Cumberland Cty. Business Council Remarks
AS PREPARED FOR DELIVERY
Cumberland County Business Council
Lunch Remarks by Thomas J. Donohue
President & CEO,
February 1, 2006
Fayetteville, N.C.
Thank you, Kirk, for that introduction and all the work that you, Tom, and the entire CCBC staff do to sustain such a fine organization. CBC has exercised strong leadership and influence in attracting jobs and investment to this community, and in creating a better business environment. With any member-based business organization, it's the organization that provides the tools, and the membership that uses them to advance the organization's goals.
CCBC offers a wide variety of political tools – candidate profiles, trips to the state capital, regular meeting with legislative staff - that give small businesses an opportunity to impact the public policy decision-making process. If you're not taking advantage of these resources, I strongly suggest that you start.
I'm very pleased to be a part of your state of the business community event. We held our annual State of American Business event in Washington the first week in January, where we laid out the challenges and opportunities facing the business community and the Chamber's agenda for tackling them. I'll be sharing parts of that agenda with you this afternoon.
I appreciated hearing Dr. College's remarks. Since I became head of the U.S. Chamber more than eight years ago, we've developed a much closer relationship with the U.S. military.
A strong relationship between business and the military has always been important, but today it is perhaps even more critical than ever. I'd even go so far as to say that our nation cannot prevail or prosper without it.
The global war against terrorism, the struggle to protect our borders and infrastructure while not surrendering our freedom and mobility, and the fight against isolationism here at home all demand cooperation between business and the military.
Business benefits greatly from this relationship. Defense spending supported nearly 2.5 million private sector jobs in 2002, and that number is projected to grow over the next several years.
This collaboration has spurred innovation, new technologies, and new ways of doing things.
As different as business and the military are, they have learned from each other and have shared advances in science, transportation and logistics, technology, and health care for the benefit of all.
So the changes occurring at Fort Bragg present businesses in and around Fayetteville with a great opportunity, and I know that you'll take advantage of them.
I'd like to share with you some of the things we're doing to create greater opportunities for small businesses.
Small businesses are the engines of economic growth. They create 3 out of 4 new jobs and employ about half of the workforce. They are the risk-takers, the doers, the innovators.
Health Care
Let me begin with the issue of health care costs and accessibility. Health care is a crisis for businesses – and small companies are feeling the greatest pain.
The increase in costs has put them in the very difficult position of forcing their employees to pay more, reduce benefits, or even drop coverage altogether.
The percentage of companies, big and small, that provide health benefits to their workers has dropped from 69% five years ago to 60% today. That decline is attributed almost solely to small businesses having to give up coverage.
Clearly, our health care system requires fixing, but doing it is hard because no one really understands the system, with all its hidden and unknown costs.
But we don't need to completely overhaul the system to immediately relieve cost pressures. There is some low-hanging fruit that we can pluck to expand access to care, and you heard the president talk about them last night in his annual address to Congress.
Expanding the availability of health savings accounts, or HSAs, is one important step. HSAs are tax-free accounts to which individuals contribute and use to pay for medical expenses not covered by their high-deductible, catastrophic plan.
The funds in the account roll over year after year, and individuals can take their HSA with them from job to job.
It's a great low-cost option for employers and their employees - and they fit growing consumer preferences for greater choice and flexibility.
Some three million individuals – triple the number from 10 months ago – are now signed up for HSAs. We want to see that number grow even larger.
The Chamber also supports the idea of small and mid-size businesses banding together across state lines to purchase health insurance through a vehicle known as an association health plan, or small business health plan.
The Chamber has helped convince the House of Representatives to pass this legislation, and we're fighting to overcome resistance in the Senate.
Our health care system would also benefit greatly from greater use of technology to track and store medical information.
While other U.S. industries such as retail, shipping, and banking have successfully made the transition to the electronic age, the health care industry's use of information technology lags far behind.
We're still stuck in a paper-based system, which creates unnecessary costs and threats to health.
The widespread adoption of health IT would help lower costs, prevent medical errors, guide medical decisionmaking, and allow providers to track health outcomes and coordinate public health activities.
One of our priorities this year is to get Congress to pass a health information technology bill.
There's another easy way to control costs and increase access – remove, or at least minimize the presence of trial lawyers in the health care system.
Rising medical liability is driving up doctor and hospital insurance costs and leading to tens of billions of dollars in unnecessary tests and procedures. No doctor wants to be sued for missing something – so they end up doing more than they need to, and business ends up footing most of the bill.
The threat of liability has become so great that doctors are moving or quitting their practice. In many communities, you can't find a practicing OB/GYN or other high-risk specialty.
Businesses in these areas are at a major disadvantage. How are they going to attract employees? And civic leaders are asking themselves, "how are we going to attract businesses to our community when our doctors are leaving and our hospitals are limiting their services?"
The U.S. Chamber is working hard for medical liability reform that would cap noneconomic and punitive damages and put doctors – not lawyers – in control of our health care system.
Legal Reform
Lawsuit abuse is another major cost-driver for businesses. You may not know it, but what you pay for an insurance policy, an automobile, or a piece of equipment is artificially inflated to account for liability.
