2012 Jobs Summit: An Innovation Agenda to Spur Growth, Create Jobs, and Sharpen America’s Competitive Edge, Remarks by Thomas J. Donohue President and CEO, U.S. Chamber of Commerce
As Prepared for Delivery
Thank you, Toby [Mack], for that kind introduction, and good afternoon ladies and gentlemen.
I’d like to thank Margaret Spellings for her leadership at the National Chamber Foundation. NCF not only provides valuable thought-leadership on our nation’s top priorities, it provides a forum for dialogue—and a platform for action.
We’re here to talk about jobs, and given May’s dismal unemployment report, some might expect a discouraging conversation. Yes, we’re in difficult circumstances. Economic growth is anemic. The jobless rate is chronically high—and moving in the wrong direction.
But if you’re looking for doom and gloom, you won’t find it here.
In fact, I hope everyone leaves this summit encouraged about our prospects and energized for the brighter days ahead. Why am I optimistic?
First, because we’ve got proof of things that are working. The 2012 Enterprising States study shows that states that foster a strong business environment and embrace innovation are bucking national economic trends—they’re growing faster and adding more jobs.
A little later today, we’ll hear from the governors of some of those states—as well as civic leaders from two of our nation’s most thriving cities. These leaders are finding positive solutions to major challenges, and they’re seeing results. There’s a lot Washington can learn from the governors who are running enterprising states.
Here’s the second reason I’m optimistic— business has a plan.
Our government has tried—with little success—to stimulate growth and job creation. But government-directed stimulus isn’t a long-term strategy to achieve sustainable growth, produce millions of new jobs, and raise our standard of living.
What we need is a comprehensive plan for growth that leverages our strengths and addresses our weaknesses. The Chamber’s American Jobs and Growth Agenda does both. Our plans calls for greater energy development; stronger infrastructure investment; expanded global trade; an aggressive innovation agenda; regulatory, legal, and tax reform; and reining in debt and deficits.
If we do those things, we can speed up economic growth and add jobs in a hurry—without raising taxes or adding to the deficit.
Spurring American Innovation
I’d like to focus my remarks today on one of those areas—innovation.
The innovation system is what keeps our economy humming, our businesses competitive and hiring, our manufacturers producing, our standard of living improving, and our wages high.
Very simply, if we want to spur a strong and sustainable recovery, America must ignite an innovation boom.
World Class Talent
We must start by developing and attracting world class talent—because human capital is the primary driver of innovation.
First, we need to develop homegrown talent.
It’s no secret that America’s K-12 schools are falling behind global competitors. What’s most alarming is that our primary areas of weakness are also the most vital to innovation—science, technology, engineering, and math, or STEM. It’s estimated that half of K-12 students are being taught science and math by teachers who aren’t proficient in those subjects. And then these kids go to college without a strong foundation in math and science. It’s no shock that they pass up studies—and careers—in the STEM fields.
So we need to reform our K-12 education system, embrace technology-driven learning and innovative teaching techniques, and stock America’s schools with the best teachers—who are rewarded based on performance.
We also need to strongly emphasize STEM studies at every level of education. Let’s encourage our young people to pursue these exciting subjects and rewarding careers.
If we don’t, our workers won’t have the education or training to keep up with the growing demand for high-skilled labor. Studies show that within a few short years, we’ll have millions of high-skilled jobs without qualified people to fill them. We’ve got to put the right people in those jobs to keep key innovation industries strong, productive, and contributing to our economy through growth and jobs.
In addition to developing more homegrown talent, we can also fill the skills gap by competing in the global race for talent—and that brings me to the second major way to build a competitive workforce. We must attract the world’s best and brightest and put them to work in our economy.
Global talent is already drawn to America’s universities. We have the best science, engineering, and technical colleges on the planet. More than half of the graduate and Ph.D. students studying high-tech disciplines at U.S. universities are foreign-born. The trouble is, after we educate them in our American institutions, many of these talented individuals are sent home because of U.S. visa limits. What we should be doing is stapling a green card to their diplomas!
Let’s get smart and adopt visa reform to make it easier for high-skilled immigrants and foreign graduates of U.S. institutions to invest their talent in our knowledge economy. If we don’t, we’ll send innovation to our competitors at the expense of our own economic growth, job creation, and global competitiveness.
The bottom line is that a globally competitive workforce is going to require a rational immigration policy—one that harnesses the energy and innovation of enterprising foreigners. If we fail to welcome the world’s talent, we’ll get left in the dust.
Robust Capital Markets
But ideas and talent are only part of the equation.
Thomas Edison—an American who knew a thing or two about innovation—said, “A vision without execution is a hallucination.”
