State of American Business 2006 Press Briefing - Remarks by Thomas J. Donohue
Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce
U.S. Chamber of Commerce
Wednesday, January 4, 2006
Download as a PDF (PDF)
Good morning and thank you for coming. My name is Tom Donohue, president and CEO of the U.S. Chamber of Commerce. Joining me is Bruce Josten, the Chamber's executive vice president for government affairs.
I'd like to make some comments and then Bruce and I would be happy to answer any questions you have.
You should each have a copy of our 2006 State of American Business report, which we are sending to the administration and every member of Congress later this week.
Let me touch on a few highlights.
Without minimizing the hardships and natural disasters that confronted many Americans last year, 2005 was a year of progress and accomplishment for the U.S. economy, the business community and the Chamber.
The economy grew at better than 4 percent in the third quarter, nearly 2 million jobs were created over the past 12 months, and both core inflation and unemployment are low. With some exceptions, companies are making money, investment capital is plentiful and still affordable, and the mood in the executive suites I visit is generally optimistic.
On the policy front, those of you who joined us here last year might recall that we laid out some pretty ambitious goals, and we achieved many of them — class action reform, bankruptcy reform, major transportation and energy bills, renewal of TRIA (the terror reinsurance backstop), the DR-CAFTA trade agreement, just to name a few.
We also made great strides in two priority initiatives — our global plan to fight intellectual property theft, counterfeiting and piracy, and our efforts to strengthen US capital markets, while protecting honest companies from overreaching regulators and prosecutors.
Our public interest law firm set new records in 2005 in both the number of cases entered and victories achieved-victories such as challenging the SEC and turning back excessive punitive damages and class actions.
And, in a bipartisan vote, the Senate confirmed the nomination of an outstanding new Chief Justice of the United States, John Roberts – a nomination the Chamber applauded and strongly supported.
There were of course some disappointments. The conversation President Bush began with the American people on the need to reform Social Security – which the Chamber supported – didn't get very far. And that's unfortunate. The longer that reform is delayed, the greater the pain will be later on.
We were also disappointed by the continuing ignorance and in some cases hypocrisy of many elected officials and thought leaders on energy. On the one hand, they bemoan the high price of energy and our dependence on foreign imports. On the other hand they oppose virtually all the steps we need to address our energy needs.
And, we were disappointed by the border security bill passed by the House last month. It does absolutely nothing to address our workforce needs or deal with undocumented workers in a fair and reasonable manner. I'll have more to say about immigration in just a few moments.
Let me turn to the year ahead.
We think the U.S. economy will continue to perform well, growing in the range of 3.5 to 3.7 percent over the first half of 2006 — with 3.5 percent growth for the year as a whole.
We do not anticipate an acceleration in overall inflation. The core consumer price index (excluding food and energy) will rise about 2.1 percent.
The Federal Reserve will push its target interest rate up to 5 percent by the middle of 2006 and then pause for some time.
Housing markets should continue to cool over the course of the year, but we don't expect the so-called bubble burst that many have speculated about.
Personal consumption will grow 2.7 percent, while growth in business investment in equipment and software will be very strong at 9.6 percent for the year.
The unemployment rate should drift down to 4.9 percent by midyear, with monthly job gains averaging about 145,000.
So overall, we are optimistic about the prospects for the economy in the coming year. Yet in some important respects, 2006 could be a more difficult year for companies and the business agenda.
Companies face an accumulating burden of rising health care, pension, and energy costs.
Restrictive immigration and visa policies, along with inadequate education and training have tightened the supply of qualified workers – very bad timing with the first wave of baby boomers about to retire.
Rising anti-trade sentiments threaten the openness of our markets, while overseas, many markets remain closed and our intellectual property is being stolen.
Growing government deficits make business an appealing target for additional taxes and mandates – even though, according to a recent report in the Wall Street Journal, the United States has the highest corporate income tax rates of the 30 richest countries.
And, a brass-knuckles political battle for control of the U.S. Congress is already under way, which could affect our ability to get things done.
Our nation is also facing two fundamental realities that have already begun to reshape our economy and our society. I'm talking about the rise of new economic competitors abroad and changing demographics at home.
We may have a strong economy today, but our prosperity and economic leadership will not last unless we respond boldly to a series of competitive challenges created by these realities.
And so the Chamber's agenda for 2006 and beyond has been developed to address some fundamental questions:
How do we stay competitive in a global economy that is rapidly changing?
How do we keep our edge when countries like India and China are turning out many more times the number of engineers and scientists than we are—and our public schools are failing so many of our children?
When will we get serious about modernizing public and private retirement and health systems — and securing the workers that we need through immigration reform as 77 million baby boomers get ready to retire?
You can read about the Chamber's ideas for addressing these challenges in the State of American Business report, and how we propose creating a more competitive American economy.
Of course, our agenda will be influenced by the initiatives and actions of the President, the Congress, the agencies and the courts – including matters such as the administration's legislative program, the Congressional calendar, and Judge Alito's confirmation process. So let me focus on a few near-term issues that will claim our early attention in 2006.
Last month, the House and Senate passed versions of pension and tax bills.
As soon as Congress returns, the Chamber will work to bring to the President's desk a pension bill that includes responsible funding rules and ensures the continued viability of defined benefit, defined contribution, multiemployer, and hybrid plans.
On taxes, we will seek a bill that extends and in some cases expands important progrowth provisions such as the 15 percent top rate on dividends and capital gains, Section 179 expensing, AMT relief, and the research and experimentation credit.
We will also press for removal of Senate provisions that constitute double taxation on energy companies through forced bookkeeping gimmicks and denial of longstanding foreign tax credits. These provisions will make us even more vulnerable on energy and potentially drive companies out of our country.
