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Technology is probably the greatest challenge for the US: Anirban Basu

Interview with Anirban Basu, Chairman & CEO of Sage Policy Group.

By Raif Karerat

WASHINGTON, DC: Anirban Basu is the Chairman & CEO of Sage Policy Group, an economic and policy consulting firm based in Baltimore, Maryland.


Anirban Basu

Basu has authored several high-profile economic development strategies on behalf of government agencies, non-profit organizations, and private institutions. He also serves as the chief economist to the national Associated Builders and Contractors association as well as chief economic advisor to the Construction Financial Management Association. To top it all off, Basu manages to find time to lecture at Johns Hopkins University on micro, macro, international, and urban economics.

In 2007, Basu was selected by the Daily Record newspaper as one of Maryland’s 50 most influential people, while the Baltimore Business Journal named him one of the region’s 20 most powerful business leaders in 2010

Seemingly never one to rest on his laurels, Basu recently spoke with The American Bazaar about his future plans in the political sphere and the current state of the American economy. Excerpts from a phone interview:

You’re Chairman & CEO of Sage Policy Group, an economic and policy consulting firm. Can you give me a primer describing the work your firm does?

We regularly research for anyone who needs it and looks to us for it. A lot of our clients are in need of economic information while operating in political context. So we do a lot of work for energy suppliers who need help relicensing dams, or forestalling a tax increase, or trying to finance a new project. We work with a lot of developers who are tracking zoning modifications, we work with a lot of attorneys whose clients find themselves involved in litigation. We do economic studies and economic development strategies for state and local governments — so we do economic research in highly politicized settings.

It seems the work you do is broad-spectrum in its applications but very much focused on the public policy.

Yeah, that’s exactly right. We are economists and policy analysts — and there’s public policy, of course, but there’s also private policy. We do a lot of analysis for private companies as well…analyzing their private economies.

You were appointed to Gov. Hogan’s transition team as an advisor on economic policy. What did the position entail more specifically?

My job was to, among other things, write a memorandum. A lot of members of the transition team were asked to write memoranda, but the difference for me was that I was allowed to beyond two pages. So I wrote a memo speaking to how to reposition the state’s economy, how to think through tax policy…and how to elevate the status of a state in the minds of investors, people who are looking for sites for physical plants or factories or distribution centers. Besides the main issue addressed in the memorandum of how to attract investors to Maryland, there’s also the impact of government downsizing to come in the years ahead.

Do you think Maryland will have to cut state worker positions in order to better balance the state budget?

That’s a great question. I think the total compensation for state government workers will clearly not be able to grow as it has in the past and may have to shrink… as people leave their jobs for either retirement, or positions in local government or in the private sector, many of those jobs will not be filled, so over time, the state worker employment level will decline. As you know, there have been some proponents of adjusting state worker compensation and I’m quite sure that many people do not like what has been proposed. This is part of dealing with a roughly 1.2 billion dollar fiscal shortfall for fiscal year 2015 and 2016. We knew that there was going to be some change, ultimately I think we end up with a smaller state government workforce, maybe not due to layoffs, but due to attrition in the next couple of years.

Sage seems to focus on the domestic economy. How much does foreign policy enter into the equation in your day to day?

I think pretty massively. If one defines foreign policy in the right way — as an example, I think most would agree that foreign policy impacts immigration policy. And immigration policy has massive impact and implications for the U.S. economy. The feeling is that because the nation is still wrestling with the post-9/11 world, we have not expanded H-1B and H-2B visa programs the way we probably would have were we not so focused on homeland security. That obviously has very significant implications for national performance. Obviously a nation that’s not permitting as many new immigrants to come is going to have slow population growth and slow population growth leads to less economic growth. It also leads to less innovation. Roughly a quarter of all businesses founded in Silicon Valley are founded by someone of Indian descent and so by not expanding the H1-B visa program, by not aggressively recruiting the best and the brightest from India, South Korea, Russia, Venezuela, South Africa, so on and so forth, we’ve probably stifled our innovation and our economy and created an environment where there is less business formation and overall less job creation. So clearly [foreign policy] has a lot of effect. Obviously there’s defensive expenditures — how much money was spent in Iraq; how much money was spent in Afghanistan. And that has implications as well for the national debt that now exceeds 18 trillion dollars.

Bringing it back stateside, is the U.S. educational system still up to the challenge of supporting the overarching economy?

To answer whether our educational system is ready to handle and support the twenty-first century economy: that’d be yes and no. There is no country that has as many top colleges and universities as America. And what’s very interesting about American colleges and universities is that they’re extraordinarily diverse.  There’s Harvard, Yale, Stanford, Cal Berkley, MIT, Cal Tech, Rice, Emory, Johns Hopkins, Georgetown, the University of Chicago, Penn, and so on and so forth. They’re all great schools in different ways. Some schools amplify engineering, some schools amplify the liberal arts, some schools amplify economics, or the social sciences, but they’re all excellent at what they do. And not only do we have excellent undergraduate programs, we have excellent graduate programs as well. And that’s one of the reasons so many people come all the way across the world to America  for higher education.

