The interviews in Colorado, Nebraska, and Ohio made it crystal clear that middle-class Americans are not counting on U.S. diplomatic, development, defense, and intelligence efforts to transform other nations but rather to protect the United States from the worst happening. They want officials tasked with these efforts to prioritize the promotion of global stability and the reduction of the U.S. vulnerabilities—likely even more so now and in the post–COVID-19 era.
There are serious strategic implications associated with reorienting activities to address these priorities, however. A focus on promoting global stability will make disengagement untenable, because a world without effective U.S. presence and leadership is a world where preventable or containable events can quickly escalate into international crises with devastating economic consequences. Americans are experiencing the effects of disengagement right now with COVID-19. But a focus on preventing global shocks also makes escalating geopolitical competition untenable, especially with China. Such competition could generate beggar-thy-neighbor policies or spark deadly confrontation, which could, in turn, cause dramatic economic shocks, inhibit effective global responses to them, and divert much-needed investments in the middle class.
To chart a different path forward, policymakers need to build and invest in international cooperation structures that provide the best insurance against those shocks and better manage the risks of systemic instability due to growing geopolitical competition, particularly with China.
To chart a different path forward, policymakers need to build and invest in international cooperation structures that provide the best insurance against those shocks and better manage the risks of systemic instability due to growing geopolitical competition, particularly with China.1 They must also closely assess U.S. vulnerabilities to future potential shocks and invest in greater economic resilience at the community level. Seven lines of effort offer a starting point:
- Bolster U.S. diplomatic leadership to mobilize effective global action and better advance middle-class interests.
- Manage strategic competition with China to mitigate risk of destabilizing conflict and counter its efforts toward economic and technological hegemony.
- Anticipate risks in a digital future and improve international policy coordination to reduce the threat of a digital crisis and promote an open and healthy digital ecosystem.
- Boost strategic warning systems and intelligence support to better head off costly shocks and build up protective systems at home.
- Shift some defense spending toward R&D and technological workforce development to protect our innovative edge and enhance long-term readiness.
- Strengthen economic adjustment programs to improve the ability of middle-class communities to adjust to inevitable changes in the pattern of economic activity.
- Safeguard critical supply chains to bolster economic security.
Bolster U.S. Diplomatic Leadership to Mobilize Effective Global Action
Future shocks are likely to arise from international developments that no nation can fully predict or manage on its own. COVID-19 is a perfect example, of course, but looking ahead to the long-term effects of the pandemic, more surprises will be in store. Episodes of political instability seem inevitable as governments worldwide struggle to manage severe political stress, deliver adequate healthcare, curb behaviors (and freedoms) that spread the virus, and boost their economies.
Many middle-class Americans interviewed across Colorado, Nebraska, and Ohio understood the risks of political isolation and rejected the idea that the United States is somehow better off alone. They want the United States to remain a positive and constructive force around the world and to defend its core values. They appreciate that noneconomic considerations—like humanitarian crises, long-term economic development needs, and human rights—need to play a role in U.S. foreign policy. But they remain concerned about serious problems at home and the potential costs of political overreach abroad.
Most interviewees see U.S. foreign aid as about more than short-term transactional gains. They understand it serves a wider purpose. It alleviates human suffering, helps to stabilize societies, and reduces the risk of civil and social unrest. It improves health, promotes schooling, and fosters economic development, which creates new markets for U.S. goods and services. It strengthens the political and diplomatic ties between the United States and others and creates good will toward Americans.
These middle-class Americans also accept that at times the United States needs to speak out against human rights abuses and punish nations whose actions undermine these values. They understand that these regimes make the world less safe and less free and hence less stable and less prosperous over the long term. Governments that severely restrict political freedoms at home may find free speech in other countries threatening and seek to curtail it. They may seek to undermine neighboring democracies that threaten their political legitimacy. They may deeply oppress minorities in their own country, which can escalate to the point of genocide and mass migration that destabilizes whole regions.
But middle-class Americans are concerned about the costs and unintended consequences of international confrontations and the potential for political overreach. They want the country to exercise its power judiciously and to selectively seek out the best opportunities for effecting positive change.
Instead of quitting the international system out of frustration, the United States needs to decide when and where to lead in international organizations—such as the United Nations, multilateral development banks, international financial institutions, and specialized agencies with universal membership, such as the WHO. Working from within, U.S. diplomats and official representatives need to anticipate and head off problems, steer the coordination of international responses to global crises, and direct aid to the most vulnerable countries.
To accomplish these goals, the international affairs budget must be protected—even in the face of severe fiscal constraints. It is currently $54.4 billion (Fiscal Year 2019), or about 1 percent of the federal budget.2 Those interviewed during this research understand that the federal government spends only a small portion of its budget on diplomacy and development, and very few support cuts to those budgets. Over the next several years, the United States should increase that level of funding by at least 20 to 30 percent to ensure a robust, modern twenty-first-century State Department and well-resourced development agencies, particularly the U.S. Agency for International Development.
Middle-class Americans . . . want the country to exercise its power judiciously and to selectively seek out the best opportunities for effecting positive change.
