Putting America Back to Work

Fifty years ago the Soviet launch of Sputnik led to a national commitment to strengthen U.S. science and technology and put a man on the moon. That shift in priorities and the impressive results inspired a new generation of innovators—people such as Bill Gates, Steve Jobs, and Arthur Levinson—to create Microsoft (MSFT), Apple (AAPL), and Genentech. The companies they built created tens of thousands of jobs and revolutionized American industry.

Today the U.S. is facing a much more ominous event: the loss of 7 million jobs, double that of any recession in our lifetimes. This isn't just a short-term problem; it's indicative of structural flaws in our economy.

Economists are telling Americans a recovery is under way. It's true that government investments of nearly $2 trillion have saved Wall Street from collapse and that both the financial sector and corporate profits are bouncing back. But what about Main Street, where the jobs crisis gets deeper every day?

The Bureau of Labor Statistics reports that 16.8% of Americans are unemployed or underemployed, including those who have stopped looking. These statistics are much worse among Americans under 25, a quarter of whom can't find a job. For recent college grads with jobs, half are in positions not requiring degrees. Economists argue jobs are a lagging indicator. Not this time. None of the CEOs I know are hiring. Without prompt action, this recovery will be a jobless one.

The Obama Administration talks about saving jobs, but what we need to do is create them. While General Motors has emerged from bankruptcy, it is unlikely to hire more American workers. Summer construction projects and Cash for Clunkers provided short-term relief but not sustainable jobs. Much of the stimulus package has been spent on reducing state budget deficits and modest tax cuts, used by many consumers to pay off massive debts.

Instead of clinging to yesterday's economy, we should use this opportunity to rally around the cause of making the U.S. fully competitive. But what will it take to create sustainable jobs? We need to refocus on America's great strengths: innovation, entrepreneurship, small business, and new company formation. These were the engines that drove job growth in the 1980s and '90s. We can do it again by unleashing these powerful forces.

The biggest job creators are small businesses and companies that are expanding, like my former company, Medtronic (MDT), which has created 35,000 jobs in the past 25 years. Yet our national policies, unlike those in many European and Asian nations, often work against them.

One lever for creating jobs is the tax code. Imagine the surge in new businesses if tax credits for long-term investments were raised. And what if R&D tax credits were raised and made permanent? President Barack Obama had a great idea back when he was campaigning: offer a one-time capital-gains tax holiday for investors in new companies, or make capital gains taxable on a sliding scale so that they decline the longer an investment is held.

The U.S. already puts an emphasis on research spending. But now's the time to double down, especially in renewable energy, information technology, and health care—three of America's greatest strengths. And with so many workers who lack the skills for tomorrow's jobs, we should institute massive retraining and education programs to prepare workers for the high-tech jobs where the U.S. has a competitive advantage.

But this commitment to jobs has to extend beyond the government. The great job creators of the past decades—companies such as Google (GOOG), Wal-Mart (WMT), Microsoft, Intel (INTC), Amgen (AMGN), and Starbucks (SBUX)—are all innovators. Today's CEOs and venture capitalists can inspire future entrepreneurs to create the companies and the jobs that will revitalize the U.S. That's what PepsiCo (PEP) CEO Indra Nooyi (page 51) has been doing by moving her company into healthy foods and beverages. Venture capitalist John Doerr of Kleiner Perkins Caufield & Byers is investing in dozens of startups in renewable energy. CEOs Eric Schmidt of Google and John Chambers of Cisco Systems (CSCO) continue to invest in emerging info tech companies.

Almost 50 years ago, John F. Kennedy seized the moment and declared an audacious goal. President Obama has a chance to offer a similar challenge to tomorrow's entrepreneurs—and to give them a clear shot at the target.

Jack and Suzy Welch are off while Jack recovers from a back infection.

    Before it's here, it's on the Bloomberg Terminal.