Harvard Gives the U.S. an 'F'

A broken political system is killing our competitiveness

By Alan Murray of Harvard.

"A new report from the Harvard Business School this morning says the United States is “failing the test” of economic competitiveness.

The report is part of a project launched in 2011 by Michael Porter and his colleagues to understand the disappointing performance of the U.S. economy in recent years and identify steps to restore growth. Looking at the last five years, it finds unusually slow economic growth, declining productivity growth, slow employment growth, declining labor force participation, stagnant or declining real incomes, and a slowdown in small business formation.

That’s not to say that the U.S. doesn’t still enjoy some outsized advantages in the global economy. The Harvard study cited strengths in higher education, entrepreneurship, innovation, management and capital markets as key areas where the U.S. still leads. But, it said, “these strengths are being offset by weaknesses,” including the corporate tax code, the K-12 education system, transportation infrastructure, health care, and a broken political system.

“Many of the weaknesses, are in areas driven by federal policy,” the report concludes. “The federal government has made no meaningful progress on the critical policy steps to restore U.S. competitiveness in the last decade or more.”

What’s to be done? In true business school form, the Harvard report offers an eight point plan:

1) Reform the corporate tax code
2) Move to a territorial corporate tax system
3) Ease immigration of highly-skilled individuals
4) Address distortions and abuses in the global trading system
5) Improve infrastructure
6) Simplify and streamline federal regulation
7) Create a sustainable federal budget, including entitlement reform
8) Responsibly develop America’s energy resources

But the number one task is to fix a broken U.S. political system, which has stymied progress on the eight points above. “To us, the confused national discussion about our economy and future prosperity in this election year is our worst nightmare. There is almost a complete disconnect between the national discourse and the reality of what is causing our problems and what to do about them. This misunderstanding of facts and reality is dangerous, and the resulting divisions make an already challenging agenda for America even more daunting.”

Amen to that. You can read the full report here."