A healthier budget also helps to meet financial commitments and obligations to international organizations, so that they have the resources to deploy in a crisis and so the United States maintains considerable influence in setting their agendas. As of April 2020, before the Trump administration pulled out of the WHO, the United States owed roughly $200 million in arrears in membership dues and assessed fees.3 Undoubtedly, international organizations created decades ago must be remodeled to effectively meet the looming challenges of this century. The United States should not be writing blank checks to international organizations. Yet, at the same time, their shortcomings can hardly be improved with little or no engagement. The United States not only sits on their governing boards but wields tremendous influence in setting their policy and management agendas. It has significant leverage over the appointments of senior officials in these organizations and has ample opportunity to hold them accountable. Granted, the United States does not have a completely free hand. The very thing that makes such international organizations so valuable as a means of mobilizing global burden-sharing—their universal membership—also makes their governance extremely complicated and cumbersome. But this just underscores the importance of sending more, and seasoned, U.S. diplomats into battle to fortify these international organizations—which are often the first and only line of defense against global developments that could spell economic disaster for Americans.
It will take highly skilled diplomats and security professionals to manage growing strategic competition with China—a country that represents a security threat, economic competitor, and global partner all at once.
Finally, there is a sense that we need to get our own house in order. U.S. credibility needs to be rebuilt through the redress of democratic deficits and social, racial, and economic injustice at home even as it seeks to reclaim the moral high ground abroad. For the foreign policy community, this means assessing the distributional impacts of proposed policies. It also means recruiting a more diverse workforce into the U.S. foreign policy community, including people from less privileged socioeconomic backgrounds, and incorporating more stakeholders into the policy formulation processes.
Manage Strategic Competition With China
It will take highly skilled diplomats and security professionals to manage growing strategic competition with China—a country that represents a security threat, economic competitor, and global partner all at once. China’s opaque political decisionmaking, its ambition for greater regional hegemony, and its huge economy make it an ongoing potential source of major shocks and antagonistic power plays. On the other hand, China is essential to devising solutions to common problems. This duality should guide U.S. policy toward China—not naïve assumptions about China’s benign intent or growing calls in both political parties to wage a new Cold War. The U.S. foreign policy establishment must prioritize managing the risks to middle-class well-being emanating from this strategic competition, such as potential job losses and financial instability owing to a major economic showdown and intrusions into their personal data, online activities, and privacy (see box 2).
Box 2: A Multifaceted and Strategic Approach to China
A foreign policy that works better for the middle class argues for a broader and more strategic approach to the challenges posed by China. That will necessitate a wide range of policy tools and a careful balancing act between the economic benefits of continued trade and investment and the many risks associated with China’s unfair trade practices and its growing use of investment and aid programs to gain influence abroad.
Many different proposals in this report have relevance for creating a more multifaceted approach to China.
- In foreign economic policy and diplomacy, the United States should coordinate a global economic recovery that protects economic freedoms, engage in multilateral fora to counter Chinese influence, build new coalitions with like-minded allies and trade partners to address emerging challenges in the digital realm, create policy responses to state-led industrial policies, and support developing nations seeking an alternative to Chinese leverage.
- In the national security realm, the United States should fund healthy military budgets that allow it to blunt Chinese destabilizing incursions in the Asia-Pacific region, repurpose some defense dollars into strategic industries and critical workforce skills, and counter China’s push for technological dominance in certain sectors.
- In economic security and domestic resilience, the United States should combat unfair Chinese trade practices, aggressively defend the country’s innovative edge and intellectual property, and reduce undue reliance on Chinese suppliers for critical goods.
Given the high stakes involved, the United States must seek to deter major power conflict and ensure freedom of access in all major arteries of global commerce. To do that, the U.S. military will need to retain dominance within the global commons and sustain alliances that provide critical platforms to project power globally—even though the Chinese will often construe these measures as hostile. The U.S. military should sustain and increase investment in new offshore capabilities, including in the areas of intelligence, command and control, cyber, and space. It should also invest more in advanced unmanned systems, including the artificial intelligence and machine learning required, as well as advanced munitions and other long range, penetrating strike options.4 Given more flexibility by Congress, the Department of Defense could make these investments within existing or somewhat reduced appropriations, such as in ground forces, legacy platforms, and possibly nuclear forces if the appropriate arms control agreements are in place and being honored.5
In addition to a well-calibrated defense posture, the United States must develop a more robust strategic posture on technological competition with China. The government of President Xi Jinping has come to see technological prowess as the key to China’s continued economic rise and its ability to defend its national sovereignty against Western interference. Influential circles in China argue that technological dominance is a source of “comprehensive strength” and that the government can use its unique powers (and control) to create homegrown champions in the high-tech industries of the twenty-first century.6 As a result, the Chinese government offers state subsidies to strategic industries, spends heavily on R&D, and invests in global technology fora and international governing bodies. Reflecting China’s initial thinking, Made in China 2025 was a ten-year plan (issued in 2015) to encourage the production of higher value-added products. The China Standard 2035 plan (expected later this year) will lay out the country’s long-term goal for global technology standards. The United States needs to take this technological competition very seriously, as discussed in the next section.
While hardening U.S. postures in some arenas, the United States needs to carve out other diplomatic spaces where it can engage constructively with China to their mutual benefit.
While hardening U.S. postures in some arenas, the United States needs to carve out other diplomatic spaces where it can engage constructively with China to their mutual benefit. For example, the United States often needs Beijing’s cooperation to neutralize rogue regimes, nonstate actors, and unconventional threats that could harm the United States. To do so, U.S. diplomats engage with their Chinese counterparts across a range of international fora to deescalate those situations. When bilateral engagements become excessively politicized, it puts Americans’ safety at risk. Mutual recriminations between the United States and China are now dominating meetings in the WHO, the UN Security Council, and the G20, drawing attention away from the public health and economic dimensions of the coronavirus crisis, among other concerns. Endless confrontation and impulsive escalation between the world’s two largest economies sow public fear, undermine investment, and cost jobs—none of which serves the interests of the American middle class.