Inventors and entrepreneurs need access to capital to help breathe life into their ideas and bring them to the market. Many startups rely on seed capital from family members, wealthy individuals, local banks, credit unions, and even credit cards to help get off the ground.
Recently, there was a lot of excitement—and a little bit of controversy—over the Facebook IPO. The important thing to remember about that and countless other examples is what made them possible to begin with—someone was willing to take a risk on a fledgling project, put up a little funding, and give it the chance to flourish and grow. Today, Facebook has 3,500 employees and is valued at upwards of $70 billion—largely because an angel investor saw some potential.
Large established firms also routinely turn to America’s vast pools of capital so they can invest in new products or services to satisfy market demand.
This capital investment creates a virtuous cycle—ideas that are transformed into products or services generate revenue that is often poured back into research, development, and discovery, leading to even more innovation, jobs, and growth. This is the process that yields cutting edge industrial techniques and more efficient business operations.
So it’s critical that we keep our markets open and efficient, and provide investors with predictable rules of the road so they can take appropriate risks. Any measures that strangle capital formation or choke off the flow of financing must be revised or repealed.
That’s why the Chamber’s Capital Markets Center is working with Congress and key regulatory agencies to fix the missteps of Dodd-Frank. Even more important, we are working to breathe life back into our capital markets so they are flush with capital and able to fulfill their fundamental mission: fueling innovation, spurring growth, and creating jobs and prosperity for Americans.
A Competitive Business Environment
A competitive business environment is just as essential to innovation as well-functioning markets.
In the Enterprising States study, we have fresh evidence of how states are fostering economic growth and jobs through innovation. What do successful states have in common? A tax and regulatory climate that allows companies to continuously innovate—unshackled by needless delays and burdensome costs.
And states that maintain a good legal reform environment can also expect hundreds of millions of dollars or more in economic activity and tens of thousands of new jobs, according to a 2011 economic study sponsored by the Chamber’s Institute for Legal Reform.
The right policies also attract manufacturers. Innovation gravitates to manufacturing centers, and manufacturers are some of the strongest drivers of new innovations.
But when the federal government’s tax and regulatory policies are excessive, it breeds uncertainty, slows investment, depresses new technologies, drives manufacturing overseas, and puts businesses at a competitive disadvantage.
Take taxes, for example. No one would hold up America’s byzantine tax code as a model of efficiency or clarity or an engine of economic growth.
Our tax code must be restructured so that it is simple and clear, spurs growth, encourages investment, and efficiently generates revenues to reduce the deficit and meet our national priorities. We must enact comprehensive tax reform that broadens the base, lowers all businesses rates, and reduces the burdens of compliance. This reform should reduce the corporate tax rate—the highest in the world— and drive innovation by permanently extending the R&D tax credit.
We must also do away with specific tax provisions that target innovators, like the $20 billion tax on medical devices that will take effect next year under Obamacare. This excise tax would squelch innovation in the medical technology industry, responsible for such vital devices as defibrillators, pacemakers, and prosthetics. It would threaten 43,000 industry jobs, disadvantage U.S. businesses, and drive some companies and their jobs overseas.
The Chamber is pushing for repeal of the medical device tax, and we will fight against other tax provisions that crush innovation and growth.
Innovation depends on a rational, efficient, and globally competitive tax system—and currently, that’s not what we’ve got.
In addition to the uncompetitive tax code, an explosion of regulations inhibits entrepreneurism and innovation.
A heavy regulatory burden prevents companies and startups from being fast and nimble in a competitive environment. Compliance costs divert time and resources from business expansion or exploration, and uncertainty restricts capital needed for experimentation.
We need a smarter regulatory system that preserves economic freedom and flexibility while removing unnecessary burdens and keeping costs low. What entrepreneurs and innovators want from government is simple—common sense, and that means clear rules based on sound science and proven benefits.
And if they can’t get that here, they’ll find it somewhere else. Systemic overregulation and punitive taxation drives innovators overseas…and straight into the economies of our competitors.
What’s true of capital is also true of innovators—they will go where they are welcome, safe, and stand a good chance of being rewarded for their efforts. A strong business environment is essential.
Resources and Infrastructure
While it’s critical that the government stop pushing policies that stifle innovation, the government does play a useful role through basic research.
The public sector has traditionally supported the basic research that lays the groundwork for much of our innovation. In turn, the private sector focuses most of its R&D efforts on applied research with an eye toward commercialization.
That equation has worked pretty well for our system. And so, as lawmakers face tough and necessary decisions about spending, they must keep an eye on the traditional role of driving basic research.