And while I'm on the subject of energy, the Chamber will continue to fight for passage of ANWR and the opening of the Outer Continental Shelf to environmentally sound oil and gas exploration. If we fail to do so, we will drive plants and industries out of our country in search of affordable energy.
More than just jobs are at stake – so is our national security and global leadership. It is unsafe and unwise to place our future in the hands of leaders like Hugo Chavez and unstable countries in the Middle East and Africa. We must increase domestic production as we continue to advance conservation and develop alternatives.
Passing a comprehensive and fair immigration bill is another top Chamber priority. We have no problem with increased border enforcement, or with reasonable requirements that employers verify the work status of who they hire, but we strongly oppose the House bill, as does much of the business community, because it is simply unworkable, unreasonable and unfair.
It would impose sweeping new mandates on employers, covering not just immigrants but all 140 million workers in our economy. It contains provisions that could potentially turn business people into criminals and turn workers into felons simply for trying to support their families.
Now the action moves to the Senate. We are going to work with both sides of the aisle to obtain a bill that provides the workers and is in keeping with our legacy as a welcoming nation. This immigration debate is about more than a piece of legislation. It is about who we are as a people and a country.
Ensuring an adequate supply of workers also means we must improve education.
Our thinking has changed. The Chamber has traditionally stayed out of school reform at the state and local level – but with the continuing poor performance of many schools and the rise of global competitors with increasingly well educated workforces, we must get involved.
Similar to our strategy in legal reform, where we issue annual state-by-state rankings of legal systems across the country, we will plan to measure and rank the performance of state school systems.
We will disseminate this information widely to the business community, investors, the press and the public. We hope this will be a positive, galvanizing force for further reform and also for additional resources and empowerment for low performing schools.
The bottom line is that this nation cannot rightfully expect to lead the 21st century's information and technology-driven global economy when we have upwards of 30 percent of our young people not even graduating from high school.
And, on the top end of the educational supply chain, we must also significantly expand the number of math, science and engineering graduates in our country. In fact, the Chamber is working with other leading business organizations to double the number of those graduates by the year 2015.
Another serious problem is the growing burden of health care, pensions and entitlements.
It is unfortunate that the political will does not yet exist to make the kinds of changes and reforms that are needed to protect the health and retirement security of our people.
Business as usual is simply not sustainable. People are living far longer than expected when their health and retirement programs were devised – and that's good news. But it is ever more expensive to provide them with pensions and health services.
Yet even in the absence of major reform, there are things Congress can do this year to provide health coverage for more Americans and strengthen retirement savings.
A large percent of the uninsured are employed. There are many others who qualify for government programs but are not enrolled. Congress should pass Small Business Health Plans – or Association Health Plans – to allow small firms to pool and purchase affordable coverage for employees.
Congress should also expand and improve Health Savings Accounts and Flexible Spending Accounts, and also permit increased tax-deferred contributions to retirement savings. A greater effort should be made to enroll eligible Americans in public health programs.
The Chamber will also continue a drumbeat message about the imperative of entitlement reform as those 77 million baby boomers prepare to retire and claim benefits.
Our campaign for legal reform at the federal level, in the states and in the courts will move ahead across all fronts this year.
We will continue to pursue a legislative solution to the asbestos litigation crisis and seek passage of a bill to stop frivolous legal assaults on the food industry. In the states, we will focus on securing additional reforms in Florida, Illinois and West Virginia while also working for improvements in California, New Mexico, Oklahoma, Pennsylvania and Wisconsin.
Our Institute for Legal Reform will educate voters in states where there are important elections for Supreme Court judges and attorneys general.
And our law firm, the National Chamber Litigation Center, will aggressively represent the interests of the business community in court.
The Chamber's effort to stop overreaching regulators and abusive prosecutors in the aftermath of Sarbanes-Oxley will continue full speed ahead.
We have formed an independent Capital Markets Commission to address the role that federal and state regulations, as well as trial lawyers, are having in driving companies and capital away from our markets.
Look for some interesting activities from the Commission in the coming months.
We will also be working with the American Civil Liberties Union, the American Bar Association and others to stop the assault on the attorney-client privilege and other time-honored rights of due process. And, we're going to work hard to persuade the 70 percent of public companies that still issue quarterly earnings guidance to stop doing so. We must create a more forward-looking business and investment culture in our country to stay on the leading edge of innovation and growth.
We will also pursue a vigorous international trade agenda, working to open markets in Southeast Asia, the Middle East, Africa and the Andean countries, through Free Trade Agreements and other mechanisms.
I was in Hong Kong to see some modest success there on the path to a global trade agreement under the WTO.
We will work hard this year to help achieve a comprehensive Doha agreement that lowers subsidies, opens markets and ensures a level playing field for American companies, workers and farmers.
The Chamber has recently expanded its staff and assets in Asia — particularly in China, where we will continue to push for full compliance with all WTO obligations. At home, we will lead the fight to keep our own markets flexible and open — opposing measures that would restrict outsourcing or make it more difficult for foreign investors to insource capital and jobs to the U.S. economy.
Our major global program to stop IP theft, counterfeiting and piracy will be significantly expanded both domestically and internationally – by educating U.S. policymakers and the American public, by disrupting the counterfeiters' supply chain at home and abroad, and through on-the-ground campaigns in China and other countries where the problem is most severe.
Lastly, 2006 is an important election year.
You can expect to see the Chamber devoting tremendous assets to defending those members of Congress in tough races who have cast the difficult votes on behalf of business and economic growth. And you can expect us to work to defeat those who perpetually have not.
As you can see, we have a full agenda and many challenges ahead, but we also have the advantage of starting the New Year from a position of strength – a very good economy, profitable companies, a motivated and engaged business community, and a strong Chamber.
And with that, Bruce and I will be happy to answer any questions you have.