A more nuanced approach to China would yield greater benefits to middle-class Americans. Most of those interviewed in the three states want the United States to push back more effectively against unfair Chinese trading practices and make investments at home to compete more successfully with China.7 But otherwise they tend to see China pragmatically and are not inclined to view the geopolitical rivalry as an organizing principle of U.S. foreign policy.
Such an approach would also enjoy far greater support among U.S. allies and partners, who prefer military deterrence over intervention and want clearer parameters for economic competition among the world’s two leading economies. As such, the United States would be far more likely to have other nations by its side when it confronts China on unacceptable behaviors, including human rights violations, as it must. That would be far preferable to the current trajectory, where U.S. allies are increasingly hedging their bets between the United States and China.
Anticipate and Manage Risks to the Digital Future
An arena of growing competition with China and others, including the European Union, is the nature of the digital future—on which so much economic activity and so many middle-class jobs will depend.8 Data-driven innovation promises to improve productivity, competitiveness, and growth across virtually every sector in the global economy. At the same time, digitalization generates operational risks from hacking and data breaches; regulatory risks from inconsistent legal frameworks; and societal risks from unauthorized use of personal data, possible bias in algorithms, and wholly autonomous systems powered by artificial intelligence that, among other things, reduce demand for labor across a range of lower- and middle-income occupations.
In response to these challenges, many governments are pursuing new regulations but are doing so without the level of international coordination necessary given the global nature of the digital ecosystem. The result is growing digital fragmentation that will slow economic growth and innovation and hurt both small and large businesses that are increasingly dependent on digital technology. The lack of policy coherence on digital issues also could harm efforts to address global challenges or even trigger a global crisis. For example, if countries adopt divergent standards to govern data analytics, it could create disputes over medical diagnostic, product, or drug safety data, undermining efforts to tackle health issues such as the current pandemic. Without global coordination, a collapse of GPS navigational systems could suspend air, sea, and surface traffic; and a telecommunications breakdown could cascade through integrated systems, even triggering automatic countermeasures from a supposed adversary.
It will be challenging for the United States to forge such cooperation, both with its rivals and its partners. Authoritarian states seek to use vast data collection and digital technologies to suppress political opposition and control their populations. But there is also tension between the United States and the European Union over competing approaches to digital regulation and about its efforts to achieve “strategic autonomy” through the creation of new national champions as part of its new digital transformation industrial strategy.
Given the global nature of the digital ecosystem and the growing importance of the digital economy to U.S. economic growth and geopolitical interests, the United States must take the lead in promoting international cooperation, coordination, and, where appropriate, standard setting. The United States should consider establishing a new international body to manage the risks of a digital crisis and promote common approaches to digital regulation. Starting with allies and like-minded countries, it should work to address one of the principal concerns about cross-border access to data and sensitive infrastructure: the trust deficit. The lack of trust has spurred efforts to restrict data collection, storage, and processing to a prescribed local environment; to build firewalls that block internet traffic into certain locations; and to impose strict privacy rules that can encumber data mobility. The Japanese government highlighted the broad concern during its G20 presidency and presentation of former prime minister Shinzo Abe’s concept of “data free flow with trust.”9 To address the growing risks, the international community will need to strengthen standard setting, verification of compliance with standards, and regulatory supervision.
The United States should also work though this new body and existing fora, including the OECD, to build common approaches on such issues as competition policy, ethical use of artificial intelligence, and workforce displacement that tie back to the needs of the middle class. As the United States seeks to develop new policies to promote competition and innovation, including by small businesses, it must work with other countries to ensure that U.S. companies are not unfairly targeted. Exchanging more information and ideas on how to handle the challenges middle-class workers and businesses will face during the emerging fourth industrial revolution could also be beneficial.
Boost Strategic Warning Systems and Intelligence Support to Reduce Vulnerability
Missteps associated with the U.S.-China strategic relationship or a global digital crisis pose clear risks to the American middle class, but threats can also erupt from other remote corners of the world. And because it is hard for Americans to connect these often distant threats with potential economic turmoil in their local communities, it is up to national security and foreign policy professionals in Washington to shed light on them. Groups of intelligence analysts and security experts are trained to track unconventional threats to the United States and flag them for senior policymakers. They watch the horizon for global pandemics, cyber attacks, biological or technological terrorist attacks, animal diseases and other threats to the global food supply, humanitarian crises, geopolitical hostilities that block commercial shipping, and disinformation campaigns that roil markets. Unfortunately, their warnings can go unheeded for a wide range of reasons.
Strategic warning systems and tactical preparation deserve greater policy attention and resources.
Strategic warning systems and tactical preparation deserve greater policy attention and resources. Some of the obstacles are structural. First, these important national security functions compete for funds with major weapons systems, military operations, and military intelligence, which have much more identifiable constituencies. Second, because the credit for preventing a crisis is hard to attribute, the political rewards for championing these functions are comparatively low. Third, the necessary expertise—in public health, plant biology and food safety, critical infrastructure, psychological operations, and emerging technologies—tends to fall outside traditional security silos, meaning that personnel systems and budgets are not built to recruit and retain them. Fourth, the foreign policy community often becomes absorbed in the crisis of the moment, which diverts resources to day-to-day policy support and away from the strategic analysis of more slow-moving unconventional global threats. Finally, the intelligence community relies on sensitive and classified sources of information, inhibiting its ability to share critical information with domestic partners and build public confidence in its capabilities and intentions.