This is especially important in a global economy in which our competitors are growing their investments by leaps and bounds. Take China, for example. The Chinese government increased its yearly R&D investment by 500% between 1991 and 2002, and Beijing plans to increase R&D spending four-fold by 2020.
While we’re talking about positive things the federal government can do for innovation, let’s not forget maintaining our investment in our physical infrastructure—it keeps the whole system moving.
Congress is up against a hard deadline on a long-term surface transportation bill. Lawmakers have the opportunity to bring needed reforms to highway and transit policy, certainty for job creators, and employment for displaced workers. We urge them to seize that opportunity and pass a final agreement without delay.
Likewise, we must invest in the technology infrastructure vital to the next wave of innovation. U.S. Internet traffic is growing rapidly. To support services and to drive digital innovation, we must continue to invest in broadband, wireless, and data centers.
The digital economy, and the commercial activity it enables, holds some of the greatest potential for growth and job creation.
Just look at the explosion of mobile applications for smart phones. These “apps” represent a brand new economic platform. Smart entrepreneurs and industries have adopted the technology that connects companies and customers anywhere, anytime. It’s transforming the way business is done in industries as diverse as retail, mapping, entertainment, and banking.
It’s estimated the “app economy” has created nearly 500,000 jobs since 2007. Before that, commercial apps didn’t even exist.
That’s the pace of innovation in the digital age. We’ve got to keep up.
Risk and Reward
There is another critical element to innovation—without it, innovation won’t exist. That’s reward.
Innovators must be allowed to take reasonable risks, and they should have the opportunity to be rewarded for their successes through profits and rights.
First, inventors must know that the fruits of their labor will be strongly protected by the law. Without that assurance, the incentive to innovate will decline.
One deterrent is the slow and inefficient U.S. patent process. Though last year’s passage of patent reform legislation was good progress, we still need to work through the logjam of patent applications and process new ones more quickly. We also need to crack down on IP theft, piracy, and rogue websites; fully fund IP enforcement; and negotiate strong IP protections in trade and investment treaties.
Economic incentives are equally important. An innovative idea has little hope of reaching consumers and bettering our lives if it can’t create economic value. And entrepreneurs and investors aren’t likely to take a chance on the next big thing—often at great personal expense— without the chance of reward.
If success is punished, demonized, or stolen, America will lose talent, capital, ideas, and jobs to our economic competitors.
And you know what’s just as vital as success? Failure. It’s our greatest teacher, after all.
We must never abandon the idea in America that it’s okay to fail. We must never reject the notion that it’s okay to make a mistake, whether you’re an inventor, an entrepreneur, or an investor.
If we instead adopt the idea that you get one shot, and if you fail you’re done, then we’ll lose more than just capital or talent or jobs. We’ll lose something that’s fundamental and special about our system—the belief that opportunities are limitless and dreams are achievable.
America is and must remain a place where you can fall on your face, pick yourself up, dust yourself off, and try again.
Nations at different stages of development don’t necessarily have to be innovative to flourish. Emerging economies can merely mimic the advancements of global powers and their economies will grow … their citizens will find work.
But for us, innovation is imperative. We innovate or we decline.
Fostering the next era of innovation requires us to focus on everything I’ve discussed today—human talent, capital, low taxes and smart regulations, basic research, critical infrastructure. And yes, reward.
With the government in its proper, limited role, there is no reason we can’t reinvigorate this economy, create jobs for millions of Americans, and reassert our innovative leadership in the world.
At our very core, we are a nation of dreamers and doers, fueled by free enterprise—a system that allows failure and rewards success. We have a dynamic workforce, the vast majority of the world’s top universities, open markets, and a culture and quality of life that draws talent from around the world.
But we’re in a global race, and we’re up against rising competitors who are growing stronger, smarter, and more aggressive. We are competing for the world’s talent, customers, and capital—we are competing for industrial might in the global marketplace and intellectual strength in a knowledge based economy.
We can never afford to rest on our advantages.
Fortunately, that’s not in our nature. We are a nation borne out of dissatisfaction and ambition. We reject complacency and crave advancement. When faced with an obstacle, we surmount it. When confronted with a problem, we solve it. When we have a need, we fill it. When we have an idea, we invent it.
Why? Not simply because we are a self-reliant people, though that is certainly true.
It’s because we are motivated by the possible. We constantly strive to make life better—we’re inspired by the thrill of discovery and the hope of reward.
That is why I am optimistic that we will solve our jobs crisis. It would be a fundamental breach of America’s principles for us not to. Our nation’s exceptional character is what propelled us to prosperity in the first place—and it’s what will restore prosperity for future generations.