2005 State of American Business Annual Report
State of American Business 2005
View the webcast
[Adobe Acrobat Reader and RealPlayer required.]
Foreword
The American business community has good reason to be confident and optimistic as we head into 2005.
Our economy is fundamentally strong and continues to outperform most of our global competitors. The U.S. Chamber is forecasting solid rates of growth, job creation, business investment, and consumer spending—along with relatively low inflation, unemployment, and interest rates—throughout 2005.
Moreover, business can point to some recent policy successes, including the enactment of important legal reforms in the states and through the courts, new free trade agreements, tax relief and pension reforms, and the defeat of nearly 200 state and federal proposals to restrict companies' ability to source and trade around the world.
The Chamber's aggressive political program helped elect a pro-business Congress and improved the legal environment in a number of states. By doing this, we sent an unmistakable message to lawmakers and candidates that when it comes to politics, we mean business!
Yet even with an expanded probusiness majority in Congress and the reelection of President Bush, America is still a nation divided and in many respects so is our government. Policy victories will not be easily won. The business community must not permit recent successes to blind us to the tremendous challenges ahead.
Our competitive position in the world is being tested as never before. The rapidly developing economies of China, India, and East Asia are becoming major players in technology, business services, and high-end manufacturing. They are consuming more of the world's resources, attracting more of its capital, and producing more engineers and science majors than the United States. Meanwhile, the European Union is consolidating and enlarging its economic power while aggressively expanding its regulatory impact in areas from antitrust policy to food production to climate change.
America's response to this competition has not been adequate. Instead, we are driving companies, capital, and jobs out of our country with excessive legal, health, tax, and energy costs as well as with abusive corporate governance rules. We countenance an inferior education system that has allowed our students to fall behind in math, science, and advanced degrees.
In addition, we must contend with a pervasive attitude among the public, policymakers, and the media that takes economic growth for granted. This attitude presumes that no matter how many burdens are piled on companies, they will somehow continue to churn out high-paying jobs, groundbreaking innovations, and rising stock prices—while resisting the lure of business centers around the world, which offer lower costs, abundant energy supplies, and legions of highly trained workers.
In fact, economic growth is not automatic. It will not "just happen." We must constantly work to improve, modernize, compete, and move up the ladder of innovation. We must take strong action now to create a more competitive American economy and secure our nation's leadership in the 21st century.
How can we achieve this?
First, remove the barriers that make it too expensive to create and keep good jobs in the United States.
Runaway litigation, abusive enforcement of corporate governance and accounting rules, expensive and unstable energy supplies, and a regulatory price tag that exceeds the entire gross national product of Canada have, according to one study, added a 22 percent premium to the price of production in the United States relative to our major foreign competitors.
Second, establish a fair, honest, and open playing field for American companies and workers in the global marketplace.
Our companies lose an estimated $250 billion per year due to intellectual property theft, counterfeiting, and piracy—part of a worldwide crime wave that has reached epidemic proportions. Competing nations have more free trade agreements in force than we do; the United States is still playing "catch-up." Proposals to restrict outsourcing could trigger retaliation and jeopardize American jobs created by foreign investors.
Third, bring tax, regulatory, health and retirement systems, and our physical infrastructure into the 21st century.
Americans are being held back by a tax system that discourages savings and investment—critical drivers of future growth. Spiraling health care costs have increased the ranks of the uninsured and the untreated. Many private pension plans as well as Social Security are in serious financial trouble. Our physical infrastructure is ill-prepared to carry the people, goods, and information in a growing economy.
Fourth, build for the future by building on America's strengths.
One of our real strengths is that America has been the best place on earth to take a good new idea, advance it with accessible capital and highly skilled entrepreneurs, and establish great global industries that create markets, jobs, and prosperity.
If we allow others to steal our best innovations, drive our capital off-shore, and fail to educate and train our workers, then we will kill what has been a uniquely American strength.
We must unlock the potential of the world's most talented people with outstanding schools and opportunities for lifelong learning. We must reaffirm America's legacy as an open, welcoming, and diverse society through immigration reform and balanced homeland security policies. Our country was built on the dreams and daring of entrepreneurs, many of them immigrants, women, and minority Americans. We must support a thriving small business sector to create new jobs and open new avenues of opportunity and independence.
To achieve these goals, we must also strengthen the Chamber of Commerce movement nationally, internationally, and at the state and community levels in politics, policy, and economic education to preserve and improve the free enterprise system.
In the pages that follow, you will find the Chamber's specific proposals for creating a more competitive American economy, as well as our economic outlook for 2005 and our assessment of the political and legislative environment.
We are under no illusions that this ambitious agenda can be achieved in a single year or even 10. Yet we must set big goals in order to achieve great things. At the Chamber, we have done this enthusiastically and look forward to working with policymakers and lawmakers of both parties, businesses of all sizes and sectors, and every American who embraces the vision of a free, prosperous nation that continues to lead the world in hope and opportunity.
Thomas J. Donohue
President & CEO
U.S. Chamber of Commerce