A series of modest changes could help in this regard. For example, while the National Intelligence Council produces an unclassified analysis of long-term threats, that product comes out only once every four years and covers a long horizon of twenty years. A more frequent annual product with a shorter time horizon (perhaps five years) could build credibility, raise public awareness of the threats, and strengthen institutional capabilities in warning. In addition, a wider mandate to provide intelligence support to domestic policy agencies with clear stakes in preventing global threats could strengthen tactical preparedness and sharpen intelligence priorities. Finally, investments in data analytics and open source intelligence could improve the analysis of specific threats of interest to domestic constituencies; make it easier to share some of the warning information among domestic partners in federal, state, and local governments; and build and calibrate event simulations to illustrate potential consequences and analyze policy options. In the realm of economic intelligence—which involves threats associated with economic espionage, investment security, financial and economic sanctions, sources of economic and market instability abroad, and supply chain and critical infrastructure, among others—a national fusion center like the National Cyber Intelligence Integration Center or National Counterterrorism Center could lead these efforts and signal stronger support for defending U.S. economic security.
Shift Some Defense Spending Toward Broad Technologies and Technical Upskilling
While superior U.S. military capabilities have helped secure the peace globally, long interventions—for example, in Iraq and Afghanistan—have proven costly to middle-class economic interests. In recent years, public support for large-scale nation building has largely evaporated while domestic economic concerns have grown, and this is a reality that the foreign policy and national security community cannot ignore. The situation has led to calls for immediate and major cuts to the defense budget, especially among some progressives. But many good middle-class jobs are tied to defense-related activities. It is vital to invest in the diversification of those local economies before subjecting them to a sudden drop in federal spending. A gradual and carefully thought-through approach is key.
For the middle class, drastic defense cuts can be just as damaging as excessive military build-ups. For example, during the interviews in Colorado, Nebraska, and Ohio, many expressed strong support for sustaining (or even increasing) this spending because it provides working families in communities an economic lifeline that might not otherwise come from the federal government. The Dayton region would be devastated by the closure of the Wright-Patterson Air Force Base, Ohio’s largest single-site employer. Colorado Springs, Colorado, would suffer greatly if funding for aerospace research was substantially reduced or halted. And thousands of families across all three states count on the National Guard and Reserves as a way to contribute toward their educational expenses, acquire coveted training, earn a livable wage, provide healthcare, and add to their portfolio of retirement benefits.
The U.S. military will remain a critical instrument of U.S. national power, as it has for many decades. The country must remain prepared to fight and win large-scale conflicts, although it should certainly not invite them. The country also needs sufficient forces and appropriate weapons platforms to deter adversaries, defend freedom of navigation and secure global commons, maintain key overseas positions like on the Korean Peninsula, train foreign militaries, and contribute to stability operations and peace keeping that contain conflict, preferably with close allies. These are investments in global stability that make the country safer. Dramatic budget cuts—like the $200 billion proposed by some progressives—are simply too risky (see box 3).
Box 3: Thinking About Defense Spending Differently
A foreign policy that works better for the middle class argues against major cuts to defense spending and calls for a moderate realignment of spending priorities.
Although cutting large defense budgets is very tempting, it is important to keep in mind that the middle class has a strong interest in global stability. Even if the country decides to invest more heavily at home, it will need the breathing room to do that. The ability to deter adversaries and contain foreign crises prevents major disruptions in the domestic policy sphere and, in this way, can be a positive enabler of change at home.
Moreover, most defense dollars are already spent at home. They support good middle-class jobs across the country and bolster many state and local economies. Major cuts to the defense budget will hurt many middle-class households. Rather, the defense budget should be pared back sparingly.
At the same time, some of the defense dollars spent at home could do more to support long-term security readiness and overall competitiveness of the U.S. economy. Using defense spending to protect the country’s innovative edge and upskill technical workforces is a form of national security investment.
More modest cuts should be sought, while making the associated activities work better for the American middle class. The funds could then be shifted toward supporting areas that promote both long-term security readiness and long-term economic competitiveness. A Presidential Task Force could bring together national security leaders, state and local leaders, educators, industry and business leaders, and other stakeholders to map out a set of significant longer-term public investments in pre-commercial R&D and technical education. Of course, the administration would need to work closely with members of Congress to make such a shift happen. Although some congressional members may resist, others will understand that these investments could diversify local economies and upskill local workforces. The funds could improve upstream innovation and build the national workforce in certain strategic industries, thus enhancing national security. Such an approach could leverage the significant expertise that the U.S. military already has in building public-private partnerships around R&D and in educating and training large numbers of personnel in applied technical fields. No equivalent levels of federal government spending would likely enjoy as much broad-based political support or create as much long-term growth potential.
The funds could improve upstream innovation and build the national workforce in certain strategic industries, thus enhancing national security.
A strong push to increase national spending on R&D, including through defense-related programs, is not a pipe dream. Between 1941 and 1964, federal research and development spending increased twenty times, catalyzing an economic and innovative boom.10 Importantly, the fruits of this investment were felt across the country in the form of both good jobs and new technologies that improved everyday life for countless Americans. Again, in the 1990s, the first generation of internet-based companies took flight and productivity surged, partly thanks to foundational public investments in communications technologies. Concerted efforts to invest broadly in basic science and advanced technologies can occur again and bring similar benefits.
