to unleash America’s most valuable economic asset: the American people. Tax and regulatory relief are allowing American families and main street job creators more breathing room and to do more. To achieve this, Washington needs to stay out of the way so that individuals are free to figure out new ways to solve old problems. Such innovation is vital to sustaining our restored economic growth. America has been a laboratory for invention since its inception, and it is that spirit that has led to our strength.”
In their testimony, witnesses across the panel shared their vision for how to encourage innovation. Dr. Harold Furchtgott-Roth, Director of the Center for the Economics of the Internet and former FCC Commissioner, said that
The simple formula of clear property rights, reduced regulation, and competition unshackled the information sector in the United States in the past. The simple formula can continue to work in the future. This formula yields economic growth in America and the foundation to preserve the American ideal for countless individuals in America and around the world: innovation is rewarded.
Dr. Michael R. Strain, Director of Economic Policy Studies at the American Enterprise Institute, agreed that allowing individual Americans to thrive without allowing Washington to get in the way is a pivotal part of growth.
Beyond encouraging innovation through increasing skills and supporting basic research, there is a wide variety of actions government can take. Avoiding excessively high tax rates, reducing regulation and other barriers to technological progress, and maintaining a posture of openness to the rest of the world through international trade are just some of the ways public policy can support innovation. Congress can also foster innovation by helping to create and enforce an appropriate regulatory environment. Likewise, imprudent regulation can stifle innovation, slowing economic growth and the rate of improvement of living standards.
Mr. Mark P. Mills, Senior Fellow at the Manhattan Institute, argued that while it may be difficult to forecast the next step in innovation and technology, economic growth depends on improving productivity.
Using technology to reduce or amplify human labor has been a central pursuit of humanity for all of recorded history. Productivity is central to economic progress. As economic historian Joel Mokyr has pointed out, technological innovation gives society the closest thing there is to a “free lunch.” From the dawn of the industrial revolution, it has enabled the near-magical increase in the availability of food, fuel and many products. Today we stand at the beginning of epoch-changing shifts in technologies relating to both manufacturing and healthcare. As history shows, such advances have never been predicted by economists. Instead they’ve been invented and propelled by innovators. We should look for evidence of the next great cycle of foundational innovation in the ‘hidden’ domains where innovators work, not where pundits and the media prognosticate.
To watch the full hearing, click here.
The Joint Economic Committee will continue to hold hearings on innovation and economic growth in order to help Congress pass sound economic policies that help all Americans. Stay tuned.