Karen Kornbluh: Can CHIPS+ Cure America’s Economic Cynicism?

This op-ed was originally published in The Hill.

By Karen Kornbluh

In the midst of high concern about the economy and following the failure of the climate and social spending bill that once contained President Biden’s Build Back Better agenda, Congress is struggling to enact bipartisan innovation legislation before departing Washington on their August vacation. Failing to do so risks cementing Americans’ cynicism about democracy’s ability to deliver.

In a Pew Research survey last year, over two-thirds of U.S. respondents reported believing American children would be financially worse off than their parents, up from 60 percent in 2019. And less than half (only 43 percent) of U.S. adult citizens believe that the American dream exists, sinking to 29 percent for adults under 30, according to a recent YouGov poll.

Unfortunately, the pessimism not only reflects the reality of the pandemic’s impact on the economy but longer-term trends. A report by think tank New America found millennials already earn 20 percent less than baby boomers did at the same stage in life. Pew found that median income growth slowed from an annual average rate of 1.2 percent from 1970-2000 to only 0.3 percent from 2000 to 2018.

That this same stagnation is not true for the most fortunate is only further grounds for Americans’ pessimism. Not only have incomes grown faster for the wealthiest, but at the end of 2021, the top 1 percent owned a record 32.3 percent of the nation’s wealth compared to 30.2 percent owned by the bottom 90 percent of Americans, according to the Federal Reserve. No wonder there is a pervasive sense that the winners of the last round game the system to benefit themselves in the future. Only two in ten Americans say they trust the government in Washington to do what is right “just about always” (2 percent) or “most of the time” (19 percent).

This cynicism can create a vicious cycle of decline. It can turn Americans against each other — and against immigrants — as they fear there is less to go around. As well, it can sap support for the kinds of public gambles that drove America’s storied economic growth and thriving middle class, from the canals and railroads of the 19th century to the expanding electricity and telecommunications networks, highway system and Space Race of the 20th century.

The internet famously emerged out of the Pentagon-funded ARPANET while the Internet Protocol and the World Wide Web developers were supported by government grants. Most recently, even the messenger RNA (mRNA) platform for vaccine development was spurred by a rush of government funding. These investments were accompanied by regulation and free education, as well as research and development, and expanded rights that broadened prosperity and the circle of opportunity.

The need is great for these kinds of bets today. As our dependence on critical technologies like semiconductors has grown, a frail U.S. supply chain has not met the moment. The U.S. risks falling behind China, which is investing in fifth-generation wireless technology, AI, high-speed rail links and developing an industrial internet. We are failing to transition to a green economy.

As heat waves roll across Europe and the U.S., the need to transition to a green economy is urgent. Yet, it is looking less likely that Congress will enact even the remaining clean energy transition investment pieces of the Build Back Better agenda.

Americans lacking evidence their government can help spur widely shared prosperity may sink further into nativism and polarization, creating fertile ground for authoritarians who seem to promise security. And without the kinds of policies needed to break this cycle, they will become a self-fulfilling prophecy.

This is why Congress should pull whatever pieces of the Bipartisan Innovation Act they can across the finish line. A successor to the America COMPETES Act passed by the House and the Senate’s United States Innovation and Competition Act, the new slimmed-down version of the bill is set to include $54 billion for the semiconductor industry and a possible tax credit to help build or modernize semiconductor fabrication facilities in the U.S., as well as significant new funding for the National Science Foundation, with a final vote expected as early as next week. Should it pass both chambers and arrive on President Biden’s desk for his promised signature before the August recess, it would represent significant progress at a time when it is sorely needed.

Of course, one bill is not sufficient to put the U.S. economy back on track, even on top of the recent stimulus and infrastructure funding. For that, we also need to reform our education system, update regulations, strengthen our care economy, reform our immigration system and safeguard rights. But it could jump start some of the optimism that motivated previous generations to invest in the future and each other — and start a new virtuous cycle of investment that helps us reclaim the American dream.

Amb. Karen Kornbluh (Ret.) is senior fellow and director of the Digital Innovation and Democracy Initiative at the German Marshall Fund of the United States, and former U.S. ambassador to the OECD.