In Fiscal Year 2019, federal R&D funding fell to 2.8 percent of the federal budget—the lowest amount in more than six decades.11 From 2007 to 2017, the real value of federal R&D expenditures only grew by 0.5 percent annually, compared with an average annual rate of more than 6 percent from 1953 to 1973.12 Moving some defense funds into revitalizing the public R&D sector would help reverse this slowdown. Programs, similar to those in national energy and defense labs, could focus on a broader range of civilian technologies, such as machine learning and artificial intelligence, advanced manufacturing, quantum computing, materials science, and green technologies. These efforts could create breakthroughs of economic, social, and national security value. The NCS, discussed in Chapter 3, could identify the specific fields of long-term importance to the United States.
A second set of investments should be directed to workforce development programs that enhance long-term security readiness, create decent-paying middle-class jobs, and help certain towns and smaller cities diversify their economies. For example, a recent study estimates that 2.4 million of the 4.6 million manufacturing jobs that could potentially be created in the United States in the decade 2018–2028 will go unfilled—mostly because American workers lack the skills needed for the increasingly technical work.13 The Trump administration pinpointed this skill deficit as a threat to the defense industrial base workforce.14 Under Executive Order 13806 on Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States, an interagency task force led by the Department of Defense was formed to look at the development of the United States’ manufacturing and STEM workforce as a national security imperative.15 The Department of Defense is therefore now working closely with the nine national manufacturing innovation institutes (collectively referred to as Manufacturing USA) to advance manufacturing education.16
Workforce shortages in cybersecurity are projected to be even greater. Industry experts estimate that the United States requires approximately 1.3 million cybersecurity professionals today but has only about 800,000.17 The Cyberspace Solarium Commission, co-chaired by Maine’s Republican Senator Angus King and Wisconsin’s Republican Representative Mike Gallagher, noted that there were currently more than 470,000 cybersecurity job vacancies in the private sector and more than 33,000 in the public sector.18 Some in the industry estimate that cybersecurity vacancies could grow to anywhere between 1.8 and 3.5 million globally within the next few years.19 The commission therefore proposed an expansion of the nation’s cybersecurity workforce, including through educational reforms at the K-12 level, cybersecurity clinics at colleges and universities, and public-private partnerships that help grow the cybersecurity ecosystem.20 It is worth noting that cybersecurity professionals now earn $69,000 per year on average, making the industry a solid source of middle-class jobs.21
This type of thinking should extend to the renewable energy sector, where jobs focused on combating climate change will be increasingly abundant. Two of the fastest-growing occupations in the United States between 2016 and 2026 will be solar photovoltaic installers and wind turbine service technicians, according to the U.S. Bureau of Labor Statistics.22 That will add tens of thousands of well-paying jobs to the hundreds of thousands that already exist in the clean energy sector—many of which require significant analytical and technical skill.23 Given the abiding national interest in energy security, and the increasing demand for energy that comes from cleaner sources, these workers should be considered part of the broader national security workforce. Their work will reduce an existential security threat and mitigate systemic shocks to the U.S. economy over the long term. And, in the process, many of them will earn enough to sustain a middle-class standard of living, as jobs within the clean energy economy offer wages that exceed the national average by 8 to 19 percent.24
Finally, the ongoing COVID-19 crisis is making a clear case for building a national security workforce that can prevent and contain global health crises. This workforce should include the governmental and nongovernmental personnel needed to sufficiently man a global early warning system, so possible future pandemics (and other health-related shocks) can be detected earlier. It also should include the manpower the Department of Homeland Security requires to effectively staff ports of entry to screen for and delay passage of those carrying infectious diseases. Lastly, it should include the public health and medical professionals needed to contain the spread of a pandemic in the United States through testing and contact tracing and to provide surge capacity for overwhelmed hospitals. After-action reports on the COVID-19 crisis—to be produced in the months and years ahead—should help determine the precise projected workforce requirements and the anticipated gaps related to pandemic preparedness.
Strengthen Economic Adjustment Assistance
Shifts in the U.S. defense posture, global trade patterns, and other structures will continue to challenge American communities. For decades, the United States has offered federally funded economic adjustment assistance programs to help workers and communities adapt to the shocks associated with major foreign policy decisions, such as trade and defense base realignments. However, current efforts are far too reactive by design, and programs are often too little, too late.
In the mid-1990s, adjustment programs struggled to absorb the major military drawdown, and they have been generally inadequate in managing the negative effects of globalization. In our urgent desire to address climate change, it is not hard to imagine that policymakers in Washington could commit the United States to sweeping regulatory changes that decimate energy-dependent communities like the ones in Colorado. Likewise, ambitious efforts to head off future global pandemics could dampen U.S. businesses that rely on low barriers to foreign travel. Or new trade agreements could drive companies out of certain locations and into others. All these developments—many of which are only partly under our control—will create both “winners and losers” within America’s middle class.
Existing adjustment programs lack a coherent framework and strategic oversight and are not linked to U.S. goals to enhance its global competitiveness or to policies that address distributional issues. The Department of Defense’s Office of Economic Adjustment, which helps states and communities manage shifts in defense posture, can only do so much when upfront investments in workforce development and infrastructure were not made. Meanwhile, the Departments of Commerce and Labor have seen steady reductions in funding for military base reuse and workforce training and reemployment. Economic adjustment assistance programs related to trade (TAA programs) or energy developments are managed entirely separately and without any significant government efforts to systematically learn and apply lessons across them. Indeed, the emerging thinking on adjustment assistance for fossil-fuel dependent workers and communities is still in its early stages and has yet to fully penetrate beyond progressive circles outside the government.