Now, I think the story with pre-K through 12 education is more complicated. It is my very strong feeling that we do not offer enough vocational training — what today is often referred to as “career and technical education”– where you help 11th and 12th graders understand what their economic prospects are going to be and what occupational categories fit with their school prep and their passion. We have created a pre-K through 12 structure in which one size fits all and as a result of that a lot of potential wins are not secured. And often people are confused by what their economic prospects are and what direction they should head in.

If implemented, will President Obama’s plan to offer free community college be a boon or a drain on the American economy in the long term?

I don’t think it’s going to be implemented as an act. Obviously we have free public education and that’s a very positive thing. That’s actually one of the primary ways in which America tries to equalize economic opportunity. Obviously people are born into different circumstances but everyone gets access to free public education. It’s very important to take advantage during those thirteen or fourteen years of free education. That allows someone to get on the ladder — the economic ladder … so why not extend it another two years into the thirteenth or fourteenth grade, meaning the first two years of community college? Well, it has its benefits, but ultimately, who pays for it? It’s the tax payer. This most recent election — at least if you look at the state level results — you notice we have Republican governors in Illinois, Massachusetts, and Maryland. There was an expression by the American people that they may be a little bit weary of taxes already. So I think it’s a non-starter — there just isn’t the money for it.

What are the greatest challenges ahead of the U.S. in the face of a diversifying global economy?

I think technology is probably our greatest challenge. We are now approaching a period during which robotics will very much take over production, whether in manufacturing or in other context, and that’s scary because we already know that the American middle class has to compete with lower cost workers across the world and we also understand that technology has the capacity to replace a lot of current workers. And so one wonders where the next generation of jobs are going to come from and how well they’ll be compensated. Already over the past 15 years we’ve observed almost no wage increase in America in real terms. The question that scares me the most is how do we sustain a middle class in the wake of globalization and technological transformation and I don’t think anyone has any good answers there.

What has been the proudest moment of your career, to date?

I think the proudest moment was when we realized this company — Sage Policy — could survive, could grow, could make a difference. We started this company in 2004 — I basically started it with my wife in an attic after a bad day in March of 2004. I really had no income at the time, I was basically unemployed, and here we are 11 years later and we’re still here and we’re basically a debt free company. I think that’s the probably the proudest aspect of my career: starting a small business and surviving for this long. Obviously every day that we can do good work and give our clients satisfaction — those are proud days. But just surviving means a lot to us.

You’ve been involved in shaping public policy to a certain degree through your work at Sage Policy Group, but do you have any aspirations to become a politician in the traditional mold?

Absolutely. I’ve said publicly that I want to run for office one day. I’ve been an economic consultant this whole time, I’m 46 years old now, and I want to have a second career. It’s a behemoth challenge though, let me tell you. You know, to get into office you have to be a dragon slayer — a giant killer! People who have been elected before us have amassed campaign funds and they have amassed connections — and I really respect people who are elected to office. Now, I may respect them less once they get into office, but I’ll tell you that running a campaign and successfully winning a state — big deal! Take what Barack Obama has accomplished. Here’s a guy from Illinois who wasn’t so well known around the country, and he took on Hillary Clinton and won. He took on Senator McCain, a war hero — and won. He took on Mitt Romney — and won. It’s really incredible. Whether or not people like Barack Obama or his policies one has to pay homage to his ability to run a campaign and his boldness to run in the first place. I’m not thinking of running for anything like that, but even local office, whether in the Maryland General Assembly or county executive — I’m really impressed by people who take the risk and run and actually win. I’d like to be one of those people but I know it’s really daunting.

How soon do you think running for office might be a reality for you?

I would say I’d like to do that in the next four years.

And that would be in Maryland, correct?

Yes, it would be some kind of Maryland office. There’s two kinds of elections broadly speaking: local elections and statewide elections. I think my first election may very well be a local election. I’d be very interested in that.

  • PerturbedPundit

    “Roughly a quarter of all businesses founded in Silicon Valley are founded by someone of Indian descent…”

    And how many of those businesses are body shops? How many of those businesses are instrumental in siphoning jobs out of the US?

    “…and so by not expanding the H1-B visa program, by not aggressively recruiting the best and the brightest from India, South Korea, Russia, Venezuela, South Africa, so on and so forth, we’ve probably stifled our innovation and our economy and created an environment where there is less business formation and overall less job creation.”

    “Best and brightest”? The latest Government Accountability Office report on the H-1B visa discusses at some length the fact that the vast majority of H-1B workers are hired into entry level positions. In fact, most are at Level I, officially defined by the Dept. of Labor as those who have a “basic understanding of duties and perform routine tasks requiring limited judgment”. Moreover, the GAO report indicates that a mere six percent of H-1B workers are hired at “Level IV”, which is officially defined by the Dept. of Labor as those who are “fully competent”. This belies the industry lobbyists’ claims that H-1Bs are hired because they are experts that can’t be found among the U.S. workforce.

    I support attracting the “best and brightest” from around the world to contribute to the US. However, the H-1B visa is not being used to that end.

    Source: U.S. Government Accountability Office – “Reforms Are Needed to Minimize the Risks and Costs of Current Program”, Jan 14, 2011