Lawsuits cost American business $129 billion a year, and 77% of that total—an incredible $88 billion—is the cost to companies with $10 million or less in revenue.
For small businesses with $1 million or less in revenue, the cost is $35 billion.
We don't want to deny justice to people who have been truly harmed. But we also don't want trial lawyers flooding our courts with bogus lawsuits and exploiting plaintiffs for personal gain.
The trial bar is using our justice system to get rich quick and everyone else is paying the price.
The Chamber has developed a comprehensive, coordinated program to counter these abuses. Eight years ago, we started the Institute for Legal Reform, an entity that has organized the business community in support of legal reform.
Few people could have predicted what we've accomplished since starting ILR. Last year, we helped pass class action reform in Congress, a bill that restricts the ability of trial lawyers to shop their lawsuits to the friendliest state courts.
Trial lawyers have become good at going to courts in jurisdictions where they know they can win - even if most of their plaintiffs are from other states and the alleged wrongdoing happened somewhere else.
This year, we're urging Congress to pass a bill that would curtail frivolous lawsuits against small businesses by forcing trial lawyers to pay the legal fees of defendant companies if it is determined their suit was frivolous.
We are also working to pass a legislative solution to the decades-long asbestos litigation crisis and a bill that would free food companies from liability stemming from people's weight problems.
A great deal of our legal reform activities is taking place in the states. The foundation of our state efforts is our annual rankings of all 50 state legal climates.
Since we started releasing our rankings in 2002, they have become the primary benchmark by which business owners, elected officials, the media, and other opinion leaders measure their state's legal environment and see firsthand how good – or bad – that environment is for businesses and consumers.
Through these rankings and through public education, lobbying, and advertising efforts, the Chamber has helped bring about major legal reform in such problematic states as Mississippi, Missouri, Georgia, Texas, and Ohio.
For the record, North Carolina currently ranks #20 – not bad, but there's room for improvement.
Taxes
Let me shift to another major priority for the Chamber this year – extension of the Bush tax cuts. In 2006, 25 million small business owners will receive an estimated $93 billion in tax relief.
Our strong and resilient economy today wouldn't have been possible without the Bush tax cuts.
And, while some argue that they have contributed to larger budget deficits, the fact remains that individual, corporate, and payroll tax revenues have all risen significantly and have helped offset increases in domestic spending and spending on the wars in Iraq, Afghanistan, and against terrorism.
The lowered tax rates are in danger of going away – in fact, some expired at the end of last year.
The Chamber is working to make them permanent, including the death tax, increased Section 179 small business asset expensing, the capital gains and dividends tax rates, and the research and experimentation tax credit.
Education/Workforce
The costs of health care, lawsuit abuse, and taxes are costs we can feel and measure. The costs of failing to develop a workforce that is sufficient in size, skills, and education are more difficult to calculate but are perhaps much higher.
Our nation is facing a major demographic challenge. We have a lot of older workers on the verge of retirement – about 77 million, in fact – and not enough younger workers to replace them.
If you think it's difficult to find quality workers today, it's going to be darn near impossible five, ten, and twenty years from now unless we take action.
The Chamber is also, for the first time in our history, entering the debate on the quality of K through 12 education. Traditionally, we have left K through 12 education to the states and local governments and instead focused on federal funding and reform such as No Child Left Behind.
But business can no longer sit on the sidelines and watch our students fail. About 30% of U.S. high school students fail to graduate in four years, and the percentage is higher in minority and inner city school districts. That simply is unacceptable.
The Chamber isn't proposing a blueprint for educational reform – every school district has different challenges and needs. But we think we can facilitate positive change by shining a spotlight on jurisdictions that are underperforming.
And so this year the Chamber will rank the educational systems of all 50 states. We know this will generate some controversy and heated discussion, but we also hope it will spur change. Our rankings are not intended to be punitive. Rather, we hope it helps those committed to improving their school districts.
The final component of our program to develop the workforce is comprehensive immigration reform.
We need a new immigration policy that both enforces our immigration and border security laws AND gives immigrants an opportunity to come here and fill jobs that Americans don't want or won't take.
Imagine what would happen to our economy if we rounded up and deported the 10 to 11 illegal immigrants who get up each day and go to work and pay taxes. There is a better, more practical way.
Our challenge is to achieve a balance between our security and our economic needs. This debate will heat up in Congress in the weeks ahead, and you'll see the Chamber right in the middle of it.
Conclusion
Ladies and gentlemen, business is in a pretty good place right now. Corporate profits are up, we're generating lots of new jobs, workers are earning more per hour in real terms than they did at the height of the 1990s expansion, and household wealth is at an all-time high.
We have to reduce health care costs and the number of uninsured, get a handle on lawsuit abuse, keep our economy humming by extending the tax cuts, and develop a workforce with the numbers, skills, and education to compete in a global, high-tech economy.
Business can't sit back and expect government to do these things on its own. We must educate, lobby, and lead the debate on these issues.
We're doing our part in the nation's capital, and I encourage you to get involved and do your part through the Cumberland County Business Council.
Thank you very much.