Existing adjustment programs lack a coherent framework and strategic oversight and are not linked to U.S. goals to enhance its global competitiveness or to policies that address distributional issues.
To better protect American communities from current and future global shocks, the federal government needs to improve its use of economic adjustment assistance. Local knowledge and expertise will be essential to make these programs more effective, but they would also benefit from a stronger strategic framework. The NCS could incorporate a section on economic adjustment needs and strategies to meet them. Local stakeholders could be convened to identify the best upstream investments in workforce development and infrastructure and to find ways to attract new businesses before a factory, military base, or coal mine closes. The technical training initiatives discussed in the preceding section could link back to these economic adjustment programs as well.
Finally, as with the competitiveness-related efforts outlined in Chapter 3, the federal government could play a role in devising creative financing solutions that strengthen economic adjustment programs. For example, the Trump administration’s Opportunity Zones provided capital gains tax benefits to encourage investments in areas lagging growth. Progressives have criticized these efforts because some of the money has gone to gentrify areas that might draw investment anyway and because the investment response through early 2020 was tepid. But rule changes could make the underlying approach more sound. For example, recent changes to the Community Reinvestment Act of 1977 have created stronger incentives for commercial banks to lend for projects in these areas, and follow-on changes could sharpen the focus on projects with the greatest benefit to local workers and households.25
Safeguard Industrial Resilience
The rapid expansion of global supply chains has lowered production costs, allowed for greater efficiency and specialization within the global value chain, and created opportunities for businesses around the world to participate in the global economy. At the same time, it has heightened the logistical complexity of international trade, made the United States more vulnerable to global supply shocks, and heightened the economic leverage of foreign suppliers such as China. The scramble to acquire personal protective equipment and medical supplies during the coronavirus pandemic is a salient example, and it has raised unsettling questions about the supply of food, essential consumer items like medicines, and critical industrial components, as well as the resilience of the defense industrial base.26
The rapid expansion of global supply chains . . . has heightened the logistical complexity of international trade, made the United States more vulnerable to global supply shocks, and heightened the economic leverage of foreign suppliers such as China.
The United States faces a long-term challenge of balancing the loss of domestic productive capacity—often the natural result of declining global competitiveness in certain market segments—and the need to ensure reliable access to critical goods during crises. To date, government officials have resisted direct intervention in domestic markets, arguing that policy measures would distort production and possibly increase costs (and consumer prices). They also argue that it is hard to anticipate specific requirements for the next crisis, implying that government could bet on the wrong horse. But with so much of the world’s production of critical goods now located in China, these arguments are less persuasive.
A more multifaceted strategy could ensure that vital goods are available during a crisis, as well as build the resilience of industrial supply chains. One prong of the strategy should be strategic stockpiling—particularly of goods that have few foreign suppliers, rely on highly vulnerable supply lines, have no close substitutes, and are relatively easy to store. These goods could include certain medicines, medical supplies, seed banks and food supply components, hard-to-produce parts critical for power production, and elements of the defense supply chain. A closely related effort involves carefully targeted reshoring—the deliberate build-up of domestic production capability in certain sectors. These efforts should focus more narrowly on manufactured goods that are difficult to store (perishable, unstable, bulky, and so on) and that require specialized facilities or personnel to produce. For example, reshoring could be useful when complex parts are needed for heavy industrial processes or vital transportation, communications, or energy networks and when skilled workers are necessary to increase overall supply chain flexibility. The United States should avoid reshoring, however, for highly tradable, noncritical goods like clothing, consumer durables, and goods that could be stockpiled instead. That could introduce unnecessary distortions that prove costly to middle-class households. For example, bringing the production of all N95 face masks to the United States could make them unaffordable for local and regional hospitals. Stress tests on essential supply chains could help to identify appropriate cases for stockpiling and reshoring.
A second prong of the strategy should be building a trusted and diverse set of trade partners to meet critical supply needs. In the aftermath of the 1970s boycott of the Organization of the Petroleum Exporting Countries, the United States combined a national scheme to stockpile petroleum (the Strategic Petroleum Reserve) with an international effort to stand up the International Energy Agency, a multilateral forum dedicated to responding to global supply disruptions, improving energy security, and enhancing international policy cooperation. This approach blended an effort to build resilience at home with international outreach to strengthen policy transparency and innovation in the wider global community. Nearly five decades on, this type of approach still has relevance.
In the digital realm, an alliance-based approach could blunt Chinese ambitions for technological dominance and strengthen domestic digital resilience. For example, the United Kingdom, France, and possibly India are starting to align with the United States, Australia, and other countries in sharply curtailing the presence of Huawei equipment in their 5G networks. This presents an opportunity for the U.S. and other like-minded governments to pursue a broader multilateral effort that improves confidence in alternative systems and fosters solutions acceptable to foreign partners. The basic elements of a path forward include creating a secure domestic 5G infrastructure free of untrustworthy vendors, assisting allies and like-minded partners to do the same, and investing (including jointly) in R&D around new approaches to deploying advanced mobile infrastructure. But first, senior-level leadership must work with Congress to establish sufficient funding levels and flexibility and to create a multilateral public-private partnership that will serve as the focal point for implementation. Unfortunately, a recent similar effort led by Virginia’s Democratic Senator Mark Warner only secured 5 percent of the requested $500 million in funding. Given growing concerns about secure supply chains and increasing unease within industry and financial circles about the United States falling further behind China in deploying 5G networks, failure to act decisively could allow Chinese tech companies to forge ahead with innovations beyond its robust nationwide 5G infrastructure.
A third prong involves leveraging technology to promote the resilience of industrial supply chains. The United States will need to rely on regeneration and redundancy for complex logistics systems, operations that depend on continuous connectivity, and/or activities that need high levels of data integrity, such as precise date-stamping in financial clearing operations and precise geolocating in shipping and aviation. Focusing on resilient design also could diminish reliance on vulnerable supply chains—for example, through designing gas turbine engines that have material tolerances allowing for 3-D printed parts.
A fourth prong is improved disaster assistance to allies and partners serving as global hubs for vital industrial supply chains. A prime example is when the United States aided Japan, a major global hub for auto parts, following the earthquake and tsunami in 2011 that caused a meltdown of a nuclear power plant in Fukushima. The United States and its allies should each diversify production capacity to diminish total reliance on any particular source, such as China in the case of Huawei and 5G.
Finally, defensive economic tools should be deployed, in coordination with U.S. allies, to protect the United States’ innovative edge in key sectors. These tools include export controls, foreign investment reviews by the Committee on Foreign Investment in the United States, licensing reviews by the Federal Communications Commission, and targeted sanctions. For example, some of these tools can be used to prevent or redress unlawful or undesirable appropriation of U.S. technology that would threaten national security. At the same time, concerns about a particular transaction should focus on incremental threats and be deployed in a manner sensitive to economic interests, such as the benefits of foreign direct investment for local communities. Accordingly, creative tools for mitigating the risk of certain deals or devising new ownership schemes that address legitimate security concerns while still garnering economic benefits should be explored.
Need for a Stabilizing and Cooperative Approach
Foreign policy professionals have a major role to play in helping the American middle class to prosper. Success will require a sustained effort to refocus U.S. leadership away from its reliance on military intervention toward a diplomatic and security stance consistent with promoting global stability and domestic resilience. The United States has adversaries that must be deterred and confronted, making major defense cuts unwise. But it also has many friends and partners that can share the burden of maintaining stability and that are interested in mutually beneficial trade, investment, and technological relationships that raise living standards for all. It is easy and popular to blame globalization for all our ills, but many Americans know that we can thrive in an open and competitive global economy. They know that U.S. influence is a powerful tool in making us safer and richer. They just want to share in the benefits more equitably.
A more tempered, disciplined foreign policy approach along these lines—focused on heading off threats, working with like-minded nations to address shared challenges, and strengthening resilience at home—would also enjoy the support of many U.S. allies and adversaries alike because it is not oriented toward remaking other states in the United States’ image, especially not under the force of arms. In turn, this support would better position the United States to press for an effective international division of labor and equitable burden-sharing. The goal is to help the American middle class and those struggling to join it. But an isolated United States cannot do it.
1 See testimony at https://www.commerce.senate.gov/services/files/6880BBA6-2AF0-4A43-8D32-6774E069B53E by Dr. Rush Doshi, Director, Brookings Institution’s China Strategy Initiative, for the hearing “The China Challenge: Realignment of U.S. Economic Policies to Build Resiliency and Competitiveness,” before the U.S. Senate Committee on Commerce, Science, and Transportation, Subcommittee on Security.
2 U.S. Congressional Research Service. Department of State, “Foreign Operations and Related Programs: FY2019 Budget and Appropriations (R45168; March 12, 2019),” by Susan B. Epstein, Cory R. Gill, and Marian L. Lawson, accessed September 15, 2020, https://fas.org/sgp/crs/row/R45168.pdf.
3 David Welna, “U.S. Was Behind on Payments to WHO Before Trump’s Cutoff,” NPR, May 7, 2020, https://www.npr.org/2020/05/07/850326053/u-s-was-behind-on-payments-to-who-before-trumps-cutoff. As of June 2020, that amount had fallen to a bit less than $100 million; see World Health Organization, “Assessed Contributions Overview of all Member States,” August 31, 2020, https://www.who.int/about/finances-accountability/funding/AC_Status_Report_2020.pdf?ua=1.
4 Ely Ratner, Daniel Kliman, Susanna Blume, Rush Doshi, Chris Dougherty, Richard Fontaine, Peter Harrell, Martijn Rasser, Elizabeth Rosenberg, Eric Sayers, Daleep Singh, Paul Scharre, Loren DeJonge Schulman, Neil Bhatiya, Ashley Feng, Joshua Fitt, Megan Lamberth, Kristine Lee, and Ainikki Riikonen, “Sustaining Conventional Military Deterrence,” in “Rising to the China Challenge,” Center for a New American Security, December 2019, https://s3.amazonaws.com/files.cnas.org/documents/CNAS-Report-NDAA-final-6.pdf?mtime=20200116130752.
6 Rush Doshi summarized the policy challenges associated with Chinese technological ambitions in recent congressional testimony; see “Prepared Statement Before the U.S. Senate Committee on Commerce, Science, and Transportation Subcommittee on Security” for the hearing “The China Challenge: Realignment of U.S. Economic Policies to Build Resiliency and Competitiveness” the United States, China, and the Contest for the Fourth Industrial Revolution July 30, 2020.
7 See, for example, Ahmed et al., “U.S. Foreign Policy for the Middle Class: Perspectives From Nebraska,” 25.
8 The foundation of this proposal was first published in late 2019 by Daniel Price; see “Today’s Tech Industry Mirrors the Pre-2008 Financial Industry: Have We Learned Our Lesson?,” Washington Post, December 2, 2019, https://www.washingtonpost.com/opinions/2019/12/02/world-leaders-should-act-avoid-digital-crisis-before-its-too-late/.
9 World Economic Forum, “Data Free Flow With Trust (DFFT): Paths Toward Free and Trusted Data Flows,” White Paper, June 10, 2020, https://www.weforum.org/whitepapers/data-free-flow-with-trust-dfft-paths-towards-free-and-trusted-data-flows.
10 Jonathan Gruber and Simon Johnson, Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream (New York: PublicAffairs, 2019), 6.
11 Office of Management and Budget, Historical Tables, “Table 9.7—Summary of Outlays for the Conduct of Research and Development 1949–2021,” historical data accessed on September 10, 2020, https://www.whitehouse.gov/omb/historical-tables/.
12 Annual percent change in the real value of federal spending on research and development, accessed via Haver Analytics on August 9, 2020. The original source is the National Science Foundation’s report on National Patterns of R&D Resources; see Mark Boroush, “U.S. R&D Increased by $32 Billion 2017, to $548 billion: Estimate for 2018 Indicates a Further Rise to $580 billion,” National Science Foundation, January 8, 2020, accessed September 15, 2020, https://www.nsf.gov/statistics/2020/nsf20309/.
13 Deloitte and the Manufacturing Institute, “2018 Deloitte Skills Gap and Future of Work in Manufacturing Study,” 2018, https://www2.deloitte.com/content/dam/insights/us/articles/4736_2018-Deloitte-skills-gap-FoW-manufacturing/DI_2018-Deloitte-skills-gap-FoW-manufacturing-study.pdf.
14 Office of the Undersecretary of Defense for Acquisition and Sustainment, Office of the Deputy Assistant Secretary of Defense for Industrial Policy, “Industrial Capabilities,” Annual Report to Congress Fiscal Year 2018, May 13, 2019, https://www.businessdefense.gov/Portals/51/Documents/Resources/2018%20AIC%20RTC%2005-23-2019%20-%20Public%20Release.pdf?ver=2019-06-07-111121-457.
15 Interagency Task Force in Fulfillment of Executive Order 13806, Report to President Donald J. Trump, “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States,” September 2018, https://s3.amazonaws.com/static.militarytimes.com/assets/eo-13806-report-final.pdf.
16 Manufacturing USA, “Institutes,” accessed May 2020, https://www.manufacturingusa.com/institutes.
17 (ISC)2, “Strategies for Building and Growing Strong Cybersecurity Teams,” (ISC)2 Cybersecurity Workforce Study, 2019, https://www.isc2.org/-/media/ISC2/Research/2019-Cybersecurity-Workforce-Study/ISC2-Cybersecurity-Workforce-Study-2019.ashx?la=en&hash=1827084508A24DD75C60655E243EAC59ECDD4482.
18 United States of America Cyberspace Solarium Commission, “CSC Final Report,” March 2020, https://drive.google.com/file/d/1ryMCIL_dZ30QyjFqFkkf10MxIXJGT4yv/view.
19 Steve Morgan, “Cybersecurity Talent Crunch to Create 3.5 Million Unfilled Jobs Globally by 2021,” Cybersecurity Ventures, October 24, 2019, reporting on Herjavec Group, “2019/2020 Cybersecurity Jobs Report,” https://cybersecurityventures.com/jobs/; and William Crumpler and James A. Lewis, “The Cybersecurity Workforce Gap,” Center for Strategic and International Studies, January 29, 2019, https://www.csis.org/analysis/cybersecurity-workforce-gap.
20 United States of America Cyberspace Solarium Commission, “CSC Final Report.”
21 (ISC)2, “Strategies for Building and Growing Strong Cybersecurity Teams.”
22 Elka Torpey, “Green Growth: Employment Projections in Environmentally Focused Occupations,” U.S. Bureau of Labor Statistics, April 2018, https://www.bls.gov/careeroutlook/2018/data-on-display/green-growth.htm.
23 Rakesh Kochhar, “New, Emerging Jobs and the Green Economy Are Boosting Demand for Analytical Skills,” Pew Research Center, March 23, 2020, https://www.pewresearch.org/fact-tank/2020/03/23/new-emerging-jobs-and-the-green-economy-are-boosting-demand-for-analytical-skills/.
24 Mark Muro, Adie Tomer, Ranjitha Shivaram, and Joseph Kane, “Advancing Inclusion Through Clean Energy Jobs,” Brookings Metropolitan Policy Program, April 2019, https://www.brookings.edu/wp-content/uploads/2019/04/2019.04_metro_Clean-Energy-Jobs_Report_Muro-Tomer-Shivaran-Kane_updated.pdf.
25 Brendan Pedersen, “OCC Goes It Alone on Narrower CRA Rule,” American Banker, May 20, 2020, https://www.americanbanker.com/news/occ-goes-it-alone-on-narrower-cra-rule.
26 For example, the pandemic’s impact on the aerospace industry’s commercial supply chain, especially if combined with defense budget cuts, may result in significant structural changes within that industry in the coming year.